Distribution Finance Capital Holdings (LSE:DFCH) — Full year results investor presentation

0:01 Good afternoon, and welcome to the DISTRIBUTION FINANCE CAPITAL HOLDINGS PLC Full Year Results Investor Presentation. Throughout this quarter presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time by the Q and A tab situated in the right corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. However, the company can review all the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to CEO, Carl D'Amasa. Good afternoon to you, sir. Good afternoon. Thanks, everyone. Delighted to be here presenting what, hopefully, you'll agree at the end of this presentation, an exceptional set of, financial results for the full year ending 12/31/2024.

0:53 I'm joined today by Gavin Morris, our our our CFO, who will be known to a number of you. For those of you that don't know, Gavin is is due to retire from the company. He's got a long run though into into the into the end of end of the year. So this will be his his last full year results, and I'm I'm delighted to say that we're very well progressed in finding a suitable relation replacement for for Gavin, which we'll be able to announce in in June in due course. Recognizing that, you know, there'll be a few people on the on the on the call today who don't know the company. I just thought I'd spend a little bit of time just going through the background of of of of DFCAPITAL.

1:47 We are a specialist lender, and we do work in specialist lending niche. We support UK based well, predominantly UK based manufacturers and dealers and distributors with working capital solutions. We were founded in 2016 as a as a nonbank lender. And unlike a lot of financial services and banks, we we aren't headquartered in London. We are headquartered in in in in in Manchester. We we did receive full authorization as a bank in September 2020, and and and, frankly, we haven't looked back, you know, since since that point. You know, the firm has gone from from strength to strength as you'll see in the in the in the numbers that we'll be talking through today.

2:35 How we how we operate, we are what I would describe as a modern digitally enabled bank that accesses the retail deposit market by advertising our our rates on the Best Buy tables and customers who want to deposit funds with us use an online platform to to apply. They can manage their account online. They can get support from our Manchester based telephone sales team as as as well. And those deposits always liquid is liquidity as we we call it supports our our lending activities, those working capital solutions that we provide to the dealers, manufacturers, and distributors.

3:21 We've been pretty myopic and like a lot of early stage banks. We've we've we've we've really looked to get to profitability as quick as we possibly could post authorization, and we managed to do that, you know, within within two within two years of of of authorization. So we are reporting this year our third year of of of of profit. And we've been very careful as we've scaled the firm to balance our growth ambitions in line with our available capital, but also managing costs, you know, carefully so that we do get to profitability as as quick as we possibly could. And what we have done now is grown our our our lending, or as we call it, new loan origination to over 1,400,000,000 a year, and we're supporting over 1,300 dealers and and 88 manufacturer partners.

4:17 What's really exciting for us, our our our journey so far has been very much characterized as as being a monoline lender, very much committed to a working capital product or inventory finance as we call it. But we are at this exciting juncture now where we're poised to to launch another scale product, which is asset finance, and I'll talk about that a little bit later on. But that does present a significant growth opportunity, you know, for the for the company. But just, you know, I think it's important, you know, before we we move on for you to understand, you know, how our our core products, as we call it, inventory finance, operates because that is the foundation of of of the firm that's that's driven the the scale and the and the and the profit generation.

5:09 We do sit between manufacturers and dealers. We allow manufacturers to ship finished goods to a dealer, and a a dealer would operate in some of the sectors that we've laid out here, lodges, holiday homes, motomes, caravans, transport, marine, planet machinery, industrial, motorcycles, agriculture equipment, and specialist automotive. And those finished goods sit on a dealer's forecourt. You've probably seen as you've you've driven around, you know, stock as as as as as dealers would would call it, sits on the forecourt, and and we fund that. We have security of each of those individual motor homes or caravans or light commercial vehicles that would be would be sitting on the on on the forecourt. So this is a a secured lending product, and we do lend a term a discount on a portfolio basis to the factory gate price and to the to the retail to the retail price. We're typically lending about 70% of the the retail price of the the product.

6:16 The dealer would look to repay us when they sell when they sell the asset as we call it. And about 60% of what we do in the inventory finance space is through manufacturer relationships or manufacturer programs as we as we call it, the 88 relationships that we that we have. And and that relationship with the manufacturer gives us access to their dealer network for us to be able to provide working capital solutions to to the dealers, but it also gives us some recourse if dealers are, you know, perhaps struggling to to sell that that that that individual product. We we do have redistribution through the through the network arrangements, and we can, in certain circumstances, ask the manufacturer to repurchase the asset as well. So, you know, that, you know, gives us, you know, really strong security and the low cost of of of risk and and credit impairments that that we talk about, which is typically 1%, you know, through the cycle.

