Time Finance (LSE:TIME) — Interims results

0:01 Good afternoon and welcome to TIME FINANCE PLC Interim Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged to be submitted at any time via the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in position to answer every question it sees during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll.

0:29 And I'd now like to hand over to Ed Rimmer, CEO, James Roberts, CFO. Good afternoon. Good afternoon, and good afternoon, everyone. Thanks for joining the TIME FINANCE interim results presentation. We will have our cameras on for the introductions, and then if you don't mind, we'll turn them off because it's easier just to navigate through the presentations with them off and then come back on at the end for any q and a. By way of introductions,

0:56 we will just flick through to that slide. I'm Ed Rimmer, chief exec of the business. I joined as permanent CEO in June of last year.

1:07 Spent a good chunk of my career prior to that with Bibi Financial Services, having joined the financial services industry in the mid the mid nineties, specifically lending to small businesses through that time. Twenty two years with Bibi, including five years as The UK chief executive. That's that's myself. James. Thanks, Ed. Yes. And good good afternoon, everybody. Glad you could join us. My name is James Roberts. I'm the CFO. I've been with TIME now for coming up to five years. Joined within a month. I can't remember which who was first and second of Ed back in the day. Previous to that, I've about twenty years experience in financial services initially qualifying as accountant with PwC and then been in industry ever since.

2:00 That's me in a nutshell. Thanks, James. So just into the the main presentation, a period of strategic delivery. I think it's probably fair to say that through the pandemic, we focused the business very much on getting it in the best possible shape to take advantage of the recovery as and when it started. And as everyone knows, probably frustratingly for many, it's been a bit up and down and stop start. I'm pleased to say though that the the last quarter of the calendar year of 2021, we definitely did see a period of sustained positivity with growth in the loan book and better environment for for lending than we'd seen over the past eighteen months. And I'll I'll take you through some of the highlights now.

2:55 I guess the summary is really we we manage the loan book very robustly. We got arrears significantly improved from the peak of the pandemic, and we now have zero deals in forbearance. That's a significant achievement from having around 25,000,000 of lending in some form of forbearance at the peak of of the pandemic in June 2020. So we focus very much on the existing book, improving arrears and improving forbearance, and it's now in a a much better shape than it than it was. As I mentioned, the the last quarter of the calendar year, we saw gross lending increasing and pleased to say that the lending book has increased by around 5% from the end of the financial year in in May last year to the midpoint in in November.

3:46 And through that time, we have improved our liquidity position. I'm really now in a good position to capitalize on the future opportunities. James will take you through the the numbers and and how the liquidity and the cash position has improved, when we get onto his slides, but that's another significant positive. The c bills and the recovery loan scheme accreditation that we obtained has been has been very positive. Overall, for the market in terms of us as a lender, that that's been a positive and a negative because, obviously, the market has been significantly disrupted by the government funding schemes effectively replacing our our products for a period of time through the the pandemic. And but I think there's definite signs that that is now coming to to an end even though the recovery loan scheme is still in place, and we have benefited through being an accredited lender on both of those schemes.

4:42 We've we've definitely had a positive through our our supportive lending partners. We have a £50,000,000 facility that funds our invoice finance division that was renewed during the first half of the year, which is a significant achievement, gives us stability to lend more volumes as we come into the recovery phase and the growth phase of The UK SMEs. And we have made some significant investment in sales resource and leadership roles, I'll come on to, as well as actually taking some cost out of the business in terms of the central support overhead, recognizing that we needed to do that because the recovery was taking longer than everyone initially expected.

5:27 It was a bit more up and down than everybody expected, and we have taken steps to reduce our overhead base during the the the the first half of the the year. Before James comes on to talk about the numbers in more detail, for those that that aren't aware, I'll just spend a few minutes going through who we are and and what we do. Many people, I'm sure, will know this, but some people won't. So I'll I'll try and put it quite succinctly, but there's just a couple of slides on on this. Effectively, we're an alternative finance provider. What does that mean? Well, we're a nonbank lender. We don't take retail deposits.

6:11 We borrow money through wholesale facilities ourselves and and lend them out to small businesses through the products that we choose to lend, which I'll I'll come on to the next slide. We support in in in the region around 20,000 UK based SMEs with their working capital requirements and and help them to grow the businesses. We're predominantly an own book lender, building our own balance sheets. We do have the opportunity to broke out certain deals that we don't want to put onto our own book either through, generally, cost criteria or credit criteria, and that tends to be in the asset finance division where we have the ability to broke out business. And we're a multiproduct provider, which is a significant advantage that we believe we have in the market and that we're more than just a one product provider.

7:02 We provide asset invoice and and loan finance as our core products as well as some peripheral products that I'll I'll I'll come on to. So we now have split out our products in terms of core owned book lending products, which you can see there, our assets invoice and commercial loans, and noncore brokerage products, which provide us with a commission that aren't building our own balance sheet lending. In terms of asset finance, they are predominantly split between soft assets and hard assets. Soft assets are those assets which typically don't have a residual value at the end of the lease, hard assets are those assets that do have a residual value. Soft assets typically include things like catering equipment, IT systems, gym equipment, and hard assets would be things like yellow plants, forklift trucks, trucks and trailers, and and engineering presses.

