Project Zoo presentation April 2017 1 Disclaimer This - - PowerPoint PPT Presentation

Project “Zoo” presentation

April 2017

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This presentation ("Presentation") has been prepared by 1pm plc (the "Company") and is confidential and is only directed at persons who fall within the exemptions contained in Articles 19 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (such as persons who are authorised or exempt persons within the meaning of the Financial Services and Markets Act 2000 and certain other investment professionals, high net worth companies, unincorporated associations or partnerships and the trustees of high value trusts) and persons who are otherwise permitted by law to receive it. This Presentation is directed only at persons having professional experience in matters relating to investments and any investment or investment activity to which this Presentation relates is only available to such persons. Persons of any other description, including those who do not have professional experience in matters relating to investments, should not rely on this Presentation or act upon its contents. This Presentation does not constitute or form part of any offer for sale or subscription or any solicitation for any offer to buy or subscribe for any securities nor shall it or any part of it form the basis of or be relied upon in connection with any contract or commitment whatsoever. Any decision in connection with any proposed purchase of shares in the Company must be made solely on the basis of the information contained in the admission document to be published by the Company. While all reasonable care has been taken to ensure that the facts stated in this Presentation are accurate and that any forecasts, opinions and expectations contained herein are fair and reasonable, this Presentation has not been verified and no reliance whatsoever should be placed on them. Accordingly, no representation or warranty express or implied is made to the fairness, accuracy, completeness or correctness of this Presentation or the opinions contained herein and each recipient of this Presentation must make its own investigation and assessment of the matters contained herein. In particular, but without prejudice to the generality of the foregoing, no representation or warranty is given, and no responsibility or liability is accepted, as to the achievement or reasonableness of any future projections or the assumptions underlying them, or any forecasts, estimates, or statements as to prospects contained or referred to in this Presentation. Save in the case of fraud, no responsibility or liability whatsoever is accepted by any person for any loss howsoever arising from any use of, or in connection with, this Presentation or its contents or otherwise arising in connection therewith. In issuing this Presentation, the Company does not undertake any obligation to update or to correct any inaccuracies which may become apparent in this Presentation. This Presentation is being supplied to you for your own information and may not be distributed, published, reproduced or otherwise made available to any other person, in whole or in part, for any purposes whatsoever. In particular, this Presentation should not be distributed to or otherwise made available to persons with addresses in Canada, Australia, Japan, the Republic of Ireland, South Africa or the United States, its territories or possessions or in any other country outside the United Kingdom where such distribution or availability may lead to a breach of any law or regulatory requirements.

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Disclaimer

Ed Rimmer, MD designate, Commercial Finance Division

• Currently engaged by 1pm in a consulting capacity with view to full-time role and plc directorship (terms agreed)
• 17 years with leading independent player, Bibby Financial Services, including 5 years as UK CEO
• Extensive experience at growing businesses, both organically and through acquisitions
• Whilst UK CEO of Bibby, increased new business and market share by 50% and doubled profitability
• Will lead 1pm’s drive to consolidate niche, high-quality, under-exploited businesses in Invoice Finance

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Presentation team

Ian Smith, CEO

• 15 months in full-time CEO role
• Previous 2 years in Non-exec Chairman role
• Instigated the current strategic plan, leading on the previous Placing and recent acquisitions
• 23 years in listed and privately-owned, PE/VC - backed entities, leading strategic transformations

and in attendance, James Roberts, CFO; joining 2 May 2017

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£12m - £15m fundraising

Sound track record in ASSET FINANCE Successful extension to BUSINESS LOANS Now adding INVOICE FINANCE

Take advantage of a market

• pportunity to consolidate niche,

small-ticket invoice finance providers. First target – sign upon Placing announcement Second target in diligence. Will increase group returns on net assets

Strategic objective to introduce “adjacent” products to provide a full suite of business finance choices for SMEs

500 1000 1500 2000 2500 3000 3500 4000 2011 2012 2013 2014 2015 2016 2016 Group 2000 4000 6000 8000 10000 12000 14000

PBT £k Revenue £k

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Financial performance – 31 May y/e

• Top line CAGR 33% over 5 years to 2016
• 10 x growth in PBT from 2011 to 2016

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The SME finance market

• 5.5m SMEs in the UK – employing 15.6m

people (BEIS Business Population Estimates 2016)

• Circa 70% are current or potential borrowers

(British Business Bank Business Finance Survey: SMEs 2016)

• Over 50% of these still go to their main bank

when first identifying a financing need (British

Business Bank Business Finance Survey: SMEs 2016)

• Their challenge is immediate day-to-day

cash flow

• High-street banks no longer structured to

meet this immediate need

• In 2016 only 6% actually applied to their

bank for a new loan or overdraft (BDRC

Continental (2016) SME Finance Monitor)

• So, where do SME borrowers go?

