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LONDON (Alliance News) - Orchard Funding Group PLC, the AIM-listed finance provider, on Thursday said "aggressive" competition is on the up in the professions finance market.
Finance brokers, with the backing of banks and private equity firms, are being converted into lending operations, according to David Clark, Orchard's chairman.
"We continue to operate effectively in our market and continue to closely monitor product offerings from our competitors," Clark said in a statement.
Orchard Funding, which raised GBP10.0 million before expenses in its July 2015 initial public offering, provides finance to clients of UK insurance brokers and professional firms such as accountants and lawyers to spread the cost of their insurance premiums or professional fees. With payments spread over a typical period of 10 months, customers are able to avoid paying a lump sum.
The company's customers tend to be insurance brokers and professional services firms, which then offer credit to their own clients.
Clark said the biggest players in the in the insurance premium finance market have been continuing to protect their positions.
"We are seeing more and more examples of brokers entering into two to three year exclusivity agreements and receiving substantial advance commission payments in return for introducing their business to insurance premium finance providers. In line with our prudent approach our company does not pay any advance commissions to brokers," Clark said.
Clark's comments came as Orchard reported a GBP703,309 pretax profit in the six months ended January 31, versus GBP661,738 in the corresponding half a year earlier. The company paid an interim dividend of 1.405 pence per share.
Orchard said it lent GBP23.6 million in the half, on a like-for-like basis an extra GBP1.4 million of lending and a 6.0% improvement year on year.
Preliminary approval was received from Barclays Bank to increase Orchard's loan facility by GBP5.0 million to GBP15.0 million when required, and Clark said the company is also exploring alternative financing options to further grow its lending book.
Clark said Orchard is putting the final touches on a regulatory business plan, capital plan and liquidity plan to submit to the Bank of England's Prudential Regulation Authority and the Financial Conduct Authority for a new bank application.
"It is anticipated that Orchard Funding Group will submit a full bank application on receiving the regulator's preliminary approval to do this," Clark said.
Shares in Orchard were down 2.8% at 104.00 pence on Thursday morning.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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