8:03 And we get our business generally from finance brokers, equipment manufacturers, suppliers on the vendor side, and some existing client referrals. Deal size typically at the minimum is is as as small as five k, and at the maximum in terms of own book lending is is is is up to two fifty k. We will broke out some business over and above that to other lenders, but that's our our our limit generally in order to manage manage risk. Sweet spot, typically, 10 to 15 k on soft asset and 50 k on hard assets. Typical yields, minimum wise, 99% up to 18%. Typically, 11% for hard asset and 14% for soft assets. And we fund the business through a range of wholesale block finance facilities, mainly provided by specialists in the field, are tier two lenders and and and a few of the the the new challenger banks.

9:02 Invoice finance disclosed and confidential typically referred to historically referred to as factoring and invoice discounting, now generally referred to as as invoice finance. Again, we get our business from brokers and along with other professional advisers and solvency practitioners and accountants and the likes. Deal size, small end 10 k up to as much as 2,500,000. They tend to be few and far between. Our sweet spot is in the region of 2 to 400 k, and typical yield, eight to 18%, but an average client will give us between 1214%. And, again, as I mentioned, funding comes through RBS by way of a back to back facility. Commercial loans, which we also now include the the c bills historically and now the RLS that we're doing within this division, again, introduces our brokers and professional firms, intermediaries.

10:00 Deal size, minimum 5 k up to 500,000. Sweet spot tends to be 25 k for unsecured deals, which still have personal guarantees against them. And secured is a $100,150,000 by way of second charge property security. Typical yields, 12 to 18%, but, again, in the in the mid tier, generally 14%. And we fund that business through, two facilities, the wholesale block funders provide us with an element of their funding to attach to the loans business. And we also have a high net worth loan note program which helps funding that division as well. The noncore brokerage brokerage is a fine a focus, sorry, on vehicle finance and mortgage lending, And both of these divisions are focused towards consumer lending, so much more heavily compliance driven.

10:53 And they are both focused on commission driven rather than, as I mentioned, own book lending. I won't go through them in detail, but suffice to say, we get introductions from direct clients and also intermediary channels, and we can cover a wide range of the market in return for commission. And we we broke out all the all the the business. So I think at that point, I will hand over to James just to take you through the financial results to the half year, and then I'll come back on to talk about where we are with our strategic plan. Thanks, Ed. Appreciate it. Yep. As Ed said, I'm just going to talk you through the the first six months of the year's numbers, both the p and l and the balance sheet, and try and draw out some key takeaways that we think are important that that sit within those numbers.

11:45 And then I'll hand back to Ed to talk about the the future and the strategy. So this side slide here really just draws out the sort of key key bullet points on the numbers. In a nutshell, we'd we'd we'd refer to it probably as a solid set of numbers, but crucially, all the fundamentals and the building blocks are in play in place, and that that's the key thing for us. The numbers I'll talk about in here, there's a few asterisks next to them, but just just to elaborate slightly. We're taking out furlough income. So the last two six month periods, h 02/20/2021 and h 01/20/2021 column the the second the second and third columns there, did include one off furlough income for staff we'd furloughed, and it's probably not comparable to keep that in there because there's nothing going forward. So that's what those those asterisks mean and and the numbers I refer about to take that. It's about £200,000 in each six month period have been taken out.

12:42 So the first one and the key one really for for for us is the origination. And origination in the period has increased significantly from the last half of the last financial year and is also up on the same period in the year before. And and the reason I say that's that's crucial is because origination is the is the future future of the business in terms of revenue and profits, the lifeblood of the business. The more origination you get in, that will drop through to revenue and in turn profit over time over the length and the lease of length of the of the lease or the loan. So that's really, really key. And as Ed alluded to, the last three months of the period we're looking at really did see a pickup in origination. And indeed, the the last three months, so September to November 2021, was the highest level of own book origination, and own book is the core strategy pillar we we set out in June. It was the highest own book origination levels since that same quarter in 2019.

13:37 So since September to November 2019, it was the highest level of own book origination we've seen, and that was pre pandemic. And, crucially, Ed alluded to it as well. December was was an even better month. It was actually it's not in these numbers, obviously, because it's December, but I think it's key to show the sort of the the the increase that's going on.

14:00 Own book origination was double the level in December 2020 and was approximately 40% higher than the level of own book origination in December 19 before the pandemic. So there's some very good indicators there on in on origination, and we're very pleased with that. In terms of the p and l itself, revenue, you can see is marginally down on the previous six months of the last financial year, but marginally up on this time last year. Importantly, gross profit is up on both six month previous six month periods, and profit before tax significantly up on the six the previous six months and in line with the one from months ago. So a solid set of of numbers. But as I alluded to, the origination is key, and that will drive future revenue as we move and profit as we move forward.

14:50 In terms of the balance sheet, Ed again touched on this. It's really been a focus of ours throughout the pandemic, and we're very pleased with the robustness and resilience of our balance sheet. Consolidated net assets over 58,000,000 now. There is a lot of goodwill in there from a previous buy and build strategy, so we focus more on the consolidated net tangible assets, which you can see just shy shy of 30,000,000 now at 29,600,000. Cash and convertible paper sits just below 10,000,000. That's the fuel for future own book lending. We'll be able to lend that out and then provide funding against that going forward so that cash and convertible paper balance is key. And by convertible paper, what I mean there is we have on our balance sheet some leases or loans we've written that we can pass on to our funding partners in return for more cash within twenty four, forty eight hours or so. So it's it's effectively cash equivalent, and that's why we bring that in there.

