TIDMTIME
RNS Number : 4290M
Time Finance PLC
21 September 2021
21 September 2021
Time Finance plc
("Time Finance", the "Group" or the "Company")
FINAL RESULTS FOR THE YEARED 31 MAY 2021
Resilient trading results despite wider Covid-19 economic
effect
Stronger balance sheet and improved cash position
Time Finance plc (AIM: TIME), the AIM listed independent
specialist finance provider, announces its final results for the
year ended 31 May 2021. The Company is pleased to report a
satisfactory performance despite the continued impact of the
Covid-19 pandemic on trading throughout the financial year.
Despite the wider macroeconomic effects of the pandemic, the
Group has remained profitable throughout, demonstrating its
resilient and diversified lending book, a strengthened balance
sheet and greatly improved liquidity. Furthermore, trading activity
in the first quarter of the current financial year is also steadily
increasing.
Commenting on the results, John Newman, Non-executive Chairman
of Time Finance, said:
"The Group's unbroken record of year-on-year growth in revenue
and profits since 2015 was severely impaired by the Covid-19
pandemic. Over a four-year period the Group's "buy and build"
strategy achieved almost a six-fold increase in revenue, five-fold
increase in PBT and 100% growth in earnings per share. The Board
and senior management team are determined that the Group returns to
this level of performance and believe that the strength of our
business model and the support of our colleagues throughout the
Group provide the resources for this to be achieved over the next
few years. Together with a stronger balance sheet and greater cash
resources, the Board has confidence in the future development of
the Group as a non-bank alternative provider of finance to UK
SMEs"
Financial Highlights:
-- Revenue for the year of GBP24.2m (2020: GBP29.2m), a decrease
of 17%
-- Profit Before Tax, Exceptional Items and Share-Based Payments
("PBTE") for the year of GBP3.1m (2020: GBP3.0m), an increase of
3%
-- Earnings per share of 1.98 pence per share (2020: 1.76 pence)
an increase of 13%
-- Consolidated Net Assets at 31 May 2021 of GBP57.1m (2020:
GBP55.2m), an increase of 3%
-- Consolidated Net Tangible Assets at 31 May 2021 of GBP28.4m
(2020: GBP26.5m), an increase of 7%
-- Cash, Cash Equivalents and Convertible "paper" of GBP11.3m
(2020: GBP1.4m)
-- Good visibility on future earnings with unearned income of
GBP14.9m (2020: GBP15.2m)
-- Blended cost of borrowings maintained at approximately 4%
(2020: 4%)
-- Consistent write-off levels despite the continued impact of
the pandemic with net write-offs in the year of 1.6% of the
year-end gross portfolio (2020: approximately 1.3%)
-- Deals in forbearance at 31 May 2021 of GBP0.8m (31 May 2020:
GBP24.3m), a decrease of 97%
-- Deals in arrears at 31 May 2021 fell by 33% from 31 May 2020
levels, to below pre-pandemic level
-- Credit risk provision at 31 May 2021 prudently held at
GBP5.2m (2020: GBP5.1m)
Operational Highlights:
-- Board restructured and strengthened with the appointment of
Ed Rimmer as CEO and Tanya Raynes as Non-Executive Director
-- Group-wide rebrand to Time Finance completed, bringing the
Group under a single, national brand
-- Government-backed accreditations from The British Business
Bank to provide both Coronavirus Business Interruption Loan Scheme
("CBILS") and Recovery Loan Scheme ("RLS") to UK SMEs
-- Continual focus on diversification and spread of risk, with
largest sector exposure accounting for approximately 5% and the top
ten sectors less than 25% of the total lending book at 31 May
2021
-- Since 31 May 2020 the Group has been recognised in London
Stock Exchange Group's '1000 Companies to Inspire Britain' report,
been awarded 'Employer of The Year' in the Business Leader Awards
and nominated in the SME Funding Awards
-- New business origination for the financial year was GBP103m
(2019: GBP147m), a decrease of 30% attributable to the impact of
the pandemic with the most significant driver of the reduction
being brokered-on vehicle finance
Ed Rimmer, Chief Executive Officer, added:
"Time Finance is well positioned to take advantage of the
post-Covid recovery and is pursuing a clearly defined growth
strategy. Fresh ideas are being brought into the organisation and
the Group is being repositioned under the Time Finance brand as a
multi-product provider of lending facilities to SMEs, focusing on
core own-book lending. Market conditions remain challenging as the
overhang of government funding initiatives is still apparent;
however, it is likely that demand for finance will increase again
through the course of our financial year. We therefore look forward
with a sense of cautious optimism."
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014 (as amended), which forms
part of domestic UK law pursuant to the European Union (Withdrawal)
Act 2018. Upon publication of this announcement via a Regulatory
Information Service, this inside information is now considered to
be in the public domain.
For further information,
please contact:
Time Finance plc
Ed Rimmer, Chief Executive
Officer 01225 474230
James Roberts, Chief Financial
Officer 01225 474230
Cenkos Securities plc (NOMAD)
Ben Jeynes / Max Gould (C
orporate Finance )
Julian Morse (Sales) 0207 397 8900
Walbrook PR 0207 933 8780
Paul Vann / Nicholas Johnson 07768 807631
paul.vann@walbrookpr.com
About Time Finance:
Time Finance's strategy is to focus on providing or arranging
the finance UK SMEs require to fund their businesses and arranging
vehicle and property-backed finance for consumers. The
multi-product range for SMEs includes asset, vehicle, loan and
invoice finance facilities. The Group operates a "hybrid" lending
and broking model enabling it to optimize business levels through
market and economic cycles.
More information is available on the Company website
www.timefinance.com .
Chairman's Statement
For the year ended 31 May 2021
Performance and dividend
Our financial year experienced the continuing effects of the
Covid-19 pandemic which has disrupted daily lives and created the
most challenging of business environments. Our priorities continued
to be focused on the health and wellbeing of our staff and on the
services we provide to our customers.
