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SimplyBiz Group PLC (The)  -  SBIZ   

Interim results for the six months to 30 June 2018

Released 07:00 11-Sep-2018

RNS Number : 3384A
SimplyBiz Group PLC (The)
11 September 2018
 

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

 

11 September 2018

The SimplyBiz Group plc

("SimplyBiz", the "Company" or the "Group")

 

Half-year results for the six months ended 30 June 2018

 

Maiden results in line with expectations, with strong period of organic growth and inaugural interim dividend announced.

 

SimplyBiz (AIM: SBIZ), the leading independent provider of compliance and business services to financial advisers and financial institutions in the UK, today announces its unaudited results for the six months ended 30 June 2018.

 

Financial highlights:

·     Group Revenue up 13.7% to £24.2m (H1 2017: £21.3m)

·     Adjusted EBITDA* up 22.0% to £5.4m (H1 2017: £4.4m)

·     Adjusted EBITDA* margin increased to 22.2% from 20.7%

·     Operating profit of £1.2m (H1 2017: £3.9m) after inclusion of IPO related costs of £3.6m

·     Adjusted profit before tax* increased 60.8% to £4.5m

·     Adjusted profit after tax* increased 61.7% to £3.6m

·     Adjusted earnings per share (EPS)* increased by 61.7% to 4.68p

·     Net debt reduced from £1.6m at date of listing to net cash of £1.2m at 30 June 2018 (30 June 2017: net debt of £24.7m, 31 December 2017: net debt of £23.0m)

·     Maiden interim dividend of 0.98p per share, in respect of the nine months trading to 31 December, post IPO, as per the stated intention in the admission document

 

Operational highlights:

·     Completion of IPO on London's Alternative Investment Market (AIM), raising £30m for the Group

·     Acquisition and integration of Landmark Surveyors Limited (acquired in January 2018), and subsequent achievement of cost synergies in line with expectation  

·     Member Firms increased by 5.7% to 3,628 (31 December 2017: 3,433, 30 June 2017: 3,367)

·     Assets under management (AUM) increased by 5.6% to £615m (31 December 2017: £582m)

·     Significant Distribution Channels division contract wins with new providers Guardian Financial Services and Vitality Invest

·     Launch of Centra, our end to end financial planning system, which has received high levels of interest; 1,635 users signed since its launch in March 2018

·     Remains the UK's largest support services compliance provider for intermediaries (by revenue)

·     Winner of Best Support Services for Advisers at 2018 Professional Advisers Awards

 

Ken Davy, Chairman, commented:

 

"We are delighted to announce our first results as a public company, following our successful AIM flotation in April. Our performance in the first half of 2018 has maintained our trading momentum, delivering strong top line organic and acquisition growth of over 13% and increasing our adjusted EBITDA margins to 22%.  

 

"Our IPO in April 2018 has been very well received by our members and partners, and we have already witnessed positive commercial and reputational benefit. We continue to increase the number of members and channel partners that we serve, as well as look to pursue selective acquisitions.

 

"I would like to thank everyone in the SimplyBiz team for their dedication in delivering a successful first half of 2018."

 

 

* Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation, operating exceptional costs and share based payment charges. Adjusted profit before and profit after tax exclude operating exceptional costs, exceptional finance charges, amortisation and share based payment charges. A reconciliation of these metrics to GAAP measures is provided in note 5. Adjusted earnings per share is calculated based on adjusted profit after tax, as shown in note 9.

 

For further information please contact:

SimplyBiz

via Instinctif Partners

Matt Timmins (Joint Chief Executive Officer)


Neil Stevens (Joint Chief Executive Officer)

Gareth Hague (Group Finance Director)




Zeus Capital (Nominated Adviser and Broker)

+44 (0) 20 3829 5000

Martin Green

Andrew Jones

Pippa Underwood




Instinctif Partners

+44 (0)20 7457 2831 / SimplyBiz@instinctif.com

Giles Stewart

Rachel Cashmore

Rui Videira

Ambrose Fullalove

 

Notes to editors

 

With over 3,600 member firms in the UK, SimplyBiz is a leading independent provider of compliance and business services to financial advisers, including directly authorised IFAs, directly authorised mortgage advisers, workplace consultants and directly authorised consumer credit brokers. It also provides marketing and promotion, product panelling and co-manufacturing services to more than 135 financial institutions, through access to its membership.

 

On 4 April 2018, the Group was admitted to the Alternative Investment Market (AIM) of the London Stock Exchange, raising £30.0m of primary proceeds in an institutional placing.

 

For more information, please visit: www.simplybizgroup.co.uk/

 

Analyst presentation

An analyst briefing is being held at 9am on 11 September at the offices of Instinctif Partners, 65 Gresham Street, London, EC2V 7NQ. To register your attendance please contact SimplyBiz@instinctif.com

JOINT CHIEF EXECUTIVES' STATEMENT

 

Overview

The first six months of 2018 saw the Group continue to deliver strong operational and financial performance, alongside the acquisition and integration of Landmark Surveyors Limited, and successful listing on AIM.

