EFT flourishes with four-wheel drive

INVESTORS looking for a company that had grown earnings per share by a compound rate of 34 per cent a year over the last five years probably would not light on Glasgow-based asset finance group, EFT. But the firm, now worth more than pounds 50m, has done just that and is gearing up management and systems for further progress.

In the short term this is slowing the growth rate (to 20 rather than 34 per cent), but the pay-off should start to come through in 1997. Its chairman, Hamish Grossart, says: "The group has still only achieved a fraction of what is possible in its chosen markets."

The size of the group's rivals, which are mostly owned by the major clearing banks, gives an idea of the potential. For example, Forward Trust, part of Midland Bank, is 40 to 50 times the size of EFT measured by assets. With EFT's higher margins, though, the disparity is far smaller in profits terms.

In each of its four product areas at the moment EFT has less than a 1 per cent market share, allowing great scope for growth.

As for those products, Mr Grossart cites "wheels" as a common theme. The commercial asset finance division provides a significant amount of vehicle finance; the consumer finance division, Haydock Finance, acquired last year, specialises in car finance; there is a large and very fast- growing contract hire arm that supplies heavy commercial trucks; the finance broking division arranges finance for buses and coaches.

Some statistics give the flavour of the rate at which the group is growing. The branch network has more than doubled over the last year to 14, stretching from Glasgow to Bournemouth. Staff numbers have risen from 97 at the end of 1994 to 209 at the 1995 year-end. In the technical jargon of the finance industry, "net outstanding receivables" (money owed to the group) and contract hire assets increased by 82 per cent over the year to pounds 125m while shareholders' funds grew by 44 per cent to pounds 21.7m.

There is ample headroom in the balance sheet to support further growth. By the standards of other industries, banking-type businesses operate with phenomenal levels of gearing. Forward Trust, for example, might have borrowings of 10 to 15 times shareholders' funds. By comparison, EFT's net indebtedness at the year-end was just 4.4 times. Indeed, the group has just completed a wholesale negotiation of debt facilities to give itself extra firepower for expansion. Undrawn facilities at the year-end totalled pounds 29.4m.

The quick road to ruin in banking is to make loans on thin margins to uncreditworthy customers. EFT tries not to make those mistakes. The group does not chase volume and claims to win business on the basis of flexibility and professionalism rather than price. Since it began making loans in 1987 it has had a separate credit risk assessment division. The man who deals directly with the customer does not authorise the loan. The group had some bad debts between 1988 and 1991 but nothing on the scale of the experience that left the big banks reeling.

Mr Grossart also points out that in areas such as consumer finance, which might look risky, there is usually enough value in repossessed cars to repay outstanding loans.

There are ambitious expansion plans in all four product areas. The commercial asset finance division is mainly centred in Scotland but opened its first English branch in Blackburn, in January. More branches are expected to open in England this year.

The consumer finance division increased lending by 18 per cent to pounds 34.5m and has opened three new branches over the last year. Growth will come in 1996 from further branch openings and possibly acquisitions.

The contract hire division, Alltruck, has six branches in the Midlands and Yorkshire. The fleet has grown from 141 vehicles in 1993 to 469 at the end of 1995. Further rapid growth is expected with an 1,000-vehicle fleet in sight.

Finance broking, a fee-based business, is the smallest of the divisions. Commission income rose by 20 per cent over the year and the group is targeting areas outside bus and coach finance.

Jamie Matheson, an analyst who follows the group at Glasgow stockbroker, Bell Lawrie, is looking for profits to reach pounds 5.3m this year, against pounds 4.5m before exceptional items. A further meaty advance to pounds 7m-plus is also reckoned in 1997 as expansionary moves bear fruit. On a 105p share price that last figure drops the p/e to around 11 with a dividend yield approaching 3.5 per cent, which looks good value for such a fast-growing business. Buy.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
peopleMathematician John Nash inspired the film Beautiful Mind
News
Richard Blair is concerned the trenches are falling into disrepair
newsGeorge Orwell's son wants to save war site that inspired book
Life and Style
Audrey Hepburn with Hubert De Givenchy, whose well-cut black tuxedo is a 'timeless look'
fashionIt may be a paradox, but the industry loves it
Arts and Entertainment
The pair in their heyday in 1967
music
Life and Style
fashionFrom bathing dresses in the twenties to modern bikinis
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine