Time Finance (LSE:TIME) — Final Results for the Year ended 31 May 2020

0:02 Good afternoon, ladies and gentlemen, and welcome to the 1PM PLC Final Results Investor Presentation. On the right hand corner of the screen. A box beneath that, simply type in your question and press send. If you're accessing this via a mobile device, the Q and A tab is situated below. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your Investor Meet company dashboard. I'd also like to remind you that this presentation is being recorded. Before we begin, we'd like to submit the following poll. I'd now like to hand over to Ian Smith, CEO and James Roberts, CFO of 1PM.

0:51 Good afternoon.

0:56 Good afternoon, everybody. Yes. It's Ian Smith here. Thank you very much for joining the presentation this afternoon. We're pleased to have the opportunity to provide you with an update on our results. It's important to us that we're able to update private shareholders and and retail investors in the same way that we do our institutional investors. So thank you, investor meet company. Thank you, Mark, for facilitating this. What we intend to do today is to provide you with a bit of background information on the company to bring you up to date, to set out the reasons why we think we are in a very robust and resilient position, to give you an overview of how we've addressed the COVID nineteen situation and the impact on our business, and then, obviously, to talk you through the financial results for 05/31/2020 that we announced earlier this week. And then towards the end, I'll also provide a few comments on our longer term strategy and and short term outlook.

1:59 So as I say, thank you very much for joining us. To give you a brief overview of 1PM at a glance, Make no apology for starting with the fact that we are a customer outcome led outcome led business. We do genuinely focus on providing the best solution that we can for our clients. It's a an important part of our cultural pillar to put pillars to put our clients at the heart of everything we do. We deliver a range of financial solutions to boost British business and, in particular, the smaller end of the SME scale. And that that organizes itself into four product divisions. So that's asset finance, providing business critical equipment for small businesses, invoice finance, which is really cash flow financing against the sales ledger, vehicle finance, and property and business loans.

2:57 In terms of how the business has developed recently and the stage in our development that we've reached now, we are lending a 123,000,000 to UK businesses. We're generating $2,029,000,000 of revenue. We originated a 147,000,000 of new business in the last twelve months. We're dealing with over 20,000 clients and small businesses. We generated 3,000,000 of profit before tax and exceptional items, all from a 179 people and working across six sites in The UK and on the strength of a balance sheet that now has equity of over 55,000,000. We've got a well respected and well regarded position in the market and have won some awards along the way.

3:43 I'm very pleased. I'm proud, in fact, to be leading a an established and stable and dedicated management team. It's a a diverse team in terms of gender, as you can see, in terms of age range, in terms of experience, and expertise. Just a a couple of minor highlights. I mean, Holly, our head of HR, has been in the business since we were 13 employees and has helped grow it to where we are today. Lorraine Nayland, our head of risk, has had a career in financial services, in particular with Lloyd's Bank. Jennifer Bodie, our head of compliance and governance, has been seventeen years in the FCA. And Carol Roberts is known as the Duane of the leasing industry. She's been in the leasing industry for fifty years since the very early days of the industry. So a very stable, well regarded, and highly respected management team who have, I think, handled, the circumstances over the last twelve months, particularly well.

4:39 And how we describe ourselves as a group, we are a nonbank specialist finance provider. The trading subsidiaries within our group that deal with regulated activities are FCA authorized. We operate a hybrid model, and that means that we're a lender on our own balance sheet, but also have the flexibility to broker business onto other funders. All of the lending that's on our balance sheet is to UK SMEs that meet our credit criteria. And so anything that's outside our credit criteria for business or indeed any deals that are for consumers, we broke onto other funders. And as I mentioned, we're deliberately multiproduct to provide all the products that we think smaller SMEs require. A couple of points in terms of our mission. Our purpose is to grow. I mean, we're we are here to grow together with our clients, adding scale and capability and products to everything we do.

5:31 But, crucially, in terms of our policies, we regard ourselves as a cautious finance provider. So although we want to growth although we want to grow, we don't want to grow indiscriminately. We want to grow by ensuring that we maintain our credit quality and maintain our margins, and we've been successfully able to to do that over the past twelve months. To bring that to life, let me just talk you through some very recent deal examples. There's nothing particularly marquee about these. These are the kind of deals that we do on a day to day basis. So the asset finance example is where for a food manufacturer, we've provided £77,000 worth of asset finance facility. But in this case, it's a good example of our broking and lending model. We've lent 50,000 on our own balance sheet and broke down 27,000 to another funder. So that's how we mitigate, some risk.

6:26 And in terms of invoice finance, the example is for a fashion and textile manufacturer that, had a very recent contract with the NHS for PPE, and we were able to provide some cash flow funding to enable them to execute against that lucrative contract for them. And the business loan example is a special situation loan, as we call it, and very particular circumstances to this company. They had the opportunity to settle a franchise fee for a lump sum payment, and we were able to provide that lump sum payment through taking appropriate security over the client's assets. So very varied examples and a snapshot of the kind of deals that we do on a regular basis. In terms of where we get our business from, we like to have a spread of introducers bringing us business, and this sets the introducer channels out by division.

