SimplyBiz Group plc (LON:SBIZ), the leading independent provider of compliance and business services to financial advisers and financial institutions in the UK, today announced its unaudited results for the six months ended 30 June 2018.
Financial highlights:
· Group Revenue up 13.7% to £24.2m (H1 2017: £21.3m)
· Adjusted EBITDA* up 22.0% to £5.4m (H1 2017: £4.4m)
· Adjusted EBITDA* margin increased to 22.2% from 20.7%
· Operating profit of £1.2m (H1 2017: £3.9m) after inclusion of IPO related costs of £3.6m
· Adjusted profit before tax* increased 60.8% to £4.5m
· Adjusted profit after tax* increased 61.7% to £3.6m
· Adjusted earnings per share (EPS)* increased by 61.7% to 4.68p
· Net debt reduced from £1.6m at date of listing to net cash of £1.2m at 30 June 2018 (30 June 2017: net debt of £24.7m, 31 December 2017: net debt of £23.0m)
· Maiden interim dividend of 0.98p per share, in respect of the nine months trading to 31 December, post IPO, as per the stated intention in the admission document
Operational highlights:
· Completion of IPO on London’s Alternative Investment Market (AIM), raising £30m for the Group
· Acquisition and integration of Landmark Surveyors Limited (acquired in January 2018), and subsequent achievement of cost synergies in line with expectation
· Member Firms increased by 5.7% to 3,628 (31 December 2017: 3,433, 30 June 2017: 3,367)
· Assets under management (AUM) increased by 5.6% to £615m (31 December 2017: £582m)
· Significant Distribution Channels division contract wins with new providers Guardian Financial Services and Vitality Invest
· Launch of Centra, our end to end financial planning system, which has received high levels of interest; 1,635 users signed since its launch in March 2018
· Remains the UK’s largest support services compliance provider for intermediaries (by revenue)
· Winner of Best Support Services for Advisers at 2018 Professional Advisers Awards
Ken Davy, SimplyBiz Group plc Chairman, commented:
“We are delighted to announce our first results as a public company, following our successful AIM flotation in April. Our performance in the first half of 2018 has maintained our trading momentum, delivering strong top line organic and acquisition growth of over 13% and increasing our adjusted EBITDA margins to 22%.
“Our IPO in April 2018 has been very well received by our members and partners, and we have already witnessed positive commercial and reputational benefit. We continue to increase the number of members and channel partners that we serve, as well as look to pursue selective acquisitions.
“I would like to thank everyone in the SimplyBiz team for their dedication in delivering a successful first half of 2018.”
* Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation, operating exceptional costs and share based payment charges. Adjusted profit before and profit after tax exclude operating exceptional costs, exceptional finance charges, amortisation and share based payment charges. A reconciliation of these metrics to GAAP measures is provided in note 5. Adjusted earnings per share is calculated based on adjusted profit after tax.
JOINT CHIEF EXECUTIVES’ STATEMENT
Overview
The first six months of 2018 saw the Group continue to deliver strong operational and financial performance, alongside the acquisition and integration of Landmark Surveyors Limited, and successful listing on AIM.
Revenue growth of 13.7% to £24.2m reflects continued organic growth and a £1.8m (8.6%) revenue contribution from the acquisition of Landmark Surveyors (from 23 January 2018). Adjusted EBITDA growth of 22.0% to £5.4m reflects a sound cost discipline and the ability of the business to generate operational leverage from its platform. Adjusted EBITDA margin trended positively to 22.2% from 20.7% in the prior year period.
Divisional Performance
The Intermediary Services Division provides compliance and business services to over 3,600 individual intermediary firms through a comprehensive membership model. Our members, that include Financial advisers, mortgage advisers, and consumer credit broker firms, conduct regulated activities that require that they are authorised and regulated by the FCA.
Member firms numbers increased by 5.7% to 3,628 (3,433 at 31 December 2017 and 3,367 at 30 June 2017) and we continue to benefit from the shift in the industry from advisers working as appointed representatives of network firms, to being directly authorised with the FCA. As advisers move away from costly, restrictive network firm structures, to the independence of being directly authorised, SimplyBiz is strategically well placed to support and guide them through their FCA registration process and assist them in a constantly evolving and increasingly complex regulatory environment.
