Asset Finance Europe interview Robert Keep, Managing Director, Norton Folgate
This March Norton Folgate (NF) regained its independence. Originally formed in 1996 by managing director Robert Keep, the company was acquired by General Capital plc in March 2007 in a transaction carrying an enterprise value of £2.9m. Following the liquidity crisis and a management buy-out, Keep (who never lifted his hands from control of the company) is back in total charge and going for growth despite the gloomy times.
“There is no doubt,” he said, “this has been the most challenging 18 months I ever remember. However, I saw it coming. By late 2007 when the credit crunch broke I forecast no change in the market until spring 2010 at the earliest. I just could not see liquidity improving any time soon – and a brokerage making sustainable profits is about liquidity more than anything else.”
In addition, Keep is critical of the way major brokerages “lost sight of their basic responsibility”. “In the boom time,” he explained, “the broker had become the buyer and the finance company the seller. Lenders were going for turnover and didn’t really look too closely at how they achieved it. They strove more and more to increase market share in a manner that was unsustainable.”
As a result, Keep predicts a major ongoing re-adjustment between brokers and lenders. “Many smaller brokers will still go under,” he insists, “until the balance is correctly set between lenders’ resources and brokers’ new business levels.”
But Keep is optimistic for NF and has set four principal areas for growth. “Firstly,” he told Asset Finance Europe, “we will build the business as we have always done – by providing asset finance to small and medium-sized businesses. Secondly, we are moving into marine and air finance where there are some great opportunities. We have just concluded a £3.4m deal for a Yacht.”
Keep has recently passed a Securities and Investment Institute examination enabling him, subject to FSA approval, to undertake corporate finance advisory services. This is the fourth avenue for growth – enabling the company to offer equity funding in addition to debt finance. Finally, the leasehold on NF’s current smart office in Hertford is due for revision soon and Keep may be persuaded to open a London City office to bring the company nearer to the heart of marine, air and corporate finance deals.
Keep is quick to praise those funders who have stuck by their broker partners. Specifically he mentions ING Lease, Close Group and Private & Commercial Finance. He remains critical of lenders who “rashly took the decision to leave the sector” and considers it to be “short-term thinking”. He said: “Given that they underwrote the deals, how can they now blame the brokers?”
NF is a finely-run brokerage with eight sales staff and four administrators and national coverage. Keep has always paid his staff a salary – unusual for the sector – but he believes it engenders staff loyalty and reduces pressure on staff to accept marginal deals. The company has 1,800 clients and some 50% of turnover comes from existing customers each month. He expects new business levels to equate to those of last year at around £18m with a distinct increase during 2010. “There will be a greater growth,” he stressed, “if the marine and aircraft finance business increases as intended.”
By then he believes a new broker/lender model will have emerged. “In the boom time,” he said, “brokers were making more money, with no risk, for introducing deals - than finance companies were funding them with risk. For the future, lenders will be far more focused on profit than volume.”