Time Finance plc (B5D1.F) Earnings Call Transcript & Summary

Okay. So we're up over 30-odd viewers now. So I'm just going to pass over to the guys to get started. And so yes, thanks all for joining today. It's an interim results presentation with James Roberts, CFO; and Ed Rimmer, CEO of Time Finance. And yes, without further ado, I'll pass over to Ed to get us started.

Thank you, [ Finton ]. Good afternoon, everyone, and welcome to the half year results presentation from myself and James Roberts for Time Finance. Just by way of brief introductions, I'm Ed Rimmer, Chief Executive. I was appointed into this role in June '21. We had a 4-year plan that was put in place coming out of the COVID pandemic, which we completed last May, very successfully. And we've recently put together a new cycle of strategy for the next 3 years, which I'll be able to update you on today. My background is very much in small business lending. I spent 22 years with Bibby Financial Services, who was one of the largest independent providers of invoice discounting and factoring in the U.K. And overall, I've had just over 30 years now experience in lending to SMEs. James?

Thanks, Ed, and good afternoon, everybody. Yes, I'm James Roberts. I'm the CFO of Time Finance. I haven't quite at [indiscernible] 30 years, got a bit more hair on my head. I'm at 25 years in FS or so, of which over a decade has been in lending. I've worked to various AIM listed companies and been with Time now since May 2017.

Thanks, James. So we're going to lose the screens just in terms of our presenting, so we can focus on the slides on our screen. It's just a bit easy, and then we'll come back on when we answer questions at the end. So our interim results update, James will take you through the financials in terms of who we are and what we do. There's some very bad background noise I'm getting. If anyone who's not on mute, I wouldn't mind just putting themselves on mute, that would be much appreciated. Thank you. So in terms of who we are, what we do. So this is really for the people who are less familiar with the business. So I'll just spend a couple of minutes going through this. Fundamentally, we are now what's referred to as an alternative finance provider. That means we're not a bank. We're not a deposit-taking institution. Our challenge is to go and borrow the money from the banks, typically high street and challenger banks at the right rate, so that we can lend out at a margin, manage our operations, manage our sales functions, make sure bad debts are controlled to an acceptable level and ultimately make money at the end of it all. So we support U.K. businesses. We have around 9,500 customers and clients that we lend to in the U.K. We lend off our own book. The business prior to Time Finance was called 1pm, and that did have more of a brokerage angle than own book. We've since changed that and focused now primarily lending on our own balance sheet. We do still have the flexibility to broke on deals. That's generally within our asset finance business where they don't quite meet the criteria that we're looking for. And we are very focused on our multiproduct offering. So asset finance, invoice finance, secured loans, a combination of those products as that's one of the things that stands us out from the crowd. We are purely a business-to-business lender. We don't do any consumer finance. We're what's called a Tier 2 lender. We're not subprime. We're Tier 2, which means that we're not competing with the banks for Tier 1 business at finer rates. We focus very much on SMEs, typically businesses that turn over up to around GBP 10 million and have borrowing requirements for anything from GBP 5,000 up to GBP 5 million. At that point, I'll hand over to James. He's now going to take you through the financials. James, are you there? We can't hear you. Okay. I think we have a technical issue with the sound. James, do you want to just put your camera on and let us know whether you're still there?

James, maybe you...

Hello, you can hear me?

Yes, we can hear you, James.