 

Revenue growth of 13.7% to £24.2m reflects continued organic growth and a £1.8m (8.6%) revenue contribution from the acquisition of Landmark Surveyors (from 23 January 2018). Adjusted EBITDA growth of 22.0% to £5.4m reflects a sound cost discipline and the ability of the business to generate operational leverage from its platform. Adjusted EBITDA margin trended positively to 22.2% from 20.7% in the prior year period.

 

Divisional Performance

The Intermediary Services Division provides compliance and business services to over 3,600 individual intermediary firms through a comprehensive membership model. Our members, that include Financial advisers, mortgage advisers, and consumer credit broker firms, conduct regulated activities that require that they are authorised and regulated by the FCA.

 

Member firms numbers increased by 5.7% to 3,628 (3,433 at 31 December 2017 and 3,367 at 30 June 2017) and we continue to benefit from the shift in the industry from advisers working as appointed representatives of network firms, to being directly authorised with the FCA. As advisers move away from costly, restrictive network firm structures, to the independence of being directly authorised, SimplyBiz is strategically well placed to support and guide them through their FCA registration process and assist them in a constantly evolving and increasingly complex regulatory environment.

 

Increased regulation is a tailwind for our business. The introduction of the Markets in Financial Instruments Directive 2018 ("MiFID II") and the General Data Protection Regulation ("GDPR"), and the impending Senior Managers & Certification Regime ("SM&CR") and Insurance Distribution Directive ("IDD") regulations have created opportunities for the Group to engage and support its members through additional service offerings. Additional services income increased by 12.1% to £2.3m (H1 2017: £2.0m), as the Group benefitted from ongoing regulatory change.

 

Given its scale, the Group is able to provide its members with a customised version of the sector's leading 3rd party specialist practice management and CRM applications at attractive rates. Software licence users increased from 3,095 at H1 2017 (FY 2017: 3,274) to 3,504, resulting in an 18.4% increase in software licence income from H1 2017.

 

In March 2018, the Group launched 'Centra', an end-to-end financial planning system in partnership with Defaqto that brings together a number of existing advisor software tools into one integrated service. Centra offers our members financial planning tools, product research, suitability reports and a centralised investment process. Interest in Centra has been significant, with over 1,600 users signed up since its launch, and the Group providing additional face-to-face training workshops to meet the level of demand.

 

Zest Technologies, the Group's employee benefits software solution, performed in line with management expectations during the period with revenue reducing from £3.3m in H1 2017 to £2.5m in H1 2018, as customers move away from the legacy application. The re-design of the Zest platform was completed in H1 2018 and the new product has received positive feedback since its launch. The Group is currently in the final stages of a number of tenders on the new software and we look forward to updating shareholders with our progress in due course.

 

The Distribution Channels Division continues to provide a highly effective, efficient distribution channel for c.135 financial institutions to reach an otherwise fragmented independent intermediary sector. The Group generates revenue from product providers when it successfully engages Members to participate in the channels offered.

 

The Group's extensive events programme has been developed to cater for the needs of Members, and allows product providers the opportunity to deliver engaging information that will enhance advisers' knowledge and continue to improve customer outcomes. As well as delivering a significant number of events and seminars in the period, we also provided a broad range of electronic and printed materials to deliver product provider brand and product communications to its members. Income in the period from these marketing service agreements increased by 20.9% to £3.0m, from £2.5m in H1 2017, although part of the increase was due to the timing of deliverables being weighted more in H1 during 2018, as compared to 2017.

 

Building on our existing strong industry relationships, in August 2018, the Group announced a multi-year partnership deal with Guardian Financial Services, one of the oldest brands in the UK financial services market. The partnership will see the two companies collaborate to deliver relevant marketing messages, training and educational opportunities to the IFA and wealth management firms who subscribed to the SimplyBiz services.

 

SimplyBiz Mortgages is the UK's third largest mortgage club, with over 1,600 members benefitting from access to a dedicated support service and preferred products from key lenders. Mortgage Services revenues increased by 18.6% to £3.1m (H1 2017: £2.6m), as a result of increased Member penetration and greater lending in the market.

 

In January 2018, the Group strengthened its capabilities in providing home valuations with the acquisition of Landmark Surveyors Ltd, a business highly aligned and complementary to Sonas Surveyors, an existing Group company. Through these companies, the Group is appointed to the majority of major bank and building society panels, providing vertical integration with our other mortgage related activities.

 

During the period, assets under management within the Group's packaged investment service Verbatim, increased from £582m at 31 December 2017, to £615m at 30 June 2018, generating revenues of £1.0m - a 21.3% increase from H1 2017.