7:18 So in asset finance, the majority of our business comes from finance brokers and from equipment suppliers. The finance brokers tend to be different depending on whether it's soft assets or hard assets. And apologies if I'm telling you something you already know here, but a soft asset would be something like a coffee machine as pictured in the graphic there where there isn't really any value in that asset after a period of use. So the decision to provide credit to that business is much more about the affordability of the business to to to repay as opposed to the intrinsic value of the asset. Whereas with a hard asset, which is typically sort of yellow planter, JCB Diggers, for example, the decision to lend is tied up much more in the value of the asset itself where there is a resell value for that particular asset after a period of use. So our leasing can be soft or hard assets, and that tends to come from finance brokers and indeed equipment suppliers, and this is where original equipment manufacturers or resellers or distributors will have customers who want to buy product on credit, and they will point those customers to us to provide the credit agreement.

8:28 This year, we're also introducing a direct channel, so going direct to companies to sell our finance products, and we'll increasingly be doing more work digitally, I. E, transacting online in the future. And it's similar across the other divisions. So our loans business comes from residential and commercial mortgage borrowers brokers, sorry, and from finance brokers, accountants, and corporate finance firms. In invoice finance, it's similar. Professional firms and insolvency practitioners, some national but mostly local to where we operate, and occasionally bank referrals. And then our vehicle finance deals, all of which are broke down, as I mentioned, tend to come from used and new car dealers and indeed fleet customers and indeed individual borrowers online.

9:19 So a broad spread and a broad range of introduction channel is where is where we receive business from. And that is important as being one of the elements that create a very robust and resilient platform. Risk mitigating spread is something that we like in everything we do. So spread in terms of introduce a channel, asset category, lending product, etcetera. The the next factor is the operating model flexibility, as I've mentioned, to be a lender and a broker. We also see in our end of the SME market a very high degree of borrower resilience. We're typically lending to independent businesses for business critical equipment, and those businesses are making staple diet consumer products. We typically don't lend to multiple outlet retail chains or multiple restaurant chains, for example. It tends to be the owner managed businesses, and there is a high degree of borrower resilience in those companies because because if they don't keep up their payments for their business critical equipment, then they don't have a business.

10:24 So that leaves lots of small individual exposures, which we like, and we take security against every deal that we do even if it's as simple as a a personal guarantee. If a deal does go bad, we're very adept at levering leveraging that personal guarantee instrument to recover our money, and we'll talk a bit more about that as we get into the detail of the numbers. All of our underwriting is done by people. We're not reliant on algorithms, and this has particularly come to the fore in the last few months of COVID nineteen. I don't believe there is a artificially intelligent pattern recognition algorithm anywhere in the world that could have predicted the nuances of customers' particular circumstances during COVID. So having people doing the underwriting and making the credit decisions has come to the fore as being a key factor in our business model.

11:18 We believe we're very cautious. We have impairment provisions that are now in excess, quite significantly in excess of what the IFRS nine accounting standards say that we should require, and certainly our provisions are in excess of our annual write offs. All the deals that we do are fixed interest rate. Once we've written a piece of business and borrowed some money, the interest rate is fixed, so we're not subject to changes in interest rates. And all of that is on the back of a strong balance sheet. We have 27,000,000 of net tangible assets and comfortable headroom in our gearing covenants from very supportive funding partners who provide us with ample operational debt facilities, which will enable to grow as we go forward, and James will explain a bit more about that shortly.

12:06 So all in all, a very robust and resilient platform, but I guess we can't really go any further without talking about COVID nineteen and our response to it. We formed an incident management team very early on in the process in in March. We've we set out four guiding principles that you can see there clearly, a a focus on the health of our employees. Importantly, an uninterrupted seamless service whilst remote working,

12:31 unwavering support to our existing borrowers in the form of forbearance, and we'll give you some up to date data on that shortly. And, crucially, remaining open for new business to support creditworthy customers during this period. And I'm pleased to say that we've been able to adhere to each of those guiding principles. I suppose COVID itself has impacted us in three key ways. The first is its effect on our own trading. And certainly in q four of the year, we found that our origination and our revenue generation and our cash flows were adversely impacted. And what we were able to do there is to leverage our strong bank relationships and our strong balance sheet and to take out our own 3,100,000 term loan arranged through NatWest to offset the negative aspects of of the COVID nineteen impact.

13:23 Secondly, in terms of the effect on our borrowing portfolio, we felt it was right and proper to be able to provide forbearance to our existing borrowers, and what that means is some form of payment reduction or payment holiday for a period of time. And we've managed that internally. We've done that through our own cash flows, which creaturely means that we haven't had to go back to our funders to ask for similar forbearance from them, and that in turn has allowed us to keep our doors open, as it were, to continue to lend. And that's the third impact on our business. We have been able to continue to lend during the COVID crisis. And crucially, very early on, we decided to leverage our strong relationship with the British Business Bank, with whom we already had a facility, to be able to become an accredited lender under the coronavirus business interruption loan scheme, civils.

14:15 And we were allocated a facility of around 7,000,000 to lend with the benefit of an 80% government guarantee. The coronavirus the CBIL scheme ended on is to it was it was due to end on the September 30. As of yesterday, it's been extended, but we were due to be able to lend 7,000,000 up to the end of September, and we were bang on track to be able to do that. And now that the scheme has been extended, we'll be applying for a further allocation to be able to continue to lend under that scheme and with the benefit of a government guarantee in the background. So I think overall, we've handled the COVID situation and the impact of COVID on our business extremely well, but it has contributed to the numbers that we've reported this year. And on that note, I'll hand over to James to talk you through the numbers both at a high level and indeed to get into some granular detail on latest developments. James?