15:44 But it's a it's a good healthy number, which should feed our our own book lending for for the foreseeable and short term future. The blended cost of borrowings is another key metric outside of staff costs. It's our biggest expense, and that's the the cost we we pay to to get the funding in to lend on from our funding partners, and we can see that it's it's been stacking across this entire period, which is good. So we've got very good relationships with our funding partners, and and there's been no increases in the in in the cost they charge us for for borrowing money. And then the final three really refer to the quality of the portfolio, the write offs, deals in forbearance and arrears, and all three are either where we want them to be or or have improved dramatically. So we can see our net write offs are are in line with the previous six months. There hasn't been a huge spike in write offs as a result of the pandemic to date, which is pleasing, and the and the data implies that's continuing at the moment.

16:42 Crucially, Ed touched on it, deals in forbearance. There are none now. And by forbearance, what we mean there is this is customers who've come to us during the pandemic and for whatever reason because of lockdown or whatever have been unable to continue paying us and so have asked for some kind of forbearance either a few months off or reduced payments or what have you. And that was very high, over 20,000,000 back in June 2020. It is now zero as at the end of November. So that's very, very pleasing. And arrears, which are the the standard deals that for whatever reason haven't paid in line with where they where where where they were meant to. Now this could be literally a day overdue, the direct debit bounced for some reason or didn't work through to some that are that that are illegal. But taken in the round, we can see a steady reduction across of these figures, 15% a year ago, 14% at the end of the last financial year, and it's now below 10% at 99% of the gross book. So the fundamentals, as I say, are are are all looking good, we believe, regards to the numbers.

17:47 The next two slides, I think, focus on why we are, I suppose, not back to where we were pre COVID. There's two key drivers there, and and we're asked a lot of times as to why other numbers aren't where they were. And so I wanted to bring that to life and and and explain it today. And the major factor is the own book lending, the loan book, if you like. And and what we this, this, as I've touched on, is a key driver of revenue, which will become profit in time over the medium term. Our brokerages can deliver short term profits and cash, but the more sustained longer term profit needs to be derived through growing our our own book. I've got a very simple simplistic example on the left there, and apologies for teaching people to suck eggs, but I think it it shows it it very simplistically. The numbers are adjusting for example. But imagine you lent a £100,000 in year one, you might get £15,000, income from that. In year two, if you also lend another 100,000, you would get the second year of the first lend and the second years and the first year of the second year lending. So you'd get 30,000. And by the third year, if it's a typical three year lend, you lend another 100,000, you're actually getting £40,000 of income in. So you can see the the the the own book and how you how it builds over time leads to significant increased income over the life of the deal.

19:08 And the graph on the on the right shows how we've been impacted by lockdown. It's it's quite telling. The size of the book has almost mirrored the the lockdowns, and in turn, that has led to lower revenues that we we've seen. You can see on on the left hand side of that graph, the book historically was growing pre lockdown. We had the first lockdown, and almost right through to when the lockdown ends, you can see a dramatic fall in the size of our own book lending. As we came out of lockdown in the summer of twenty twenty, the first lockdown, the loan book began recovering again, and then we were hit with the second and the third lockdowns towards the end of twenty twenty and early twenty twenty one. And, we can see the loan book fell as a result of that, only beginning to recover once we we emerge from restrictions into July.

19:56 So what this shows is that the loan book has been massively impacted by the pandemic. And if we can get a clear run without any lockdowns and touch wood, it's looking like they may be a thing of the past. We can see that it does recover relatively quickly. It looks like we've got a clear run ahead of us. The own book, as we touched on, origination was really, really good in October, November, December 2021, boding very well for that loan, lending book to grow, and that in turn will future feed future revenue and, future profits. So that's quite an important factor

20:30 as to why we haven't got back to where we are, but it's purely a timing issue. The the second factor is our brokerages. Again, spoke in the slides earlier. We've got the core businesses, the own bit lending, and the noncore businesses. And if we look at the the table here, we can see pre pandemic, the right hand column, our our brokerages contributed roughly 6,000,000 of revenue and roughly a million pounds of profit to the group and in turn cash. They have been disproportionately hit by the pandemic. You can see that fall from 1,100,000 profit on the right hand side to, £300,000 loss, to May 21. And on the left hand side column, we can see that revenue for the first six months at 1,500,000 and still marginally loss making. So the the the brokerages really have been a drag on the numbers.

21:25 It's for two reasons, really. The the typical lenders in this sphere for our our consumer mortgages and bridging second charge mortgages, bridging side have been very much in and out. If

21:35 ever there's a lockdown, they seem to close their doors, and then they come back in. And if there's another change in policy, they they go back out again. So it's been very stop start. And on the vehicle side, which is which is the main driver of the the the noncore brokerages, there's very well publicized delays in the chips for cars and everything like that. So there's a big delay in supply. And that's why these have taken longer to to come back to the levels they were at before. We have taken steps. Ed Ed touched on it, I'm sure he will again later. We have taken steps to rationalize the business to reflect that. And the cost base of the noncore brokerages is now at the January 1, about £1,000,000 per annum less than they were pre pandemic levels. But needless to say, they have had a dampening effect on on our numbers.