 

Strategy

The Group's growth strategy focuses on both organic growth and growth by acquisition. Organic growth is expected to be driven by growth in the Group's membership base, in its service offering and its average revenue per customer. Growth in its core membership will in turn be accretive to the distribution division, enhancing the Group's position as an enabler of more effective financial service provision.

 

Building on its proven ability to execute and integrate acquisitions, management will also continue to pursue selective acquisitions to enhance the scale of the Group and breadth of services offered.

 

FINANCIAL REVIEW

 

Six months ended

June 2018

£'000

June 2017

£'000

Group Revenue

24,207

21,288

Operating Expenses

(18,839)

(16,888)

Adjusted EBITDA

5,368

4,400

Adjusted EBITDA margin %

22.2%

20.7%

Operating costs of an exceptional nature

(3,790)

(161)

EBITDA

1,578

4,239

Depreciation

(129)

(109)

Impairment of goodwill

-

(181)

Amortisation of other intangible assets

(62)

-

Share option charges

(132)

-

Net finance costs

(2,410)

(1,515)

(Loss) / profit before tax

(1,155)

2,434

Taxation

(570)

(560)

(Loss) / profit after tax

(1,725)

1,874

 

 

 

Adjusted EPS

4.68p

2.90p

Revenue growth (%)

13.7%

 

Adjusted EBITDA growth (%)

22.0%

 

 

 

 

 

Revenue

Revenues grew by 13.7% to £24.2m, reflecting £1.8m contribution from the acquisition of Landmark Surveyors (from 23 January 2018) and £1.1m (5.1%) of organic growth.

 

The Distribution Channels Division contributed 54% of revenue in the period, compared to 50% in H1 2017, as a result of the Landmark Surveyors acquisition.

 

Adjusted EBITDA and Adjusted EBITDA margin

Underlying operating expenses, which exclude costs of an exceptional nature, increased by £2.0m (11.6%) to £18.8m, as compared to H1 2017. Landmark Surveyors contributed to £1.6m of the increase, with organic growth in operating expenses of only 2.0%, well below our organic revenue growth rate.

 

Adjusted EBITDA is used by management as a key measure of financial performance allowing better understanding of the underlying performance of the Group. Adjusted EBITDA growth of £1.0m (22.0%) included £0.8m (17.7%) of organic growth, with the group able to benefit from its operational leverage to increase adjusted EBITDA margin in the period to 22.2% from 20.7% in H1 2017.

 

Operating costs of an exceptional nature

Operating costs of an exceptional nature include £3.6m of professional fees incurred on admission to AIM, as well as £0.1m of professional fees on the acquisition of Landmark Surveyors Limited.

 

Share based payments

Share based payment charges of £0.1m have been recognised in respect of the options issued on IPO.

 

Financial income and expense

Finance expense in H1 2018 included £0.7m interest paid in relation to the debt that was repaid on IPO. The current year expense also includes one off charges totalling £1.6m on early settlement of the retired debt and share warrant.

 

Taxation

The tax charge for the period has been accrued using the tax rate that would be applicable to the total earnings chargeable to tax.

 

Adjusted earnings per share (EPS)

Adjusted EPS has been calculated based on the post-IPO weighted average number of shares, for both periods, for comparable purposes.

 

Dividend

At the time of the IPO the Directors stated an intention to implement a progressive dividend policy to seek to maximise shareholder value and reflect the Group's strong earnings potential and cash flow. The Board declares an interim dividend of 0.98p per share in respect of the trading for the 9 month period to 31 December 2018, post IPO. The dividend will be paid on 23 October 2018, to shareholders on the register on 21 September 2018.

 

Cash flow and Closing Net Cash

At 30 June 2018, the Group had net cash of £1.2m, compared to net debt at the date of listing of £1.6m and net debt of £23.0m as at 31 December 2017. Operating cash flow of £3.5m (H1 2017: £3.7m) represented cash conversion of 65% (H1 2017: 84%) of adjusted EBITDA. The reduction in cash conversion is due to higher than average working capital balances at the end of FY 2016, which reversed in H1 2017. Management expect cash conversion rates to increase in H2 2018, in line with historic trends of greater than 75%.

 

Funds raised in the IPO were used to repay the previous £35m borrowings, with a new £15m Revolving Credit Facility implemented at IPO at a significantly lower interest rate.

 

 

 

OUTLOOK

Since the end of the period, trading has continued in line with the Board's expectations, and we remain on track to deliver on market expectations for the full year.

