REG - Fintel PLC - Full Year Results
19/03/2024 07:00
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RNS Number : 3237H Fintel PLC 19 March 2024
19 March 2024
Fintel plc
("Fintel", the "Company", the "Business" or the "Group")
Full year results for the year ended 31 December 2023
Resilient financial performance and significant strategic and operational
progress
Fintel (AIM: FNTL), the leading provider of fintech and support services to
the UK retail financial services sector, today announces its audited
consolidated results for the year ended 31 December 2023.
Matt Timmins, Joint CEO of Fintel
"2023 has been a defining year for Fintel. We have delivered a resilient
financial performance and significant progress against our strategy, which
balances growth across our core activities, organic investment and
complementary M&A.
"We are executing our strategy at pace, enhancing our service and technology
platform, increasing our scale and reach, and strengthening our position at
the heart of the UK retail financial services sector to inspire better
outcomes for all.
"The cash-generative nature of our business, underpinned by our financial
resources, positions us well to capitalise on the favourable market conditions
for M&A, whilst delivering further organic growth and value to all of our
stakeholders.
"In the new financial year to date, we are trading in line with expectations
and remain well positioned to take advantage of opportunities in our market."
Financial highlights - Resilient performance, in line with expectations
· Adjusted EBITDA(1) growth of 5.6% to £20.5m (FY22: £19.4m) and
adjusted EBITDA margin of 31.5% (FY22: 29.1%), during period of significant
organic and inorganic investment
· Core(2) SaaS & Subscription revenue up 2.2% to £37.6m (FY22:
£36.8m); up 11.8% on a like-for-like basis excluding the gross to net revenue
impact from a change in contractual terms of key software reseller agreement
and acquisitions (FY23: £34.2m; FY22: £30.6m)
· Core revenue increased c.0.3% to £56.6m (FY22: £56.4m) and grew
5.6% on a like-for-like basis (FY23: £47.7m; FY22: £45.2m), excluding the
impact of volatility in the mortgage market, the gross to net revenue change
of the software reseller revenues and acquisitions
· Four acquisitions completed in 2023 with initial net cash
investment of £13.3m, delivering combined core revenues of £1.5m in the
period
· Strong balance sheet with £12.7m of cash, and £69m of headroom
in £80m Revolving Credit Facility, providing flexibility for further
investment
· Net cash of £1.7m (FY22: £12.8m), having invested significantly
in the business and M&A
· Adjusted EPS(1) of 12.2 pence per share (FY22: 12.2 pence per
share), consistently demonstrating strong profitability
· Final dividend of 2.35 pence per share proposed, resulting in a
full year dividend of 3.45 pence per share, an increase of 6.2% on prior year
Financial highlights 2023 2022 % change
Alternative performance measures
Core(2) revenue £56.6m £56.4m 0.3%
Core SaaS & subscription revenue £37.6m £36.8m 2.2%
Core adjusted EBITDA £20.2m £18.6m 8.6%
Core adjusted EBITDA margin 35.7% 32.9% 280 bps
Adjusted EBITDA(1) £20.5m £19.4m 5.6%
Adjusted EBITDA margin 31.5% 29.1% 240 bps
Adjusted EPS(1) 12.2p 12.2p -
Statutory measures
Statutory revenue £64.9m £66.5m (2.4%)
Statutory EBITDA £14.4m £16.7m (13.5%)
Statutory EPS 6.8p 9.5p (28.2%)
Net cash £1.7m £12.8m (86.7%)
Dividend per share 3.45p 3.25p 6.2%
Strategic and operational highlights - Significant progress
· Fintel has made continued strategic progress, with sustained
growth across core activities, organic investment into technology and research
platforms, and inorganic investment to increase our scale, IP and capabilities
o Sustained growth across core activities
§ Growth in SaaS and Subscription revenue, which now represents 66.4% of core
revenues (FY22: 65.1%)
§ Strong growth in fintech software revenue of 11.5%, following significant
extension of proprietary software solutions
§ 24.9% growth in Distribution as a Service revenue
o Increased organic investment of £4.8m into technology and service
platform
§ Enhanced Consumer Duty support and technology package, helping
intermediaries to implement requirements
§ Expanded proprietary financial planning and competitor and market
intelligence software solutions with launch of four new modules
§ Extended ratings and reviews portfolio and expanded into tax advantaged
market
§ Deepened insights for Product Providers through upgraded partner portal,
and scaling of Strategic Asset Allocation and Distribution as a Service
partnerships
o M&A investment to increase our scale, IP and capabilities,
capitalising on favourable market conditions
§ Four acquisitions completed over the period:
· MICAP, a provider of independent research and advice tools
· Competent Adviser, a dynamic learning platform enabling advisers
to meet increasing regulatory competency requirements
· VouchedFor, a leading review site for Financial Advisers,
Mortgage Advisers, Solicitors and Accountants
· AKG, a leading provider of independent assessments and ratings of
financial strength
· Acquisitions are performing as expected
§ Two further acquisitions completed post period end:
· Owen James, the leading provider of strategic engagement events
in UK financial services
· Synaptic Software, an independent provider of financial adviser
planning and research software, and Webline, a quote and apply portal for
advised sales of protection products
§ Investment in Plannr through Fintel Labs technology incubator
· Expanding Fintel's technology proposition and extending the
capabilities of Defaqto Engage through a two-way integration
· With Fintel's support, Plannr has now successfully launched to
the intermediary market
Current trading and outlook - Continue to trade in line with expectations
· Current trading remains in line with expectations, with growth in
fintech software revenue and software license sales offsetting pressures in
the UK housing market
· With expectations that interest rates and housing market activity
will become more positive in 2024, Fintel is well positioned to benefit from a
recovery in the mortgage market
· Clear growth strategy with demand underpinned by positive market
dynamics and structural drivers including regulatory pressure, the FCA
Consumer Duty regulation and demand for technology and data
· Organic growth expected to be driven by ongoing software adoption
across membership base, further technology penetration across the wider
market, and synergies arising from recent acquisitions
· Qualified M&A pipeline, underpinned by financial resources and
favourable market conditions
Notes
(1)Adjusted EBITDA and adjusted EPS are alternative performance measures for
which a reconciliation to a GAAP measure is provided in note 8 and note 10
(2)Core business excludes revenues from panel management and surveying.