7:20 It as a working capital product, it is short in its average average tenure or average term. We are typically lending about a hundred and fifty days in in duration, and the product is entirely fee based. So, you know, the dealers will know exactly, you know, in in terms how much it's gonna cost them to hold the product on the forecourt pending sale, and they'll know how much of their margin is gonna be is gonna be, you know, paid over to to us to have that stock on on on display. As I mentioned earlier, we are, you know, highly digitized bank. You know, we do have old fashioned relationship managers as as as well who are, you know, speaking to the dealers.

8:08 But drawing down on the facilities that we we pledged to the dealers is done in the digitized way. And, you know, that makes it really easy for people to do business with us, and we get really strong, you know, customer customer advocacy scores, and we use a Net Promoter Score to do that. And in the last year, we got plus 38, which is, frankly, you know, to die for in the in the in the business in the business lending in the business lending space. So that's a whistle stop tour of the of the core inventory finance product. So just looking at the the full year results for for 2024. Well, as I said earlier, it's been, you know, an exceptional, exceptional year. We've we've grown our our our lending to to over 1,400,000,000, which is up 20% or 250,000,000 on the on the prior year.

9:00 And that's rolled through to a a record loan book of of 666,000,000. We're now supporting more dealers than we have done ever before, 1,334 dealers and 88 manufacturers. And as we've as we've looked to grow, we've had a really disciplined approach to to our lending, whether that's, you know, making sure that the dealers we we onboard and we lend to meet, you know, robust credit criteria, but also, you know, looking at, you know, pricing and not compromising on

9:36 the the net interest margin to to provide growth. And we've actually increased our net interest margin through the period to almost almost 88%. The the the credit quality of the portfolio has been exceptionally strong. We had 33 dealers out of those 1,300 or so that we we had at the end of the year in arrears or in legal recovery, which is and we we currently we we can't re arrears as one day one day past due as well. So that's unlike a lot of banks that report thirty days past thirty days past due. So, you know, we we believe we're running a, you know, very, very clean portfolio supported by, you know, really strong credit oversight from our portfolio management team. And those ingredients have led us to report a stunning profit before tax for the year at just over 19,000,000, which is on a reported basis, you know, more than four times what we achieved in in 2023.

10:38 We we've looked at things on a what we think is perhaps a more sensible basis given that we had quite a significant credit provision right back in in 2024. So if we adjust for for that, the profit before tax was 14,400,000, which is 55% up on the adjusted number for for 2023.

11:04 And what's really pleasing is to see the that financial performance start to flow through into to the return on equity. You know, that myopic focus on getting to profitability is flowing through, and we're almost now on the on the cusp of, you know, double digit return on equity. The profitability that's flowing through to the balance sheet has delivered a larger tangible net asset value, and we've seen that increase by eight point eight point two pence to 63.8p per share. You know, underpinning what we do is the strength of of deposit raising franchise, and we've we've managed to increase our deposits by 75,000,000 to 650,000,000, and that supports our our our lending. And we've got over 15,000 deposit accounts now.

11:59 It's also worth noting that we do have maturity through the year as well, so we've managed to replenish, you know, the the the accounts that we're maturing to to grow overall deposits by 75,000,000. And as I said earlier, we do that through the digitized platform and a an application process by putting best best buy rates out out to the customers. But our customers give us, you know, regular feedback. We we use FIFO as a as a measure for that, and we've achieved 4.8 stars in the period. And we have been awarded again by FIFO this year, second year running a platinum trusted service award. And I think, you know, fundamental as well, we put an awful lot of emphasis in the firm on on our culture, you know, creating an environment where our employees can thrive, where, you know, they they they enjoy coming to work, have a smile on the face, spring in the step, and and are really ambitious for the organization and and and want to put their best foot forward in in supporting our our customers.

13:04 It's no surprise to me that we've we've been recognized by best companies as offering world class levels of engagement. We're a three star rated firm, the the highest rating you could get. And we've also been ranked as number five best financial services business to work for in the in The UK. And if all those financial outputs weren't enough, 2024 has also been very much about getting the foundations in place for, you know, for future growth, which I'll talk about a little bit later on.

13:38 But, you know, some of the achievements that we've we've got here, and it's quite a laundry list, but I don't apologize for it being that. You know, we've launched new products and services, stock flow financing, which allows us to fund stock that's serialized assets in warehouses and and distribution centers, and we've leveraged, you know, technology to be able to to do that. It's a it's a twist on the on the inventory finance proposition that we have today. We've built from the ground up an asset finance or higher purchase capability, and we bring that to market in in the second quarter of this year, leveraging the best technology that is out there on a legacy free basis.

14:24 And we've designed, you know, this to be scalable, but also, you know, compliant, you know, from launch. So I think, you know, some of the read across that people may be aware of in the motor finance challenges, we've made sure that, you know, we're fully compliant with all the legal and regulatory requirements. And that's been endorsed actually as we've we've submitted an application to provide consumer lending, you know, to to customers of our dealers in the in the leisure in the leisure space. Having gone through a six month process with the the FCA to get those permissions, grueling grueling process of of of checks, we received approval from them in in February 2025. We've we've diversified our our savings proposition as well. We've we've launched our award winning savings to small businesses as well.

