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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| The Simplybiz Group Plc | LSE:SBIZ | London | Ordinary Share | GB00BG1THS43 | ORD GBP0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 195.00 | 190.00 | 200.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMSBIZ
RNS Number : 9630Y
SimplyBiz Group PLC (The)
15 September 2020
15 September 2020
The SimplyBiz Group plc
("SimplyBiz", the "Company" or the "Group")
Half-year results for the six months ended 30 June 2020
Resilient Performance - Digital Acceleration
SimplyBiz (AIM: SBIZ), a leading independent provider of compliance, technology and business services to financial advisers and financial institutions in the UK, today announces its unaudited results for the six months ended 30 June 2020.
Financial highlights:
-- Revenue of GBP28.9m (H1 2019: GBP29.1m) -- Operating profit of GBP5.0m (H1 2019: GBP3.2m) -- Adjusted EBITDA*(1) of GBP7.4m (H1 2019: GBP8.0m) -- Adjusted EBITDA*(1) margin of 25.5% (H1 2019: 27.5%) -- Adjusted EPS *(2) of 4.22p (H1 2019: 5.57p) -- Free cash flow conversion*(3) of 65% (H1 2019: 43%) -- 30 June 2020 net debt of GBP25.8m (30 June 2019: GBP30.1m) -- Full year guidance maintained - adjusted EPS no less than 11.0p (PY: 13.0p)
Operational highlights:
-- Digital strategy accelerated -- Scale and growth in intermediary services -- Decisive cost control and efficiency improvements -- Strong performance and contribution from Defaqto -- Mortgage completions of GBP7.4bn -- Awarded Service Company of the Year
Operational Update
The company took strong and positive action within the first week of national lockdown to successfully ensure it could fully support its customers and colleagues. All services to intermediary customers were moved onto a proprietary digital platform and delivered without disruption. Decisive cost control and efficiency improvements were made which will deliver sustained margin benefits in the future. Fintech & Research remained resilient and robust over the period with continued product developments to support our future growth.
The Company's mortgage valuation business and events programme were significantly impacted by the lockdown, though volumes moderately increased in June. Management expects a continued slow recovery in the housing market during the second half of the year. Mortgage completions were consistent with prior year, further demonstrating the resilience of our customer base and services.
Management quickly and successfully moved to agile working, bringing forward and enhancing developments to the digital platform, enhancing the delivery of services.
Dividend
As stated in the Operational & COVID-19 Update announcement on 27 April 2020 and Pre-Close Statement on 23 July 2020, the Board does not intend to recommend an interim dividend in respect of the current financial year. A further update on the FY20 dividend will be provided in January 2021.
Matt Timmins, Joint CEO of The SimplyBiz Group plc, commented:
"We are delighted to report strong and resilient trading for H1 2020, demonstrating the robust nature of our business. We benefitted from an improving quality of our underlying earnings, under-pinned by six full months trading from Defaqto which helped offset a significant reduction in valuation income during the period. The quality of our revenues, the resilience of our customers, and the benefits of a stronger digital delivery platform have enabled strong trading during challenging times. We have responded quickly and decisively to deliver growth in key strategic areas, whilst improving the quality of our underlying earnings.
We have accelerated our digital strategy. This data led, digital delivery, will further improve our quality of earnings, margins and cash generation going forward, whilst also improving customer service."
"On behalf of the Board, I would like to thank all of our colleagues, customers, and wider stakeholders for their support during these unprecedented times."
*(1) Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation, share option charges and operating exceptional costs. Adjusted profit before and profit after tax exclude operating exceptional costs and amortisation of intangible assets arising on acquisition.
*(2) Adjusted Earnings Per Share is calculated as adjusted profit after tax, which excludes operating exceptional costs and amortisation of intangible assets arising on acquisition, divided by the average number of ordinary shares in issue for the period.
*(3) Free cash flow conversion is calculated as adjusted EBITDA, less working capital movements, lease payments, CAPEX, development expenditure, corporation tax paid and interest, as a percentage of Adjusted EBITDA.
For further information please contact:
Hot Features
Premium
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 Joint Broker) +44 (0) 20 3829 5000
Martin Green
Dan Bate
Liberum (Joint Broker)
Cameron Duncan
James Greenwood
Ed Phillips +44 (0) 20 3100 2222
Instinctif Partners +44 (0)78 3767 4600 /
SimplyBiz@instinctif.com
Lewis Hill
Catherine Wickman
Notes to Editors
The SimplyBiz Group provides essential support services, software and data that enable professional financial advisers, financial intermediaries and product providers to deliver better outcomes for their customers.
The SimplyBiz Group supports 3,700 intermediary firms with regulatory and business support in addition to 1,900 customer firms of its fintech platform, while providing essential distribution support to over 400 financial institutions.
The Company's understanding of the changing regulatory landscape and deep insights into the needs of customers, advisers and product providers enables it to add unique value to the retail financial services sector.
