We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for Free to get streaming real-time quotes, interactive charts, live options flow, and more.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Orchard Funding Group Plc | LSE:ORCH | London | Ordinary Share | GB00BYZFM569 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 30.00 | 28.00 | 31.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Security Brokers & Dealers | 7.86M | 1.71M | 0.0802 | 3.68 | 6.3M |
From Apr 2019 to Apr 2024
TIDMORCH
RNS Number : 1163H
Orchard Funding Group PLC
13 November 2018
13 November 2018
Orchard Funding Group PLC
('Orchard Funding Group' or the 'company' or the 'group')
Full Year Results
For the 12 months ended 31 July 2018
Orchard Funding Group PLC, the finance company which specialises in insurance premium finance and the professions funding market, announces its audited full year results for the year ended 31 July 2018.
Highlights
-- The group continues to be strongly cash generative, with revenues in the period increasing by 13.4% to
GBP5.17 million for the 12 months to 31 July 2018 (31 July 2017 GBP4.56 million)
-- The loan book grew by 8.8% year on year to GBP30.95m as we continue to apply our disciplined approach to lending, with impairments remaining relatively low against our peers
Hot Features
Premium
-- Profit after tax rose from GBP1.34 million to GBP1.51 million - an increase of 12.7%
-- Earnings Per Share ("EPS") rose in the period by 13.1% to 7.08p (31 July 2017 6.26p)
-- The group lent GBP68.73 million to clients in the 12 months to 31 July 2018 an increase of 8.5% (31 July 2017
GBP63.35 million)
-- We are proposing a full year dividend per share of 3.0 pence -- Barclays Bank has again renewed our facility at GBP15 million
-- Conister Bank provided us with a new facility this year of GBP2 million, giving us additional liquidity
-- Application was made to the PRA and FCA for a banking licence in July 2018
-- We have strengthened the board with the appointment of Gary Jennison as Non-Executive Chairman in November 2017
Ravi Takhar, Chief Executive Officer of Orchard, said: ""I am, again, very pleased with Orchard's performance during the year. We are passionate about our business and continue to grow in a prudent and controlled manner. We will continue to focus on our core markets and as we have already demonstrated this will result in an increased share of those markets. Trading since the period end has continued to be robust and in line with management expectations.
We have a number of strategic avenues available to us to support the group's growth and we look forward to the year ahead with cautious optimism."
The board is pleased to propose a final dividend of 2 pence per share to be paid on 21 December 2018 to shareholders on the register on 14 December 2018, with an ex-dividend date of 13 December 2018. The final dividend is subject to shareholder approval at the company's upcoming annual general meeting ("AGM") to be held on 12 December 2018.
The AGM is to be held at the company's registered office. The company's annual report and Notice of the AGM will be sent out to shareholders in November 2018.
For further information please contact
Orchard Funding Group PLC +44 (0)1582 635 507 Ravi Takhar, Chief Executive Officer
finnCap Limited (Nomad and Broker) +44 (0)20 7220 0579 Jonny Franklin-Adams (Corporate Finance)
Emily Watts (Corporate Finance) Jeremy Grime (Research Director)
For Investor Relations please go to: www.orchardfundinggroupplc.com
Group financial highlights
2018 2017 2016
Lending volume GBP68.73m GBP63.35m GBP48.56m
Loan book GBP30.95m GBP28.42m GBP21.80m
Revenue GBP5.17m GBP4.56m GBP3.47m
Gross profit GBP4.64m GBP4.15m GBP3.15m
Profit before tax GBP1.89m GBP1.64m GBP1.27m
Profit after tax GBP1.51m GBP1.34m GBP1.00m
EPS (pence)1 7.08 6.26 4.70
DPS (pence)2 3.00 3.00 2.81
Return on capital employed3 6.77% 6.73% 6.41%
Return on equity 10.76% 10.16% 8.14%
------------------------------ --------- --------- ---------
1. There are no factors which would dilute earnings therefore fully diluted earnings per share are identical.
2. Dividends per share are based on interim dividends paid in the year and proposed final dividend for the year.
3. See the Group strategic report for further information on key performance indicators ("KPIs").
Chairman's statement
Orchard Funding Group plc has had a very satisfactory year. I am pleased to report that this success has been driven by a continued increase in overall lending volumes, which grew by 8.49% to GBP68.73m. This in turn fed through to an increase in group revenues of 13.46% to GBP5.17m, a record for the group. The position at the year end showed a 6.70% increase in shareholders' equity from GBP13.17m to GBP14.04m.
Investment in staff and systems meant that administrative costs in the business grew by 9.28% to GBP2.74m. This was lower than growth rates in revenue. These increases in investment are important and necessary to ensure that the business continues to support and delight our customers and continue to provide them with the levels of service that they have, rightly, come to expect of us.
The group's profit before tax rose by 15.36% to GBP1.89m, in line with market expectations. Group earnings per share rose by 13.10% to 7.08p (2017 6.26p), a more than respectable outcome for the year.
The level and growth of dividends announced by any company is a balance between retention for future investment and rewarding shareholders for the confidence they have shown in the business. It is no different for Orchard Funding Group and we are happy to propose that the annual dividend (including the interim dividend) remains the same as last year at 3.00p.
The group's main focus of operations is the insurance premium finance market, currently an area growing well and showing every sign of continuing to so do. This has always been at our core. Along with the professional fee funding market, the board is actively involved in seeking other profitable funding streams (school fee funding and sports membership funding as examples). These should add to shareholder value over time.
The macro background remains generally favourable for the group. Despite the recent increases in base rate, interest rates in the UK still remain relatively low but should they rise further in the future the group is well placed to react quickly. Loans are generally for a 10-month period and none are longer than 12 months in duration.
