Time Finance LON:TIME the AIM-listed, alternative financial services company is having the time of its financial life, reporting Profit Before Tax had increased 172% in its third-quarter trading update published today (8th March).
The market liked the news, with shares rising from market opening by 15.7% as at 1100. The financial services firm started the day at 25p and had jumped to 27p within the first hour. The company has offered a 22.9% year-to-date return, a 28.2% one-year return with its shares ranging between 15p and 27p over a 52-week period. The company has a market capitalisation of GBP20.6m.
Strong recovery
As previously reported, the Bath-based alternative finance company had a tough lockdown period in 2020-21 that saw its loan book contract. However, as reported, lending did recover once society emerged from the pandemic – especially as the government tapered its lockdown business support packages, especially through products like the government-guaranteed Bounce Back Loans programme.
The company saw own-book lending origination rise from GBP39.5m by 34% to GBP52.9m when compared to the corresponding period. This saw a corresponding 28% uptick in revenue to GBP20m when compared to 3Q21/22.
The big number was a 172% rise in profit to GBP3m with strong visibility of future earnings with unearned income up 30% to GBP19.4m as at 28th February 2023. The signs are good for Time Finance, and management now anticipates full-year trading to be ahead of expectations at no less than GBP3.6m profit before tax when the books close at the end of the financial year.
The company operates in the business-to-business segment, offering a range of business financing products including: Asset Financing, Invoice Finance, Business Loans and Vehicle Finance. Based in Somerset with subsidiary offices across the UK, the company has been a constituent of the AIM index since August 2013.
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The significant contributor to growth was Time’s Invoice Financing service, followed by its “Hard” Asset Financing products. The company also noted that the quantum of loans had increased as had quality with a larger proportion migrating to the secured financing area.
Time Finance is wholly-focussed on just the B-2-B and prioritises secured lending. The company’s Asset Finance allow companies to finance the purchase of capital machinery – be it ‘hard assets’ like earthmoving equipment used in construction, or ‘soft assets’ such as office furniture or computer software – over time, spreading the cost of repayments over the term of the loan rather than as just one lump-sum. This allows the financier to repossess the item if the loan is not cleared.
Invoice Financing allows a company to access the money it is owed before the invoices become due, using the invoice as security and paying the borrower a proportion of that invoice up-front, usually within 24 hours of issue – as opposed to waiting 30, 60 or 90 days for payment. The customer can then use the money for cashflow or investment purposes immediately. Time Finance offers a credit control service through this product.
Time Finance also offers vanilla business loans of between GBP50,000 and GBP500,000 that are secured against property, with short-term and long-term repayment schedules. To complement its offering, the company also has vehicle and fleet financing products.
“Business is robust”
Chief executive, Ed Rimmer said in a statement this morning: “I am delighted […] to confirm that the expected results for the full-year to 31 May 2023 are being further uplifted. This is the second time since the start of the calendar year that these have been raised […] Despite the well-publicised wider macro-economic headwinds, the group has continued to grow at a faster rate than expected, demonstrating that demand for finance from UK businesses is robust.”
Bridgewise rated Time Finance as a ‘Hold’. The analyst said: “Looking at Time Finance’s financials […] reflected decent results. We do believe, though, that macro-related market conditions will influence the company’s performance more significantly than its individual results. Overall, Time Finance’s value and growth factors are trending positively, and we, therefore, give Time Finance an overall grade of 76 and a ‘Hold’ recommendation.”
Andrew Renton, an analyst for Cenkos said: “Time Finance has released a positive update for the period ending 28th February 2023. It follows a strong first half and shows continued momentum in the business. We are upgrading our FY23E revenue forecasts from GBP25.7m to GBP26m and FY23E PBT from GBP3.2m to GBP3.6m. Time’s valuation looks deeply discounted on an FY24E P/E ratio of 5.8x and P/TNAV of 0.6x. We expect a material re-rating as management continue to deliver profitable growth and we believe upside risks to forecasts remain dominant.”