Throughout this period we have remained "open for business" and
we have provided essential financial support to our SME customers
with our comprehensive range of financing products. These included
the Government-backed Coronavirus Business Interruption Loan Scheme
(CBILS) and, more recently, the Recovery Loan Scheme (RLS). We
received accreditation for both schemes from the British Business
Bank.
I am extremely proud of how the Group has faced the uncertain
and changing business environment and for this the Board is
indebted to all our staff whose commitment and enthusiasm has been
remarkable. It is pleasing to report that despite the continuing
effect of the pandemic, which included a further period of
disruption in the economy from the imposition of another period of
lockdown in the second half of our financial year, the Group's
revenue was GBP24.2m (2020: GBP29.2m) with profit before tax and
exceptional items of GBP3.1m (2020: GBP3.0m). Fully diluted
earnings per share were 1.85p (2020: 1.74p).
The Group's balance sheet was significantly strengthened during
the year with net cash and cash equivalents of GBP7.7m (2020:
GBP0.1m). The forbearance on leases and loans that we had granted
to support our customers who were experiencing financial hardship
as a result of lockdown fell dramatically during the financial year
to less than GBP1m, a reduction of over 95%. This was accompanied
by deal arrears falling to pre-pandemic levels. This has
demonstrated that our credit risk policy, which has been applied
consistently throughout the pandemic, has been effective while
still allowing us to provide much needed financial support to our
customers.
The Group's trading update on 16 June 2021 provided details of
the current dividend policy. This was in the context of the updated
business strategy which sets an objective of more than doubling the
Group's lending book over the next few years. This will require the
application of the Group's available cash resources into leveraging
our funding facilities to maximum effect for the successful
achievement of our lending objectives with the focus being on the
growth of shareholder value rather than dividend distribution. The
Board has therefore confirmed that the 2019 interim dividend that
was deferred as a result of the pandemic will not be paid and that
while cash resources are being deployed to business growth at the
current time, future dividends will be kept under review.
Our strategy
The Group Strategic Report sets out progress against the Group's
goals and objectives which were updated in the yearend trading
report released on 16 June 2021. The focus of the strategy is for
the Group to continue to grow as a well-diversified and
risk-mitigated alternative finance provider, recognised as having a
comprehensive range of business finance products to offer to an
expanding base of UK SME customers. This will be reflected in our
focus on providing more secured own-book lending while maintaining
the flexibility to act as a broker where appropriate. The
underlying strength of our market position and product offering was
further enhanced with the rebranding of our business as Time
Finance in December last year. The rebranding consolidated our
various trading names into one consistent brand name which has
simplified the operating structure with a single nationally
recognised brand.
The balancing and management of risk is an important
responsibility for the Board at all times, but particularly so
where there exists a greater level of economic uncertainty. In this
respect, the Board considers that the Group's business model, in
offering multi-product financial services to a wide range of
business sectors, will continue to deliver a high degree of
commercial resilience. We remain confident that this resilience and
flexibility within the business model will ensure that the Group
can balance its risk exposure in a prudent manner while maintaining
competitive levels of customer
service.
Governance and culture
The business operates in a regulated environment and a key
responsibility for the Board is to ensure that strong and effective
governance operates throughout the Group.
The Board has four sub-committees, namely Audit, Remuneration,
Nominations and Governance and Risk, with membership comprising
only of non-executive Directors. The committees meet on a regular
basis.
The Board will continue to focus on increasing diversity in all
its forms and it is pleasing to note that women now represent 55%
of the Group's senior management team. This is an important
consideration for the Group where women make up 56% of our total
workforce.
There is a clear emphasis within the Group on maintaining a
corporate culture that adheres to its core values of being
"genuine" and acting with "integrity" and "agility". These values
underpin everything that we do across the business and are key in
ensuring responsible attitudes and behaviours are foremost in every
member of our team. It is heartening that these qualities are
successfully demonstrated every day by our staff in meeting the
financial needs of our customers.
During the year, staff from our Talent Leadership Programme with
Tanya Raynes, our recently appointed non-executive Director, as
Board sponsor, formulated our approach to our Environmental, Social
and Governance (ESG) responsibilities. We are embedding ESG as an
integrated part of our core business strategy.
Our people
On 6 January 2021 it was announced that, following discussions
between the Directors, the Company's principal shareholders, and
Ian Smith, its Chief Executive Officer ("CEO"), it had been decided
that Ian's planned retirement date of 31 December 2021 should be
brought forward and effected as soon as a successor was appointed.
Ian stepped down in February and his dedication and commitment to
our business was acknowledged with the Board's sincere thanks and
appreciation.
In February we were fortunate in securing the services of Ed
Rimmer as Interim CEO of the Group and in June Ed was appointed as
permanent CEO. Ed has extensive experience within the financial
services sector and his specific knowledge of the Group from his
time with us as Group COO between 2017 to 2020 has enabled him to
take up the CEO responsibilities quickly and effectively.
This period of change in the executive leadership of the Group
was challenging and I wish to make special reference to the
contribution of James Roberts, our CFO. His financial expertise,
particularly in the treasury management of a business whose raw
material is cash, has been exemplary and his participation in the
wider management of the Group's operations has been greatly
appreciated by the Board.
In March this year we appointed Tanya Raynes as a non-executive
Director of the Company. Tanya has brought to the Board a wealth of
strategic, financial and commercial expertise from a variety of
senior executive roles within both blue-chip corporates and SMEs.
After qualifying with PricewaterhouseCoopers as a Chartered
Accountant, Tanya gained extensive structured financing experience
with GE Capital and is currently Non-Executive Chair of Pula
Aviation Services.
My intention to retire was announced in January this year and
the Board are delighted to announce that Tanya will succeed me as
Chair when I retire following the Company's AGM to be held on 21
October 2021. I am confident that Tanya will lead the Board in a
thoughtful and constructive way and that the stewardship of the
Group will be in very capable hands.
The enormous dedication shown by our colleagues throughout the
Group in the face of the most challenging conditions has been
exceptional and on behalf of the Board, I wish to record our
sincere thanks and appreciation for their hard work and
commitment.
Outlook
The Group's record of year-on-year growth in revenue and profits
since 2015 has been severely impaired by the Covid-19 pandemic.
Over a four--year period, the Group's "buy and build" strategy
achieved almost a six-fold increase in revenue, a five-fold
increase in PBT and 100% growth in earnings per share.
The Board and the management team are determined that the Group
returns to this level of performance and believe that the strength
of our business model and the support of our colleagues throughout
the Group provide the resources for this to be achieved over the
next few years.
In the year ahead, we will focus on our recovery from the impact
of the pandemic but it is clear that the economic effects of the
pandemic will continue to overshadow many of the sectors in which
our customers operate. The Group benefits from being a provider of
a wide range of financial products to SMEs across multiple business
sectors and has no overweight dependence on any specific business
category.
The strength of the Group's business model has been demonstrated
by its continued profitability throughout the period of the
pandemic and together with a stronger balance sheet and greater
cash resources gives the Board confidence in the future development
of the Group as a non--bank alternative provider of finance to UK
SMEs.
In this, my last statement as Chairman, I would like to record
my sincere thanks to my fellow Directors and colleagues throughout
the Group for their unfailing support during my six years on the
Board. My best wishes go to them and all our stakeholders for a
successful and healthy future.
John Newman
Chairman
21 September 2021
Chief Executive Officer's Report
For the year ended 31 May 2021
Introduction
Time Finance is a multi-product, specialist finance provider to
UK SMEs acting as both a lender and broker in arranging funding for
their working capital requirements. This hybrid lending and broking
model enables the Group to effectively manage credit risk, capital
allocation, revenues and customer service through changing market
and economic conditions. The financial results for the Group for
the year ended 31 May 2021 consolidate the results of the various
trading entities that form the Group's product divisions and group
functions.
The Group was rebranded during the year after previously trading
under the banner of 1pm plc for nearly 20 years. The business
comprises four product divisions: Asset Finance, Vehicle Finance,
Loan Finance and Invoice Finance. The divisions are supported by
central group functions: Risk, Compliance, Finance, IT, Human
Resources and Marketing.
The Covid-19 pandemic continued to disrupt the wider small
business lending market during the period under review. The trading
year started in more optimistic fashion with the first lockdown
ending in early July 2020. However with further and unexpected
lockdowns in November 2020 and January 2021, momentum was further
interrupted. The main issue for lenders such as Time Finance has
been the lack of demand brought about by the various government
funding and support schemes, and the use of these facilities in
some cases to repay other borrowing. The Group did though become an
accredited lender through the Coronavirus Business Interruption
Loan Scheme ("CBILS") which enabled it to utilise the GBP12m
allocation to provide term loans to small businesses, backed by the
government's 80% guarantee. Despite all the disruption through the
year, the financial performance and results to May 2021 as a whole
were satisfactory, demonstrating the Group's resilience through
such challenging times.
The results achieved are due to the commitment and hard work
shown by all colleagues in the Group. A lot of time was spent
working remotely from home with people having to quickly transition
to "the new normal". This has provided many different challenges to
businesses throughout the country, and Time Finance is no
exception; colleagues have at times felt somewhat isolated and it
is to their credit that the business has remained effective and
robust during these challenging times. As the business moved
through the latest year end to 31 May 2021, the outlook was looking
much more positive as the teams gradually returned to the offices
with a roadmap set out for the full return by September 2021.
Sustainable, robust business model
The hybrid commercial model of being a lender and a broker
enables the Group to mitigate risk through deciding which business
to fund on its own balance sheet and which to broker on to other
lenders. The Group has also maintained sound operational principles
designed to develop a robust business including:
- a widely spread lending book with security taken to support
lending facilities and suitable margin achieved on each deal to
justify the risk taken.
- fixed interest rates are charged for the term of the lending
with interest rates incurred on borrowings drawn down equally being
fixed for the term and the Group's policy is, wherever possible, to
match the term of borrowings drawn to the term of lending
provided.
- underwriting is carried out by people as opposed to automated
systems for credit decisions. Although an essential element of the
Group's development continues to be the deployment of IT systems,
it is essential that credit decisions are taken by people given the
markets we operate in.
- a realistic approach to provisioning. The net write-off rate
(the gross value of receivables written-off less recoveries) in the
year to 31 May 2021 was approximately 1.6% of the year end gross
lending portfolio. The total provisions carried in the balance
sheet at 31 May 2021 amounted to GBP5.2m, representing 5.2% of the
net lending portfolio. Having spent much of the year dealing with
forbearance requests and generally supporting customers through the
pandemic, a detailed internal review was carried out on the entire
lending book, with the provisioning reflecting the recommendations
made from this review.
Market positioning and new business origination
The Group provides the main finance products that SMEs require
for day to day working capital requirements and to grow their
businesses over the longer term. Since the Global Financial Crisis
of 2008, the lending market has transformed with the traditional
banks no longer being the automatic point of call for small
business finance; many alternative finance providers have emerged
in the form of challenger banks, fin-tech lenders and independent
providers such as Time Finance who generally offer more flexibility
and a high level of focus on customer service. As the Group is not
a retail deposit taker, wholesale funding facilities are utilised
at competitive rates. In order to make an acceptable margin on
lending, the Group chooses to operate in the "Tier 2" market
segment, serving SMEs typically at the smaller end of the
market.
New business origination in the year to 31 May 2021 amounted to
GBP103m, down on the GBP147m achieved the previous year (which
included 9 months of pre-Covid activity). Of this origination 46%
was funded on balance sheet and 54% was broked-on, compared with
37% and 63% respectively in the prior year. The bias towards less
broked-on volumes was down to the suppressed vehicle finance market
for leasing new and second-hand cars; the Group's policy is to not
carry residual balance sheet risk in respect of cars and so 100% of
all finance deals originated for such assets are broked-on.
Financial results
Total revenue for the year to 31 May 2021 was GBP24.2m, a
decrease of GBP5.0m year-on year. Revenue comprises interest and
other income (such as facility fees, document fees and asset
assurance income) of GBP21.0m from own-book lending (2020:
GBP23.4m) and, secondly, commission income of GBP3.2m from broking
activities (2020: GBP5.8m). Interest and other income from lending
therefore accounted for 87% (2020: 80%) and commission income from
broking accounted for 13% (2020: 20%) of total revenues. As
mentioned above, there was an increase in lending on the Group's
own-book. This is primarily down to the difficult market conditions
with other lenders restricting lending, particularly with respect
of the vehicle division which is 100% brokered-out.