Analyst presentation
An analyst briefing is being held at 9:30am on 19 March 2024 via an online
video conference facility. To register your attendance, please
contact fintel@mhpgroup.com (mailto:fintel@mhpgroup.com) .
For further information please contact:
Fintel plc via MHP Group
Matt Timmins (Joint Chief Executive Officer)
Neil Stevens (Joint Chief Executive Officer)
David Thompson (Chief Financial Officer)
Zeus (Nominated Adviser and Joint Broker) +44 (0) 20 3829 5000
Martin Green
Dan Bate
Investec Bank (Joint Broker) +44 (0) 20 7597 5970
Bruce Garrow
David Anderson
MHP Group (Financial PR) +44 (0) 7736 464749
Reg Hoare Fintel@mhpgroup.com (mailto:Fintel@mhpgroup.com)
Robert Collett-Creedy
Notes to Editors
Fintel is the UK's leading fintech and support services business, combining
the largest provider of intermediary business support, SimplyBiz, and the
leading research, ratings and Fintech business, Defaqto.
Fintel provides technology, compliance and regulatory support to thousands of
intermediary businesses, data and targeted distribution services to hundreds
of product providers and empowers millions of consumers to make better
informed financial decisions. We serve our customers through three core
divisions:
The Intermediary Services division provides technology, compliance, and
regulatory support to thousands of intermediary businesses through a
comprehensive membership model. Members include directly authorised IFAs,
Wealth Managers and Mortgage Brokers.
The Distribution Channels division delivers market Insight and analysis and
targeted distribution strategies to financial institutions and product
providers. Clients include major Life and Pension companies, Investment
Houses, Banks, and Building Societies.
The Fintech and Research division (Defaqto) provides market leading software,
financial information and product research to product providers and
intermediaries. Defaqto also provides product ratings (Star Ratings) on
thousands of financial products. Financial products are expertly reviewed by
the Defaqto research team and are compared and rated based on their underlying
features and benefits. Defaqto ratings help consumers compare and buy
financial products with confidence.
For more information about Fintel, please visit the website:
www.wearefintel.com (http://www.wearefintel.com)
Chair's statement
Year in review
2023 was a year of material global socio-economic uncertainty and significant
change within the UK advice market. In addition, the landmark Consumer Duty
regulation was introduced by the FCA, and the impact of technology, data and
automated processes on the financial services market intensified.
Despite these external changes, Fintel once again demonstrated its agility
with a positive step change of our own, accelerating our strategic momentum
and risk mitigation.
The advice market is the centrepin of our commercial position, economic
strength, and forward strategy. 2023 was a period of tumultuous change for
advisers, with material volatility across the financial needs of their
clients, the adoption of Consumer Duty, ongoing market consolidation, and an
accelerating race to respond to the digital future of efficient advice
provision in the UK.
We enhanced our Intermediary Services support model, technology suite, and
product research offering, retaining our position as the leading provider to
the directly authorised intermediary market. As a result, we further deepened
our key relationships, as we deliver aligned capabilities that will strengthen
our members' market position, as well as our own.
Our institutional clients in the product provider market have worked with us
extensively to enhance their ability to demonstrate the quality of their
products and services to the market, and to optimise their distribution
strategies. This has led to further solid growth in our Distribution as a
Service ("DaaS") proposition, and significantly deeper relationships.
Following the 2023 launch of Fintel Labs, a venture designed to strengthen our
technology proposition and foster innovation in the sector, we invested in and
supported an innovative technology business, customer relationship management
("CRM") entrant Plannr. CRM is mission critical to the technologies deployed
by our client base, and our early-stage investment in and collaboration with
Plannr will provide us with the leading strategic CRM platform for small to
medium-sized intermediary firms long into the future. Alongside this, we
renewed our strategic partnership with Intelligent Office, the leading medium
to large-sized adviser CRM platform in the UK, with a revised five-year
partnership agreement. This new agreement gave rise to a material change in
how we account for the business between us, reducing our reportable run-rate
revenues, whilst significantly increasing our reportable profit margin
percentage from these activities.
Coming into 2023 we were acutely aware that asset prices across global
financial technology, research and services had dropped significantly, as the
increasing cost of capital directly impacted private equity investment and
those incumbents backed by it, whilst trading uncertainties dampened the
inorganic ambitions of larger institutions in the market.
Fintel has strategically mapped acquisition targets within adjacent markets
since its highly successful acquisition of Defaqto in 2019, but we paused
activity in the run-up to 2023, as asset prices were prohibitive to
shareholder value creation. That changed significantly in 2023, when the
fiscal capacity and deal foundations we created over recent years combined
with attractive asset prices, enabled us to participate tactically in the
M&A market. We have done so with great success, without equity dilution to
our shareholders, and at an efficient cost of capital through the use of our
own liquidity and favourable debt conditions, whilst retaining a positive net
cash position at the year end.
Our acquisition strategy is clear. We look for technology and data-led
businesses which offer cultural alignment, a strong forward growth profile
and, most crucially, a clear place in the service needs of our client base.
Financially, the business has delivered consistently throughout 2023,
demonstrating the largely recurring nature of its growing revenue streams and
its ability to control operating costs, and invest significantly in its
future. 2023 has demonstrated that Fintel is a highly resilient, predictable
growth engine that operates uniquely in a growing market sector.
As a purpose-led organisation, we continue to strengthen our environmental,
social and governance ("ESG") commitments, aligning to key external reporting
standards and expanding our internal KPIs as we embed ESG principles across
our operations. With a focus on long-term sustainable value creation for all
of our stakeholders, we are committed to delivering measurable benefits for
our business, the financial sector and broader society.
