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July 1, 2010updated 12 Apr 2017 4:22pm

Davenham closes to new business

Following a lengthy battle for survival, the asset and trade finance specialist Davenham has decided to stop writing new business and expects to de-list from AIM following a strategic review of its business.

By Brendan Malkin

Following a lengthy battle for survival, the asset and trade finance specialist Davenham has decided to stop writing new business and expects to de-list from AIM following a strategic review of its business.

It plans to collect in its existing book and to hold a shareholder meeting at which it will propose to cancel its securities on AIM.

The share price of the company plummeted 71.4 percent to 0.5 pence in reaction to the news, announced yesterday morning.

During its 19-year history, Davenham rose to become one of Britain’s top asset finance providers.

However, it was crippled by the recession and writedowns in its property arm which caused its net asset value to plummet from 26.3 million in 2008 to £3 million by year end last year

The Manchester-based company recorded operating losses a year ago of nearly £50 million, compared with profits of £13.1 million in June 2008.

Its decision to close new business followed a long running strategic review, carried out by both Davenham and Hawkpoint Partners, a corporate finance advisory firm.

Its hardest hit division, its property finance arm, was closed to new business during the first half of 2009.

Soon afterwards it ceased writing new business in its small ticket leasing and professional loans, although it continued to offer loans through its trade and larger ticket asset finance divisions.

The SME specialist lender, which was formed 19 years ago and has offices in Manchester, Leeds, Birmingham and London, announced in January it was looking for a buyer.

Subsequently, rumours emerged that it was planning to hold on to its better performing asset finance arm.

At the NACFB Commercial Finance Expo in Birmingham, taking place on the day the announcement was made, brokers expressed their disappointment over the news, as well as surprise that a buyer had not been found for the ailing company’s asset finance book.

After posting heavy losses at the end of 2008, the company introduced a wave of costs savings measures last year, including making redundancies and closing offices.

It managed to almost halve its administrative expenses to £6.2 million, and it scaled-back its loan portfolio from £247.3m down to £144.2m by December last year.

It also took control of its impairment charges, which dropped from £31.3 million at the end of 2008 to £1.8 million in December last year.

However, these efforts were not enough to keep the company afloat. In a statement yesterday, Davenham concluded that “there is no value for ordinary shareholders in the company”.

Davenham launched an acquisition finance business in January 2007, but had to scale back lending to IFAs last September, after property loans went bad.

Six months later, in June 2009, not long before the start of the banking crisis, bought London Scottish’s leasing business, Manor Credit, for £25.1 million.

Brendan Malkin

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