1pm plc (LON:OPM), the AIM listed independent specialist provider of finance facilities to UK SMEs, has announced final results for the year ended 31 May 2020, reporting a resilient performance despite the business impact of Covid-19 in the fourth quarter of the financial year.
The Company’s financial performance for the three quarters to 28 February 2020 was in line with market expectations before being significantly impacted by the Covid-19 pandemic in the fourth quarter to 31 May 2020. Despite the impact of Covid-19, the Group has remained profitable throughout and trading activity in the current financial year to date is steadily increasing with financial results for the first quarter ahead of the Group’s internal operating budget.
Commenting on the Group’s performance, John Newman, Non-executive Chairman, said:
“The effect of the coronavirus pandemic in the last quarter of our financial year interrupted the Group’s consistent growth since 2014 in revenue, profit before tax and earnings per share. However, taking into account the fourth quarter, the results for the year were satisfactory. The strength of the balance sheet, liquidity and financial resources give the Board confidence that the Group will be in a robust position to take advantage of the opportunity our markets will offer as the economy recovers. It is encouraging that in the first quarter of the new financial year there has been an improving trend in business activity.”
· The inherent strengths of the Group’s strategic market position as a multi-product finance provider to UK SMEs, comprising Asset, Vehicle, Loan and Invoice finance, to a very broad range of business sectors, combined with the risk-mitigating model of being both a lender and a broker, have come to the fore in the current economic climate and have proven the Group’s commercial resilience.
· Effective business continuity plans have also attested to the Group’s operational resilience and have underpinned the continuation of a seamless service for the Group’s customers.
· The Group’s ability to develop new lending opportunities despite the business impact of Covid-19, such as becoming an accredited funding partner under the UK Government’s Coronavirus Business Interruption Loan Scheme (“CBILS”), has demonstrated the Group’s commercial responsiveness and agility as a non-bank, specialist finance provider, focused on personal customer service and tailored lending solutions.
· New business origination for the financial year was £147.0 million (2019: £161.0 million), a decrease of 9 per cent. The year-on-year decrease is entirely attributable to the impact of Covid-19. Of the total origination, £54.5 million (37 per cent.) was written on ‘own-book’ and £92.5 million (63 per cent.) was placed for broker commission income.
· Excluding Vehicle finance deals originated, all of which are placed with other funders, 56 per cent. of new business was written on own-book and 44 per cent. placed for broker commission income (2019: 52 per cent. and 48 per cent., respectively).
· As at 31 May 2020, the Group had granted forbearance to existing customers totalling £0.9 million in respect of leases and loan deals with a portfolio value of £24.9 million, representing 20 per cent of the Group’s receivables. The strength of the Group’s balance sheet enabled this forbearance to be granted without the Group needing to request similar forbearance from its own funding partners. This, in turn, enabled the Group to continue to lend to viable and credit-worthy UK SMEs throughout the Covid-19 affected period.
· No material increase in bad debt write-offs had occurred as a result of Covid-19 as at 31 May 2020 due to large numbers of UK SMEs being able to access funding through the availability of the UK Government’s temporary Covid-19 financial support schemes. A decision was taken, however, to increase the bad debt provision as at 31 May 2020, as noted below, as a prudent governance measure.
· Revenue for the year of £29.2 million (FY 2019: £31.8 million), of which 80 per cent. is from lending activities and 20 per cent. from broking activities. The year-on-year decrease in revenue is wholly attributable to the Covid-19 affected fourth quarter of the financial year.
· Profit before tax and exceptional items for the year of £3.0 million (FY 2019: £8.1 million), stated after a ‘one-off’ increase in the bad debt provision of £2.1 million recorded in the fourth quarter of the financial year to mitigate any potential bad debts that may arise in the future from the impact of Covid-19.
· A similar level of net portfolio write-offs to the prior year, representing under 1.0% of the gross lending portfolio, but provisions prudently increased to 5.2 per cent., or £5.1 million (31 May 2019 1.9 per cent., or £2.4 million).
· Operating expenses of £12.8 million (2019: £13.3 million), a decrease of 4 per cent.
· Fully diluted earnings per share of 1.74 pence per share (2019: 6.61 pence per share)
· Consolidated net assets at 31 May 2020 of £55.2 million (31 May 2019: £53.8 million) and consolidated net tangible assets of £27.0 million (2019: £25.9 million).
· Borrowing facilities as at 31 May 2020 of £174 million (31 May 2019: £167 million), of which £66.1 million drawn at year-end (2019: £89.3 million drawn). The continued support from the Group’s funding partners through facility renewals and increases, together with the Group becoming an accredited CBILS lender, demonstrates the high regard in which the Group is held by other major financial institutions.
· Net interest margin and the blended cost of borrowing maintained at approximately 12% and 4% respectively.
· Good visibility of future revenue already secured with “unearned income” as at 31 May 2020 of over £15.2 million (2019: £17.6 million)
· Unaudited cash balances of £2.3 million as at 31 August 2020, in addition to a currently unutilised overdraft facility of £1.0 million.
The payment of the interim dividend previously due be paid on 12 May 2020 and a decision on the amount and timing of any final dividend for the financial year ended 31 May 2020 were deferred and will continue to be deferred until the Group’s financial performance for the first half of the current financial year is known. At that time, an assessment will also be made as to whether the Company is in a position to provide forward-looking guidance on the Group’s financial performance for the whole of the current financial year.
On current trading and prospects, Ian Smith, Chief Executive Officer, commented:
“Although financial results from trading in the current financial year have not yet returned to pre-Covid levels, trading activity is steadily increasing. Results for the first quarter of the new financial year are ahead of management’s expectations. The recent period of trading impacted by Covid-19 has served to demonstrate and underline the strength of the Group’s market-position, product offering, operating model and liquidity position, all of which ensure the Group is well-placed to return to its planned growth trajectory.”