The business enjoys good visibility of future revenue in that
'unearned income' (i.e. future interest income from 'own-book'
deals already written on the Group's balance sheet) as at 31 May
2021 amounted to GBP14.9m (2020: GBP15.2m).
The Group's profit before tax and exceptional items for the year
ended 31 May 2021 was GBP3.1m, compared with GBP3.0m in the prior
year. Profit before tax was GBP2.0m (2020: GBP2.0m), and profit
after tax GBP1.8m (2020: GBP1.6m).
At 31 May 2021, the Group's total gross receivables stood at
GBP116m, compared with GBP123m on 31 May 2020, the reduction
attributable principally to the flat market conditions and also
early settlements made from customers utilising the cheaper
government funding schemes available. Total active borrowing
facilities at 31 May 2021 amounted to GBP163m (2020: GBP159m), of
which GBP67m was drawn (2020: GBP64m).
Also, at 31 May 2021, consolidated net assets stood at GBP57.1m
(2020: GBP55.2m), an increase of 3%. The return on equity was
therefore 3% (2020: 3%) and the return on net tangible assets
(excluding goodwill and intangible assets held on the balance
sheet) was 6% (2020: 6%).
Net cash and cash equivalents held at 31 May 2021 was GBP7.7m
(2020: GBP0.1m). The improvement was down to lower lending volumes
and the significant reduction in forbearance which stood at GBP0.8m
at 31 May 2021 (2020: GBP24.3m), plus loans from our bank. The
strength of the Group's balance sheet, together with its liquidity
in the form of available operational debt facilities for lending
and cash held, ensure the Group is well-placed to take advantage of
the post-Covid recovery.
At 31 May 2021, there were 92,512,704 shares in issue (2020:
88,985,316). The increase during the year consisted of 2,138,500
shares issued in relation to share options exercised by the Group's
Senior Management Team, and 1,388,888 shares issued as contingent
consideration to the vendors of Positive Cashflow (Holdings) Ltd.
Given these issues of shares, earnings per share were 1.98 pence
(2020: 1.76 pence), and on a fully diluted basis were 1.85 pence
(2020: 1.74 pence).
Operational progress
The year to 31 May 2021 was one of significant disruption for
the Group. The plans for the year were formulated in late spring of
2020 as the business anticipated coming out of the first lockdown
with the realistic assumption that the wider UK economy would
gradually recover through the later part of 2020 and more rapidly
into 2021. This has not proven to be the case given the further two
lockdowns and with it, a continuation of the majority of colleagues
working from home for in excess of 12 months. In addition, there
was also a significant change across the leadership of the business
as Ian Smith stepped down from his position as Chief Executive in
January 2021 and at the same time, John Newman, our Chairman,
announced his intention to retire. The Group was under interim
leadership for the last 3 months of the financial year to 31 May
2021, within which time a new strategy was presented and agreed by
the board. I was appointed as permanent CEO on 1 June 2021 with the
remit to deliver the new strategy and with it a recovery in the
financial performance to pre-Covid levels as soon as possible.
Despite all the changes, much progress was achieved during the
year. The Asset Finance division saw demand increase in specific
segments of the market, most notably for light goods vehicles which
increased in number to meet the demand for home deliveries during
lockdown. The Loans division benefitted from becoming an accredited
lender under both CBILS and, more latterly, the replacement
Recovery Loan Scheme ("RLS"). By 31 May 2021, a total of GBP12m had
been lent under the CBILS programme and the Group has accreditation
for a similar amount of lending under RLS. If utilised by the end
of this calendar year, in excess of GBP20m will have been lent
under these schemes. The Invoice Finance business focused heavily
on supporting clients through the pandemic and although lending
volumes reduced significantly, overall client numbers did not. To
put this into perspective, at the peak of the downturn, advances to
clients were down by 50% on pre-pandemic levels but with the actual
number of active client facilities having reduced by just 10%. The
business was also rebranded in late 2020 which provides an exciting
opportunity to take the Group forward under one name and maximise
the opportunities that go with this.
Culture, compliance and governance
Time Finance is a customer focused business with a strong desire
to be "easy to deal with". At the same time, the Group has high
standards for compliance and governance for all its lending and
broking activities by reference to the principles and guidelines of
the Financial Conduct Authority and the codes of conduct of
relevant industry bodies.
Outlook
The business is well positioned to take advantage of the
post-Covid recovery and has a new growth strategy that is being
pursued. Fresh ideas are being brought into the organisation and
the Group is being repositioned under the Time Finance brand as a
multiproduct provider of lending facilities to SMEs, focusing on
core own book lending. Market conditions remain challenging as the
overhang of government funding initiatives is still apparent;
however, with repayments under these schemes now due and with the
Furlough scheme finishing at the end of September, it is likely
that demand for finance will increase again through the course of
our financial year. We therefore look forward with a sense of
cautious optimism.
Ed Rimmer
Chief Executive Officer
21 September 2021
Group Strategic Report
For the year ended 31 May 2021
Time Finance continues to be an alternative provider of finance
to the high street and challenger banks, serving SMEs predominantly
with finance requirements ranging from GBP5,000 to GBP2.5m. The
Group provides Invoice Finance, Asset Finance, Loan Finance and
Vehicle Finance. It lends from its own balance sheet or through
brokering on business that does not meet its lending parameters,
which would mainly be due to the size of a transaction, pricing or
credit quality.
From 2015, the business, formerly 1pm plc ("1pm"), set about
diversifying from a single product provider of soft asset finance
to a broader multi product business. This enabled it to offer a
wider product portfolio to an enlarged target market and mitigate
risk through a larger spread of lending. This expansion was
predominantly through acquisitions of other lenders who were in the
main small, owner-managed and entrepreneurial businesses.