22:22 As Ed touched on, one of the key things we've really focused on over the last eighteen months or so is the balance sheet, and it's something we're very proud of. I think in under any metric, the the the balance sheet is is looking particularly solid and robust. Our net tangible assets continue to grow. Our liquidity to to provide the fuel for future own book lending is still in very healthy, and the lending book performance under that underpins the group is is improving all the time. I won't dwell too much on on the first two, tables on the left just to say that, you know, net tangible assets, that's taking out the goodwill associated with the buy and build strategy of the past. It's just under 30,000,000 now, continues to grow as we remain profitable, which is good. And the liquidity position, this cash and paper that I touched on earlier, is still around about 10,000,000. It's marginally lower than May. We'd expect that because our book is growing, and we're we're lending money out. We don't want to be sitting on 10,000,000 of cash permanently.

23:19 That would be inefficient. We want to use that up to lend to lend to to to good growing UK businesses, and and we have begun doing that very much in the last quarter.

23:29 A new graphic for these presentations, suppose, is the one on the right, sort of the Wimbledon tennis colors. The green element is the deals in forbearance, and the sort of purple element is the the the deals in arrears. As you can see there, pre pre the pandemic, it was relatively flat. The arrears level, bit bit up and down, but relatively flat. Then the pandemic hit, and you can see that that it rapidly went up just after February 2020, including a green element, which is forbearance, and it continued to go up all the way through to sort of June, July time in 2020. Since then, the forbearance has come away very quickly and is now at zero as we've touched on. And pleasingly, the arrears, have also fallen significantly.

24:17 And it was about,

24:20 sort of April, May, June time in 2021. You can see the arrears level got back to the historic historic pre pandemic levels. And, actually, in the last three months, September, October, November, you can now see it's it's lower than it's ever been way back to December 18 for the whole three year period. So the work of our colleagues in credit and risk is has been great there, and the portfolio has really has shown its its resilience and is in a much better position than it has been in in the in the recent past. I've been speaking about the fundamentals of the business, and this is my final slide, and I have before I hand back to Ed. But one of the other key fundamentals is is the diversification and the spread of the lending we do. We think it's important not to be overexposed, in any one sector or area, and so diversification is key to us. And so I wanted to just draw that out again here. You can see here we've got the, the bar charts of the top 10 sectors by the amount we've actually lent. The pie chart is the top 10 sectors we lend to by

25:20 the number of deals. So the the bar chart is probably the more pertinent, but what you can see from that is that there's no one sector over 10% exposure we have. And once you're down to the tenth largest sector, it's well below 2%. And indeed, the the top 10 sectors make up around about 30% of our book. So we have a very, very well spread diversified book, which I think adds to the robustness and the resilience of the book. So from my side of things, as I said, we think it's a solid set of numbers when you look at the p and l,

25:51 but a quite impressive set of numbers when you look at the balance sheet, the fundamentals are right, and and this origination that we've seen over the last three months, including December, really has given us cause for cautious optimism in terms of the own book lending, which is obviously the key strategic arm driving us forward for the medium term.

26:11 And with that, I will hand back to Ed. Thank you. Thanks, James. So just touching on the strategy that James mentioned that we launched in June last year when I took up the full time CEO role. Just to recap on what we're trying to achieve and and how we're trying to do it. And then on the next slide is a bit of progress in terms of the the work and and successes that we've made in the first half of this year. So in terms of the aims, what are we looking to to be? Well, first thing is to become a nationally recognized SME funder, and that's really taken into account that it's only just over twelve months since we rebranded the business, from the collection of businesses that were predominantly acquired to to TIME FINANCE.

27:01 The second one is to more than double the the gross lending book, and that was from a starting point of around 110,000,000 up to 250,000,000 at the end of the the four year plan. The third one was to achieve profits organically in excess of the 2019 pre COVID levels. And then the last one was to significantly strengthen the balance sheet, which again was taking us from a starting point of around 28,500,000 up to 50,000,000 plus in terms of tangible net asset value. How are we going to do that? Well, there was a six pronged attack, if you like, starting at the top of the diagram and working my way around clockwise. The first was very much this message that we've already put across in this presentation and others, which was the focus on core core products, own book lending, secured lending across those three products, asset finance, invoice finance, and and loan finance, either secured through invoices, tangible assets, or property.

28:02 And that is the way forward, we believe, for for the business. The second was the multiproducts opportunity, very much pushing forward what we believe is not unique completely to this business, but we are amongst a smaller pool of businesses that are more unique in terms of having more than one offering and being an independent business, I e, a nonbank business and giving us that flexibility that we can provide to small businesses that really, really value it.

28:34 And and that that is very much taking our products and being able to provide more than one product to an existing customer or a new customer so that we can increase our margins and they will stay with us for a longer period, and, obviously, that we have more attractions to offer our broker market and and our client base. Repositioning the brand and investment in marketing. As I touched on, many people will remember that that we were a collection of different brands. It was quite confusing. And having one brand under TIME FINANCE will enable us to position the business for those core products as as we want to move forward rather than having very different historic views of how we were seen under the different brands, and and that's definitely helped over the last twelve months. I'll I'll come on to the progress that we've made there.

29:25 The fourth strand was investing in further talent, recognizing that we needed to bring in additional sales talents and leadership talents in the right areas, and we've made good good progress there. Bring further liquidity into the business, recognizing that to grow the business quite quickly, we may need additional help from third party resources rather than just our own balance sheets. We've not needed that as yet, for the reasons that James gone through. Our own balance sheet has actually improved, but we do believe that that will come back into the four, in in the more medium term, but that hasn't been a priority over the the the the last six months. And, again, the last strand, which which, again, hasn't been a priority over the last six months, but it it will it will come into play, hopefully. The plan that we've set out is predominantly organic growth, but we are open minded to specific targeted acquisitions.

