Dealing on AIM

RNS Number:1233X
Ultimate Finance Group PLC
12 June 2002




Ultimate Finance Group plc ("Ultimate Finance") announces that dealings in its
ordinary shares have commenced today on the Alternative Investment Market of the
London Stock Exchange ("AIM").


Key points:


•         Newly formed Ultimate Finance Group plc, a factoring business, has
successfully raised £1.82 million by way of a placing.


•         A total of 7,583,332 new ordinary shares have been placed at the
Placing Price of 24p per share.  This represents 67.5% of the enlarged issued
ordinary share capital.


•         The Group proposes to offer recourse factoring, confidential invoice
discounting, disclosed invoice discounting and trade finance services. Factoring
is a strongly growing sector of the financial market.



•         Shareholders' funds will be supplemented by conditional facilities
totalling £4,500,000 from Bank of Scotland.



•         Figures from the Factors and Discounters Association ("FDA")
demonstrate that its members were providing £6.2 billion in funding at the end
of 2000 compared with £4.9 billion the previous year - an increase of 26 per
cent.



•         The factoring and invoice discounting industry in the UK is now
serving approximately 28,000 businesses and turning over approximately £77
billion per annum.



•         The executive directors have 70 years of experience in the industry
between them having established and run  successful factoring businesses in the
past.



•         The directors have made arrangements to be able to commence offering
factoring services to clients within a few weeks of the receipt of the Placing
proceeds.



•         Dawnay Day Corporate Finance Limited is Nominated Adviser and W H
Ireland Limited is Broker to Ultimate Finance.



Press enquiries:


Richard Pepler                 Ultimate Finance Group       [phone]

Richard Lee / David Youngman   W H Ireland                  [phone]

Gerald Raingold                Dawnay Day Corporate Finance [phone]

Shane Dolan                    Biddicks                     [phone]





Introduction



Ultimate Finance is a newly-formed cash flow finance company established by a
number of experienced executives.  The management team believe that, with the
continuing growth they envisage for its products, there is an opportunity to
establish a successful factoring, invoice discounting and trade finance group.
The executive Directors of Ultimate Finance have spent most of their working
lives in this sector of the financial market. The Group will initially operate
from offices in Manchester and Bristol. With the ability to provide a variety of
products which should fulfil the needs of clients, the Directors believe that
satisfactory margins will be achievable.



The Market



One of the success stories of the financial services sector since the 1970's has
been the growth in the popularity and market penetration of factoring and
invoice discounting. These products are now regarded by many financial advisers
and banks as the preferred way to fund the working capital requirements of their
smaller/medium sized business customers (SMEs). In practice, this means that
more of those customers are being encouraged to switch from their normal
overdraft arrangements. New business is therefore expanding. The factoring and
invoice discounting industry in the UK is now serving approximately 28,000
businesses in the UK and turning over approximately £77 billion per annum.



The provision of factoring and similar products has grown rapidly in the UK in
recent years. As at 31 December 2000, members of the FDA (a trade body
representing factoring and invoice discounting companies) were providing over
£6,200 million of funding showing a 26 per cent increase on the 1999 figure of
£4,900 million (source: FDA). Over the same period, turnover achieved by members
of the FDA increased by 18 per cent. (source: FDA). It is the Directors'
intention that the Company should apply for membership of the FDA.



The Directors believe there is still an opportunity for significant growth in
the use of factoring products in the UK. Factoring, invoice discounting and
trade finance provide small and medium-sized businesses with a highly flexible
form of funding based on their debtors and, on occasion, finished goods. Funds
are, in effect, provided in line with the growth of a business and are not
restricted, as with a normal bank overdraft, by a formula based on the assets or
net worth on a balance sheet. More funding can therefore be made available to
currently under-resourced businesses. This can be of particular relevance to
rapidly growing businesses. Following a recent court judgment which questioned
the efficacy of certain fixed charges over book debts, banks in the future may
be more cautious in respect of business funding through overdrafts secured by
way of fixed charges over book debts. In this event, it is likely that this will
encourage further growth in factoring.



Strategy



The Group's target market will initially be established businesses with a proven
track record and annual turnover of up to £3 million. The main types of
businesses to be targeted are wide and include the following:


Manufacturing                                        Services
Electronics                                          Recruitment and Employment Agencies
Engineering                                          Transport
Printing                                             Distribution
Food                                                 Catering Supplies
Timber                                               Design



The Directors consider it important to target businesses with simple or
straightforward products or services where disputes are the exception and
invoices tend to get paid in full without reserve within 90 days or less. In
addition, there should be a good spread of customers. Trade finance will only be
available to those businesses trading in finished goods.



It is expected that introductions of new business will arise from referrals from
professional contact, database marketing, and a targeted advertising programme.
In line with industry practice, commissions equivalent to between 10 per cent.
and 15 per cent. of the service charge may be paid to introducers.



In order to provide the geographic coverage of a significant part of the United
Kingdom, the Company will establish two centres of operation with offices
initially in Greater Manchester and Bristol where the executive Directors have
long established business connections. The northern office will be controlled
initially by Brian Sumner and a new northern business manager together with
support staff. The southern office, which will be operated from the outskirts of
Bristol, will be the responsibility of Richard Pepler and Jeremy Coombes,
respectively the managing director and operations director. The main
administration will also be based in Bristol and suitable experienced staff have
been identified.



In order to minimise exposure to bad debts, the Group will undertake an
appropriate risk assessment procedure. Risk assessment will be performed prior
to the initial funding and then on a regular basis thereafter.