Sorry. I don't quite know what happened there. I'll get the screen sharing back on. Apologies, everybody. IT is obviously not my strength. Let's get that going again. One second. Okay. Sorry about that, a little hiatus. The joys of IT. Yes, so I'm just going to do a quick whistle stop tour of the numbers, 4 or 5 slides on the 6 months trading to the end of November. And then I'm going to hand back to Ed, who can run through the strategy and where we go from here. If there are 4 key takeouts from the numbers section, these are the points I'd really like to stress on this slide here. Our numbers are based on 18 consecutive quarters of lending book growth. So since we've come out of COVID, we've grown quarter-on-quarter without interruption, which we think is quite impressive. We've got a very robust, in our mind, an ever-strengthening month-to-month balance sheet. We reinvest our profits into the business to grow our balance sheet and hopefully, the inherent value of the of the business, and that's at all-time highs now. We've seen growth in all our financial key metrics on the profit before -- on the profit and loss account. And we're in the lending game. So credit arrears and write-offs are absolutely key, and we're seeing those well controlled and indeed falling. So those are the 4 key things, which in the current macroeconomic environment, we're quite pleased with. Some of the key metrics in a little bit more detail here. And if you look at the right-hand side of this table, you can see they've all got nice green ticks next to them. So at a high level, we're quite pleased. The key ones here are the own book deal originations increased by nearly 50%, 48%, up to just under GBP 63 million. That's up from GBP 42 million in the same period 12 months before. What is own book deal origination and why is it important? This is the deals that come across our desk and we write ourselves and put them on our balance sheet. So it's roughly 1/3 to 1/2 of what comes across our desk. We pick the right credits for us and we write them on our own balance sheet. And it's important because if your origination goes up and it's of the right qualities and the deals work as planned, that will drop through into increased revenue and in turn, profit over the coming months and indeed years over the length of the lease of the loan. So it's an early warning sign that things are going in the right direction or conversely in the wrong direction. As you can see there, 48% growth from the period 12 months before, we think is pretty good. That's led to the lending book reaching an all-time high of just over GBP 235 million, 12% or so above where it was in November 2024. And that then has led to revenue increasing to, again, an H1 record of GBP 18.8 million. Some of you may notice that the revenue increase of 4% is a bit below the gross lending book increase of 12%. That's because there's a lag of when the -- from the lending book growing to becoming revenue. If you look lower down, there's an unearned income line, which shows 13% growth to GBP 29.6 million. That's the future interest in these leases and the loans stored up on the balance sheet, but they're released to the P&L every month during the life of the lease and the loan. So the book has grown, but it hasn't all come through yet to the revenue in this period, but it will do over the next 3, 6, 9, 12 months and beyond. Profit before tax has increased again, another H1 record, increased by 10% to GBP 4.3 million. And a crucial point for us, and Ed will talk more about business improvement in a bit, but you can see our margins are increasing. We've increased by 100 bps since this time last year to 23%. That's led to earnings per share growth by 7% to GBP 3.47 million, which we're pleased with. So the P&L is all moving in the right direction. There is this GBP 29.6 million unearned income, which gives us future visibility of revenue. And if the deals work as planned, then that will turn into profit. So as we stand at the end of November, we've got nearly GBP 30 million of revenue stored up ready to drop into the P&L in coming months and years. I say it every time, on the one hand, I apologize on the other, I don't. But we are -- it's relatively easy to lend money, the skills and getting it back. So the next 2 lines, arrears and write-offs are absolutely key metrics for us. If these were increasing and increasing significantly, then there could be trouble coming down the line. But we can see arrears have fallen by 0.8% to 4.5%. That's the lowest they've been since COVID. And write-offs, we are in the lending game invariably, some we will not be able to cure and get back on track or recover security through. They've fallen from 1.2% a year ago to 1%. So we've grown the book. We've increased the revenue. We've increased the profits. We've increased the margins, but we haven't done it at the expense of the quality of the book and storing up trouble for the future. As we can see, the book is performing better than it has done before. And all of that has led to the net tangible assets, the inherent value on the balance sheet increasing by 14% from the end of November in 2024 to just over GBP 47 million as at the end of November this year. So as I said, going back to the green ticks on the right, we think all the financial metrics are moving in the right direction, and it's all relatively pleasing. I mentioned that arrears and write-offs are key for us. So I just wanted to bring that to life here. This graph shows the arrears for the group and the 2 key growth areas of our business, hard asset and invoice finance since we came out of COVID. Just to elaborate a little bit on arrears, arrears aren't necessarily deals that will be written off. This is anything from -- there could be a day lay in paying us for whatever reason all the way through to deals which are in the legal process of trying to be recovered. But invariably, most of the arrears will be cured one way or the other in time. If that was going up, though, some will invariably be written off, and so it could be storing up trouble for the future. So this is quite an important graph for us, we feel, because it shows from the low teens coming out of COVID, it's fallen quite rapidly to the sort of mid-2022, it fell to about 6%, and then it's remained in the 4% to 6% bracket ever since, but with a general downward trend. So as I said, arrears are very well controlled. And what you can see in our 2 growth areas, hard asset and invoice finance are 2 key areas of focus. Those are actually lower than the overall group arrears. So that's particularly pleasing. So the areas we're focusing on and we're trying to write more and more of are actually have a better arrears performance than some of the other areas such as soft assets. So that's quite a key graph for us and shows we think everything is going in the right direction. Funding is also quite key for us. We've stated we're going to get towards GBP 300 million lending book over the next 2.5 years. Well, to do that, we have to have the right funding firepower in place. We put in between 10% and 20% of equity in every deal we write. So we need some funding partners behind us to help us write those deals. Pleasingly, we think we've got the funding firepower in place now to meet that GBP 300 million target. We'll constantly look to evolve it and change it and improve it. But as we stand here today, whatever happens, we've got the base level to meet those targets. You can see we've got funding of roughly GBP 265 million. We've drawn about GBP 170 million at the end of November, and we have headroom of about GBP 94 million or so to go up. Crucially, there's quite a lot of headroom. There's no nonutilization fees in there. So we're not paying for that headroom effectively. It's there to give us the firepower to grow forward. And we've got a number of funding partners who we've been very supportive and supported us through our growth period over the last few years over a number of years, British Business Bank, Aldermore, Siemens, NatWest, RBSI, et cetera, and a number of others are listed there. So we think we've got a very diversified funding panel, and we think we've got the funding in place to meet the targets that we've said. And the final slide for me before I hand back to Ed, in the lending game, in our view, risk is key and particularly for us, diversification and spread of lending is key. So this just shows the makeup of our lending book. And you can see the bar chart on the left. Note our largest sector is less than 13% of the book. And if you went to the trouble of adding them all up, they're less than 1/3 of the lending book in the top 10 sectors SIC codes. So we're very well spread. So if there's a particular downturn in one sector or another, obviously, it's not ideal. It's a bit of a pain, but it's not disastrous. We're incredibly well spread, and we focus on that. We also have a very experienced risk team, heads of risk in asset and IF, respectively, multiple experienced and skilled underwriters. We have a strict credit policy we adhere to what we think reflects risk and reward appropriately. IF also has security through the debtor book advance rate, while asset has security through the asset itself. And then there's also wherever we can, we'll take additional plan B or plan C security through the form of potentially debentures or cross-company guarantees, charges over property and PGs, et cetera. So risk is a very, very key thing for us as a lending business and one thing we think we're very well diversified and we have a very skilled and experienced colleagues in our risk department that mean these arrears and those write-offs are falling as we saw earlier. And with that, I'll hand back to Ed.