However, if conditions are of benefit to the group then they are inevitably also helpful to our competitors. We have seen strong competition in some areas of our focus with pressure being put upon rates. The largest players in the accountancy fee funding market continue to aggressively protect their market positions. The same can be said of the insurance premium finance market. That said, we believe that we are in a strong position to continue to grow our lending volumes at acceptable rates without needing to resort to some of the tactics our competitors have utilised.
The board remains focused on the cost of our own borrowing and continually looks to seek out new ways in which to keep this as low as possible. Potential sources of liquidity for the group are always examined and we continue to keep all our options under review. With this in mind, you will note our CEO's comments on the banking licence application in his "Chief executive's review" below. It is the way forward for the group.
One of our special services for brokers is to help them find their way through the regulation covering lending. Quite rightly, the FCA has been much tougher on lenders in recent years, but this has meant it has been inundated with consumer credit applications. To help brokers avoid these delays, we will allow them to avoid this regulatory burden and use our regulatory permissions, whilst still being able to obtain all the benefits of their own lending operation. Interest from brokers in our innovative approach remains considerable and we believe we are still the only providers of such a service in the UK.
The board is very satisfied with the progress of the group to date. We will continue to examine all appropriate strategic avenues for the group and will also continue to make the investments necessary to ensure continuing success while, at the same time, remaining focused on the cost of our borrowing, the rates returned and the size and quality of the loans we provide.
We look to the future with confidence.
Gary Jennison Chairman
12 November 2018
Chief executive's review
We are pleased to report that we continue to build on the progress we made last year and continue to increase our profits on a year on year basis.
As stated in the "Our business model" section below, and for the reasons given in that section, we no longer separate insurance broking and professional fees and therefore information on individual markets would not be helpful
The lending market is being flooded by liquidity from alternative funding sources, but we continue to sail a focused and steady course. Our key competition is still the largest players in the market, whose multi-billion-pound lending market we continue to target.
We are delighted to confirm that we have now moved all of our business to a newly developed in-house IT platform, therefore removing our reliance on 3rd party IT providers. Our new IT platform uses cutting edge technology, which will significantly improve our offering to our clients and our competitiveness in the future. Our 3rd party IT platform held us back in the past and we will no longer suffer from this constraint on our business. By using our lean approach to the IT project, we have delivered a new IT platform at minimal cost to the company.
We have also entered 2 new and exciting markets; school fee funding and golf fee funding. Whilst we are still in the early stages of penetrating these markets, we are in the process of discussions with a number of schools and golf clubs and believe these will be great asset classes to add to our balance sheet for the future.
We have continued to work on what we believe to be the most significant improvement to our business over the course of the year. We are happy to confirm that our bank licence application has been submitted at the invitation of the Regulator and is progressing towards approval. A bank licence will significantly reduce our costs of liquidity and enable us to add greater leverage to our business, which will over-time drive higher returns to our shareholders. We hope to receive our bank licence in the first quarter of 2019.
We remain a small, lean, hardworking and profitable finance company in a huge financial services market. We are passionate about our business and have now operated in our market for nearly 18 years. We will continue to work as hard as we can and to the best of our abilities. We are confident that this will result in an increased share of our market.
We operate in a multi-billion-pound market, which is dominated by two large and well managed companies. We will continue to work hard to take a very small portion of the market for the group. We have the capital, liquidity and a great team to achieve our conservative plans and projections for the business and are looking forward to our continued growth over the coming years.
We paid a dividend of 2p per share in December 2017 and an interim of 1p per share in April 2018. I am happy to announce that the board has proposed a final dividend of 2p per share to be paid in December 2018, subject to shareholder approval.
Ravi Takhar
Chief executive officer 12 November 2018
Group strategic report
Strategy and objectives
The group's principal objective is to increase our profitability in a prudent, sustainable manner. The reason for this is that our stakeholders (employees, shareholders, partners, other customers, creditors and government) will all benefit from profit growth in the group.
We have two main financial strategies for doing this:
-- to grow our lending book profitably. In the short to medium term, the directors believe that the group's aims will be achieved first by increasing the number of our partners (insurance brokers, professional firms), including taking on new partners (schools and sports clubs) and secondly, by increasing the volume of business from these partners. We have, once again, bolstered our sales team with motivated, competent professionals who are attacking new potential customers and markets and have already achieved sensible growth in a hard economic environment;
-- to give further security to our sources of liquidity. As we mentioned in the half year report, we were confident that the PRA would welcome our application for a banking licence. They have done so and we are now into the process. A banking licence has been a long-standing strategic goal for Orchard. It will enable us to increase our liquidity further and reduce our reliance on commercial lenders as we build our customer deposit base.
Our financial strategy is bolstered by our non-financial strategies. First, we consider those brokers and professional firms with whom we work as our partners. We provide them with the tools they require to run their own finance businesses or we directly provide their customers with finance. We have found that in this way these businesses become supportive participants in our objectives because they see how this will assist them in achieving theirs. Our sales team are given support in meeting the targets set for them by finding partners who fit in with our business ethos, arranging prospect meetings and, where required, making use of senior personnel to help them close the deal. Care of our partners is of paramount importance in our business culture and this aspect is a constant part of training for all staff. Feedback from our partners in this area has been positive. Performance targets set for our staff (for example, answering partner enquiries promptly) have all been met.
The aim going forward is to build strongly on both our core markets and those which assist in achieving our overall objectives.
Our business model
The group's main business is providing credit to businesses and consumers to enable them to spread the cost of their insurance premiums or professional fees.
In the past, the group has reported in terms of there being two core areas - insurance premium funding and funding for professionals. The board has reviewed this method of reporting and concluded that the nature of these (and additional products) is so similar that any segregation would not give meaningful information to users of the financial statements. Both areas are managed on a similar basis, carry similar risks and rewards and need to comply with the same regulations. The board, which is considered to be the chief operating decision maker, now receives information on an aggregated basis. For this reason they are not separated this year (except to the extent that regulation requires it).
