TIDMSBIZ
RNS Number : 8155R
SimplyBiz Group PLC (The)
05 March 2019
5 March 2019
The SimplyBiz Group plc
("SimplyBiz", the "Company" or the "Group")
Full year results for the twelve months ended 31 December
2018
Full year profits exceeded expectations, with strong period of
organic growth and final 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 audited
consolidated results for the twelve months ended 31 December
2018.
Financial highlights:
-- Group Revenue up 15.0% to GBP50.7m (FY17: GBP44.1m)
-- Adjusted EBITDA* up 19.7% to GBP11.4m (FY17: GBP9.5m)
-- Adjusted EBITDA* margin increased to 22.5% (FY17: 21.7%)
-- Operating profit of GBP6.8m (FY17: GBP8.8m) after charging IPO related costs of GBP3.6m
-- Adjusted profit after tax* increased 61.6% to GBP8.6m
-- Adjusted earnings per share (EPS)* increased by 28.2% to 11.92p
-- Net debt reduced from GBP1.6m at date of listing to net cash
of GBP6.4m at 31 December 2018 (31 December 2017: net debt of
GBP23.0m)
-- Final dividend proposed of 2.05p per share, in respect of the
nine months trading to 31 December, post IPO, as per the stated
intention in the admission document. Total dividend of 3.03p per
share
Operational highlights:
-- Completion of IPO on London's Alternative Investment Market
(AIM), raising GBP30m for the Group
-- Acquisition and integration of Landmark Surveyors Limited (January 2018)
-- Important contract wins in both divisions, including UNUM and
Howard Kennedy in Intermediary Services and new providers Guardian
Financial Services and Vitality Invest in Distribution Channels
-- Member Firms increased by 8.5% to 3,726 (31 December 2017: 3,433)
-- Launch of end-to-end financial planning system, Centra; 2,300
users signed since its launch in March 2018
-- Winner of Best Support Services for Advisers at 2019 Professional Advisers Awards
Ken Davy, Chairman of The SimplyBiz Group, commented:
"I'm delighted to report a strong performance for 2018, in a
transformational year which saw the Group's successful admission to
AIM and continued momentum in its organic and inorganic growth
strategy.
"With our impressive revenue growth, well-supported by a number
of structural drivers, the strength of the Group's regulation and
capital light operating model is clearly demonstrated by a
significant increase in EBITDA margin.
"The continued growth in membership numbers is testament to the
value of our proposition as individuals and businesses continue to
adapt to an increasingly complex and highly regulated intermediary
market.
"Having successfully deleveraged the business, our balance sheet
strength ensures we have a strong platform from which we can take
advantage of the significant market opportunities we see."
* 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)
Zeus Capital (Nominated Adviser
and Joint Broker) +44 (0) 20 3829 5000
Martin Green
Andrew Jones
Pippa Hamnett
Peel Hunt LLP (Joint Broker) +44 (0) 20 7418 8900
Guy Wiehahn
Andrew Buchanan
Rishi Shah
Instinctif Partners +44 (0)20 7457 2020 /
SimplyBiz@instinctif.com
Catherine Wickman
Katie Bairsto
Notes to editors
With over 3,700 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
GBP30.0m 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 9.30am on 5 March 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
2018 was a significant year for SimplyBiz, with the period
marking the Group's successful admission to AIM in April 2018, a
pivotal and important step in its growth ambitions. The Group has
performed strongly over the year, with profits exceeding
expectations, as it continues to execute its organic and inorganic
growth strategy.
The Group continued to invest in its talent base, and in
particular, strengthened its compliance and policy teams at every
level throughout the Group, to cater to an increase in Member Firms
requiring compliance and regulation services in an increasingly
complex and regulated market.
Revenue grew by 15.0% to GBP50.7m, reflecting a GBP3.7m
contribution from the acquisition of Landmark Surveyors (from 23
January 2018) and GBP2.9m (6.6%) of organic growth. Group
membership numbers increased by 8.5% to 3,726.