15:15 Thanks, Ian. As Ian said, COVID really has impacted these numbers. Our year end is to the end of May and so obviously the final quarter March, April and May was right at the the height of the COVID issues and so that impacted the numbers. One point to draw out is that up to the end of February or the first three quarters, we were trading pretty much where we thought we'd be. But the the negative figures you'll see on the right hand column are driven purely by that final fourth quarter drop off in business. Looking at some of the key key lines, our deal origination fell. Again, that's because of COVID. And by deal origination, those what I mean by that is those are deals that come across our our desk and we either write on our own book if they meet our credit criteria and pricing or we broke them on if the maybe the margins are too thin for us or or they're not of the credit quality we'd like. So that is really the lifeblood of the business. So although it has fallen, it is still significant origination.

16:13 And, crucially, the green shoots of recovery experienced in q one since since this year end, those figures are are coming back up to to levels we experienced previously. So that's that's pleasing. But the the the origination was down and that contributed to the revenue falling. So revenue is down by a similar amount to just over 29,000,000 for the year. If you take that fall in revenue and the increase in the bad debt provision, which you'll see is the final bullet point and I'll talk about the bad debt provisioning in a bit more detail on a future slide. But the increase in bad debt provision that we put in place to we think cautiously and prudently mitigate for any potential future impact of of COVID in the coming coming months. It saw that combined with the revenue saw the profit before tax exceptional items fall to level of 3,000,000. So significantly down, but purely driven by the impact of COVID both on a lower revenue and an increased provisions.

17:09 Crucially, though, we remain profitable and cash generative throughout. Some other key things to draw out are operating expenses. They have fallen during the period and that was partly due to the fact that again, as a result of COVID, we decided to cut our cloth if you like and rebase our cost base for the world we find ourselves operating in. So the effects of those changes we've made will be experienced more in the current financial year, but there was some impact in the period to 05/31/2020. Our net assets continue to grow. So as I said, despite the COVID turmoil, the business remained profitable and our net assets increased to over £55,000,000 and our net tangible assets over 27,000,000 And the two penultimate bullet points are quite key ones, think, for us anyway and a sort of source of pride really.

18:02 We are primarily an owned book lender. We are a broker as well, but we're primarily an owned book lender and we'll talk about the funders and the borrowers we've got in place. But crucially, they have all been very supportive throughout this period where they've maybe tightened their facilities or even frozen facilities and increased rates because of increased risks to other funders in our boat with us because of the strength of the relationship and the high regard we think they hold us in. They've maintained the rates they charge us have been pretty static. So you can see the blended cost of borrowing throughout the period remained flat at 4%. And our funding facilities have been renewed, extended during this period, meaning we're primed for growth as and when the economy allows it in the near future hopefully.

18:50 We then have some new slides to those who we presented to before coming up now. There's four slides, one per each of our trading divisions, so that's asset, invoice, finance, loans and vehicles. Two reasons for that, this is the first year in our statutory accounts we've included segmental analysis, which obviously has some detailed notes on on how the individual entities have traded. And secondly, because a number of investors and potential investors have said to us before they'd like to understand better each of the four four divisions. So if we start with asset finance here, this is a really in a microcosm of the the same message I said for the overall group. It is our largest division and so it has driven the overall group performance significantly. So the story is very similar there. We start in the top left hand corner, you'll see the the blue lines, which are the year to May 20 are lower than the orange lines, which were the year before, and this is deal origination.

19:43 So deal origination again because of COVID COVID in q four reduced during the period, we can see it's down from fifty four million to forty one. As I touched on, the q one is certainly green shoots of recovery. So this period to May 31, this snapshot, that's May 31 very much is the is the low point. If we move around in a clockwise direction, we can see the split of owned book versus broke tone, and this is quite a key one for us. If possible, we and we get the right deals coming across our desk, we can write them on our own book, we will. If the pricing's right and the credit's right, then we'll write them on our own book. And the reason for that is that over the length of the lease, which can be anything from three months to five years, but invariably around three years, we will earn a lot more profit from an own book deal than a broke ton deal. Broke ton is fine for short term cash and profit generation, but over the long longer term, on your own book is is more profitable.

20:39 So we will put if it's the right quality and the right price on our own book. So moving more towards a higher percentage of own book, we think is a good thing for future growth, and it shows that the marketing messaging and the relationships with the broker, salespeople we're bringing on board, are getting those messages out there, we're seeing ever more, and that's continued into q one in the current financial year of deals coming across that we're able to write on our own books. So that's quite a key stat and and quite a pleasing one for us. As we move down, we've got the portfolio there. So this shows the portfolio has fallen as we'd expect. Two reasons for that, and this is actually reflective across the wider group, is one is, as I touched on, the origination has reduced in q four, so that meant that the new deals coming on were lower than the repayments and capital interest and capital repayments we were making, the book began to sell full.

21:31 But crucially, a second point is that there was a conscious decision from us to point deals that we thought were in particular difficulty, and we didn't think we'd be able to help that were on our book towards other forms of finance such as the government backed bounce back loans, etcetera. So we effectively derisked our book by taking some of those out of our book and and put pushing them onto bounce back loans elsewhere. So the fall was exacerbated by that risk mitigation tool, which we think was the right thing to do. Coming to the bottom right hand corner, bad debt provision, obviously, a key one for us. So we can see here the bad debt provision in the asset division increased significantly. We felt it had the greatest risk profile and was impacted the most by COVID, so we took the opportunity to increase the bad debt provision. We haven't seen crucially any increase in in write offs or or liquidations or anything like that, but we felt that it was the right time to put increase the provisions because looking forward into the future, it could be that there could be an increase in in write offs at that stage, and we wanted to be ahead of the game. So we increased the provision prudently, even cautiously, some might say, to look forward into the future, which we thought was the right thing to do. But all of that's fed through into the profit and loss on the bottom left hand corner.