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Alternative Finance

• As a specialist provider, we have:
• greater flexibility
• faster service
• more personal approach
• 13

days from proposal to pay-out (HSBs up to 60 days)

• Provide or arrange commercial leases,

loans and vehicle finance

• Business-critical equipment for SMEs
• Finance from £1,000 to £250,000; 3 to 60

months

• Across a broad range of sectors
• 22% of SMEs still use credit cards for

finance (British Business Bank Business Finance

Survey: SMEs 2016)

• at a blended interest rate of circa 17%

we are a cost-competitive alternative

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Deals

“1pm had agreed and paid out a £42,000 loan which allowed us to begin repair work faster than planned and reopen our gym before substantial losses to our memberships.”

Mark – Space Premier Fitness

“Within two weeks 1pm had secured, agreed and paid out over £50,000 to allow us fund the equipment we needed for our newest venture.”

John Ennis/Matt Farrell – Graffiti Group

“As I’m not a homeowner it was hard to find funding for my new start business, 1pm managed to source £20,000. Our gym has been

• pen 6 weeks and already has over

250 members.”

Chris Kirkby – Kirkby Gyms

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Why we succeed

• Underwriting decision within 4 hours
• Every customer circumstance is a ‘story’

requiring a ‘pair of eyes’ on the deal and potentially a site visit – we are

• perationally set up to do this
• Strict underwriting and credit control –

aim to be “brilliant at the basics”

• PGs on all advances
• Write-off rate less than 1% of portfolio
• Typically dealing with owner-managers for

whom their business is their life – often a lower credit risk than may be apparent from their trading results

• Receivables now total c. £75m.
• £15m of unearned income
• Carrying an impairment provision of c.

£1m (1.67% of capital outstanding)

• Cautious, prudent approach to growth

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Breadth of portfolio

23% 11% 11% 9% 5% 5% 5% 4% 28% Restaurants / Cafes Beauty and Hairdressing Garage Retail Health and Fitness Pubs and Bars Takeaway Scaffolds Other 13% 12% 11% 9% 9% 8% 7% 5% 27% Telephone systems Survey equipment Garage Data collection units Catering Energy management Laundry Office Other 8.62% 7.06% 4.96% 3.70% 3.29% 2.9% 2.48% 2.38% 2.33% 2.09% 2.06% 2.03%

Freight transport by road Remediation activities and

• ther waste management

services Renting and leasing of construction and civil engineering machinery and equipment Other transportation support activities Demolition Specialised construction activities (other than scaffold erection) n.e.c.

Private companies Quantum Finance (Investec); Armada Leasing; Kingsway; GAM; ...multiple small brokers with their own book

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Competition

Banks 9 consecutive quarters

• f positive net bank

lending to SMEs, but no longer structured to support smaller businesses Challenger Banks Although lessors themselves, they do not

• perate in the smaller

end of the market and instead lend to us to lend-on – 11.5% NIM Alternative finance platforms P2P lending up 30% in 2016 (AltFi Data 2016). The FinTech trend needs to be deployed better in lending to business Quoted companies Private and Commercial Finance Group (PCFG), although the business lending part of PCFG is mostly vehicles Three divisions: Asset Finance (long-established); Loans (recently formed) and now Commercial Finance. Theoretically widespread, but in practice there are few businesses of scale in small-ticket lending. Banks Challenger Banks Alternative finance platforms Quoted companies Private companies Flexibility X X Speed of service X Personal approach X X X X Broad range of financial products X X

   



         

Investment in resources 2014 Acquisition: Academy 2015 Adjacent products iLoans 2017 ‘Fintech’ platform Acquisition: Bradgate 2016 Bell Finance 2017 Further M&A?