Strong revenue growth converted to strong adjusted EBITDA
growth, which increased 19.7% to GBP11.4m, reflecting a prudent
approach to cost control and the business' ability to generate
operational leverage from its platform. Adjusted EBITDA margin
increased to 22.5% from 21.7% in the prior year.
Divisional Performance
The Group's ability to increase its support to existing members,
whilst diversifying into new and adjacent markets has been key to
its growth and success.
At the time of its launch in 2002, the Company worked with
independent financial advisers, focused on wealth accumulation and
decumulation. As the Group has evolved, it has successfully
penetrated new markets including mortgages and protection, consumer
credit, will writing and estate planning, and workplace.
The Group operates two divisions within the business;
Intermediary Services and Distribution Channels.
The Intermediary Services Division provides compliance and
business services to over 3,700 individual intermediary firms
through a comprehensive membership model. The Group's membership,
which includes 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 increased by 8.5% to 3,726 (3,628 at 30 June 2018
and 3,433 at 31 December 2017) which saw revenues increase by 5.0%
to GBP23.3m, as a result of growth in both membership fees and
software licence income. This was offset by declining income for
employee benefit software as customers transitioned over to the new
Zest Technology Platform.
With an increase in regulation, including the introduction of
the Markets in Financial Instruments Directive 2018 ("MiFID II"),
the General Data Protection Regulation ("GDPR"), and Insurance
Distribution Directive ("IDD"), the Group has seen higher uptake by
clients in additional services. Additional services income
increased by 7.1% to GBP4.5m, demonstrating that SimplyBiz is a
clear beneficiary of changing regulation.
In addition, 2019 will see the requirement for all solo-FCA
regulated firms to implement the Senior Manager & Certification
Regime. The Group remains well positioned to provide its clients
with market-leading practical guidance and a range of services that
will ensure a smooth and seamless transition to meet the
requirements of the new regime, as well as providing support for
advisers on an ongoing basis.
The Group has continued to invest in software development, which
saw the launch of Centra in March 2018. Centra is an investment
advice support platform, designed in consultation with advisers to
be a 'one-stop-shop' for financial planning. Centra gives advisers
seamless access to product research, product comparisons,
independent ratings, risk and asset allocation tools and
Suitability Reports, making it one of the most comprehensive in the
sector. More than 2,300 advisers adopted Centra in the nine months
to 31 December 2018, since its launch.
In addition, the Group continues to re-sell industry leading
back office software to its membership base and users increased
from 3,274 at 31 December 2017 to 4,280, contributing to a 24.8%
increase in software licence income from FY 2017.
Following the Group's significant investment into Zest, the
employee benefits software segment of the Intermediary Services
division, it secured several long-term contracts from well-known
names including UNUM and Howard Kennedy. The Group is confident
that Zest will become one of the leading choices for companies
offering flexible benefits to their employees.
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 firms that the Group serves rely on
SimplyBiz to provide them with relevant and timely information
about product manufacturers' services and products collectively
facilitating better outcomes for clients. Revenues in this division
increased by 25.2% to GBP27.4m, and contributed 54% of Group
revenue in the period, compared to 50% in 2017, partly as a result
of the Landmark Surveyors acquisition.
The Group has continued to build on its extensive events
programme 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, the Group also provided a broad range of
electronic and printed materials to deliver product provider brand
and product communications to its members. The Group's marketing
services present its strategic partners with the opportunity to
access over 25% of the retail financial service marketplace. Income
in the period from these relationships increased by 11.6% (GBP0.7m)
to GBP6.9m, from GBP6.2m in FY 2017 due to the Group's growing
market reach as it continues to partner with the UK's leading
insurance, investment, credit and mortgage providers.
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 14.1% to GBP6.5m (FY 2017: GBP5.7m),
as a result of higher levels of lending through the Group's
mortgage club.
Market Overview
The Group firmly believes that demand for its services will
continue to grow, due to the widely acknowledged increase in
regulatory pressures and increased propensity to outsource.
Furthermore, the transfer of personal wealth from generation to
generation means that professional advice, tax and estate planning
will become increasingly important to their clients.
