Distrib. Fin. Regulatory News (DFCH)

12 July 2023

This announcement contains inside information as stipulated under the UK version of the market abuse regulation (EU no. 596/2014) as it forms part of UK law by virtue of the European Union (withdrawal) act 2018 (as amended from time to time).

Distribution Finance Capital Holdings plc

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

Trading update for the six months ended 30 June 2023

Distribution Finance Capital Holdings plc, the specialist bank providing working capital solutions to dealers and manufacturers across the UK, announces a trading update for the six months ended 30 June 2023.

• Continued strong new loan origination up c. 38% to c. £607m (H1 2022: £439m), including c.£21m of new lending originated across adjacent receivables financing (invoice discounting) and wholesale funding products.

• Loan book ended the period up 18% at £519m (H1 2022: £309m), which was ahead of management expectations in what is usually a weaker Q2.

• 184 new dealers added during the period, taking live dealers to 1,152 (H1 2022: 908) with total facilities being provided of £926m (H1 2022: £724m).

• Stock turn slowed to approximately 133 days (H1 2022: 110 days), extending by 13 days since year end (Dec 2022: 120 days).

• Over £168m of retail deposits raised and retained through the period (H1 2022: £84m) at an average interest rate of 4.4%.

• Net Interest Margin ("NIM") continued to perform in excess of the Group's 6% target, influenced by movements in the UK base rates. The Group expects to revert to and maintain its NIM target as base rate reduces over the medium-term.

• Continued positive portfolio performance: 29 dealers (Dec 2022: 24) with arrears greater than one day past due date.

• Further progress made to pursue non-dilutive Tier 2 capital to support product diversification and medium-term growth strategy.

At 31 December 2022, the Group reported one obligor completing a major refinancing with arrears equivalent to c.1% of the loan book. Given the complexities of the legal entities and funding structures in place under single ownership, the restructuring and refinancing process has been delayed but is expected to conclude over the summer months. The Group has extensive cross company and personal guarantees in place and expects to be repaid in full once the refinancing is concluded.

Outlook

• As anticipated in a more challenging macro-economic environment, the Group sees early signs of a tightening of demand and discretionary spend by end-users for dealers' products. In response, certain manufacturers, particularly across leisure sectors, are reducing production capacity over the summers months to adjust product supply to align better with expected demand. Accordingly, stock turn is expected to extend further over the coming months and trend towards our historical average of 150 days.

• Despite continued macro-economic uncertainty and the increase in bank base rate over the last year requiring greater vigilance and a cautious approach to our lending activities and portfolio management, the Board currently expects financial performance for the full year to be slightly ahead of management expectations, targeting a year end loan book for 2023 in the range of £550m-600m, and continued profitable growth.

The Company expects to announce its results for the six months ended 30 June 2023 during September 2023.

Carl D'Ammassa, Chief Executive, commented: "Whilst the macro-economic environment has continued to prove challenging this year, we have proven that our products and services play an important role in supporting working capital for dealers and manufacturers. We have increased our lending ahead of seasonal expectations achieving new record loan balances along the way. Our proven retail deposit raising capability has successfully supported our lending growth. We remain cautiously optimistic about our second half performance, despite the general economic uncertainty caused by high interest rates to curb inflation."

The person responsible for arranging the release of this announcement on behalf of the Company is Karen D'Souza (Company Secretary).

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