Post on 11-Sep-2020
Project “Zoo” presentationApril 2017
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This presentation ("Presentation") has been prepared by 1pm plc (the "Company") and is confidential and is only directed at persons who fall within theexemptions contained in Articles 19 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (such as persons who areauthorised or exempt persons within the meaning of the Financial Services and Markets Act 2000 and certain other investment professionals, high networth companies, unincorporated associations or partnerships and the trustees of high value trusts) and persons who are otherwise permitted by law toreceive it.
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Company must be made solely on the basis of the information contained in the admission document to be published by the Company. While allreasonable care has been taken to ensure that the facts stated in this Presentation are accurate and that any forecasts, opinions and expectationscontained herein are fair and reasonable, this Presentation has not been verified and no reliance whatsoever should be placed on them. Accordingly,no representation or warranty express or implied is made to the fairness, accuracy, completeness or correctness of this Presentation or the opinionscontained herein and each recipient of this Presentation must make its own investigation and assessment of the matters contained herein. In particular,but without prejudice to the generality of the foregoing, no representation or warranty is given, and no responsibility or liability is accepted, as to theachievement or reasonableness of any future projections or the assumptions underlying them, or any forecasts, estimates, or statements as to prospectscontained or referred to in this Presentation. Save in the case of fraud, no responsibility or liability whatsoever is accepted by any person for any losshowsoever arising from any use of, or in connection with, this Presentation or its contents or otherwise arising in connection therewith. In issuing thisPresentation, the Company does not undertake any obligation to update or to correct any inaccuracies which may become apparent in thisPresentation.
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Disclaimer
Ed Rimmer, MD designate, Commercial Finance Division
• Currently engaged by 1pm in a consulting capacity with view to full-time role and plc directorship (terms agreed)
• 17 years with leading independent player, Bibby Financial Services, including 5 years as UK CEO
• Extensive experience at growing businesses, both organically and through acquisitions
• Whilst UK CEO of Bibby, increased new business and market share by 50% and doubled profitability
• Will lead 1pm’s drive to consolidate niche, high-quality, under-exploited businesses in Invoice Finance
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Presentation team
Ian Smith, CEO
• 15 months in full-time CEO role
• Previous 2 years in Non-exec Chairman role
• Instigated the current strategic plan, leading on the previous Placing and recent acquisitions
• 23 years in listed and privately-owned, PE/VC - backed entities, leading strategic transformations
and in attendance, James Roberts, CFO; joining 2 May 2017
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£12m - £15m fundraising
Sound track record in ASSET FINANCE
Successful extension to BUSINESS LOANS
Now adding INVOICE FINANCE
Take advantage of a market opportunity to consolidate niche,
small-ticket invoice finance providers.
First target – sign upon Placing announcement
Second target in diligence.
Will increase group returns on net assets
Strategic objective to introduce “adjacent” products to provide a full suite of business finance choices for SMEs
0
500
1000
1500
2000
2500
3000
3500
4000
2011 2012 2013 2014 2015 2016 2016Group
0
2000
4000
6000
8000
10000
12000
14000
PB
T £
k
Rev
enu
e £
k
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Financial performance – 31 May y/e
• Top line CAGR 33% over 5 years to 2016
• 10 x growth in PBT from 2011 to 2016
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The SME finance market
• 5.5m SMEs in the UK – employing 15.6m people (BEIS Business Population Estimates 2016)
• Circa 70% are current or potential borrowers (British Business Bank Business Finance Survey: SMEs 2016)
• Over 50% of these still go to their main bank when first identifying a financing need (British Business Bank Business Finance Survey: SMEs 2016)
• Their challenge is immediate day-to-day cash flow
• High-street banks no longer structured to meet this immediate need
• In 2016 only 6% actually applied to their bank for a new loan or overdraft (BDRC Continental (2016) SME Finance Monitor)
• So, where do SME borrowers go?