Bexhill borrows up to 75% of the amount advanced to each of its clients (up to a maximum of GBP15m) from its bankers, Barclays Bank plc. Orchard has in the past borrowed through Orchard Lending Club (a trading style of the group). These loans are still extant. In August 2017 the company arranged a facility of GBP4m with Conister Bank. This was reduced in July 2018 to GBP2m, as being all that was required at the time and to keep down costs. The balance of lending is provided by these companies from their own resources. At 31 July 2018 the group had capital and reserves of
GBP14.04m. Both subsidiaries have operated within a disciplined lending environment since their inception. Barclays performs regular reviews and supplements these with an audit every six months by external independent auditors. Conister requires information on lending to be sent on a regular basis. Lending limits to our supporting partners and to the end borrowers are set by reference to financial and other qualitative information for both. Limits are set based on financial information, credit reports, regulatory requirements and other qualitative factors obtained from our partners and their clients. In addition, an annual review process, including regulatory permissions and credit checks, is conducted and each partner is monitored monthly for the company's financial exposure to that entity.
The group's average cost of finance was approximately 3.44% in the financial year to 31 July 2018 (4.06% in the year to 31 July 2017).
A bank licence will increase our liquidity and reduce reliance on third party financing.
The business environment
The insurance premium finance market in which the group operates is still expected by the board to grow over the next five years in line with the general insurance market. We believe that most of our premium finance growth will come from the direct insurance side rather than from broker premium funding companies, although the premium funding company activities will remain the largest part of the business for the foreseeable future. The market for professional fee finance has slowed this year. This fact, coupled with an aggressive response from our competitors, has meant a lot of hard work to get to where we are. We have been examining new markets which, although at an early stage for us, are already looking very promising. Providing finance for school fees and sports clubs are two of these areas. Needless to say, the same vigorous, disciplined approach will be applied to lending in these sectors.
There is the continuing uncertainty attaching to the UK leaving the European Union, which applies to many businesses. However, the board believes that the direct effect of this on Orchard will not be significant in the short term. Conditions arising from this process (including the recent rises in interest rates) have had little impact on us so far. If rates rise further, the nature of the business will allow fairly quick reaction to this with our average loans being ten months on average and none over twelve. Increases in interest rates will also lead to availability of liquidity becoming more important for businesses and consumers and the board believes that this will bring further opportunities for Orchard.
Principal risks and uncertainties
The group's activities expose it to a variety of risks;
-- credit risk; -- liquidity risk; -- cash flow interest rate risk; and -- conduct risk.
The group's overall risk management programme focuses on reducing the effect of these risks on the group's financial performance. A regular assessment of the principal risks affecting the group is carried out by the board of directors. It identifies, evaluates and mitigates financial risks and has written policies for credit risk and liquidity risk.
The principal risks, an explanation of what they are, their impact on the group and how they are mitigated, are shown in Table 1 below. Our sole business is lending money and therefore the risks apply to this area.
There are other risks associated with general financial uncertainty in this business (or in any other business), e.g. loss of staff and insurance risk. These have been reviewed but are not considered key or principal risks.
Table 1 principal risks
Assessment
of change
Risk Explanation of Impact on the in risk year-on- Mitigation of risk
risk group year
Credit The risk that A major loss could have This is an Money is only lent
risk a serious for
debtors will effect on group profit. ongoing periods up to one
default. Although year
loans to insurance broking situation. through regulated
finance companies can Despite introducers who guarantee
be
substantial, we have mitigation the loans. Borrowing
a claim on limits
the underlying agreements there is are set based on
which still prudent
are considerably smaller. risk that underwriting principles.
For this bad
reason any losses are debts may Impairment reviews
likely to are
come from relatively occur. This regularly conducted
small debts, to
therefore these would happened identify potential
have little in problems
impact on liquidity 2018 early.
or solvency.
------------------- --------------------------- ------------------------ ----------------------------
Liquidity A lack of funding If our funding had been This is an Our bankers have
to halved
risk finance our for the whole of the ongoing supported us since
2018 year, 2002
business. and there had been no situation. and last year increased
changes in our
overheads, there would There has funding by 50%. They
still have have
been a pre-tax profit been no renewed our facility
of for
approximately GBP0.8m. change in another year and
There is no this have
threat to solvency or risk. indicated, so far
own as they are
liquidity through a able, that they have
reduction in no
funding. wish to withdraw
that
support. Other lines
of
credit have since
been
opened to us. Available
credit and our own
cash
balances amounted
to
GBP2.3m at 31 July
2018.
------------------- --------------------------- ------------------------ ----------------------------
Cash flow An increase in Loans already made will This is an Management is in
bank be regular
interest rate means that effectively charged ongoing contact with its
at a lower bankers
rate risk loans already margin for part of the situation. and routinely reviews
made borrowing the
need to be covered term. Despite two financial situation
in the
by new borrowing In any realistic scenario, increases economy. Loans made
liquidity in are
at a higher rate. and solvency would not rates this relatively short
be term (no
significantly affected. year, there more than twelve
months
has been with the average
no at ten) so
significant any increase is likely
to
change in have a fairly short-term
this
risk. impact.
------------------- --------------------------- ------------------------ ----------------------------
IT risk Disruption to Persistent failures This is an There are in place
or would have an robust
failure of our enormous impact on our ongoing business continuity
IT business
systems. and could lead to its situation. procedures and security
collapse. Our
Clearly, this new system measures in the event
of IT
would affect solvency. will give failures or disruption.