22:48 We can see there the revenue reduced again because of COVID in q four. Gross profit fell as well again because of COVID in q four and the increase in the bad debt provision, and that's led through rolled through to a profit before tax significantly lower than year before within our asset division. The crucial thing there, though, is that this bad debt provision, and apologies to labor the point, but the increase in the bad debt provision is us looking forward to the impact we think might happen over COVID over the next six to twelve and beyond months. So that big increase of over 2,000,000 in bad debt provision really is a one off. It's not a statutory exceptional item, but it's a one off. So if that that won't be there next year and then you the division is is profitable in the millions again. So the fact it remained profitable is good. And without that bad debt provision as we move forward, it will be significantly more profitable.

23:39 Similar set of, graphics here for the invoice finance division, slightly different story though because of the nature of the and the the nature of the business. We can see here the origination actually increased during the year, and that that's because origination invoice finance is slightly is calculated in a slightly different way. In asset and loans, it's the individual deal. Some someone comes to us for £50,000 lend. Invoice finance, however, is the size of the facility we we grant to people. So we could be granting a £500,000 facility, but they may only draw 200,300,000,100,000 of it even. So there were an increase in new clients, an increase in facilities made during the period, so that origination figure has gone up. But as you can see on the right top right hand column, the portfolio for invoice finance, the amount we've actually lent lent has gone down. And again, that's because of COVID in q four whereby people weren't utilizing those facilities as much as they had in the past. So slightly different story on origination because of the nature of invoice financing, the fact it's a facility rather than a specific, for example, £50,000 deal, but the portfolio is the same story.

24:47 Q four reduction as people weren't utilizing the facilities as much. Having said that, we did increase the bad debt provision because of the nature of invoice finance and the fact we have control of the entire debtor book and are advancing a relatively small sum. The invoice finance bad debt provision is is far lower, but in real terms there, we have effectively doubled it in the period, but in in in in monetary terms, it's it's not a huge increase. And it's that change in the bad debt provision not being huge that you can see on the left hand side meant that the invoice finance division remained relatively profitable similar to the year before, slightly lower but not significantly lower and that's because of the fact that the bad debt provision was only marginally increased in real terms. The third slide is loans. As as Ian mentioned, we have two types of loans here.

25:34 We have personal property backed loans, which we broke on. These are for second charge mortgages, etcetera. And we also have our own book lending arm as well, which will do special situations or small working capital loans. We can see here the the the brokerage arm origination increased during the period. That's despite the brokerage really retracting in q four. It did it advance a significant number of increased deals during the first three three periods of the three quarters of the year. The own book loans stayed relatively static. Again, a very quiet fourth quarter, but it had been going well ahead of expectations for the first '3 quarters. We've got a similar story in the top right hand graphic there. We can see that the portfolio for the own book, and so the own book loans here fell from just under 10,000,000 to just under 8,000,000. Again, purely driven by by COVID combination of lower origination and a combination of us derisking the book by pointing certain clients towards bounce back loans and what have you.

26:34 Bottom right hand graphic, again, it's the bad debt provision. We see an increase here, relatively percentage wise, relatively high one. However, again, in terms of monetary, it's it's relatively small given the smaller nature of the the loan division, but a similar story and message behind it. And then in the profit and loss account on the left hand side, we can see the business the division did remain profitable,

26:55 but because of that increase in bad debt provision and the lower origination revenue in the final quarter, it was marginally so and down on the year before. Vehicles, our fourth and final division is different. It is not a known book lender. We like vehicles. They're a good source of profit and cash, but we pure we broke on purely those deals. So it's it's purely brokerage, this one here. And it's actually got a a pretty good performance compared to the year year before in terms of origination and number of vehicles supplied. They really were flying until COVID hit. Once COVID hit, the vehicle division effectively had to close its doors because dealers and the like had their doors closed, so there was very little of anything coming in in the final quarter. However, the first three quarters have been really were going good guns.

27:42 And as I say, the green shoots of recovery are there in Q1. The dealers have opened their doors again and we're seeing a return towards the levels we experienced before. But what that did mean, that final quarter where the doors were closed, the vehicles division really didn't earn hardly any revenue at all and so it was marginally loss making for the period in question. That now, as I say, changed. We've hit the low points and we're on the road to recovery there.

28:12 One of the key strengths we think in the group and Ian and have said this for a number of years now and I think the COVID events have borne it to be true, is the spread and the diversification of the group. We pride ourselves on doing a number of small deals in a variety of sectors. And what this graph here is showing is if we take the left hand side, it's a bar chart showing the value of the deals we have out per sector, and on the right hand side, the pie chart is showing the number of deals we have per sector. So just to give you an example, you can see the largest slice of the pie, just over 11% in terms of number of deals is unlicensed restaurants. But in terms of the value of those deals, the green bar in the middle at just over 3% is the value of the unlicensed restaurants. So you can see there's a significant number of small ticket deals in that aspect.

29:08 Crucially for us on the bar graph, the key one, no one sector is over 6.5% of the overall lending book and once you get to the second sector, they're all below 5%. When we're down to the tenth sector, it's just over 2% and what you can imagine is a tale of dozens and dozens of sectors reducing over time as we move out. You can see that one sector could struggle and in this black swan event we've suffered over the last six months, a number of sectors could suffer. But because we are not exposed materially to any one sector, well, it's a pain and difficult, the robustness of the business stands through and we were able to trade through it, which we have done profitably. I've said it earlier, we are primarily a loan book lender. We do broker on, it's about 20% of our revenues, but primarily we are an loan book lender, so the portfolio is a key thing. This is quite a busy slide, so if you bear with me, just wanna try and draw some key points out on it.

