As I sit and type this morning, there are clearly an increasing number of companies delivering either a downbeat message to the market or worse announcing a warning on profits.
Thankfully, TIME FINANCE continued its positive trading run on the news front yesterday, which saw the delivery of excellent full year 2024 numbers, accompanied by a positive update on the start of the current financial year.
There is a fair bit here on the blog on the company (for anyone interested in delving back) which is an alternative finance provider to UK SMEs, which additionally takes in asset and invoice financing.
In the past, as the story has progressed, I have been fortunate enough to speak with management, with the last occasion occurring back in January of this year.
The shares were then sitting around 38p, having enjoyed a positive run-northwards, but which looked destined for further gains following strong news and subsequent upgrades.
Indeed, the shares now stand at 55p having more recently caught the eye of the wider investment community as momentum continues.
Following yesterday’s announcement, I once more caught up with management to hear more on the full year results and the continuation of the growth journey which should hopefully pave the way for further upside.
Before looking at that full year 2024 performance and the numbers, it is perhaps worth taking note of the trading update that was also released concerning the first quarter of the current financial year.
This has seen a strong start, with revenues for the period increasing by an impressive 20% YoY to £9.1m, whilst pre-tax-profit moved to £1.9m, representing an impressive 46% uplift.
Commenting on that performance, CEO ED Rimmer said, “we were pleased with that, as Q1 typically is a bit more of a challenge for us, with June, July and August not usually the best quarter, but it’s actually been ok and we have got to where we hoped to have got to.
That normally means the Autumn months are better, so that’s another positive point” concluded Rimmer.
In terms of the overall market conditions, the CEO added that there continued to be opportunities out there, but alongside that, there had been an uptick in insolvency activity.
Whilst that is relative right across the spectrum, it’s something which TIME have been aware of and paid close attention to and Rimmer added that within that trend, it does also throw up opportunities for the company.
The flexibility and other attractions that TIME has to offer are things that businesses aren’t going to get from bigger lenders Rimmer explained and as a testament to that, new wins in the first quarter have been what he describes as pretty good.
Regarding the inevitable level of bad debts, net deals in arrears reduced by 1% to 5% YOY, whilst bad debt write offs halved to 1%, thus delivering a stable picture. Rimmer stressed that they had fully expected an uptick on the insolvency front and had been prepared with a firm and continuing focus on backing the right deals and other measures in place to mitigate downside.
“We have to make sure we get it right and we have the experience with that, making sure we aren’t just chasing volume” added the CEO.
In terms of the overall business which has been delivering on the previously outlined and implemented structured four-year plan, Rimmer said that they are continuing to focus on the asset base lending product.
“This is where we can provide more than one funding line into the same client, whether that be a combination of invoice finance with a loan, or asset finance and invoice financing, or all three combined.
We think that is still one key area differentiator for us and we have done three of those deals in the first quarter and we want to do more of them. There aren’t lots of those deals, but when they do come, they are more remunerative, where clients stay with us longer and they are more sticky”.
As an example of that and the general market activity, the CEO spoke of TIME’s supporting of one of its biggest clients, that being a recruitment company which had undergone a restructuring process. This has seen TIME supporting the business in question with a big facility at the beginning of this year that amounted to a £3.5m funding facility, enabling it to facilitate and execute on its plans.
Looking at TIME’s numbers that were released for full year 2024, this saw momentum continuing to build with the gross book hitting £200m as revenues of £33.2m delivered pre-tax-profit of £5.9m, which was slightly ahead of the previously upgraded numbers.
Basic EPS of 4.8p represented a marked increase on the prior year's 3.5p and puts the stock on a current PE of circa 11.
However, given the positive start to the current financial year and the potential for a further upgrade, the forward PER of little more than 9 remains highly attractive, particularly given broker Cavendish has pencilled in EPS of 6.5p for next year.
Importantly, margins have improved and provides for further confidence in TIME’s strategy, not least, as the space in which it operates provides for a positive runaway ahead.
“We operate in that Tier 2 space” Rimmer said, “and its always a challenge to make sure you don’t get drawn into people thinking that we are always more expensive than the competition, because X Y and Z are offering this deal or that deal. So, I think in that Tier 2 space, you really have to make sure that you stay in there and price the deals right and accordingly, so we don’t really want to be drawn into that top space at all, because all you end up seeing is finer margins.
We need to make it very clear where our market position is and our rates have been maintained because of that and what we are focused on in our markets”.
Clearly TIME is now a tight ship with a clear and ongoing growth strategy but which as part of that, inevitably sees some deals slipping by.
To that end, Rimmer said that they see some of these that may appear attractive, but in certain cases they know that as a result of the terms competitors may win on, it is probably something TIME shouldn’t be getting involved in anyway, which underlines the philosophy.
There is, he added, a constant reminder to the sales team of where their market is and where they should play and there appears plenty on offer for continued organic growth.
With the next step of its ongoing plan for growth now set to take the business further forwards, Rimmer confirms that organic growth remains the core focus. Not least, as they believe there exists a number of really good opportunities in the markets and sectors in which TIME operates.
That said, acquisitions will now probably provide more of a focus for the business as he explained. “That is partly because we are now in a slightly different phase of our own development and plan, along with the market now probably likely to generate more opportunities on that front. We have actually looked at a couple in the last quarter, but neither really ticked the boxes that we are looking for, so if we did make a play for acquisitions, they would still be focused on what we are doing as bolt-on-deals”.
On the investor front, in the past I have touched upon the relationship with its major shareholder Arena in regarding that investor’s own plans or vision for TIME.
Previously, I was informed that there hadn’t been much in the way of contact and to date Arena’s presence has been one of a passive nature. That appears to continue to be the case, as Rimmer said that there hasn’t been any dialogue with them since May or June where they held a shareholder meeting with them.
That would appear to suggest that with a near 20% stake which has increased substantially in value, Arena is quite happy with the current situation.
Worth noting though, is that Arena does have something of a track record of being active across its investments, often supporting growth or realising upside from undervalued situations, so it will be interesting to monitor its presence.
Summing up on the performance and outlook, the CEO said that they were very pleased with the results and that it had been a really good two or three years for the business. The increase in the share price has also been welcomed and moving forward he sounds a cautiously optimistic note without any hint of complacency, suggesting that it remains a work in progress, but clearly in a positive vein.
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