 

Matt Timmins and Neil Stevens (Joint Chief Executive Officers)



 

Consolidated statement of profit or loss and other comprehensive income

for the six months ended 30 June 2018


 

 

Note



 

 

6 months

ended

30 June 2018


 

 

6 months ended

30 June 2017





£000


£000








Revenue

6



24,207


21,288








Operating expenses

7



(22,890)


(17,339)

Amortisation of other intangible assets

10



(62)


-





              


              

Operating profit




1,255


3,949

Finance income

8



41


32

Finance costs

8



(2,451)


(1,547)





              


              

(Loss) / profit before taxation




(1,155)


2,434








Taxation




(570)


(560)





              


              

(Loss) / profit for the financial period




(1,725)


1,874





              


              








Earnings per share - basic

9



(2.26p)


3.47p

Earnings per share - diluted

9



(2.26p)


3.47p

 

 

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 2018


 

 

Note

Unaudited

30 June 2018

£000

Unaudited

30 June 2017

£000

Audited

31 December 2017
£000

Assets





Non-current assets





Property, plant & equipment


439

386

384

Intangible assets

10

23,111

17,835

18,205



                

                

                

Total non-current assets


23,550

18,221

18,589



                

                

                

Current assets





Trade and other receivables


9,065

8,664

7,505

Deferred tax asset


34

57

25

Cash and cash equivalents -unrestricted


10,691

8,211

10,998

Cash and cash equivalents - restricted


545

545

545


          

                

                

                

Total current assets


20,335

17,477

19,073


          

                

                

                

Total assets


43,885

35,698

37,662



                

                

                






Equity and liabilities





Equity attributable to the owners of the Company





Share capital

12

765

10

10

Share premium account

12

36,809

50,852

52,544

Other reserves

13

(61,255)

(63,147)

(61,387)

Retained earnings


46,257

4,082

2,982



                

                 

                

Total equity


22,576

(8,203)

(5,851)



                

                

                

Liabilities





Current liabilities





Trade and other payables


9,112

8,283

8,161

Financial liabilities - borrowings

11

10,010

-

-

Income tax liabilities


446

614

16



                

                

                

Total current liabilities


19,568

8,897

8,177



                

                

                

Non-current liabilities





Financial liabilities - borrowings

11

-

33,459

33,665

Trade and other payables


1,125

598

400

Financial derivatives


-

690

848

Deferred tax liabilities


616

257

423


          

                

                

                

Total non-current liabilities


1,741

35,004

35,336


          

                

                

                

Total liabilities


21,309

43,901

43,513


          

                

                

                

Total equity and liabilities


43,885

35,698

37,662



                

                 

                

Consolidated statement of changes in equity

 


Share

Share

Other

Retained

Total


capital

premium

reserve

earnings

equity


£000

£000

£000

£000

£000







Balance at 1 January 2017

10

50,852

(63,147)

3,008

(9,277)

Total comprehensive income for period

-

-

-

1,874

1,874







Transactions with owners, recorded directly in equity






Dividends

-

-

-

(800)

(800)


                

                

                

                

                

Total contributions by and distribution to owners

-

-

-

(800)

(800)


                

                

                

                

                

Balance at 30 June 2017

10

50,852

(63,147)

4,082

(8,203)

Total comprehensive income for period

-

-

-

2,913

2,913







Transactions with owners, recorded directly in equity






Issue of shares

-

1,692

-

-

1,692

Purchase of minority interest

-

-

-

(2,248)

(2,248)

Transfer to retained earnings

-

-

1,760

(1,760)

-

Dividends

-

-

-

(5)

(5)


                

                

                

                

                

Total contributions by and distribution to owners

-

1,692

1,760

(4,013)

(561)


                

                

                

                

                

Balance at 31 December 2017

10

52,544

(61,387)

2,982

(5,851)


                

                

                

                

                

Total comprehensive income for period

-

-

-

(1,725)

(1,725)







Transactions with owners, recorded directly in equity






Issue of share capital

176

29,844

-

-

30,020

Bonus issue of shares

579

(579)

-

-

-

Transfer to retained earnings

-

(45,000)

-

45,000

-

Share option charge

-

-

132

-

132


              

                

                

                

                

Total contributions by and distribution to owners

755

(15,735)

132

45,000

30,152


               

                

                

                

                

Balance at 30 June 2018

765

36,809

(61,255)

46,257

22,576


               

                

                

                

                

 

 

 

 

 

 

 

 

 

Consolidated statement of cash flows

for the 6 months ended 30 June 2018


 

6 months ended
30 June 2018

 

6 months ended
30 June 2017 


£000

£000




Net cash (used in) / generated from operating activities (note 15)

(530)

4,980




Cash flows from investing activities



Finance income

41

30

Purchase of property, plant and equipment

(46)

(65)

Development expenditure

(437)

(404)


                

                

Net cash used in investing activities

(442)

(439)


                

                

Cash flows from financing activities



Finance costs

(922)

(1,450)

Loan repayments made

(36,193)

(77)

Drawdown of loans

10,093

-

Purchase of shares in subsidiaries

-

(1,099)

Acquisitions, net of cash received

(2,333)

-

Issue of share capital

30,020

-

Dividends paid

-

(800)


                

                

Net cash generated from / (used in) financing activities

665

(3,426)


                

                

Net (decrease) / increase in cash and cash equivalents

(307)

1,115

Cash and cash equivalents at start of period

11,543

7,641


                

                

Cash and cash equivalents at end of period

11,236

8,756


                

                

 

 

 



 

NOTES TO THE INTERIM FINANCIAL INFORMATION

 

1.             General information and basis of preparation

 

The consolidated interim financial information has been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs), as adopted by the European Union and AIM rules. The accounts have been prepared in accordance with accounting policies that are consistent with the Group's Annual Report and Accounts for the period ended 31 December 2017 and that are expected to be applied in the Group's Annual Report and Accounts for the period ended 31 December 2018. The financial information set out in these interim financial statements for the six months ended 30 June 2018 and the comparative figures for the six months ended 30 June 2017 are unaudited.

