TIDMFNTL
RNS Number : 3827M
Fintel PLC
21 September 2021
21 September 2021
Fintel plc
("Fintel", "the Company" or the "Business")
Half Year Results for the Six Months ended 30 June 2021
Robust Trading, Digital Acceleration, Strategic Delivery
Fintel (AIM: FNTL), the leading provider of fintech and support
services to the UK Retail Financial Services sector, today
announces its unaudited consolidated results for the six months
ended 30 June 2021.
Financial highlights:
-- Solid Revenue growth - up 10% to GBP31.7m (H1'20: GBP28.9m)
-- Strong Adjusted EBITDA*(1) - up 12% to GBP8.3m (H1'20: GBP7.4m)
-- Solid adjusted EBITDA*(1) margin - up 60 bps to 26.1% (H1'20: 25.5%)
-- Adjusted PBT*(2) - up 12% to GBP6.0m (H1'20: GBP5.4m)
-- Adjusted EPS*(3) - down 2 % to 4.1p (H1'20: 4.2p ), after one off tax charges
-- Robust cash flow conversion*(4) of 81% (H1'20: 65%)
-- Strategic deleveraging - proforma net debt *(5) to EBITDA ratio of c. 0. 2x (H1'20: 1.5x)
Strategic Highlights
-- Strategic disposal of non-core Zest Technology
-- Strategic Technology and Distribution partnership with Tatton Asset Management
-- Strategic disposal of Verbatim Funds
-- Strategic launch of Distribution as a Service ("DaaS")
Dividend
The Board intends to pay an interim dividend of 1.0p per share,
on or around 4 November 2021.
Matt Timmins, Joint CEO of Fintel plc, commented:
" I am delighted to report that Fintel delivered a robust
financial performance in the first half of the year , and we remain
confident of meeting our full year expectations.
We have also made significant strategic progress in the period,
signing our largest ever fintech contract in a partnership that
includes the disposal of the Verbatim funds, and realised excellent
value from the sale of Zest. The launch of "distribution as a
service" is off to an excellent start.
We have significant financial resources to match our ambitions
for the business, both in terms of accelerating organic growth and
creating value through acquisitions"
*(1) Adjusted EBITDA is earnings before interest, tax,
depreciation, amortisation, share option charges and exceptional
operating costs.
*(2) Adjusted PBT is calculated as adjusted profit before tax,
which excludes exceptional operating costs and amortisation of
intangible assets arising on acquisition.
*(3) Adjusted Earnings Per Share is calculated as adjusted
profit after tax, which excludes exceptional operating costs and
amortisation of intangible assets arising on acquisition, divided
by the average number of ordinary shares in issue for the
period.
*(4) Free cash flow conversion is calculated as adjusted EBITDA,
less working capital movements, lease payments, CAPEX, development
expenditure, corporation tax and interest paid, as a percentage of
Adjusted EBITDA.
* (5) Net debt position is shown on a proforma basis at 30 June
2021 including the effect of the sale of Zest Technology and
Verbatim funds.
For further information please contact:
Fintel via Instinctif Partners
Matt Timmins (Joint Chief Executive
Officer)
Neil Stevens (Joint Chief Executive
Officer)
David Thompson (Chief Financial
Officer)
Zeus Capital (Nominated Adviser
and Joint Broker) +44 (0) 20 3829 5000
Martin Green
Dan Bate
Pippa Hamnett
Investec Bank (Joint Broker) +44 (0) 20 7597 5095
Bruce Garrow
David Anderson
Harry Hargreaves
Instinctif Partners (Financial +44 78 3767 4600 / fintel@instinctif.com
PR)
George Peele
Mark Walter
Notes to Editors
Fintel is the UK's leading fintech and support services
business, combining the largest provider of intermediary business
support, SimplyBiz, and the leading research, ratings, and Fintech
business, Defaqto.
Fintel is the leading provider of digital, data led and expert
services to product providers, intermediaries, and consumers to
help them navigate the increasingly complex world of retail
financial services. Fintel provides technology, compliance and
regulatory support to thousands of intermediary businesses, data
and targeted distribution services to hundreds of product providers
and empowers millions of consumers to make better informed
financial decisions. We serve our customers through three core
divisions;
The Intermediary Services division provides technology,
compliance, and regulatory support to thousands of intermediary
businesses through a comprehensive membership model. Members
include directly authorised IFAs, directly authorised mortgage
advisers and wealth managers.
The Distribution Channels division delivers market Insight and
analysis, product design and compliance and targeted distribution
channels to financial institutions and product providers.
The Fintech and Research division comprises Defaqto which
provides market leading software, financial information and product
research to product providers and intermediaries. Defaqto also
provides product ratings to help consumers compare products and buy
with confidence.
For more information about Fintel, please visit the website:
www.wearefintel.com
Analyst Presentation
An analyst briefing is being held at 09:30 GMT on 21 September
2021 via an online video conference facility. To register your
attendance please contact Fintel@instinctif.com
For more information, please visit: www.wearefintel.com
JOINT CHIEF EXECUTIVES' STATEMENT
Overview
Fintel has delivered a strong financial performance while
navigating continued disruption from COVID 19, with 10% growth in
revenue and a 12% increase in adjusted EBITDA.
As we accelerate our digital growth and increase focus on our
core business, we remain confident of meeting our full year
expectations and our longer-term strategic ambitions. Solid
profitability and strong cashflow conversion are underpinned by
increasing margins and higher quality earnings, demonstrating the
strength of our market position and customer proposition.
An adjusted EBITDA margin of 26.1% (H1'20: 25.5%) demonstrates
the progress we have made in improving margins and enhancing
earnings quality across the business.