Thank you, James. So I just want to take you through where we are with our current strategic plan. As I mentioned, it's a refreshed plan that was put in place in June last year for a 3-year period. And it focuses on 4 key things. And they're all key in terms of getting the balance right. We are very much focused on, yes, growing the book, but not at the expense of credit quality and making sure that we do so efficiently and ultimately, that we also leverage our brand in terms of our colleagues, our introducers and all our stakeholders to make sure that we fundamentally have a better business. So I'll just take you through those 4 pillars, if you like, that are key to our current strategy. Lending book growth, our objective is to grow the book GBP 300 million plus by the end of the period to May '28, and there's a few initiatives listed there, not exhaustive that we're working on, expanding the invoice finance sales team. It's a very attractive area of our business in terms of invoice finance as a product. And we think there's still some geographical coverage where we've got some shortfalls. We have made some headway in getting the sales presence improved, still some improvements we can make. Product development, we've started to look at a stand-alone loans offering, secured loans. That is something that we currently do, but only in conjunction with the other lending facilities. And I see that developing into the start of the next financial year. The direct-to-market strategy has also started to be looked at. That's quite a big project. Most of our business comes from introducers, brokers, accountants and financial intermediaries. And it's a way that we can acquire business a little bit more cost competitively moving forward. And we can also cross-sell more into those clients because we have a direct relationship rather than through an intermediary. And acquisition is an area that we haven't really focused on in the previous plan. We spent 4 years repositioning the business, very much refocusing it. And I think the time is now right to focus on inorganic growth, obviously, for the right opportunities, and they would very much be focused in our core offerings of asset and invoice finance. We're not looking to go and diversify hugely away from what we class now as core business. Resilient lending, our objective there is to control arrears in the 5% to 6% range. As James just presented, they actually reduced in the half year to November, which was pleasing to see. We do think there's further room for improvement from that 5% to 6% range as we've demonstrated, but that's broadly the range that we accept as part of lending in the Tier 2 space. So how are we going to do that? Well, the focus is very much on what we now class as secured lending. You've heard that many times before, which is invoice finance and hard asset. They're the 2 predominant products that we now offer, and they account for in excess of 90% of our current lending book. We further strengthened the risk team, as James mentioned. We now have a dedicated Head of Risk in Invoice Finance. And we also have dedicated heads of underwriting and collections in the asset finance business. So very much around the experience and the knowledge and the expertise that we have in the business that is key to managing the risk as well as enhancing our systems. I won't go into that in great depth. It's really very much part of the next point in terms of operational leverage. But we are improving our systems. We've recently changed the front office systems for both asset and invoice finance, and we're in the process of changing the back office in asset finance to enhance our systems. Operational leverage is possibly the biggest change to the previous plan. This is really all about the next 3 years focusing on, yes, growing the business, taking on the right business, but focusing on back-office improvements. So can we grow the business with a lower comparative headcount than we had previously and ultimately reduce the cost-income ratio and increase the profit margin to the mid-20s, and that is our target by the end of this plan. How are we going to do that? Well, it's very much embracing technology, but it's also about challenging the way that we do things in our back offices, the way that we've always done things, things move, things migrate, better ways of doing things come into businesses. And that's what we've very much challenged ourselves on over the last 12 months. We took on a Head of Business Improvement 18 months ago. We've built a small team around here. We now have 5 people. We don't want that to get too big. You see many businesses going down this route, but we don't want it to be too small, so we can't get any traction. So it's very much balancing the spend that we're putting into investing in the business to make our systems and our back office more efficient and making sure that we don't do that at the expense of obviously reducing profitability. Improved data and reporting into the business will help us improve cross-selling. It will help us with our multiproduct offering, and it will help us ultimately grow the business at the front end. And as I've mentioned, enhancing our systems is key. We're not looking to develop our own systems. We are looking to develop our own data warehouse, so that we have a single view of all our customers and clients. And that's utilizing a number of API links into the business. We're really looking to