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Alternative Finance
• As a specialist provider, we have:
• greater flexibility
• faster service
• more personal approach
• 13 days from proposal to pay-out(HSBs up to 60 days)
• Provide or arrange commercial leases,loans and vehicle finance
• Business-critical equipment for SMEs
• Finance from £1,000 to £250,000; 3 to 60months
• Across a broad range of sectors
• 22% of SMEs still use credit cards forfinance (British Business Bank Business FinanceSurvey: SMEs 2016)
• at a blended interest rate of circa 17%we are a cost-competitive alternative
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Deals
“1pm had agreed and paid out a
£42,000 loan which allowed us to
begin repair work faster than
planned and reopen our gym
before substantial losses to our
memberships.”
Mark – Space Premier Fitness
“Within two weeks 1pm had
secured, agreed and paid out over
£50,000 to allow us fund the
equipment we needed for our
newest venture.”
John Ennis/Matt Farrell – Graffiti Group
“As I’m not a homeowner it was
hard to find funding for my new
start business, 1pm managed to
source £20,000. Our gym has been
open 6 weeks and already has over
250 members.”
Chris Kirkby – Kirkby Gyms
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Why we succeed
• Underwriting decision within 4 hours
• Every customer circumstance is a ‘story’requiring a ‘pair of eyes’ on the deal andpotentially a site visit – we areoperationally set up to do this
• Strict underwriting and credit control –aim to be “brilliant at the basics”
• PGs on all advances
• Write-off rate less than 1% of portfolio
• Typically dealing with owner-managers forwhom their business is their life – often alower credit risk than may be apparentfrom their trading results
• Receivables now total c. £75m.
• £15m of unearned income
• Carrying an impairment provision of c.£1m (1.67% of capital outstanding)
• Cautious, prudent approach to growth
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Breadth of portfolio
23%
11%
11%
9%5%
5%
5%
4%
28%
Restaurants / Cafes
Beauty and Hairdressing
Garage
Retail
Health and Fitness
Pubs and Bars
Takeaway
Scaffolds
Other
13%
12%
11%
9%
9%8%
7%
5%
27%
Telephone systems
Survey equipment
Garage
Data collection units
Catering
Energy management
Laundry
Office
Other
8.62%
7.06%
4.96%
3.70%
3.29%
2.9%
2.48%
2.38%
2.33%
2.09%
2.06%2.03%
Freight transport by road
Remediation activities andother waste managementservices
Renting and leasing ofconstruction and civilengineering machinery andequipmentOther transportation supportactivities
Demolition
Specialised constructionactivities (other than scaffolderection) n.e.c.
Private companiesQuantum Finance
(Investec);Armada Leasing;Kingsway; GAM;
...multiple small brokers with their own book
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Competition
Banks9 consecutive quarters
of positive net bank lending to SMEs, but no
longer structured to support smaller
businesses
Challenger BanksAlthough lessors
themselves, they do not
operate in the smaller end of the market and
instead lend to us to lend-on – 11.5% NIM
Alternative finance platforms
P2P lending up 30% in 2016 (AltFi Data 2016).
The FinTech trend needs to be deployed better in lending to business
Quoted companiesPrivate and Commercial Finance Group (PCFG), although the business
lending part of PCFG is mostly vehicles
Three divisions: Asset Finance (long-established); Loans (recently formed) and now Commercial Finance.
Theoretically widespread, but in practice there are few businesses of scale in small-ticket lending.
Banks Challenger Banks Alternative finance platforms Quoted companies Private companies
Flexibility X X
Speed of service X
Personal approach X X X X
Broad range of financial products X X
Investment in resources
2014
Acquisition:
Academy 2015
Adjacent products
iLoans
2017
‘Fintech’ platform
Acquisition:
Bradgate2016
Bell Finance
2017
Further M&A?