Market Cap May 2015 £25m Market Cap target £100m

  

Goal

• £100m market cap

Objectives

• Building scale through a model of distributed separate entities
• Having a multi-channel, multi-product offering to SMEs
• Maintaining risk mitigation through funding and broking
• Strict underwriting and credit control policies
• Being appropriately geared with cost-effective funding
• Being digitally capable (e.g. Fintech)

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Strategic growth plan

Currently £33m

The Invoice Finance Process

Client sells product / service

• n credit terms

Invoice raised and sent electronically to Lender Lender performs risk checks i.e. verify invoice / credit check customers Lender advances between 75-90%

• f the value of

invoices Customers pay the Lender directly As Lender collects customer payments, balance paid to client less fees Further sales and invoices generated and continues through the cycle

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£16.0bn £17.3bn £18.9bn £19.3bn £20.3bn £22.2bn £10 £12 £14 £16 £18 £20 £22 £24 2011 2012 2013 2014 2015 2016

Billions

The UK Invoice Finance market

• 10,000

20,000 30,000 40,000 50,000 60,000 70,000 80,000 Q1 09 Q3 Q1 10 Q3 Q1 11 Q3 Q1 12 Q3 Q1 13 Q3 Q1 14 Q3 Q1 15 Q3 Q1 16 £m Domestic factoring Domestic Invoice Discounting Export factoring Export Invoice Discounting Non recourse

• Debtors financed per quarter
• Advances

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Onepm CF

2017 Competitive landscape

Risk Quality Small-ticket Mid-market Full service Asset Based Lending

Ashley I G F Calverton Gener8 Factor 21 Bibby Group Aldermore Close Shawbrook RBS IF Clydesdale HSBC IF Santander Barclays LTSB CFS ABN Amro Leumi ABL Positive Ultimate Regency Amicus Pulse Secure Trust Metro Bank Skipton 15 Hitachi

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First target – Gener8 Finance

The business and reasons to acquire:

• Good quality client portfolio; 145 clients and 4.5 years

average client life

• Very low levels of historic bad debts
• Excellent reputation for client service
• 2016 Revenue £2.6m; PBT £0.9m (34%); Lending £12m on

£30m receivables

• Strong relationship with debt provider (Lloyds) who have

funded the business since start up in 2008

• Robust back office processes and procedures – 15 staff
• Oxford based and predominately targets clients south of

Birmingham

• Strong relationship between exiting CEO and Ed Rimmer
• Excellent platform from which to implement a controlled

expansion strategy

• Significant cross selling opportunities

Consideration:

• £5.25m in cash on Completion (from Placing

proceeds)

• Represents circa 6.5x normalised current PBT.

Note: Gener8’s exiting CEO has indicated he will reinvest circa £150k in the proposed placing.

Status of the acquisition:

• Due Diligence completed with no “Red Flags”
• Meeting held with Lloyds who are supportive of

change in control and future plans

• 6 month handover agreed with exiting CEO
• Legal documentation drafted
• Target date for signing SPA (exchange of contracts)

and announcement: 10th May 2017.

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Second target & acquisition status

The business and reasons to acquire:

• Steady business, conservatively run with clear
• pportunities for growth
• Well respected management team, well known to Ed

Rimmer

• Management wish to continue in their roles and have

strong buy-in to being part of the 1pm group

• Excellent reputation for client service
• Low levels of historic bad debt
• 2016 Revenue £4.1m; PBT £1.1m (27%). Lending £23m on

£46m receivables

• Very good relationship with debt provider (RBS), great
• pportunity for more attractive terms to be negotiated
• Based in Manchester with sub office in Birmingham (total

24 staff), therefore providing excellent complementary regional fit with Gener8 Finance.

Status of the acquisition:

• Letter of Intent signed, with exclusivity period
• Internal Due Diligence conducted with no “Red Flags”
• External Due Diligence in progress
• Meeting to be held with debt provider
• Proposed timing: Completion late May/early June 2017

Proposed consideration:

• £4.5m cash on Completion (from Placing proceeds)
• £2.0m deferred cash over 3 years
• £2.5m share-based earn-out over 3 years
• £9.0m total. Circa 6x current year PBT excluding earn-out

Short Term

• Complete organised handover with exiting

CEO

• Focus on solidifying key client relationships
• Appoint Sales Director and build internal

sales team to boost new business

• Invest in marketing
• Complete second acquisition

Longer Term

• Drive cross selling opportunities within the 1pm

group, including improved use of technology

• Deliver economies of scale from enlarged
• peration where possible
• Pursue other suitable acquisition opportunities
• Development of other commercial finance

products

• Position Onepm Commercial Finance as a

challenger to mid-market players

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Organic growth plan post-acquisitions

On completion of acquisitions, Commercial Finance Division will be comparable in size to the Asset Finance and Loans Divisions with circa £75m of receivables and yielding 20%+ on funds advanced.

