Time Finance LON:TIME the AIM-listed, alternative financial services company has continued the positive momentum previously reported upon, improving from its record breaking performance in January celebrating another high watermark as it released it final results to end-May today (25th September).
Speaking to The Armchair Trader James Roberts, chief financial officer, explained that in the last year Time Finance has been focusing on improving its customer service, with the aim to give potential clients and clients a speedy response and the opportunity to talk to a human customer services agent who can offer a range of products and services and a flexible, personal response.
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As far as the back office operations of the alternative lender, Roberts said that over the past few years’ Time Finance had built up its credit, accountancy, arrears management and support teams – the bulk expense of its personnel costs – and as a result is now in a situation where it can grow the business without annually increasing overhead costs, so it can redirect revenue into the business to build its own lending book.
Revenue and profits up again
Time Finance saw revenue increase year-on-year by 20% to GBP33.2m. With reduced costs this increased revenue flowed into the bottom line and saw Time’s profit before tax up from GBP4.2m to GBP5.9m – a 41% jump.
“We will reinvest the money back into the business,” said Roberts, “….our profit has improved because of the compounding effect – a bigger book means bigger profit […] and using our own generated revenue to lend-on to businesses means we pay less in financing charges and hopefully accrue greater future revenues – a snowballing effect.”
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Roberts noted that the business was still a “growth stock” so shareholders shouldn’t be expecting dividends any time soon. However, earnings per share was 4.8p/share, up 30% from 2023. Roberts said: “…We want to use excess cash to grow the business, believing it’s a much better deployment of capital.”
Time Finance’s shares opened trading yesterday (24th September) at 52.6p, up 85% over a year and up 44% year-to-date with the lender’s shares ranging between 26.6p and 55p over a 52-week period. Time Finance has a market capitalisation of GBP48.1m.
Still undervalued by the market
“We could do with the share price being a bit higher,” said Roberts, “[…] we still think the company is undervalued by the market and has plenty more room to grow. […] We’ve increased profit by 40% this year, which is marginally ahead of our predictions, and just on a compounding basis, we expect this to increase more next year, so expect the share price to catch up with the true value of the business.”
The lender’s growth has been driven by its own-book deal origination, with Time Finance booking GBP91.6m of new deals, up 25% y-o-y which contributed to a lending book of GBP201.2m by the end of May, an increase of nearly 20%. The ratio of own-book lending to broked-on lending improved to 97% vs 3%.
With consolidated assets of GBP66.1m, future visibility of earnings with unearned income of GBP25.1m and net deals in arrears falling 1% to 5% of book, with only 1% of deals being bad debt write offs, and debt for on-lending headroom of over GBP65m, the case for future sustained profitability that Roberts makes is compelling.
“After paying the mortgage, one of the primary outgoings that small business owners prioritise is the financing of their plant and machinery […] so we feel quite secure about the financial sustainability of our end-customers,” said Roberts.
He was quite bullish about the UK SME sector, saying: “I think there’s too much doom and gloom being spread about by politicians and the media when talking about the UK’s small business sector.”
SME sector’s ‘remarkable resilience’
“I think it’s quite remarkable the incredible resilience of UK SMEs, who have had to deal with Covid, a cost-of-living crisis [and] rising interest rates over the past few years and are still coming out punching […] I think as a nation we do run down our achievements quite a bit. Instead, we should be celebrating the sustainability, innovation and resilience of small business, which are the backbone of the economy and where future economic growth, and prosperity is going to come from.”
Roberts commented on the push-pull relationship between SMEs and high street banks, in that traditional lenders have over the years made it much harder and more expensive for small businesses to access capital. This pushed many small businesses away from traditional big lenders. At the same time disruptors like Time Finance, with flexible and simple offerings and a high level of service, have pulled small businesses into their universe. “Now,” said Roberts, “many small businesses totally bypass the traditional high street lender and beat a path directly to alternative finance providers like Time Finance when they need financial support.”
The business is well-balanced between its two main pillars, Asset Financing and Invoice Financing with both growing at similar levels over the year to stand at approximately GBP90m and GBP68m respectively, which, explained Roberts, gives Time Finance a useful hedge against changes in interest rates either up or down, as both legs have an inverse relationship to one another with reference to the base rate.
Time Finance has delivered another strong year of progress and remains ‘One to Watch’.