Increased regulation is a tailwind for our business. The introduction of the Markets in Financial Instruments Directive 2018 (“MiFID II”) and the General Data Protection Regulation (“GDPR”), and the impending Senior Managers & Certification Regime (“SM&CR”) and Insurance Distribution Directive (“IDD”) regulations have created opportunities for the Group to engage and support its members through additional service offerings. Additional services income increased by 12.1% to £2.3m (H1 2017: £2.0m), as the Group benefitted from ongoing regulatory change.
Given its scale, the Group is able to provide its members with a customised version of the sector’s leading 3rd party specialist practice management and CRM applications at attractive rates. Software licence users increased from 3,095 at H1 2017 (FY 2017: 3,274) to 3,504, resulting in an 18.4% increase in software licence income from H1 2017.
In March 2018, the Group launched ‘Centra’, an end-to-end financial planning system in partnership with Defaqto that brings together a number of existing advisor software tools into one integrated service. Centra offers our members financial planning tools, product research, suitability reports and a centralised investment process. Interest in Centra has been significant, with over 1,600 users signed up since its launch, and the Group providing additional face-to-face training workshops to meet the level of demand.
Zest Technologies, the Group’s employee benefits software solution, performed in line with management expectations during the period with revenue reducing from £3.3m in H1 2017 to £2.5m in H1 2018, as customers move away from the legacy application. The re-design of the Zest platform was completed in H1 2018 and the new product has received positive feedback since its launch. The Group is currently in the final stages of a number of tenders on the new software and we look forward to updating shareholders with our progress in due course.
The Distribution Channels Division continues to provide a highly effective, efficient distribution channel for c.135 financial institutions to reach an otherwise fragmented independent intermediary sector. The Group generates revenue from product providers when it successfully engages Members to participate in the channels offered.
The Group’s extensive events programme has been developed to cater for the needs of Members, and allows product providers the opportunity to deliver engaging information that will enhance advisers’ knowledge and continue to improve customer outcomes. As well as delivering a significant number of events and seminars in the period, we also provided a broad range of electronic and printed materials to deliver product provider brand and product communications to its members. Income in the period from these marketing service agreements increased by 20.9% to £3.0m, from £2.5m in H1 2017, although part of the increase was due to the timing of deliverables being weighted more in H1 during 2018, as compared to 2017.
Building on our existing strong industry relationships, in August 2018, the Group announced a multi-year partnership deal with Guardian Financial Services, one of the oldest brands in the UK financial services market. The partnership will see the two companies collaborate to deliver relevant marketing messages, training and educational opportunities to the IFA and wealth management firms who subscribed to the SimplyBiz services.
SimplyBiz Mortgages is the UK’s third largest mortgage club, with over 1,600 members benefitting from access to a dedicated support service and preferred products from key lenders. Mortgage Services revenues increased by 18.6% to £3.1m (H1 2017: £2.6m), as a result of increased Member penetration and greater lending in the market.
In January 2018, the Group strengthened its capabilities in providing home valuations with the acquisition of Landmark Surveyors Ltd, a business highly aligned and complementary to Sonas Surveyors, an existing Group company. Through these companies, the Group is appointed to the majority of major bank and building society panels, providing vertical integration with our other mortgage related activities.
During the period, assets under management within the Group’s packaged investment service Verbatim, increased from £582m at 31 December 2017, to £615m at 30 June 2018, generating revenues of £1.0m – a 21.3% increase from H1 2017.
Strategy
The Group’s growth strategy focuses on both organic growth and growth by acquisition. Organic growth is expected to be driven by growth in the Group’s membership base, in its service offering and its average revenue per customer. Growth in its core membership will in turn be accretive to the distribution division, enhancing the Group’s position as an enabler of more effective financial service provision.
Building on its proven ability to execute and integrate acquisitions, management will also continue to pursue selective acquisitions to enhance the scale of the Group and breadth of services offered.
