Pretty penny: Why it pays to wait for the right moment to pounce

When a battle to take over Earlypay ended with the victor pulling out of a binding deal and leaving the company’s share price in disarray, Equitable Investors’ Martin Pretty jumped at the opportunity to take stake.

Mr Pretty, whose Dragonfly fund has delivered 4.43% per annum over the past three years, had been watching the company for several years after first meeting CEO Daniel Riley at a conference back when his business was still called CML Group.

At the time, the company was in the process of transitioning from being predominantly a labour hire and recruitment white-label business into the alternative financier focused on small and medium enterprises (SMEs).

It was a transformation that Mr Pretty was interested in, but one which eventually led the company’s management to decide a trade sale was the best option for shareholders, and CML Group was placed up for sale.

Then, in March 2020, the private equity company that won the takeover battle pulled out of its binding offer, which Mr Pretty said caused some “indigestion” in the share price, which dropped dramatically.

“Earlypay then had to go back and think about what the next growth strategy would be,” Mr Pretty said.

“What they did do, was they bought a fintech company called Skippr. Skippr had built a platform but had not commercially scaled it, so they effectively bought a new platform and brought in new efficiencies and it allowed them to access smaller customers they previously hadn’t been able to afford to market to.”

This strategy – which included the rebrand into Earlypay – helped the business return to growth, Mr Pretty said.
Importantly, Earlypay CEO Mr Riley said the features this platform offers provide the company with a unique edge in the SME financing space.

“We can provide loans as low as $20,000 and can increase that to loans of $20 million-plus,” he said.

“The reason for that is that the Earlypay platform automation allows us to profitably service smaller clients, while our scale, experience and our funding structures mean we can also serve very large national clients.”

Earlypay also lends money against their borrowers’ invoices, and integrates its platform with clients’ accounting software to offer real-time overview of receivables.
This process means the company can offer flexible lines of credit while shifting exposure from the borrower to the borrowers’ clients.

“That means we can service SMEs at all stages of the business cycle, whether they’re in start-up, growth or mature,” he said.

“We can also service businesses that are perhaps in wind-down phase or even credit impaired. We just heighten the level of our oversight depending on the credit rating of the client.”

Click here to view more videos from Martin Pretty’s  Meet the Fund Manager’ session, or click here to view the full ‘The Insider: Meet the CEOs’ session.

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