T/o up 437% but 1,004% (organic) profit growth, last 5 years.



Money raised @ 10p
Further funds @ 15p
Further funds @ 24p
Further funds @ 26p
Further funds @ 36p

Portfolio up 6,100% in 5 years. 85% (organic) compound growth last 4 years......forward p/e 8




BRITANNIA FINANCE (Est.1998)

Latest News
Wednesday 10th Dec 2003 Interim Results:
http://www.ofex.com/cgi-bin/news.cgi?action=CoStory&ISIN=GB0031884421&NewsID=18800
Thursday 27th May 2004 ~ Two institutions invest in excess of 425,000 @ 36p
Monday 12th July 2004 ~ Britannia market makers increase from one to four
Wednesday 14th July 2004 ~ Full year results
http://www.ofex.com/cgi-bin/news.cgi?action=CoStory&ISIN=GB0031884421&NewsID=19826

MD says "The company's prospects are excellent & we expect another record year of growth".


The record so far:

Turnover*
2000 687,000
2001 1,248,304
2002 1,664,531
2003 2,466,679
2004 3,692,683
2005 5,000,000 Est.
2006 6,750,000 Est.

*~Interest & brokerage fees received.

Pre-tax profit*2
2000 67,631
2001 107,502
2002 179,063
2003 308,979
2004 746,792
2005 1,250,000-1,500,000 Est.
2006 2,025,000-2,350,000 Est.

*2~note conservative a/c methods are used which depress profits...compared with peers

Portfolio*3
2000 182,000
2001 709,000
2002 2,200,000
2003 5,300,000
2004 11,100,000 (12.8m @ 30/6/04)
2005 18,500,000 Est.
2006 26,750,000 Est.

*3~Once this reaches circa 12m as costs are largely fixed, turnover will to a large degree filter through directly to the bottom line...ie profits.

Earnings per share*4
2000 0.3p
2001 0.5p
2002 0.8p
2003 1.5p
2004 2.8p
2005 4.3p-5.2p Est.
2006 6.5p-8.0p Est.

*4~note conservative a/c methods are used which depress eps...compared with peers

From Ample/iii:
Buy Britannia Finance at 40p

By Monisha Varadan, editor of Unquoted-Analyst.com

Britannia Finance has a great business model. It is a growth stock on a lowly rating. As such at 40p its shares look to be a cracking long term investment. The business model is simple. For premium interest rates it provides car loans to people with slightly above average credit risk. But it also has a flexibility towards the type and age of vehicle; typically it finances older, more prestigious cars that hold their value which the big players aren't interested in. In identifying such a niche area of business, Britannia has produced some fantastic returns and its shares have soared during its 20 months on Ofex. However they are still cheap. Our conservative estimates put Britannia on a 2006 price earnings ratio of just 5. Buy.
The Background

Britannia Finance was formed in 1998 by Managing Director, Mark Burgess, and actually made a profit on its first day. Granted it was only 20 pounds, but profit nonetheless. Floated on Ofex in 2002 at 10p, the steady increase in the share price is evidence of the company's great growth potential. Key to a successful company is a credible management - and we have great confidence in the attitude of Mark Burgess who, at 30, has previous experience at Cattles and GE Capital Motor Finance and has got off to a flying start with the initial growth of Britannia.

In the six months to 31 October 2003 Britannia generated spectacular results, boosting its pre-tax profits by 229% to 407,000 pounds. Turnover was up by 49% at 1.58 million pounds without the proportionate increase in costs. The company again expects to produce record results for the full year to 30 April 2004, and we are looking for profits of at least 700,000 pounds. Results to be announced on 14 July.
The Lending Model

Last month Britannia extended its credit agreement with Barclays from 6 million to 10 million pounds secured against the loan book. Its bank facilities advance 80 - 95% of the finance required, so Britannia only has to produce 5 - 20% of the money from its own equity. A borrowing rate of 5.9% and a colossal lending rate of 31% means Britannia will make approximately 1 million pounds profit excluding expenses on the additional 4 million pound facility alone. Revenues from this will appear within 3 years (the duration of a loan) and for the time it takes to lend the full amount. Concerns over interest rate hikes are still unfounded, even with a 1% increase over time Britannia is still making a 24% return without adjusting its own lending rate.