Significant work went into integrating the acquired businesses
between 2017 and 2019. All the acquired brands were retained, given
they had well established markets and networks for business
origination. As the wider business developed and the acquired
entities became more integrated within the Group, it was clear that
the business needed to move forward under one unified brand and so
the decision was taken to rebrand the Group. This was completed in
December 2020 with the launch of Time Finance. The new name
recognised two of the most critical aspects of running a small
business - Time and Money. Positioning the Group as a credible
partner to SMEs and helping them to achieve their growth
ambitions is a key part of the Group's strategy.
Strategic Objectives
The Covid-19 pandemic severely impacted business volumes during
the year, with the various government funding initiatives
significantly reducing the need for third party finance. The
Group's change of CEO in March 2021, and the subsequent easing of
lockdown restrictions on the back of the government's rapid
vaccination roll out, provided a good opportunity to review and
refresh the Company's medium-term strategy. This was approved by
the Board ahead of the 31 May 2021 year end and allowed the Board
to present the plans to stakeholders during June of this year. The
summary headlines of the Group's objectives over the next 4 years
are:
-- More than double the Group's gross lending book organically
from its current level to approximately GBP250m
-- Through organic-led growth, achieve revenue and PBTE levels
in excess of the 2019 pre-Covid levels of over GBP30m and GBP8m
respectively
This will be achieved through the following strategic
initiatives:
-- Focusing on core products: Asset, Invoice and Loan finance
-- Focusing on own-book lending
-- Predominantly focusing on a secured lending proposition with an increasing average deal size
-- Investing in key sales resources
-- Repositioning the brand and investing in marketing
-- Bringing further liquidity into the Business
Comments on each of the above initiatives are below:
i. Focus on core products
Whilst the business offers a range of products that includes
funding from our own balance sheet and broking on business, it
fundamentally has three core and well-established products which it
will focus on expanding with experienced Directors leading each of
these divisions. Importantly, it will also look to offer an Asset
Based Lending proposition where the core products can be operated
together as a package to increase the cash available to its SME
customers, and with it, the returns and security on offer to it as
a lender.
ii. Focus on own book lending
As the economy recovers post Covid-19, there will be good
opportunities for non-bank, specialist lenders like Time Finance
with SMEs requiring finance to grow once the government support
initiatives wind down. Some of the acquisitions that were
historically made by 1pm were Business to Consumer companies, which
are more burdened by regulation and compliance. The Group will not
be looking to focus on these areas of the business to contribute
significant growth. The focus will be on funding Business to
Business customers on the Group's own balance sheet. As the Group's
own lending book increases, so will the size of its balance sheet
and with it the inherent valuation of the business.
iii. Focus predominantly on secured lending and increased deal size
When funding SMEs the Group will look to obtain tangible
security wherever possible to underpin its lending. This could be
taking title to professionally valued fixed assets or book debts,
supported by registering debentures and/or property charges. At the
same time, the Group will increase the average ticket size of the
soft asset business which historically has operated in the micro
end of the SME lending market. Over time, this will reduce the
delinquent debt levels and increase efficiencies through dealing
with a lower number of enquiries from more established
businesses.
iv. Investment in key sales resources
In order to grow the business, the Group will look to acquire
further new business talent and put the Group in the best possible
position to take advantage of the post-Covid recovery. As per the
previously mentioned focus on core products, this recruitment will
be centred around invoice, asset and loan finance as well as
training the Group's teams internally to maximise cross-selling
opportunities.
v. Reposition of the brand and investment in marketing
The rebrand to Time Finance provides the Group with an excellent
opportunity to reposition the business in line with our core
strategic aims. Historically under the various trading brands that
comprised 1pm, there was potentially a lack of market understanding
and clarity as to what the business stood for and where it wanted
to operate. An experienced Head of Marketing has been appointed to
deliver this repositioning strategy as part of a refreshed overall
marketing plan that will aim to see the business widely recognised
as the independent finance provider of choice to SMEs.
vi. Potentially add further liquidity into the Business
The Group feels it has sufficient cash resources to deliver its
medium -- term objectives. However, should the opportunity arise to
grow the business more rapidly than expected, it may require
further liquidity in the business to support the increased use of
its senior debt facilities for financing leases and loans. Finding
suitable liquidity at sensible pricing is therefore a key priority
over the course of the next 12 months.
Key performance indicators
The Board and the Senior Management Team regularly review and
monitor key metrics in assessing the performance of the Group. Some
of these key metrics to help gauge the Group's meaningful progress
are detailed below.
o Revenue - decreased 17% to GBP24.2m (prior year GBP29.2m)
o Profit Before Tax - maintained at GBP2.0m (prior year GBP2.0m)
o Diluted Earnings Per Share - increased 6% to 1.85p (prior year 1.74p)
o New Business Origination - decreased 30% to GBP103m (prior year GBP147m)
o Cash, cash equivalents and convertible paper of GBP11.3m (prior year GBP1.4m)
o Funding interest rate - maintained at a blended rate of 4% (prior year 4%)
o Net interest margin - decreased to 10.4% (prior year 11.5%)
Principal risks and uncertainties
'Principal risks' are defined as a risk or a combination of
risks that, given the Group's current position, could seriously
affect the performance, future prospects or reputation of the
Group. These risks could potentially materially threaten the
business model, performance, solvency or liquidity, or prevent the
delivery of the strategic objectives outlined above. The Board has
overall responsibility for ensuring that risk is appropriately
managed across the Group and, through the Risk Committee, has
established the Group's appetite to risk, approved its structure,
methodologies, policies, and management roles and
responsibilities.
As well as regular external reviews and audits from the Group's
statutory auditors and the quarterly audits from a number of its
funding partners, the Group has numerous internal checks and
balances. Initial responsibility rests with the Operating Board
which manages the business divisions and functions with line
managers responsible for identifying and managing risks arising in
their business areas. This is augmented by the Group's central and
independent Compliance, Finance, IT and Human Resources functions
with responsibility for reporting to the Board. The Group has a
Director of Risk who reviews all significant Group credit exposures
and a Director of Governance and Compliance who reviews all
significant Group operating risks and adherence to regulatory
requirements.