However, us We
our controls are such more control have developed our
that even a own
minor disruption is but will system which, although
very quickly not
picked up and action effect any operational, is
taken. We consistently
have never had this change in being tested. This
type of this will give
failure. risk. more control than
we have
previously had.
------------------- --------------------------- ------------------------ ----------------------------
Conduct Any action that Failing to bring conduct This is an The board sets the
risk in
risk leads to customer line faces regulatory ongoing risk. minimum standards
action, fines,
detriment or and reputational damage, required and provides
has an which
adverse effect can harm us for years oversight to monitor
on beyond the that
market stability event. these risks
or
effective are managed effectively
competition. and escalated where
appropriate.
------------------- --------------------------- ------------------------ ----------------------------
In summary:
-- credit risk is reduced by a robust system of checks on borrowers and by third party guarantees;
-- liquidity risk has been alleviated by a new source of funding from another bank and should be further eased by obtaining a bank licence;
-- cash flow interest rate risk is mitigated by the fact that loans are short term and by regular interaction with our bankers;
-- risk from disruption of the IT system is avoided by thorough business continuity procedures; and
-- conduct risk is taken very seriously. All our employees are responsible for the management and mitigation of conduct risk, in particular the board.
Our internal control systems ensure that the incidence of fraud or error is kept to a minimum. Much of this process is automated.
The nature of the business is that loans are made either to introducer finance companies or to clients of our introducing partners. Although there is high concentration when lending to finance companies, (at 31 October the largest nominal exposure was 14.78% of our loans), the individual debts making up these loans are assigned to us in the event of default. The reality, therefore, is that our exposure is low. At 31 October 2018, (the latest date of review), total outstanding loans were GBP31.13m, of which the highest was GBP0.13m, representing 0.43% of the outstanding amounts. This was the level of our highest exposure at that date. The situation was similar throughout the year and is expected to remain so for the foreseeable future.
We have experienced late payments in the past. The majority of these are through clients of our introducers (or the introducers themselves) changing banking details. Where there are other issues which cause late payment, we investigate these. We review debts for impairment and make provision where necessary. As part of this process, we have provided for GBP0.29m during the year to 31 July 2018 (GBP0.05m in the year to 31 July 2017), giving a provision of
GBP0.34m carried forward at 31 July 2018 (GBP0.05m at 31 July 2017). This potential bad debt has arisen as a result of a fraud and a major customer of one of our partner brokers going into liquidation. In the previous year one situation arose causing a loss of GBP0.05m (see note 10). Because of the size of the individual repayments. any impact on our business through late payments would be negligible.
Development and performance of the business
The fundamental function of the business is to lend money safely. To do this the group has relied on obtaining funding to provide loans to clients of its partners. The ability to provide this money is crucial to the business and availability of funds is a key area to enable future growth. This is the major reason for applying for a banking licence.
The ability to find borrowers is also key to the business. This has been discussed at the beginning of the Group strategic report. We have continued with our more formal and extensive marketing plan. This continues to work well (albeit that economic conditions are challenging at present). Our sales team has been further enhanced during the year.
Our margin is another key area. Upward changes in base rate could erode our margins (but only in the short term). Our rates would increase to reflect any further increases in base rate. Our own analysis indicates that the influence on our business would be negligible. Indeed, neither the reduction in bank rate during the previous year nor the increase in this year have had any real impact.
Overheads in this business are relatively stable. We have increases resulting from an increased sales function, increasing our bank borrowings, investment in the banking licence and enhancements to our IT systems. Other overheads have not altered significantly.
The board has identified the following financial KPIs:
-- Lending.
-- Gross rate on loans made.
-- Borrowing and other capital resources.
-- Cost of borrowing.
The table below gives a breakdown
of our KPIs. Actual
2018 2017 2016
Group
Loans made in the year GBP68.73m GBP63.35m GBP48.56m
Average gross rate on loans
made 6.29% 6.06% 6.22%
Level of borrowing GBP16.06m GBP13.79m GBP9.24m
Own capital resources GBP14.04m GBP13.17m GBP12.34m
Cost of borrowing GBP0.45m GBP0.33m GBP0.24m
---------------------------------- --------- ----------- ---------
The increase in loans made in the year and the increase in average rate over the previous year has resulted in increases in reported turnover of GBP0.61m to GBP5.17m. As stated earlier the market has been hard.
This increase in lending has led to an increase in borrowing requirement.
This is the first year that we have combined our lending activities (for the reasons disclosed in the section on "Our business model" on page 4 of the statutory accounts). To give a comparison with previous years' reporting we set out below tables showing separate KPIs for insurance premium and professional fee funding.
2018 2017 2016
Insurance premium funding
Loans made in the year GBP51.25m GBP43.04m GBP32.79m
Average gross rate on
loans made 5.68% 5.49% 5.64%
Level of borrowing GBP15.01m GBP13.54m GBP9.22m
Own capital resources GBP3.66m GBP2.94m GBP2.42m
Cost of borrowing GBP0.41m GBP0.32m GBP0.24m
----------------------------- ----------- ----------- -----------
Professional fee funding
Loans made in the year GBP17.48m GBP20.31m GBP15.77m
Average gross rate on
loans made 8.09% 7.27% 7.44%
Level of borrowing GBP1.04m GBP0.25m GBP0.04m
Own capital resources GBP0.93m GBP0.68m GBP0.52m
Cost of borrowing GBP0.04m GBP0.01m GBP0.00m
----------------------------- ----------- ----------- -----------
In terms of non-financial indicators, the most important of these is quality of management and staff.
Our senior members of staff have a substantial number of years of experience between them working in the business. Because, over the years, they have taken on additional responsibilities, they know each area of the business well.
All our staff are fully trained for the role which they take. Customer care is of paramount importance in our business culture and this aspect is a constant part of training for all staff members. Feedback from our partners in this area has been very positive. Performance targets set for our staff have all been met.
