Back in March 2008, when the credit crunch was putting the financial sector through the mincer, few held out much hope for Ultimate Finance (UTF). At the time, the boutique finance house was barely profitable, paid no dividend and had a stock market value of just £1.47m. But a prudent approach to lending (bad debts remain below 1 per cent of loans) and a tight hold on costs ensured the group's survival, and in the six months to last December pre-tax profits increased 70 per cent to a record £560,000.
- Cashing in on small-company demand for loans
- Bad debts under control
- Well-funded
- Broad range of services
- Growing competition
- No customer deposit base
Part of Ultimate's success has come by kind permission of the high-street banks, which were obliged to pay less attention to their small-business customers while they focused on toxic loans. So Ultimate Finance proceeded to build up a range of services designed to oil the operating cogs of run-of-the-mill small companies.
There is a pressing need for such facilities. Chief executive Jeremy Coombes reckons that most small and medium-sized companies are disillusioned with the big banks as just over half of all funding applications are rejected. But small companies need more than just loans. For example, Ultimate provides a factoring service, where it offers cash advances on unpaid invoices; then it puts a client manager in place to manage the ledger and chase up debtors. Or, for companies wishing to stay hands-on (and pay a smaller fee), there is a simple invoice discounting service where the client remains responsible for collecting the debts. Ultimate also provides trade finance, which helps businesses bridge the gap between goods being paid for and sold.
| ULTIMATE FINANCE (UFG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 24p | MARKET VALUE: | £17.9m | |
| TOUCH: | 23p-24p | 12M HIGH: | 24p | Low: 13p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | 7 | |
| NET ASSET VALUE: | 15p | NET DEBT | 264% | |
| Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 6.44 | 0.45 | 1.33 | 0.6 |
| 2011 | 9.71 | 0.72 | 1.20 | 0.7 |
| 2012 | 10.9 | 1.19 | 1.36 | 0.8 |
| 2013* | 12.3 | 2.25 | 2.70 | 0.9 |
| 2014* | 13.5 | 3.24 | 3.50 | 1.0 |
| % change | +10 | +44 | +30 | +11 |
Normal market size: 7,000 Market makers: 6 Beta: 0.3 *WH Ireland forecasts (profits & earnings not comparable) | ||||
New services have also been introduced and are working well. Ashley Business Cash provides companies as diverse as restaurants and MOT garages with a cash injection based on future sales, and in return takes a slice of future credit-card receipts; in the second half this loan book jumped from £42,000 to £707,000. Other services include asset finance, which provides funds for small-ticket hire purchase items and leasing, and demand is strong - its loan book grew 54 per cent to £3.38m in the second half of 2012.
Group finances look in decent shape. Ultimate still has £5.4m headroom on a £34m borrowing facility with Lloyds Banking, which was recently extended by a year to July 2015. So Mr Coombes reckons there is enough to meet Ultimate's financing needs for the time being. That said, the group has to rely on raising funds from the big banks because, unlike some operators, such as Secure Trust, it has no deposits from retail customers.
