Distrib. Fin. Regulatory News (DFCH)

2 July 2021

Distribution Finance Capital Holdings plc

("DF Capital", the "Company" or, together with its subsidiaries, the "Group")

Q2 Trading Update

and

Notice of Interim Results

Distribution Finance Capital Holdings plc, a newly authorised bank providing working capital solutions to dealers and manufacturers across the UK, today announces its Q2 trading update and re-affirms the Board's expectation to achieve monthly run-rate profitability during Q4 2021.

The Group is pleased with the progress it has made during the quarter, building on the momentum reported since the beginning of the year. New loan origination has continued at pace, exceeding £295m during the 6-month period to June 2021 (2020: £115m) underpinned by the strong pipeline previously reported by the Group, which now exceeds £1bn.

The Group's progress in converting its pipeline and the on-boarding of new dealers has exceeded expectations. During the first 6 months of 2021 the Group onboarded more than 80 new dealers and as at 30 June 2021, the Group had in excess of 700 dealer relationships with aggregate dealer loan facilities totalling c.£465m (2020: £364m).

Dealers across most sectors are reporting strong demand for new and used assets, particularly amongst those sectors focused on the leisure, recreational activities and home delivery markets. This pent-up demand, driven by the impact of the global pandemic and on-going foreign travel restrictions, has led to loan repayments exceeding expectations. As a result, the Group's stock turn has accelerated from c.150 to c.110 days in line with the speed of product sales.

Whilst many dealers within the Group's network are reporting record sales, inventory replenishment has been impacted, with many of the Group's manufacturer partners reporting increasing commodity prices and a knock-on impact on their supply chains. Manufacturer production levels are exceptionally high, however the achievement of projected delivery dates have been materially impacted. This exceptional trend, coupled with high stock turn, has slowed the Group's overall loan book growth. As a result, the Group's loan book stood at £166m at 30 June 2021 (2020: £166m) and has continued to deliver strong arrears performance.

Whilst the strong new loan origination, accelerated stock turn and associated loan repayments are expected to continue through Q3 2021, which impacts near-term gross revenue, the Group expects growth to normalise through the second half of the year and remains confident about inventory replenishment beyond the summer months. The Board is pleased to re-affirm its expectation to achieve monthly run-rate profitability during Q4 2021. This target is underpinned by pricing and operating cost disciplines, an increasing number of dealers, total loan facilities provided and the strength of projected manufacturer order books during the winter re-stocking period, particularly in the transportation sector, which is expected to lead to significant loan origination in the second half of the year.

Carl D'Ammassa, Chief Executive of the Group, commented: "The momentum we saw in the first quarter has continued at pace. We continue to originate significant volumes of new lending to support the strength of demand our customers are seeing on the back of the staycation and UK leisure boom. It is pleasing to see the speed of adoption of electric light commercial vehicles too, which we expect to be a significant driver of our loan book growth in the second half. Whilst these remain unusual times, it is clear that our dealer and manufacturer partners are thinking beyond 2021, anticipating normalising trading conditions which should positively impact the Group's performance in 2022 and achievement of full year profitability."

The Group's interim results for the six months ended 30 June 2021 are expected to be announced on 23 September 2021.

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