The key risks identified and which the Board has reasonable
expectation are appropriately mitigated are:
i. Credit Risk
The risk of default, potential write off, disruption to cash
flow and increased recovery costs on a debt that is either not
repaid individually or if there is a wider market deterioration.
This is mitigated by the Group adopting prescribed lending policies
and adhering to strict credit and underwriting criteria
specifically tailored to each business area. The Group also has the
ability to 'broke-on' certain business rather than write it on its
own book. As such, any market deterioration impact can be reduced
by broking-on prospective deals.
ii. Funding Risk
The risk of the Group not being able to meet its current and
future financial obligations over time, specifically that funding
is not available to meet the Group's growth targets. The Group has
active funding facilities across Block Discounting, a Secured Loan
Note programme and Back-to-Back invoice finance facilities,
aggregating to GBP163m with ample headroom to meet its growth
targets for the medium future. As detailed previously, should the
opportunity arise to grow considerably faster than the medium-term
plan anticipates, then the Group could decide to augment its
funding with additional liquidity.
iii. Regulatory Risk
The risk of legal or regulatory action resulting in fines,
penalties and sanctions that could arise from the Group's failure
to identify and adhere to regulatory requirements in the UK. In
addition, there is the risk that new or enhanced regulations could
adversely impact the Group. The Group employs a Director of
Governance and Compliance, who reports to the Board and who manages
a well- established and independent compliance department with
appropriate resources and access to external advisors. The
department looks both internally at the Group ensuring its
practices are appropriate and externally at future developments to
ensure the Group is prepared to adopt any changes in regulation as
and when they arise.
Section 172 Statement and stakeholder engagement
Section 172 of the Companies Act 2006 requires a director of a
company to act in the way he or she considers, in good faith, would
most likely promote the success of the company for the benefits of
its members as a whole. In doing this s.172 requires a director to
have regard, amongst other matters, to:
- the likely consequences of any decisions in the long term;
- the interests of the company's employees;
- the need to foster the company's business relationships with suppliers, customers and others;
- the impact of the company's operations on the community and environment;
- the desirability of the company maintaining a reputation for
high standards of business conduct;
- the need to act fairly with members of the company.
The Directors give careful consideration to the factors set out
above in discharging their duties under Section 172. This includes
the Board receiving regular training on their obligations as
Directors from advisors and on an ongoing basis from the Company
Secretary. Board Papers are also prepared with this in mind,
ensuring Directors have all the relevant information required to
enable them to properly reflect and consider the factors set out
above in their decision making.
Our decisions
The key decisions, many of which were taken in light of the
pandemic and its widespread economic impact, made by the Board
during the year were:
i. Focusing on a strengthened balance sheet with improved
liquidity. This had the dual result of safeguarding the ability of
the Group to operate in the short term by meeting its debts as they
fall due and operating within its banking covenants; while
positioning the Group for future growth as and when the country
emerges fully from the pandemic.
ii. Restructuring of the Board. A new CEO was appointed during
the year and the Non-Executive arm of the Board augmented with an
additional member adding renewed direction, challenge and
experience to the Board to support the recovery and future growth
prospects of the Group.
iii. Rebranding the Group. Continuing with its strategic plan to
transition from several stand-alone brands to a single nationally
recognised brand, Time Finance was launched as a consolidated brand
in December 2020.
Further detail on the medium-term strategy and the Board's
decision-making driving this can be found in the Chairman's
Statement, CEO's Report and CFO's Report in the annual report and
accounts, as well as earlier on within this Strategic Report.
The Board sees the value of building and maintaining strong
relationships with all its key stakeholders, who are identified
below:
Our employees
The business is committed to open and transparent communication
with its staff, primarily through a mixture of regular monthly
all-staff email communications augmented by the delivery of regular
"Town Hall" all-staff meetings at each Group site, where strategic
and performance updates are delivered by members of the Operating
Board and two-way communication is encouraged. In addition to
gathering feedback throughout the year through regular meetings,
the Company also encourages employees to share their views with all
managers adopting an "open door" policy.
Our customers, suppliers and investors
The Group's customers fall into two distinct categories covering
both business-to-business ("B2B") and business-to-consumer ("B2C")
sectors. The Group is committed servicing them both effectively
with a network of dedicated broker or relationship managers within
the B2B side of the business who work tirelessly to ensure that all
parties are satisfied with the management of the relationship. Our
B2C customers benefit from the expertise, skill and customer focus
of our dedicated teams of highly trained employees.
The Group works with a number of key suppliers, primarily
providers of IT, marketing support services and expert advisors.
Each relevant function has dedicated staff who work closely with
these suppliers to ensure the successful delivery of these services
for both parties.
In addition, the Group invests in its technology infrastructure
to ensure that its customer base and key suppliers have a market
leading experience.
The Group adopts a proactive policy with regards to its
interactions with its investors attempting to foster an open and
ongoing dialogue with shareholders throughout the year. The
Chairman, CEO and CFO make themselves available to meet investors
as required as well as providing updates through regular investor
presentations, roadshows, presenting at shareholder events and the
publication of detailed and timely RNS and RNS Reach updates. The
Group hopes this helps manage the expectations of shareholders and
understand the motivation behind shareholder voting decisions
whilst striving to make the right decisions as it navigates the
pandemic-impacted market in which it operates. The Group
continually aims to strike an appropriate balance between long-term
shareholder value and short-term
business needs.
Our communities and the environment
Whilst the Group has limited direct impact on the environment it
is mindful of its responsibility in this regard. To this end, a
staff body has been developed to focus specifically on the ESG
agenda and the impact the Group has on these important areas.
Our standards
Acting with integrity is one of the key cultural pillars of the
Group which continually strives to maintain a high standard of
business conduct. All staff are trained thoroughly and subject to
rigorous continual professional development standards. The various
awards the Group has won are testament to the high standards of
business conduct it prides itself on.
Summary
The post-Covid recovery should present the Time Finance Group
with many opportunities, whilst acknowledging the potential threats
that also may come our way through potential increased default
and delinquent debt. SMEs will need access to finance to recover
and grow their businesses, and having an independent, credible and
flexible alternative to the banks presents the Group with a
significant opportunity once market conditions improve.