The robust performance in the core Intermediary division is in
line with our strategy of increasing average revenue per customer
and recruiting higher value new members as we continue to digitise
our core offering and increase market penetration through improved
adoption of our proprietary software. This has been augmented by
growth from housing related transactions, driven by positive market
conditions and the roll out of remote valuations.
In our Distribution division, new product development, service
enhancement and packaged solutions are improving the quality of our
underlying earnings as we continue to transition our industry
partners to subscription and ad valorem agreements, increasing our
longer-term recurring revenue towards our mid-term target of 70-80%
recurring core revenues.
A proforma net debt to EBITDA ratio of c.0.2x * (5) and cash
flow conversion of 81% (H1'20: 65%) reflects our continued focus on
balance sheet efficiency. The disposal of Zest and the Verbatim
Funds has enabled us to deleverage the business, creating
significant resources for future investment, and with cash flow
conversion of 81% (H1'20: 65%) we are now well ahead of our
mid-term target of 70%.
Divisional Performance
Intermediary Services revenue increased 3% to GBP12.6m (H1'20:
GBP12.3m)
The Intermediary division provides technology, compliance, and
regulatory support to over 3,000 intermediary businesses through a
comprehensive membership model. Members include directly authorised
IFAs, mortgage advisers and wealth managers.
The Intermediary division delivered a robust performance with a
3% increase in membership revenues. As the regulatory landscape for
our members becomes more complex, we continue to benefit from
increasing demand for help with new and existing regulation. We
continue to improve our average revenue per customer through
digitisation of our core services and higher software adoption,
with a 9% growth in Software license income during the period.
The financial highlights of the Intermediary division were as
follows:
- Membership fee income increased by 4% to GBP5.6m (H1'20: GBP5.3m).
- Average Revenue per Customer ("ARPC") of GBP6,870 (FY'20:
GBP6,729) - an increase of 2% on an annualized basis
- Software license income grew 9% to GBP2.9m (H1'20: GBP2.7m)
Distribution Channels revenue increased 22% to GBP11.3m (H1'20:
GBP9.2m)
The Distribution division delivers market Insight and analysis,
product design and targeted distribution channels to financial
institutions and product providers.
The Distribution Channels division recovered from a weak H1'20,
benefitting from the improvement in the overall housing market, the
introduction of remote valuations and an increase in housing
related transactions.
Marketing services revenue continued to be impacted by the
lockdown restrictions in the first half of the year, but management
remains highly confident of a recovery in H2'21 and into 2022. As
we transition to a combination of online and physical events and
our new Distribution as a Service ("DaaS") model, we will convert
existing annual contracts to multi-year recurring partnership
income for the provision of data and distribution channels.
The financial highlights in the Distribution division were as
follows:
- Marketing services revenues of GBP1.7m (H1'20 GBP2.6m)
- Mortgage services revenues of GBP3.2m (H1'20: GBP2.3m)
- Valuation services revenues of GBP4.0m (H1'20: GBP2.1m)
- Fund revenues of GBP1.2m (H1'20: GBP1.1m)
- Insurance services revenues of GBP1.2m (H1'20: GBP1.1m)
Fintech and Research revenue increased 5% to GBP7.8m (H1'20:
GBP7.4m)
Fintech and Research comprises Defaqto. Defaqto provides
market-leading software, financial information and product research
to product providers and financial intermediaries. Defaqto also
provides product ratings to allow consumers compare products and
buy with confidence.
Revenue growth was driven by customer growth in risk mappings
and reviews due to increasing the scope of the service, an extended
range of star ratings products and fund review product
launches.
The financial highlights from the Fintech and Research division
were:
- 52% growth in Recommendations on our fintech platform of GBP37.0bn (H1'20: GBP24.3bn)
- Software revenues of GBP3.7m (H1'20: GBP3.6m)
- Product Ratings revenue of GBP3.8m (H1'20: GBP3.5m)
- Gross profit margin of 60% (H1'20: 57%)
Strategic Delivery and Priorities
Our accelerated digital strategy continues to deliver margin
growth, robust cash flow and good capital efficiency.
Significant strategic progress has been made with the sale of
non-core asset Zest Technology for GBP10m (22x trailing EBITDA.
These proceeds may increase by up to a further GBP1.5m based on
performance.
A fintech, distribution and fund management strategic
partnership with Tatton Asset Management was entered into, securing
long term recurring revenue via 5-year SaaS enterprise partnership
(generating a minimum of GBP7m), with further significant potential
through a near 30% increase in our fintech client base and reach.
The deal also generates up to GBP5.8m cash through the sale of the
Verbatim Funds, again facilitating our future financial
flexibility. The combined effects of these two transactions reduces
proforma net debt to c.0.2x*(5) EBITDA, creating funding headroom
for further strategic growth.
The Company's value creation strategy combines organic growth
and selective acquisitions. Organic growth is expected to be driven
by growth in our core digital, software and technology offering as
well as by increasing average revenue per customer - an ongoing
business focus.
Capital discipline and a strong focus on cash return on capital
employed, along with a prudent balance sheet and leverage
management, remains a key strategic priority for us, ensuring we
can take advantage of selective and appropriate opportunities when
they arise to further enhance shareholder value.
Outlook
Current trading remains robust. Our strategic plan is being
implemented efficiently and at pace. We remain confident that the
Company is in a strong position to deliver in line with current
market expectations for FY21.
We are Fintel.
