Results presentation year ended 31 May 2018 September 2018 1 - - PowerPoint PPT Presentation

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Results presentation year ended 31 May 2018 September 2018 1 - - PowerPoint PPT Presentation

Results presentation year ended 31 May 2018 September 2018 1 Disclaimer This presentation ("Presentation") has been prepared by 1pm plc (the "Company") and is confidential and is only directed at persons who fall within the


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1

Results presentation

year ended 31 May 2018

September 2018

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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

  • r 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

  • r 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

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  • 1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

  • 5,000

10,000 15,000 20,000 25,000 30,000 35,000 2013 2014 2015 2016 2017 2018

Track Record

One pm Academy Bradgate iloans Gener8 Positive CF2U PBT £k

✓ 7 successful acquisitions since 2015 delivering to plan ✓ 70% 4-year CAGR in profits ✓ 31% organic growth in FY18 ✓ 24% increase in EPS ✓ Substantial increase in dividend with a progressive policy ✓ Good visibility of income for FY19 ✓ A strong start to FY19 with growth meeting management’s targets

Track record of delivery

Organic growth in all businesses as well as acquisitions

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Income £000 PBT £000

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SLIDE 4

Who we are

A group based on core values of being “Fair, Flexible, Trusted, Personal”

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  • 1pm is a non-bank, alternative finance provider
  • We operate a hybrid model; flexibility to either fund on own balance sheet, or to

broke-on to other lenders – hedge against market cycles

  • Own balance sheet is purely lending to UK SMEs; we broke-on business lending
  • utside our credit criteria and all consumer finance
  • Multi-product - tailored solutions from the full range of finance products SMEs require
  • Cautious underwriting (net write-offs of 1.2% of net portfolio)
  • Conservative provisioning (bad debt provision of 1.5% of the net portfolio)
  • Robust quality of earnings as well as strong growth
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Asset Finance and Vehicles Broking Asset secured and PG-backed Loans Commercial (i.e. invoice) Finance

Three operating divisions

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180 employees, 7 sites, dealing with circa 20,000 borrowers

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Deal examples

Pizza house - Edinburgh Edge 3240 Gas base oven & catering equipment £20,994 over 36 months at 15.2% Proprietor PG taken Own book Repeat customer

  • Midlands

JCB Loadall for aggregates recycling £34k HP over 60 months at 16.0% yield 65% LTV. Own book Director PG taken Systems for Assistive Learning Disclosed receivables finance £700,000 facility for 12 months 2.95% over base + fees of 0.5% of sales (£28k p.a.). Own book

  • Mr. S.

Second charge loan for home improvements £60,000 over 20 years at 4.58% Total commission and fees £6.2k Broked to Optimum Credit

  • Mr. B.

Used car loan £6,427 over 60 months 14.65% APR £570 commission Broked to Motonovo Scottish Premier Football Club £292k for turf lights for pitch maintenance 48 months at 14%. Own book Broked on a repeat order for commercial laundry equipment.

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Core competence - underwriting

Rigid criteria – robust processes – risk/reward pricing

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  • Spread is fundamental in SME lending and creates a natural hedge:
  • Largest sector by value only 5% of portfolio and by no. of deals only 6%
  • Multiple SIC codes – top 10 sectors account for only 1/3rd of the portfolio
  • Largest lease c. £300k. Average deal size £15k. Largest IF facility c. £1.0m. Average £150k.
  • LTV advance on hard assets, typically 60-70%; on IF facilities, typically 55% of sales ledger
  • Security is paramount and timely follow-up essential:
  • Personal guarantees from the directors/proprietors of each SME; all soft asset leases and all loans
  • Assiduous follow-up on arrears and impairments, turning impaired deals into Charging Orders
  • Strong track-record in collections; 75% of impaired value recovered over the past 10 years
  • Margin is risk-priced to facilitate robust growth:
  • Policy decision not to relax price or credit criteria to chase aggressive top-line growth

…all leads to high quality of earnings

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Banks

HSBs lend to SMEs, but no longer structured to support smaller businesses

Banks Challenger Banks Alternative finance platforms Quoted companies Private companies Flexibility

X X

Speed of service

X

Personal approach

X X X

Range of products

X X X

✓ ✓ ✓ ✓

✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Competition

Fragmented sector - few at scale in small-ticket lending

Challenger Banks

Also lessors, but do not

  • perate in the smaller

end of the market. Lend to us wholesale.

