Time Finance (TIME:31.5p), an alternative provider of finance to the high-street and challenger banks, has upgraded earnings guidance again. The Bath-based group provides three main finance products – invoice finance, asset finance and loan finance – which small and medium-sized enterprises (SMEs) require for day-to-day working capital requirements and to grow their businesses over the longer term.
Business has been booming, as highlighted by a near-quadrupling of pre-tax profits to £4.2mn in the 12 months to 31 May 2023. Moreover, scaling-secured lending activities and transaction size have driven the lending book to a record high of £180mn on 31 October 2023, or a third higher than in May 2022. Importantly, delinquency debt levels remain static, reflecting the focus on lending to more established and credit-worthy businesses.
The operational gearing of the business is such that profit growth strongly outpaces revenue growth in a positive revenue cycle. House broker Cavendish upgraded its revenue estimate from £30.1mn to £30.8mn for the 12 months to 31 May 2024, implying 11.5 per cent annual growth, but pre-tax profit guidance has been raised from £5mn to £5.4mn, implying 28 per cent annual growth. On this basis, the shares trade on a modest forward price/earnings (PE) ratio of 7.1 and on an unwarranted 25 per cent discount to tangible net asset value (TNAV) estimates, too.