People are happy to contribute towards our success and their views are always listened to by senior management. In many cases ideas which come forward are put into action and in all situations explanations are given when this does not happen.
Going concern
The financial statements have been prepared on a going concern basis which assumes that the group will be able to continue its operations for the foreseeable future.
The directors continually assess the prospects of the group. Forecasts are prepared for a three-year period, on a rolling basis. These are also subject to sensitivity analysis, the main aspect of which is the value of loans made. In all scenarios, there is no indication that there will be a problem in continuing as a going concern. However, it is important to appreciate that the further away in time the estimate, the less reliable it is. The forecasts are prepared on the basis that bank base rate will rise by 0.25% pa over the next three years. This has been intimated by Mark Carney, Governor of the Bank of England. Should this be the case we are in a position to react within a short period of time (as mentioned in the section on cash flow interest rate risk above) and with relatively little impact on our margins.
The key assumptions and bases used in the forecasts are:
-- Loans through our partners will grow from circa GBP69m in 2018 to circa GBP120m in 2021; -- Liquidity will be available to fund those loans; -- Margins will remain stable on both corporate and direct business;
-- Overhead will increase at the rate of inflation with stepped increases at certain points (when capacity constraints are hit);
-- The funding system will be able to accommodate the increased business.
The consolidated statement of financial position shows the situation at the year end in detail.
The directors have prepared and reviewed financial projections for the 12-month period from the date of signing of these financial statements. Based on the level of existing cash and the projected income and expenditure, the directors have a reasonable expectation that the company and group have adequate resources to continue in business for the foreseeable future. Accordingly, the going concern basis has been used in preparing the financial statements.
Environmental, social responsibility, community, human rights issues and gender diversity
The group is a small group. The impact of the group on the environment consists of power used in an office environment and fuel used for getting to and from work. Environmental issues are therefore negligible.
The group operates out of an office in Luton. Most of our employees are based in the local area. We therefore contribute to the economy of the local community. None of our employees earn less than GBP10 per hour (before any bonuses). We provide health club membership and childcare vouchers for any staff who wish it. We review the background of our suppliers and will not use any supplier which, as far as we are aware, breaches our own high standards as regards human rights.
The main board of directors is currently all male. The main reason for this situation is that the group took in outside board members who were best suited to the positions. The board of the two subsidiaries consist of one male and two females each. Males make up 57.89% of the employees in total (41.67% in 2017).
Approved by the directors and signed by order of the board
Liam McShane, Company secretary
12 November 2018
Consolidated income statement
2018 2017
Notes GBP000 GBP000
------------------------------------------------ ------- -------
Continuing operations
Revenue 4 5,174 4,560
Finance costs 6 (452) (329)
Other operational costs 5 (83) (78)
------------------------------------------------ ------- -------
Gross profit 4,639 4,153
Administrative expenses 5 (2,746) (2,512)
------------------------------------------------ ------- -------
Operating profit and profit before tax 1,893 1,641
Tax 7 (381) (303)
------------------------------------------------ ------- -------
Profit for the year from continuing operations 1,512 1,338
Other comprehensive income - -
------------------------------------------------ ------- -------
Total comprehensive income for the year
attributable to the owners of the parent 1,512 1,338
------------------------------------------------ ------- -------
Earnings per share attributable to the owners of the parent during the year (pence)
Basic and diluted 8 7.08 6.26
Consolidated statement of financial position
2018 2017
-----------------------------------
Notes GBP000 GBP000
----------------------------------- ----------- -------- --------
Assets
Non-current assets
Property, plant and equipment 59 76
Intangible assets 42 75
Trade and other receivables 10 18 23
----------------------------------- ----------- -------- --------
119 174
----------------------------------- ----------- -------- --------
Current assets
Trade and other receivables 10 31,084 28,523
Cash and cash equivalents:
Bank balances and cash in hand 1,286 1,728
---------------------------------------------------------- --------
32,370 30,251
----------------------------------- ----------- -------- --------
Total assets 32,489 30,425
----------------------------------- ----------- -------- --------
Equity and liabilities
Equity attributable to the owners
of the parent
Called up share capital 214 214
Share premium 8,692 8,692
Merger reserve 891 891
Retained earnings 4,240 3,369
----------------------------------- ----------- -------- --------
Total equity 14,037 13,166
----------------------------------- ----------- -------- --------
Liabilities
Non-current liabilities
Borrowings 11 49 57
Deferred tax 5 7
----------------------------------- ----------- -------- --------
54 64
----------------------------------- ----------- -------- --------
Current liabilities
Trade and other payables 12 2,051 3,182
Borrowings 11 16,008 13,734
Tax payable 339 279
----------------------------------- ----------- -------- --------
18,398 17,195
----------------------------------- ----------- -------- --------
Total liabilities 18,452 17,259
----------------------------------- ----------- -------- --------
Total equity and liabilities 32,489 30,425
----------------------------------- ----------- -------- --------
Consolidated statement of changes in equity
Called
up Retained Share Premium Merger Total
share earnings reserve equity
capital
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 August
2016 214 2,545 8,692 891 12,342
Changes in equity
Profit and total
comprehensive
income - 1,338 - - 1,338
Transactions with
owners:
Dividends paid - (514) - - (514)
---------------------- ---------------------- --------------- ---------------------- ------------- --------------
Balance at 31 July
2017 214 3,369 8,692 891 13,166
---------------------- ---------------------- --------------- ---------------------- ------------- --------------
Changes in equity
Profit and total
comprehensive
income - 1,512 - - 1,512
Transactions with
owners:
Dividends paid - (641) - - (641)
---------------------- ---------------------- --------------- ---------------------- ------------- --------------
Balance at 31 July
2018 214 4,240 8,692 891 14,037
---------------------- ---------------------- --------------- ---------------------- ------------- --------------
Retained earnings consist of accumulated profits and losses of the group. They represent the amounts available for further investment in group activities. Only the element which constitutes profits of the parent company are available for distribution. There are no restrictions on payment of dividends by the subsidiaries to the parent or by the parent to shareholders.