15:19 We've extended the British Business Banks Enable Guarantee, which will allow us to be capital efficient, you know, moving forward as well, putting our capital to work to deliver, you know, maximum amount of lending we possibly can, and we've extended that to 350 for 350,000,000. We're now able to lend on a multicurrency basis as well so we can support some of our existing dealer and and manufacturer partners with the with foreign currency transactions. And we have done some lending on a selective basis in in euros as well to support some of our Irish and and and dealers in the in the in The Netherlands. We've also launched and and implemented a customer relationship management platform, which will not only give us a single customer view, but it will also allow us to be more efficient in how we how we process things and and and and handle our our our our customer interactions.

16:22 And it does break the connection with our with our core banking platform as well so that we're able to interchange to to use the the latest technology as as as well as we as we move move forward. And an example of that, you know, is keeping ahead of the curve all the time is the upgrade to our data warehouse. We've replaced that, put new infrastructure in place, and that will allow us not only to meet our regulatory reporting requirements from a a data perspective, it but will also allow us to use the data we have in the firm to provide better outcomes, better solutions, better products, better services, you know, for our customers. So I think you can see when you bring all of this together, the financials, but also, you know, the the initiatives that we've we've rolled out, you know, through and delivered on through the year that put the foundations in place for future growth, you can you can see why, you know, I'm really pleased with what the firm's achieved in in 2024.

17:19 But I'll hand over to Gavin now just to to cover a bit more of the meat on the the bones around the the financial performance. So, Gavin, over to you. Thank you, Carl. So if if I start off with the income statement. So as we walk through the income statement, you'll see the strong underlying sustainable profit growth we have in the business. If I start off with net income, so we've seen a 20% growth in net income. That's due to the significant year on year loan book growth. We've seen a 15% loan book growth together with an increase in net interest margin of 30 basis points to 7.9%. Now the increase in NIM is a function of two things. So we've got strong pricing discipline. Contractually, with our dealers, as base rates go up, we are able to pass that base rate increase onto the dealers.

18:09 That's on new business written after the base rate increase, not on any outstanding business they've got at that time. So as base rates have gone up, we've passed that on to the dealers, and you can see that with the gross yield increasing from 11.1% to 12.2% as that full base rate increase that happened through 2023 has rolled through the book. At the same time, we are funding our book from deposits. And as base rates have gone up, deposit rates have gone up. But because the maturity of the deposit book is slightly longer than the loan book, it takes longer for that increase to flow through the book. So there's been a bit of upside in timing of the base rate there. But what we've also seen is as base rates have gone up, deposit rates haven't gone up to quite the same extent. There's been some embedded upside there as well. So overall, that's flowed through to a very strong net interest margin of 7.9%.

19:03 We would expect that to come down a little bit as we go forward as some of those factors unwind. If I look at operating expenses, they've increased by 20% year on year. A big driver of this is our ongoing IT investment that Karl referred to on earlier slides. We're looking at making sure we have market leading technology solutions. We've been ensuring that as the bank matures, we're making sure that we continue to enhance our underlying controls. We've had further investment in cybersecurity, and then we've had the the investment in new product development. Despite all these significant, investments, the cost income ratio has only increased slightly from 57 and a half to 58.6%.

19:50 I think a key key thing to bring out is in our existing inventory finance portfolio,

19:56 the underlying costs we need to support that portfolio embedded. So as as that book continues to grow, we don't expect the cost to increase, so we'll get operational leverage from that. As we go into the asset finance piece, there will be a drag this year because we've got costs of people on the ground building that, getting ready to go, and it will take some time for the loan book to grow accordingly. So there will be a slight drag this year, but we expect our cost income ratio to be less than 50 less than 50% in the medium term. Touching on impairment. We actually had an impairment right back this year. The net impact was a gain of 200,000, but that includes a $4,700,000 one off write back. Without that, that was a cost of risk of about 75 basis points that I've touched on a subsequent slide, but that's well below our through the cycle expected loss of just under 1%.

20:51 So overall, that means we've got profit before tax of 19,000,000. If we adjust for that one off recovery, that's 14,400,000. And that gives us a return on equity adjusted return on equity of almost 10%, just at we're at 9.8. If I move on to the next slide. So on this slide, I'll just quickly touch on, obviously, talked about the loan book growing. The deposit book has grown at a similar level because that is how we fund our loan book. In terms of the ability to raise deposits, it's extremely easy. We've got a great franchise that Carl's referred to. And as we continue to grow, we will continue to use deposits in the same way.