For more information, please visit: www.simplybizgroup.co.uk/
Analyst presentation
An analyst briefing is being held at 09:30 BST on 15 September 2020 via an online video conference facility. To register your attendance please contact SimplyBiz@instinctif.com
JOINT CHIEF EXECUTIVES' STATEMENT
Overview
During the six months to 30 June 2020, SimplyBiz delivered a robust financial and operational performance, reacting quickly and decisively to COVID-19 restrictions. The robust nature of revenues, the resilience of its customers base, and a stronger delivery platform following the acquisition of Defaqto have enabled growth in key strategic areas offsetting reductions in valuations and marketing events. The company delivered a strong adjusted EBITDA margin with strong cash conversion.
Headline revenue was broadly consistent with the prior year at GBP28.9m (H1 2019: GBP29.1m), as the positive performance from Defaqto and growth in core Intermediary Services were offset by the impact of COVID-19 on the Distribution Channels division.
Adjusted EBITDA of GBP7.4m represented a robust 25.5% (H1 2019: 27.5%) margin flowing from the higher margin Fintech & Research division, coupled with the quick and efficient implementation of cost saving measures, including the utilisation of certain UK Government assistance packages.
Divisional Performance
The Intermediary Services division provides compliance and business services to over 3,700 individual intermediary firms through a comprehensive membership model. Members, including financial advisers, mortgage advisers and wealth managers, conduct regulated activities and are regulated by the FCA.
The Company reacted quickly and decisively to accelerate its digital strategy and deliver a package of member benefits that enabled uninterrupted high quality delivery of all intermediary services, maintained customer scale and recurring subscriptions value, and strengthened the opportunities for future engagement and growth.
Membership fee income increased by 4% to GBP5.3m, compared to H1 2019. The Company continued to pursue its strategy of focussing on recruiting larger firms and wealth managers, with average fees increasing by 3%.
Increased regulation continues to drive demand for our services. Additional services income increased by 9% to GBP2.6m (H1 2019: GBP2.4m) and the acceleration of the Company's digital delivery in the period strengthened its growth potential.
Software licence users increased from 4,106 at 30 June 2019 to 4,580 (30 June 2020), contributing to a strong and accelerating 10% increase in software licence income to GBP2.7m.
Revenues in Zest Technologies, the Group's employee benefits software solution, were stabilised and grew marginally ahead of the prior year at GBP1.7m.
The Distribution Channels division was significantly impacted by the COVID-19 restrictions, with revenues reducing by 31% to GBP9.2m.
The Surveying business was unable to provide physical onsite valuations for 10 weeks, from late March, with the majority of its surveyors placed on furlough as a result. The market has subsequently improved with volumes currently around c50% of previous 'normal' levels. Valuation Services revenues in the period were GBP2.1m (H1 2019: GBP4.4m).
The temporary closure of the housing market also impacted Mortgage Services income, with lower than expected mortgage completions and reduced panel management transactions during Q2. Growth in the months prior to lockdown helped maintain total mortgage completion at GBP7.4bn, consistent with H1 2019. Mortgage Services revenues for the period were GBP2.3m (H1 2019: GBP3.1m) mainly due to a reduction in panel management services (surveying).
The Company's extensive events programme has also been impacted by lockdown restrictions, with all physical events suspended from the end of March. The Company acted quickly and decisively to develop an innovative new virtual events service that has attracted excellent attendance and superb customer feedback. Revenues from marketing agreements were GBP2.6m (H1 2019: GBP3.6m).
The Fintech & Research division contributed GBP7.4m of revenue for the period, compared with GBP4.2m for the three and a half months following the acquisition on 22 March 2019. The acquisition remains earnings enhancing. Defaqto continues to provide a significant strengthening of its delivery platform and remains a strategic priority for future quality earnings growth.
Strategy
The Company's strategy comprises organic and acquisitive growth. Organic growth is expected to be driven by growth in the Company's digital service and technology offering to its customers as well as increasing average revenue per customer. An accelerated digital strategy will deliver strong margin growth and greater cash and capital efficiency. The integration of Defaqto and the Company's enhanced ability to provide data driven, digitised services, will further improve the quality of earnings.
Management continue to pursue selective acquisitions to enhance the services offered, the technology capabilities it possesses and to build on the scalable platform of the Company, subject to prudent balance sheet management, particularly with regard to sensible leverage ratios.
Financial Results:
Jun-20 Jun-19
GBPm GBPm
Group Revenue 28.9 29.1
Expenses (21.5) (21.1)
Adjusted EBITDA 7.4 8.0
------ ------
Adjusted EBITDA margin % 25.5% 27.5%
Depreciation (0.1) (0.1)
Depreciation of lease asset (0.4) (0.3)
Amortisation of development
expenditure and software (0.5) (0.5)
Adjusted EBIT 6.4 7.1
------ ------
Operating costs of an exceptional
nature - (3.0)
Share option charges (0.4) (0.3)
Amortisation of other intangible
assets (1.0) (0.6)
Net finance costs (0.6) (0.5)
Profit before tax 4.4 2.7
------ ------
Taxation (1.6) (1.3)
Profit after tax 2.8 1.4
------ ------
Adjusted earnings per share
(EPS) 4.22p 5.57p
Revenue
Revenues of GBP28.9m were 1% lower than the prior period, largely due to revenue reductions resulting from the COVID-19 restrictions. These reductions were balanced by underlying growth from both the Intermediary Services and Research & Fintech divisions, and a full six months' contribution from Defaqto.