The share premium account arose on the IPO on 1 July 2015 at a premium of 95p per share. Costs of the IPO have been deducted from the account as permitted by IFRS.
The merger reserve arose through the formation of the group on 23 June 2015 using the capital reorganisation method as shown in note 2.4 below.
Consolidated statement of cash flows
2018 2017
Notes GBP000 GBP000
Cash flows from operating activities:
Profit before tax 1,893 1,641
Adjustment for depreciation and amortisation 56 48
Hire purchase interest 2 2
---------------------------------------------- ------ --------- ---------
1,951 1,691
(Increase) in trade and other receivables (2,556) (6,541)
(Decrease)/increase in trade and
other payables (1,131) 1,525
---------------------------------------------- ------ --------- ---------
(1,736) (3,325)
Tax paid (323) (316)
---------------------------------------------- ------ --------- --------- Net cash absorbed by operating activities (2,059) (3,641) ---------------------------------------------- ------ --------- --------- Cash flows from investing activities Purchases of property, plant and equipment (1) (2) Purchase of intangible fixed assets (5) (59) ---------------------------------------------- ------ --------- --------- Net cash absorbed by investing activities (6) (61) ---------------------------------------------- ------ --------- --------- Cash flows from financing activities Dividends paid (641) (514) Net proceeds from borrowings 2,276 4,565 Hire purchase repaid (12) (11) ---------------------------------------------- ------ --------- --------- Net cash generated by financing activities 11.2 1,623 4,040 ---------------------------------------------- ------ --------- --------- Net (decrease)/increase in cash and cash equivalents (442) 338 Cash and cash equivalents at the beginning of the year 1,728 1,390 ---------------------------------------------- ------ --------- --------- Cash and cash equivalents at the end of year 1,286 1,728 ---------------------------------------------- ------ --------- ---------
Notes to the consolidated financial statements
1. Preliminary announcement
Orchard Funding Group plc ("Orchard") is a public limited company incorporated and domiciled in England and Wales, whose shares are publicly traded on the AIM market of the London Stock Exchange. The registered office is 721 Capability Green, Luton, Bedfordshire LU1 3LU and the principal place of business is the United Kingdom.
The preliminary announcement set out above does not constitute Orchard's statutory financial statements for the years ended 31 July 2018 or 2017 within the meaning of section 434 of the Companies Act 2006 but is
derived from those audited financial statements. The auditor's report on the consolidated financial statements for the years ended 31 July 2018 and 2017 is unqualified and does not contain statements under s498(2) or
(3) of the Companies Act 2006.
The accounting policies used for the year ended 31 July 2018 are unchanged from those used for the statutory financial statements for the year ended 31 July 2017. The 2018 statutory accounts will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
2. Compliance with accounting standards
While the financial information included in this preliminary announcement has been computed in accordance with IFRS, this announcement does not itself contain sufficient information to comply with IFRS.
Accounting standards adopted in the year
No new accounting standards that have become effective and adopted in the year have had a significant effect on the Group's Financial Statements.
Accounting standards issued but not yet effective
At the date of authorisation of the Financial Statements, there were a number of other Standards and Interpretations (International Financial Reporting Interpretation Committee - IFRIC) which were in issue but not yet effective, and therefore have not been applied in these Financial Statements. The Directors have not yet assessed the impact of the adoption of these standards and interpretations for future periods, but do not expect them to have any significant impact on the Group's financial statements.
3. Going concern
The financial statements have been prepared on a going concern basis which assumes that the Group will be able to continue its operations for the foreseeable future. The Directors have prepared and reviewed financial projections for the 12 month period from the date of signing of these financial statements. Based on the level of existing cash and the projected income and expenditure, the Directors have a reasonable expectation that the Company and Group have adequate resources to continue in business for the foreseeable future.
Accordingly the going concern basis has been used in preparing the financial statements. This is discussed more fully in the Group strategic report. Orchard Funding Group plc ("the company") and its subsidiaries (together "the group") provide funding and funding support systems to insurance brokers and professional firms through the trading subsidiaries. The group operates in the United Kingdom.
4. Segment information
The group operates wholly within the United Kingdom therefore there is no meaningful information that could be given on a geographical basis. In previous years the board recognised two discrete operating segments - insurance premium funding and professional fee funding. After a detailed review of this method of analysis, the board has concluded that the nature of these (and additional products) is so similar that any segregation (other than central costs) would not give meaningful information to users of the financial statements. Both areas are managed on a similar basis, carry similar risks and rewards and need to comply with the same regulations. For this reason they are not separated this year (except to the extent that regulation requires it).
The board therefore assesses the entire business based on operating profit (before tax and exceptional items, but after interest which is a cost of sale). The revenues, operating costs and operating profit are shown below.