30:10 On the top left hand side, we can see the value of the actual lending book that we had at the 05/31/2020. You'll see their gross receivable is a 123,000,000, net portfolio of about a 108. That's down on the year before. As I said, two reasons. Origination fell off in q four because of COVID, and we took the opportunity to derisk the book by suggesting people take advantage of bounce back loans and things like that. Together, that meant the book fell from about a 142 at the end of May nineteen to about a 123 at the end of May twenty. The middle points there split that 123 out into up to date and in arrears. And by that, what we mean by up to date is 104,700,000 of that book is work was working exactly as we thought. They paid every penny of interest. They paid every penny of capital. It was hunky dory for want of a better expression. But you could see there there is there is 18,000,000 of that of that book or about 15% that were in some form of arrears.

31:09 Now that could be a day late, maybe because of a failure of the deep direct debit or what have you through to ninety days or a hundred and twenty days.

31:17 Crucially, with that figure, at the August 30, 9,000,000 or 50% of that 18,000,000 is now back on track and working as we'd expected. So we're working through the others, that shows that that figure has come down significantly as the credit team have begun working on the, I suppose, the low point of everything at the May 31 and the height of the COVID issues. As we touched on earlier, we have increased the bad debt provision relatively materially from £2,400,000 to 5,100,000 We feel that's the right thing to do in the current environment and it positions us to if things worsened going forward, we have adequate provisions there to more than cover that, we believe. The sentence at the bottom left hand corner is quite a key one, I think, and again shows I think the resilience of the group.

32:06 What we've found is where deals have been written off and we've unfortunately had to to try and recover them by other means in legal or or anything like that. Over the last four or five years, we've been consistently due to the small nature of the deals we do, been recovering about 75% of the amount we write off. And crucially, between March and and September now, every month in that six month period, we've seen that maintained. So despite the wider COVID issues, we are still, because of the nature of the of the model, able to recover between

32:34 7080% each month of the amounts we write off. And that's quite a key thing for us and gives us comfort that the level of provisioning is is is prudent even even cautious. And the reason for that is because our average deal size is sub £10,000 and by hook or by crook, if people have if it gets to this risk of bankruptcy, they tend to be able to to repay somehow 5,004 thousand, 6,000, whatever. And so with so the PG on these deals really does lead to a good recovery rate. The right hand side shows the forbearance. So by forbearance, this is us giving some kind of reduced payment to to our clients. We can see here that since COVID hit roughly two thousand clients requested forbearance.

33:22 We've granted just over 60% or 1,200 or so of those those requests. The reasons for some we wouldn't have granted is some people were chancing their arm. They've very, very successful businesses that really didn't need forbearance, and it's not our place to give forbearance

33:36 where it's not needed. Another ones we were concerned that maybe we'd just be delaying issues. And so those are the ones we recommended and pushed towards bounce back loans and have you derisked the book as I touched on. What you can see there though is the significant spike in Q4 FY 2020 as people requested forbearance at the beginning of the COVID crisis compared to Q1 of this financial year where really now people have sort of come through that and can see light at the end of the tunnel. And so the requests we're receiving now are very, very few and far between. What that means in terms of value is that roughly 31,000,000 of our deals have had some form of forbearance. The crucial thing here is we haven't got 31,000,000 of our book sitting there not paying us.

34:23 What we've done is offered them one of three or four different scenarios. They could have no interest payments for two or three months. They could have 50% payments for two or three months. They could have no payments for two or three months. They couldn't sit there for six months and not pay us anything.

34:39 And every one of those people in forbearance there is is is sticking to those new plans. What that means in a cash point, which is quite key we think down in the bottom right hand side, is the impact of giving forbearance has only been £1,100,000 of reduced cash received than we would be expecting in the normal course of business. On the flip side, pointing clients to bounce back loans elsewhere, etcetera, has meant we've received £1,500,000 of cash in more than we would have done in the period. So the net effect of forbearance and settlements is actually we're about £400,000 stronger in a cash position through this crisis, which we think is a very good outcome. I mentioned the spread and diversification being a key pillar of the group. We think funding is another key strength.

35:24 We have a number of key funding partners who've been very supportive, worked with us for a number of years, the likes of NatWest, the British Business Bank, Oldhamore, Siemens, Hitachi, and Investec. We have over 10,000,000 facilities with all of those. We have a $325,000,000 facility with the British Business Bank in particular. And and these guys fund our distinct divisions. So the block funding line, 105,000,000 there, that funds the asset division, which is both hard and soft assets. The fact we've got significant headroom, we think, is a good thing. It thinks it means we're primed and ready to go for growth as and when it it it comes back, and we crucially, we pay no nonutilization fee for those facilities. So they're a very good thing to have, and we appreciate the support we have from our funding partners.

36:13 Our loans division is funded by a secured medium term loan note program, which again has significant funding power as the market picks up. And our invoice finance division is funded by a back to back facility of 42,000,000 with NatWest. So we've got a number of significant funding partners there. They've maintained their rates at a similar level for us, which is great, and they've renewed or extended facilities for us. So as and when things come back to normal and I'm sure Ian will talk about it, we think the competition will be far less and the opportunity is far greater, we have the firepower to take advantage of that as that materializes. Just a couple more quick slides from me. Ian mentioned that we were accredited as a CBILS lender in May and we began lending in June. We had a $7,000,000 facility with the British Business Bank to lend CBILS loans by the end of September, and we're on course to have have done that almost to the penny in the next couple of weeks. As Ian alluded to, only forty eight hours ago, that CBILLS scheme was extended for another month or so.

