Time Finance Q&A: Primed for the next stage of growth (LON:TIME)

Time Finance

Time Finance plc (LON:TIME) Chief Executive Officer Ed Rimmer caught up with DirectorsTalk to discuss who they are & what the company does, trading & strategic update for the last financial year, doubling the lender book by May ’25 and achieving growth.

Q1: Ed, if we can kick off with, who are Time Finance, and what do you do?

A1: The company is an AIM listed provider of finance to small businesses in the UK. The company has been trading for just over 20 years in the UK market and, up until the end of last year, it was known as 1PM PLC.

In simple terms, we borrow money, and we lend it on two small businesses at a margin Amongst that we provide various services for which we charge additional fees and then we obviously have costs to cover in terms of people, processes, systems, premises, and crucially management of risk through minimizing bad debts. And at the end of that, we hope to make a profit.

That’s in simple terms, what we do. We’re not a tier one funder, we’re not a deposit taker so we obviously have to go to the deposits takers, which are the banks in the main, to negotiate the best rates possible, and then lend those out in our chosen markets. They are invoice finance, asset finance, loan finance, and a combination, hopefully, of those products, which I’ll come on to talk about.

In a nutshell, that’s what we do, we lend money on our own balance sheets, and we also broker on some of the deals we get that don’t fit within our credit policy.

Q2: Now, you’ve published your trading and strategic update for the last financial year. Given the wider impact of COVID over the last 15 months or so, it seems the business has navigated that period pretty well and is in robust shape?

A2: I think we have. It’s been a tough journey for the team, particularly the credit and risk team, who I have to say have done a fantastic job, particularly through the first lockdown where forbearance levels, this time last year reached £25 million. I’m pleased to say that at the end of our financial year, just gone, to at the end of May, the forbearance levels have reduced down to just than £1 million pounds so a fantastic achievement in terms of managing that credit risk.

The level of arrears have also reduced significantly. They peaked at around £25 million as well, this time last year, they’re now back down to £15 million, which is actually lower than they were when we went into the pandemic.

So, all things considered, it’s obviously been a lot difficult, a lot of difficult times, we have seen volumes a lot lower, but they’re starting to pick back up again. I think the businesses, all things taken into account, is in reasonable position.

Q3: Just talking of growth, you’ve set a medium-term vision to more than double the lender book by May ’25. What are the key objectives behind this plan?

A3: We’ve set our four-year medium-term plan out to take the lending book from around £100 million, where we are today, to £250 million so slightly more than doubling the size of the lending book.

The key metric behind that as well, in terms of profitability and bottom-line return, is to try and get the business back up to pre-COVID levels around £6 million, as soon as possible. And with that, double the size of the balance sheet in terms of the net assets, they currently stand at around £28 million, and our plan is to get that up to £50 million in the four-year plan.

So, there are our three key financial metrics and then obviously behind that is a plan of how we’re going to do that.

Q4: Doubling the book will involve significant scaling up so how will you achieve that growth?

A4: Yes, so there’s a number of key things.

I think that the main thing is really focusing on core business. When 1PM, as the business was called, started to expand probably from around 2015, a number of acquisitions were completed, the business expanded predominantly through acquisitions.

We completed seven acquisitions in the space of three years and that, for anyone’s experience in acquisitions, is challenging. Some of the deals that were completed worked really well, some of them didn’t quite work as well and I think amongst that time, the business got a little bit muddled, if I’m honest. We did business to business acquisitions in terms of small business lending, but we also did some business to consumer acquisitions that were highly regulated and not necessarily in keeping with the business-to-business strategy.

So, I think the key parts of the plan moving forward is to refocus the business on what I would call our core products and that is asset finance, invoice finance, and loan finance, which are predominantly secured lending products to small businesses in the UK market and not necessarily focusing on our broking activities too much into the consumer space.

I think with that comes a repositioning of one of our products as well, which is the soft asset business, which was the original 1P, small ticket, soft asset business down in Bath. We’re looking to increase the minimum ticket size to a minimum of £5K, previously we’ve had a lot of very, very small ticket businesses that we’ve funded £1000, £2000, £3000 pounds and that creates an awful lot of work at the very small end of the market. Lots of volume and lots of work attached to that do we’re looking to become more efficient and reduce the number of proposals that we’re get in and complete in return to doing slightly higher.