Our progress this year is a testament to our exceptional people, unique
culture, and focused client engagement as we continue to simplify and improve
a rapidly changing market.
Financial performance and dividend
The underlying resilience and cash-generative nature of our business have been
clearly demonstrated through our strong financial performance for FY23,
despite the backdrop of a challenging macroeconomic environment both
domestically and internationally.
Both our revenue and adjusted profit before tax continued to perform in line
with the Board's expectations for the full year. This, coupled with our
continued strong cash flow conversion and balance sheet, has again enabled us
to demonstrate our progressive dividend policy with a further year-on-year
enhancement. This resulted in an interim dividend of 1.1 pence per Ordinary
Share, paid in November 2023, and I am pleased to confirm that the Directors
are recommending a final dividend of 2.35 pence per share payable on 19 June
2024, resulting in a full year dividend of 3.45 pence per share.
Progress against our strategy
Our primary focus for 2023 was to: (a) sustain growth across our core
activities, (b) increase our organic investment into our future technology and
research offerings, and (c) take significant advantage of market conditions
through a series of targeted acquisitions. Each of these reflects our
strategic ambitions for medium to long-term profitable growth, and the
establishment of a market leading position and dominant market share within
our target sectors.
I am pleased to report that despite considerable negative market sentiment,
most notably in the connected sectors of mortgages and surveying, we have
progressed well against each of these objectives.
We have invested significantly across 2023, and we will continue to do so
across 2024, as we have clear sight of material and sustainable shareholder
value creation opportunities.
Fintel is a business with a clear strategy, a positive market environment in
which to execute it, and an experienced team that combines vision with a
proven ability to deliver consistent strategic progress year on year.
Board transition
The Board of Directors has remained stable and unchanged during 2023, enabling
a smooth transition of the Chair role from Ken Davy to me, with Ken returning
to standard non-executive status as indicated to our shareholders this time
last year. This demonstrates the robustness of our succession planning and the
cohesiveness of our Board in managing structural change effectively.
I would like to take this opportunity to thank Ken directly for his excellent
support throughout both my entry into Fintel and the transition to Chair.
Furthermore, I would also like to thank the remaining Board members for their
support, diligence and commitment throughout 2023.
Outlook
It remains clear that the macro-economic environments, both domestically and
internationally, remain challenging for UK businesses in the medium term. That
said, I am confident that the UK financial services sector will continue to
offer opportunities for a business such as ours to grow, diversify and enhance
shareholder value. We have the Executive team, the strategy, and the financial
strength to take direct advantage of structural changes in the market.
Throughout 2023 we have demonstrated our ability to deliver significant
strategic progress. We enter 2024 with momentum and are confident in our
ability to continue to enhance shareholder value across the medium term.
I would like to express the Board's deep gratitude to each of our Fintel
colleagues for their innovation, hard work, commitment and dedication to the
Company and, indeed, to our many external partners and customers, all of whom
bring value to us each day.
These are the bedrocks of our future success over the years to come, as we
continue to inspire better outcomes for all.
Phil Smith
Non-Executive Chairman
JOINT CHIEF EXECUTIVE OFFICERS' STATEMENT
Strategic expansion capitalising on market opportunities
2023 has been a defining year for Fintel. We have delivered a resilient
financial performance and invested significantly, enhancing our service and
technology platform and increasing our scale and reach through the completion
of four complementary acquisitions in the year.
We have strengthened our unique position at the heart of the retail financial
services sector, and in a rapidly changing market, we have helped financial
professionals deliver better outcomes for their clients, remain compliant in
the face of changing regulation, and drive their businesses forward at pace.
As we scale our compelling proposition, enhancing our insight, IP and
technology capabilities to meet evolving market needs, we are strongly
positioned for continued organic and acquisitive growth, creating sustainable
value for all of our stakeholders.
In a year of significant volatility, in particular within the mortgage market,
our total statutory revenue remained resilient, decreasing by 2.4% to £64.9m
(FY22: £66.5m), while our adjusted EBITDA increased by 5.6% to £20.5m (FY22:
£19.4m) and adjusted EBITDA margin to 31.5% (FY22: 29.1%), in line with Board
expectations.
Strategic priorities
Our strategic priorities are to deliver growth, enhance margin and improve the
underlying quality of our core revenues in line with our medium-term
objectives. To deliver these objectives we balance sustainable growth across
our core activities, organic investment into our technology and research
platforms with inorganic investment to increase our scale, IP and
capabilities.
Following significant organic investment into our technology and services
platform of £4.8m and into four acquisitions with initial net cash investment
of £13.3m in 2023, we see further opportunities to capitalise on favourable
market conditions and execute our inorganic growth strategy in 2024. We will
continue to realise our active M&A pipeline, leveraging our financial
agility to expand our market position, increase market penetration in our
target sectors and deliver material and sustainable shareholder value.
Strategic delivery - sustained growth across our core activities
We continue to focus on scaling our core business and improving the underlying
quality of our revenues. Our three medium-term (2021-2024) strategic
objectives balance continued growth with re-investment in our core
capabilities as we digitise and enhance our service and technology platform.
Progress against strategic targets
Strategic focus 2023 2024 target
Core Revenue growth 5.6%* 5-7%
Margin 35.7% 35-40%
Earnings quality 66.4% 70-80%
Core revenue growth
Objective: core business revenue growth of 5-7% annually.
In 2023 our core business continued to perform well and in line with our
target range, growing 5.6% (FY23: £47.7m; FY22: £45.2m) on a like-for-like
basis*. Key drivers consisted of strong growth in fintech software and
membership services revenue, combined with expansion of data services and
ongoing adoption of the Distribution as a Service ("DaaS") proposition. Our
total core revenue remained resilient, increasing by 0.3% in the year (FY23:
£56.6m; FY22: £56.4m), enhanced by £1.5m revenue from the four acquisitions
completed in the year.
*Like-for-like basis strips out the impact of acquisitions, mortgage market
volatility and the changes in revenue recognition of a software reseller
agreement
EBITDA margin
Objective: core EBITDA margin of 35-40%.
