Non-Stan­dard Fi­nance looks to stand out

Web­site: www.ns­f­group­


Non-Stan­dard Fi­nance (NSF) listed on the main mar­ket of the Lon­don Stock Ex­change as a cash shell in 2015 rais­ing £103m from a broad range of in­sti­tu­tional in­vestors in­clud­ing IN­VESCO, Wood­ford and Marathon. Hav­ing ran Prov­i­dent

Fi­nan­cial (PFG) for 23 years (six years as CEO and 17 as chair­man), John van Kuf­feler (CEO) saw an op­por­tu­nity to build an­other, well-cap­i­talised group fo­cused on serv­ing the 10m to 12m UK con­sumers that are ei­ther un­able or un­will­ing to bor­row from high street banks.

Un­like many other lenders, when lend­ing di­rect, NSF aims to meet their cus­tomers faceto-face, thereby es­tab­lish­ing a per­sonal re­la­tion­ship with them but also help­ing to re­duce the rate of im­pair­ment on loans is­sued.

Hav­ing com­pleted three ac­qui­si­tions since IPO, NSF now has 175,000 cus­tomers, over 130 lo­ca­tions across the UK and lead­ing po­si­tions in three core seg­ments of the UK’s non-stan­dard fi­nance mar­ket: branch-based lend­ing, guar­an­tor loans and home credit. All of the group’s busi­nesses are fully au­tho­rised by the Fi­nan­cial Con­duct Au­thor­ity.


Branch-based lend­ing is the group’s largest divi­sion, rep­re­sent­ing two thirds of Group op­er­at­ing profit be­fore cen­tral costs in the first six months of 2018. Ev­ery­day Loans is the UK mar­ket leader, pro­vid­ing un­se­cured loans of be­tween £1,000 and £15,000 to UK cus­tomers via its 64 branches, up from 44 branches a year ear­lier.

Af­ter ap­ply­ing on­line or by phone, ap­pli­cants that pass an ini­tial screening process are asked to at­tend their lo­cal branch for an in-depth in­ter­view when the branch com­pletes a for­mal credit as­sess­ment face-to-face.

Hav­ing pro­cessed over 1m ap­pli­ca­tions in 2017, the busi­ness made just over 30,000 loans in 2017 and grew its loan book by 21%. In the first six months of 2018 an­nu­alised loan book growth had ac­cel­er­ated to 28% but this was not at the ex­pense of credit qual­ity: the rate of im­pair­ment fell to 19% of rev­enue (2017: 23%) and op­er­at­ing profit in­creased by 22%.

Whilst an ex­pen­sive model to op­er­ate when com­pared with pure on­line lenders, the face-to-face con­tact with cus­tomers is a key fac­tor in driv­ing prof­itable growth by keep­ing im­pair­ment rates low.

In guar­an­tor loans, NSF is now the UK’s sec­ond largest op­er­a­tor with over 21,000 ac­tive cus­tomers at the end of June 2018 and a loan book

IN­TRO­DUC­ING… NON-STAN­DARD FI­NANCE A col­lec­tion of busi­nesses which of­fer credit to the around 10m UK adults not served by main­stream fi­nan­cial ser­vices com­pa­nies.

of £63m, up 56% from a year ear­lier. Cus­tomers are typ­i­cally a younger per­son, earn­ing be­tween £24,000 and £30,000 but with a lim­ited or poor credit score. Loans are for amounts rang­ing from £1,000 to £10,000 and typ­i­cally for a pe­riod of be­tween three to four years.

The pres­ence of a guar­an­tor means that they are able to bor­row at a much lower rate of in­ter­est than were they to bor­row on their own and al­lows them to get on the credit lad­der so they can start to re­build a credit his­tory for them­selves.

This rapidly grow­ing seg­ment has been in in­vestors’ spot­light re­cently fol­low­ing the highly suc­cess­ful IPO of Amigo

(AMGO), the mar­ket leader, in July 2018. NSF’s busi­ness is grow­ing at a sim­i­lar rate to Amigo and is start­ing to re­alise ad­di­tional scale ben­e­fits that are help­ing to in­crease prof­its and re­turns.

In home credit, NSF is the num­ber three player with just un­der 100,000 cus­tomers and a loan book of £38m at the end of June 2018. Hav­ing ben­e­fited from a ma­jor re­struc­tur­ing at Prov­i­dent Fi­nan­cial, the busi­ness has grown sig­nif­i­cantly over the past 18 months – the loan book was up 53%, driv­ing both rev­enue and profit growth.


Over­all, the lat­est re­sults for the six months to 30 June 2018 showed that nor­malised rev­enue had in­creased by 51% year on year and op­er­at­ing profit was up by 79%. Earn­ings per share (EPS) was up 7%, due to higher fund­ing costs as­so­ci­ated with its lat­est ac­qui­si­tion that was com­pleted in Au­gust 2017.

In recog­ni­tion of the board’s con­fi­dence in the sec­ond half, it has de­clared a 20% in­crease in the half year div­i­dend per share (DPS) to 0.6p. Di­rec­tors have been buy­ing shares since the half year re­sults on 2 Au­gust 2018.

The group has £260m of long-term debt fund­ing al­ready in place and is in the fi­nal stages of in­creas­ing this to £330m thereby un­der­pin­ning its growth plans into 2020.

House bro­ker Shore Cap­i­tal is ex­pect­ing a strong sec­ond half in 2018 with full year nor­malised EPS of 4.1p and DPS of 2.5p ris­ing to 6.9p and 4.2p re­spec­tively in 2019.

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