We should still see around 60% of the business that we did previously, but it’s making the business more efficient and taking the deal size up a little bit in that soft assets side. So, that’s really the first core strategy.

The other things really just to focus on, the multi products offering of 1PM as it was, and now TIME is, I think, a real differentiator for us. We have lots of competition in the market from the mainstream banks to the new challenger banks, FinTech companies, other listed businesses, and also smaller regional privately-owned businesses. Each of them has their markets and their advantages but I think there’s a much smaller pool of providers of finance to the UK SMEs that have all our product offerings, as well as being flexible, as well as being agile, and as well as providing a really personal approach to our customers and clients.

So, I think it’s that product mix that we’re going to focus on being more than just a one trick pony, if you like, we can take our multiple products out to market, provide those to one client, become a one-stop shop, even if it’s for clients that don’t necessarily need those other products now, at least if they understand what we can provide, how we can provide it, they can come back to us at a later day without having to look to other alternative providers.

So, that’s a key part of the plan. We’ve already started the development of that internally through internal cross selling to market our other products to existing clients. That’s something that we had going in the business previously, but it stalled during the pandemic, understandably, there was other priorities and we’ve started a plan and a project to relaunch that.

I’m pleased to say that we’ve got somebody joining to head up the development of an asset-based lending product at the beginning of September, and that will take the joined-up products out to market as well as trying to promote them internally to existing clients. So that’s another key part of our strategy, moving forward.

A couple of other things. Really repositioning the business now that we are TIME, 1PM historically, I think, was associated with the original 1PM business in Bath, which was small ticket leasing. All the acquisitions that were completed, the brand names were really left as they were so again, the business was a little bit complicated in terms of who did what and knowing that actually we had other parts of the business that were all part of the same group.

So now that we’re all Time Finance, we’re looking to invest some money in marketing, move towards more digital and online marketing as well, and really get the message out to market in terms of what we are, who we are, where we’re looking to play in the market so that ideally when we are talking to introduce as a business, customers, and clients, then they’ve already heard of us.

That’s probably not the case at the moment, because it’s a relatively new name in the market but I think over the course of this plan, it’s very much achievable. It won’t be easy, it’ll take time, but I think with the right level of marketing, support, investment, and messaging to the market, we can achieve that. So, it’s really getting that message out and positioning the company in the markets that we want to be known for.

The other key point is investing in some additional sales, talents, and sales resource. There’s been a lot of change in the market through the pandemic, actually, not just because of the pandemic, a lot of the lenders, the banks particularly, have decided that they prefer to lend to the small business end of the market, through people like ourselves providing wholesale funding, and that’s creating opportunities.

There’s been some change in the market with other independent providers as well, in terms of ownership and different strategies, and it’s created an opportunity to acquire some salespeople who ordinarily may not have been looking and may not have been in the market.

Investing in that sales talent to deliver our plan is something that we’ve acknowledged, and the Board have agreed to. That may mean some additional cost comes into the business before the returns are seen, but that’s part of investing in the future.

So, those are the key parts of the strategy moving forward.

Q5: On a personal note, Ed, how are you finding having come back into the business over the past three months?

A5: It’s been really good. I didn’t entirely know how things would have panned out through the pandemic, and I have to say, that as I mentioned earlier, it’s not been without its challenges, but I think the businesses has ridden the storm, if you like, really well so I think we’re now primed for that next stage of our growth.

The focus has very much been on credit and risk, and as we come out of the various lockdowns and opportunities start to come about, we are in a good position to take those opportunities and I’m looking forward to moving the business forward during, hopefully, another growth phase of the economic cycle.

I think there’ll be further ups and downs. I think we obviously need to see the government support, people moving away from that government support so I think that will start in earnest when the furlough scheme finishes in September, if it does finish in September.

There’s obviously the other government funding initiatives that are still in place, but I think the key thing is the furlough scheme, and then, ultimately small businesses will always need finance to help them grow and help them run their day-to-day activities through working capital. That’s when businesses like ours will start to grow ourselves again, and there will be opportunities in the market.

So, I’m looking forward to taking those opportunities and making sure that the company is in the best possible situation to maximize those opportunities.

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