Distribution Finance Capital Holdings PLC (LSE:DFCH) (H1 2026) Earnings Call Highlights: Record …

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• New Lending: Record high of almost GBP1.1 billion, up 31% year-over-year.

• Loan Book: Closed the period at GBP932 million, a 27% increase (GBP200 million) year-over-year.

• Profit Before Tax: Record GBP13.4 million, up almost 50% year-over-year.

• Return on Tangible Equity: 15.4%, up nearly 4 percentage points; approximately 20% excluding excess capital.

• Tangible Net Asset Value (TNAV) per Share: 82.2p, up 17% year-over-year.

• Net Interest Income: Increased by approximately 24% period-on-period.

• Net Interest Margin (NIM): 7.5%, normalizing from exceptional levels, with an expected move toward 7%.

• Cost-Income Ratio: Improved to 53% from 58.1% at June 2025.

• Cost of Risk: Reduced by 14 basis points to 0.49%.

• Earnings Per Share (EPS): 6p.

• Asset Finance New Lending: GBP28 million in H1, significantly up year-over-year.

• Asset Finance Loan Book: GBP40 million at half-year end; business unit now run rate breakeven.

• Asset Finance Origination (Year to August): Approximately GBP55 million from over 1,500 individual transactions.

• Asset Finance Dealer Network: 273 dealers signed up, representing over 370 unique retail locations.

• Provision Coverage: Stable at 1%.

• CET1 Capital Ratio: 17.8%, comfortably above regulatory minimums.

• Total Capital Ratio: 20.8%, comfortably above regulatory minimums.

• Dealers in Arrears: Reduced to 36, representing 2.5% of the overall dealer base.

• Value of Arrears: 0.7% of the loan book.

• Loan Book Guidance (Year-End): Expected range of GBP920 million to GBP950 million.

Release Date: September 10, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Record new lending of nearly GBP1.1 billion, up 31% year-over-year, driving a 27% increase in the loan book to GBP932 million.

• Record profit before tax of GBP13.4 million, up almost 50% year-over-year, with return on tangible equity at 15.4% (underlying ~20% excluding excess capital).

• Strong credit quality with cost of risk at 0.49%, down 14 basis points, and low arrears at 0.7% of the loan book.

• Improved cost-income ratio to 53% from 58.1%, with expectations to reach 45-48% by 2030 through operational leverage.

• Well-capitalized with CET1 ratio of 17.8% and total capital ratio of 20.8%, sufficient to fund growth plans without dilutive equity raise, and potential for shareholder returns from 2028.

Negative Points

• Net interest margin is expected to normalize towards 7% from the current 7.5%, potentially reducing income growth.

• Cost of risk is expected to increase in the second half as macroeconomic pressures play through, moving back towards appetite.

• Challenging macroeconomic and geopolitical environment persists, which could impact credit performance and growth.

• Asset finance, while growing, is a lower-margin product, which may dilute overall margins as it scales.

• No plans to uplist to the Main Market, which may limit visibility and liquidity for some investors.

Q & A Highlights

Q: How do you expect net interest margins to evolve as the lending mix continues to change?A: Sameera Khaliq (CFO Designate) explained that the long-term normalized net interest margin is expected to trend towards 7%, down from the current 7.5%. This is predicated on the lending mix evolving from a monoline product to a more diverse base including asset finance, which is lower margin but has a comparable return due to lower cost to serve.

Q: Do you have any plans to issue further sub debt, either Tier 2 or AT1?A: Sameera Khaliq (CFO Designate) confirmed that optimizing the capital stack is on the horizon. With GBP20 million of Tier 2 already in place, the company has capacity for more and is exploring opportunities between CET1 and AT1. A full capital plan will be shared with the Board later this year.

Q: To what extent are the pending class actions against holiday park operators a consideration when providing inventory finance to that sector?A: Carl D’Ammassa (CEO) stated that this is a consideration across all lending. He noted that the company is careful and only works with operators who subscribe to the industry body and behave correctly, avoiding the lower-quality end of the market.

Q: Shareholders in Time Finance seem unhappy with the recent takeover price and low multiple of earnings. Does that put a cap on the valuation for our company?A: Carl D’Ammassa (CEO) dismissed the comparison, noting that Time Finance is a nonbank lender with very different growth characteristics. He emphasized the Board’s focus on maximizing shareholder value through 10%-15% annual growth and stated that any approach would be considered to ensure the full potential of the organization is recognized.

Q: Has the Board ever considered uplisting to the Main Market?A: Carl D’Ammassa (CEO) stated that no, the Board has not considered uplisting. He believes AIM is the right place for the company, especially now that its market cap has surpassed GBP100 million, which feels like the right size and shape for an AIM-listed business.

Q: What are the key drivers behind the record profit before tax of GBP13.4 million?A: Sameera Khaliq (CFO Designate) attributed the nearly 50% increase in profit before tax to strong income growth (up 24%) driven by a larger loan book, a resilient net interest margin of 7.5%, and a reduced cost of risk at 0.49%. She also noted an improved cost-income ratio, which dropped to 53%.

Q: Can you provide an update on the performance and outlook for the asset finance business?A: Carl D’Ammassa (CEO) reported exceptional progress, with new lending of GBP28 million in H1 and a loan book of GBP40 million. The unit is now run-rate breakeven. He noted that by August, originations had reached GBP55 million from over 1,500 transactions, with 273 dealers signed up. The company expects to hit the GBP100 million loan book milestone in the coming months.

Q: What is the outlook for the full-year loan book, and what are the expectations for the rest of 2026?A: Carl D’Ammassa (CEO) stated that the company expects its loan book to fall in the range of GBP920 million to GBP950 million at the end of the year. This outlook is based on anticipated further growth in the core inventory finance product during the restocking period and the continued pace of growth in asset finance.

Q: How is the company’s capital position, and can it fund its growth plans without a dilutive capital raise?A: Sameera Khaliq (CFO Designate) confirmed that capital remains strong, with CET1 at 17.8% and total capital at 20.8%, comfortably above regulatory minimums. She stated that growing profitability, combined with significant capital headroom, gives the company confidence to fund its growth plans to 2030 without a dilutive capital raise.

Q: What is the plan for returning capital to shareholders?A: Sameera Khaliq (CFO Designate) reiterated the intention to pay a maiden dividend in 2029 based on 2028 results. Carl D’Ammassa (CEO) added that from the financial year 2028 onwards, the company would consider share buybacks or other distributions, which could be regularized thereafter, while still supporting its growth journey.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.