Time Finance plc (LON:TIME) Chief Executive Officer Ed Rimmer caught up with DirectorsTalk for an exclusive interview to discuss key reasons for progressing well, the main differentiators, outlook for the rest of the financial year, and what investors can expect going forward.
Q1: Ed, just looking through the update, the business seems to be progressing well. What would you say the key reasons are for this?
A1: There’s a couple of main reasons.
The first is the market, the opportunities that have come our way I think have been driven by the challenges that SME’s have faced. Obviously increasing interest rates, increase in inflation, supply chain difficulties, all that’s added up to small businesses having to access third party finance, particularly obviously after the government funding schemed ending a couple of years ago.
So, whilst interest rates have been high and naturally you would think that that’s the preventative measure for businesses wanting and needing to borrow money, clearly the products that we offer, particularly invoice finance, which is a cashflow finance solution, people have needed to access cashflow.
That’s driven the opportunities I think in the last 6-12 months our way, and we’ve seen some really interesting opportunities.
Partly, also, the bigger lenders, the banks in particular have tightened up as well in terms of their credit risk profile and that’s pushed opportunities into the market for independent alternative lenders like Time Finance.
The second reason is really our own internal plan and our strategic focus. We moved away from a collection of brokerage businesses and lending businesses when we rebranded the company 2 or 3 years ago. Our focus has been very much on own book lending to the extent that we are now 97% own book lending in terms of the volume that we’ve done over the last 6 months, as opposed to 3% where we’ve brokered out some solutions.
So, it’s a very small percentage that we broker out, it does still offer us an opportunity to do that, but the majority of the transactions have been on our own book, focussed on our key products, which is asset finance and invoice finance, both of which are secured lending products. That’s been very much our focus.
I think with the people that we brought in, the focus on our own book lending products, the proposition that we’ve managed to put in into the market in terms of what we stand for now within our broker community, they’ve all added up to our strategy being delivered and we’re pleased with the progress we’ve made.
Q2: What are your main differentiators in the market?
A2: I think that one of our key differentiators is definitely our product offering so we are a multi-product provider, which means that we provide more than just one solution to SME’s.
So, we’re able to offer:
- invoice finance for cashflow finances, an alternative to a typical bank overdraft,
- fixed asset funding through traditional HP and leasing
- business loans which are typically secured by property charges, typically second charges on commercial or residential properties.
More importantly, we’re now able to offer a combination of all three of those lending products through an asset based lending offering, which we launched in April of last year. Those deals tend to be fewer of them but bigger in value, they tend to last longer as well, and they’re a bit more remunerative for us.
So, that’s a key part of our plan is really pushing our multi-product offering.
There’s not many of our competitors that are able to do that, some can. The bigger competitors typically can offer a multi-product but they tend to lack in terms of the personal touch and the flexibility, and the smaller competitors tend to offer one product.
We’re in a smaller bunch of providers who can offer more than one solution to smaller businesses which I think is a key differentiator for us.
The other thing is our real approach to small business lending, it’s very service-orientated, very flexible, very personable, and also quick as well. Small businesses by their very nature need quick decisions and that’s something that we’ve focussed on heavily in the last year in terms of speeding up our processes so that we can give decisions as quickly as we can.
So, I think they’re really the differentiators that have helped us have a successful first half to the year.
Q3: How do you see the rest of the financial year playing out into 2024?
A3: Well, I think it’ll be very similar, I don’t see a major change in the first half of 2024 which is broadly the second half of our financial year through to the end of May.
I think the insolvency market will continue to be busier than it has been, there’s unfortunately more businesses that are struggling, I don’t see that changing despite some encouraging signs that inflation is reducing slightly. Interest rates have arguable peaked, I don’t see the impacts on small businesses changing dramatically at all in the first 6 months.
So, I think there will still be opportunities, I think there will unfortunately be still insolvencies that are quite high in the small business markets and that will present us with opportunities to provide businesses with cashflow solutions and funding that they desperately need.
I think opportunities should still come our way, there will be challenges because clearly, in that environment we have to protect our own book, our arrears have stayed relatively the same which we’ve been genuinely pleased about because the overall size of the book has increased. We’re now lending over £185 million, as a percentage terms, the arrears have stayed the same so that’s been encouraging in the environment where we’ve seen increased strain on clients and customers that we’ve managed to maintain the quality, if not improve it.
So, it’s really all about getting the balance right, making sure that you pick the right opportunities and you get the balance right between credit risk and reward, and that’s really what it comes down to.
Q4: You mentioned earlier the strategy changes being positive throughout the year, is there anything else investors can expect from Time Finance through the end of year and into 2024?
A4: I think if I go back to when the business was called 1PM, before we rebranded, it was a make-up of a number of acquisitions and some of them were involved in consumer finance, some of them were business to business finance, some of them were own book lenders, some of them were brokerages, it was quite muddled.
One of the things that I, and the Board, have really wanted to focus on in the last couple of years with our current strategy is simplifying the business, I think that’s really helped us to perform strongly as well. I don’t see that we’re going to deviate from that over the next 6 months.
This time next year, we’ll be looking to finalise our next 5-year plan, that might have some slightly different things in it in terms of leading into other products but I would still suggest that those products will be adjacent to what we’re already doing in the asset finance and invoice finance market.
I don’t see us deviating materially from the plan that we’re on but it’s really all about making the most of that, and I still think there’s some great opportunities that we haven’t maximised yet. If we can stay on that path, I’m sure it should add up to a successful year.