Neil Stevens & Matt Timmins
Joint Chief Executive Officers
FINANCIAL REVIEW
Jun-21 Jun-20
GBPm GBPm
Revenue 31.7 28.9
Expenses (23.4) (21.5)
-------- --------
Adjusted EBITDA 8.3 7.4
-------- --------
Adjusted EBITDA margin % 26.1% 25.5%
Depreciation (0.2) (0.1)
Depreciation of lease asset (0.3) (0.4)
Amortisation of development expenditure
and software (0.9) (0.5)
-------- --------
Adjusted EBIT 6.9 6.4
-------- --------
Share option charges (0.4) (0.4)
Net finance costs (0.5) (0.6)
-------- --------
Adjusted profit before tax 6.0 5.4
-------- --------
Taxation (2.0) (1.3)
Adjusted profit after tax 4.0 4.1
-------- --------
Adjusted earnings per share (EPS) 4.1p 4.2p
Revenue
Revenues of GBP31.7m were 10% higher than the prior period. Our
focus on core revenue growth (up 3% from GBP24.2m to GBP24.9m)
continues to progress, highlighting the strength of the core
business model and sustained demand for our products and services
during the ongoing COVID period.
A key performance measure within core revenue is the quality of
revenue; our focus is on generating an increasing percentage of our
revenue from SaaS and Subscriptions, delivering longer term
recurring revenue streams at high margins. SaaS and Subscriptions
now represent 67.0% (H1'20: 61.3%) of our core revenue.
This combination of growth and increasing quality of our core
revenue period on period keeps us on track to achieve our
medium-term financial objectives.
Non-core revenues increased 48% to GBP6.8m (prior period
GBP4.6m). The principal driver of this was the recovery in our
housing survey and valuations business following the easing of
lockdown restrictions.
Revenue by Segment
Revenues in the Intermediary Services division grew by 3% to
GBP12.6m, as a result of continued growth in membership revenues,
improved penetration of additional services and new software
licenses.
Distribution Channels achieved revenues of GBP11.3m (up 22%).
Marketing Services, experienced reduced demand due to restrictions
on meetings and events. The re-opening of the valuations market and
increased housing transactions more than compensated with increased
revenue to GBP4.0m (H1'20 GBP2.1m).
Fintech and Research revenues increased by 5% to GBP7.8m with
continued growth across the full range of products offered, with
Product Ratings particularly strong. This highlights increased
uptake and usage of the service, providing a further platform to
grow SaaS and Subscriptions revenues.
Gross profit by Segment
We report our segments to the gross profit level as this
highlights the contribution each segment makes in its own right,
taking account of directly attributable costs, but before
allocation of shared infrastructure costs which serve the business
as a whole. At an EBITDA level, economies of scale in shared
support costs will help us achieve our key strategic aim of
increasing EBITDA margin over the next 2/3 years.
Gross profit has increased to GBP13.7m (H1:20 GBP12.8m) however
the greater proportion of valuation services, a lower margin
activity, in the current period slightly outweighs the positive
impact of growth in Fintech and Research, with gross margin
reducing marginally in total by 90 basis points from 44.2% to
43.3%.
Intermediary Services
We have continued to invest in our intermediary services
providing additional value and support for our members, which
underpins the ongoing growth in our recurring revenues. Gross
margin therefore reduced by 70 basis points from 31.6% to 30.9%,
with Average Revenue Per Customer ("ARPC") growing 2% to GBP6,870
and revenues overall increasing by 3%.
Distribution Channels
The gross margin has reduced 490 basis points from 50.9% to
46.0% largely due to a change in mix. Although the weight of core
mortgage related income served to offset a reduction in events
activity, which generate our highest margin contribution, the
reduction was the result of increased surveying and valuation
activity which typically generates a lower margin.
Fintech and Research
As more customers take up the SaaS and Subscriptions element of
our service offering, the gross margin improves. With a
well-managed cost base, the contribution to margin from incremental
revenue growth generated an additional 320 basis points to gross
margin, growing from 56.5% to 59.7%.
Adjusted EBITDA
Adjusted EBITDA margin is calculated as adjusted EBITDA (as
defined in note 6), divided by revenue. Whilst adjusted EBITDA is
not a statutory measure, the Board believes it remains a highly
useful measure of the cash profit from underlying trade and
operations, excluding one-off and non-cash items.
The Company delivered a strong adjusted EBITDA margin of 26.1%
(H1'20: 25.5%). Infrastructure and support costs have remained flat
period on period at GBP5.4m (see note 7).
Share-based payments
Share-based payment charges of GBP0.4m (H1'20: GBP0.4m) have
been recognised in respect of the options in issue.
Financial income and expense
Net finance expenses of GBP0.5m (H1'20: GBP0.6m) relate to the
utilisation of the Company's 5-year revolving credit facility,
which is due for renewal in March 2024.
Taxation
The tax charge for the period has been accrued using the tax
rate that is expected to apply to the full financial year.
The corporate tax rate in the UK will increase from 19% to 25%
from 1 April 2023. The increase was announced in the March 2021
Budget, and was substantively enacted on 10 June 2021.
This has an FY21 impact on our deferred tax balances which need
to be increased by this 6 percent tax rate movement. The gross
impact of this on a full year basis will be c.GBP1.6m, effectively
increasing our deferred tax liability from GBP5.1m (19% effective
rate) to GBP6.7m (25% effective rate). As a result, in the interim
results for the period ended 30 June 2021 the net deferred tax
liability has increased by GBP0.8m, being the half year equivalent
charge of the full year adjustment. This is a non-cash charge and
will unwind in future years.
Earnings per share
Earnings per share has been calculated based on the weighted
average number of shares in issue in both years. Adjusted earnings
per share in the year amounted to 4.1 pence per share; a decrease
of 2% year-on-year (H1'20: 4.2 pence per share). It should be noted
that had tax rates remained constant with the prior year at 19%,
the adjusted earnings per share would have increased to 5.0p in the
period - a year on year increase of c.18%.