2018 Total Central Financing
GBP000 GBP000 GBP000
-------------------------------------- ----------------------- ------------------ ------------------------
Revenue 5,174 - 5,174
-------------------------------------- ----------------------- ------------------ ------------------------
Interest payable (452) - (452)
Operational costs and administrative
expenses (2,829) (658) (2,171)
-------------------------------------- ----------------------- ------------------ ------------------------
Operating profit/(loss) before
tax 1,893 (658) 2,551
Current tax expense (381) - (381)
-------------------------------------- ----------------------- ------------------ ------------------------
Profit/(loss) for the year after
tax 1,512 (658) 2,170
-------------------------------------- ----------------------- ------------------ ------------------------
2017 Total Central Financing
GBP000 GBP000 GBP000
-------------------------------------- ----------------------- ------------------ ------------------------
Revenue 4,560 - 4,560
-------------------------------------- ----------------------- ------------------ ------------------------
Interest payable (329) - (329)
Operational costs and administrative
expenses (2,584) (592) (1,992)
Goodwill on consolidation written
off (6) - -
-------------------------------------- ----------------------- ------------------ ------------------------
Operating profit/(loss) before
tax 1,641 (592) 2,239
Current tax expense (303) - (303)
-------------------------------------- ----------------------- ------------------ ------------------------
Profit/(loss) for the period after
tax 1,338 (592) 1,936
-------------------------------------- ----------------------- ------------------ ------------------------
5. Expenses by nature
2018 2017
GBP000 GBP000
------------------------------------------------ ------- -------
Interest payable in cost of sales 452 329
Other operational costs 83 78
Employee costs (including directors) 1,002 1,072
Advertising and selling costs 273 218
Bank fees 553 438
Professional and legal fees 198 228
Impairment provision 290 79
IT costs 66 71
Depreciation and amortisation 56 54
Other expenses 308 352
------------------------------------------------ ------- -------
Total cost of sales, other operational
costs and administrative expenses 3,281 2,919
------------------------------------------------ ------- -------
6. Finance income and costs
The group's income comes from making loans.
Interest payable on borrowings to finance these loans is therefore included as a cost of sale. The amount included was GBP452k (2017 GBP329k).
7. Tax expense
7.1 Current year tax charge:
2018 2017
-----------------------------------------
GBP000 GBP000
----------------------------------------- ------ ------
Current tax expense 365 331
Adjustment re previous year tax expense 18 (25)
Deferred tax expense relating to the origination and reversal of
(2) (3)
temporary differences
381 303
7.2 Tax reconciliation
The tax assessed for the year differs from the main corporation tax rates in the UK (19%, 2017 - 19% and 20%). The differences are explained below.
2018 2017
-------------------------------------------
GBP000 GBP000
------------------------------------------- -------- --------
Profit before tax for the financial
year 1,893 1,641
------------------------------------------- -------- --------
Applicable rate - 19.00% (2017 19.67%) 19.00% 19.67%
------------------------------------------- -------- --------
Tax at the applicable rate 360 323
Effects of:
Expenses not deductible for tax 3 5
Adjustment re previous year tax expense 18 (25)
------------------------------------------- -------- --------
Tax charge for the period 381 303
------------------------------------------- -------- --------
8. Earnings per share
Earnings per share is based on the profit for the year of GBP1,512k (2017 GBP1,338k) and the weighted average number of ordinary shares in issue during the year of 21.35m (2017 21.35m). There are no options or other factors which would dilute these therefore the fully diluted earnings per share is identical.
9. Dividends
2018 2017
-------------------------------------------------
GBP000 GBP000
------------------------------------------------- ------ ------
Amounts recognised as distributions to equity
holders in the period:
Final dividend for the year ended 31 July 2017
of 2p (2016 1.405p) per share 427 300
Interim dividend for the year ended 31 July
2018 of 1p (2017 1p) per share 214 214
------------------------------------------------- ------ ------
641 514
------------------------------------------------- ------ ------
Proposed final dividend for the year ended
2018 of 2p (2017 2p) per share 427 427
------------------------------------------------- ------ ------
10. Trade and other receivables
2018 2017
Group Group
GBP000 GBP000
---------------------------------- -------- --------
Non-current
Other receivables 18 23
---------------------------------- -------- --------
18 23
---------------------------------- -------- --------
Current
Trade receivables 30,945 28,413
Intercompany receivables - -
Other receivables 111 86
Prepayments 28 24
---------------------------------- -------- --------
31,084 28,523
---------------------------------- -------- --------
Standard credit terms for trade receivables are based on the length of the loan but repayments are due on a monthly basis. As part of the impairment review process (and among other evaluation methods), debts on which no repayment has been received in the last 30 days are assessed. It is not abnormal for borrowers to miss a payment for several reasons (e.g. changing banks) and 30 days gives time for the situation to be rectified. Debts within this 30 day period are not considered past due. Any debts for which repayments are still outstanding after 30 days would be considered overdue and subject to an impairment review. The amount of debts past due but not impaired at the year end was GBPNil (2017 GBPNil). The directors consider that the carrying amount of trade and other receivables approximates their fair value. There are impaired debts at the year end amounting to GBP343k (2017 GBP53k) against which GBP290k was charged in the year (2017 GBP53k). Provision has been made in full for these.