30:21 They were very much likely be acquisitions that that that complements our existing core products of asset invoice and loans, but the markets haven't really been conducive to acquisitions at this point in time. Hopefully, that will change as we travel through the the plan. So in in terms of progress during the first half year with our strategic plan, the first part of it focused on our core products. Well, what have what have we done? Well, we've seen strong volumes come through in our in our core products as we've said in the last quarter of the calendar year, and we've particularly benefited from the recovery loan scheme volumes that we've seen coming through. The invoice finance division particularly had a couple of record months in October and November, I'm pleased to say, with new business wins and the existing client book getting back up to where we were, starting to get it back up to where we were pre pandemic in terms of the overall lending volumes.

31:22 So that's seen good progress. In terms of the multiproduct solutions, well, we've relaunched and embedded our internal cross selling initiative, which we branded as Excel internally. We did a a recent branch review of that as to what it looked like prior to the pandemic. It it really took a backseat during much of 2020 and early twenty twenty one, but we're now starting to see some good opportunities come through on that. It's still early days. There's still much more we can do, but we do have now a basis to push forward that initiative and that project internally, and I'm positive that that will provide us with some some good opportunities as we travel through the recovery into into this year.

32:10 Secured loans, actually, as of today, we've just relaunched our secured loan proposition into the market, which is doubling the maximum size of deals that we will look at from two fifty to 500,000. That's been spearheaded by Sharon Briden. I'll I'll come on to to her role, shortly. But that's a real positive. And we're looking to launch, an asset based lending offering into the market by the end of our h '2, probably somewhere around March, April time. And that is really off the back of invoice finance being able to offer other things as one facility. So some some stock finance, some plants and machinery finance, and some property finance as well as invoice financing, one integrated offering where you can operate this on one system through one financing facility, and that'll be a big step forward for us as well.

33:04 In terms of repositioning the brand, under TIME FINANCE away from where we were seeing previously with our collection of brands, we've we've really seen a a good improvements in that in terms of the online presence, the feedback that we've had from our brokers and our customers and clients. TIME FINANCE is making much more of a of a a prevalent name for itself in the SME lending market. It's only a year in, so these things don't happen overnight. But I'm I'm really happy with the progress that we've made there. We've repositioned our soft assets offering as well so that we are now doing generally a minimum five k lens much more away from the very, very micro end of the business. And, again, that's more in line with our strategy of being a secured lender.

33:53 And as we've said time and time through this presentation, we focus very much in our core products and our secured lending rather than our brokerage arm, which we do class as now noncore to the future. Very much, a priority over the last six months, and a lot of time has been spent on this through my time and other people's time is investing in further talent, recognizing that there was an opportunity in the market through other lenders going through change and us rebranding the business and having a good story to tell and providing good opportunities for the people to develop their careers is bringing some further talent into the business. And I'm pleased to say that's been a particular success over the first half of the financial year.

34:39 We've recruited a successor to Carol Roberts who, has is now retiring as director of asset finance. And I'm pleased to say that, that that he has joined the business, this week, Steve Nichols, and and that that will provide us with more, I think, direction for the longer term to take the asset finance division forward. Sharon Briden, I mentioned, has been recruited as the the lead of of commercial loans in ABL. She's already made a real impact into the business and taken the loans division forward and developed the ABL offering. Very pleased to have Sharon on board. And we've hired a number of experienced sales staff within the invoice finance division and the asset finance division.

35:27 We've taken on four four people in in asset finance, two broker managers, and two account managers for vendor and and and broker respectively. And we've taken on five people within invoice finance in the sales side, including a a very experienced head of sales in the South, Adrian Payne, who's made a a a real good impact already. So that that that, I'm pleased about the progress we've made there. Bringing further liquidity into the business, well, we haven't brought any new liquidity into the business, but we have secured our existing back to back facility with RBS for the invoice finance division on another three year renewal. And all the wholesale facilities, the block discounting facilities for the asset finance and the loan finance have been renewed and extended under existing or improved terms. So, again, that theme of having the business set up to take advantage of the opportunities is very much what we've been doing over the last six months.

36:28 So just in summary and and and an outlook, I think the resilience and the strength that James has has set out in terms of the numbers has has has really played through despite the various waves of the pandemic. We've had strong focus on the existing book, improving arrears, and and obviously reducing forbearance, and that's managed, helped to manage liquidity very well. We have made some cost reductions to rightsize the business. We've reduced the headcount by around 15%, and that was really acknowledging that we supported our staff and our teams through the pandemic with a view that things would return relatively quickly. That didn't happen through through lockdowns two and three, and we had to make a decision around our cost base, and we've we've done so.

37:17 So we've made those reduction reductions and rightsized the business for what we believe we need moving forward this year. And we have a solid platform now, we believe, to take advantage of the opportunities that will will come our way post COVID as businesses recover and and grow. I think in terms of the outlook, we have our new vision and a clear strategy, and we've made good progress during the first half of the year delivering the strategic plan. We we have an enthusiastic, motivated, and experienced leadership team in place with some new blood that's recently come in through through Steve Nichols and Sharon Briden. We have to acknowledge that the dampening impact of the brokerages has impacted the figures, and we are assessing what to do with the brokerage businesses.

