Distribution Finance loan book growth stalled by inventory replenishment issues

Newly authorised bank Distribution Finance Capital said on Friday that it was "pleased" with the progress it had made during the second quarter of its trading year but failed to record any growth in its loan book due to inventory replenishment issues.

Distribution Finance stated new loan origination had continued at pace, exceeding £295.0m during the six months ended 30 June 2021, up from £115.0m a year earlier, underpinned by its "strong pipeline", which now exceeds £1.0bn.

Throughout the first half, DF onboarded more than 80 new dealers and now has in excess of 700 dealer relationships, with aggregate dealer loan facilities totalling roughly £465.0m.

However, the AIM-listed group acknowledged that while "many dealers" within its network were reporting record sales, inventory replenishment had been impacted, with many of its manufacturer partners reporting increasing commodity prices and a knock-on impact on their supply chains.

Although Distribution Finance said manufacturer production levels were still "exceptionally high", the achievement of projected delivery dates had been "materially impacted", meaning overall loan book growth had been slowed and was flat year-on-year at £166.0m.

Chief executive Carl D'Ammassa said: "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.

"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."

As of 0935 BST, Distribution Finance shares were down 3.28% at 59.0p.