Ed Rimmer
Chief Executive Officer
21 September 2021
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 MAY 2021
2021 2020
GBP'000 GBP'000
CONTINUING OPERATIONS
Revenue 23,799 29,062
Other income 425 182
--------- ---------
Total Revenue 24,224 29,244
Cost of sales (9,362) (13,319)
--------- ---------
GROSS PROFIT 14,862 15,925
Administrative expenses (11,475) (12,793)
Exceptional items (843) (909)
Share-based payments (277) (31)
--------- ---------
OPERATING PROFIT 2,267 2,192
Finance costs (250) (181)
Finance income 3 9
--------- ---------
PROFIT BEFORE INCOME TAX 2,020 2,020
Adjusted earnings before interest,
tax
exceptional items and share-based
payments 3,140 2.960
Exceptional items (843) (909)
Share-based payments (277) (31)
PROFIT BEFORE INCOME TAX 2,020 2,020
------------------------------------- --------- ---------
Income Tax (243) (465)
--------- ---------
PROFIT FOR THE YEAR 1,777 1,555
========= =========
Profit attributable to:
Owners of the parent 1,777 1,555
========= =========
Earnings per share expressed
in pence per share
Basic 1.98 1.76
========= =========
Diluted 1.85 1.74
========= =========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 MAY 2021
2021 2020
GBP'000 GBP'000
ASSETS
NON-CURRENT ASSETS
Goodwill 28,241 28,241
Intangible assets 476 526
Property, plant and equipment 551 767
Right-of-use property, plant &
equipment 224 428
Trade and other receivables 44,335 46,157
Deferred tax 806 944
-------- --------
74,633 77,063
-------- --------
CURRENT ASSETS
Trade and other receivables 55,073 60,038
Tax receivable 113 185
Cash and cash equivalents 7,969 1,304
-------- --------
63,155 61,527
-------- --------
TOTAL ASSETS 137,788 138,590
======== ========
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital 9,252 8,899
Share premium 25,543 25,360
Employee shares 63 -
Treasury shares (790) (310)
Retained earnings 23,051 21,274
-------- --------
TOTAL EQUITY 57,119 55,223
-------- --------
LIABILITIES
NON-CURRENT LIABILITIES
Trade and other payables 33,749 28,639
Financial liabilities - borrowings 3,369 -
Lease Liability 44 238
-------- --------
37,162 28,877
-------- --------
CURRENT LIABILITIES
Trade and other payables 41,692 51,052
Financial liabilities - borrowings 1,634 2,407
Tax payable - 287
Provisions - 546
Lease Liability 181 198
-------- --------
43,507 54,490
-------- --------
TOTAL LIABILITIES 80,669 83,367
-------- --------
TOTAL EQUITY AND LIABILITIES 137,788 138,590
======== ========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MAY 2020
Called Retained Share Treasury Employee Total
up Share Earnings Premium Shares Shares Equity
Capital
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 June
2019 8,760 19,888 25,134 (300) 298 53,780
Total comprehensive
income - 1,555 - - - 1,555
Transactions with
owners
Purchase of treasury
shares - - - (10) - (10)
Dividends - (498) - - - (498)
Issue of share capital 139 - 226 - - 365
Value of employee
services - - - - 31 31
Reclassification of
Employee - 329 - - (329) -
Shares
---------- ---------- --------- --------- --------- ---------
Balance at 31 May
2020 8,899 21,274 25,360 (310) - 55,223
========== ========== ========= ========= ========= =========
Total comprehensive
income - 1,777 - - - 1,777
Transactions with
owners
Purchase of treasury
shares - - - (480) - (480)
Issue of share capital 353 - 183 - - 536
Value of employee
services - - - - 63 63
Balance at 31 May
2021 9,252 23,051 25,543 (790) 63 57,119
========== ========== ========= ========= ========= =========
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 MAY 2021
2021 2020
Cash generated from operations GBP'000 GBP'000
Profit before tax 2,020 2,020
Depreciation & amortisation charges 754 883
Finance costs 165 181
Finance income (3) (9)
Decrease in inventory - -
Decrease in trade and other receivables 6,787 18,947
(Decrease) in trade and other
payables (4,248) (17,677)
Movement in other non-cash items 745 612
-------- ---------
6,220 4,957
Cash flows from operating activities
Interest Paid (165) (181)
Tax paid (397) (1,488)
-------- ---------
Net cash from operating activities 5,658 3,288
-------- ---------
Cash flows from investing activities
Acquisition of subsidiaries - (500)
Purchase of software, property,
plant & equipment (314) (375)
Contingent consideration paid (197) (565)
Interest received 3 9
-------- ---------
Net cash from investing activities (508) (1,431)
-------- ---------
Cash flows from financing activities
Payment of lease liabilities (213) (218)
Loan repayments in year (635) (991)
Loans issued in year 4,100 -
Change in overdrafts (Invoice
Finance) (869) (349)
Equity dividends paid - (498)
-------- ---------
Net cash from financing activities 2,383 (2,056)
-------- ---------
Increase/(decrease) in net cash
and cash equivalents 7,533 (199)
Net cash and cash equivalents
at beginning of year 132 331
-------- ---------
Net cash and cash equivalents
at the end of the year 7,665 132
======== =========
1. ACCOUNTING POLICIES
Basis of preparation
These financial statements have been prepared in accordance with
International Financial Reporting Standards ("IRFS") as adopted by
the European Union and International Reporting Interpretations
Committee ("IFRIC") interpretations and with those parts of the
Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared under the historical
cost convention.
2. SEGMENTAL REPORTING
The Group provides a range of financial services and product
offerings throughout the UK. The Group has introduced reporting on
a segmental basis as this accurately reflects the four trading
divisions, namely: Asset Finance, Vehicle Finance, Loan Finance and
Invoice Finance.
The operating segments also reflect its organisational and
management structures. The Group reports internally on these
segments in order to assess performance and allocate resources. The
segments are differentiated by the types of products provided.