The six months to October 2003 saw 1905 cases and total receivables up at 9 million pounds. It's scrupulous credit checks leave Britannia with current bad debt rates of 0.25%, which in itself is impressive considering most lenders suffer bad debt rates of 8% upwards. It has of course accounted for a marginal increase in bad debt as the lending facility grows. Britannia currently lends 5 million - 6 million pounds per year, with a long term vision to lending 100 million pounds in 2010. Given that the motor finance market is worth in excess of 11 billion pounds per year, the potential for growth is massive.

Britannia's other neat little remit is its brokerage division. This earns a healthy commission from placing its greater risk customers with other finance companies. Commission from the brokerage division amounted to 473,000 pounds during the six months to October 2003; 30% of overall turnover. This was down on the same period in 2002 because of the focus placed on the loan division, and consequently fewer recommendations were made to third parties.

This balance of brokerage and lending makes Britannia a one-stop shop for a range of candidates - making money out of even the most undesirable loan applicants - allowing the dealer to maximise on car sales.
The Long Term Plan

The management of Britannia has two key principles in mind for expanding the company. Firstly, it must maintain the quality of its customers to ensure loan repayment. Secondly, the company must make an adequate return on capital. The competition is fierce so rather than clashing head on, Britannia aims to seek niche lending areas which are not exploited by the main leaders. Diversifying into other areas in order to spread its risk is another option, and the business model can be applied to a number of other forms of financial provision such as mortgages.

Most of the business is executed in the North West with a long term view to expand nationwide, with agents already in place in the South West and Scotland. Traditionally Britannia's customer base has spanned small to medium sized motor dealers, though more recently the company has successfully branched out to much larger national groups.

The company has also invested in an internet proposal system, which eliminates the manual input of data so the business can be scaled up without increasing the number of operational staff. Britannia will be able to underwrite credit proposals in-house in 35 minutes, putting it in a different league with just a few other majors able to offer a similar service standard. Burgess believes its capacity (a fairly ambitious turnover up in excess of 700 million pounds) will compete favourably in high volume used car supermarkets. This could literally transform the volume of in-house business overnight.

The company is now of a size that institutions are starting to take an interest. Burgess has a 57% stake in the business and received and rejected a 24p a share bid well over a year ago. He is confident that further such approaches to the company will be made and in the long run Britannia is bound to be taken out. Consolidation is a natural dynamic of this industry.

A move to AIM is under consideration, which, while opening up access to more capital and gaining a higher profile, would prove more costly than an Ofex quote. And with several additional market makers round the corner, Britannia will experience the same level of liquidity as it would if it were traded on AIM. The company has done several successful fundraisings through Ofex, worth 1.2 million pounds gross, the proceeds of which have been used to expand the lending division.
The Valuation

At 40p - 42p Britannia is capitalized at 7.87 million pounds and the conversion of loan notes at 56p will see a further 290,000 pounds added to the value. Last month Burgess went through a phase of off-loading shares, which Britannia's Corporate Advisor, Ruegg and Co, assured us was for paying off his mortgage. In total he sold 690,000 shares at 36p, realizing 248,000 pounds. To be fair he retains 10.9 million of the 19.1 million shares in issue.

At the interim stage last October the company had cash reserves of 248,000 pounds. Even our cautious forecasts for the year to April 2004 see pre-tax profits in excess of 700,000 pounds rising to 1.5 million pounds in 2005 and 2.2 million pounds in 2006. That equates to fully diluted earnings per share of 2.5p rising to 5.5p and on to 8p. An April 2006 price earnings ratio of 5 does not look expensive for what is an exciting growth story. Buy.
30/4 Pre-tax Eps(p) PER.
2003A 0.3 1.16 35
2004E 0.7 2.5 16
2005E 1.5 5.5 7.5
2006E 2.2 8.0 5.0

Beware, this is the poster formerly known as thirdeye.

& your point?

Nasty profit warning today. Directors not brave enough to put figure on likely shortfall.

Avoid.