Retirement and later life planning has never been more important
following the arrival of pension freedoms in 2015. The management
team also believes that the continued increase in demand for equity
release will gradually move these products into more mainstream
lending and reinforce the need for financial advice.
A continuation of the culture of trust between consumers and
independent financial advisers has seen client numbers increase,
reflecting demand for long-term savings, investment, insurance and
tax needs.
SimplyBiz strongly believes in the value of high-quality
financial advice and positive outcomes for consumers and it will
continue to act as a market enabler in this highly fragmented
space, to improve its delivery throughout the UK.
Strategy
With the Company in a robust financial position following its
successful listing on AIM in April 2018, the Group continues to
pursue its strategy of both organic growth and growth by
acquisition. Key to the Group's success and growth is its ability
to increase its support for existing customers whilst diversifying
into new markets which are strategically linked.
An increasing membership base, continued investment in its
expanding service offering, and subsequent growth in average
revenue per customer will allow SimplyBiz to build upon its
continued organic growth.
The high rates of growth in the Group's core membership base
will in turn enable the expansion of the Distribution Channels
division, strengthening the Group's ability to offer distribution
services to product manufacturers.
With its strong financial position, combined with the strength
of its services offering, the Group will continue to scope out
opportunities to develop and enhance the business through selective
acquisitions within this highly-fragmented marketplace.
A responsible industry participant
The training and development division of SimplyBiz has worked
hard to contribute to the sustainability of the financial services
profession.
During 2018, the Group launched both the UK's only Financial
Adviser Academy Programme and a Paraplanner Apprenticeship; both
have been fully subscribed since launch. In addition, the firm is a
strong advocate of improving financial competency amongst consumers
and it has worked with its partners to create and distribute "The
Young Person's Guide To Money" financial education campaign. Tens
of thousands of SimplyBiz's brochures have now been distributed by
financial advisers to young people across schools and colleges, and
feedback on the scheme has been extremely positive.
The Group will continue to offer support and guidance to
financial services professionals at every point in their career,
from embarking on an apprenticeship scheme to starting a business,
and from applying to the FCA for authorisation to operating a
compliant and successful intermediary practice and, eventually,
succession planning for the future.
Outlook
The Board strongly believes that SimplyBiz is well placed to
continue to take advantage of the opportunities that arise within
the markets it operates in, and that its strong business model
positions it for continued growth to deliver a successful year
ahead for the business, clients, staff, and Shareholders.
Matt Timmins and Neil Stevens
Joint Chief Executive Officers
FINANCIAL REVIEW
Year ended December December
2018 2017
GBP000 GBP000
------------------------------------------ --------- ---------
Group revenue 50,686 44,066
Underlying operating expenses (excluding
share option charges) (39,267) (34,523)
Adjusted EBITDA 11,419 9,543
Adjusted EBITDA margin (%) 22.5% 21.7%
Operating costs of an exceptional nature (3,829) (342)
EBITDA (excluding share option charges) 7,590 9,201
Depreciation (256) (220)
Impairment of goodwill - (178)
Amortisation of other intangible assets (257) -
Share option charges (320) -
Net finance costs (2,523) (3,322)
Profit before tax 4,234 5,481
Taxation (1,385) (694)
Profit after tax 2,849 4,787
Adjusted EPS 11.92p 9.30p
Revenue growth (%) 15.0%
Adjusted EBITDA growth (%) 19.7%
Revenue
Revenues grew by 15.0% to GBP50.7m, reflecting GBP3.7m
contribution from the acquisition of Landmark Surveyors (from 23
January 2018) and GBP2.9m (6.6%) of organic growth.
Adjusted EBITDA and adjusted EBITDA margin
Underlying operating expenses, which exclude costs of an
exceptional nature (mainly relating to the Group's IPO) and share
option charges, increased by GBP4.7m (13.7%) to GBP39.3m, as
compared to FY17. Landmark Surveyors accounted for GBP3.5m of the
increase, with organic growth in operating expenses of a modest
3.3%, 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
GBP1.9m (19.7%) included GBP1.7m (17.9%) of organic growth, with
the Group able to benefit from its operational leverage to increase
adjusted EBITDA margin in the period to 22.5% from 21.7% in
FY17.