21:39 What we've been able to do last year is we've now diversified and we're able to get SME lending. SME lending can be anything between 10 to 50 bits bits cheaper. So not only does it give us access to the new market, potentially, gives us some slightly cheaper form of lending. But it's fair to say the retail deposit market is far larger than the SME deposit market. So although we expect the SME portion of our deposit book to grow, it will grow relatively slowly. In terms of capital, although our loan book's grown 15%, our CET1 margin is reduced by only 5%. That's a function of two things. We're now generating significant profit that we can recycle as capital, And then we've increased the British Business Bank Enable Guarantee scheme from $250,000,000 to $350,000,000 So that makes sure we ensure that we are being efficient in the management of our capital.

22:35 Addition, we have a 10,000,000 drawn on our 20,000,000,000 tier two facilities, so there's an extra 10,000,000 to go on that. So with the regeneration of capital, the efficient use of our capital base through the enable guarantee and the headroom we've got in our Tier two, we can grow the loan book in the medium term to about 1,300,000,000 without the need to raise any additional dilutive Tier one capital. In terms of the impairment coverage on our loan book, that's currently running about 1%, and we're very comfortable that we've prudently provided for our loan book based on where we are in the economic cycle. When we talked earlier on about the sort of characteristics of our product, it's highly secured and our loan to wholesale value is currently running about 84%.

23:29 In terms of what that would mean in terms of loan to retail value, that would be more like 70%. So again, very well secured. The stock days, we look at stock days to understand sort of the vitality and the health of our dealers and how that's performing. That's modestly reduced about one hundred and forty days. We're very comfortable with that. In the appendix, we set out what we deem to be where we deem stock days to be at a level we'd like to get concerned with, and we're not concerned about that. They're well within those criteria at the moment. So we're very comfortable with stock days. And I'll touch on, on a subsequent slide, a couple of the sectors. So what that leaves us with is a tangible net asset value per share has increased by 8.2% to 63.8% compared to today's share price of around 35p.

24:25 Moving on to the next slide. So we've been very closely focused on the underlying credit quality of our dealers. So we've got the benefit of being choosy in what dealers we bring onto our books. We want to make sure they meet the credit criteria we want. And also, we have exited a number of dealers where we felt they haven't been using the facility yet we'd expect, or we've had other credit concerns. That has manifested in the fact that of our over 1,300 dealers at the year end, there are only 33 dealers in arrears. So and that is, as Carl said earlier, arrears of one day plus, not thirty days plus. So that's 2% of that of our dealers in arrears. As a percentage of loan book, that comes out at just point six of a percent.

25:15 And how that flows through to cost of risk, you can see that through the this year, we had a cost of risk of point 8%. And through the cycle, it's been well under 1% apart from the large obligor provision we had in 2023. Without that, 2023 would have been at 0.6. So if we look at the diversification of our portfolio, if you look at the this chart, on the top left, you've got structured finance, which is about 75,000,000. That's the only part of this that isn't in our inventory finance portfolio. All the other sectors are part of our inventory finance. So if I just touch on some of the themes that we're seeing in the largest sectors. In motor home and caravan, which is our largest sector, end user demand has been particularly high during the second half of twenty four.

26:06 And this increase in demand alongside a rebalancing of the production by manufacturers has allowed dealers to adjust stock to align with full demand. However, we have seen the caravan tour market seen stock overhang from prior years. The holiday home and lodge sector has continued to be more challenging, and it has been our most challenging sector more recently. Dealers have been dealing with both severe weather conditions and the impact of the royal life failure. However, we are seeing customer sales picking up and operators are filling the stock gaps with moving more towards larger units. And then finally, in the marine sector, we've seen manufacturers recalibrate their production levels, looking at larger boat market.

26:52 And that's where customers are more insulated from ongoing macroeconomic challenges. With that, I'll pass back to Carl. Thanks, Kevin. So if we just look now to, you know, to the future, and I I I get very excited every time I I I look at this particular page. It's it's our, I suppose, our medium term strategic road map on a on a single on a single page. Now we have set guidance out to full year 2028, and I think it's important to say that, you know, to bring these ambitions to life, and we can't say this enough,

27:32 with the self generation of profit, the use of tier two, the efficiency tools that we have with the British Business Bank enabled guarantee means that we can we can scale the lending off the back of this this the strategy without the need to do a a capital a capital raise, which frankly, is not often heard of in banks that are really staged and are scaling. And that's a testament to the decision we made on authorization to focus on profitability at the at the outset, which we achieved within within within two years of authorization. So the the guidance really is that we're gonna get our loan book to about 1,300,000,000 full year 2028.

28:21 Our assumption is that the mix of of products and services that we'll have in place will still deliver a net interest margin well above the 6% that we've we've proven we can achieve so far. The the the cohorts of customers that we'll be targeting, particularly in the the new product asset finance, will will fall well within the 1% impairment losses that we've that we we talk about. And as we grow our lending and and widen the jaws between income generation and and and and cost increase, we'll see our cost to income ratio fall below 50%. So putting all of those ingredients in the in the blender as it were, you can see how we're we're expecting to get to a a mid teens post tax return on equity by the by the end of of of twenty twenty eight.

