Summary

Blue Motor Finance Limited, a UK-based Fintech company specializing in auto finance, has been recognized as Europe's fastest-growing company with a staggering revenue growth rate of 51,364% and £61.4 Million in revenue for 2017.

Abstract

Blue Motor Finance Limited, originally founded in 1992 and rebranded in 2014, has rapidly ascended to become Europe's top fast-growing company according to the FT 1000 list. The company's success is attributed to its innovative use of machine learning and agile development to streamline the auto finance process, primarily for second-hand car purchases. With over 155 employees as of 2017, the company has disrupted the traditional auto finance industry by offering superior service through a more efficient technology platform. Blue Motor Finance's growth strategy includes quick decision-making, leveraging real-time data, and a commitment to reaching a broad customer base, having lent £1 billion to 100,000 customers. Despite potential risks such as Brexit, subprime auto debt, competition, and rising central bank interest rates, the company remains focused on expanding its UK market presence while considering international opportunities.

Opinions

The author suggests that individual investors should monitor Europe's growth companies for potential investment opportunities, despite challenges like Brexit and the end of easy money.
There is a critique that the FT 1000 list would be more informative if it included profit/loss ratios and information on which companies are publicly listed.
The author expresses concern about the sustainability of some companies' growth, citing examples like Deliveroo, which is expanding rapidly but at a high financial burn rate.
The author is impressed by Blue Motor Finance's remarkable growth rate and its strategic use of technology to gain a competitive edge in the auto finance market.
The author believes that the risks associated with subprime auto debt are significant and underplayed, drawing a parallel to the subprime mortgage situation and suggesting investors should be cautious about auto equity exposures in the near future.
While the company is bullish on its growth prospects in the UK, the author notes that potential risks such as Brexit's economic impact, rising central bank interest rates, and the possibility of increased competition could affect future growth.

Top 1000 European Fastest Growing Companies — #1

Image taken from: Blue Motor Finance Limited Website

This is the first in a total of 1000 break downs of each company was recently listed in “The FT 1000: third annual list of Europe’s fastest-growing companies”

“Europe’s growth companies have big challenges ahead, from the potential disruption of Brexit to the end of the era of easy money”. However, the growth and potential of these companies is definitely something that an individual investor who is interested in great companies and innovation worldwide should be keeping tabs on.

The FT 1000 continues to be dominated by the technology sector, which accounts for 149 of the businesses, and that is without counting the fintech and e-commerce categories. Again, Germany has the lion’s share of company headquarters at 230, while London remains the top city, with 63 businesses based there — down from last year’s 74.

The list is a fantastic compilation of the top 1000 but would have been great if things such as profit/ loss ratios and which companies are already listed. Profit/ loss would be useful because companies such as Deliveroo which is #2 on the list is burning through tons of cash for its expansion and other companies are nearing bankruptcy but are near the top of the list.

Follow through this series and I will give a brief and conscience overview of each company.

#1: Blue Motor Finance

Blue Motor Finance was actually incorporated in 1992 under the name Park Asset Finance Limited and came under the control of the current directors and senior management in July 2012. It changed its name to Blue Motor Finance Limited in July 2014 which is also when they started loan operations after securing funding from private equity investors Cabot Square Capital LLP. As of 2017 the company had 155 employees.

The company is a lending business that primarily specialises in Hire Purchase agreements to consumers for the purchase of second-hand cares from dealerships or through brokers. It uses machine learning and agile development technology to improve the process and have an advantage over their competition..

It has rapidly become one of the UK’s leading Fintech companies. It claims of “changing the way auto finance and ownership works.” The company has successfully disrupted an established industry offering both dealers and customers better service by replacing their legacy systems with a smarter and more efficient platform.

They have quickly become Europes fastest growing company with a remarkable absolute revenue growth rate of 51,364%!! It had revenue of £61.4 Million in 2017.

They have achieved this rapid growth rate due to their:

Quick decision-making through innovative technology:

“Automated decision-making allows proposals to be allocated accurately to our risk tiers. Quick decisions are enabled through innovative technology with over 60% of application decisions made within 60 seconds.”

2. Using real time data to drive business

“Innovation is everything at Blue. We focus on the latest technological advancements and automations, using real time data to drive decisions, simplify processes and creating unique solutions for car finance.”

3. £1 billion of lending to 100,000 customers

“We combine the vigour of a scaleup business with the benefit of proven expertise. We are an innovative, dynamic UK FinTech company, enabling auto-finance products to reach over 100,000 customers with £1bn lent to date.”

A typical Blue customer is ages 39 years old, is employed and on an annual salary of £30,578 and wishes to finance a 4 and half year old vehicle with a borrowing cost of £8,715 over a term of 56 months.

The company believes there is still room for growth in the UK market and are considering their options for expansion abroad. However, they have made it clear the Britain is their main focus as of know.

The company is doing phenomenally and has a parent company with significant resources to support it. However, there are possible risks to future growth such as:

Brexit: In its financial statements the company’s director believes that Brexit will have a minimal effect on the growth rate of the company. However, this is a little hard to believe since there is yet to be a clear understanding of the effects that Brexit will have to the economy and to the consumers.
Subprime Auto Debt — Ballooning worldwide: Global auto debt has significantly increased since the financial crisis of 2008. While many have mentioned this as a risk over the last couple of years, my belief is that this has been underplayed. The level of debt has surpassed the financial crisis levels and others might argue that consumers are in stronger financial positions today than they were at that point. But, that might not be the case as central banks worldwide are slowly moving towards rate hike. Blue Motor Finance Limited like many other bundles up these loans and then proceeds to sell them to third parties. So, like the Subprime Mortgage situation this is an area of significant risk. Investors should be looking at their auto equity exposures in the next 1–3 years.
Possible Competition: At the moment the company is clearly ahead of any competition but that is not to say there is non or that the ones they do have will not adjust and improve. My opinion is that this is less of a risk then the others but still something that should be watched.
Central Bank Interest Rates: Lastly, it is interest rates. They have been at historic lows for a very long time. This will be changing. It is not a matter of if but a matter of when. When they do rise it will increase the borrowing cost and decrease the average consumers spending power since the majority of Auto-Loan holders have other debts to their name such as: student loans, mortgages and appliance loans.