 

The comparative financial information for the period ended 31 December 2017 in this interim report does not constitute statutory accounts for that period under 435 of the Companies Act 2006. The interim financial information do not contain all the information required for statutory financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2017, which have been prepared in accordance with IFRS as adopted by the European Union.

 

Statutory accounts for the period ended 31 December 2017 have been delivered to the Registrar of Companies.  The auditors' report on the accounts for 31 December 2017 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 Group and its subsidiaries at 30 June 2018. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group 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.

 

The following recently adopted IFRSs have been applied by the Group for the first time in these financial statements:

 

·      IFRS 9 Financial Instruments - adoption of IFRS 9 had no material impact on the financial statements.

·      IFRS 15 Revenue from Contracts with Customers - The effect of adopting the new revenue standard has been to recognise revenue on bundled contracts based on the performance of the individual deliverables. Adoption of the new standard has no material effect on the opening balance sheet at 1 January 2018. The revenue streams and policies of the Group remain consistent with those described in the 2017 accounts.

 

The following adopted IFRSs have been issued but have not been applied by the Group in these financial statements:

 

·      IFRS 16 Leases introduces a single, on-balance sheet accounting model for lessees, which has an effective date of 1 January 2019. The Group is in the process of quantifying the potential impact of this standard. It is expected that the Group will adopt IFRS 16 on 1 January 2019.

 

2.             Going concern

 

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Joint Chief Executives' statement.

 

The Directors have considered these factors, the likely performance of the business and possible alternative outcomes and the financing activities available to the Group. 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 Group and its Parent Company have 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.

 

3.             Accounting policies

 

The accounting policies adopted are consistent with those used in preparing the consolidated financial statements for the financial year ended 31 December 2017.

 

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total earnings.

 

Amortisation of intangible assets is charged to the profit and loss account on a straight line basis over the useful lives of the asset. Intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:

 

·      Brands                                   10 years

·      Customer relationships     8 years

 

The basis for choosing these useful lives is with reference to the period over which they can continue to generate value for the group.

 

4.             Estimates

 

The preparation of interim financial information requires management to make certain judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual amounts may differ from these estimates.

 

In preparing these interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 31 December 2017.



 

 

5.             Reconciliation of GAAP to Non-GAAP measures

 

The Group 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 on-going trade.

 

Adjusted EBITDA is calculated as follows:




6 months

ended 30

June 2018

 

6 months

ended 30

June 2017



£000

£000

Operating profit


1,255

3,949

add back:




Depreciation


129

109

Impairment of goodwill (note 10)


-

181

Amortisation of other intangible assets (note 10)


62

-

Operating costs of exceptional nature (note 7)


3,790

161

Share option charges


132

-


              

              

Adjusted EBITDA


5,368

4,400


              

              

 

Adjusted profit before tax is calculated as follows:




6 months

ended 30

June 2018

 

6 months

ended 30

June 2017



£000

£000

(Loss) / profit before tax


(1,155)

2,434

add back:




Operating costs of exceptional nature (note 7)


3,790

161

Finance costs of exceptional nature (note 8)


1,635

-

Impairment of goodwill (note 10)


-

181

Amortisation of other intangible assets (note 10)


62

-

Share option charges


132

-


              

              

Adjusted profit before tax


4,464

2,776



              

              

 

Finance costs of an exceptional nature represent the one-off costs incurred on settlement of the previous loan facility and associated share warrant, including the accelerated release of capitalised arrangement fees.

 

 

 

 

 

 

Adjusted profit after tax is calculated as follows:




6 months ended 30 June 2018

 

6 months ended 30 June 2017



£000

£000

(Loss) / profit after tax


(1,725)

1,874

add back:




Operating costs of exceptional nature (note 7)


3,790

161

Finance costs of exceptional nature, net of tax (note 8)


1,324

-

Impairment of goodwill (note 10)


-

181

Amortisation of other intangible assets (note 10)


62

-

Share option charges


132

-


              

              

Adjusted profit after tax


3,583

2,216


              

              

 

6.             Segmental Information

 

In the period covered by this financial information, the Company was domiciled in the UK and as such all revenue is derived from external customers in the United Kingdom. 

During the period under review, the information reported to the Company's joint Chief Executive Officers, who are considered to be the chief operating decision makers, was predominately based on the consolidated Group, with disaggregation where appropriate. The consolidated information is shown in the statement of profit or loss.

