FNFC back in the black

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The Independent Online
First National Finance Corporation pleased the City yesterday by returning to the black after four years of losses, with a 60 per cent rise in profits from its core consumer credit business.

The company's shares rose 7p to 64p as it confirmed that a long-awaited refinancing of its £730m bank debt mountain should be in place by the end of the year. The talks had not been expected until 1996 .

Analysts raised their forecasts for next year's figures as First National announced pre-tax profits of £2.7m for the year to 31 October 1994, against a loss of £36.9m last time.

Alex Robinson of Smith New court said: "I'm very pleased with the figures. They have finally delivered. I thought they would make a loss."

With the consumer credit loan book now growing, Ms Robinson expects First National to make £11.2m next year, putting it on a p/e of 8, compared with around 4.5 at the moment.

The core consumer credit business increased profits from £16.6m to £26.3m The final dividend was unchanged at 1p, making a 1.5p total.

The three loan portfolios that are being wound down following an "adventurous" lending binge in the late 1980s all cut their losses in 1994, Martin Mays-Smith, chairman, said.

Commercial lending losses to a range of property and time share operations fell from £23m to £12.4m. Losses on a number of property joint ventures fell from £9.6m to £5.2m, while the group's central borrowing costs and overheads fell from £9.3m to £6m.

Mr Mays-Smith said the growth in the consumer credit operation had been helped by increased selling of insurance products. "This was a good performance against a pretty depressing market," he said. Conditions remained "competitive". The company had debtsof £1.4bn by the end of the lending binge in 1990. Since then it has securitised more than £1bn of these loans. The group's 107 banks gave the company breathing space to wind down its problem loans, but there was a heavy price for survival - high interest rates, and professional fees paid to restructuring advisers.

Once the refinancing has been completed, loan and advisory costs will fall. Mr Mays-Smith hinted that the company's dividend policy would then be able to reflect its improved cash position. Total bank borrowing fell from £910m in October 1993 to £730m this time.

The chairman said the group was determined to press on with selling associated insurance products. The consumer credit business made a return on customer loans of more than 2 per cent, with a longer-term target return now set at 4 per cent.