Potential breaks even with vehicle hire venture

Potential Finance Group, an asset financier for the small and
medium-sized sector, said its venture into the vehicle hire
business broke even in the financial year ended September 30,
2007.

But costs associated with the start-up and accounting rules that
require employee share options to be treated as an expense, pushed
its full-year results into a loss of £112,000.

“Vehicle hire has suppressed the profit overall,” said Vivien
Ware, Potential’s finance director.

For the year, Potential reported a gross profit of £1.6m on a 46
per cent rise in turnover to £4.1m. Administrative expenses of
£1.6m and a notional charge of £102,000 in share options widened
its operating loss to £115,000 against £22,000 the previous
year.

Ware said share options charges will continue to appear in the
current year’s financials, but rapid growth at its vehicle hire
business should result in the group reporting a reasonable amount
of profit.

Excluding the impact of the share-option charge, Potential made
a profit before tax of £14,000.

“Our positive predictions at the time of the interim
announcement have proved realistic and Potential Vehicle Hire (PVH)
did, as anticipated, make a small profit in the second half. Even
more encouraging is the month-on-month profit PVH has contributed
since the year end,” chairman, Peter Cordrey, said in a
statement.

Meanwhile, the asset finance division which largely
finances wheeled assets, reported a year-end portfolio of £12.5m in
receivables.

Potential’s broker division, which was formed in 2006, has
become a significant profit centre for the group, the company said.
It has plans to build on the brokerage within the asset-finance
business as a hedge against the onset of greater risk brought about
by the credit crunch.

“We try to be flexible in response to what’s happening around
us, ” Ware said when asked if Potential is looking to cut down on
underwriting deals. “It’s to try to react to the fact funding might
be harder to get hold of because of this credit crunch … It’s
really trying to protect ourselves in the event there should be an
issue going forward.”

Indeed, balance-sheet strengthening and prudence appears to be
the way forward for the group. As at end September 2007, Potential
was geared at twice its shareholders’ funds.

Potential told shareholders in the March 18 results release that
it would explore the possibility of raising capital over the next
few months and also focus on indentifying a strategic investment
partner.