Operating costs of an exceptional nature
Operating costs of an exceptional nature include GBP3.6m of
professional fees incurred on admission to AIM, as well as GBP0.1m
of professional fees on the acquisition of Landmark Surveyors
Limited, and GBP0.1m of restructuring costs.
Share-based payments
Share-based payment charges of GBP0.3m have been recognised in
respect of the options issued on IPO and the Save As You Earn
scheme issued subsequently.
Financial income and expense
Finance expense in FY18 included GBP0.7m interest paid in
relation to the debt that was repaid on IPO. The current year
expense also includes one-off charges totalling GBP1.6m as a result
of early settlement of the retired debt and share warrant.
Taxation
The tax charge for the year includes the beneficial impact of
research and development claims submitted in respect of FY17,
offset by non-deductible expenses incurred during the IPO
process.
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 declared and paid an interim dividend of
0.98 pence per share in respect of the trading for the nine-month
period to 31 December 2018, post-IPO, and is proposing a final
dividend of 2.05 pence per share. The final dividend will be paid
on 2 May 2019, to Shareholders on the register on 15 March 2019,
with an ex-dividend date of 14 March 2019.
Cash flow and closing net cash
At 31 December 2018, the Group had net cash of GBP6.4m, compared
to net debt at the date of listing of GBP1.6m and net debt of
GBP23.0m as at 31 December 2017. Operating cash flow in the period
of GBP10.8m (2017: GBP10.1m) represented cash conversion of 95%
(2017: 105%) of adjusted EBITDA. The reduction in cash conversion
is due to higher than average working capital balances at the end
of FY16, which reversed in H1 2017.
Funds raised at the IPO were used to repay the previous GBP35m
borrowings, with a new GBP15m revolving credit facility implemented
at IPO at a significantly lower interest rate.
Going concern
On the basis of the Group's current and forecast profitability
and cash flows, and the availability of committed funding, the
Directors consider and have concluded that the Group will have
adequate resources to continue in operational existence for the
foreseeable future. For these reasons they continue to adopt a
going concern basis in the preparation of the financial
statements.
Gareth Hague
Group Finance Director
Consolidated statement of profit or loss and other comprehensive
income
for the year ended 31 December 2018
Note Year ended Year ended
31 December 31 December
2018 2017
GBP000 GBP000
Revenue 6 50,686 44,066
Operating expenses 7 (43,805) (35,263)
Amortisation of other intangible
assets 10 (124) -
Operating profit 6,757 8,803
Finance income 8 79 65
Finance costs 8 (2,602) (3,387)
Profit before taxation 4,234 5,481
Taxation (1,385) (694)
Profit for the financial
period 2,849 4,787
Earnings per share - basic 9 3.96p 8.39p
Earnings per share - diluted 9 3.94p 8.39p
There are no items to be included in other comprehensive income
in the current or preceding period.