Revenues in the Intermediary services division grew by 6% to GBP12.3m, as a result of growth in member numbers and improved penetration of additional services and software licences. Fintech & Research revenues increased by GBP3.2m (77%) as a result of the full period of trading vs three and a half months in 2019 and continued organic growth from Defaqto.
The Distribution Channels division has been impacted by the COVID-19 lockdown restrictions, with GBP3.2m (42%) lower revenues from Valuation and Mortgage Services that directly link to housing transactions, and from the GBP0.9m (26%) impact to marketing events being moved from physical to digital delivery.
Operating profit and adjusted EBITDA margin
Operating profit increased by 56% to GBP5.0m (H1 2019: GBP3.2m, after exceptional charges of GBP3.0m).
Adjusted EBITDA margin is calculated as adjusted EBITDA (as defined in note 6), divided by revenue. Whilst adjusted EBITDA is not a statutory measure, the Board believe it is a highly useful measure of the underlying trade and operations, excluding one-off and non-cash items.
The Company delivered a robust adjusted EBITDA margin of 25.5% (H1 2019: 27.5%) due to continued revenue growth in higher margin sectors, rapid and decisive cost saving measures, and GBP0.8m received through the UK Government's assistance schemes.
Operating costs of an exceptional nature
Exceptional operating costs in the prior year included GBP2.6m of professional fees in respect of the acquisition of Defaqto and GBP0.4m of termination costs.
Share-based payments
Share-based payment charges of GBP0.4m (H1 2019: GBP0.3m) have been recognised in respect of the options in issue. The increase in the charge reflects the full period of issue for options granted in 2019.
Financial income and expense
Net finance expenses of GBP0.6m (H1 2019: GBP0.5m) relate to drawdowns on the Group's revolving credit facility agreement.
Taxation
The tax charge for the period has been accrued using the tax rate that is expected to apply to the full financial year. The tax expense includes a deferred tax charge of GBP0.6m, being the deferred tax liability arising on intangible assets acquired with Defaqto, along with the change in the UK corporation tax rate from 17% to 19%.
Earnings per share
Earnings per share has been calculated based on the weighted average number of shares in issue in both periods.
Dividend
During the period the Company paid the final dividend in respect of FY19 of GBP2.8m. As announced in April, the Board does not intend to recommend an interim dividend in respect of the current financial year.
Cash flow and closing net debt
At 30 June 2020 the Company had net debt of GBP25.8m, compared to GBP27.0m at 31 December 2019 and GBP30.1m at 30 June 2019. Net debt is calculated as borrowings less cash and cash equivalents and amortised arrangement fees. In March 2020, the Company drew down the remaining GBP7.0m of the GBP45m Revolving Credit Facility to provide ongoing financial flexibility.
Free cash flow conversion was strong at 65% for H1 2020, vs 43% in H1 2019. In the prior period, cash flow conversion was lower due to the timing of Defaqto's cash receipts across the year.
Free cash flow conversion is calculated as adjusted EBITDA, less working capital movements, lease payments, CAPEX, development expenditure, corporation tax paid and interest, as a percentage of Adjusted EBITDA. A reconciliation of free cash flow is provided in note 6.
OUTLOOK
Trading has continued in line with the Board's expectation since the end of the period.
The Board remains confident of the Company's strong trading and cash generation and continues to expect that 2020 full year adjusted earnings per share shall be no less than 11.0p (2019 FY: 13.0p).