37:19 And so we I've got the nod in the week from the BBB that we'll be able to extend our facility if needed. So this is a great source of new origination for us, another product to offer to people. It makes us very competitive. And crucially, we haven't used this in a as a race to the bottom in term of in terms of rates or in terms of credit quality. We've maintained our rates and we've maintained our strict underwriting policy. So we are getting what we think is correctly priced, good quality deals, but now with an 80% backing guarantee from the government. And so we're delighted to still be able to lend CBILS for another month or so. The final slide then from me before I hand back to Ian, just some key KPIs in the balance sheet.

38:04 We've mentioned the fact that despite this storm and the May 31 being very much the bottom of the issues, we recover well in Q1 this financial year. We saw our equity, our balance sheet strengthened to over $55,000,000 of which over $27,000,000 of that is net tangible assets touched on. During all this period of turmoil, our cash has strengthened. We've always been relatively cash light as we look to lend out, but we have seen our cash increase from over 1,000,000 to over 2,300,000. We've maintained our net interest margin, which is the difference between what we get funds in at and we lend them out at, so we still have a healthy margin of 12%. And crucially for some shareholders, the dividend points at the bottom. Some shareholders don't want us to pay a dividend. They want us to invest for growth. Other shareholders do want us to pay dividends. We had a progressive dividend policy we announced two years ago that we'd been following through. We put that on hold in May where we saw how and we think the correct thing to do, the prudent thing to do is to keep that on hold until January when we'll have our interim numbers and have a better picture of how this is panning out. But our intention very much if things go to plan is to reinstate that progressive dividend policy in January.

39:20 But at the moment, we think quite correctly it is deferred. And I'll hand back to Ian. Thank you, James, for that comprehensive overview. A short word on strategy. Essentially, our strategies are unchanged despite COVID nineteen. Clearly, COVID nineteen has somewhat interrupted the timing, but the strategic objectives that we've stated and have been in the public domain for some time are the same. We intend to build scale in all that we do. Clearly, our focus today is on organic growth. There will be opportunities, I'm sure, as the market evolves for looking at acquisition opportunities, and we always look at carefully selected acquisition opportunities. But we're in capital preservation mode right now as you'd expect, and therefore, focus is on on organic growth.

40:10 In terms of other objectives, we we want to continue to reduce our cost of borrowing where we can, increase own book lending, which is happening now. We will be completing a rebranding project in the in the near future, and we'll announce that when we're able to do so. And we're looking at the possibility of introducing new broking products through additional FCA permissions that we've been granted. And we're continually innovating through using more financial technology and improving our digital capability and investing in new hires and in management and personnel training and succession, all of which is about delivering operational leverage from the group that we have created, including the ability to cross sell. So our strategic intent and our strategic aspirations are unchanged, albeit perhaps to some extent interrupted in terms of timing at present, which really leads me on to our summary and an outlook. I mean, one PM has a strong balance sheet. You know, we're trading from a strong position.

41:12 We've got robust and resilient policies and characteristics that form part of our business model. We're in a strategically sound market position in our view. We had a a pre COVID track record of delivering against expected financial results, and I think we've responded effectively and intelligently to the business impact of COVID nineteen over the past six months. So we are now reaping the benefits of that. We're making good progress in returning back to pre COVID levels of origination. The first quarter of the new financial year has exceeded our own internal operating budget. I mean, there are no market expectations, market guidance in the market at present, but in terms of our internal operating budgets, we've exceeded those.

41:57 And that has been important and has resulted from staying open for business. And I think that has put us in a very good position competitively. There are some as some other nonbank lenders in our industry who

42:10 have not been open for new lending, and we're benefiting from that competitive position. And we as we've described, we have proven additional provisions in our balance sheet now to cover the potential impairments that may come as the economy comes out of COVID over the next few months. So when it gets to the interim results in January, we'll reconsider market guidance for the current financial year at that point. And as James mentioned, we'll also reconsider our interim and final dividend that have been postponed for the time being. Our final slide is just simply a snapshot of the shareholders, the main shareholders, the top 10 shareholders as of May 31. No substantial differences as of August 31. And that concludes the slides that we wanted to talk through today. I hope that's been helpful for all of you. And I'll hand back to Mark now to take us through the question and answer session. That's very kind, Ian, and thank you, James, very much for the presentation. Ladies and gentlemen, do please continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. But just while the company take a few moments to review the Q and A that has come in during the live event and ahead of entering into the pre submitted 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, can be accessed via your Investor Meet company dashboard.

43:31 I'd also like to remind you that your feedback is important to the company. And immediately post the presentation ending, you'll be redirected for the opportunity to provide feedback in order that the company can better understand your views and expectations. And we'll be very much encouraging you to do that where it's possible. Ian James, I guess before we address the questions that are coming through the live event, we had three presubmitted questions. The first of which was, how do you feel you fared against your competitors during COVID-nineteen in terms of winning new business and retaining existing? And what are you seeing in the new lending and business trends? Yes. Thank you, Mark. So as I mentioned in terms of competition, we have seen some of our regular competitors not be in quite a strong position as we found ourselves in in being in in providing forbearance to existing customers and managing that through their own cash flows.