enhance the relationships that we have with third-party suppliers of systems and managing those more robustly. So that's broadly the strategy that we're implementing there in terms of improving our efficiencies. And the final point is leveraging our brand further. So that's using our brand identity and our loyalty to ensure that the market is very much aware of what we have to offer. Yes, that is focused amongst our introducers, our clients and our customers. So we've recently undertaken a Net Promoter Score measurement. That was really good. We had an overall score in the 40s. It's the first time we've done this. We want to improve that so that we get over 50 next time. And ultimately, the more people that we can have as promoters of our business and ambassadors of our business, the more that we can market that into the market, not just with prospective new clients and introducers, but also employee staff engagement is really important to us. We undertook the best companies survey last year for the first time, and we had a really encouraging rating. We were a 1-star rating, which for the first time of doing this was really encouraging, as I say. We're repeating that this year, and we hope to further improve on that. And that's really around making sure that we have a great place to work and our colleagues feel engaged. And that obviously has a knock-on effect in terms of the improved service that we provide to introducers and clients and customers. So that's a summary of our strategic plan. So just to wrap up, in terms of the summary, you've heard from James in terms of the numbers. I won't repeat that all, but we have seen good growth in our lending book at the start of this year. We've seen revenues increase, profits increase. The funding is as good as it's ever been really since I've been involved in the business in terms of having enough headroom to grow and deliver the plan. And write-offs actually dropped from the previous half year comparative, which we were obviously really pleased to see in a challenging wider macroeconomic environment. Our strategy, you've just heard from me, it's very much around the 4 pillars: continuing to grow, trying to get the book past that GBP 300 million barrier for this 3-year cycle, making sure that it's to the right credit, so that we're resilient in our lending strategy, very much focusing on the efficiencies and improving the margins and making sure that we leverage our brand through our introducers, our customers, our clients and our internal colleagues. The investment case, well, I think that the track record of what we've done over the last 4.5 years has been really good and solid. And we've, I think, delivered what we said we would do. And in many ways, we've overperformed from what we said we would do. We've had continuous growth now. The momentum is carried into half year for this current financial year, which is good, and we've obviously just presented the numbers. So a good set of numbers to continue that momentum from the first 4-year plan. Our model is sustainable and proven. I always stress the point that James made. We have a very well spread and diversified book of lending. We're not reliant on one sector. We're not reliant on one introductory channel, and we don't have any significant individual customer or client concentration. So that makes me or helps me certainly sleep at night, and that is very much fundamental to managing the risk in this business, having a well-spread lending book. The focus on what we now class as core business has continued. So invoice finance and hard asset finance now make up 87% of the lending book. And as you can see there, well over 90% of new business in the 6-month period was to those core products. And we have a strong team with lots of experience, and we're continually adding to that team when the right opportunities come along for business to join what we consider to be an exciting journey and a good place to work. The last point is really just to say that in times of boom and bust, again, I've said this many times, alternative lenders like ourselves do pretty well. The key is to make sure that when the opportunities present themselves, you choose the right ones and you don't get too far away from what you consider to be outside comfort zones. And that's really, really important. There are opportunities out there at the moment for us as banks tighten their purses and move further away from small business lending, but it's really important to make sure that we back the right horses, so to speak. And certainly, we believe we're doing that at the moment, and there will be other opportunities to expand the business as we move forward. The final few slides is very much an appendix for people to look at their leisure. It shows some historic financial performances and the trends that we've seen over the last 4 years, gives you a little bit more information around our core offerings of asset finance and invoice finance. And then finally, just gives you an idea of where we play in the market and how we stand out from the crowd. But we've done those slides a number of times. And then there's one final one, which talks about our client and customer testimonials through the Trustpilot ratings that we've had, which again underpins our sales and marketing efforts. So leave you to look at those at your leisure. At that point, we will come back on the screens and open it up to any questions, which James will facilitate.