Our core business delivered an adjusted EBITDA of £20.2m (FY22: £18.6m) and
an EBITDA margin of 35.7% (FY22: 32.9%), during a year of significant organic
and inorganic expansion of our scale, IP and capabilities, performing in line
with our target range.
Earnings quality
Objective: 70-80% of core revenue from SaaS and subscriptions
SaaS and subscription revenue has increased by 2.2% to £37.6m, now
representing 66.4% (FY22: 65.1%) of the core revenues. Key drivers were
continued expansion of our DaaS proposition, and quality recurring revenue
streams added through recent acquisitions. These positive drivers offset the
impact of the amendment of our largest software reseller agreement.
Organic and inorganic investment to capitalise on growth opportunity
The UK retail financial services market is open, independent, and competitive,
providing choice and value to consumers. However, it is also complex and
fragmented, with thousands of products to choose from, delivered by hundreds
of providers, through thousands of intermediaries, within a changing
regulatory environment.
In this dynamic landscape, Fintel provides technology and services to
financial product manufacturers, intermediaries and consumers. Fintel's
wide-reaching sector presence and unparalleled market insight ensure continued
and numerous opportunities for growth. Benefiting from a clear growth strategy
underpinned by structural market drivers, our model combines diverse and
recurring revenue streams with a proven ability to adapt to industry trends,
respond to customer demand and develop new products. This creates significant
opportunities for both organic and acquisitive growth, enhanced revenue
quality, and sustainable value creation for all of our stakeholders.
Rising tide of regulation
The UK financial services regulatory landscape is constantly evolving, and
financial firms need to adapt quickly and efficiently to the changing
requirements whilst continuing to operate profitably. The recent changes
resulting from the FCA Consumer Duty regulation require intermediaries to
evidence suitability at point of sale, and financial product providers at the
point of product design, creating opportunities for Fintel across the value
chain.
Responding to this need, we expanded our Consumer Duty support package,
helping intermediaries to implement requirements across all four consumer
outcomes included in the regulation. We also adapted two of our key software
solutions including the launch of Consumer Duty Profiles within our
proprietary financial planning software, enabling advisers to benchmark
products and evidence fair value, as well as the Customer Appeal module within
our market and competitor intelligence software, showing the relative
importance that different customer profiles place on the insurance product
features, and enabling product providers to evidence fair value and
suitability. We also expanded our regulatory technology capability, acquiring
Competent Adviser, a regulatory learning platform for intermediaries, and
VouchedFor, provider of the Elevation feedback tool, helping intermediaries
monitor Consumer Duty compliance.
With an experienced team of nearly 150 in-house product and regulatory experts
and a growing suite of technology solutions supporting delivery of compliance
requirements, we are strongly positioned to continue benefiting from
regulatory change.
Product value as important as price
The UK's financial services market offers thousands of financial products to
choose from. This wealth of choice creates complexity for today's educated
consumers, who increasingly pay attention to quality and suitability of
financial products, looking beyond the price.
Providing an independent, expert assessment of a product's features and
benefits and distilling this into ratings, Defaqto Star Ratings are recognised
by 98% of intermediaries and trusted by consumers, with 89% of people more
likely to choose a Defaqto rated product. In 2023 we built on this brand
equity, refreshing the Star Ratings proposition with an updated brand identity
and expanding our reach through a new distribution partnership with one of the
leading comparison sites, MoneySupermarket. We also enhanced the ratings
coverage to include tax-advantaged products, leveraging the data from MICAP,
provider of independent research and advice tools for tax-advantaged
investment products, acquired in July 2023.
Maintaining the UK's largest financial product database with over four million
product features mapped, and a wide-reaching, unique expert product ratings
brand, with Defaqto Star Ratings present in an estimated 52 million of
consumer financial decisions, we continue to be well positioned to capitalise
on the growing consumer demand for product insight and comparison.
Demand for data and insights
With the growth in digital product distribution and regulatory focus on
suitability and fair value, the demand and need for quality financial data
throughout the product development and sales lifecycle is stronger than ever.
From our position at the heart of the retail financial services market, we
provide data and insight services throughout the value chain, helping
consumers make better informed financial decisions, intermediaries to
recommend suitable products and product providers to design and distribute
better products. In 2023 we improved our partner portal insights, scaled our
Distribution as a Service offering, and expanded our ratings and reviews
platform into adjacent markets. We also completed the successful acquisition
of MICAP, provider of independent research and insight on tax-advantaged
products, and AKG, provider of financial strength assessments, significantly
increasing the scale and IP of our subsidiary business Defaqto.
As we realise synergies resulting from these recent acquisitions and continue
to scale our data and technology platform, we see material opportunities to
enrich our services and deepen our market penetration in this sector.
Demand for flexible, integrated technology
Ongoing consolidation in the intermediary market has created a need for
flexible, modular operating systems. With advisers currently using multiple
pieces of software, integration and scalability are key to efficiency.
In this context our objective is to lead innovation, delivering products and
solutions that add value and eliminate effort for our clients and the wider
market. In 2023 we enhanced our proprietary financial planning software with
the launch of a product and platform switching module and a cash flow planning
tool, and completed a two-way integration with new CRM solution Plannr. We
also completed two acquisitions, Competent Adviser and VouchedFor, through our
knowledge and technology platform Fintel IQ, designed to provide modular,
integrated solutions to the retail financial services market whilst widening
our addressable market and penetration.
We will continue to invest in our technology platform, helping financial
intermediaries operate more effectively and increasing value per customer. We
see further opportunities for growth in this area, as we continue to realise
our active M&A pipeline and consolidate a fragmented UK financial
technology market.
Value generation
Our underlying financial resilience, underpinned by a diverse customer base,
growing quality revenue streams, disciplined cost control and significant
investments in future growth, enables us to continue to expand our proposition
and revenue streams despite the backdrop of a challenging macroeconomic
environment.
