Hi, it's Paul here.

Estimated timings for today's report - similar to yesterday. I'll start writing sections from late morning, then will work mainly in the afternoon. Estimated completion time: 5 pm.

Update at 16:44 - today's report is now finished.




SimplyBiz (LON:SBIZ)

Share price: 200p
No. shares: 96.8m
Market cap: £193.6m

Interim results

SimplyBiz (AIM: SBIZ), the independent provider of compliance and business services to financial advisers and financial institutions in the UK, today announces its unaudited results for the six months ended 30 June 2019.

The headline figures look great, but the growth has almost all come from an acquisition. Organic revenue growth was only 3%. Net debt looks a bit high too, so I'll check out the balance sheet below.

Very good adjusted EBITDA margin, of 23.4%

Note that exceptional costs are very high, at £3.0m in H1 TY, and £3.8m in H1 LY - that's worth checking out, to determine how exceptional these costs really are.

Outlook - sounds fine;

Trading has continued in line with the Board's expectations, since the end of the period. The Group remains on track to achieve market expectations for earnings for the full year.

Stockopedia is showing 12.6p forecast EPS for FY 12/2019, giving a PER of 15.9 - probably about right.

Balance sheet - this is where it goes wrong for me. It's very top-heavy, with £106.6m intangibles.

NAV is £63.3m, so once we write off the intangibles that becomes heavily negative, with NTAV of -£43.3m

It has £11.6m of cash, and £41.5m of debt, giving net debt of £30.1m - that looks too high to me. Although the acquisition RNS in Mar 2019 indicated that net debt should reduce to under 2 times EBITDA by the end of 2019.

Given that revenues are recurring in nature, then maybe a stretched balance sheet doesn't matter that much? Although it makes me uneasy, as there's no cushion if anything were to go wrong.

Cashflow statement - it doesn't look very cash generative. Maybe there's an H2 weighting to cashflow? Note that £930k of development spending was capitalised in H1 2019, more than double the prior year H1 comparative.

My opinion - for me, the stretched balance sheet puts me off.

Did SBIZ over-pay for the large acquisition earlier this year? It seems to have…

Unlock the rest of this Article in 15 seconds

or Unlock with your email