Consolidated Statement of Financial Position
As at 31 December 2018
31 December 31 December
2018 2017
Note GBP000 GBP000
Assets
Non-current assets
Property, plant & equipment 375 384
Intangible assets 10 23,137 18,205
Total non-current assets 23,512 18,589
Current assets
Trade and other receivables 8,712 7,505
Deferred tax asset 116 25
Cash and cash equivalents
-unrestricted 13,291 10,998
Cash and cash equivalents
- restricted 545 545
Total current assets 22,664 19,073
Total assets 46,176 37,662
Equity and liabilities
Equity attributable
to the owners of the
Company
Share capital 12 765 10
Share premium account 12 36,791 52,544
Other reserves 13 (61,067) (61,387)
Retained earnings 50,081 2,982
Total equity 26,570 (5,851)
Liabilities
Current liabilities
Trade and other payables 10,254 8,161
Financial liabilities
- borrowings 11 7,433 -
Income tax liabilities 496 16
Total current liabilities 18,183 8,177
Non-current liabilities
Financial liabilities
- borrowings 11 - 33,665
Trade and other payables 725 400
Financial derivatives - 848
Deferred tax liabilities 698 423
Total non-current liabilities 1,423 35,336
Total liabilities 19,606 43,513
Total equity and liabilities 46,176 37,662
Consolidated statement of changes in equity
Share Share Other Retained Total
capital premium reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 January 2017 10 50,852 (63,147) 3,008 (9,277)
Total comprehensive income for
period - - - 4,787 4,787
Transactions with owners, recorded
directly in equity
Dividends - - - (805) (805)
Issue of shares - 1,692 - - 1,692
Purchase of minority interest - - - (2,248) (2,248)
Transfer to retained earnings - - 1,760 (1,760) -
Total contributions by and distribution
to owners - 1,692 1,760 (4,813) (1,361)
Balance at 31 December 2017 10 52,544 (61,387) 2,982 (5,851)
Total comprehensive income for
period - - - 2,849 2,849
Transactions with owners, recorded
directly in equity
Issue of share capital 176 29,826 - - 30,002
Bonus issue of shares 579 (579) - - -
Transfer to retained earnings - (45,000) - 45,000 -
Dividends - - - (750) (750)
Share option charge - - 320 - 320
Total contributions by and distribution
to owners 755 (15,753) 320 44,250 29,572
Balance at 31 December 2018 765 36,791 (61,067) 50,081 26,570
Consolidated statement of cash flows
for the year ended 31 December 2018
Year ended Year ended
31 December 31 December
2018 2017
GBP000 GBP000
Net cash generated from operating activities
(note 15) 6,033 10,743
Cash flows from investing activities
Finance income 79 65
Purchase of property, plant and equipment (109) (174)
Development expenditure (657) (772)
Net cash used in investing activities (687) (881)
Cash flows from financing activities
Finance costs (1,078) (2,907)
Loan repayments made (38,786) (154)
Drawdown of loans 10,093 -
Purchase of shares in subsidiaries - (3,786)
Acquisitions, net of cash received (2,534) -
Issue of share capital 30,002 1,692
Dividends paid (750) (805)
Net cash used in financing activities (3,053) (5,960)
Net increase in cash and cash equivalents 2,293 3,902
Cash and cash equivalents at start of
period 11,543 7,641
Cash and cash equivalents at end of period 13,836 11,543
NOTES TO THE INTERIM FINANCIAL INFORMATION
1. General information and basis of preparation
The consolidated 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.
The financial information for the period ended 31 December 2018
and the period ended 31 December 2017 does not constitute the
Group's statutory accounts for those periods. Statutory accounts
for the period ended 31 December 2017 have been delivered to the
Registrar of Companies. The statutory accounts for the period ended
31 December 2018 will be delivered to the Registrar of Companies
following the Group's Annual General Meeting.
The auditors' reports on the accounts for 31 December 2018 and
31 December 2017 were 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.
2. Going concern
The Group meets its day-to-day working capital requirements
through operating cash flows and bank loan facilities. The Group's
forecasts and projections, taking account of reasonable possible
changes in trading performance, show that the Group is expected to
have a sufficient level of financial resources available through
facilities agreed and expected to be agreed when these fall due for
renewal.
The Group has net current assets of GBP4,481,000 and net assets
of GBP26,570,000 as at 31 December 2018 (31 December 2017: net
current assets of GBP10,896,000 and net liabilities of
GBP5,851,000).
On the basis of the Group's current and forecast profitability
and cash flows, the Directors consider and have concluded that the
Group will have adequate resources to continue in operational
existence for the foreseeable future. For these reasons they
continue to adopt a going concern basis in the preparation of the
financial statements.
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.
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 IFRS has been issued but have not been
applied by the Group in these financial statements:
-- IFRS 16 'Leases' is a replacement for IAS 17 'Leases' and
will be effective for the period ending 31 December 2019 onwards.
IFRS 16 required lessees to recognise a lease liability reflecting
future lease payments and a right-of-use asset for lease
contracts.