We continue to re-invest in our people, data and digital capabilities,
focusing on enhancing our technology platform, knowledge and IP, with a record
organic investment in our technology and service platform of £4.8m during the
year. We do this whilst developing valuable services for our customers,
supporting our people and ensuring we manage our operations responsibly,
building a strong platform for sustainable growth.
The cash-generative nature of our business, combined with a significant
revolving credit facility, positions us well to continue realising our active
M&A pipeline, further enhancing our revenue streams and delivering value
to all of our stakeholders.
Our robust adjusted earnings per share ("EPS") performance of 12.2 pence per
share (FY22: 12.2 pence per share), taking into account significant investment
in the year underscores our strong profitability and commitment to generating
substantial value for our shareholders, underpinned by a progressive dividend
policy. On a statutory basis EPS was 6.8 pence per share (FY22: 9.5 pence per
share), which is reflective of significant investment in system transformation
and M&A adviser costs.
Ensuring better outcomes
Fintel's purpose of inspiring better outcomes is at the centre of everything
we do. Guided by that purpose, in 2022 we launched a holistic environmental,
social and governance strategy, cementing our long-term commitment to
sustainable value creation for all of our stakeholders. In 2023 we focused on
integrating ESG principles within our operations and delivering on commitments
set out in our Better Outcomes Plan, driving measurable change in our
business, our industry and wider society in line with our stakeholder
priorities and leading reporting standards and frameworks. This progress has
been recognised by the ICA Compliance Awards 2023, seeing us shortlisted as a
finalist for the "ESG Initiative of the Year" award.
Our people
We invest in our people, recognising that our team is fundamental to our
ongoing success. As we seek to cultivate an engaging, inclusive workplace
where everyone can thrive, we prioritise addressing our employee feedback and
needs. We are delighted to see this approach reflected in our strengthened
position in the top 20 "Best Companies to Work For" in financial services, as
well as the "Outstanding Company to Work For" accreditation awarded for the
second consecutive year and a further accolade, winning "Employer of the Year"
at the FT Adviser Diversity in Finance Awards 2023.
We are also delighted to welcome Phil Smith's appointment as Chair of Fintel,
succeeding our founder Ken Davy. Ken's leadership and dedication have been
instrumental in shaping the robust foundation and remarkable trajectory of our
Company over the years. Looking ahead, we are confident that Phil's
stewardship will further our commitment to excellence, innovation, and
sustained growth.
Outlook
We have started 2024 with momentum, completing the acquisitions of Synaptic
Software, an independent provider of financial adviser planning and research
software, and Owen James, the leading provider of strategic engagement events
in UK financial services.
The core business continues to trade well, with pressures in the UK housing
market offset by growth in fintech software revenue and software licence
sales. With expectations that interest rates and market activity will adjust
positively in 2024, we are well positioned to benefit from a recovery in the
mortgage market.
Our expanding market position, diverse customer base and recurring revenue
streams provide resilience against these macroeconomic headwinds and we
continue to benefit from structural drivers including increasing regulatory
requirements as a result of the FCA Consumer Duty regulation and ongoing
demand for data and insights across the retail financial services value chain.
As we realise our active M&A pipeline, we are well placed to capitalise on
favourable market conditions, leveraging our financial agility and the
significant headroom in our £80m revolving credit facility.
Looking to the future, we are confident in executing our growth strategy,
delivering an end-to-end service platform for UK retail financial services and
consolidating a fragmented fintech market to enhance our future earnings,
proposition and growth opportunities, as we inspire better outcomes for all.
Matt Timmins and Neil Stevens
Joint Chief Executive Officers
FINANCIAL REVIEW
Year ended 31 December 2023
Year ended Year ended
31 December 31 December
2023 2022
£m £m
Group revenue 64.9 66.5
Expenses (44.4) (47.1)
Adjusted EBITDA 20.5 19.4
Adjusted EBITDA margin % 31.5% 29.1%
Depreciation (0.4) (0.3)
Depreciation of leased assets (0.4) (0.4)
Amortisation of development expenditure and software (1.3) (1.1)
Adjusted EBIT 18.4 17.6
Operating costs - non underlying (4.4) (0.7)
Impairment on sale of operations (0.2) (0.7)
Share option charges (1.5) (1.3)
Amortisation of other intangible assets (2.2) (2.0)
Net finance costs (0.5) (0.5)
Profit before tax 9.6 12.4
Taxation (2.2) (2.3)
Profit after tax 7.4 10.1
Adjusted earnings per share* ("EPS") 12.2 12.2
* Adjusted EPS excludes non-underlying costs and amortisation of
intangible assets arising on acquisition, divided by the average number of
Ordinary Shares in issue for the period.
Revenue
The business continued to perform well throughout 2023, with our diverse
customer base offsetting the impact of the mortgage market. Core revenue
grew 0.3% to £56.6m (FY22: £56.4m), slightly ahead of the same period last
year and in line with the Board's expectations.
Core organic revenue of £55.1m (FY22: £56.4m) is impacted by an amendment in
contractual terms of our primary software reseller agreement which has been
recognised on a net basis since May 2023. Core organic revenue, on a
like-for-like basis, has increased by 2.9% (LfL: FY23: £51.7m; FY22:
£50.2m), stripping out the impact of acquisitions and the gross to net
revenue recognition of the renegotiated software seller agreement.
Excluding the impact of mortgage market volatility, core organic revenue grew
by 5.6% in line with our medium-term target (LfL: FY23: £47.7m; FY22:
£45.2m). Whilst mortgage related activities experienced a significant 21.2%
revenue decline during the year, the segment remains profitable, and is well
positioned for a rapid return to previous performance levels as the UK housing
market normalises.
In line with the Company's strategy, four acquisitions were completed during
the year with expansion into adjacent markets enhancing our scale, IP, and
proposition. The combined core revenue from these acquisitions recognised
during the period amounted to £1.5m.
On a statutory basis, Group revenue, encompassing the non-core property
surveying business, experienced a reduction of £1.6m to £64.9m (FY22:
£66.5m). Excluding the impact of the change in the software reseller
agreement revenue recognition and acquisitions, as well as the impact of
increased volatility in the mortgage market, statutory revenue for 2023
remained resilient, reflecting the inherent strength of our subscription-based
model which underpins our growth opportunities.