44:27 So those particular businesses have had to ask for forbearance from their funders and therefore have been unable to lend for new business. So we fared well in comparison with some of those businesses that have been unable to lend. And, of course, by adding the CBILLS products to our portfolio of origination channels, we've been able to have the benefit of those additional loans as well. So we we we fared well in particular in relation to our competitors in that respect. What I would also point to is, as evidenced by a couple of Google reviews, we've actually had some very strong reviews from customers around how we have dealt with them in terms of providing forbearance, looking at their individual circumstances. So to that extent, I think the market has perceived us as being a helpful customer led lender, which as I said right at the start of the presentation, is very important to us.

45:20 In terms of new lending, I mean, there have been some quality issues out there in terms of some companies. I think James used the expression of chancing their arm about funding under the government schemes and coming to us, for example, for CBOELS loans. We very much held our credit policy in place, and therefore, we continue to lend what we think is high quality and high margin business. Thank you very much. I I think you touched on the next question through the presentation, but just for whether you could expand slide. Do you expect bad debt to increase post government support schemes scaling back? Yeah, I'll take that one if that's okay, Mark. Yes, think we did touch on it and then but I'll add a bit of flavor now. And also I saw one of the questions that's popped up on the q and a tab from Paul is is about the the provisioning levels as well. So hopefully, can kill two birds with one stone here.

46:15 Yeah. So we increased our bad debt provision as as we said to to 5,100,000. We feel we have been cautious, prudent there. And what we have done deliberately is we have looked forward, excuse me, we have looked forward to potentially some of the government support schemes pulling, being pulled and what that could do to our book and we think we factored that into our prudent and cautious bad debt provisioning level. So so we do not expect any material increase in our bad debt provision this financial year. We think we've effectively factored that into our numbers as of the May 31. And we think we've I mean, you never know, but we think we factored in a potential downside there. And so we would expect our bad debt provision not to increase materially at all.

47:05 Thank you very much. And just finally, do you see scope to reduce your overall cost base? I'll take this one again if that's okay, Mark. Yes. So we've made a conscious decision in the the answer, sorry, is a yes and a no. The yes is we did, as I touched on, we did take out a number of staff costs towards the end of the the the financial year under review. On a run rate basis, that's about three £250,000 we would have saved on on on our cost base in in the current financial year. But we didn't go further than that, and that was deliberate because our view is we didn't wanna cut our nose off despite our face. We very much feel that we will return to pre COVID levels and hopefully beyond.

47:54 And so what we didn't wanna do is make wholesale redundancies for say six or nine months and then have to go and rehire people like that or the same people again. We felt that was the wrong thing to do. We want the business here primed and ready for growth. And we think over q one where we're seeing a real increase in origination, we we think that validates the decision we've made. So yes, we have taken best part of $0.07 $5,000,000 out on a run rate basis, but we haven't gone any further than that because we feel that would be a very short term decision to have made. Thank you very much indeed. Well, that completes the pre submitted questions. So if I could ask you just to click on the Q and A tab so you can see the questions that have been submitted by investors. And I know I haven't given you an awful lot of time, but perhaps if you could start at the top and where appropriate, if I could ask you to read out the question, perhaps even who it's from and then give you a response where that's appropriate. Thanks ever so much. Yeah. Thank you very much, Mark. I mean, are some, I think, very valid and important questions here that for us to address, so we will attempt to address all that they're there in the time that we have available.

48:55 So firstly, John B. I please ask what is being done to address the 75% decline in the share price over the last five years? Pre COVID nineteen, the company was has been unable to generate shareholder value, and this has been reflected in the lower share price. Yeah. So I think I think my comments on that, John, are that, you know, we fundamentally, we're here to run the business and manage the business as best we can, and we have delivered our numbers over the past five years. And to many for many to to a great extent, the share price decline has been outside our control. That said, what can we do about it? I mean, clearly, we've spent a lot of time talking to non shareholding institution investors through Nomad and Broker Over the last few years, we are continually looking at strategic opportunities to see if we can unlock the valuation problem that we perceive we've had over the last few years.

49:50 We've looked at various tools like the introduction of the progressive dividend policy and a share buyback program, and we're constantly challenging our advisers to help us with addressing the share decline issue. I have to say that we're not any different, really, to many other companies in this financial services sector. There is a sentiment problem that we're all having to deal with. But fundamentally, our job is to deliver the numbers, and we've continued to do that. So that's the primary objective. But, of course, anything that we can do to try and improve the shareholder returns, we will we will be focused on as we come out of this COVID period. I think that leads on to the second question from John b. What will one PM do to return value to shareholders? Assuming the business improves, will one PM prioritize generating value to shareholders instead of pursuing equity funded acquisitions, brackets that have historically severely diluted shareholder return?

50:46 Well, I think the answer is yes. I mean, clearly, right now, we're in capital preservation mode, we're focusing on organic growth, and we want to do that in order to increase shareholder value. Now is not the right time to be issuing shares to fund acquisitions. I totally agree with that. The only point I'd make about this dilution in the past is that all of our acquisitions have proved to have been successful and are generating profitable business now. So it is the overall sentiment issue around the valuation of the business that has caused the decline in the value of the shares, not not the dilution the dilution in my view. A question from Mark s. The company is trading at naught point five tangible book value despite conservative bad debt provision on the balance sheet and historically has traded at a premium to tangible book value due to high profitability. This leaves the company owned to a bid. What bid defense has the company put in place to avoid being bought out at a low point for the business?