29:22 Now I'm hoping when when when I finish on the on this slide, you take away that, you know, DF Capital is not going to be short of opportunity in how to bring those full year 2028 results to to life. We've put down here the the three main, you know, areas of of of of lending, you know, again, are gonna be supported by, you know, the retail deposit raising that we franchise that we we've successfully have in operation today. So is there opportunity in the core inventory finance products in existing with existing customers and existing dealers? Yes. There is. We're expected to grow, you know, market share across across those those areas that we operate.

30:11 You know, today, there is more that we can we can go at. We're not quite at the pace that we've we've seen we've seen historically. Stock flow finance, which is the the that twist on the inventory finance side of things, you know, providing support to other serialized assets that aren't on forecourts in in in warehouse is really quite exciting. You know, we we see that as a as a growth area which would, frankly, elbow out invoice discounting, which is a which is a a route that a a a lot of people are are using funding to to support support their their stock provision of of this of this of this nature. Just moving to the far right hand side, structured finance. Now this is gonna be something that is really ancillary to what we we we do.

31:04 It's not a deviation from the sectors that we operate. We are still very much committed to supporting manufacturers and dealers in in our in our chosen markets. We're not we're not becoming a challenger a challenger bank, you know, per per se. But what we're looking to do here is where there are existing customers that perhaps have a, you know, a need for, you know, different working capital or, you know, invoice discounting to support, you know, areas of their business where we've got stock flow financing, invoice discounting sits really well alongside, you know, customers who will take the stock flow finance product, and we'll leverage the relationship that we've built with Sotago using their, you know, tech technology platform to, you know, to help with with that.

31:58 There are also opportunities where, you know, some dealers have spoken to us about plans to develop their business, either perhaps, you know, taking on new facilities or parks or refurbishing their existing operations. And, you know, we'll be quite happy to draw on the expertise that we have across across the firm built up over many years of of of of of business lending, you know, to to help, you know, those needs and and and build, you know, deeper relationships. Even if it's just short term in nature, and we get we get refinanced by perhaps a, you know, a a bank, we'll be happy to to do that because it cements our position in the markets and, as I say, deepens the relationships with with with our customers. What's most exciting is the ginormous opportunity in in asset finance or higher purchase.

32:48 We've estimated across the existing sectors that we we work in today that there's a a a 10,000,000,000 annualized sales opportunity for us to look to try and try and convert. And it will be given the mix of of of assets that we support today, you know, focused very much on on on on consumer, but we will do some business to business lending, so supporting the acquisition of plant and machinery or or or commercial vehicles as an example by by businesses. But we are gonna enter this this asset finance market by providing end user financing to to to support the acquisition of motorhomes and and and caravans. Now we're not gonna be slavish to to this to this mix.

33:37 What what what what you will almost certainly see is us not exceeding 15% of loan book on the on the structured finance side of things, and that, you know, that is gonna move over over over time. As far as twenty twenty eight's concerned, I'd I'd I'd expect our inventory finance proposition to be about 50% of our of our loan book and for asset finance to be scaling and being about 40% of our lending. And as we fast forward, you know, from mid teens return on equity to high teens return on equity and beyond, then you will see us skew more towards, you know, asset asset finance given the size of that that that market market opportunity. So as I said at the start, I just hope you look at this and think, wow. You know, there is there is so much opportunity here for for for DFCH Capital.

34:29 And what we're gonna be really focused on is making sure we allocate our capital to the best place where we can we can really maximize return and really, really sweat it sweat it hard, you know, to deliver the best the best financial performance off the back of these significant opportunities where we can be hugely hugely selective. So what's the what's the immediate areas of of of focus for as well? You know, priority number one, we built this. It's ready to ready to go. We'll be launching in short order after after the Easter break asset finance and rolling that out to our existing existing dealers who are, frankly, poorly poorly served by incumbents who have made decisions perhaps, you know, more recently to roll their specialist motor home and caravan lending operations into into mode motor finance divisions. And I think everybody knows the the challenges that's facing, you know, lenders in in in in that space.

35:37 Stock flow financing is building is building momentum. We've we've already got a number of of customers in that in that space, and the pipeline is looking is looking strong. And concurrently, whilst we develop that and grow the lending, we'll continue to to grow our market share and drive out the seasonality that we do see in our book as well in the in the core inventory inventory finance space. On a as as they arise basis, we'll we'll we'll continue to to look at bespoke structured finance solutions as as as well to support existing participants and and and customers in the in the industry segments that we we work with today. Purely to build some additional resilience and optionality in our deposit raising capability, we'll we'll diversify funding by building a deeper relationship with the an aggregated platform.