31 Dec 23 31 Dec 22 Change Change
Core organic revenue ex. Mortgage commissions £47.7m £45.2m £2.5m 5.6%
Core organic revenue from mortgage commissions £4.0m £5.0m (£1.0m) (21.2%)
Core organic revenue, like-for-like basis(*) £51.7m £50.2m £1.5m 2.9%
Core organic revenue from software reseller agreements £3.4m £6.2m (£2.8m) (46.0%)
Total core organic revenue £55.1m £56.4m (£1.3m) (2.5%)
Core revenue from acquisitions £1.5m £Nil £1.5m n/a
Total core revenue £56.6m £56.4m £0.2m 0.3%
* Like-for-like basis strips out the impact of acquisitions and the changes in
revenue recognition of a software reseller agreement.
Divisional performance
Intermediary Services
Our Intermediary Services division provides compliance and business services
to financial intermediary firms through a comprehensive membership model.
Members, including financial advisers, mortgage advisers and wealth managers,
are regulated by the FCA.
Intermediary Services revenue decreased 4.9% to £22.4m (FY22: £23.5m).
Stripping out the revenue impact of the change in contractual terms of the
software reseller agreement and acquisitions, revenue grew 5.4% on a
like-for-like basis (LfL: FY23: £18.3m, FY22: £17.3m). The Intermediary
Services division is well positioned to continue benefiting from increasing
regulatory changes, including the Consumer Duty regulation, with demand for
services driving growth across a number of its key revenue lines.
During 2023 Fintel acquired Competent Adviser and VouchedFor. These
contributed combined revenues of £0.8m (£0.5m to software license income and
£0.3m to membership fee income respectively), and gross profit of £0.3m to
the division from the date of acquisition.
In 2023 the Intermediary Services division delivered:
· average revenue per customer ("ARPC") of £8,019 (FY22: £7,807)
- an increase of 2.7%;
· membership fee income of £11.8m (FY22: £11.5m) - an increase
of 3.2%;
· software licence income of £3.7m (FY22: £6.3m) - as a result
of the change in contractual terms of primary software reseller agreement now
recognised on a net basis through revenue since May 2023;
· additional services income of £6.1m (FY22: £5.7m) - an
increase of 6.0%; and
· gross profit* of £10.9m (FY22: £9.5m) with gross profit
margin** of 48.9% (FY22: 40.4%).
* Gross profit is calculated as revenue less direct operating costs.
** Gross profit margin is calculated as gross profit as a percentage of
revenue.
Distribution Channels
The Distribution Channels division delivers data, distribution and marketing
services to product providers.
Core Distribution Channels revenues decreased to £11.9m (FY22: £13.0m).
Excluding volatility in mortgage related commissions, core Distribution
Channels income was consistent with prior year. Whilst mortgage related
activities experienced a significant 21.2% revenue decline during 2023, this
segment remained profitable, and is well positioned for a rapid return to
previous performance levels as the UK housing market normalises. We continue
to scale our Distribution as a Service ("DaaS") offering into adjacent markets
and extending our partnerships, as we convert our revenue to long term
subscription agreements with 74% of partner revenue converted to DaaS.
In 2023 Distribution Channels delivered:
· core commission revenues of £6.8m (FY22: £8.1m) - a decrease
of 16.4%;
· marketing services revenues of £5.1m (FY22: £4.9m) - an
increase of 3.6%, as we see the continued conversion of product provider
revenue to long-term subscription agreements with DaaS revenues of £3.7m
(FY22: £3.0m), an increase of 24.9%;
· non-core panel management and valuation services revenues of
£8.4m (FY22: £10.1m) - a decrease of 17.3%; and
· Gross profit of £7.6m (FY22: £9.2m) with gross profit margin of
37.8% (FY22: 39.8%).
Fintech and Research
Fintech and Research includes our Defaqto business and provides market-leading
software, financial information and product research to product providers and
financial intermediaries.
Fintech and Research revenues grew by 12.0% to £22.3m (FY22: £19.9m), driven
by ongoing software adoption and demand for ratings.
In 2023 we further enhanced our Fintech and Research capabilities,
accelerating deployment of our proprietary financial planning software, and
expanding our research and ratings platform, including the launch of new Star
and Diamond Ratings for enterprise and investment scheme ("EIS").
During 2023 Fintel acquired MICAP and AKG contributing combined revenues of
£0.7m in product ratings revenue, and gross profit of £0.2m from date of
acquisition.
In 2023 Fintech and Research division delivered:
· Software revenue of £10.7m (FY22: £9.5m) - an increase of
11.5%;
· Product ratings revenue of £10.1m (FY22: £8.9m) - an increase
of 14.1%;
· Other income of £1.5m (FY22: £1.5m) from consultancy and ad
hoc work; and
· Gross profit of £14.2m (FY22: £12.5m) with a gross profit
margin of 63.4% (FY22: 63.0%).
Profitability
Adjusted EBITDA remains strong at £20.5m (FY22: £19.4m), increasing by 5.6%.
Our core business delivered a solid adjusted EBITDA margin of 35.7% (FY22:
32.9%).
The resulting adjusted EBITDA margin of 31.5% (FY22: 29.1%) compares well with
prior periods due to improved revenue mix with continued growth on higher
margin business lines.
The business continues to deliver towards medium-term targets and is well
positioned for continued scalable growth.
Adjusted EBITDA margin is calculated as adjusted EBITDA (as defined in note
8), divided by revenue. Whilst adjusted EBITDA is not a statutory measure, the
Board believes it is a highly useful measure of the underlying trade and
operations, excluding one-off and non-cash items.
The adjusted EBITDA in our core business has also performed well, increasing
8.6% to £20.2m (FY22: £18.6m). The core adjusted EBITDA is the adjusted
EBITDA calculated above excluding the trading results of our non-core property
surveying business.