The Group is currently assessing the impact of IFRS 16 on its
existing lease portfolio and it is expected to impact the majority
of their operating lease commitments. This includes a material
impact on the balance sheet, as both assets and liabilities will
increase, and it is also expected to have a material impact on key
components on the income statement, such as a reduction in
operating expenses, which is expected to materially increase
EBITDA. The adoption will also result in an increase in
depreciation on the right-of-use asset and interest recognised on
the lease liability. This will result in a change to the profile of
the income statement over the life of the lease and will
consequently impact profit after tax. There will be no impact on
cashflows, although the presentation of the cash flow statement
will change.
Management has begun to review and quantify the expected impact
using the current lease portfolio. The impact of this will depend
upon the facts and circumstances as at the time of adoption and the
transition choices adopted. The impact is expected to be a material
increase in the assets and liabilities of the Group, in a similar
quantum to the operating lease commitments noted in the statutory
accounts.
4. Critical accounting estimates and judgements
The Company makes certain estimates and assumptions regarding
the future. Estimates and judgements are continually evaluated
based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances. In the future, actual experience may
differ from these estimates and assumptions. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities are
discussed below.
Impairment of goodwill
The Group is required to test, on an annual basis, whether
goodwill has suffered any impairment. The recoverable amount is
determined based on value in use calculations. The use of this
method requires the estimation of future cash flows and the choice
of a discount rate in order to calculate the present value of the
cash flows.
There are no critical judgements that are considered to have a
significant risk of causing a material adjustment to the financial
statements.
Identification and valuation of other intangible assets
Under IFRS accounting the Group is required to make an
assessment of the identifiable intangible assets acquired in a
business combination. Such an assessment involves the use of
judgement, both in the identification of the assets and in the
estimation of their value.
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:
Year ended Year ended
31 December 31 December
2018 2017
GBP000 GBP000
Operating profit 6,757 8,803
add back:
Depreciation 256 220
Impairment of goodwill (note 10) - 178
Amortisation of other intangible assets
(note 10) 124 -
Amortisation of development costs (note
10) 133 -
Operating costs of exceptional nature
(note 7) 3,829 342
Share option charges 320 -
Adjusted EBITDA 11,419 9,543
Operating costs of exceptional nature and share option charges
have been adjusted for to provide comparability to the prior year,
when these items did not occur.
Adjusted profit before tax is calculated as follows:
Year ended Year ended
31 December 31 December
2018 2017
GBP000 GBP000
Profit before tax 4,234 5,481
add back:
Operating costs of exceptional nature
(note 7) 3,829 342
Finance costs of exceptional nature
(note 8) 1,635 -
Impairment of goodwill (note 10) - 178
Amortisation of other intangible assets
(note 10) 124 -
Amortisation of development costs (note
10) 133 -
Share option charges 320 -
Adjusted profit before tax 10,275 6,001
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:
Year ended Year ended
31 December 31 December
2018 2017
GBP000 GBP000
Profit after tax 2,849 4,787
add back:
Operating costs of exceptional nature
(note 7) 3,829 342
Finance costs of exceptional nature,
net of tax (note 8) 1,324 -
Impairment of goodwill (note 10) - 178
Amortisation of other intangible assets
(note 10) 124 -
Amortisation of development costs (note
10) 133 -
Share option charges 320 -
Adjusted profit after tax 8,579 5,307
6. Segmental Information
During the year, the Company was domiciled in the UK and as such
all revenue is derived from external customers in the United
Kingdom.
The Group has two operating segments, which are considered to be
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 years
ended 31 December 2018 and 2017.