36:33 Gives us different access to different client client cohorts as well as further SME deposit deposit raising. It's obvious to say this, and I I know everybody will be disappointed if I if I if I said we were gonna throw caution to the wind, but we're not. We're gonna remain vigilant and cautious as we have done, you know, through our our journey in managing customer arrears and making sure that we enter relationships with the right the right the right counterparties. And, you know, as I say, you're gonna hear us talk as we move forward more about return on capital, you know, because that's that's the, you know, the piece that's going to be, you know, critical for us as we now transition from being a monoline lender into a lender and making sure we put our capital to work in the in in the right in the right place to to drive for our investors the the strongest return on on on equity.

37:31 It's worth us just spending a few minutes on on on asset finance. Some of this we'll have touched on already. You know, we are poised to launch this after after Easter, focused initially on motorhomes and caravans. We think that's a, you know, great place to start. We understand the market really well. The quality of the obligor is is is strong. We've been able to use data and analytics to make sure that we're targeting the right customer cohort so it falls well within our our risk our risk appetite. The dealers, I mean, they've been banging on our door for for a good two or three years to say when are we gonna launch something like this. So it won't be a surprise that, you know, in having conversations and getting dealers signed up, this has been really welcomed, not only as a as an alternate to to the incumbents, but the proposition that we pull together is is modern, and it's tech enabled.

38:26 And, you know, that makes it easy for for for dealers to to support their customers. I can't say this enough, you know, particularly given all of the the issues in the in the motor finance space. We have made sure that we are compliant with all of the elements of both the regulatory and the legal challenges that have been raised in relation to to to motor finance. So we are we are confident that we'll be entering this market legacy free. We can focus on delivering great service to, you know, to to the dealers, and we do not have to progress any remediation at all. And as I say, that's been backed by, you know, receiving FCA approval to to do this after a six month, you know, grueling grueling process.

39:12 We don't need new relationships, know, to be able to distribute this. The market opportunity from our existing dealer relationships is estimated at, you know, $1,010,000,000,000 pounds worth of sales that we can we can go after. And and, frankly, as we scale this, which is is gonna be over a number of years, our our strongest assumption, the biggest amount that we need to originate of that and convert of that 10,000,000,000, you know, at today's at today's at today's level is about £400,000,000. So market share really that we're shooting for is small, and that's where we feel that we can be really selective about the obligors that we enter into relationships with that will meet our our credit quality.

39:59 It's important to note that, you know, there is a £2,000,000 drag assumed in our numbers, you know, this, you know, this this this year that will unwind and will drive profitable profitability next year, and then we'll we'll grow profitability in the asset finance proposition significantly beyond, you know, 2026. And that, as I say, is a key contributor to those 2028, you know, plans. So just drawing, you know, this part to a close. I mean, the outlook for for 2025, what are we expecting? No surprise. Net interest margin will will continue well above the 6% target that we talked about in the in in the past.

40:45 We're gonna continue to invest in technologies we have done, keep making sure everything's up to date and modern, and that will unlock further operate operational leverage, which will see an improvement in our in our cost income ratio, part offset by, you know, the the drag of the new the new asset finance capability. We're expecting arrears to to continue to normalize but be well managed, you know, through through the period. We're not expecting any surprises. We're we're expecting to operate in the sub 1%, you know, cost of cost of risk this this year. Loan book by the end of the year, given everything that we've got we've got going on, we think we'll be in the 750 to 800,000,000 range.

41:34 And I I I can't I can't say this say this enough, but, you know, to to bring the growth plan to life between now and 2028, we don't need to do an equity raise. There's no dilution here for for shareholders. We'll be we have optionality as what we do with retained earnings, and, you know, the plan is for us to to reinvest in in in in in in growth. So I'm hoping you're feeling, you know, buoyed by the 2024 performers, excited as we are about 2025 and what we can unlock here and see that we've made really, really good progress now in getting ourselves, you know, fast forwarding, you know, to the mid teens returns that we've talked about and that really coming to life now at this exciting juncture for the firm as we become a a multiproduct lending lending franchise beyond beyond this year.

42:31 So that's the the end of this part of the presentation. I think we're happy to open this up to to some of the questions that have been have been coming through whilst we've been talking. Perfect. Well, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions, and you can do so just by using the q and a tab that's situated on the top right hand corner of your screen. But just while the company take a few moments to review the questions that have been submitted today, I'd like to remind you the recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. As you can see, we have received a number of questions throughout today's presentation. What I'll what I'll do is I'll just hand back to you to run through the questions, and I'll pick up from you at the very end. Great. Well, we've got I'll I'll I'll deal with a couple of questions on on asset on asset finance. So one of the questions is about the rollout and the speed of of of rollout. I think, you know, what we've what we've what we've what we've done historically in our lending is we've been very, you know, careful and considered around our our growth.

43:32 What we've what we've always wanted to do is to make sure we provide a really, you know, great, you know, service, you know, to, you know, to our customers. And, you know, this is gonna be new. So you are going to see, you know, perhaps a a a a slower pace of of of growth through through this year. And, you know, we'll we'll look to, you know, accelerate things, you know, perhaps, you know, through the through the final quarter of of of the of the year. One of the one of the other questions here is, you know, how long the onboarding process with the dealer will take. Well, you know, we've we've actually started onboarding a number of dealers. We've we've got a pipeline of motor home and caravan dealers that meets our criteria and and, frankly, some of the FCA criteria of about a 100.