Market Cap May 2015 £25m
Market Cap target £100m
Goal
• £100m market cap
Objectives
• Building scale through a model of distributed separate entities
• Having a multi-channel, multi-product offering to SMEs
• Maintaining risk mitigation through funding and broking
• Strict underwriting and credit control policies
• Being appropriately geared with cost-effective funding
• Being digitally capable (e.g. Fintech)
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Strategic growth plan
Currently £33m
The Invoice Finance Process
Client sells product / service on credit terms
Invoice raised and sent electronically
to Lender
Lender performs risk checks i.e. verify invoice /
credit check customers
Lender advances between 75-90%
of the value of invoices
Customers pay the Lender directly
As Lender collects customer payments,
balance paid to client less fees
Further sales and invoices
generated and continues through
the cycle
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£16.0bn
£17.3bn
£18.9bn£19.3bn
£20.3bn
£22.2bn
£10
£12
£14
£16
£18
£20
£22
£24
2011 2012 2013 2014 2015 2016
Bill
ion
s
The UK Invoice Finance market
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Q109
Q3 Q110
Q3 Q111
Q3 Q112
Q3 Q113
Q3 Q114
Q3 Q115
Q3 Q116
£m
Domestic factoring Domestic Invoice Discounting
Export factoring Export Invoice Discounting
Non recourse
• Debtors financed per quarter • Advances
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Onepm CF
2017 Competitive landscapeR
isk Q
ualit
y
Small-ticket Mid-marketFull service Asset
Based Lending
Ashley
I G F
Calverton
Gener8
Factor 21
Bibby
Group
Aldermore
Close
Shawbrook
RBS IF
Clydesdale
HSBC IFSantander
Barclays
LTSB CFS
ABN
Amro
Leumi
ABL
Positive
Ultimate
Regency
Amicus
Pulse
Secure
Trust
Metro
Bank
Skipton
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Hitachi
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First target – Gener8 Finance
The business and reasons to acquire:
• Good quality client portfolio; 145 clients and 4.5 years average client life
• Very low levels of historic bad debts
• Excellent reputation for client service
• 2016 Revenue £2.6m; PBT £0.9m (34%); Lending £12m on £30m receivables
• Strong relationship with debt provider (Lloyds) who have funded the business since start up in 2008
• Robust back office processes and procedures – 15 staff
• Oxford based and predominately targets clients south of Birmingham
• Strong relationship between exiting CEO and Ed Rimmer
• Excellent platform from which to implement a controlled expansion strategy
• Significant cross selling opportunities
Consideration:
• £5.25m in cash on Completion (from Placing proceeds)
• Represents circa 6.5x normalised current PBT.
Note: Gener8’s exiting CEO has indicated he will reinvest circa £150k in the proposed placing.
Status of the acquisition:
• Due Diligence completed with no “Red Flags”
• Meeting held with Lloyds who are supportive of change in control and future plans
• 6 month handover agreed with exiting CEO
• Legal documentation drafted
• Target date for signing SPA (exchange of contracts) and announcement: 10th May 2017.
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Second target & acquisition status
The business and reasons to acquire:
• Steady business, conservatively run with clear opportunities for growth
• Well respected management team, well known to Ed Rimmer
• Management wish to continue in their roles and have strong buy-in to being part of the 1pm group
• Excellent reputation for client service
• Low levels of historic bad debt
• 2016 Revenue £4.1m; PBT £1.1m (27%). Lending £23m on £46m receivables
• Very good relationship with debt provider (RBS), great opportunity for more attractive terms to be negotiated
• Based in Manchester with sub office in Birmingham (total 24 staff), therefore providing excellent complementary regional fit with Gener8 Finance.
Status of the acquisition:
• Letter of Intent signed, with exclusivity period
• Internal Due Diligence conducted with no “Red Flags”
• External Due Diligence in progress
• Meeting to be held with debt provider
• Proposed timing: Completion late May/early June 2017
Proposed consideration:
• £4.5m cash on Completion (from Placing proceeds)
• £2.0m deferred cash over 3 years
• £2.5m share-based earn-out over 3 years
• £9.0m total. Circa 6x current year PBT excluding earn-out
Short Term
• Complete organised handover with exiting CEO
• Focus on solidifying key client relationships
• Appoint Sales Director and build internal sales team to boost new business
• Invest in marketing
• Complete second acquisition
Longer Term
• Drive cross selling opportunities within the 1pm group, including improved use of technology
• Deliver economies of scale from enlarged operation where possible
• Pursue other suitable acquisition opportunities
• Development of other commercial finance products
• Position Onepm Commercial Finance as a challenger to mid-market players
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Organic growth plan post-acquisitions
On completion of acquisitions, Commercial Finance Division will be comparable in size to the Asset Finance and Loans Divisions with circa £75m of receivables and yielding 20%+ on funds advanced.