51:42 Well, it's a very good question and something, obviously, that we're mindful of. The the the bid defense that we have is that we have three shareholders, and I think the shareholder slide is still up on your screens. Three shareholders own more than 50% of the business, and I know that all three of them would not sell to an opportunistic bid at a ridiculously low price. So my my most readily available bid defense mechanism that I have is the shareholders in the business who understand the potential value of this business and would not, I believe, sell shares to an opportunistic bidder. And a further question from Mark in relation to Wellesley Finance that have taken just short of 20 of the equity of the business. And if you see the shareholder slide there, Cloverleaf three seventy four Limited is a ring fenced subsidiary within Wellesley Finance.

52:34 Have we had contact with Wellesley, have those discussions been constructed with regard to future of the business? Yes and yes. We have had some contact with Wellesley. They're not an insider, so they don't have any privileged information. But they are in the lending industry. They are a strategic investor in the sense that they want to help us grow our business, and the discussions have been constructive. An operational question from Paul l. Why have loans divisions given low profitability? Is there a strategic vision as to why it is or can be more important to profit before tax? Yes. The strategic vision for loans is that we want to grow and scale our own book loans business in order for it to become more on a par with the size of our asset finance division and our our invoice finance division so that we can generally become a player in asset backed lending. So providing a range of combined facilities for asset, loan, and invoice finance for small businesses. It is important to increase loans division scale, and we have some plans and some opportunities to consider in order to do that over the next twelve to eighteen months as the market and economic conditions allow.

53:53 Further question from Paul was in relation to the provisioning, which I think James has covered in his earlier answer. So I think that question's covered off. Thank you, Paul. In relation to the share price again from Mark s, the share price is at I think that means multiyear low. The directors don't currently have large holdings in the company, and the company is guiding a positive and prudent future. If this is the case, why aren't directors investing their own cash into the equity? Well, apologies for being a little bit blunt and perhaps a little bit glib here, but, I mean, we are employees. We're not investors. And we are very rarely in a position, frankly, where we can buy shares because of being insiders, obviously, and having price sensitive information.

54:42 We've just released our full year results, so that's the end of our close period. But there are other activities that we are considering that effectively mean that we are in a position where we we should not be trading shares. So we are rarely in a position where we can invest. All that said, I believe, as you say, we are guiding a positive and prudent future. And when the opportunity arises for directors to consider acquiring shares, I'm sure we will we will do so. Moving on. John b, why does one PM not track against market expectations? Shareholders are not aware of management expectations, so it is fairly easy to beat management expectations. Well, I fully understand your point there. There are no market expectations in the market at present, so I'm not sure where you might be referring to in terms of market guidance. There isn't any. Certainly nothing official.

55:36 Send cost or our broker, they've not provided any market guidance. But I'd say your point isn't helpful necessarily for directors and management teams just to say we're tracking to management expectations. As I say, when it comes to the half year results, we will reassess whether we can provide clear market expectations for profitability for the current financial year. A further question from Paul. When will we get details of the new executive remuneration scheme, and what can you tell us about objectives and structure now? I can't tell you anything about objectives and structure now. The remuneration committee is actively considering what the terms of the new scheme should be and considering in conjunction with shareholders in the form of, in particular, our non executive director, Ron Russell, who is obviously a large shareholder, so has an interesting say in this matter.

56:26 So it's under active consideration, and we'll announce the details as and when they become finalized. And from Allan v, is there any intention to buy back one PM shares? We do have an agreed share buyback scheme, and we have an employee benefit trust that is from time to time acquiring shares in the market. So so that is happening. And then I think it's the final question from Michael s. Explaining the net asset value further, I think to explain the investment case to future investors, you should flesh out the breakout of the acquired businesses from 2015 to 2017 and how they presumably, that means how they have contributed to the p and l since they were acquired. Yeah. Good good point. I think the segmental analysis that we're providing does effectively provide that in the sense that, for example, the invoice finance division is does constitute two companies that were acquired in 2017.

57:22 So we can see the separate performance of that particular division. And, yes, you know, we we as we always do, we confirm the position of the acquired companies, and they are all profitable and and trading effectively as we thought when we bought the companies. All of the businesses that we acquired that had earn out arrangements. The earn out arrangements have all completed and they have all been achieved. So the acquisitions have fared very well since since acquisition. But point taken on continuing to explain to investors that that is the case. That's brilliant. Thank you very much. I think that is, as you said, that's taken care of literally all the questions that have come through on the live chat. Perhaps, Ian, I could just ask you to wrap up. And I know feedback, we're coming up to the hour as well, so perfect timing. But perhaps I could then direct because I know that investor feedback is important to you.

58:10 But if I could ask you to wrap up, that'd be great. Thanks very much. I'd say I appreciate the opportunity to go our results. In terms of the investor and shareholder perspective. Clearly, we think we represent incredibly good value in terms of trading at a discount to our tangible net asset value, but our job is to make sure we continue to deliver results from a robust and resilient platform and to trade through the current economic uncertainties, and that's our intention for the course of this current financial year. And we'll keep everybody updated as as and when we're able to. Sorry, Ian, I managed to mute you instead of myself just as you created the wrap up. But thanks once again for the presentation today. Could I ask investors please not to close this session as you'll now be automatically redirected for the opportunity to provide feedback?

59:03 You access this meeting from our website, the feedback page will appear. Alternatively, if you came in through the link in the email, you'll be asked to log back in to provide feedback. Would be very good if you could do that for us. On behalf of the management team at one p. M. And Investor Meet company, I'd like to thank you for attending today's presentation. That now concludes today's session, and good afternoon to everyone. Thank you.