1pm (LON:OPM) 17/1, 1H results chat with Ian Smith, the CEO.
1pm is a non bank, specialising in lending to tier 2 & 3 UK SMEs. The PLC announced interim results, to the end of November on Wednesday 15/1. The share price had risen almost 40% in the past few month ( from an oversold position) but fell 20% on the results news. The current market cap is around £30m and the stock trades on AIM. The average customer loan is £15k and the LTV advanced on hard assets (with personal guarantees). Gross lending, at 30/11 was £143.5m in total , net £122.8m. The largest sector lent to is kept below a 5% total exposure. At 31/11 asset finance has a £70.4m book, loans £8.3m and invoice finance £44.1m. Freight transport, maintenance, repair is the largest sector exposure at 4.9% of the loan book (and 10.5% of deals), business support 4% (9.4% of deals), unlicensed restaurants 2.5% (10.7% of deal number) and licensed 2.2% (9.4% of deals). A good spread of risk is sort.
Ian Smith, the CEO has been cautious in recent years with many issues to consider when lending. The 1H numbers do show the flexibility in risk management that 1pm has and still gently growing the book. Business can either be brokers on,and a commission taken or funded by the balance sheet. A loan is typically for 3 years and at 12% of interest, funded at 3.9%. The 1H 2020 saw an increase in brokered on business to 52% of new deal origination (48% FY 19, 40% FY18) and this increase resulted in a reduced profit margin. Total deal origination was up 7% (industry too) to £87m but revenues were down 3% to £15.6m and PBT down 21% to £3.2m. The EPS fell from 3.14p to 2.7p and the interim dividend set at 0.35p a share, up 29%. The own book lending portfolio was £143m being up 1%. Gearing is around 3x of net tangible assets. The bad debt provision hike continues, reaching 2.2% of net portfolio (from 1.9%, upped by £300k) with 3% the target. In reality, bad debt are less than 1% but the PLC is being prudent and has built up a reserve in recent years. The personal guarantee from a borrowers works very well. The retail investor sees this bad debt increase as optically bad news. In summary,…
