“Growing Success within the Asset Finance Sector”
Many Independent asset finance companies like Liberty Leasing plc start out with small modest beginnings but with big aspirations of becoming a well-regarded and profitable business. In 15 years Liberty has remained determined and consistent in their growth strategy and this appears to be reflected in the profits and as of March 2016 have increased the book debt to £92million. They’ve also received recognition for their growth having won the NACFB Small Funder of the Year back in December last year and named one of the “Top 1000 companies to Inspire Britain” by the London Stock Exchange for a third consecutive year.
Over the last couple of decades, the industry has changed considerably. From changes in regulation, the economic climate, the broker channel and even the way we communicate. At the turn of the Millennium the way we all did business was very different, in just 15 years we have waved goodbye to the fax machine and said hello to email, smartphones, cloud based systems and the fast moving world of digital and social media. This is something Liberty knows all too well from having started out in 2002 in a business park at Hamble-le-Rice, Southampton. By 2004 their Chairman Tony Captain recruited Allan Clegg and Paul Sheedy as the first two full-time employees. By 2014 Liberty had outgrown their offices and relocated to their fully refurbished premises in Warsash, which comfortably caters for their team of 42 colleagues. As Directors, Allan and Paul offer a blend of confident experience and an energetic buzz resulting in a cohesive culture and motivated team.
Back in the early days Liberty began by offering fairly small ticket HP and Lease agreements to SME’s, financing mostly Light Commercial Vehicles and UPVC Window Manufacturing Equipment. At this time the industry was awash with High Street Banks, Finance Companies and Investment Banks all offering asset finance, the challenge facing a new entrant like Liberty was finding a gap in the market and building a name for themselves.
Over time Liberty’s portfolio diversified but they consistently maintained clear parameters, Paul Sheedy explains: “As Liberty has grown we have been able to underwrite larger, lower rate transactions for prime customers whilst still being able to assist brokers in the second tier and challenged credit market. This has meant that Liberty is able to compete successfully on asset transactions for most types of credit and for deals ranging from £10,000 – £1,000,000 with the ability to build credit lines up to £3,000,000 for long-term existing hirers.
Although our target market has expanded, the principles are the same as when we started in 2001, we like to underwrite asset backed transactions through the established professional UK broker network.”
Pre crunch & competing in a saturated market
In the mid 2000’s competition was fierce with people referring to some banks as “throwing suitcases of money from their windows”. Lewis Banford, Regional Account Manager recalls a conversation around this time with a Broker who said “I have more lenders than I do customers, what can you do that the others can’t?” Lewis continued “we knew we couldn’t compete with some of their rates but business owners appreciated our face-to-face personal service which set us aside from most.”
At the same time major regulation by the FCA (or as it was then the FSA) still seemed like a long way off, although there were a number of changes in Consumer Credit regulation over what was and wasn’t ‘regulated’.
This led Liberty to working with the NACFB (National Association of Commercial Finance Brokers) who gave them direct access to their members and were regarded as being the ‘self-regulator’ in the commercial finance industry. This recognition of the NACFB’s importance and a genuine commitment to their Code of Conduct made it an easy decision for Liberty to become a Patron of the NACFB.
Credit Crunch | Tough times for SME’s and the finance industry
Like many, Liberty began to see arrears and bad debt increasing and they rebalanced their focus between New Business and protecting the Book. However, they took a supporting stance with their clients where there was a solid business model, working through this period with them rather than simply ‘pulling the plug’. This approach worked and as a result Liberty continued lending (thanks to a panel of block discounters) and maintained their 20% year on year growth.
Allan Clegg and Paul Sheedy believe the key to Liberty’s success is simple and two prong; understanding the business you’re in and treating people well and with mutual respect.
Allan Clegg explains the importance of operating with clarity “Liberty view what they do as an asset based business. We stick to hard assets with a good resale value, so we tend to give assets that have an uncertain value, such as some IT, a miss. We photograph our assets, record serial numbers, and make it our business to know their resale value should we ever have to reduce an exposure on a deal. In 2015 we reduced our reliance on third parties and appointed Nigel Wilkinson as Head of Assets to further improve accuracy in valuations and save time which means a faster turnaround for our customers.”
“We rely on our brokers for introductions, our relationship is based on mutual respect,” says Paul Sheedy. “We don’t set minimum volume targets on our brokers, so whether it’s just one introduction a year, or many, we give each broker our very best service, and we never forget their introductions when the customer comes to us second time round, we remember the broker who originally introduced the client to us.”
Capitalising on a lean Asset Finance Market
By 2010 the worst of the recession was over and there was talk of ‘green shoots’ in the economy, arrears and defaults began to fall and reached pre-crunch levels by the summer of 2010. Liberty remained committed to their growth strategy whilst navigating through this financial downturn, which allowed them to capitalise on the absence of some of their former competitors. For the first time they were able to offer larger facilities at keener rates than ever before.
Over the past five years their loan portfolio and net worth have grown at a compound growth rate of 26 percent per annum. Profit before tax has grown at a compound rate of 45 percent per annum, reaching £4,549,377 million in FY15 (see chart), representing a 35% PBT margin. This financial success saw Liberty rank on the Investec Mid Market Top 100 which is an official ranking by Investec with data analysis provided by Experian and provides a list of the fastest growing private companies in the UK with a minimum turnover of £10m and EBITDA of £1m.
2016 and beyond
The first quarter of 2016 has resulted in some record-breaking figures for Liberty. The total amount of new business written in Q1 equated to £18 million against a target of £12 million. February set an all-time record with £6.8m business written which is the best month since our inception back in 2001 and almost 200 deals were written in this time by our 16 strong Sales team.
Allan Clegg concludes:
“The size of the book debt has enhanced Liberty’s ability to compete with the larger bank owned operations in the SME market, particularly when we are funding larger, competitive transactions. We wouldn’t be in this position if we had deviated from our plans for growth, especially through the tougher times.
It’s incredible and humbling to see what we’ve achieved over the past 15 years and owe it to the commitment and hard work of our team and loyalty of our brokers and customers”