Trade receivables can be analysed
as follows:
2018 2017
Group Group
GBP000 GBP000
------------------------------------ ------ -------
Amount receivable not past due 30,945 28,3413
Amount receivable past due but - -
not impaired
Amount receivable impaired (gross) 343 53
Less impairment (343) (53)
------------------------------------ ------ -------
30,945 28,413
------------------------------------ ------ -------
11. Borrowings
2018 2017
Group Group
-------------------------
GBP000 GBP000
------------------------- ----------------------------- ---------------------
Non-current:
Other loans 41 41
Hire purchase contracts 8 16
49 57
Current:
Bank loans 16,000 13,520
Other loans - 204
Hire purchase contracts 8 10
------------------------- ----------------------------- ---------------------
16,008 13,734
------------------------- ----------------------------- ---------------------
11.1 Terms and debt repayment schedule:
The bank loans are due within
one year. The other loans fall
due as follows:
2018 2017
Group Group
GBP000 GBP000
--------------------------------- ------ ------
Within 1 year - 204
Later than 1 year but no later
than 2 41 40
Later than 2 years but no later
than 5 - 1
--------------------------------- ------ ------
41 245
--------------------------------- ------ ------
The minimum payments under hire purchase contracts are as follows:
2018 2017
Group Company Group Company
--------------------------
GBP000 GBP000 GBP000 GBP000
-------------------------- --------------- --------- ------------- ---------
Within 1 year 8 - 11 -
Later than 1 year but no
later than 5 9 - 18 -
-------------------------- --------------- --------- ------------- ---------
17 - 29 -
Future finance charges (1) - (3) -
-------------------------- --------------- --------- ------------- ---------
16 - 26 -
-------------------------- --------------- --------- ------------- ---------
The present value of hire purchase liabilities are as follows:
Within 1 year 8 - 10 -
Later than 1 year but no
later than 5 8 - 16 -
-------------------------- -------------- ----
16 - 26 -
-------------------------- -------------- ----
Barclays Bank borrowings are secured by a fixed and floating charge over all the assets of Bexhill UK Limited, bear interest at rates of 2.90% above LIBOR plus any associated costs, and are repayable within one year of the advances. The loans are provided on a revolving 12 monthly basis under a facility which is due for renewal on 29 July 2019 at which time it is expected that they will be renewed. The maximum drawdown on the facility is currently GBP15m all of which was drawn at the year end (2017 GBP1.4m undrawn). The directors consider that the terms of this facility closely match the maturity dates of the group's receivables.
Conister Bank borrowings are secured over the assets of Orchard Funding Limited, bear interest at a rate of 4.5% pa and are repayable within one year of the advance. The maximum drawdown facility is currently GBP2m of which GBP1m was drawn at the year end (2017 GBPNil available).
Other borrowings are unsecured and bear interest at varying rates between 4.00% and 6.25%.
Hire purchase liabilities are secured on the assets that they finance and bear interest at varying rates.
11.2 Reconciliation of liabilities arising from financing activities
2016 Cashflows 2017 Cashflows 2018
------------------------------
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ ------- --------------- -------- --------------- --------
Non-current:
Other loans 1 40 41 - 41
Hire purchase contracts 26 (10) 16 (8) 8
------------------------------ ------- --------------- -------- --------------- --------
27 30 57 (8) 49
------------------------------ ------- --------------- -------- --------------- --------
Current:
Bank loans 9,174 4,346 13,520 2,480 16,000
Other loans 25 179 204 (204) -
Hire purchase contracts 9 1 10 (2) 8
------------------------------ ------- --------------- -------- --------------- --------
9,209 4,526 13,734 2,274 16,008
------------------------------ ------- --------------- -------- --------------- --------
Total liabilities from
financing 9,236 4,556 13,791 2,266 16,057
Hire purchase interest
included in operating
cashflows (2) (2)
--------------- ---------------
Cashflows from financing
activities 4,554 2,264
------------------------------ ------- --------------- -------- --------------- --------
Compromising
Net proceeds from borrowings 4,565 2,276
Borrowings repaid (11) (12)
--------------- ---------------
4,554 2,264
--------------- ---------------
12. Trade and other payables 2018 2017
Group Group
GBP000 GBP000
--------------------------------------- ----------------- --------------------
Trade payables 1,710 2,833
Other payables 51 40
Other tax and social security
costs 33 43
Accrued expenses 257 266
--------------------------------------- ----------------- --------------------
2,051 3,182
--------------------------------------- ----------------- --------------------
The directors consider that the carrying value of trade and other payables approximates to their fair value.
13. Financial instruments
The company is exposed to the risks that arise from its use of financial instruments. The objectives, policies and processes of the company for managing those risks and the methods used to measure them are detailed in note 3 below.
13.1 Principal financial instruments
The principal financial instruments used by the company, from which financial instrument risk arises, are as follows:
-- Cash and cash equivalents
-- Trade and other receivables
-- Trade and other payables
-- Borrowings
13.2 Financial instruments by category
The group held the following financial assets at the reporting date:
2018 2017
Group Group
-------------------------------
GBP000 GBP000
------------------------------- -------------- ------------------------
Loans and receivables:
Trade and other receivables:
non-current 18 23
Trade and other receivables:
current
Cash and cash equivalents: 31,056 28,499
Bank balances and cash in
hand 1,286 1,728
------------------------------- -------------- ------------------------
32,360 30,250
------------------------------- -------------- ------------------------
The group held the following financial liabilities at the reporting date:
2018 2017 Group Group GBP000 GBP000
Other financial liabilities at amortised cost:
Interest bearing loans and
borrowings:
Borrowings payable: non-current 49 57
Borrowings payable: current 16,008 13,734
Trade and other payables 2,018 3,139
---------------------------------- ------ ------
18,075 16,930
---------------------------------- ------ ------
13.3 Fair value of financial instruments
The fair values of the financial assets and liabilities are not materially different to their carrying values due to the short-term nature of the current assets and liabilities.
13.4 Financial risk management
The company's policies for financial risk management are outlined in note 3 above. A sensitivity analysis of the group's exposure to interest rate movements has not been prepared as, in the opinion of the directors, the impact would be immaterial given the short term nature of the group's lending.
14. Treatment of borrowings
The group borrows money from its bankers and lends this on, together with its own funds, to its customers. Any increase in activity leads to an increase in debtors and an associated increase in borrowings. If the company was one which bought and sold goods or services the money borrowed would be similar to the company's stock in trade and the change in creditors would be shown as part of operating cash flows. However, accounting standards require cash flows from financing to be shown separately and this means that there appears to be a large outflow of cash from the company's operations which is then covered by borrowings. For reasons stated above this is not the case.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR FKBDDFBDDADD
(END) Dow Jones Newswires
November 13, 2018 02:00 ET (07:00 GMT)
1 Year Orchard Funding Chart |
1 Month Orchard Funding Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