Dividend
Recognising the improved financial performance and strong
liquidity of the business, the Board intends to announce an interim
dividend of 1.0p (H1'20: nil). It is the Board's intention that
this will be paid on or around 4 November 2021 to shareholders on
the register on 1 October 2021. The Board intends the ex-dividend
date to be 30 September 2021.
As previously communicated in our annual results for the year
ended 31 December 2020, the Board intends to adopt a progressive
dividend going forward.
Cash flow and closing net debt
At 30 June 2021, the Company had net debt of GBP15.5m, compared
with GBP25.8m at 30 June 2020. This represents a net debt to EBITDA
ratio of 0.9x (H1'20; 1.5x). Net debt is calculated as borrowings
less cash and cash equivalents, and amortised arrangement fees.
This deleveraging highlights the strong cash generative nature of
the business.
Following the sale of Zest Technology on 21 July 2021 and the
sale of the Verbatim Funds on 15 September 2021 these total sale
proceeds were used to further reduce our net debt, resulting in a
pro forma*(5) Net Debt EBITDA ratio of c.0.2x including the effect
of these two transactions.
Free cash flow conversion was strong at 81% in H1'21 (H1'20:
65%). Free cash flow for the period of GBP6.8m (H1'20: GBP4.7m) was
driven by an increased EBITDA, a reduction in capital expenditure
on tangible fixed assets and good working capital management.
Free cash flow conversion is calculated as adjusted EBITDA, less
working capital movements, lease payments, CAPEX, development
expenditure, corporation tax paid and interest, as a percentage of
Adjusted EBITDA. A reconciliation of free cash flow is provided in
note 6.
Accounting policies
The Company's consolidated financial information has been
prepared consistently in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006 ("Adopted IFRS").
Going concern
The Directors have undertaken a comprehensive assessment to
consider the Company's ability to trade as a going concern for at
least the next 12 months. The Directors have considered the
Company's financial position and its committed borrowing facilities
and performed various sensitivity analyses to assess the impact of
more severe but plausible downside scenarios.
On the basis of the Company's current and forecast profitability
and cash flows, and the availability of committed funding, the
Directors consider and have concluded that the Company will have
adequate resources to continue in operational existence for at
least the next 12 months from the date of approving the unaudited
financial statements. As a result, they continue to adopt a going
concern basis in the preparation of the financial statements.
David Thompson
Chief Financial Officer
Consolidated statement of profit or loss and other comprehensive
income
for the six months ended 30 June 2021
Note 6 months ended 6 months ended
30 June 2021 30 June 2020
GBPm GBPm
Revenue 7 31.7 28.9
Operating expenses 8 (25.2) (22.9)
Amortisation of other intangible
assets 12 (1.0) (1.0)
Operating profit 5.5 5.0
Finance income 9 - 0.1
Finance costs 9 (0.5) (0.7)
Profit before taxation 5.0 4.4
Taxation 10 (1.8) (1.6)
Profit for the financial
period 3.2 2.8
Profit attributable to
shareholders:
Owners of the Company 3.1 2.7
Non-controlling interests 0.1 0.1
3.2 2.8
Earnings per share - basic 11 3.2p 2.8p
Earnings per share - diluted 11 3.2p 2.8p
There are no items to be included in other comprehensive income
in the current or preceding period.
Consolidated Statement of Financial Position
As at 30 June 2021
Audited
Note Unaudited Unaudited 31 December
30 June 2021 30 June 2020 2020
GBPm GBPm GBPm
Assets
Non-current assets
Property, plant & equipment 13 1.3 1.3 1.5
Lease asset 13 4.8 5.2 5.0
Intangible assets and goodwill 12 104.4 106.0 105.4
Deferred tax asset, non-current - 0.1 -
Total non-current assets 110.5 112.6 111.9
Current assets
Trade and other receivables 10.0 9.3 10.2
Deferred tax asset 0.6 0.1 0.2
Cash and cash equivalents 8.3 18.9 10.3
Current tax asset 0.1 - -
Total current assets 19.0 28.3 20.7
Total assets 129.5 140.9 132.6
Equity and liabilities
Equity attributable to the
owners of the Company
Share capital 15 1.0 1.0 1.0
Share premium account 15 65.2 64.8 64.8
Other reserves 16 (51.8) (52.7) (52.2)
Retained earnings 61.4 55.6 61.0
Equity attributable to the
owners of the Company 75.8 68.7 74.6
Non-controlling interest 0.2 0.2 0.2
Total equity 76.0 68.9 74.8
Liabilities
Current liabilities
Trade and other payables 18.8 16.0 17.4
Lease liabilities, current 0.4 0.6 0.6
Current tax liabilities - 0.2 0.2
Total current liabilities 19.2 16.8 18.2
Non-current liabilities
Loans and borrowings 14 23.8 44.7 29.7
Lease liabilities, non-current 4.4 4.6 4.5
Deferred tax liabilities 6.1 5.9 5.4
Total non-current liabilities 34.3 55.2 39.6
Total liabilities 53.5 72.0 57.8
Total equity and liabilities 129.5 140.9 132.6
Consolidated statement of changes in equity
Share Share Other Non Retained Total
capital premium reserve controlling earnings equity
interest
GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2020 1.0 64.8 (52.0) 0.1 55.7 69.6
Total comprehensive income
for period - - - 0.1 2.7 2.8
Transactions with owners,
recorded directly in equity
Dividends - - - - (2.8) (2.8)
Share option charge - - 0.4 - - 0.4
Deferred tax on share options
exceeding profit and loss
charge - - (1.1) - - (1.1)
Total contributions by and
distribution to owners - - (0.7) - (2.8) (3.5)
Balance at 30 June 2020 1.0 64.8 (52.7) 0.2 55.6 68.9
Total comprehensive income
for period - - - - 5.4 5.4
Transactions with owners,
recorded directly in equity
Issue of share capital - - - - - -
Share options - - 0.5 - - 0.5
Total contributions by and
distribution to owners - - 0.5 - - 0.5
Balance at 31 December 2020 1.0 64.8 (52.2) 0.2 61.0 74.8