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 2020
Note 6 months 6 months
ended ended
30 June 2020 30 June 2019
GBP000 GBP000
Revenue 7 28,870 29,086
Operating expenses 8 (22,912) (25,354)
Amortisation of other intangible
assets 12 (994) (550)
Operating profit 4,964 3,182
Finance income 9 47 41
Finance costs 9 (666) (562)
Profit before taxation 4,345 2,661
Taxation 10 (1,583) (1,234)
Profit for the financial
period 2,762 1,427
Profit attributable to
shareholders:
Owners of the Company 2,707 1,416
Non-controlling interests 55 11
2,762 1,427
Earnings per share - basic 11 2.80p 1.61p
Earnings per share - diluted 11 2.78p 1.59p
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 2020
Audited
Unaudited Unaudited 31 December
Note 30 June 2020 30 June 2019 2019
GBP000 GBP000 GBP000
Assets
Non-current assets
Property, plant & equipment 13 1,294 492 454
Lease asset 5,166 1,511 2,653
Intangible assets and goodwill 12 106,048 106,644 106,210
Deferred tax asset, non-current 80 - 1,262
Total non-current assets 112,588 108,647 110,579
Current assets
Trade and other receivables 9,253 11,023 11,774
Deferred tax asset 91 116 194
Cash and cash equivalents
-unrestricted 18,921 11,010 10,666
Cash and cash equivalents
-restricted - 545 -
Total current assets 28,265 22,694 22,634
Total assets 140,853 131,341 133,213
Equity and liabilities
Equity attributable to the
owners of the Company
Share capital 15 968 968 968
Share premium account 15 64,755 73,149 64,755
Other reserves 16 (52,716) (60,760) (51,993) Retained earnings 55,644 49,939 55,695 Equity attributable to the owners of the Company 68,651 63,296 69,425 Non-controlling interest 134 11 79 Total equity 68,785 63,307 69,504 Liabilities Current liabilities Trade and other payables 16,031 18,175 17,195 Lease liabilities, current 580 271 540 Current tax liabilities 230 1,315 651 Total current liabilities 16,841 19,761 18,386 Non-current liabilities Loans and borrowings 14 44,695 41,615 37,685 Lease liabilities, non-current 4,610 1,179 2,176 Deferred tax liabilities 5,922 5,479 5,462 Total non-current liabilities 55,227 48,273 45,323 Total liabilities 72,068 68,034 63,709 Total equity and liabilities 140,853 131,341 133,213
Consolidated statement of changes in equity
Share Share Other Non Retained Total
capital premium reserve controlling earnings equity
interest
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 January 2019 765 36,791 (61,067) - 50,081 26,570
Total comprehensive income
for period - - - 11 1,427 1,438
Transactions with owners,
recorded directly in equity
Issue of share capital 203 36,358 - - - 36,561
Dividends - - - - (1,569) (1,569)
Share option charge - - 307 - - 307
Total contributions by and
distribution to owners 203 36,358 307 - (1,569) 35,299
Balance at 30 June 2019 968 73,149 (60,760) 11 49,939 63,307
Total comprehensive income
for period - - - 68 7,120 7,188
Transactions with owners,
recorded directly in equity
Transfer to other reserves - (7,449) 7,449 - - -
Cost of share issue - (945) - - - (945)
Share option charge - - 205 - - 205
Deferred tax on share options
exceeding profit and loss
charge - - 1,113 - - 1,113
Dividends - - - - (1,364) (1,364)
Total contributions by and
distribution to owners - (8,394) 8,767 - (1,364) (991)
Balance at 31 December 2019 968 64,755 (51,993) 79 55,695 69,504
Total comprehensive income
for period - - - 55 2,707 2,762
Transactions with owners,
recorded directly in equity
Dividends - - - - (2,758) (2,758)
Share option charge - - 390 - - 390
Deferred tax on share options
exceeding profit and loss
charge - - (1,113) - - (1,113)
Total contributions by and
distribution to owners - - (723) - (2,758) (3,481)
Balance at 30 June 2020 968 64,755 (52,716) 134 55,644 68,785
Consolidated statement of cash flows
for the 6 months ended 30 June 2020
6 months 6 months
ended ended
30 June 30 June
2020 2019
GBP000 GBP000
Net cash generated from operating activities
(note 18) 7,784 2,214
Cash flows from investing activities
Finance income 47 41
Purchase of property, plant and equipment (954) (42)
Development expenditure (1,355) (930)
Acquisitions, net of cash received - (38,886)
Net cash used in investing activities (2,262) (39,817)
Cash flows from financing activities
Finance costs (279) (475)
Loan repayments made - (27,676)
Drawdown of loans 7,000 37,500
Transaction costs related to borrowing (45) (420)
Payment of lease liability (460) (385)
Payment of deferred and other consideration (725) (725)
Issue of share capital - 29,072
Dividends paid (2,758) (1,569)
Net cash generated from financing activities 2,733 35,322
Net increase / (decrease) in cash and
cash equivalents 8,255 (2,281)
Cash and cash equivalents at start of
period 10,666 13,836
Cash and cash equivalents at end of period 18,921 11,555
NOTES TO THE INTERIM FINANCIAL INFORMATION
1. Reporting entity
The SimplyBiz Group plc is a company domiciled in the UK. These condensed consolidated interim financial statements ('interim financial statements') as at and for the six months ended 30 June 2020 comprise the Company and its subsidiaries (together referred to as 'the Group'). The Group is primarily involved in the provision of compliance, technology and business services to financial advisers, including directly authorised IFAs, directly authorised mortgage advisers, workplace consultants and directly authorised wealth managers. It also provides marketing and promotion, product panelling and co-manufacturing services to more than 135 financial institutions, through access to its membership.
2. Basis of accounting
These interim financial statements have been prepared in accordance with IAS 34 Interim financial reporting and should be read in conjunction with the Group's last annual consolidated financial statements as at and for the year ended 31 December 2019 ('last annual financial statements'). They do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the Group's financial position and performance since the last annual financial statements.
The financial information set out in these interim financial statements for the six months ended 30 June 2020 and the comparative figures for the six months ended 30 June 2019 are unaudited. The comparative financial information for the period ended 31 December 2019 in this interim report does not constitute statutory accounts for that period under 435 of the Companies Act 2006.
Statutory accounts for the period ended 31 December 2019 have been delivered to the Registrar of Companies. The auditors' report on the accounts for 31 December 2019 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 2020. 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.
These interim financial statements were authorised for issue by the Company's Board of Directors on 14 September 2020.