The strategic proposition:
• 1pm to be a consolidator of niche, high-quality, well-run, small-ticket invoice discounting and factoring businesses – butwhich are under-exploited in terms of growth potential;
• 1pm to be a provider of a range of relevant finance solutions to the SME sector;
• Increase shareholder returns, targeting 15%+ return on net assets in the short-term
Transaction outline:
• £12 - £15m fundraise – a Placing and £1m Open Offer
• To finance £5.25m of cash consideration for the acquisition of Gener8
• To finance the £4.5m cash element of the proposed consideration for the second target
• To provide funds for initial post-acquisition growth – industry norm is 5:1 leverage with bank facilities – high ROE – 30%+
• To meet transaction expenses
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Proposed transaction
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Summary
• The 1pm group has a clear strategic growth plan and is successfully implementing it;
• There is a clear and present opportunity now to introduce complementary adjacent SME
lending products such as Invoice Discounting and Factoring;
• The plan is compelling – a consolidator of independent, high-quality, well-run, but under-
exploited players in the small-ticket segment of the market – a space we know well;
• Seeking shareholder and new investor support to raise £12 - £15m to acquire identified
target businesses;
• The acquisitions will be earnings-enhancing and will increase shareholder returns;
• This will position 1pm as a balanced, established, risk-mitigated finance provider to a
broad range of SMEs;
• Board is optimistic and confident of further organic growth.
Appendices
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Example once equity is being utilised:
Equity £2m
5:1 leverage with bank facilities £10m
Total to lend £12m
Contribution based on historic margins £600k
Return on Equity 30%
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Initial post-acquisition growth utilisation
Client numbers
-
5,000
10,000
15,000
20,000
25,000
Q109
Q3 Q110
Q3 Q111
Q3 Q112
Q3 Q113
Q3 Q114
Q3 Q115
Q3 Q116
Domestic FactoringDomestic Invoice DiscountingExportABL facilities
£0 - £500k
£500k - £1m
£1m- £5m
£5m - £10m
£10m - £50m
£50m+
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
Q109
Q3 Q110
Q3 Q111
Q3 Q112
Q3 Q113
Q3 Q114
Q3 Q115
Q3 Q116
• driven by £0 - £500k and £1m - £5m segments • driven by domestic factoring and invoice discounting
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Onepm market positioning
Equality:
Operate in ‘partnership’
with customer to meet their
needs
Authority:
Dictate the way the
product and service works
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Competitor Performance – client numbers
Company 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
CLIENT NUMBERS
2015 OVER 2014 +/-
% CHANGE,
2015 OVER
2014
MARKET
SHARE
2015 %
1 RBSIF 7436 10654 10529 9779 9906 8745 9792 8950 9945 9967 9934 -33 0% 20.10%
2 Lloyds CF 8115 8467 9604 9837 9974 9539 9656 10059 10299 9611 9299 -1312 -14% 18.90%
3 HSBC 6320 6263 6392 6159 5699 5714 6045 6382 6749 7428 7649 220 3% 17.40%
4 Bibby Financial Services 2737 2980 3160 3385 3530 3790 4008 4227 2877 3755 3969 214 6% 9%
5 Barclays 4815 5061 5117 4967 3723 3297 3235 3149 3003 2999 2912 -77 -3% 6.40%
6 Close 1016 1087 1097 1025 999 1079 1029 1017 1026 1075 1105 30 3% 2.50%
7 Aldermore 677 741 813 819 729 892 1009 1114 1196 1194 1096 -108 -9% 2.50%
8 ABN AMRO 768 778 837 998 922 964 979 998 878 857 795 -62 -7% 1.80%
9 Hitachi Capital 378 377 360 366 433 530 647 641 -6 -1% 1.50%