Non-underlying adjustments
The operating charge to the income statement in respect of non-underlying
items of £6.8m (FY22: £3.4m) includes the following:
· operating expenses of £4.4m, including:
· £1.8m M&A-related costs - consisting of professional
advisory fees on completed and pipeline acquisitions;
· £1.5m transformation costs - implementation costs to enhance
Fintel's customer relationship management ("CRM") platform and a new
enterprise resource planning ("ERP") system both of which are targeted to go
live in April 2024;
· £0.7m employee restructuring;
· £0.4m award related costs;
· amortisation of other intangible assets of £2.2m - relating to
intangibles acquired on acquisition of Regulus Topco Limited (owner of Defaqto
Limited), Landmark Surveyors Limited, and 2023 acquired entities: Competent
Advisor, VouchedFor, AKG and MICAP; and
· impairment on disposal of operations of £0.2m relating to
contingent consideration recognised in respect of the disposed Verbatim funds.
No other costs have been treated as non-underlying.
Share-based payments
Share-based payment charges of £1.5m (FY22: £1.3m) have been recognised in
respect of the options in issue and include the IFRS 2 cost of the new
long-term growth incentive plan issued on 18 August 2023.
Financial income and expense
Finance income of £0.3m (FY22: £nil) relates to interest earned on surplus
cash on short term deposits.
Finance expenses of £0.8m (FY22: £0.5m) includes interest costs on the
drawn portion of the RCF, interest on leasing arrangements and the commitment
fee for the unutilised facility. Of the seven acquisitions across 2023 and
this year to date, four were entirely funded through cash reserves, while the
initial consideration for VouchedFor and Synaptic Software involved partial
debt financing.
Taxation
The rate of corporation tax applicable for 2023 is a blended average rate of
23.5% following the corporation tax rate change in April 2023 to 25%. The
underlying effective tax rate of 20.7% for the period (FY22: 19%) includes the
estimated beneficial impact of research and development claims for Defaqto. As
a significant UK corporation tax paying Group, we settle our liability for
corporation tax on a quarterly basis in advance and have paid c.£2.8m in
corporation taxes evenly throughout the year.
Earnings per share
Earnings per share has been calculated based on the weighted average number of
shares in issue at each balance sheet date. Adjusted earnings per share in the
period amounted to 12.2 pence per share (FY22: 12.2 pence per share).
Statutory earnings per share in the period amounted to 6.8 pence per share
(FY22: 9.5 pence per share).
Cash flow and closing cash position
At 31 December 2023 the Group reported a robust liquidity position, featuring
a total cash balance of £12.7m, £1.7m net of debt (FY22: £12.8m), and
substantial headroom in the £80m revolving credit facility with £69m
undrawn.
Net cash to adjusted EBITDA ratio is 0.1 times at FY23 (FY22: 0.7 times).
Underlying operating cash flow conversion was strong at 88% (FY22: 118%),
despite a significant increase in development expenditure of £4.5m (FY22:
£1.7m). This is calculated as underlying cash flow from operations as a
percentage of adjusted operating profit. Underlying cash flow from operations
is calculated as adjusted operating profit, adjusted for changes in working
capital, depreciation, amortisation, CAPEX and share-based payments. A
reconciliation of free cash flow and underlying cash flow conversion is
provided in note 8 to the financial statements.
The Company's significant capitalised development expenditure, M&A and
transformation costs impact the Company's cash generation.
Acquisitions
Investments in four acquisitions were made in the year of £13.3m (net of cash
acquired of £1.8m and including acquisition costs). Upfront consideration of
£15.1m for these four acquisitions was funded by £8.6m from cash reserves
and £6.5m from the Group's £80m revolving credit facility. Deferred and
business performance contingent consideration payable over the next three
years is capped at £12.5m.
Subsequent to the year end, a further investment of £6.4m was made in a
further three companies and was funded by cash reserves and existing drawings
on the RCF facility. Details of all the acquisitions are given in note 20 to
the Financial Statements.
Capital allocation
The Group's priority is to strike a balance between sustaining the core
business, pursuing growth through acquisitions and delivering value to
shareholders. Strategic initiatives include organic investment in enhancing
and broadening our product offering; and inorganic investment, such as
strategically aligned acquisitions. The Group manages its capital structure
through regular review by the Board ensuring alignment with the Company's
objectives and responsiveness to changing market conditions. In the event that
the Group needs to adjust its policy, we retain an agile approach in order to
meet the ever-changing needs of our business and market.
Dividend
During the year the Company paid the final dividend in respect of FY22 of
£2.3m, and an interim dividend in respect of FY23 of £1.1m. The Board is
proposing a full year dividend in respect of FY23 of 3.45 pence, an increase
of 6.2% on the FY22 dividend of 3.25 pence. The proposed final dividend of
2.35 pence (FY22: 2.25 pence) reflects the Group's strong business performance
and cash generation during the year. The dividend is payable on 19 June 2024,
to shareholders on the register on 24 May 2024 with an ex-dividend date of
23 May 2024, subject to shareholder approval at the Company's annual general
meeting.
Accounting policies
The Group's consolidated financial information has been prepared consistently
in accordance with UK-adopted International Accounting Standards ("UK-adopted
IAS"). The Group applied for the first time certain standards and
amendments, which are effective for annual periods beginning on or after 1
January 2023. Their adoption is not expected to have a material effect on the
financial statements.
Going concern
The Directors have undertaken a comprehensive assessment to consider the
Company's ability to trade as a going concern for a period of 18 months to
30 September 2025.
The Directors have robustly tested the going concern assumption in preparing
these financial statements, considering a number of severe but plausible
downside scenarios, which would collectively be considered remote. The Group
continues to enjoy robust cash generation and maintains a strong liquidity
position at 31 December 2023 and the Directors remain satisfied that the going
concern basis of preparation in the financial statements is appropriate.
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 at least the next 18 months. As a result, they
continue to adopt a going concern basis in the preparation of the financial
statements.