Total comprehensive income
for period - - - 0.1 3.1 3.2
Transactions with owners,
recorded directly in equity
Issue of shares - 0.4 (0.4) - - -
Dividends - - - (0.1) (2.7) (2.8)
Deferred tax on share options
exceeding profit and loss
charge - - 0.4 - - 0.4
Share option charge - - 0.4 - - 0.4
Total contributions by and
distribution to owners - 0.4 0.4 (0.1) (2.7) (2.0)
Balance at 30 June 2021 1.0 65.2 (51.8) 0.2 61.4 76.0
Consolidated statement of cash flows
for the 6 months ended 30 June 2021
6 months 6 months
ended ended
30 June 30 June
2021 2020
GBPm GBPm
Net cash generated from operating activities
(note 18) 8.5 7.8
Cash flows from investing activities
Finance income - 0.1
Purchase of property, plant and equipment - (1.0)
Development expenditure (0.9) (1.4)
Net cash used in investing activities (0.9) (2.3)
Cash flows from financing activities
Finance costs (0.4) (0.3)
Loan repayments made (8.0) -
Drawdown of loans 2.0 7.0
Transaction costs related to borrowing - -
Payment of lease liability (0.4) (0.5)
Payment of deferred and other consideration - (0.7)
Dividends paid (2.8) (2.8)
Net cash (used) / generated from financing
activities (9.6) 2.7
Net (decrease) / increase in cash and
cash equivalents (2.0) 8.2
Cash and cash equivalents at start of
period 10.3 10.7
Cash and cash equivalents at end of period 8.3 18.9
NOTES TO THE INTERIM FINANCIAL INFORMATION
1. Reporting entity
Fintel plc (formerly the Simply Biz Group Limited) is a company
domiciled in the UK. These condensed consolidated interim financial
statements ("interim financial statements") as at and for the six
months ended 30 June 2021 comprise Fintel and its subsidiaries
(together referred to as "the Company"). The Company is the leading
provider of digital, data led and expert services to product
providers, intermediaries and consumers to help them navigate the
increasingly complex world of retail financial services. Fintel
provides technology, compliance and regulatory support to thousands
of intermediary businesses, data and targeted distribution services
to hundreds of product providers and empowers millions of consumers
to make better informed financial decisions.
2. Basis of accounting
These interim financial statements have been prepared in
accordance with IAS 34 Interim financial reporting and should be
read in conjunction with the Company's last annual consolidated
financial statements as at and for the year ended 31 December 2020
("last annual financial statements"). They do not include all of
the information required for a complete set of IFRS financial
statements. However, selected explanatory notes are included to
explain events and transactions that are significant to an
understanding of the Company's financial position and performance
since the last annual financial statements.
The financial information set out in these interim financial
statements for the six months ended 30 June 2021 and the
comparative figures for the six months ended 30 June 2020 are
unaudited. The comparative financial information for the period
ended 31 December 2020 in this interim report does not constitute
statutory accounts for that period under 435 of the Companies Act
2006.
Statutory accounts for the period ended 31 December 2020 have
been delivered to the Registrar of Companies. The auditors' report
on the accounts for 31 December 2020 was unqualified, did not draw
attention to any matters by way of emphasis, and did not contain a
statement under 498(2) or 498(3) of the Companies Act 2006.
The interim financial statements comprise the financial
statements of the Company and its subsidiaries at 30 June 2021.
Subsidiaries are consolidated from the date of acquisition, being
the date on which the Company obtained control, and continue to be
consolidated until the date when such control ceases.
The interim financial statements incorporate the results of
business combinations using the acquisition method. In the
consolidated balance sheet, the acquiree's identifiable assets,
liabilities and contingent liabilities are initially recognised at
their fair values at the acquisition date.
These interim financial statements were authorised for issue by
the Company's Board of Directors on 20 September 2021.
3. Use of Judgements and Estimates
In preparing these interim financial statements, management has
made judgements and estimates that affect the application of
accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from
these estimates.
The significant judgements made by management in applying the
Company's accounting policies and the key sources of estimation
uncertainty were the same as those described in the last annual
financial statements.
4. Changes in significant accounting policies
The accounting policies applied in these condensed consolidated
interim financial statements are the same as those applied in the
Company's consolidated financial statements in the 2020 Annual
Report & Accounts.
Current taxes
The policy for recognising and measuring income taxes in the
interim period is described in note 10.
5. Going concern
The Company's business activities, performance and position are
set out in the Joint Chief Executives' statement.
The Company Directors have prepared cash flow forecasts for the
Company for the period to 31 December 2022 which indicate that,
taking account of severe but plausible downside scenarios, the
Company will have sufficient funds, to meet its liabilities as they
fall due for that period.
Various sensitivity analyses have been performed to assess the
impact of more severe but plausible downside scenarios to future
trading. Under these severe but plausible downside scenarios the
Company continues to operate within its available facilities and
does not incur any covenant breaches.