Thanks, Ed. Yes, hopefully, everyone can hear me now after that slide. Let me get my video going as well, there we are. Sorry about that. Yes. So we're just going to open up to questions. Thank you to those who submitted them. I think you're still able to if you've got other questions. Also worth drawing to your attention is, I think a poll is going to be sent around to you during this question section. You should be able to fill in the poll and Ed and I and the Board members will look at what you say back and look to improve presentations and things and take on board comments moving forward. So please do complete that poll during the next sort of 10, 15, 20 minutes as we hopefully answer some questions. So Ed, I'll own the questions. I'll run through them and then invariably 90% of them are fire your way. Right. First one from Keith. The executive directors have received generous and well-deserved rewards in terms of shares and bonuses. But the shareholders have not -- the share value has gone down from a year ago, and it's not performed particularly well compared to the stock market. Are you looking after the shareholders' interest? And what is happening in returning some of the money in the form of dividends? Ed, are you okay to answer that one?

Well, that's a nice, easy one to start with. Thank you, James. Yes, I think, look, it clearly depends on when investors bought the stock. I completely appreciate that. We had a business that -- sorry, there's quite a lot of background noise again. People could just turn off, thank you. Yes, we had a good run on the share price where we got up to mid-60s. It's then fallen back. But obviously, each month, as people have heard, our post-tax profit is retained in the business. And obviously, the net tangible assets have increased month-on-month. So we're now trading broadly at around 1x book. At the same time, some of the larger banks, financial institutions have had a better run on the markets and their ratings have gone up to what many would consider to be more normal, although obviously, over the number of years with the banks and the financial institutions, it's been anything other than normal in terms of valuations. I think all we can do is concentrate on what we're in control of, and that's delivering the results, delivering the strategy. And the share price will, I'm very confident, eventually catch up. It has recovered. 2 years ago, we were trading at a significant discount to tangible net assets. We're now at book value. We have been quite a bit ahead of that. And obviously, that's where we want to get the trading back to. And our job is to obviously make sure we deliver the results and come on to forums like this and let people know how we're doing and answer questions. But everything, as you've heard, is going in the right direction. So yes, I'm confident that the share price will pick up. The point about dividends, we're not a dividend-paying stock. We review that regularly. We had a review of that in December at our Board meeting. We were all agreed to remain as a nondividend paying stock. There is some more background noise. I'm really sorry, but if everyone could just make sure the cameras -- the sound is on mute. And that is the policy that we've decided to do. We believe that we can utilize our retained profits and our cash by growing the business, and we are a growth stock. So yes, that's the strategy of the business at the moment.