The strategic proposition:

• 1pm to be a consolidator of niche, high-quality, well-run, small-ticket invoice discounting and factoring businesses – but

which are under-exploited in terms of growth potential;

• 1pm to be a provider of a range of relevant finance solutions to the SME sector;
• Increase shareholder returns, targeting 15%+ return on net assets in the short-term

Transaction outline:

• £12 - £15m fundraise – a Placing and £1m Open Offer
• To finance £5.25m of cash consideration for the acquisition of Gener8
• To finance the £4.5m cash element of the proposed consideration for the second target
• To provide funds for initial post-acquisition growth – industry norm is 5:1 leverage with bank facilities – high ROE – 30%+
• To meet transaction expenses

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Proposed transaction

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Summary

• The 1pm group has a clear strategic growth plan and is successfully implementing it;
• There is a clear and present opportunity now to introduce complementary adjacent SME

lending products such as Invoice Discounting and Factoring;

• The plan is compelling – a consolidator of independent, high-quality, well-run, but under-

exploited players in the small-ticket segment of the market – a space we know well;

• Seeking shareholder and new investor support to raise £12 - £15m to acquire identified

target businesses;

• The acquisitions will be earnings-enhancing and will increase shareholder returns;
• This will position 1pm as a balanced, established, risk-mitigated finance provider to a

broad range of SMEs;

• Board is optimistic and confident of further organic growth.

Appendices

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Example once equity is being utilised: Equity £2m 5:1 leverage with bank facilities £10m Total to lend £12m Contribution based on historic margins £600k Return on Equity 30%

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Initial post-acquisition growth utilisation

Client numbers

• 5,000

10,000 15,000 20,000 25,000 Q1 09 Q3 Q1 10 Q3 Q1 11 Q3 Q1 12 Q3 Q1 13 Q3 Q1 14 Q3 Q1 15 Q3 Q1 16 Domestic Factoring Domestic Invoice Discounting Export ABL facilities £0 - £500k £500k - £1m £1m- £5m £5m - £10m £10m - £50m £50m+

• 2,000

4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 Q1 09 Q3 Q1 10 Q3 Q1 11 Q3 Q1 12 Q3 Q1 13 Q3 Q1 14 Q3 Q1 15 Q3 Q1 16

• driven by £0 - £500k and £1m - £5m segments
• driven by domestic factoring and invoice discounting

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Onepm market positioning

Equality: Operate in ‘partnership’ with customer to meet their needs Authority: Dictate the way the product and service works

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Competitor Performance – client numbers

Company 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

CLIENT NUMBERS 2015 OVER 2014 +/- % CHANGE, 2015 OVER 2014 MARKET SHARE 2015 %

1 RBSIF 7436 10654 10529 9779 9906 8745 9792 8950 9945 9967 9934

• 33

0% 20.10% 2 Lloyds CF 8115 8467 9604 9837 9974 9539 9656 10059 10299 9611 9299

• 1312
• 14%

18.90% 3 HSBC 6320 6263 6392 6159 5699 5714 6045 6382 6749 7428 7649 220 3% 17.40% 4 Bibby Financial Services 2737 2980 3160 3385 3530 3790 4008 4227 2877 3755 3969 214 6% 9% 5 Barclays 4815 5061 5117 4967 3723 3297 3235 3149 3003 2999 2912

• 77
• 3%

6.40% 6 Close 1016 1087 1097 1025 999 1079 1029 1017 1026 1075 1105 30 3% 2.50% 7 Aldermore 677 741 813 819 729 892 1009 1114 1196 1194 1096