The Directors have considered these factors, the likely
performance of the business and possible alternative outcomes and
the financing activities available to the Company. Having taken all
of these factors into consideration, including the impact on
covenants relating to the external borrowing facility, the
Directors confirm that forecasts and projections indicate that the
Company has adequate resources for the foreseeable future and at
least for the period of 12 months from the date of signing the half
year report. Accordingly, the financial information has been
prepared on the going concern basis.
6. Reconciliation of GAAP to Non-GAAP measures
The Company uses a number of "non-GAAP" figures as comparable
key performance measures, as they exclude the impact of one-off
items that are not considered part of ongoing trade. Amortisation
of other intangible assets has been excluded on the basis that it
is a non-cash amount, relating to acquisitions in the current and
prior periods. Operating costs of an exceptional nature have been
excluded as they are not considered part of the underlying trade.
Share option charges have been excluded from Adjusted EBITDA only
as non-cash costs.
The Company's "non-GAAP" measures are not defined performance
measures in IFRS. The Company's definition of the reporting
measures may not be comparable with similar titled performance
measures in other entities.
Adjusted EBITDA is calculated as follows:
6 months ended 6 months
30 June 2021 ended 30
June 2020
GBPm GBPm
Operating profit 5.5 5.0
add back:
Depreciation 0.2 0.1
Depreciation of leased assets 0.3 0.4
Amortisation of other intangible assets
(note 12) 1.0 1.0
Amortisation of development costs and
software (note 12) 0.9 0.5
EBITDA 7.9 7.0
Add back:
Share option charges 0.4 0.4
Adjusted EBITDA 8.3 7.4
Adjusted profit before tax is calculated as follows:
6 months ended 6 months
30 June 2021 ended 30
June 2020
GBPm GBPm
Profit before tax 5.0 4.4
add back:
Amortisation of other intangible assets
(note 12) 1.0 1.0
Adjusted profit before tax 6.0 5.4
Adjusted profit after tax is calculated as follows:
6 months ended 6 months
30 June 2021 ended 30
June 2020
GBPm GBPm
Profit after tax 3.2 2.8
add back:
Amortisation of other intangible assets,
net of deferred tax charge / credit 0.8 1.3
Adjusted profit after tax 4.0 4.1
Free cash flow conversion is calculated as follows:
6 months ended 6 months
30 June 2021 ended 30
June 2020
GBPm GBPm
Net cash generated from operating activities 8.5 7.8
Adjusted for:
Finance income - 0.1
Finance costs (0.4) (0.3)
Purchase of property, plant and equipment - (1.0)
Payment of lease liability (0.4) (0.5)
Development expenditure (0.9) (1.4)
Free cash flow 6.8 4.7
Adjusted EBITDA (as above) 8.3 7.4
Free cash flow conversion 81% 65%
Adjusted EPS is reconciled to the statutory equivalent in note
11.
7. Segmental Information
During the year, the Company was domiciled in the UK and as such
substantially all revenue is derived from external customers in the
United Kingdom. Since the acquisition of Defaqto in March 2019, the
Company has an operation in Norway which is wholly immaterial to
the Company's revenues.
The Company has three operating segments, which are considered
to be reportable segments under IFRS. The three reportable segments
are:
-- Intermediary Services;
-- Distribution Channels; and
-- Fintech and Research
The Intermediary Services division provides technology,
compliance and regulatory support to thousands of intermediary
businesses through a comprehensive membership model. Members
include directly authorised IFAs, directly authorised mortgage
advisers and directly authorised wealth managers are authorized by
the FCA.
The Distribution Channels division delivers market Insight and
analysis, product design and compliance and targeted distribution
channels to financial institutions and product providers.
The Fintech and Research division comprises our Defaqto
business. Defaqto provides market leading software, financial
information and product research to product providers and
intermediaries.
The reportable segments are derived on a product/customer basis.
Management have applied their judgement on application of IFRS 8,
with operating segments reported in a manner consistent with the
internal reporting produced to the chief operating decision makers
("CODM"). The chief operating decision makers are deemed to be the
Joint CEOs. No aggregation of operating segments has occurred.
Segmental information is provided to gross profit, as the CODM
believe this best represents segmental profitability and
performance before taking account of the shared costs in the
business that support these three segments.
The tables below present the segmental information.
6 months ended 30 June Intermediary Distribution Fintech and Admin and
2021 Services Channels Research Support Costs Fintel
GBPm GBPm GBPm GBPm GBPm
Revenue 12.6 11.3 7.8 - 31.7
Direct operating costs (8.7) (6.2) (3.1) - (18.0)
---------------------------- -------------- -------------- ------------- --------------- --------
Gross profit 3.9 5.1 4.7 - 13.7
Administrative and
support costs (5.4) (5.4)
Adjusted EBITDA 8.3
---------------------------- -------------- -------------- ------------- --------------- --------
Amortisation of other
intangible assets (1.0)
Amortisation of development
costs and software (0.9)
Depreciation (0.2)
Depreciation of lease
asset (0.3)
Share option charges (0.4)
---------------------------- -------------- -------------- ------------- --------------- --------
Operating profit 5.5
---------------------------- -------------- -------------- ------------- --------------- --------
6 months ended 30 June Intermediary Distribution Fintech and Admin and
2020 Services Channels Research support Costs Fintel
GBPm GBPm GBPm GBPm GBPm
Revenue 12.3 9.2 7.4 - 28.9
Direct operating costs (8.4) (4.5) (3.2) - (16.1)
---------------------------- -------------- -------------- ------------- --------------- --------
Gross profit 3.9 4.7 4.2 - 12.8
Administrative and
support costs (5.4) (5.4)
Adjusted EBITDA 7.4
---------------------------- -------------- -------------- ------------- --------------- --------
Amortisation of other
intangible assets (1.0)
Amortisation of development
costs and software (0.5)
Depreciation (0.1)
Depreciation of lease
asset (0.4)
Share option charges (0.4)
---------------------------- -------------- -------------- ------------- --------------- --------
Operating profit 5.0
---------------------------- -------------- -------------- ------------- --------------- --------
Segmental assets and liabilities are not analysed between
reporting segments for management purposes and the chief
decision-makers consider the Company statement of financial
position as a whole to best represent the presentation of the net
assets of the Company.
