ARM Corporate Finance Limited is acting as the Company’s nominated adviser, with SVS Securities plc as its broker.
Placing statistics
Up to 21,666,666 new Ordinary Shares are being issued at 3 pence per share. Assuming subscription in full, this will represent a total of 10.34 per cent of the issued share capital of the Company immediately following the Placing, equating to £650,000 gross proceeds for the Company.
The market
The Company operates in the non-standard secured loans and mortgages market, and proactively caters for a large cross-section of homeowners who need specialist-lending solutions. These include small business owners who require financing options to support their businesses, and customers who are disenfranchised for a number of reasons; for example, they have an adverse credit record, are self-employed or have changed jobs several times in a short space of time.
The market for non-standard secured loans and mortgages is widely regarded as a high growth area as demand increases from consumers seeking to consolidate and refinance existing sources of debt by tapping into the additional equity in their homes. Between 2000 and 2004 the value of outstanding debt secured on dwellings increased annually by an average of 12% per year from £536 billion in 2000 to £852.5 billion in September 2004, according to Mintel.
By Datamonitor’s estimations this market represented 9.1 million people in 2004 and is currently valued at approximately £41.2 billion. A number of contributors to Datamonitor’s UK Non-standard and Sub-prime Mortgages 2005 report, estimate that this specialist field of lending will account for 20-25 per cent of the total secured loans and mortgages market in five years time.
The strategy
The Company’s business strategy is founded on offering personalised marketing services to customers from a network of satellite offices, which is in direct contrast to the call centre strategy favoured by some of their competitors.
The three existing offices in Twickenham [head office], Oldham and Darlington are all performing well ahead of plan with a forecast for continued growth as evidence shows that customers are more responsive to a local business. In addition, the usually complex nature of an individual’s financial requirements in this market means that customers benefit from the personalised and tailored support during the application process.
Based on these market predictions, business forecasts and historical evidence, the Company is planning to expand its network by opening four new satellite offices in 2006, situated in Peterborough, Ashford, Cardiff and Scotland. The rationale for seeking an AIM placing, therefore, is to raise the finance required to outfit, staff and generate initial working capital for these four new offices.
The Directors believe that this strategy will place Elephant Loans at a significant advantage in winning new customers and growing the business. It will also enable the Company to run more cost effective and carefully targeted marketing campaigns from each branch, compared to competitors that require high cost national marketing campaigns.
The Packager business
As a packager, the Company offers non-standard secured loans and mortgages from an exclusive panel of specialist lenders to customers.
Packagers form a niche part of the non-standard market. At the time of this announcement, Elephant Loans is believed to be one of less than 50 companies in the UK that have full loan packaging rights. This exclusivity is due to the nature and extent of the contractual relationships that packagers have with their panel of specialist lenders, and is testimony to the quality of the packager’s operation.
Specialist lenders must be assured their select panel of packagers can act as a complete distribution channel for their products. This requires the packager to manage the end-to-end customer experience, as well as the administration for the loan application process, which includes all applicant due diligence, processing of lender documentation and arranging valuations. Therefore, in order to become a lender’s accredited packager, a company itself must not only achieve the industry’s rigorous regulatory requirements, but also attain the stringent due diligence, compliance and operational standards required by the lender.
In the case of Elephant Loans, the Company has been awarded the position of packager by some of the most respected lenders in the market, notably Money Partners Limited, igroup Loans Limited [part of GE Money home Lending Limited] and Kensington Mortgages Limited.