3. Use of Judgements and Estimates
In preparing these interim financial statements, management has made judgements and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements.
4. Changes in significant accounting policies
The accounting policies applied in these condensed consolidated interim financial statements are the same as those applied in the Group's consolidated financial statements in the 2019 Annual Report & Accounts.
Current taxes
The policy for recognising and measuring income taxes in the interim period is described in note 10.
Accounting for Government Support
Amounts receivable under the UK Government's Coronavirus Job Retention Scheme have been recognised in profit or loss on a systematic basis net of the expense for which the monies are intended to compensate, once any conditions related to the receipts are met.
5. 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 Group Directors have prepared cash flow forecasts for the Group for the period to 31 December 2021 which indicate that, taking account of severe but plausible downside scenarios, the Group will have sufficient funds, to meet its liabilities as they fall due for that period.
The cash flow forecasts include the impact of the recent global outbreak of COVID-19, which has led to a net 1% drop of revenue in the first half of the year across the Group. Various sensitivity analyses have been performed to assess the impact of more severe but plausible downside scenarios to future trading. Under these severe but plausible downside scenarios the Group continues to operate within its available facilities and does not incur any covenant breaches.
The Directors have considered these factors, the likely performance of the business and possible alternative outcomes and the financing activities available to the 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 has adequate resources for the foreseeable future and at least for the period of 12 months from the date of signing the half year report. Accordingly, the financial information has been prepared on the going concern basis.
6. Reconciliation of GAAP to Non-GAAP measures
The 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 ongoing trade. Amortisation of other intangible assets has been excluded on the basis that it is a non-cash amount, relating to acquisitions in the current and prior periods. Operating costs of an exceptional nature have been excluded as they are not considered part of the underlying trade. Share option charges have been excluded from Adjusted EBITDA only as non-cash costs.
The Group's "non-GAAP" measures are not defined performance measures in IFRS. The Group's definition of the reporting measures may not be comparable with similar titled performance measures in other entities.
Adjusted EBITDA is calculated as follows:
6 months 6 months ended
ended 30 30 June 2019
June 2020
GBP000 GBP000
Operating profit 4,964 3,182
add back:
Depreciation 124 133
Depreciation of leased assets 359 321
Amortisation of other intangible assets
(note 12) 994 550
Amortisation of development costs and
software (note 12) 523 494
EBITDA 6,964 4,680
Add back:
Operating costs of exceptional nature
(note 8) - 2,997
Share option charges 390 307
Adjusted EBITDA 7,354 7,984
Adjusted profit before tax is calculated as follows:
6 months 6 months
ended 30 ended 30
June 2020 June 2019
GBP000 GBP000
Profit before tax 4,345 2,661
add back:
Operating costs of exceptional nature
(note 8) - 2,997
Amortisation of other intangible assets
(note 12) 994 550
Adjusted profit before tax 5,339 6,208
Adjusted profit after tax is calculated as follows:
6 months 6 months
ended 30 ended 30
June 2020 June 2019
GBP000 GBP000
Profit after tax 2,762 1,427
add back:
Operating costs of exceptional nature
(note 8) - 2,997
Amortisation of other intangible assets,
net of deferred tax charge / credit 1,323 471
Adjusted profit after tax 4,085 4,895
Free cash flow conversion is calculated as follows:
6 months 6 months
ended 30 ended 30
June 2020 June 2019
GBP000 GBP000
Net cash generated from operating activities 7,784 2,214
Adjusted for:
Operating costs of exceptional nature (note
8) - 2,997
Finance income 47 41
Finance costs (279) (475)
Purchase of property, plant and equipment (954) (42)
Payment of lease liability (460) (385)
Development expenditure (1,355) (930)
Free cash flow 4,783 3,420
Adjusted EBITDA (as above) 7,354 7,984
Free cash flow conversion 65% 43%
7. Segmental Information
During the year, the Company was domiciled in the UK and as such substantially all revenue is derived from external customers in the United Kingdom. Since the acquisition of Defaqto in March 2019, the Group has an operation in Norway, which is wholly immaterial to the Group's revenues.
The Group has three operating segments, which are considered to be reportable segments under IFRS. The three reportable segments are:
-- Intermediary Services; -- Distribution Channels; and -- Research & Fintech
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 wealth managers.
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 Research & Fintech segment provides a fintech platform for over 9,000 users, across 3,300 firms and providing independent ratings of 21,000 financial products and funds, licenced by 250 brands.
The reportable segments are derived on a product / customer type basis. Management have applied their judgement on application of IFRS 8, with operating segments reported in a manner consistent with the internal reporting produced to the chief operating decision makers ('CODM'). The chief operating decision makers are deemed to be the Joint CEOs. No aggregation of operating segments has occurred.
Segmental information is provided for Adjusted EBITDA, which is the measure used when reporting to the CODM.
The tables below present the segmental information.