10 Ultimate 223 222 299 311 279 275 308 400 583 193 46% 1.30%
11 Skipton Business Finance 205 246 274 312 358 409 492 553 61 12% 1.30%
12 BNP Parisbas (formerly Fortis) 116 492 590 361 313 369 404 467 532 539 7 1% 1.20%
13 Santander (Liquidity) 104 125 129 117 127 212 276 403 459 56 14% 1%
14 Factor 21 114 138 154 162 170 179 221 284 340 56 20% 0.90%
15 Ashley 204 245 265 256 235 260 292 284 311 27 10% 0.70%
16 IGF 521 566 515 405 414 399 392 223 221 223 231 8 4% 0.50%
17 Calverton 117 103 123 151 165 173 202 226 24 12% 0.50%
18 Shawbrook (Formerly Centric) 220 201 194 204 214 229 217 224 7 3% 0.50%
19 Leumi ABL 51 80 103 114 130 140 153 177 199 199 0 0% 0.50%
20 Positive 75 105 117 127 151 154 182 190 8 4% 0.40%
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Non Execs:John Newman (Chair),
Julian Telling, Ron Russell
James RobertsCFO
Mike NolanMD Asset Finance
Ed RimmerMD Commercial
Finance
Statutory Board
Operating Board
Junior Board
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Management
GM Onepm
GMLoans
GMBradgate
GMAcademy
Ian SmithCEO
Group HR
Academy Vehicles
Compliance
Bradgate
Group FC
iLoans
Projects
tba: GMInvoice Finance
tba: Gener8
Funding Structure
Bank facility
Block lines £62m
£1m Over-draft
SLN £7.5m
Equity Placing
Back-2-back
Onepm Treasury Ltd
1pm (UK) Ltd t/a Onepm Finance
Academy Leasing Ltd
Bradgate Business Finance Ltd (including Bell Finance)
1pm plc
Intelligent Loans
Onepm Commercial Finance Ltd
First charge
First charge
First charge
Second charge
First chargeNotes: In addition to First and Second charges, security also taken by funders through assignment of underlying lease, loan and invoice finance contracts
Cross guarantees including 1pm plc
Asset Finance
InvoiceFinance
Loan Finance
First charge
27
Current funding
28
1pm plc ownership – top 10 holders
Now LombardOdier
29
H1 2017 Origination and P&L
• Approx 50% of lease business originated by Academy and
Bradgate is ‘broked-on’ for commission (24% as a Group).
Vehicles all broked-on; no funding risk taken
• Pro-rata lease figures reflect a competitive market over past 12
months and a policy decision to not relax credit criteria
• Loans figures reflect the level of designated funding for loans and
management of the proportion of loans to leases in accordance
with our business model
H1:2016 H2:2016 H1:2017
LEASES£m: Onepm 5.5 5.8 5.0
Academy 4.4 8.5 10.8
Bradgate 2.2 6.4
9.9 16.5 22.2
LOANS£m: Onepm 6.1 4.0 4.4
VEHICLES£m: Academy 4.0 6.9 9.8
20.0 27.4 36.4
37% 33%
ACTUAL
H1: 2016 H2: 2016 H1: 2017
REVENUE £m: Onepm 3.79 4.21 4.23
Academy 1.46 2.85 3.14
Bradgate 0 0.24 0.62
5.25 7.30 7.99
PBT £m: Onepm 1.26 0.94 1.06
Academy 0.50 1.00 0.96
Bradgate 0 0.02 0.03
1.76 1.96 2.05
Exceptional items £m -0.10 -0.27 0
PBT £m: 1.66 1.69 2.05
Basic earnings per share (p): 2.91 2.96 3.08
ACTUAL
30
H1 2017 KPIs & Funding
• Funding is in the form of Block Discount facilities from 12 banks, plus HNW loans in the form
of a £7.5m Secured Loan Note and (in Onepm’s case) 7 individuals and 1 corporate lender
• Block Discount lenders include: Siemens; Lombard; Investec; Aldermore; Hitachi; Close;
Hampshire Trust; Shawbrook; Conister
H1: 2016 H2: 2016 H1: 2017
Gross margin %: Onepm 57.8 53.4 53.7
Academy 82.4 79.3 76.5
Bradgate 0 70.8 63.4
Blended 64.6 64.1 63.4
Net Interest Margin %:
Blended average price 17.2 16.0 16.7
Blended cost of funds 5.7 5.2 5.2
Net Interest Margin: 11.5 10.8 11.5
Block funding: Facilities £m 42.8 62.2 62.0
Utili l ised £m 29.3 37.6 43.8
Utilised % 68.5% 60.5% 70.6%
Headroom £m 13.5 24.6 18.2
ACTUAL