Thanks, Ed. Next question, I think, is for you as well, if that's okay. This is from Matt. And Matt asks, please share your thoughts on the current competitive environment.

Well, as ever, it's always competitive. It always has been. People say it's really competitive at the moment. I'm not sure there's ever been any time in my time in this business or in my previous years where it's been easy or there's been no competition. So is it more competitive than ever? Probably not, but I think there's some specifics that is evident at the moment. Some of the private equity money that's backing some of our competitors is ensuring that rates are driven down a little bit because top line is under pressure. But as I say, if it's not private equity that's driving that, there's always lenders out there that are trying to grow top line potentially at the expense of bottom line. That's always been the way. We're not one of those. So it's a competitive landscape in all our offerings. And it's obviously incumbent to us to make sure that we're positioned to be able to compete. We very much compete around our service, our flexibility, our speed of response and everything that you probably wouldn't associate with bigger banks. And yes, that is very -- there's still very clearly a place for service-driven lenders in our market, particularly with small businesses who quite often need a bit of flexibility and a bit of an arm around their shoulders to help guide them through what are very challenging conditions. So yes, that's the summary of that.

Thanks, Ed. I think one more for you, and then I'll take the one -- the next one after that. But Nick has asked, how do you win new business?

So as you heard in the presentation, most of our new business comes from intermediaries, brokers, accountants, consultants and solvency practitioners and the likes. It's really our job to go and build relationships with those intermediaries and make sure that they're really clear on what we can offer, why we're different and why they should deal with us and ultimately manage those relationships so we get a regular flow of business, and that's how we get business. And you'll also recall that we talked about a direct-to-market model. We have started that off in our asset finance business. We do have some hunters as we call them, that are charged with -- or tasked with going and finding business directly. But it's the same concept really rather than building relationships with introducers, they're building relationships directly with clients. And hopefully, that brings repeat business as well in the asset finance world. So yes, that's how we get business. And obviously, a lot of that is very dependent on the quality and the skills and the knowledge and the experience and the training that we give to our salespeople.

