The recently announced Trading Update from Time Finance (LON:TIME), the £30m capitalised specialist flexible finance provider, was really quite positive, certainly enough for the group’s shares to continue to be rated as a Buy.
The Bath-based group has over 11,000 UK business customers who turn rapidly to Time Finance when seeking funding to achieve their goals.
The Business
The company offers a multi-product range for small to medium-sized enterprises, providing three products, namely Asset Finance, Commercial Loans, and Invoice Finance.
The company’s lending proposals are originated through various channels, such as finance brokers and other professional firms, equipment vendors, suppliers and dealers, and direct from borrowers.
It is also concentrating on being an ‘own-book’ lender, with the group retaining the ability to ‘broker-on’ deals where appropriate, enabling it to optimise business levels through market and economic cycles.
It lends over £175m every year, while helping to arrange over £73m of funding through its own broker channels.
Asset Finance enables investment in vital equipment or refinancing existing assets. Its business products consist of hire purchase, finance lease, and asset-based lending.
Invoice Finance helps in improving the cashflow of the customer’s business. It provides funding and offers an optional credit control service, where it manages a tailored collections process on the customer’s behalf.
In its Commercial Loans side, it offers business loans secured against collateral as well as secured loans on a short or long-term basis, with monthly repayments.
Sales Per Region And Business
Based upon the group’s 2023 £27.6m turnover, its Asset Finance side represented 60% of its business, Invoice Finance was 38.7%, with Other business being the remainder 1.3%.
All of its business was derived from the UK last year.
Management Outlook
In late September in the Q1 Trading Update, Ed Rimmer the group’s CEO stated that:
“As we enter the second half of our four-year medium-term strategic plan, I am very encouraged that the first quarter of the new financial year has delivered continued growth in both revenue and profits.
These results are driven by the increasing size of our lending book, which has now grown consistently for over twenty-four months.
Such growth reflects both the demand for our multi-product offering; the value placed on our excellent customer service, and also the robust nature and resilience of small and medium-sized businesses across the UK.
The Board has real confidence that the Group remains well positioned to continue on its growth trajectory and to build long-term value for its shareholders.”
Trading Update
For the first five months of the current fiscal year to end May 2024, the group has indicated a very strong momentum in its business.
Its Lending Book to the end of October stood at a record high of some £180m, while its arrears numbers were holding very steady at around the 6% level.
Ahead of the scheduled Trading Update for the first half year, the Management has ‘guided’ that the current year is progressing better than market expectations, indicating that the full year could well show not less than £5.4m pre-tax profits.
The Equity
There are some 9.5m shares in issue.
Larger holders include Arema Investors (19.92%), GPIM (18.37%), Ronald Russell (Chmn) (12.48%), Hargreaves Lansdown Asset Management (8.88%), Aeternitas Imperium (3.85%) and Lombard Odier Asset Management (3.30%).
While other notable names include IG Markets, James Roberts (CFO), KW Investment Management and HSBC Global Asset Management are all holders of less than the declarable 3% stake.
Broker’s View
Analyst Andrew Renton at Cavendish Capital Markets jacked up his estimates following the latest Update.
For this year he is now looking for the group’s total revenue to rise to £30.8m (£27.6m), taking its adjusted pre-tax profit up to £5.7m (£4.4m), while lifting earnings to 4.6p (3.7p) per share.
The broker sees the current year’s momentum being extended into the group’s subsequent trading period.
His estimates for the year to end May 2025 are for £33.1m of total revenues, £6.7m of profits and 5.4p per share of earnings.
Understandably he has a good Price objective on the group’s shares, looking for 47p against the current 32.5p – which offers a quite handsome upside of over 44%.
My View
In one of my articles towards the end of September I stated that at just 28.30p this group’s shares were looking cheap.
A couple of Friday’s ago the shares hit 33.90p, that was on the back of over half a million shares being traded in reaction to the latest Trading Update.
Since then, they have been down to 31p but closed on Friday night at 32.50p.
From around this current level, I see the shares edging forward very soon over the 40p barrier, helped by good corporate news – possibly such as that coming with the next Trading Update on Wednesday 20th December.
Could there be a nice little taste for active players prepared to take a pre-Christmas punt?
As far as I can see Time Finance is moving very well and offers investors – short, medium or long-term – very attractive growth prospects over the next couple of years.
(Profile 23.12.20 @ 21.5p set a Target Price at 30p*)
(Profile 07.01.22 @ 23.5p set a Target Price at 30p*)
(Asterisks * denote that Target Prices have been achieved since Profile publication)