38:08 We are actively looking at those options at the moment. The lending book has shown good signs of growing through the last quarter of the calendar year, and we we believe that that will continue with the focus on our core products and our own book lending. And and the growth in the core lending business reinforces our belief in the strategy that we're we're playing out and that I've just summarized that it is it is the right strategy to to focus on own book secured lending with our multiproduct opportunities and really help opportunity help SMEs with their opportunities that they will see through this year and into next year as they recover and grow post the disruption of the last couple of years. So that brings us to a conclusion of the, of the presentation.

38:59 Obviously, we can now move into any any questions that may have been posted, which James will facilitate. Ed, James, thank you for your presentation today. Ladies and gentlemen, please continue submit your questions using the q and a tab situated in the right hand corner of your screen. But just while I kindly take a few moments to review those questions, I'd like to remind you that a recording of this presentation along with a copy of the slides and the published q and a be accessed via investor dashboard. As you can see, we received a number of questions today and thank you to all investors for submitting their questions. Could I please ask that you read out the question and give a response rate as appropriate to do so? And I'll pick up from you at the end. Thank you. Thanks. Yeah. And thanks, Ed. I'll I'll just read out some of these questions, Ed, and then between us, we'll work out who who best to to answer them if that's okay. So first question from from Martin. Thank you, Martin.

39:50 What return on capital do you expect to earn in in the next few years? Pre pandemic, your return on invested capital were between 1216%. Well, they're currently in the in the low single digits. Eddie, you should I take that one as sort of a numbers one? Yeah. Sure. Well, we we have set out our stall, Martin, that we want to during the life of our medium term strategic strategic plan plan that Ed set out in June, we want to return to and significantly exceed pre pandemic both revenues and and profits. We haven't specified in great detail those exact numbers beyond the next sort of eighteen months or something. But I think we can say, given that that goal, at the end of that period, we will have ROIC back to where they were, if not beyond where they were. I can't go into sort of great levels of exact percentages, but they should be better than they were pre pandemic. But as as I touched on in my section on the numbers, it won't be overnight because growing your own book takes time, and then the the profits from that drop in over over over the medium term as well. So but by the end of the the the plan, we should be we should be there and beyond.

41:04 The the second question from Simon is how fixed is the cost base? How much more revenue can you cope with from the current position to get real gearing to generate higher PBT. Ed, are you okay to to take that one? How much how much extra revenue can we get out of our our current cost base in your mind? Yeah. Sure. Thanks, James. I think from what what I just concluded on on saying with regards to the cost base that we've reduced with the with the headcount reductions, we're we're very confident that we can now push forward with the plan for this year in terms of the top line without increasing the the costs too much. So I I think without getting into any any specific numbers, take it that we're in a good position now to push forward without increasing the the costs at the same rate as we increase income.

41:58 That's the general the general theme. Thanks, Ed. We've then got another question from Martin again. Given the strategic focus on our own book, origination, what origination growth do you expect for the next three to five years? Would you like to take that one, Ed, or or maybe I'm happy No. That's fine. I mean, we we set out the plan to take take the the the lending volume up from around about 110,000,000 up to 250,000,000 over that four year period. There is a a higher growth in years three and four, recognizing that there was more uncertainty in the early part of the plan as we came out of the pandemic, and I think that's that's been the right decision because that's played out this year, which is the first year of the of the four year plan.

42:49 But broadly, it's a it's a doubling of the of the of the lending book, which would see a doubling of the origination to achieve that. So I think in in simple terms, it's not done on a on a on a simple linear formula on a per annum basis for the the four year plan, but it it it and and it is more back ended in the in the last two years than the first two years. But we would start to look we would need to start to achieve 20% broadly, 20% minimum increase in in the originations as we start to come out of the of the of the of the of the pandemic and see a sustainable period of growth rather than just one or two months in isolation, that's the sort of growth that we would need to be achieving on a year on year basis. Great. Thanks, Ed. There's a couple of questions here I think are very similar, so I'll read them both out. And I think as they relate to funding costs, I think they're one for me, Ed. But there's one from Martin again.

43:46 How does a potential rise in inflation impact the business, in particular, the lending and borrowing rates? And there's also one from Paul saying talk about the relationship between funding costs and lending income as rates rise. So I think they're they're vaguely similar. So if I take that one, just those two, sorry. Just to explain, our funding is on on deals that have we sorry. Our our interest costs on funding we have taken out is fixed from this point we take it out. So theoretically and and the same on the deals we've lent. If we lend someone an asset or a loan at x percent and and rates change, it's it's fixed, though, once the deal's done. So for businesses for business that is already written and it's in somewhere in that three to five year period of the length of the lease of the loan, these impacts, interest rate rights, etcetera rises, etcetera, don't impact us.

44:42 The issue will be on new business. And walking that through, you'd probably accept ex expect at some stage our funders to say, right, new funding. As I say, the existing funding's fixed, but new funding you draw down will be at a slightly higher rates to reflect the the interest charges. All other things being equal and what we've done in the past is we would then pass those those interest rises on to our customers on new business customers. We'd have a new rate card ourselves. So theoretically, our net interest margin would not be impacted because deals already done are fixed, and future deals you theoretically could pass on any increase to that we get to the end customer. Clearly, there's nuances in their competition and and and that type of thing in the market, so you couldn't say a 100%, but that would be the the general assumption of how it will work.

