MIDAS SHARE TIPS: New lender Non-Standard Finance gets support of Neil Woodford
Ever since the financial crisis, it has become increasingly difficult to borrow money from the bank.
Traditional high street lenders have drawn in their horns and consumers, particularly the less well-off, have had to look elsewhere.
Last week’s Budget – with its increased levy on the banks – will do little to help. Around 12million people are now considered to be ‘non-standard’ borrowers and the amount of outstanding loans in this sector amounts to £145billion.
Support: Fund manager Neil Woodford is a shareholder
Non-Standard Finance (NSF) has been formed to address these borrowers’ needs in a professional, effective fashion. Listed on the stock market last month at 100p, the shares are now 106p and should deliver long-term rewards.
NSF is chaired by John van Kuffeler, who ran home credit group Provident Financial for 22 years before retiring in December 2013. During his time at the helm, Provident expanded into a FTSE 250 company with more than two million customers and profits of almost £200million.
Van Kuffeler also chaired debt recovery business Marlin Financial Group for four years, until it was snapped up for £295million in February 2014. Disinclined to hang up his hat at 65, van Kuffeler began last year to consider other opportunities.
As banks have become so much pickier about who they lend to, hundreds of firms have sprung up to service borrowers’ needs. However, new regulations from the Financial Conduct Authority are making it increasingly hard for smaller lenders to run their businesses.
Van Kuffeler intends to plug this gap. Highly experienced in both the financial services sector and the regulation that surrounds it, he assembled a team of like-minded directors to build a new consumer finance business.
Fellow directors include Charles Gregson, chairman of top broking firm ICAP, Robin Ashton, chairman of Leeds Building Society and Nick Teunon, former finance director at Marlin. Their intention is to take NSF from a business worth just over £100million on flotation to a valuation closer to £400million in the next three to five years.
Such is their combined reputation that renowned fund manager Neil Woodford and asset managers Invesco and Marathon agreed to invest £48million in the business before the flotation and are now committed shareholders.
At the moment, the business is a cash shell but the intention is to buy at least one company in the next six months and possibly a couple more by the end of the year. Around 20 possible targets have been shortlisted and discussions have begun with several of them.
Van Kuffeler is focusing on three areas: home credit, where Provident Financial dominates the market but competition is otherwise quite limited; guaranteed loans, where creditworthy parents act as guarantors so their children can borrow money; and branchbased unsecured lending, where firms lend money to people including the selfemployed or recent immigrants.
In most of these cases, risk assessment is critical – not just via computer- generated box-ticking but face-to-face discussion and in-depth analysis of people’s financial situation and credit-worthiness.
This is where the experience of van Kuffeler and his team will be invaluable – not in making the individual assessments but in buying businesses that combine diligent risk management with good service so customers keep coming back and debts are repaid.
NSF expects to deliver strong growth and pay out half its post-tax profits in dividends, probably beginning next year.
Midas verdict: It is unusual to put money into a company that has no business yet. But NSF’s management team is determined to make a go of it for themselves, for hard-pressed consumers and for shareholders. Buy.
Most watched Money videos
- The new Volkswagen Passat - a long range PHEV that's only available as an estate
- 'Now even better': Nissan Qashqai gets a facelift for 2024 version
- BMW's Vision Neue Klasse X unveils its sports activity vehicle future
- MG unveils new MG3 - Britain's cheapest full-hybrid car
- German car giant BMW has released the X2 and it has gone electric!
- Mini unveil an electrified version of their popular Countryman
- Steve McQueen featured driving famous stunt car in 'The Hunter'
- Skoda reveals Skoda Epiq as part of an all-electric car portfolio
- How to invest for income and growth: SAINTS' James Dow
- How to invest to beat tax raids and make more of your money
- BMW meets Swarovski and releases BMW i7 Crystal Headlights Iconic Glow
- Iconic Dodge Charger goes electric as company unveils its Daytona
- BUSINESS LIVE: Anglo American snubs BHP bid; NatWest...
- Greek energy tycoon hails London as premier financial hub...
- Is it time to cash in on the GOLD RUSH? Mining stocks...
- Czech billionaire trying to buy Royal Mail takes 20%...
- Anglo American snubs 'opportunistic' £31bn BHP bid
- UK cybersecurity star Darktrace agrees £4.3bn private...
- SMALL CAP MOVERS: Filtronic shares skyrocket following...
- ALEX BRUMMER: Darktrace sale betrays whole Cambridge...
- SHARE OF THE WEEK: All eyes on Apple with Big Tech...
- New private parking code to launch later this year that...
- NatWest follows rivals with profit slump
- Darktrace takeover lands Mike Lynch £300m and chief Poppy...
- I can barely recall 'Tell Sid' share offers of the 1980s...
- MARKET REPORT: Google owner's value hits $2,000,000,000,000
- Pearson's boss given a bloody nose as shareholders...
- INVESTING EXPLAINED: What you need to know about high...
- PWC partners choose another man to become their next leader
- Sitting ducks: Host of British firms are in the firing...