• 108
• 9%

2.50% 8 ABN AMRO 768 778 837 998 922 964 979 998 878 857 795

• 62
• 7%

1.80% 9 Hitachi Capital 378 377 360 366 433 530 647 641

• 6
• 1%

1.50% 10 Ultimate 223 222 299 311 279 275 308 400 583 193 46% 1.30% 11 Skipton Business Finance 205 246 274 312 358 409 492 553 61 12% 1.30% 12 BNP Parisbas (formerly Fortis) 116 492 590 361 313 369 404 467 532 539 7 1% 1.20% 13 Santander (Liquidity) 104 125 129 117 127 212 276 403 459 56 14% 1% 14 Factor 21 114 138 154 162 170 179 221 284 340 56 20% 0.90% 15 Ashley 204 245 265 256 235 260 292 284 311 27 10% 0.70% 16 IGF 521 566 515 405 414 399 392 223 221 223 231 8 4% 0.50% 17 Calverton 117 103 123 151 165 173 202 226 24 12% 0.50% 18 Shawbrook (Formerly Centric) 220 201 194 204 214 229 217 224 7 3% 0.50% 19 Leumi ABL 51 80 103 114 130 140 153 177 199 199 0% 0.50% 20 Positive 75 105 117 127 151 154 182 190 8 4% 0.40% 25

Non Execs: John Newman (Chair), Julian Telling, Ron Russell James Roberts CFO Mike Nolan MD Asset Finance Ed Rimmer MD Commercial Finance

Statutory Board Operating Board Junior Board

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Management

GM Onepm GM Loans GM Bradgate GM Academy Ian Smith CEO Group HR Academy Vehicles Compliance Bradgate Group FC iLoans Projects tba: GM Invoice Finance tba: Gener8

Funding Structure

Bank facility Block lines £62m £1m Over- draft SLN £7.5m Equity Placing Back-2- back Onepm Treasury Ltd 1pm (UK) Ltd t/a Onepm Finance Academy Leasing Ltd Bradgate Business Finance Ltd (including Bell Finance) 1pm plc Intelligent Loans Onepm Commercial Finance Ltd First charge First charge First charge Second charge First charge Notes: In addition to First and Second charges, security also taken by funders through assignment of underlying lease, loan and invoice finance contracts Cross guarantees including 1pm plc

Asset Finance Invoice Finance Loan Finance

First charge

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Current funding

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1pm plc ownership – top 10 holders

Now LombardOdier

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H1 2017 Origination and P&L

• Approx 50% of lease business originated by Academy and

Bradgate is ‘broked-on’ for commission (24% as a Group). Vehicles all broked-on; no funding risk taken

• Pro-rata lease figures reflect a competitive market over past 12

months and a policy decision to not relax credit criteria

• Loans figures reflect the level of designated funding for loans and

management of the proportion of loans to leases in accordance with our business model

H1: 2016 H2: 2016 H1:2017 LEASES £m: Onepm 5.5 5.8 5.0 Academy 4.4 8.5 10.8 Bradgate 2.2 6.4 9.9 16.5 22.2 LOANS £m: Onepm 6.1 4.0 4.4 VEHICLES £m: Academy 4.0 6.9 9.8 20.0 27.4 36.4 37% 33% ACTUAL H1: 2016 H2: 2016 H1: 2017 REVENUE £m: Onepm 3.79 4.21 4.23 Academy 1.46 2.85 3.14 Bradgate 0.24 0.62 5.25 7.30 7.99 PBT £m: Onepm 1.26 0.94 1.06 Academy 0.50 1.00 0.96 Bradgate 0.02 0.03 1.76 1.96 2.05 Exceptional items £m

• 0.10
• 0.27

PBT £m: 1.66 1.69 2.05 Basic earnings per share (p): 2.91 2.96 3.08 ACTUAL

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H1 2017 KPIs & Funding

• Funding is in the form of Block Discount facilities from 12 banks, plus HNW loans in the form
• f a £7.5m Secured Loan Note and (in Onepm’s case) 7 individuals and 1 corporate lender
• Block Discount lenders include: Siemens; Lombard; Investec; Aldermore; Hitachi; Close;

Hampshire Trust; Shawbrook; Conister

H1: 2016 H2: 2016 H1: 2017 Gross margin %: Onepm 57.8 53.4 53.7 Academy 82.4 79.3 76.5 Bradgate 70.8 63.4 Blended 64.6 64.1 63.4 Net Interest Margin %: Blended average price 17.2 16.0 16.7 Blended cost of funds

5.7 5.2 5.2

Net Interest Margin: 11.5 10.8 11.5 Block funding: Facilities £m 42.8 62.2 62.0 Utililised £m 29.3 37.6 43.8 Utilised % 68.5% 60.5% 70.6% Headroom £m 13.5 24.6 18.2 ACTUAL