45:35 Okay. Moving on. We've got a question here from Darren. Thanks, Darren. We have seen other financial verticals heavily disrupted by young tech companies. Could this happen in your products, and how do you mitigate it against it? Is digital part of your strategy we will pay more attention to? Ed, probably probably one for you if that's alright. Yes. Well, Darren, I could spend probably the rest of the afternoon talking about this subject as I'm sure many other people could. It's been a very topical subject over the last ten years or so since the the the financial crash as many of the fintech companies have have arisen. And I'm still probably counting on one hand how many of them are actually making any money.

46:21 So there has been disruption clearly to the sector, but there's also been second wave of disruption to the actual fintechs themselves because none of them can actually make much money. We are not a fintech business. We we acknowledge that technology is important to customers and making things easy for them. We're all consumers as well who are familiar with how markets have changed in terms of how we utilize technology. So we absolutely willing are and will include it in our future plans, but we are not a a young tech company and we never will be. The challenge that we have, I think, is to really focus on keeping up with the markets rather than getting left behind.

47:07 We're not gonna be at the forefront of technology nor do we want to be quite frankly. We're a we're a flexible financier to small businesses who need service from people. We need to acknowledge, however, that that those same people need to have ease of ease of use. And with that comes some investment in technology, and that's really where we are. Our our digital investment is about IT. It it it's about things that we're all familiar with now in terms of online quoting systems, being able to, access your account online and through apps, and utilizing that personal relationship in tandem with efficient IT. So that's where we see our our role in in that whole disruption space of fintech, not as a fintech provider and certainly not as a a new wave player in that market.

48:02 Thanks, Ed. Got another question here from Paul to and it he's asking, does the period reduction in arrears translate into write offs and impact short term profit? That's probably one for me. Ed, if that's alright. Yeah. So in in simple terms, Paul, no is is the answer. We have as as we showed on those graphs, we've seen a significant reduction in arrears over the last, eighteen month well, year now since the height of the pandemic. Those haven't certainly by any stretch been all write offs. The vast majority of that that reduction in arrears is getting people back on track as they as the as The UK SME businesses have proved remarkably resilient actually, and they've begun paying again and caught up with what they were behind during the pandemic. So so there have been write offs. Don't get me wrong.

48:56 I think you saw on one of the slides, there was about 2% of net write offs sorry. 2%, yeah, net net bad debt write offs, but that's very much in line with historic trends. The the the vast majority of the reduction in arrears is due to the sterling effort efforts of our our colleagues in credit who have got the vast majority of those those deals that were a bit behind back on track and and working. So there there hasn't been a real significant impact on on on short term profit. No. How does the continuing is it Paul again? High debt, bad debt provision impact profits? Again, probably one one for me, Ed, if that's alright. But that that again, it hasn't really impacted profits over the last year or so. I don't know how long you've been following us, Paul, or whatever. But when the pandemic hit, we we increased our bad debt provision.

49:54 We roughly doubled it a couple of million extra into the bad debt provision. That was a hit. That was a a big one off hit to future proof us. We we felt to the best of our knowledge at the time on on any potential write off. So that was a hit. Since then, as I said, it's been relatively business as usual. There's been the odd write off. There's been the odd movement in provision up or down, but there hasn't been, there isn't an ongoing impact negatively on profits because of maintaining our bad debt provision at roughly the level it's it's been at now for the past eighteen months or so. Paul a different Paul. Paul g this time, not Paul l, has asked, can you describe your pathway to a dividend payment?

50:41 Ed, I don't I don't know if you wanna take that one. Yeah. Again, this has been a topic of debate, obviously, across the the board historically and and more latterly. And we believe that we still need to utilize our our own cash to grow the business. So whilst we've improved our cash resources on our on our balance sheet and our overall liquidity, it's not yet at a level that we've got, you know, lots of excess cash that we believe we can start to repay shareholders in terms of dividends. What we do, though, want to do is get to a point where we can reactivate the dividend. There was obviously one and a policy previously in place. I think once we see the the the the sustainable growth coming through, we'll then start to really have an idea of of how much more cash that we need to bring into the business to support that high level of growth.

51:38 And at that point, we'll then start to, have a better understanding of of when a dividend can can can start to be be paid. But at the moment, the focus is very much on making sure that we use the money that's available to us to deliver this strategic plan, and and increase the share price through growth, rather than rather than provide this as an income stock. That's how we that's how we see things. Thanks, Ed. Paul l asks, the brokerages provide immediate cash flow. Can you compensate from other operational sources? That that's probably one for me. Ed, you you're right, Paul. Absolutely. The brokerages did pre pandemic provide immediate cash flow as we saw on one of the tables.

52:24 It was roughly a million pounds a year profit and and because of the nature of the brokerages, it's roughly there's very little time lag. There's not much accruals or anything there. So it's roughly a million pounds cash in in that year, and it was a it was a it was a nice, additional cash flow into the business. Clearly, they're not there at the moment. They may well come back, but at the moment, they're not there. But we have used, as we've said, the the last eighteen months to really improve our cash. The increasing arrears sorry. The the decreasing arrears that we've spoken on is actually a source of cash. People catch up with the money they owe or they settle and move on elsewhere, and you get all your capital back and and interest. So that really has bolstered our cash position as we've touched on. It's it's nearly £10,000,000, and that sets us up for the the short to medium term in terms of the the cash we need to grow the own book.