Alternative finance platforms

Growing sector, but comparatively small (rate of growth slowing)

Quoted companies

Tend to be single product focused, or banks e.g. PCF, Orchard

Private companies

Quantum Finance (Investec) and multiple regional players

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Financial Highlights

Strong performance. Positive trends across all key metrics

  • Total deal origination
  • Revenue
  • Profit before tax
  • Net assets
  • Earnings per share
  • Blended cost of borrowing
  • Own-book element of total origination
  • Funding facilities
  • Net write-offs

£142.9m from £83.0m £30.0m up from £16.9m £7.9m up from £4.1m £48.1m up from £28.5m 7.57 pence per share up from 6.09 4.1% down from 5.3% £62.9m up from £39.8m £162.6m up from £74.5m 1.2% of net portfolio unchanged +72% +78% +93% +69% +24%

  • 23%

+58% x 2.2

✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Note: Comparisons taken from reported statutory accounts

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Deal origination

Increasing demand, flexibility, cross-sell opportunities

Asset Finance

  • £1.5m turnover UK SME
  • introduced via Academy supplier

relationship

  • Combination of 6 own book and

broked-on asset deals (4 current)

Vehicles broking

  • Lead passed internally to Vehicles
  • Now manage the 13 van fleet
  • Identified internally that client

uses invoice finance through RBS

Invoice finance

  • Positive Cashflow introduced
  • £100k IF facility being prepared
  • Continuing high demand for 1pm products:
  • new business origination up 72% to £142.9m
  • 31% organic like for like
  • Flexible ‘own-book’/‘broked-on’ model:
  • 44% written on own book, 56% broked-on
  • ability to adapt to cycles in the sector and economy
  • all vehicle business broked on. No own-book residual risk
  • Cross-selling growth:
  • unique range of products available to UK SMEs
  • £13m of lead generation in last quarter of financial year
  • cross sell becoming embedded within the group
  • higher margins; minimal client acquisition cost

“Xsell”: how it is working

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  • Of the Commission income, £2.4m vehicles; £1.1m equipment leases and £1.7m loans
  • 31% ‘like-for-like’ organic growth
  • £19.3m of unearned income at 31 May, which is over 50% of 2019 revenue expectations

already ‘secured’

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Revenue

Organic and acquisitive growth

By Product (£m) 2018 2017 +/- Own book Lease 15.2 12.1 26% Own book Loan 3.1 2.6 19% Own book invoice finance 6.5 0.0 n/a Commission Income 5.2 2.2 136% Total 30.0 16.9 78%

  • Growth in all product areas
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Net Interest Margin

Reducing cost of funding outstripping rate pressures

  • Interest rate price range charged to lease and loan customers 12% to 22%
  • Cost of Borrowing range reduced to between 2.5% and 8.5% (prior year 4.5% and 8.8%)
  • Blended cost of Borrowings now 4.1% (prior year 5.3%)
  • Net Interest Margin increased to 12% (prior year 11.5%)

Earnings Per Share

Strong growth despite share issue to fund acquisitions

  • Basic EPS increased from 6.09p to 7.57p, up 24%
  • Fully diluted EPS increased from 5.69p to 6.46p, up 14%
  • 28.86m shares issued in June 2017 to establish the invoice finance division
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Funding

Reducing rates and significant headroom for growth

  • Group Treasury function established
  • Rationalised and efficient group-wide “block-discounting” facilities for Asset businesses
  • Secured Loan Note Programme embedded for loan business
  • “Back-2-Back” facilities in place for the invoice finance businesses
  • Gearing remains contained at c5x Net Tangible Assets
  • 4.1% average borrowing rate driven by cheaper B2B invoice finance facilities and

continued reduction in ‘Block’ rates due to treasury ‘bulk buying’

  • Potential opportunities for longer term and/or cheaper funding being explored

Key Funding Lines - £m Facility Usage at 31 May 18 Headroom Bank Overdraft 1.0 1.0 Block Funding lines (no non-utilisation fees) 112.6 59.3 53.3 Secured Loan Note & other HNW loans 12.0 6.1 5.9 Back to back facilities 37.0 30.7 6.3 Total Funding Facilities 162.6 96.1 66.5

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Balance Sheet as at 31 May £’m Cash Generative Group £’m