Year ended Year ended
31 December 31 December
2018 2017
GBP000 GBP000
Intermediary Services
Revenue 23,329 22,223
Operating expenses, before amortisation and
depreciation (18,135) (18,290)
Intermediary Services EBITDA 5,194 3,933
Operating costs of exceptional nature (1,763) (144)
Intermediary Services EBITDA 3,431 3,789
Distribution Channels
Revenue 27,357 21,843
Operating expenses, before amortisation and
depreciation (21,132) (16,233)
Distribution Channels EBITDA 6,225 5,610
Operating costs of exceptional nature (2,066) (198)
Distribution Channels EBITDA 4,159 5,412
Total EBITDA 7,590 9,201
Impairment of goodwill - (178)
Amortisation of other intangible assets (124) -
Amortisation of development costs (133) -
Depreciation (256) (220)
Share option charges (320) -
Operating profit 6,757 8,803
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:
Year ended Year ended
31 December 31 December
2018 2017
GBP000 GBP000
Depreciation of tangible assets 256 220
Payment in respect of operating leases 4,760 4,340
Research expenditure 161 561
Operating costs of exceptional nature:
Costs in relation to corporate restructuring
and refinancing - 303
Restructuring costs 77 10
Write off of Director's loan - 89
Professional fees for acquisitions 130 69
Release of deferred consideration - (129)
Fees in relation to IPO process 3,622 -
3,829 342
8. Finance Expense and Income
Year ended Year ended
31 December 31 December
2018 2017
GBP000 GBP000
Finance Expense
Bank interest payable (967) (3,229)
Fair value loss on financial instruments (345) (158)
Accelerated arrangement fees on settlement
of previous loan (775) -
Accelerated implied interest charge on settlement
of previous loan (515) -
(2,602) (3,387)
Finance Income
Bank interest receivable 79 65
79 65
Net finance expense (2,523) (3,322)
9. Earnings per share
Basic Earnings Per Share Year ended Year ended
31 December 31 December
2018 2017
GBP000 GBP000
Profit attributable to equity shareholders
of the parent 2,849 4,787
Weighted average number of shares
in issue 71,974,191 57,065,211
Basic profit per share (pence) 3.96 8.39
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.
Diluted Earnings Per Share Year ended Year ended
31 December 31 December
2018 2017
GBP000 GBP000
Profit attributable to equity shareholders
of the parent 2,849 4,787
Weighted average number of shares
in issue 71,974,191 57,065,211
Diluted weighted average number of
shares and options for the period 369,892 -
72,344,083 57,065,211
Diluted profit per share (pence) 3.94 8.39
An adjusted EPS has been calculated below based on the adjusted
profit after tax, which removes items not considered to be part of
underlying trading.
Adjusted basic Earnings Per Share Year ended Year ended
31 December 31 December
2018 2017
GBP000 GBP000
Adjusted profit after tax (note 5) 8,579 5,307
Weighted average number of shares
in issue 71,974,191 57,065,211
Adjusted earnings per share (pence) 11.92 9.30
10. Intangible assets
Other Intangible Assets
Goodwill Brand Customer Development Total
Relationships expenditure
GBP000 GBP000 GBP000 GBP000 GBP000
Cost
At 1 January 2017 16,250 - - 1,361 17,611
Additions - - - 772 772
At 31 December 2017 16,250 - - 2,133 18,383
Additions 3,520 115 897 657 5,189
At 31 December 2018 19,770 115 897 2,790 23,572
Amortisation and
impairment
At 1 January 2017 - - - - -
Charge in the period 178 - - - 178
At 31 December 2017 178 - - - 178
Charge in the period - 12 112 133 257
At 31 December 2018 178 12 112 133 435
Net book value
At 31 December 2018 19,592 103 785 2,657 23,137
At 31 December 2017 16,072 - - 2,133 18,205
11. Borrowings
31 December 31 December
2018 2017
GBP000 GBP000
Secured bank loan:
Current 7,500 -
Non-current - 34,486
Less; loan arrangement fees (67) (821)
7,433 33,665
On 5 April 2018, the Group repaid its previous loan in full and
drew down GBP10.1m from a new GBP15.0m Revolving Credit Facility
('RCF') provided by Yorkshire Bank. GBP2.6m of the RCF has since
been repaid.
The previous loan was due to be settled in June 2022. On
settlement of the loan, GBP775k of capitalised loan arrangement
fees were accelerated into the profit and loss account, along with
GBP515k of implied interest (due to the discounting of the amount
repayable to the present date). GBP90k of loan arrangement fees
were incurred on the new RCF, which have been capitalised and
amortised over 3 years. The margin payable on the facility is based
on the net leverage of the Group, with a range of 1.6% to 2.0%
above LIBOR.