The Products



The Directors anticipate that recourse factoring will account for approximately
70-75 per cent. of the Group's turnover. Funding would be provided, in most
cases up to 80 per cent. Of approved debts, on a continuing basis together with
debt collection and sales ledger management. The balance of funds would be
forwarded to the client less any outstanding charges. Debtor insurance may be
provided as an additional service. Service charges of usually between 1 per
cent. and 3 per cent. of turnover would be levied on clients together with a
funding charge of between 2 per cent. and 4 per cent. over base lending rate.
Export sales can be funded through recourse factoring provided that these
account for no more than about 20 per cent. of gross receivables of the relevant
client. In most cases, it will be a requirement that export debtors are credit
insured. It is anticipated that this method of funding will account for less
than 10 per cent. of total debts factored.



Confidential invoice discounting operates in a very similar way to factoring.
The differences are that the arrangement is not disclosed to the debtors and the
client continues to run its own sales ledger as it is usually more equipped to
do so than the average factoring client. The client evidences existence of debt
and various checks are then carried out on a confidential basis. The client
continues to run its own sales ledger and collects its debts but, on receipt of
the monies from the debtor, these are paid into a trust account in the client's
name but controlled by the Company. The amount not previously advanced to the
client, less charges outstanding, is then forwarded to the client. The client
will also send the Company, or give the Company electronic online access to, its
monthly debtor ageing which will be checked for trends. Cash receipts into the
trust account will also be checked. The availability of confidential invoice
discounting will be restricted to the highest rated clients.



Disclosed invoice discounting will be offered only if the debtors are considered
to be of good quality and the client's credit control is considered effective
and efficient. The arrangement is disclosed to debtors although the client
continues to run its own sales ledger.



Trade finance will form a relatively small part of the Group's activities,
particularly in the initial stages, and will be available as a support service
only supplementing one of the above products. Nevertheless, it should form a
valuable additional service for clients and will enable the Company to finance
transactions from order through to collection of the debt from the end customer.
Trade finance will be provided by the Company predicated upon firm received
orders for finished products from a creditworthy buyer which is credit insured.
All goods will be pre-sold. The Board anticipates that less than 10 per cent. of
the client portfolio will utilise trade finance.



Strong Management Team



Clive Garston (non-executive chairman)



Clive Garston, aged 57, is a solicitor and has been a partner of Halliwell
Landau since 1978 specialising in corporate finance and mergers and
acquisitions. He was senior partner of the firm between 1989 and 1995 and is
currently the senior partner of the firm's London office. He is a non-executive
director of a number of quoted and unquoted companies, including Sports &
Leisure Group plc.



Brian Sumner (chief executive)



Brian Sumner, aged 55, has over 32 years' experience in factoring and invoice
discounting. Having become a director of Alex Lawrie in the 1970's following
senior positions in sales / marketing and operations, in 1983 he founded The
Boston Financial Company Limited (which was the foundation stone of what
ultimately became Lloyds TSB Commercial Finance Limited) and later founded
Causeway Invoice Discounting Limited. The latter company was subsequently
successfully sold to N M Rothschild & Sons Limited and was renamed Five Arrows
Commercial Finance Limited. Brian was a founder director of the FDA and the FDA
Educational Foundation, sitting on its Executive Committee between 1995 and
1998, and was also chairman of its Education Committee during that period.
Consequently, Brian is a well known figure in the factoring industry.



Richard Pepler (managing director)



Aged 42, Richard Pepler has 23 years' experience in commercial banking, leasing,
trade finance, factoring and invoice discounting and has held a number of senior
management and director positions, particularly in sales. He has been involved
in the factoring and trade finance sector now for nearly 17 years and is a
regular speaker at business seminars, including Institute of Directors
conferences. He was area manager of Arbuthnot Factors (which subsequently became
Barclays Commercial Services) and later NMB-Heller. He then moved to become
national sales manager of Bibby Factors Limited before establishing the business
of Bibby Factors (Bristol) Limited with Jeremy Coombes, becoming sales director
and a principal underwriter of all new business for Bibby Factors (Bristol)
Limited. He also led group marketing for over two years for The Bibby Group of
Factors Limited.



Jeremy Coombes (operations director)



Jeremy Coombes, aged 37, has 15 years' experience in factoring in various
operational and underwriting roles. He has held positions in the factoring,
invoice discounting and international departments of HSBC Invoice Finance and
NMB-Heller including auditor, and as senior client manager looking after 50 key
accounts with funds in use of around 15 million. He was promoted to manager of
the Merchant/Trade Finance division of NMB-Heller to set up and run this new
operation. He subsequently established the business of Bibby Factors (Bristol)
Limited with Richard Pepler where his duties as operations director included
development and planning of operation strategy, financial planning and risk
control.



Derek Ashford (non-executive director)



Derek Ashford, aged 46, is a chartered accountant and the finance director of
W.H. Ireland Group plc. After some years in private practice, in 1994, he was
appointed financial controller of the Cater Allen Offshore Investment Division
in Jersey. Following the acquisition of Cater Allen by Abbey National Plc in the
autumn of 1997, he became Head of Financial Planning and Management Information
for the enlarged Abbey National Offshore Group. He returned to the UK in January
1999 to take up the position as finance director of W.H. Ireland Limited and,
subsequently, W.H. Ireland Group plc.



Richard Lee (non-executive director)



Richard Lee, aged 56, is a corporate strategy consultant and a director of W.H.
Ireland Group plc. He has wide experience as a director of various public
companies in a variety of industries. He is non-executive chairman of Prime
People plc, a fully-listed company operating in the recruitment sector, and a
non-executive director of Freedom Finance Limited.



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