53:14 And as Ed touched on on one of the six point plans, if if and when we do need additional cash to grow even faster, we we're confident with with various debt partners we've been seeking speaking to and that type of thing that we we may well be able to get additional operational debt if and when required there. So at the at the moment, yes, it has it has it is slightly lower cash than pre pandemic from the brokerages, but it's it's certainly not a material figure for ourselves. What have we got next? Sorry. The Colin here says the top line figures of the results are no more than previous inflation. Is this what you expected given the emphasis you placed on increasing the sales team? You offered the view at the last meeting that it would take three months to see results.

54:06 Is it the effect of the new sales positions that you see raising the own book lending? Ed, is that is that one you're happy to take? Yep. Yes. It it absolutely, in part, it is. The sales guys that have come in, there's been a tangible improvement, particularly in the invoice finance division since we made that senior appointment. Of course, they haven't all come in at the same time. Some of them have come in later in the in the in the the quarter, so in the calendar year. And we've also of those five people I've said recruited, one only started at the start of January, one one only starts at the start of February. So there's a bit of a lag there. It's not as simple as saying that they all came in at the same time, and they're all the reasons why we've seen an improvement in the the last quarter of the financial year. Part of that was undoubtedly the fact that we had finally, we had three months of of sustainable activity before, of course, we started to see the the changes at the, yeah, the early part, middle of December when the government guidelines came out for people to go and work from home again.

55:18 Now we're yet to see whether that will impact on January's results. Let's be honest. I don't think it will it will do any business much good other than those that are favorable for people working at home. But, thankfully, we've we've had the green light now that people can come back to work, you know, from from next week. And and that's really the impact it has on our clients where where where they just get disruption from and they lose a bit of momentum. So we did we did definitely see an improvement with the sales resource, but part of it was also market driven. And we've still got a bit of a lag from those people coming coming in, getting up to speed, and then delivering the the results, which we'll see in the second half of the year. Thanks, Ed.

56:03 Conscious of time, and there's a few more questions there, so we're probably not gonna be able to get through them all. Apologies. But we'll we'll we'll get we've got a couple of minutes to go, so we'll do the best we can. One here from Toby. If you're considering options for noncore brokerages, will overall origination volume potentially drop. Should I take that one, Ed, or would you like to I'm happy to to take that. I think the key point with that is is actually that's a really good question because where where we've historically reported volume of origination, that has absolutely included the the the the total volume. And what what what is important to well, for us to get out there for people to understand is what's the actual income attached to that specific origination in terms of own book versus brokerage.

56:57 So the simple answer to the question is, will overall origination volume potentially drop? The answer is is yes. But the there's a big book there, but but what will be the impact to the income and the profitability? It it would be it would be lower because, of course, we get the initial hit from a positive hit to the income when you get brokerage income in, but there's not a trail of income while you're building your balance sheets. And there's not the other fees that you can get through lending as well. So it's important that we obviously, you know, allow people to understand what the impact of that that that hit is if if it does happen in terms of income versus origination, and and that's the point to make there.

57:45 Thanks, Ed. I I think we've got one minute left. So I'll I'll fire one more question at you because I think it's one for you, if that's alright, before we we wrap up. But it it's it's from Colin, and he says, under dividends, you say invest in business. Under your six point plan, you say make strategic may make strategic acquisitions. It worries me. A lot of time and shareholder value was lost under integration of copious previous acquisitions. Ed, could you elaborate a little bit more on the the acquisition point? Yeah. Well, I'm I'm again, I'm I'm I'm glad that that Collins asked that question because it's definitely been a, you know, a big theme of the past in terms of the acquisitions. And I I've I've made the comments in in the the previous presentations that we've done that not all those acquisitions worked out worked out well.

58:36 Some could say that, well, that's acquisitions. They they don't all work out well, and some could say, well, you know, you got you got them wrong. That debate is probably for another another time. The point that I would like to make is that Colin's making some some concern or or or maybe setting out some some concerns about acquisitions. I would stress that we are not looking to go into acquisitions that aren't core to what we already do. Any acquisitions that we will consider would be along the lines of bolt ons to invoice assets or or loans, and they would be for good good strategic reason and good value. I think, really, in hindsight, we entered too many markets too quickly, and there wasn't necessarily some some some strategic rationale to one or two of the acquisitions that were made, certainly on the brokerages.

59:28 That won't be the case moving forward. So that's that's the point to really get across there. If we do look at any acquisitions, they'll be they'll be for good reason and aligned with our with our strategic plan. Thanks, Ed. I think that's that's probably it's 02:00, isn't it? That's perfect. Thank you for that. I think you've addressed all those questions you can from investors. And, of course, the company will review all questions submitted today. Before redirecting investors to provide you with their feedback, which I know is particularly important to the company, can I just ask you for a few closing comments? Yeah. I would say that the closing comment really is that for a a small agile business that's looking to support SMEs, TIME FINANCE is a is a is a great alternative to the the bigger banks.

1:00:16 SMEs will always need cash. They demonstrated that through the pandemic where they needed the government support, but that's now coming to an end. And and and they will always need cash for working capital and to expand. We we if we recognize that, then really it's all about us being a credible alternative to our our competitors and our peers, and and I very much believe that we are for the reasons that we've we've we've set out. So, you know, hopefully, with sustainable economic activity moving forward over this year and into next year, we're we're best placed to to capitalize on that. Ed, James, thank you for updating investors today. Could I please ask investors not to close this session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations?

1:01:07 It's going to take a few moments to complete, and it'll be and I'm sure it'll be greatly valued by the company. On behalf of the management team of TIME FINANCE PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.