Time Finance plc (LON:TIME) Chief Executive Officer Ian Smith caught up with DirectorsTalk for an exclusive interview to discuss their rebranding, further development and integration, how business has fared during COVID-19, the impact on the lending portfolio, expected revenue and profit figures and the longer term outlook for the company.
Q1: Now, you’ve rebranded to Time Finance, why have you chosen to do this now?
A1: We set out the intention to invest in marketing and in our branding some two years ago now and we’ve been working on that project over that time period in-house really. There have been a couple of delays that are Brexit-related and COVID-related but we felt that now was the time to rebrand for two reasons really.
I think first because we’ve completed the buy and build journey that we’ve been on over the last five or six years now, acquiring six companies to put the platform of core products together. So, essentially that part of the development of the group has been done so we thought that now was the right time to signal the completion of that process and the start of the next phase of growth.
I think the second reason is that the business model has fared well and stood us in good stead during this COVID period and that’s given us the confidence really to, as I say, signal the second phase of growth, having come through this COVID effected period very well as a group.
Q2: Can you tell us about the name, its meaning, and the reasons behind the new branding?
A2: It’s a bit of a nod to the past in the sense that 1pm was the old name, not that that was ever to do with the time, that was more derived from one payment monthly but I think time and finance to us are the two things, perhaps the two elements, that are the most elusive assets, if you like, for small businesses as they grow and freedom to grow is what both time and finance enable. So, we felt that it just sort of captured the essence of what we’re all about as a business.
The inspiration, I suppose, for the logo that we’ve used comes from a number of factors and our values as a business so it’s a kind of an hourglass logo so it reflects the fact that time is money. The top part of the logo is kind of a shield symbol which reflects trust and integrity and the lower part of the symbol is an upward arrow, reflecting growth and direction.
If you put the whole logo on its side it reflects the infinity symbol which sort of conveys endless possibilities and agility and flexibility and creativity.
So, putting all those things together, we felt the logo, the look, the feel, and the name itself captured everything that we as a business are trying to do, which is to be totally committed to the growth of small businesses in the UK.
Q3: So, what will the new brand signal for further development and integration of the group?
A3: I think in terms of development, it’s very important for all of our stakeholders, our introducers, and our customers to be able to see that all of the products that we’re providing for small businesses are available under one roof. By coming to us as the primary source of finance for small business, they’re going to be able to get the solution that they require for themselves or for their customers. So, I think what it signals is the ability to be able to provide all of our core products under one roof and potentially new products.
In terms of integration, I think it does help us as a business in terms of aligning our various processes from the businesses that we’ve acquired over the years and to operate as one. So, I think, the change to the new brand is important internally as well as externally for both groups of people. All of our stakeholders externally can see that we’re the place to come to for finance and all of our employees internally can see that we now operate as one business.
Q4: You’ve also issued a half year trading update, how has the business faired through the last six months of COVID?
A4: Very well, actually, so our last year-end was 31st of May which was probably the low point in terms of the impact of COVID on our business, each month since then the business has grown and as the trading update says, it is in line with what we internally expected in terms of the budgets that we’ve set. All of our budgets have been set to get us back to pre-COVID levels of activities as soon as we were able to and certainly during this financial year.
The half year reflects the breadth of what we do in terms of lending into many, many different sectors, some of which are performing well during this COVID-impacted period and it also shows the operational resilience of the business. At 30th November, which is the half year that we’re reporting on, we had more cash in the bank than we did at the end of May so £3.5 million compared to £1.3 million and a net tangible assets had increase to £28 million from £26.5.
So, generated cash during this last six month period and we’ve been profitable so I think at this point, we say that we’re fairing very well.
Q5: Now, there’s presumably been an impact on your lending portfolio, what are the main impacts that you’ve seen?
A5: Yeah, certainly, there are some different dynamics going on as far as the lending book is concerned. At 31st of May, which is the last year and the net lending book, the principle that we lend was about £125 million and that fell to around £95 million during the COVID-impacted period for a couple of reasons really.
One and the first is that we were writing less business during that time as one would expect but secondly, quite a number of our borrowers took the advantage of government-backed funding, bounce back loans and CBILS loans to effectively settle early their obligations with us. Whilst on the one hand that reduces our lending book, and obviously it’s the lending book that creates the interest income which becomes our revenues, that’s not a good thing if our book reduces but on the other hand, it de-risks the book in the sense that these businesses that were able to take funding from the government have been able to pay off their obligations to us and we don’t therefore have a collections issue going forward.
So, as I say, I know the book became smaller as a result of COVID, actually I think the quality of our book is now higher and since that low point of £95 million, the book has been increasing month on month during the last six months as we’ve originated new business and it’s back to around £105 million as at the 30th November. So, we’re pleased with how that’s tracking.
There have been arrears in the portfolio but we’ve been able to reduce those steadily over the last six months, we have given forbearance to some customer, some customers have requested payment holidays, for example, for a period of time and at one point there was around £25 million of our portfolio that was under some form of forbearance. That’s now down to around £3 million so most of those deals have come back on track.
So, I think the portfolio, albeit slightly smaller at the end of November, is actually a higher quality portfolio and better place to generate interest income as we go forward.
Q6: With that in mind then, what are the expected revenue and profit figures for the half-year and what does this suggest for the rest of the financial year?
A6: So, the revenue that we’ll generate from that portfolio, let me take a step back, so in terms of our total revenue, 80% is interest income from our lending, around 20% is commissioning come from broking. That total revenue for the half year will be not less than £11.6 million for the half-year period and that is lower than the same period last year, of course, because it’s still COVID affected and obviously the portfolio is lower, as I’ve just explained. We’re pleased with that level of revenue for the six-month period and what that will generate is profits are not less than £1.2 million for the six month period which is a lot better than the previous six months which were clearly in the most heavily COVID-impacted periods.
So, in the last six months before the start of this financial year, it was actually a loss of around £1 million so we’ve now turned that to a profit of £1.2 million and again, that trajectory is improving month on month so we’re pleased with trading performance.
For the rest of the financial year, what we’ve said is that what we’ll do when we publish the full interim results on the 19th January, we’ll make a reassessment then as to whether we’ve got the visibility to be able to reinstate market guidance for the full year. Assuming that we continue with the trend that we’re seeing for the first six months then we will be able to give guidance for the full year at that point.
Q7: With 2021 fast approaching, what do you see as the longer term outlook for Time Finance over the next year to 18 months?
A7: I think we are cautiously optimistic at this point, if not perhaps a little bit bullish about what we think could happen as the economy improves, clearly were all buoyed up by the news around vaccines at the moment. So, there is the prospect, I suppose, that in 2021 we’re going to get back to some level of normality from a business perspective.
Given our market position, which is all about spread and lending to many, many different sectors and, as I say, many of those are performing very well and given the trend that we’ve seen over the last six months, for the half year results that we’re reporting on, we are cautiously optimistic about that continuing for the second half of the financial year and indeed beyond.
The whole point about our rebranding, as I said earlier, is to signal the next phase of growth so we’re cautiously optimistic about our position and what we can do in the UK economy as that improves over the next 12 to 18 months.