44:28 And a lot of those are going through the the onboarding process, which is an assessment of of them, their understanding of of of the process, some training, and obviously, the the contracting of those. And we will allow we'll allow the dealers to to to activate over a over an extended period of time to manage that that continued, you know, grade of grade of of of service. One other question we've had about is the the credit quality checks in place for asset finance. You know, this is an area where we've been absolutely blessed with data availability. Now this is gonna be, you know, a credit scored solution automated in in in in nature with, obviously, some manual intervention to make sure the the the systems are working working correctly at the the launch days, you know, certainly.

45:32 But, you know, the the the customers, you know, particularly in the motor home and caravan space are generally high quality. I mean, we need to draw the distinction here between perhaps, you know, people who need cars, which frankly is everybody, you know, re regardless of your your, you know, your credit credit worthiness. You know, everybody, know, needs a needs a car or wants a car, you know, these these these days. Whereas, you know, those that are wanting motor homes and caravans are generally, you know, the demographic that, you know, are stronger from a credit worthy worthiness perspective. So we've been able to pull together using probabilities of defaults and and loss given default data, you know, precision around not only the the quality of obligor that we want to bring on our book, but also the pricing, the risk adjusted pricing that we that we're prepared to to take. So we've got a high degree of confidence. We've been working, you know, with with with experts in this area. It'll be no surprise that we've you know, part of the the cost drag is recruiting, you know, people that I generally call as ninjas in these in in these arts that are, you know, bringing new skills to the to the team as as well. So high degree of confidence about our ability, you know, to bring this to life in a controlled way, but also making sure that we're considered not rushing, you know, not rushing at this and trying to get funds out at as as quick as we as quick as we can.

46:55 Just to to close out on asset finance, somebody said, why now in relaunch launched asset finance, don't you need to wait for the motor finance ruling clarification before really proceeding? I think everybody's clear. The law is clear on what the requirements are. I e, it'll be no surprise. You need to tell people when you're making commission, disclose all of that. You know, we've we've we've had all of our documentation validated in in in that regard. What is unfolding now in the motor finance space is what is the redress, if any, that will be required. And, you know, clearly, as we are launching with no legacy and everything being, you know, legally compliant, we don't need to wait for the for the outcome at all. The outcome is only dealing with redress for nondisclosure of of of commission and breach of fiduciary duty.

47:45 So it's totally unrelated to anything that we'll we'll we'll be we'll be doing. And I think the other the other point on that is other competitors in the marketplace may be focusing on remediation. So it's another good time for us to be entering with that completely clean slate. There's a question here on the in the core product about, you know, what happens if a if a motor home or caravan dealer goes bust. I suppose it's same for for for any dealer. Assume you reclaim the inventory and try and sell it. That is absolutely right. What we would look to do is repossess the the those those assets as we call them and look to redistribute those through the the dealer network. There is a statement here that if a dealer goes bust from having too much industry sorry, inventory, then there's too much inventory in the market from a lack of demand. That's not necessarily true, actually.

48:37 You know, there are some geographic challenges in selling. There are some just people that can't aren't aren't very good at at selling. We've got a great example, you know, from from last year that there was a a well established motorhome and caravan group that overtraded. And we had an awful lot of assets that we needed to to to to repossess, which we did. And we we redistributed those through the existing dealer network, and we did not have to make a single credit loss provision in relation to that. That's the wonders of of having a broad network of of of dealers and our portal, you know, that the dealers transacting does allow us to advertise product for sale, and they can they can take that and and and take it into into their forecourts and and and sell them. So, yeah, I don't think it holds true that a dealer going bust because they've got too much stock is because of the market a market dynamic.

49:36 What you generally find is dealers, if there is a market dynamic, are pretty good at managing their their their inventory levels. Anyway, it's the odd dealer here or there that, you know, doesn't doesn't manage things particularly particularly well, and we've got routes to deal with that, which is proven across a number of a number of sectors. Just in relation to the next question, which is customer demand. What does demand look like now for the rest of the year in your end markets? Can you talk about your major areas of lending and what appetite consumer demand is is is is like? So I think, you know, if I if I deal with things in the in the in the business to business space, I think, you know, there were people were were buoyed by, you know, a view that there was gonna be, you know, government government investment. That generally means that, you know, there there will be, you know, good good demand for for for stock. I think, you know, the the the latest the latest statements, the budgets in October has made people, you know, far more cautious about, you know, committing themselves to to buy new assets. And clearly, that then rolls through back through the, you know, the the the dealer the dealer network. I mean, agriculture is one that's always, you know, particularly challenging, probably made worse by the the government decisions in relation to, you know, inheritance

51:08 inheritance tax and and the like. On the on the leisure side of things, I mean, motorhomes, caravans, you know, still very strong receipt. We've had an awful lot of of of loan repayments, which is good news because that means dealers are selling products. We've had an awful lot of of of new stock coming through as well. So, you know, particularly in the Motown space, you know, people avoid you know, the the, you know, the people that are buying these assets aren't really those that are worried about cost of living interest rates and and and inflation. You know, it's something that they perhaps saved up for and, you know, over an extended period of time and are confident they can perhaps, you know, extend themselves a bit further by by borrowing a little bit of of money as well. So that's, you know, a big part of our balance sheet is looking strong.