Thanks, Ed. Yes, I think there's a couple I can probably answer, give you a bit of a rest, and then we'll fire a few more to you, if that's okay. So I'll take this one. Ashton has asked, can you please explain why the revenue growth is lagging the growth in the loan book? And is your net lending margin coming under pressure? So 2 elements there. Thank you, Ashton. I think I alluded to when we ran through the numbers that there is a lag in terms of the book becoming revenue. And that's primarily due to the fact that the leases and the loans are not -- well, sorry, it's primarily due to the fact that we're an own book lender rather than a brokerage, which is when you broke down in the old world, it would hit your -- you get all the revenue in that 1 month. What we get with the lease and loan is we get the revenue spread over the length of that lease or loan. Now we'll lend anything from 3 months to 60 months, sometimes even 72 months. but it's very much a bell curve and our average lease is about 4 years. So we will be spreading that loan book growth -- the revenue associated with that loan book growth over a period of 4 years. So as we mentioned earlier, there's a big increase in unearned income, which is that stored up revenue, and that will be released over the months and years of the lease. So it is a bit of a lag in terms of the book grows and then the revenue flows through a little bit slower. But on the flip side, it's a good point because it gives you surety of income moving forward. So swing them around about in that respect. Hopefully, that answers that point. Is the margin coming under pressure? Yes and no, we're not in a race to the bottom. We have very strict credit criteria. We think we price risk and reward in. But as Ed mentioned, there's quite a bit of competition out there. So yes, there's always competition and pressure on the margin, but we think we're pretty well positioned to keep lending at the rates we are and enjoying, hopefully, the margins that we do. Hopefully, that answers that question. There was another one from Scott, who says, what's the current headcount and to achieve your 3-year plan, how much will it need to increase? I'll answer that one, if that's okay, and then hand back to Ed on some others. So just on the headcount, an interesting point is the headcount at the moment as at the end of November is about 155 people. Interestingly, 12 months before, it was about 157 and 158. So I think that demonstrates the point Ed alluded to about our focus on efficiencies and business improvement. We have increased revenue. We've increased profits. But actually, our headcount has fallen not by much, but it's fallen by a couple of people over the last 12 months. So we're very minded on headcount. The 3-year plan through to the end of May '28 is very much predicated on the back and middle offices remaining about the same level. So very, very few new hires in that level. There will, however, need to be some hires at the front end, some salespeople. Again, Ed alluded to them, we feel we're a little bit underweight in certain parts of the U.K. in terms of our sales presence. So we will be hiring a few more salespeople. But in the grand scheme of things, it's relatively immaterial. We think we can hit those numbers with a relatively immaterial increase in headcount. Right, Ed. What would you say -- Nick has asked, what sets you apart from other lenders?

Well, I think we started to touch on that in one of the other answers, didn't we, in terms of we're very focused on service quality to small businesses, and they still value that. So I won't repeat that. I think we still have -- for a Tier 2 lender, we do have really good relationships with our funders and the margin that we borrow money at is very competitive. So we don't really suffer in terms of the cost of our money and having to compete on an uneven playing field in terms of the money we can lend and the cost of what we lend at. So yes, it's very much around the service angle, the flexibility, fast speed of response and finding ways to do deals, I always say it's all about having a can-do attitude. The second best answer to -- so yes, is a very quick no. So if we can't do something, we need to be very, very clear of why and move on to the next opportunity. So yes, very much focused on that service angle.

Thanks, Ed. We've nearly got through. There's a couple of questions left. So if anyone does have any other ones, please add them in, in the next couple of minutes where we answer the last 2. So 2 left. Are there any particular markets or sectors you expect strong growth in?

Yes. So I think -- I mean, obviously, everyone will be aware of the flavors out there, the trends around technology and obviously, AI, renewables, defense, obviously, with the push that Mr. Trump has placed on Europe. And they all sound like very, very macro industries that has no impact on SMEs. That's not actually the case. Certainly, in defense and renewables, they do trickle down to small engineering businesses who have very simple CNC machinery shops. And typically, in those trades, they do eventually flow down, and we have quite a lot of those businesses that we fund, whether that be for working capital in terms of invoice discounting or funding fixed assets for engineering businesses. So I think those 3 sectors definitely will see stronger growth. Construction is one of the sectors that we do quite a lot in, in terms of asset finance, again, lots of yellow plants and construction equipment. That's been up and down, certainly more strain felt in the last 6 months, but opportunities are still there. And logistics and transport is another favored sector for us. And again, there's been lots of opportunities there. So I think it really comes back to the point that we made earlier that I made earlier when I summed up the spread and the concentration in industries is something that's a real positive for this business, I believe, because we don't have all our eggs in one basket. Sometimes that can mean that when something is flying along and you pick the right industry, you miss out. But I guess it's a bit like investing in a fund that the risk mitigation is key. And we take the view that it's better to be well spread across a wide range of sectors. And that definitely helps us with our arrears and our write-offs.

Thanks, Ed. A couple of other questions have come in, so -- which is good. Nick has asked, Ed, who is Stroke [indiscernible] your perfect customer?