From 1 January 2017, the Group has established two operating segments, which are considered reportable segments under IFRS. The two reportable segments are:

·      Intermediary Services

·      Distribution Channels

 

Intermediary Services provides compliance and regulation services to individual financial intermediary Member Firms, including directly authorised IFAs, directly authorised mortgage advisers, workplace consultants and directly authorised consumer credit brokers.

Distribution Channels provides marketing and promotion, product panelling and co-manufacturing services to financial institutions. This division of the Group also undertakes survey panelling and surveying work for Mortgage Lenders.

The reportable segments are strategic business units that offer different products and services.  Operating segments are reported in a manner consistent with the internal reporting produced to the chief operating decision-makers.



 

The tables below present the segmental information for the periods ended 30 June 2018 and 2017.

 


6 months ended 30 June

6 months ended 30 June


2018

2017


£000

£000

Intermediary Services



Revenue

11,185

11,065

Operating expenses, before amortisation and depreciation

(8,834)

(8,947)


              

              

Intermediary Services EBITDA

2,350

2,118

Operating costs of exceptional nature

(1,751)

(84)


              

              

Intermediary Services EBITDA

599

2,034


              

              

Distribution Channels



Revenue

13,022

10,223

Operating expenses, before amortisation and depreciation

(10,004)

(7,941)


              

              

Distribution Channels EBITDA

3,018

2,282

Operating costs of exceptional nature

(2,039)

(77)


              

              

Distribution Channels EBITDA

979

2,205


              

              

Total EBITDA

1,578

4,239




Impairment of goodwill

-

(181)

Amortisation of other intangible assets

(62)

-

Depreciation

(129)

(109)

Share option charges

(132)

-


              

              

Operating profit

1,255

3,949


              

              

In determining the trading performance of the operating segments central costs are allocated based on the divisional contribution of revenue to the Group.

The statement of financial position is not analysed between reporting segments for management and the chief decision-makers consider the Group statement of financial position as a whole. 

No customer has generated more than 10% of total revenue during the period covered by the financial information.

 

 

7.             Operating Profit

 

Operating profit for the period has been arrived at after charging:


6 months ended

30 June 2018

6 months ended

30 June 2017 


£000

£000




Depreciation of tangible assets

129

109

Operating costs of exceptional nature:



Costs in relation to corporate restructuring and refinancing

-

191

Restructuring costs

65

10

Write off of Director's loan

-

89

Professional fees for acquisitions

120

-

Release of deferred consideration

-

(129)

Fees in relation to IPO process

3,605

-


              

              


3,790

161

 

 

 

              

              

8.             Finance Expense and Income

 


6 months ended

30 June 2018

6  months ended

30 June 2017


£000

£000

Finance Expense



Bank interest payable

(816)

(1,547)

Fair value loss on financial instruments

(345)

-

Accelerated arrangement fees on settlement of previous loan

(775)

-

Accelerated implied interest charge on settlement of previous loan

(515)

-


              

              


(2,451)

(1,547)

Finance Income



Bank interest receivable

41

32


              

              


41

32


              

              

Net finance expense

(2,410)

(1,515)


              

              

 

9.             Earnings per share

 

Basic Earnings Per Share


 

6 months ended

30 June 2018

 

6 months ended

30 June 2017



£000

£000





(Loss) / profit attributable to equity shareholders of the parent

(1,725)

1,874



              

              

Weighted average number of shares in issue


76,470,588

53,971,492



              

              

Basic (loss) / profit per share (pence)


(2.26p)

3.47p



              

              

 

Diluted Earnings Per Share


 

6 months ended

30 June 2018

 

6 months ended

30 June 2017



£000

£000





(Loss) / profit attributable to equity shareholders of the parent

(1,725)

1,874



              

              

Weighted average number of shares in issue


76,470,588

53,971,492

Diluted weighted average number of shares and options for the period

444,406

-



              

              



76,914,994

53,971,492



              

              

Diluted (loss) / profit per share (pence) (see below)


(2.26p)

3.47p



              

              

 

The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purpose of calculating the diluted loss per share for the current year is identical to those used for the basic loss per share. This is because the exercise of share options would have the effect of reducing the loss per share and is, therefore, not a dilution under the terms of IAS 33.

An 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. For comparable purposes the weighted average number of shares in issue has been treated as those in issue post IPO for both the current and prior year.