12. Share Capital & Share Premium
Share capital
Ordinary Ordinary Ordinary Ordinary Ordinary
A shares B shares C shares D shares 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 - 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 17,647,149
At 31 December
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.
-- A conversion of all categories of shares, in a ratio of 1 to
1, into a new category of Ordinary shares.
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 GBP45,000,000 of its
share premium account.
Share Premium
Share
Premium
GBP'000
At 1 January 2017 50,852
Issue of share capital 1,692
At 31 December 2017 52,544
Issue of share capital 29,826
Transfer to retained
earnings (45,000)
Bonus issue (579)
At 31 December 2018 36,791
13. Other reserves
Merger Capital Put and Share Total
Reserve redemption Call Option Option Other
reserve reserve Reserve Reserves
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 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 - - - 320 320
At 31 December 2018 (61,395) 8 - 320 (61,067)
14. Share-based payment arrangements
At 31 December 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 year
ended 31 December 2018 are as follows:
Scheme Grant Date Number of Vesting conditions Contractual
awards life of options
---------------- ------------- ---------- ------------------- -----------------
Approved Scheme 4 April 2018 229,412 3 years' service 3 to 10 years
from grant
date
Unapproved 4 April 2018 250,000 3 years' service 3 to 10 years
Scheme from grant
date
---------------- ------------- ---------- ------------------- -----------------
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 3 to 10 years
from grant date,
subject to an
equity hurdle
of 40% above
the IPO price.
------------- ----------------- ------------------- -----------------
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 Unapproved Management
CSOP CSOP incentive
plan
-------------------------------- --------- ----------- -----------
Fair value at grant date GBP0.64 GBP1.59 GBP290.22
Share price at grant date GBP1.70 GBP1.70 GBP1.70
Exercise price GBP1.70 GBP0.01 GBP1.785
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%
-------------------------------- --------- ----------- -----------
Save As You Earn ("SAYE") scheme
On 24 September 2018, the Group established the Save As You Earn
("SAYE") scheme and invited all Group employees to enter into a
three-year savings contract linked to an option which entitles them
to acquire Ordinary Shares in the Company.
537,618 options were issued under the scheme, with an exercise
price of GBP1.70. The fair value of the shares at date of grant (1
December 2018) was GBP0.70, and the share options are due to vest
in three years from grant. Expected volatility, dividends and the
risk-free interest rate have been assumed to be consistent with the
approved CSOP scheme noted above.
15. Notes to the cash flow statement
Year ended Year ended
31 December 31 December
2018 2017
GBP000 GBP000
Cash flow from operating activities
Profit after taxation 2,849 4,787
Add back / (deduct):
Finance income (79) (65)
Finance cost 2,257 3,229
Fair value losses on derivative financial
instruments 345 158
Taxation 1,385 694
6,757 8,803
Adjustments for:
Impairment of goodwill - 178
Depreciation of property, plant and equipment 256 220
Amortisation of other intangible assets 257 -
Share option charge 320 -
Operating cash flow before movements in
working capital 7,590 9,201
Increase in receivables (1,186) (446)
Increase in trade and other payables 620 1,017
Cash generated from operations 7,024 9,772
Income taxes (paid) / received (991) 971
Net cash generated from operating activities 6,033 10,743
16. Acquisitions
On 23 January 2018 the Group purchased 100% of the share capital
of Landmark Surveyors Limited for GBP4,834,000. The principal
activity of the company is residential surveying and the purchase
price includes GBP1,450,000 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 year to 31 December 2018, Landmark Surveyors
contributed revenue of GBP3.7m and adjusted EBITDA of GBP0.2m. If
the acquisition had occurred on 1 January 2018, management
estimates that revenue would have been GBP3.9m and adjusted EBITDA
would have been GBP0.1m.
The Group incurred acquisition related costs of GBP0.1m 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:
Fair Value
GBP000
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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR DXGDXCDGBGCS
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March 05, 2019 02:02 ET (07:02 GMT)
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