No customer has generated more than 10% of total revenue during
the period covered by the financial information.
8. Operating Profit
Operating profit for the period has been arrived at after
charging:
6 months ended 6 months ended
30 June 2021 30 June 2020
GBPm GBPm
Depreciation of tangible assets 0.2 0.1
Depreciation of lease asset 0.3 0.4
9. Finance Expense and Income
6 months ended 6 months ended
30 June 2021 30 June 2020
GBPm GBPm
Finance Expense
Bank interest payable (0.4) (0.6)
Finance charge on lease liability (0.1) (0.1)
(0.5) (0.7)
Finance Income
Bank interest receivable - 0.1
- 0.1
Net finance expense (0.5) (0.6)
10. Taxation
6 months ended 6 months ended
30 June 2021 30 June 2020
GBPm GBPm
Current tax charge 1.0 1.0
Deferred tax charge 0.8 0.6
Tax charge for the period 1.8 1.6
The tax charge for the period has been accrued using the tax
rate that is expected to apply to the full financial year. The
corporate tax rate in the UK will increase from 19% to 25% from 1
April 2023. The increase was announced in the March 2021 Budget,
and was substantively enacted on 10 June 2021. This has a
consequential impact on the deferred tax balances which were held
at 19%. Due to this change in rate, the net deferred tax liability
has increased by GBP0.8m at 30 June 2021 (being the half year
equivalent).
11. Earnings per share
6 months 6 months
Basic Earnings Per Share ("EPS") ended ended
30 June 2021 30 June 2020
GBPm GBPm
Profit attributable to equity shareholders
of the parent 3.1 2.7
Weighted average number of shares
in issue 96,847,677 96,782,296
Basic profit per share (pence) 3.2p 2.8p
Earnings per share has been calculated based on the weighted
average number of shares in issue in both periods.
6 months 6 months
Diluted Earnings Per Share ended ended
30 June 2021 30 June 2020
GBPm GBPm
Profit attributable to equity shareholders
of the parent 3.1 2.7
Weighted average number of shares in
issue 96,847,677 96,782,296
Diluted weighted average number of shares
and options for the period 826,541 483,999
97,674,218 97,266,295
Diluted profit per share (pence) 3.2p 2.8p
Adjusted EPS has been calculated below based on the adjusted
profit after tax, which removes one of items not considered to be
part of underlying trading.
6 months 6 months
Adjusted basic Earnings Per Share ended ended
30 June 2021 30 June 2020
GBPm GBPm
Adjusted profit after tax (note 6) 4.0 4.1
Weighted average number of shares
in issue 96,847,677 96,782,296
Adjusted earnings per share (pence) 4.1p 4. 2p
12. Intangible assets and goodwill
Other Intangible Assets
Total
other
Intellectual intangible Development
Goodwill Brand property assets expenditure Total
GBPm GBPm GBPm GBPm GBPm GBPm
Cost
At 1 January 2020 76.2 3.1 24.4 27.5 5.1 108.8
Acquisitions - - - - - -
Additions - - - - 1.4 1.4
At 30 June 2020 76.2 3.1 24.4 27.5 6.5 110.2
Additions - - - - 1.0 1.0
Adjustments - - - - - -
At 31 December 2020 76.2 3.1 24.4 27.5 7.5 111.2
Additions - - - - 0.9 0.9
At 30 June 2021 76.2 3.1 24.4 27.5 8.4 112.1
Amortisation and
impairment
At 1 January 2020 0.2 0.2 1.5 1.7 0.8 2.7
Charge in the period - 0.2 0.8 1.0 0.5 1.5
At 30 June 2020 0.2 0.4 2.3 2.7 1.3 4.2
Charge in the period - 0.2 0.8 1.0 0.6 1.6
At 31 December 2020 0.2 0.6 3.1 3.7 1.9 5.8
Charge in the period - 0.2 0.8 1.0 0.9 1.9
At 30 June 2021 0.2 0.8 3.9 4.7 2.8 7.7
Net book value
At 30 June 2021 76.0 2.3 20.5 22.8 5.6 104.4
At 31 December 2020 76.0 2.5 21.3 23.8 5.6 105.4
At 30 June 2020 76.0 2.7 22.1 24.8 5.2 106.0
Intellectual property is a single asset covering the three
elements of customer relationships, technology and data.
Capitalised development expenditure relates to the development of
the software platform in Zest Technology Limited, and technologies
in Defaqto. We have not performed an impairment test against the
carrying value of intangible assets at the interim balance sheet
date.