Intermediary Distribution Research
6 months ended 30 June 2020 Services Channels & Fintech Group
GBP000 GBP000 GBP000 GBP000
Revenue 12,293 9,223 7,354 28,870
Adjusted operating expenses, before
amortisation and depreciation (9,886) (7,164) (4,466) (21,516)
----------------------------------------- ------------ ------------ ---------- ----------
Adjusted EBITDA 2,407 2,059 2,888 7,354
Operating costs of an exceptional
nature -
Amortisation of other intangible
assets (994)
Amortisation of development costs
and software (523)
Depreciation (124)
Depreciation of lease asset (359)
Share option charges (390)
----------------------------------------- ------------ ------------ ---------- ----------
Operating profit 4,964
----------------------------------------- ------------ ------------ ---------- ----------
Intermediary Distribution Research
6 months ended 30 June 2019 Services Channels & Fintech Group
GBP000 GBP000 GBP000 GBP000
Revenue 11,605 13,329 4,152 29,086
Adjusted operating expenses, before
amortisation and depreciation (9,265) (9,657) (2,180) (21,102)
----------------------------------------- ------------ ------------ ---------- --------
Adjusted EBITDA 2,340 3,672 1,972 7,984
Operating costs of an exceptional
nature (2,997)
Amortisation of other intangible assets (550)
Amortisation of development costs
and software (494)
Depreciation (133)
Depreciation of lease asset (321)
Share option charges (307)
----------------------------------------- ------------ ------------ ---------- --------
Operating Profit 3,182
----------------------------------------- ------------ ------------ ---------- --------
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.
8. Operating Profit
Operating profit for the period has been arrived at after charging:
6 months ended 6 months ended
30 June 2020 30 June 2019
GBP000 GBP000
Depreciation of tangible assets 124 133
Depreciation of lease asset 359 321
Operating costs of exceptional nature:
Restructuring costs - 59
Professional fees for acquisitions - 2,549
Loss of office expense - 389
- 2,997
Operating costs of exceptional nature
Professional fees for acquisitions relate to the purchase of Defaqto in 2019. Loss of office expense relates to the redundancy of a senior employee and restructuring costs relate to a restructure program in a single legal entity.
9. Finance Expense and Income
6 months ended 6 months ended
30 June 2020 30 June 2019
GBP000 GBP000
Finance Expense
Bank interest payable (603) (559)
Finance charge on lease liability (63) (3)
(666) (562)
Finance Income
Bank interest receivable 47 41
47 41
Net finance expense (619) (521)
10. Taxation
6 months ended 6 months ended
30 June 2020 30 June 2019
GBP000 GBP000
Current tax charge 951 1,291
Deferred tax charge / (credit) 632 (57)
Tax charge for the period 1,583 1,234
Current income tax expense is recognised at an amount determined by multiplying the profit before tax for the interim reporting period by management's best estimate of the weighted-average annual income tax rate for the full financial year, adjusted for the tax effect of certain items recognised in full in the interim period. As such, the effective tax rate in the interim financial statements may differ from management's estimate of the effective tax rate for the annual financial statements.
11. Earnings per share
Basic Earnings Per Share ('EPS') 6 months 6 months
ended ended
30 June 2020 30 June 2019
GBP000 GBP000
Profit attributable to equity shareholders
of the parent 2,707 1,416
Weighted average number of shares
in issue 96,782,296 87,867,713
Basic profit per share (pence) 2.80p 1.61p
Earnings per share has been calculated based on the weighted average number of shares in issue in both periods.
Diluted Earnings Per Share 6 months 6 months
ended ended
30 June 2020 30 June 2019
GBP000 GBP000
Profit attributable to equity shareholders
of the parent 2,707 1,416
Weighted average number of shares in
issue 96,782,296 87,867,713
Diluted weighted average number of shares
and options for the period 483,999 1,203,045
97,266,295 89,070,758
Diluted profit per share (pence) 2.78p 1.59p
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.
Adjusted basic Earnings Per Share 6 months 6 months
ended ended
30 June 2020 30 June 2019
GBP000 GBP000
Adjusted profit after tax (note 6) 4,085 4,895
Weighted average number of shares
in issue 96,782,296 87,867,713
Adjusted earnings per share (pence) 4.22p 5.57p
12. Intangible assets and goodwill
Other Intangible Assets
Goodwill Software Brand Intellectual Total Total
property other
intangible Development
assets expenditure
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cost
At 1 January
2019 19,770 - 115 897 1,012 2,790 23,572
Acquisitions 54,737 34 2,904 23,551 26,455 2,395 83,621
Additions - - - - - 930 930
At 30 June 2019 74,507 34 3,019 24,448 27,467 6,115 108,123
Additions - - - - - 1,424 1,424
Adjustments 1,669 - 36 - 36 (2,395) (690)
At 31 December
2019 76,176 34 3,055 24,448 27,503 5,144 108,857
Additions - - - - - 1,355 1,355
At 30 June 2020 76,176 34 3,055 24,448 27,503 6,499 110,212
Amortisation
and impairment
At 1 January
2019 178 - 12 112 124 133 435
Charge in the
period - 4 60 490 550 490 1,044
At 30 June 2019 178 4 72 602 674 623 1,479
Charge in the
period - 10 181 848 1,029 129 1,168
At 31 December
2019 178 14 253 1,450 1,703 752 2,647
Charge in the
period - 4 153 841 994 519 1,517
At 30 June 2020 178 18 406 2,291 2,697 1,271 4,164
Net book value
At 30 June 2020 75,998 16 2,649 22,157 24,806 5,228 106,048
At 31 December
2019 75,998 20 2,802 22,998 25,800 4,392 106,210
At 30 June 2019 74,329 30 2,947 23,846 26,793 5,492 106,644
Intellectual property is a single asset covering the three elements of customer relationships, technology and data. Capitalised development expenditure relates to the development of the software platform in Zest Technologies Limited, and technologies in Defaqto.
