In our Jan 21 initiation note ‘Time to be rerated’ we suggested that Time’s results for H1 to 30 Nov 20 showed that a recovery from a Covid-induced slump in good quality lending demand and spike in bad debt provisions was well underway. In a corporate update released today Time has confirmed ongoing momentum of that recovery.
Forbearance levels have reduced from the June 20 pandemic peak of £25m to under £2.5m on 31 Mar 21, with total arrears now below the 28 Feb 20 pre-Covid level. This has contributed to net tangible assets rising to £28.5m on 31 Mar 21 along with cash and equivalents increasing to £6m (31 May 20: £1.5m). The numbers are clearly moving in the right direction.
Time has also announced renewed funding facilities which total over £170m. This provides significant headroom to grow (£97m as at 30 Nov 20). Since our initiation note, Time has appointed Ed Rimmer as interim CEO. Ed has 20 years of commercial finance experience and was previously Time’s COO.
All of the above suggests that momentum is positive for the fundamentals of Time Finance. We also remind readers that Time looks undervalued with respect to peers. Its price-to-book ratio of 0.5 is far below the peer group median of 1.3 (the difference has in fact increased since our initiation note in January: 0.4 vs 1.0).
There is potential for further rerating.
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