51:53 Marine is generally is generally quite positive and and insulated from from most things, particularly at the the larger boat boat end of the the market. Motorcycles has been quite quite tough. You know, the the and it is is expected to continue, you know, in that in that in that vein. But I think, you know, we've we've we've rolled together all of the all of our expectations around the market, and we've we clearly have navigated, you know, a lot of uncertainty since since being authorized as a as as as a bank, and we've we've demonstrated that we can continue to grow. But what's super exciting for us is we aren't just a monoline now as we enter, you know, 2024.

52:39 We've got more products and services at our disposal to to support our growth ambitions, which we're we're talking about a loan book at the top end of of of of 800,000,000, which, you know, is not a massive step from where we where we are now. So maybe there's there's then a question on analyst update. Will there be a q one trading update this year? Because there wasn't one last year. So it's it's all around the timing of of our statutory update. So last year, we produced our year end accounts around the ninth or tenth of April. And therefore, at that time, we've just gone through the end of q one. So wrapped up in our full year results last year, we did a q one trading update. We will be doing a q one trading update probably expected towards the back end of next week. And, therefore, it's similar timing to last year. It's just last year, we did it as part of the statutory accounts or the the full year update. So there will be a q one update back end of next week. Yeah.

53:38 And then we've got a couple of questions just on on on on share price. So, I mean, there's one here about do we have a cure for the common cold? Sadly, sadly, sadly not. I'm I'm, if a fourfold increase in profit isn't enough to share price to jump, you need some big news. Look. I we'll take that as a compliment. I mean, we can we can only control what we can control. I mean, there's an awful lot going on, you know, you know, in the in the in the stock market. There's an awful lot going on in the world, you know, over the this this period right now. But we're gonna continue to deliver on our plan, and our view is that, yeah, the markets will sort themselves, you know, will sort themselves out. You know, that being said, what is what is, you know, key for us given those structural challenges, you know, there are, you know, a number of our institutional shareholders who built their positions up over time. You know, some have seen outflows given the strength of interest rates. People, you know, less interested in in in in holding their their investments in the in the stock market, and they've decided to put them in savings accounts with people like DFCAPITAL because they know it's fabulous returns and a great a great a great service.

54:50 But, you know, so some people have had to clip their positions, and, you know, that's you know, that means there are, you know, have been appointed sellers in the market. And what is key is for us to continue to get our message out there to meet shareholders of all different shapes and and sizes and, you know, get get our story out there in the retail markets. We've we've brought on a new financial PR company. We've met, you know, some some some press this morning off the back of that new relationship. We're gonna continue to use this platform to get our story to get our story out there. And we have been tipped, funnily enough, in a number of a number of newspapers as well as as as as one to watch. So we're gonna continue to do control the things that we that we can, which is financial results, continue to ruin the firm really well, deliver on our deliver on our plan whilst making sure our story is is is out there. And then you've gotta hope as the market starts to stabilize and the the global position improves that that means that we'll see an improvement in the share price. You know? But for those, you know, that that that are bought into the virtues of DFCAPITAL, there's never been a better time, you know, this sort of discount to be be getting involved in the company. And if you do, I I hope that you, you know, over the over the medium term reap the benefits of of that belief in our in our story.

56:20 So I think that deals with all the questions. Well, thanks very much for answering those questions. Of course, the company can review all the questions submitted today, and we will publish responses on the investor meet company platform. But just before redirecting investors to provide you their feedback, you know, it's particularly important to the company. Carl, I just wondering if I could ask you for a few closing comments. Look. I I'm hoping it's come across to everybody that not only being super proud of what we've what we've done and what the team have have done at DFCAPITAL, we've got so much opportunity, you know, ahead of us. I'm excited, you know, to be at this this this point in in our journey, looking forward to leading the firm, you know, moving moving forward. And it'd be remiss of me not to to thank Gavin, you know, for his contribution to to the company as as he sees sees us through the next few months and and and and hands over to our our new CFO and then goes off to enjoy retirement.

57:22 Thank you, Carl. Thanks. Thanks, everyone, for your time. That's great. And thank you once again for updating investors today. Could I please ask investors not to close the session as you will now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? On behalf of the management team of DISTRIBUTION FINANCE CAPITAL HOLDINGS PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.