13. Property, plant & equipment
Lease Assets Owned Assets
------------------------------ ---------------------------------
Property Plant Total Leasehold Office Total
& Equipment improvements Equipment
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cost
At 1 January
2019 - - - - 1,443 1,443
Recognition of
right of use
asset on initial
application of
IFRS 16 343 225 568 - - -
343 225 568 - 1,443 1,443
Additions 1,015 43 1,058 - 37 37
Acquisitions 11 195 206 - 213 213
At 30 June 2019 1,369 463 1,832 - 1,693 1,693
Additions 1,285 243 1,528 - 171 171
Disposals - - - - (216) (216)
At 31 December
2019 2,654 706 3,360 - 1,648 1,648
Additions 2,872 - 2,872 881 83 964
At 30 June 2020 5,526 706 6,232 881 1,731 2,612
Depreciation
At 1 January
2019 - - - - 1,068 1,068
Charge in the
period 195 126 321 - 133 133
At 30 June 2019 195 126 321 - 1,201 1,201
Charge in the
period 212 174 386 - 153 153
Disposals - - - - (160) (160)
At 31 December
2019 407 300 707 - 1,194 1,194
Charge in the
period 276 83 359 - 124 124
At 30 June 2020 683 383 1,066 - 1,318 1,318
Net book value
At 30 June 2020 4,843 323 5,166 881 413 1,294
At 31 December
2019 2,247 406 2,653 - 454 454
At 30 June 2019 1,174 337 1,511 - 492 492
Leasehold improvements relate to the new head office, which remained under construction at 30 June 2020.
14. Borrowings
30 June 2020 30 June 2019
GBP000 GBP000
Secured bank loan:
Current - -
Non-current 45,000 42,000
Less loan arrangement fees (305) (385)
44,695 41,615
On 21 March 2019, the Group repaid the loan facility provided by Yorkshire Bank and drew down GBP45.0m from an RCF provided in two equal amounts of GBP22.5m from Yorkshire Bank and NatWest. The drawdown from Yorkshire Bank was net of the settlement of the previous funding. The RCF is a four-year facility, with the option of a one-year extension. The margin payable on the RCF is based on the net leverage of the Group with a range of 1.5% to 2.6% above LIBOR. In March 2020, the Group exercised the one-year extension for the facility.
On 21 March 2019, the Group repaid the acquired debt of Defaqto of GBP24,676,000 (including accrued interest).
On 21 June 2019, the Group repaid GBP3.0m of the RCF, and on 23 December 2019 repaid GBP4.0m.
On 23 March 2020, the Group drew down GBP7.0m of the RCF.
15. Share Capital & Share Premium
Share capital
Ordinary
Shares
Number of fully paid shares (nominal value
GBP0.01):
At 1 January 2019 76,470,588
Issue of share capital 20,311,708
At 30 June 2019 and 31 December 2019 96,782,296
Issue of share capital -
At 30 June 2020 96,782,296
Share Premium
GBP'000
At 1 January 2019 36,791
Issue of share capital 36,358
At 30 June 2019 73,149
Cost of share issue (945)
Transfer to other reserves (7,449)
At 31 December 2019 64,755
Issue of share capital -
At 30 June 2020 64,755
On 21 March 2019, the Company issued 20,311,708 new GBP0.01 ordinary shares for GBP1.80 per share, as part of the funding for the acquisition of Defaqto. 4,160,600 of these shares were issued in part consideration for the acquisition of Defaqto.
16. Other reserves
Merger Capital Share Total
Reserve redemption Option Other
reserve Reserve Reserves
GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2019 (61,395) 8 320 (61,067)
Share option charge - - 307 307
At 30 June 2019 (61,395) 8 627 (60,760)
Share option charge - - 205 205
Deferred tax on share options
exceeding profit and loss charge - - 1,113 1,113
Transfer from share premium 7,449 - - 7,449
At 31 December 2019 (53,946) 8 1,945 (51,993)
Share option charge - - 390 390
Deferred tax on share options - - (1,113) (1,113)
At 30 June 2020 (53,946) 8 1,222 (52,716)
During 2019, the Company issued 4,160,600 new GBP0.01 ordinary shares at a value of GBP1.80 per share in part consideration for the acquisition of Defaqto, resulting in an increase in the merger reserve. The opening balance on the merger reserve arose during the introduction of a new ultimate parent company (The SimplyBiz Group plc) in 2015.
17. Share-based payment arrangements
At 30 June 2020, the Group had the following share-based payment arrangements.