31/5/18 31/5/17 An indicative month…… Assets Operational cash flow Non-Current Assets 81 67 Monthly receipts c£5.5m Current Assets 78 26 General outgoings c£0.9m Total Assets 159 93 Funder repayments c£3.2m Cash generation c£1.4m Equity Retained Earnings 15 9 Other cash flows Share capital & premium 33 20 Deferred consideration c£0.2m Total Equity 48 29 Cash to utilise in new deals c£1.2m Liabilities New deals (leverage) Non-Current Liabilities 37 35 Cash in deals (20%) c£0.8m Current Liabilities 74 30 Commissions c£0.4m Total Liabilities 111 65 Funding drawdown c£3.2m Total Equity and Liabilities 159 93 Deals paid-out c£4.0m

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Balance Sheet and cashflows

Strengthening and cash generative

✓ ✓ ✓

c£1.2m

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Own-Book Portfolio

Increasing own-book, bad debts under control

  • Own-book gross* portfolio increased 59% (from £89.5m to £142.1m)
  • Bad debt provision increased to £1.8m from £1.2m (1.5% of the net** portfolio (2017: 1.3%))
  • Net*** bad debt charge remains at around 1.2% of the net portfolio (2018: £1.5m: 2017: £0.9m)
  • Conclusion of IFRS9 adoption work – no material impact on impairment provisions
  • The invoice finance companies continue to experience exceptionally low bad debt write offs.

Less than £0.5m over 10 years of trading – currently generating nearly £7m p.a. of revenue. Bad Debt Provision £m Net Portfolio Provision % Asset 70.7 1.2 1.6% Loan 15.3 0.3 2.0% Invoice Finance 36.8 0.3 1.0% Group 122.8 1.8 1.5%

*Gross portfolio means total receivable including unearned interest. **Net portfolio, means total receivables less unearned interest income. ***Net bad debts or write-offs means bad debt expense less recoveries.

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Highly diversified lending

Credit risk – no major concentrations by region or sector

2.9% 1.8% 1.6% 1.8% 1.5% 1.5% 2.0% 1.4% 1.9% 1.5% Top 10 by deal number

LONDON Essex Staffordshire CC Hertfordshire Birmingham Aberdeen City and Aberdeenshire SCOTLAND Barnsley, Doncaster and Rotherham Tyneside Leeds

4.1% 3.4% 3.0% 2.5% 2.4% 1.9% 1.8% 1.7% 1.7% 1.5%

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

£m Top 10 by Principal o/s (leases, loans, HP) & credit facility (invoice financing) 5.8% 4.3% 4.2% 3.9% 3.6% 2.9% 2.4% 2.2% 2.2% 2.0% Top 10 by deal number

Unlicensed restaurants Maintenance & repair of vehicles Hairdressing & beauty Licensed restaurants Public houses & bars Business support services Freight transport by road Take away food Specialised construction activities Retail sale in food, beverages or tobacco

5.0% 3.6% 3.4% 3.0% 2.9% 2.9% 2.8% 1.7% 1.7% 1.6%

1 2 3 4 5 6

£ M's Top 10 by Principal o/s (leases, loans, HP) & credit facility (invoice financing)

  • Top 10 Geographical areas
  • Top 10 Industry Sectors
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Asset Finance and Vehicles Broking Asset Secured and PG- backed Loans Commercial (invoice) Finance

Summary by division

Risk-adjusted yields, conservative underwriting and provisioning

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  • £102m p.a.
  • £70.7m
  • £112m
  • £52m
  • Fixed 16%
  • Fixed 5%
  • Typically 3 years
  • Net write-offs1%
  • Approaching 2%
  • £28m p.a.
  • £15.3m
  • £12m
  • £6m
  • Fixed 18.5%
  • Fixed 6.5%
  • 1 to 3 years
  • Net write-offs 1%
  • 2.0%
  • £12m p.a.
  • £36.8m
  • £37m
  • £6m
  • c.4% +15% fees
  • c.2.5%
  • 1 year facilities
  • minimal
  • c. 1.0%

Origination: Own book (net): Funding facilities: Headroom: Blended interest rate: Blended interest cost: Deal term: Impairments: Impairment provision:

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Objectives

  • Scale through a model of distributed separate entities (7 brands)
  • Multi-channel, multi-product offering to SMEs
  • Funding and broking to maintain risk mitigation
  • Strict policies on underwriting, sector spread and credit control
  • Cost-effective funding and appropriate gearing
  • Digital capability – process automation & FinTech

Investment in Onepm resources 2014 Acquisition: Academy 2015 Adjacent products: iLoans Gener8 Positive “Platform1” automation & Fintech project Acquisition: Bradgate 2016 Bell 2017 Further bolt-on M&A CF2U 2017 Market Cap May 2015 £25m Market Cap target £100m (for this phase)

✓ ✓ ✓

Currently circa £45m

✓ ✓

Strategic plan

2014 to 2018 successfully implemented

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2018

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Next phase of growth

Key elements

Organic growth in each group entity

Maintain focus on lending to smaller UK SMEs Operate a hybrid model, broking-on consumer business Origination currently in line with plan

Operational synergies

Drive benefits from operating as a Group Deliver synergies from “Platform1” project Pursue access to lower-cost and longer-term funding

Further strategic expansion

Fragmented sector - potential for further acquisitions “Bolt-on” books of receivables, or smaller entities Plus ‘transformational’ deals, given the right conditions

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Summary and Outlook

Following successful buy-and-build growth phase…

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  • A multi-product, non-bank, alternative finance provider of increasing

scale in a fragmented sector

  • Focused on lending to under-served smaller SMEs; strong growth, low

market share, so significant potential

  • Highly profitable; return on net assets 13% (excluding goodwill 32%)
  • Ample borrowing facilities to fuel further growth
  • Low impairments and well-provided for bad debts - robust quality of

earnings and future visibility

  • Paying a progressively growing dividend; +30% in FY18 to 0.65p and

planned annual 30% increases for next 3 years

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Appendices

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Ownership

10 largest holdings

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23.24% 20,035,065 100.00% 86,207,540

Fund Manager

% Holdings % (Prev) 31 Aug 2018 86,207,540 £45,689,996 Lombard Odier Asset Management (Europe) Limited 22.84% (22.84%) 19,691,352 Sapia Partners LLP 13.59% (12.66%) 11,714,510 Russell R Esq 12.25% (12.25%) 10,557,224 Hargreaves Lansdown 7.56% (6.62%) 6,518,088 Nolan M F Esq 5.14% (6.30%) 4,432,969 Interactive Investor Trading Limited 4.80% (4.15%) 4,140,409 Charles Stanley & Co 3.44% (3.53%) 2,964,381 Barclays Stockbrokers Limited 2.79% (2.32%) 2,407,885 Jacques H Ms 2.18% (2.18%) 1,876,749 Halifax Share Dealing 2.17% (1.60%) 1,868,908 Total 76.76% (74.44%) 66,172,475 Other Grand total

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Non Execs: John Newman (Chair), Julian Telling, Ron Russell James Roberts CFO Ed Rimmer COO

Mark Burgess Vehicles Peter Nolan Head of Credit & Fintech Richard Arnold GM Bradgate Michaela Dodd Marketing & GM Academy

Ian Smith CEO

Holly Parker Head of HR Jen Bodey Compliance & Governance Alun Winter Loans David Smith CF Division (Positive) 23

Management structure

Executing transition to a group – delivering synergies

Operating Board Plc Board

Tansy Battson CF Division (G8)

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UK SMEs require access to funds to grow their businesses. Market underserved by HSBs and Challengers moving upscale into bigger ticket deals. 1pm meets the need by providing the finance products SMEs require:

  • Asset finance
  • Vehicle finance
  • Loan finance
  • Invoice finance

either by providing the cash direct or broking-

  • n to others where the risk profile doesn’t meet

1pm’s strict credit criteria.

Products provided

A full range of SME finance

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Aug 2006

Onepm admitted to AIM raising £1.3m

  • n flotation

Feb 2014

Ian Smith (CEO) joins the Group, initially as Non- exec Chairman

Aug 2015

Academy acquired and £7.3m raised via a placing. Mike Nolan (MD Asset Finance) joins the Group

March 2016

Bradgate Acquired

March 2017

iLoans Acquired

May 2017

James Roberts (CFO) joins the Group

June 2017

Gener8 acquired and £13.0m raised via a placing. Ed Rimmer (MD Commercial Finance) joins the Group

July 2017

Positive acquired

Dec 2017

CarFinance 2U Acquired

How we got here

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