Orchard Funding Group reports strong profit growth following year-end change

Orchard Funding Group has delivered a strong set of final results, but there is one big catch investors need to keep in mind from the outset – these numbers cover 18 months, not the usual 12. The company changed its year-end from 31 July to 31 January, so headline growth looks huge partly because the reporting period is longer.

That said, once you strip that out and look at the company’s own annualised comparisons, this still reads like a genuinely good update. Lending grew, income improved, bad debt charges fell sharply, and profit stepped up far faster than costs.

Orchard Funding Group final results: the key numbers retail investors should watch

Metric	18 months to 31 Jan 2026	12 months to 31 Jul 2024
Lending volumes	£182.77 million	£114.70 million
Gross total income	£15.73 million	£9.64 million
Net total income	£12.68 million	£6.89 million
Profit before tax	£6.59 million	£2.12 million
Profit after tax	£4.91 million	£1.57 million
Basic earnings per share	23.11p	7.39p
Loan book net of ECL	£66.14 million	£66.98 million
Borrowings	£33.64 million	£40.22 million
Cash	£1.07 million	£1.48 million

The standout adjusted figure is net total income, which rose by around 22.8% on an annualised 12-month basis. Lending volumes were up by around 6.2% on the same basis. That tells you Orchard is not just doing more business – it is doing more profitable business.

Why Orchard Funding Group profit growth looks better than the headline noise

The headline profit jump is eye-catching, with profit before tax rising to £6.59 million from £2.12 million. Because of the longer period, you cannot take that rise at face value. Even so, the underlying trend still looks very healthy.

A big part of the improvement came from income growth and better credit performance. Net impairment losses on financial assets – essentially bad debt charges and expected losses – dropped to just £0.06 million from £1.24 million. That is a major swing and one of the clearest positives in the whole release.

There is context here too. Last year included a £479,000 provision linked to Nukula Limited, trading as Insure That, which went into administration in July 2024. With that pain largely in the rear-view mirror, the latest period looks cleaner.

Insurance premium finance remains the engine room of Orchard Funding Group

Orchard’s core market is insurance premium finance – lending that lets customers spread the cost of insurance payments. It is not glamorous, but it is dependable. Insurance is often a must-have purchase, which gives this market a defensive feel when the wider economy gets shaky.

The company says most of the growth came from the direct insurance side, up 14.66% on an adjusted 12-month basis, excluding Toyota products. Lending to broker premium funding companies was also higher on that basis, up 6.59%.

Not every area moved the right way. Professional fee funding grew over the full 18-month period, but was actually 28.03% lower on an adjusted 12-month basis. Orchard also remained cautious in static caravan and property bridging, and said longer-term lending slowed because of the economic backdrop. That is sensible risk control, but it does cap growth.

Margins, funding costs and the quiet win in Orchard’s numbers

This is where the results get more interesting. Orchard says it operates in very competitive markets and cannot pass on base rate rises to customers. That is a real constraint. When borrowing costs go up, margins get squeezed.

So it matters that the average cost of finance eased to 7.68% from 7.99%. It is not a dramatic drop, but it helps. Management says lower rates are starting to feed through to net income, which could support profitability further if that trend continues.

There is still a risk here. Some borrowing is linked to bank base rate and some to SONIA, the Sterling Overnight Index Average, a benchmark interest rate used in UK lending markets. If rates stay higher for longer, or fall more slowly than expected, Orchard’s margins could come under pressure again.

Loan book, borrowings and balance sheet strength at Orchard Funding Group

The loan book ended the period at £66.14 million, almost flat against £66.98 million at the last year-end. That might look underwhelming given the rise in lending volumes, but this is a short-duration lending model, so the year-end snapshot does not tell the whole story.

More encouraging is the funding position. Borrowings fell to £33.64 million from £40.22 million, while the group still had unused facilities of £17.31 million on the general facility and £2.89 million on the restricted facility. That gives it room to lend without looking stretched.

Cash was only £1.07 million, down from £1.48 million, so this is not a cash-rich business in the traditional sense. But lenders like Orchard are better judged on funding lines, loan performance and access to liquidity than on a chunky cash pile alone. On that basis, the balance sheet looks solid enough.

Costs, technology and what management is doing right

Operating costs excluding impairments rose to £6.03 million from £3.60 million, which is a fair increase. But again, this covers 18 months, and staff numbers were broadly flat at 23 despite the integration of two small acquisitions. The financial contribution from those acquisitions was not disclosed.

That suggests cost control has actually been pretty disciplined. Wage costs rose, as you would expect, but the company still converted income growth into much stronger profit.

There are also a couple of operational positives worth noting. Orchard continues to invest in its in-house lending platform, Lend XP, and says it has achieved ISO 27001 accreditation for the software. In plain English, that is a recognised information security standard, and it matters in a regulated lending business.

Orchard Funding Group dividend and what it says about confidence

Income investors will notice the improving shareholder returns. Orchard paid interim and special dividends totalling 3p per share during the period and is proposing a final dividend of 1p per share, subject to shareholder approval.

That totals 4p per share relating to this 18-month period, versus nil final dividend last time. It is not a huge payout, but it does signal confidence from the board. Companies under pressure do not usually reach for special dividends.

Risks to watch after these Orchard Funding Group final results

• Interest rates – Orchard cannot easily pass higher funding costs on to customers.
• Regulation – the company says compliance costs continue to rise.
• FCA motor finance review – management flagged this as a headwind affecting the market in which Orchard Finance operates.
• Economic uncertainty – inflation, oil and gas prices, and borrower stress could all affect demand or credit quality.

None of these risks are hidden, and that is actually a positive. Management sounds alert rather than complacent.

My view: a strong Orchard Funding Group RNS with a few sensible caveats

This looks like a good set of results. The period change makes the headlines look bigger than they really are, but the annualised figures still point to a business that is growing income, defending margins better and seeing much lower credit losses.

The biggest positives for me are the 22.8% annualised rise in net total income, the collapse in impairments to £0.06 million, and the reduction in borrowings. The weaker points are the flat year-end loan book, lower cash, and ongoing exposure to rate and regulatory pressure.

Overall, Orchard Funding Group appears to be doing the dull stuff well – and in specialist finance, that is usually where value is created. This is not a flashy growth story, but it does look like a disciplined lender quietly improving its economics.