13. Property, plant & equipment
Lease Assets Owned Assets
----------------------------- --------------------------------
Plant Leasehold Office
Property & Equipment Total improvements Equipment Total
GBPm GBPm GBPm GBPm GBPm GBPm
Cost
At 1 January
2020 2.6 0.7 3.3 - 1.6 1.6
Additions 3.0 - 3.0 0.9 0.1 1.0
Acquisitions - - - - - -
At 30 June 2020 5.6 0.7 6.3 0.9 1.7 2.6
Additions - 0.2 0.2 - 0.3 0.3
Disposals (0.4) - (0.4) - (0.1) (0.1)
At 31 December
2020 5.2 0.9 6.1 0.9 1.9 2.8
Additions - 0.1 0.1 - - -
Disposals - (0.1) (0.1) - - -
At 30 June 2021 5.2 0.9 6.1 0.9 1.9 2.8
Depreciation
At 1 January
2020 0.4 0.3 0.7 - 1.2 1.2
Charge in the
period 0.3 0.1 0.4 - 0.1 0.1
At 30 June 2020 0.7 0.4 1.1 - 1.3 1.3
Charge in the
period 0.2 0.2 0.4 - 0.1 0.1
Disposals (0.4) - (0.4) - (0.1) (0.1)
At 31 December
2020 0.5 0.6 1.1 - 1.3 1.3
Charge in the
period 0.2 0.1 0.3 0.1 0.1 0.2
Disposals - (0.1) (0.1) - - -
At 30 June 2021 0.7 0.6 1.3 0.1 1.4 1.5
Net book value
At 30 June 2021 4.5 0.3 4.8 0.8 0.5 1.3
At 31 December
2020 4.7 0.3 5.0 0.9 0.6 1.5
At 30 June 2020 4.9 0.3 5.2 0.9 0.4 1.3
Leasehold improvements relate to the new head office, which was
completed in September 2020.
14. Borrowings
30 June 2021 30 June 2020
GBPm GBPm
Secured bank loan:
Non-current 24.0 45.0
Less loan arrangement fees (0.2) (0.3)
23.8 44.7
The Company has access to a GBP45m Revolving Credit Facility
provided in two equal amounts of GBP22.5m from Yorkshire Bank and
NatWest. The RCF runs to 2024. The margin payable on the RCF is
based on the net leverage of the Company with a range of 1.5% to
2.6% above LIBOR.
As at 30 June 2021, the RCF was drawn by GBP24m, providing
access to a further GBP21m of funding. Following the sale of Zest
Technology, a further GBP10m was repaid in July 2021.
15. Share Capital & Share Premium
Share capital
Ordinary
Shares
Number of fully paid shares (nominal value
GBP0.01):
At 1 January 2020 96,782,296
Issue of share capital -
At 30 June 2020 96,782,296
Issue of share capital 24,316
At 31 December 2020 96,806,612
Issue of share capital 211,190
At 30 June 2021 97,017,802
Share Premium GBPm
At 1 January 2020 64.8
Issue of share capital -
At 30 June 2020 64.8
Issue of share capital -
At 31 December 2020 64.8
Issue of share capital 0.4
At 30 June 2021 65.2
16. Other reserves
Merger Share Option Total Other
Reserve Reserve Reserves
GBPm GBPm GBPm
At 1 January 2020 (53.9) 1.9 (52.0)
Deferred tax on share options exceeding
profit and loss charge - (1.1) (1.1)
Share option charge - 0.4 0.4
At 30 June 2020 (53.9) 1.2 (52.7)
Share option charge - 0.5 0.5
At 31 December 2020 (53.9) 1.7 (52.2)
Share option charge - 0.4 0.4
Issue of shares (0.3) (0.3)
Deferred tax on share options exceeding
profit and loss charge - 0.3 0.3
At 30 June 2021 (53.9) 2.1 (51.8)
17. Share-based payment arrangements
There have been no material changes to the share-based payment
arrangements in the period to those disclosed in the annual report
and accounts for the period ended 31 December 2020 other than as
disclosed below:
CSOP 2018
During the current period, 35,295 awards were exercised. No
awards were forfeited. The cumulative awards forfeited totalled
26,471 as a result of bad leavers.
CSOP 2019
During the current period, 90,701 awards were exercised. No
awards under the plan have been forfeited as a result of bad
leavers.
CSOP 2020
During the current period, 85,106 awards were exercised. No
awards under the plan have been forfeited as a result of bad
leavers
18. Notes to the cash flow statement
6 months 6 months
ended 30 ended 30
June 2021 June 2020
GBPm GBPm
Cash flow from operating activities
Profit after taxation 3.2 2.8
Add back / (deduct):
Finance income - (0.1)
Finance cost 0.5 0.7
Taxation 1.8 1.6
5.5 5.0
Adjustments for:
Amortisation of development expenditure
and software 0.9 0.5
Depreciation of property, plant and equipment 0.2 0.1
Depreciation of lease asset 0.3 0.4
Amortisation of other intangible assets 1.0 1.0
Share option charge 0.4 0.4
Operating cash flow before movements
in working capital 8.3 7.4
Decrease in trade and other receivables 0.1 2.5
Increase/(decrease) in trade and other
payables 1.3 (0.7)
Cash generated from operations 9.7 9.2
Income taxes paid (1.2) (1.4)
Net cash generated from operating activities 8.5 7.8
19. Subsequent Events
On 21 July, the Company disposed of its fully owned non-core
subsidiary Zest Technology ("Zest") for an initial consideration of
GBP10m, representing a disposal multiple of 22 times trailing
EBITDA (12 months ended 30 June 2021). The disposal proceeds may
increase by up to a further GBP1.5m based on revenue delivered in
FY'21.
On 14 September, the Company entered into a strategic
partnership with Tatton Asset Management ("TAM") securing a 5-year
fintech and distribution agreement that will generate a minimum
revenue of GBP7m and the sale of the Verbatim fund management
business for a cash consideration of up to GBP5.8m. The
consideration comprises an initial GBP2.8m received on completion
of the transaction and the balance over a three-year period based
on business performance.
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IR FZGZLMGZGMZZ
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