Shares in Bath-headquartered Time Finance were today trading at a near two-year low after it warned of a decline in both its annual profits and revenues.
The firm, which specialises in asset, loan and invoice finance products, said its financial outlook at been hit by the UK’s “macro-economic headwinds” while a key part of the business had also underperformed.
In a trading update, the firm – which is listed on the London Stock Exchange’s AIM market – warned that its pre-tax profits for the year to 31 May will fall by 45% to £1.1m compared to the previous year due to a goodwill write-off of a non-core brokerage and restructuring costs in streamlining the business.
Revenue for the year will come in at £23.6m, a fall of 2%.
The firm said earlier this year its board had taken the decision to streamline its management structure and reposition the team for own-book growth with the objective of removing infrastructure costs required for the non-core consumer brokerages.
This resulted in a one-off exceptional cost of around £700,000 and a corresponding reduction in staff costs.
It also said it had made significant progress towards delivering the medium-term strategy to significantly increase own-book deal origination and its commercial lending and plans for the divestment of its non-core, consumer-focussed brokerage businesses were progressing well.
During the year, its non-core brokerage businesses had continued to be significantly impacted by the effects of the pandemic, it said.
Chief executive officer Ed Rimmer added: “The results for the year ended 31 May mark a significant first step on the group’s journey to enacting the new strategy first announced in June of 2021.
“The results, while satisfactory, reflect the organic growth we anticipated in relation to the commercial own-book lending but are impacted by the continued underperformance of the non-core consumer brokerages and wider macro-economic headwinds that have buffeted the UK economy over the past six months.
“The changes made, combined with our renewed focus on own-book lending, mean that the group is now better placed to benefit from further organic growth and we look forward to building value for our shareholders in the near term.”
By focussing on growing its commercial lending book in what it called a “safe and secure manner”, its lending book was 18% larger at 31 May this year than the same date in 2021, while the volume of deals originated for own-book lending was 36% higher than the prior year.
It added: “Importantly, a large part of this growth was achieved during the final quarter of the financial year, indicating that the group’s re-focused strategy is becoming embedded and is setting the business up on a solid footing for the current financial period and beyond.
“This in turn provides management with a degree of optimism as we begin the new financial year in terms of both repeat and future revenue streams.”
In line with the new re-focused strategy, the firm decided to close its non-core, second-hand vehicle brokerage business which, despite concerted efforts, remained loss making throughout the period since the start of the pandemic and was not showing any indications of returning to its pre-Covid business levels.
This depressed the group’s consolidated profits in the financial year by around £300,000 with the “dampening effect” likely to continue, the group warned.
Closing the business resulted in an exceptional, one-off accounting adjustment to write-off around £1m of goodwill associated with the original acquisition.
“However, it also eliminates further ongoing losses being incurred, enables more management time to be focused on the profitable parts of the business and provides greater clarity of funding proposition coming into the new financial year,” the group added.
Time Finance’s shares were trading at 17.6p at midday, down 3.6% on the day. In mid-January the shares were 27p.