Well, without alienating lots of our clients and customers that we deal with because it's very widely spread, as I've just said. Yes, a typical customer would be looking to borrow between GBP 200,000 and GBP 750,000, a nice family business that's been around for 2 or 3 generations, and they provide us with a security that we're happy with. We get a rate that we're happy with. And it's in the recruitment sector where all the invoices are backed up by signed time sheets. It's nice spread debtor book across all blue-chip debtors. How many of those deals have we got? Probably not that many because there's quite a lot of quirks to everything that I've just said. So of course, we fund lots of family businesses, lots of businesses that need to borrow between GBP 200,000 and GBP 700,000, lots of businesses that are in recruitment sectors. But quite often, they have quirks. They might not have been making lots of money. They might have lost a customer contract, which has led to them reducing their own costs and needing a bit of a turnaround plan. There's lots of quirks to many businesses. So I would probably answer that the reality of what we do, the best customers for us are those that do have a bit of a story to tell and that aren't perfect because the ones that are perfect typically will end up with a Tier 1 lender because they can get rates that we wouldn't be able to compete with. So we like businesses that have got a story. It doesn't mean to say that they're bad businesses at all. The reality of small business lending is that most businesses have got a story to tell, and we like that. And that's part of the fun in lending to small businesses. So yes, hopefully, that answers the question.

Yes. Thanks, Ed. David has asked, if within your control, what are the 3 things that would significantly improve your earnings ahead of expectations? Do you want to take that, Ed? Or do you want to break up to you?

No, I'm happy to take that. So the 3 things that would increase our earnings, well, the obvious one is more new business. We all want more new business. We've done pretty well. We can always do better. And I obviously would love to have a stronger flow continually of new business. So that's one thing that can definitely improve. The margins, obviously, if we can improve the margins attached to every client, then that would help improve it. One of the key things there is the efficiency drive and how you manage those clients. So it's unrealistic to think that you can keep improving your margins at the front end when it's a competitive sector. So you have to look at how you manage your margins in the in-life management and the way that you as a lender manage those clients to generate an improvement in earnings. And then obviously, the last thing is the arrears and the bad debts. I mean that's probably the most important. We can go and originate deals. We can find more sales. You can reduce your rates, you can do promotions. But you really do need to have a handle on the arrears and the bad debts, and that has a massive impact in terms of the earnings. So it's a combination of the 3 really. It's the front-end sales, the margin you get for managing those clients and the -- obviously, the arrears and ultimately the write-offs.

We have one more question and one more point. Fredrik has said, what's your target equity to debt ratio? What's your overall target for the balance sheet as well? Shall I take that one, Ed?

Yes, please do, James.

Okay. Well, I think this is -- hopefully, I'm right in thinking this is relating to gearing. Our gearing at the moment on the balance sheet is about 3x our net tangible assets. So as Ed mentioned, there's a reasonable amount of goodwill on our balance sheet. So we focus on net tangible assets, and we're geared to about 3x our net tangible assets. We don't really be geared lower than 2.5x. We don't really want to be geared more than 3.5x. Lower than 2.5x probably means we're not being as ambitious as we could be. And once you get over 3.5x, it's certainly 4x gearing. Arguably, you're, in our view, a little bit leveraged a bit too high. So around about 3 is where we are. We think it's about the right level of gearing, but there's a little bit of flexibility either side. So that's where we think we'll be on there. I think with that, I've answered all the questions. If I haven't, apologies, I think I have looking through them all. There's one other point by someone -- a listener saying they've got a few ideas on things on the business. Please e-mail myself or Ed or IR as in Investor Relations, [email protected], and myself and Ed will gladly engage and discuss things. So if anyone has any questions or anything, please do feel free to get in touch any time, and we'll do our best to come back to you. But that's probably the best way to share any ideas you've got. And I think there, we've covered everything unless [ Finton ] is here, IT, [ Finton ], have I missed anything? I think we're all right, aren't we?

No. No, I think that's all good. And I just want to say thanks to both yourself and Ed. Thanks for a really great presentation for going through the Q&A. And just for all those who were viewing, this recording will be made available shortly on Time Finance's investor website alongside the deck from today's presentation. And so yes, thanks to everyone who came along and who submitted questions. And most importantly, thanks to our 2 speakers today.

Thank you, and thank you, everyone, for joining, and we look forward to updating when we get to the Q3 update and then verbally through another online presentation once we get past year-end in June. Thank you.

Thanks all.