1PM

A decision to quit the sub-prime lending market to focus on prime loans has helped restore the fortunes of small-ticket leasing specialist 1PM (OPM).

The Bath-based firm focuses on loans in the £1,000 to £30,000 range, with the term of its loans ranging from 12 to 60 months. By exiting sub-prime it has slashed bad debts; moreover, as banks are still poor at lending to SMEs, this is welcome news for 1PM. Clients like the service because, as the name 1PM suggests, they pay in one monthly fixed instalment for the term of the loan.

Receiving the vast majority of its leads from leasing brokers, 1PM has a cautious underwriting approach, with its main constraint to growth being the access of funding. Managing director Maria Hampton says, 'Getting business is not a problem; our priority is on carefully selected lending for mission-critical requirements.' One neat source of finance is via self-invested personal pensions (SIPPs). One client recently advanced £200,000, in return for a three-year rate of 8.25% per annum.

Loans are made nationwide and range from hairdressers to catering companies and offices. In the year to May, sales leapt 43% to £1.9m, helping 1PM swing to a pre-tax profit of £154,000 (2010: £338,000 loss). The AIM company also lifted its lease portfolio by 66% to £10.1m. Bad debt write-offs fell 46% to £188,000, helped by the appointment of a new credit controller.

As the business expands 1PM should be well placed to partly fund its lease portfolio via its own receivables. With 1,500 clients and a relatively fixed overhead, new business flows quickly through to the bottom line. Debts are secured on assets, while for larger loans further collateral such as directors' loans will be required. Sub-penny share 1PM trades in a sweet spot, and has huge scope for further growth. Buy.