 

Adjusted basic Earnings Per Share


 

6 months ended

30 June 2018

 

6 months ended

30 June 2017



£000

£000





Adjusted profit after tax (note 5)


3,583

2,216



              

              

Weighted average number of shares in issue


76,470,588

76,470,588



              

              

Adjusted earnings per share (pence)


4.68p

2.90p



              

              

10.          Intangible assets

 


Goodwill

Intangible assets

Development expenditure

Total


£000

£000

£000

£000

Cost





At 1 January 2017

16,250

-

1,361

17,611

Additions

-

-

402

402


              

              

              

              

At 30 June 2017

16,250

-

1,763

18,013

Additions

-

-

370

370


              

              

              

              

At 31 December 2017

16,250

-

2,133

18,383

Additions

3,520

1,012

436

4,968


              

              

              

              

At 30 June 2018

19,770

1,012

2,569

23,351


              

              

              

              

Amortisation and impairment





At 1 January 2017

-

-

-

-

Charge in the period

178

-

-

178


              

              

              

              

At 30 June 2017

178

-

-

178

Charge in the period

-

-

-

-


              

              

              

              

At 31 December 2017

178

-

-

178

Charge in the period

-

62

-

62


              

              

              

              

At 30 June 2018

178

62

-

240


              

              

              

              

Net book value





At 30 June 2018

19,592

950

2,569

23,111


              

              

              

              

At 31 December 2017

16,072

-

2,133

18,205


              

              

              

              

At 30 June 2017

16,072

-

1,763

17,835


              

              

              

              

 



 

11.          Borrowings

 


30 June 2018

30 June 2017 


£000

£000

Secured bank loan:



Current

10,093

-

Non-current

-

34,372

Less loan arrangement fees             

(83)

(913)


              

              


10,010

33,459


              

              

 

On 5 April 2018, the Group repaid its previous loan in full and drew down £10.1m from a new £15.0m Revolving Credit Facility ('RCF') provided by Yorkshire Bank.

 

The previous loan was due to be settled in June 2022. On settlement of the loan, £776k of capitalised loan arrangement fees were accelerated into the profit and loss account, along with £515k of implied interest (due to the discounting of the amount repayable to the present date). £90k of loan arrangement fees were incurred on the new RCF, which have been capitalised and amortised over 3 years. 

 

 

12.          Share Capital & Share Premium

 

Share capital        


Ordinary

A shares

Ordinary

B shares

Ordinary

C shares

Ordinary

D shares

Ordinary Shares

Total

Number of fully paid shares:







At 1 January 2017

8,349,148

50,852

1,331,112

256,974

-

9,988,086

Issue of share capital

-

-

-

-

-

-


              

              

              

              

              

              

At 30 June 2017

8,349,148

50,582

1,331,112

256,974

-

9,988,086

Issue of share capital

-

281,380

-

-

-

281,380

Repurchase of shares and cancellation

-

-

-

(26,075)

-

(26,075)


              

              

              

              

              

              

At 31 December 2017

8,349,148

332,232

1,331,112

230,899

-

10,243,391








Repurchase of shares and cancellation

-

-

-

(1,093)

-

(1,093)

Bonus issue of shares

75,142,332

2,990,088

11,980,008

2,068,254

-

92,180,682

Share consolidation

(75,142,332)

(2,990,088)

(11,980,008)

(2,068,254)

-

(92,180,682)

Bonus issue of shares

45,295,619

1,802,410

1,275,069

208,043

-

48,581,141

Share conversion

(53,644,767)

(2,134,642)

(2,606,181)

(437,849)

58,823,439

-

Issue of share capital

-

-

-

-

17,647,149

17,649,149


              

              

              

              

              

              

At 30 June 2018

-

-

-

-

76,470,588

76,470,588


             

             

             

             

             

             

 

During 2017 the Company bought back and cancelled 26,075 D ordinary shares. On 5 December 2017, the company issued 281,380 B ordinary shares.

During 2018, prior to the IPO listing, the Company bought back and cancelled 1,093 D ordinary shares.

As part of the IPO process, the following share restructuring took place on 4 April 2018:

·      An initial bonus issue of shares in the ratio of 9 new shares to 1 existing share was issued across all share categories.

·      A share consolidation across all share categories, at a rate of 10 shares to 1.

·      A second bonus issue of shares across all share categories at differing share ratios.

In addition to the above, an issue of 17,647,149 new ordinary shares was made on 4 April 2018, and the Company undertook a reduction of its share capital by cancelling £45,000,000 of its share premium account.

Share Premium   






Share Premium £'000

At 1 January 2017 and 30 June 2017





50,852

Issue of share capital





1,692






              

At 31 December 2017





52,544

Issue of share capital





29,844

Transfer to retained earnings





(45,000)

Bonus issue





(579)






              

At 30 June 2018





36,809






             

 

 

13.          Other reserves

 


Merger Reserve

Capital redemption reserve

Put and Call Option reserve

Share Option Reserve

Total Other Reserves


£'000

£'000

£'000

£'000

£'000

At 1 January 2017 and 30 June 2017

(61,395)

8

(1,760)

-

(63,147)

Transfer to retained earnings

-

-

1,760

-

1,760


              

              

              

              

              

At 31 December 2017

(61,395)

8

-

-

(61,387)

Share option charge

-

-

-

132

132


              

              

              

              

              

At 30 June 2018

(61,395)

8

-

132

(61,255)


             

             

             

             

             

 

 

14.          Share-based payment arrangements

 

At 30 June 2018, the Group had the following share-based payment arrangements.