Issued in 2018
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 2019 are as follows:
Number Contractual
Scheme Grant date of awards Vesting conditions life of options
----------------- ---------- --------- ------------------ ---------------
4 April 3 years' service
Approved Scheme 2018 229,412 from grant date 3 to 10 years
4 April 3 years' service
Unapproved Scheme 2018 250,000 from grant date 3 to 10 years
----------------- ---------- --------- ------------------ ---------------
During the period 11,765 awards (2019: 5,882) under the above plans have been forfeited as a result of bad leavers.
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 three years and ten 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:
Number Contractual
Grant date of awards Vesting conditions life of options
------------ --------- ---------------------------------------- ---------------
3 years' service from grant date,
subject to an equity hurdle of
4 April 2018 2,250 40% above the IPO market capitalisation 3 to 10 years
------------ --------- ---------------------------------------- ---------------
If the equity hurdle is achieved, the A Shares are convertible into shares of the Company, based on 15% of the value created above 105% of the market capitalisation at IPO, subject to a 7.35% dilution cap on the issued share capital at the point of vesting.
As at 30 June 2020, the MIP was below the required equity hurdle.
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
Incentive
CSOP CSOP 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. Expected volatility, dividends and the risk-free interest rate have been assumed to be consistent with the approved CSOP scheme noted above.
During the period, 45,098 awards (2019: 119,631) under the above plans have been forfeited as a result of bad leavers. Assumed retention on the remaining options at 30 June 2020 is 90%.
Issued in 2019
Company Share Option Plan ("CSOP")
In September 2019, the Group established an additional 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 2019 are as follows:
Number Contractual
Scheme Grant date of awards Vesting conditions life of options
----------------- ------------ --------- ------------------- ---------------
26 September 3 years' service
Approved Scheme 2019 15,564 from grant date 3 to 10 years
26 September 2 years' service
Unapproved Scheme 2019 61,302 from grant date 3 to 10 years
26 September 1.52 years' service
Unapproved Scheme 2019 90,791 from grant date 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.
The following inputs were used in the measurement of the fair values at grant date of the share-based payment plans:
Approved Unapproved Unapproved
CSOP CSOP CSOP
--------------------------------------------- -------- ---------- ----------
Fair value at grant date GBP0.54 GBP1.84 GBP1.86
Share price at grant date GBP1.93 GBP1.93 GBP1.93
Exercise price GBP1.93 GBP0.01 GBP0.01
Expected volatility 45% 45% 45%
Option life (expected weighted average
life) 3 2 1.52
Expected dividends 2% 2% 2%
Risk-free interest rate (based on government
bonds) 1.3% 1.3% 1.3%
--------------------------------------------- -------- ---------- ----------
Save As You Earn ("SAYE") scheme
On 26 September 2019, the Group established the 2019 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.
375,145 options were issued under the scheme, with an exercise price of GBP1.58. The fair value of the shares at date of grant (1 December 2019) was GBP0.70, and the share options are due to vest in three years. Expected volatility, dividends and the risk-free interest rate have been assumed to be consistent with the approved CSOP scheme noted above.
During the period 21,870 awards (2019: 3,417) have been forfeited as a result of bad leavers. An assumed retention rate of 85% has been applied at 31 December 2019 on the outstanding shares.
Issued in 2020
Company Share Option Plan ("CSOP")
In March 2020, the Group established an additional Company Share Option Plan ("CSOP"), which granted share options to certain key management personnel. All options are to be settled by physical delivery of shares. The terms and conditions of the share option scheme granted during the period ended 30 June 2020 are as follows:
Number Contractual
Scheme Grant date of awards Vesting conditions life of options
----------------- ------------- --------- ------------------ ---------------
1 years' service
Unapproved Scheme 11 March 2020 85,106 from grant date 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.
The following inputs were used in the measurement of the fair values at grant date of the share-based payment plans:
Unapproved
CSOP
--------------------------------------------- ----------
Fair value at grant date GBP1.77
Share price at grant date GBP1.82
Exercise price GBP0.01
Expected volatility 45%
Option life (expected weighted average
life) 1.52
Expected dividends 2%
Risk-free interest rate (based on government
bonds) 1%
----------------------------------------------- ----------
18. Notes to the cash flow statement
6 months 6 months ended
ended 30 30 June 2019
June 2020
GBP000 GBP000
Cash flow from operating activities
Profit after taxation 2,762 1,427
Add back / (deduct):
Finance income (47) (41)
Finance cost 666 562
Taxation 1,583 1,234
4,964 3,182
Adjustments for:
Amortisation of development expenditure
and software 523 494
Depreciation of property, plant and equipment 124 133
Depreciation of lease asset 359 321
Amortisation of other intangible assets 994 550
Share option charge 390 307
Operating cash flow before movements in
working capital 7,354 4,987
Decrease in trade and other receivables 2,518 491
Decrease in trade and other payables (717) (2,906)
Cash generated from operations 9,155 2,572
Income taxes paid (1,371) (358)
Net cash generated from operating activities 7,784 2,214
19. Subsequent Events
No material subsequent events have arisen since the balance sheet date.
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END
IR DGGDCRSBDGGS
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