The segmental results and comparatives are presented with
intergroup charges allocated to each division based on actual
revenues generated. Intergroup expenses are recharged at costs and
largely comprise; Marketing, Compliance, IT and Human Resources
costs.
Asset Vehicle Loan Invoice Other Total
For the year ended 31 Finance Finance Finance Finance
May 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
CONTINUING OPERATIONS
Revenue 12,822 2,582 2,223 6,488 109 24,224
Cost of sales (6,331) (829) (1,039) (1,163) - (9,362)
GROSS PROFIT 6,491 1,753 1,184 5,325 109 14,862
Administrative expenses (3,394) (1,922) (795) (2,590) (2,774) (11,475)
Exceptional items (44) (128) (8) (128) (535) (843)
Share-based payments - - (22) (43) (212) (277)
OPERATING PROFIT 3,053 (297) 359 2,564 (3,412) 2,267
Finance costs (124) (27) - (6) (93) (250)
Finance income 2 - - 1 3
PROFIT BEFORE INCOME
TAX 2,931 (324) 359 2,559 (3,505) 2,020
Intra-group recharges (1,864) (375) (323) (943) 3,505 -
PROFIT BEFORE INCOME
TAX 1,067 (699) 36 1,616 - 2,020
-------- -------- -------- -------- -------- ---------
Adjusted earnings before interest, tax, exception items
and share-based payments 2,975 (196) 389 2,730 (2,758) 3,140
Exceptional items (44) (128) (8) (128) (535) (843)
Share-based payments - - (22) (43) (212) (277)
PROFIT BEFORE INCOME
TAX 2,931 (324) 359 2,559 (3,505) 2,020
-------------------------- -------- -------- -------- -------- -------- ---------
Asset Vehicle Loan Invoice Other Total
For the year ended 31 Finance Finance Finance Finance
May 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
CONTINUING OPERATIONS
Revenue 15,540 3,032 2,484 8,265 9 29,244
Cost of sales (8,479) (1,460) (1,520) (1,860) - (13,319)
GROSS PROFIT 6,975 1,572 964 6,405 9 15,925
Administrative expenses (4,828) (1,421) (834) (3,183) (2,527) (12,793)
Exceptional items (104) (10) (76) (22) (697) (909)
Share-based payments (31) - - - - (31)
OPERATING PROFIT 2,012 141 54 3,200 (3,215) 2,192
Finance costs (134) (4) - (8) (35) (181)
Finance income 7 - - 2 9
PROFIT BEFORE INCOME
TAX 1,885 137 54 3,194 (3,250) 2,020
Intra-group recharges (1,718) (337) (276) (919) 3,250 -
PROFIT BEFORE INCOME
TAX 167 (200) (222) 2,275 - 2,020
-------- -------- -------- -------- -------- ---------
Adjusted earnings before interest, tax, exception items
and share-based payments 2,020 147 130 3,216 (2,553) 2,960
Exceptional items (104) (10) (76) (22) (697) (909)
Share-based payments (31) - - - - (31)
PROFIT BEFORE INCOME
TAX 1,885 137 54 3,194 (3,250) 2,020
-------------------------- -------- -------- -------- -------- -------- ---------
3. PROFIT BEFORE INCOME TAX
The profit before income tax is stated after charging:
2021 2020
GBP'000 GBP'000
Depreciation - owned assets 530 684
Amortisation - computer software 224 199
Net credit loss charge 1,733 3,777
Funding facility interest charges 2,777 3,828
Introducer commissions 2,881 3,884
Fees payable to the Company's
auditor for audit of Company's
subsidiaries 72 71
Fees payable to the Company's
auditor for the audit of the
Company 13 13
Fees payable to the Company's
auditor for non-audit services - 23
Fees payable to the Company's
auditor as associate on valuation
work - 6
======== ========
4. DIVIDENDS
2021 2020
GBP'000 GBP'000
Ordinary shares GBP0.10 each
Final - 498
Interim - -
========= =========
Total - 498
========== =========
The Company confirmed that the 2019 interim dividend that was
deferred as a result of the pandemic will not be paid and that
while cash resources are being deployed to business growth at the
current time, future dividends will be kept under review.
5. EARNINGS PER SHARE
Earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the year. For diluted
earnings per share, the weighted average number of shares is
adjusted to assume conversion of all dilutive potential ordinary
shares.
2021
Weighted
average Per-share
Earnings number of amount
GBP'000 shares pence
Basic EPS
Earnings attributable to ordinary
shareholders 1,777 89,481,386 1.98
Effect of dilutive securities
Share Options (81) 2,204,018 (0.13)
Diluted EPS
Adjusted earnings 1,696 91,685,404 1.85
========= =========== ==========
2020
Weighted
average Per-share
Earnings number of amount
GBP'000 shares pence
Basic EPS
Earnings attributable to ordinary
shareholders 1,555 88,627,630 1.76
Effect of dilutive securities
LTIP options and contingent
consideration - 715,602 (0.02)
Diluted EPS
Adjusted earnings 1,555 89,343,232 1.74
========= =========== ==========
6. PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information set out in this announcement does not
comprise the Group's statutory accounts for the years ended 31 May
2021 and 31 May 2020. The financial information has been extracted
from the statutory accounts of the Group for the years ended 31 May
2021 and 31 May 2020.
The auditors' opinion on those accounts was unmodified and did
not contain a statement under section 498 (1) or 498 (3) Companies
Act 2006 and did not include references to any matters to which the
auditor drew attention by the way of emphasis.
The statutory accounts for the year ended 31 May 2020 have been
delivered to the Registrar of Companies. Those for the year ended
31 May 2021 will be delivered to the Registrar of Companies
following the Company's Annual General Meeting.
7. ANNUAL REPORT AND ANNUAL GENERAL MEETING
The Annual Report and Accounts will be available from the
Company's website, www.timefinance.com , from 21 September 2021.
Notice of the Annual General Meeting, which will be held at the
Apex City of Bath Hotel, James Street West, Bath, BA1 2DA on 21
October 2021 at 9am, will be posted to Shareholders.
This information is provided by RNS, the news service of the
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