 

Company Share Option Plan ("CSOP")

On 4 April 2018, the Group established the Company Share Option Plan ("CSOP"), which granted share options to certain key management personnel. The CSOP consists of two parts, and all options are to be settled by physical delivery of shares. The terms and conditions of the share option schemes granted during the six months ended 30 June 2018 are as follows:

 

Scheme

Grant Date

Number of awards

Vesting conditions

Contractual life of options

Approved Scheme

4 April 2018

400,000

3 years' service from grant date

3 to 10 years

Unapproved Scheme

4 April 2018

 

425,000

3 years' service from grant date

3 years

 

Management Incentive Plan ("MIP")

On 4 April 2018, the Group established the Management Incentive Plan ("MIP") which invited eligible employees to subscribe for A Shares in the Company's subsidiary SimplyBiz Limited. Participants have a put option to sell the A shares to the Company in exchange for ordinary shares of the Company at any point between 3 years and 10 years after the date of grant, provided that they are still employed and an equity hurdle is met. The terms and conditions of the MIP are as follows:

 

Grant Date

Number of awards

Vesting conditions

Contractual life of options

4 April 2018

2,250

3 years' service from grant date, subject to an equity hurdle of 40% above the IPO price.

3 to 10 years

 

The fair value of services received in return for share options granted is based on the fair value of the share options granted. The fair value has been measured using the Black-Scholes model for the unapproved CSOP scheme, and the Monte Carlo model for the MIP and approved CSOP scheme.

 

The following inputs were used in the measurement of the fair values at grant date of the share based payment plans.

 


Approved CSOP

Unapproved CSOP

Management incentive plan

Fair value at grant date

£0.64

£1.59

£290.22

Share price at grant date

£1.70

£1.70

£1.70

Exercise price

£1.70

£0.01

£1.785

Expected volatility

40%

40%

40%

Option life (expected weighted average life)

3

3

3

Expected dividends

2%

2%

2%

Risk-free interest rate (based on government bonds)

1.2%

1.2%

1.2%

 

 

 

 

 

15.          Notes to the cash flow statement


 

6 months ended 30 June 2018

 

6 months ended 30 June 2017


£000

£000

Cash flow from operating activities



(Loss) / profit after taxation

(1,725)

1,874

Add back / (deduct):



Finance income

(41)

(32)

Finance cost

2,451

1,547

Taxation

570

560


              

              


1,255

3,949


              

              

Adjustments for:



Impairment of goodwill

-

181

Depreciation of property, plant and equipment

129

109

Amortisation of other intangible assets

62

-

Share option charge

132

-


              

              

Operating cash flow before movements in working capital

1,578

4,239


              

              

Increase in receivables

(1,301)

(1,499)

(Decrease) / increase in trade and other payables

(581)

736


              

              

Cash (used in) / generated from operations

(304)

3,476

Income taxes (paid) / received

(226)

1,504


              

              

Net cash (used in) / generated from operating activities

(530)

4,980


              

              

 



 

16.          Acquisitions

 

On 23 January 2018 the Group purchased 100% of the share capital of Landmark Surveyors Limited for £4,834,000. The principal activity of the company is residential surveying and the purchase price includes £1,450,000 of deferred consideration, which is payable in two equal tranches on the 1st and 2nd anniversary of the acquisition.

 

The acquisition of Landmark Surveyors strengthens the Group's capabilities in providing home valuations, with the business highly aligned and complementary to Sonas Surveyors, an existing Group company. In the period to 30 June 2018, Landmark Surveyors contributed revenue of £1.8m and adjusted EBITDA of £0.2m. If the acquisition had occurred on 1 January 2018, management estimates that revenue would have been £2.0m and adjusted EBITDA would have been £0.1m.

 

The Group incurred acquisition related costs of £0.1m relating to external legal and professional fees. These costs have been included in 'operating expenses' in the consolidated statement of profit or loss and other comprehensive income.

 

The following fair values have been determined on a provisional basis:


Provisional Fair Value


£000

Net assets acquired


Property, plant & equipment

138

Trade and other receivables

296

Cash and cash equivalents

1,052

Trade and other payables

(924)

Income tax liabilities

(68)

Intangible assets - Brands

115

Intangible assets - Customer relationships

897

Deferred tax liability

(192)


              


             1,314 


              

Consideration paid


Initial cash price paid

3,384

Deferred consideration

1,450


              


             4,834


              

Goodwill

3,520


              

 

Goodwill acquired on the acquisition relates to the assembled workforce and the synergies expected to be achieved from integrating the company into the Group's existing business.

 

 

17.          Subsequent Events

 

No material subsequent events have arisen since the balance sheet date.

 

 

 

 


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Interim results for the six months to 30 June 2018 - RNS