Time Finance LON:TIME the AIM-listed, alternative financial services company, published its interim results for the six-months to end-November this morning (28th January), and the Bath-based lender has once again improved its numbers across the board.
But the company’s ambitious management thinks that the company can do even better, announcing a new strategic plan to maintain Time Finance’s momentum, growing the firm’s lending book to GBP300m, maintaining the tight control the team has over arrears and write-offs, increasing profit margins to the mid-20% range and upping return on equity to mid-teen levels by May 2028.
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Speaking to The Armchair Trader, Ed Rimmer, Time’s CEO, explained: “The new four-year strategic plan is more evolution than revolution. We’ve spent the last few years simplifying our business and concentrating on the areas that we believe have the most potential [invoice financing and asset-base lending] and it’s a growth strategy that plans on more of the same to keep growth going.”
Rimmer said that the company needs to increase its geographic reach in invoice-financing, especially in London and the South East, and sees more opportunities for bolt-on acquisitions during the year.
“Recently we’ve been focussed on organic growth – building our own-lending book and securing external financing” said Rimmer, “and over the last few years the environment hasn’t supported […the kind of M&A activity that Time Finance is planning this year]. However, with a rise in interest rates, a lot of the smaller financing companies are asking themselves if it’s worth continuing; and this will create opportunities [for larger competitors with free cash availability looking at sector consolidation].”
Time Finance focused on targeted acquisitions
Rimmer said the company would only look at making acquisitions in the areas it is already robust – invoice-financing and ABL.
The company reported revenue up 16% year-on-year to GBP18.2m and Time’s gross lending book increased 11% y-o-y to GBP209.4m, believing adding another GBP100m in the next four-years was achievable. Profit before tax came in at GBP3.9m, up 44% y-o-y and profit margin improved from 17% to 21%.
EPS was up 39% to 3.24p, net assets grew from GBP63.9m to GBP69m and net deals in arrears fell one percentage point y-o-y to 5% of the lending book with net write-offs stable at 1%. James Roberts, Time Finance’s CFO said: “We’re a lending business, so we’re always going to have some arrears and some write-offs – that’s just the nature of the lending business – but over the last few years we’ve been building up our risk-management team with some key hires […] bringing in a new head of risk five-years ago. We’ve just put the last piece of her team in place [with a director of invoice-financing risk] and we now feel well-resourced in this area.”
Roberts was also pleased with the pantheon of financial partners that Time Finance has built up. On-lenders include NatWest, RBS, British Business Bank, Siemens, Novuna, Aldermore, Cynergy Bank and United Trust Bank and Roberts said: “Access to financing is our biggest risk; financing [for on-lending] is our raw material, and if we don’t have access to it, it’s a potentially huge risk […] however, we’re happy we have a diverse and broad panel of lenders, who are looking at giving us more money, as we’ve consistently done what we said we would do – we’re a good investment. If one of our lenders pull back [because of external economic reasons] we have a large group of other lenders who will support our growth.”
The company reported extended and improved funding facilities, including a GBP65m back-to-back invoice finance facility with NatWest and a GBP64m asset finance facility with the British Business Bank.
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Rimmer added: “The trend of the bigger banks retreating from SME lending – especially the ‘S’ part – is continuing apace, but for these banks to maintain their ‘SME Lender Status’ they’re outsourcing the actual lending part to companies like ours, giving us the money to lend to our network, rather than doing it directly themselves.”
With total funding facilities of GBP233m in place, and having headroom of GBP92.2m, Roberts said that Time Finance has the requisite funding in place in entirety for the next three-and-a-half-years.
The company is planning on building its human resource, trying to increase the quality and efficacy of hires, investing in new people and building new teams. Although not reducing headcount, management wants to make its human resource work more efficiently and effectively, focusing on the areas where it feels weak, especially geographically. Rimmer noted that the industry is getting more grey hair, and a lot of the personnel who entered what was a new market twenty-years ago are now approaching retirement.
Developing future leaders
Hiring at the ‘more mature’ end of the market is also quite expensive, and new staff come with old ideas and old practices, more aligned to client retention, as opposed to new client growth. To counteract this trend, Time Finance established a graduate training programme last year. which it is going to build-out as part of the new strategic plan, in order to develop a new cadre of future leaders in the alternative finance market space, that can keep Time Finance relevant and growing.
“The new graduates we have brought into Time Finance are going to be training in our different departments and at present not burdened with sales or client management responsibilities. They are really keen to crack-on, but I’m having to hold them back a bit, ready to unleash them in the next few years,” said Rimmer.
Time Finance opened the week (27th January) at 64.9p, up 69% over one-year, with shares ranging between 32.55p and 66.5p over a 52-week period. The company has a market cap of GBP59.2m. Rimmer was pleased with where the share price was currently, but believed it could go higher. He said: “I’m happy with the share price, and we’ve got a number of investor meeting coming up soon, […] but with its strength we now have the luxury, should we deem it necessary and strategic, to use the listing [to raise capital] more than what we have done in the past.”
SMEs will continue to grow, despite the economic mood-music
Despite the increasingly negative economic news, both Rimmer and Roberts were broadly optimistic about the SME market’s outlook. The company did see a moderate negative reaction on the sales front post-budget in October, as some of its clients delayed on investing in bigger ticket plant and machinery, and companies dealing with invoices had a mild panic about them getting paid on time, but this quickly blew over and normal service resumed by December.
“SMEs, by their nature are entrepreneurial, and they will find a way as they embrace flexibility […] in fact I like these conditions, as it means that more companies are looking around the market to see what alternative finance options are out there […] yes, some companies will go out of business, but others in the SME sector will pick up that business – which is still there – and they will need to have greater exposure to finance to capitalise on the new business.”
Time Finance has delivered another strong year of progress and remains ‘One to Watch’.
