FNFC announced a pre-tax pounds 32m loss for the year to 31 October after a pounds 34m loss in 1991, with provisions for bad and doubtful debts of pounds 114m after pounds 120m last year. The outcome was as expected after weekend newspaper reports prompted a Stock Exchange announcement by the company on Wednesday.
The group also made an extraordinary loss of pounds 25m, compared with a pounds 10m extraordinary loss in 1991. It was attributed to a write-down of the value of group premises, the disposal of leisure businesses, and write-downs and losses in the discontinued property division.
But the company assessed its outlook as 'now much improved' by lower interest rates, wider profit margins on lending and declining bad debt provisions. The shares gained 11 1/2 p, closing at 68p.
Tim Ingram, finance director, said: 'The effect of lower interest rates, wider margins and the lower level of provisions means that good things can happen for FNB (First National Bank, the consumer lending arm) despite the recession in 1993.'
However, the group expects continued losses in commercial lending.
No dividend was recommended for the second consecutive year. If the rights issue is approved by shareholders, and if economic conditions remain stable, the group intends to declare a dividend of 1.5p for 1993.
Stockbrokers' analysts were pleasantly surprised by the terms of the rights issue of new convertible preference shares, which carry a cumulative return of 7 per cent. Karen Neale, of Barclays de Zoete Wedd, said: 'It's quite attractively priced and it secures the group's survival.'
The chairman, Martin Mays- Smith, said the rights issue was aimed at strengthening the group's capital position and increasing liquidity. In the short term, its proceeds will be used to reduce FNFC's debts.
First National Bank made a pounds 5m loss for the year but bounced back into profit in the second half, helped by lower default rates. The division specialises in second mortages and home improvement loans.
The commercial lending business, First National Commercial Bank, slipped further into the red in the second half for a pounds 19m loss for the year. The rest of the group lost pounds 8m.
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