David Thompson
Chief Financial Officer
Consolidated statement of profit or loss and other comprehensive income
for the year ended 31 December 2023
2023 2023 2022 2022
2023 Underlying Year ended 2022 Underlying Year ended
Underlying adjustments* 31 December Underlying adjustments* 31 December
Note £m £m £m £m £m £m
Revenue 5-6 64.9 - 64.9 66.5 - 66.5
Operating expenses 7-8 (48.0) (4.4) (52.4) (50.2) (0.7) (50.9)
Amortisation of other intangible assets 12 - (2.2) (2.2) - (2.0) (2.0)
Impairment on disposal of operations 7 - (0.2) (0.2) - (0.7) (0.7)
Group operating profit/(loss) 16.9 (6.8) 10.1 16.3 (3.4) 12.9
Finance income 9 0.3 - 0.3 - - -
Finance expense 9 (0.8) - (0.8) (0.4) (0.1) (0.5)
Profit/(loss) before taxation 16.4 (6.8) 9.6 15.9 (3.5) 12.4
Taxation (3.4) 1.2 (2.2) (2.9) 0.6 (2.3)
Profit/(loss) for the financial year 13.0 (5.6) 7.4 13.0 (2.9) 10.1
Profit attributable to shareholders:
Owners of the Company 7.1 9.8
Non-controlling interests 0.3 0.3
7.4 10.1
Earnings per share - adjusted (pence) 10 12.2p 12.2p
Earnings per share - basic (pence) 10 6.8p 9.5p
Earnings per share - diluted (pence) 10 6.8p 9.4p
There are no items to be included in other comprehensive income in the current
year or preceding year.
* Underlying adjustments are detailed in note 7
Consolidated statement of financial position
as at 31 December 2023
31 December 2023 31 December 2022
Note £m £m £m £m
Non-current assets
Investments 1.2 -
Property, plant and equipment 11 1.2 1.2
Lease assets 11 2.2 2.2
Intangible assets and goodwill 12 118.2 95.2
Trade and other receivables 1.5 1.6
Total non-current assets 124.3 100.2
Current assets
Trade and other receivables 10.2 10.6
Current tax asset - 0.4
Cash and cash equivalents 12.7 12.8
Total current assets 22.9 23.8
Total assets 147.2 124.0
Equity and liabilities
Equity
Share capital 15 1.0 1.0
Share premium account 15 67.0 66.8
Other reserves 17 (50.0) (51.3)
Retained earnings 84.6 80.8
Equity attributable to the owners of the Company 102.6 97.3
Non-controlling interest 0.3 0.5
Total equity 102.9 97.8
Liabilities
Current liabilities
Trade and other payables 20.9 18.6
Lease liabilities 14 0.4 0.4
Total current liabilities 21.3 19.0
Non-current liabilities
Loans and borrowings 14 10.7 -
Other payables 5.1 -
Lease liabilities 14 1.5 1.8
Deferred tax liabilities 5.7 5.4
Total non-current liabilities 23.0 7.2
Total liabilities 44.3 26.2
Total equity and liabilities 147.2 124.0
Consolidated statement of changes in equity
for the year ended 31 December 2023
Share Share Other Non- Retained Total
controlling
capital premium reserves interest earnings equity
£m £m £m £m £m £m
Balance at 1 January 2022 1.0 65.6 (52.3) 0.3 73.9 88.5
Total comprehensive income for the year
Profit for the year - - - 0.3 9.8 10.1
Total comprehensive income for the year - - - 0.3 9.8 10.1
Transactions with owners, recorded directly in equity
Issue of shares - 1.2 - - - 1.2
Dividends - - - (0.1) (3.2) (3.3)
Share option charge - - 1.3 - - 1.3
Release of share option reserve on exercise - - (0.3) - 0.3 -
Total contributions by and distributions to owners - 1.2 1.0 (0.1) (2.9) (0.8)
Balance at 31 December 2022 1.0 66.8 (51.3) 0.5 80.8 97.8
Balance at 1 January 2023 1.0 66.8 (51.3) 0.5 80.8 97.8
Total comprehensive income for the year
Profit for the year - - - 0.3 7.1 7.4
Total comprehensive income for the year - - - 0.3 7.1 7.4
Transactions with owners, recorded directly in equity
Issue of shares - 0.2 - - - 0.2
Dividends - - - (0.5) (3.5) (4.0)
Share option charge - - 1.5 - - 1.5
Release of share option reserve on exercise - - (0.2) - 0.2 -
Total contributions by and distributions to owners - 0.2 1.3 (0.5) (3.3) (2.3)
Balance at 31 December 2023 1.0 67.0 (50.0) 0.3 84.6 102.9
Consolidated statement of cash flows
for the year ended 31 December 2023
Year ended Year ended
31 December 31 December
2023 2022
Note £m £m
Net cash generated from operating activities 18 12.5 15.6
Cash flows from investing activities
Purchase of property, plant and equipment (0.3) (0.2)
Finance income 0.3 -
Development expenditure (4.5) (1.7)
Cost of acquisitions - net of cash received (13.3) -
Equity investments (1.0) -
Loan to equity interest (0.6) -
Net proceeds from sale of operations 0.6 -
Net cash flows used in investing activities (18.8) (1.9)
Cash flows from financing activities
Finance costs (0.5) (0.2)
Loan drawn/(repaid) 11.0 (7.0)
Transaction costs related to borrowing - (0.5)
Payment of lease liability (0.5) (0.5)
Issue of share capital 0.2 1.2
Dividends paid (4.0) (3.3)
Net cash flows from/(used in) financing activities 6.2 (10.3)
Net (decrease)/increase in cash and cash equivalents (0.1) 3.4
Cash and cash equivalents at start of year 12.8 9.4
Cash and cash equivalents at end of year 12.7 12.8
Non-underlying operating costs, as per note 7, are included in net cash
generated from operating activities.
During the year there were cash outflows of £13.3m (net of cash acquired of
£1.8m) in respect of investment in four acquisitions by the Group. Further
details can be found in note 20.
Notes
1 General information and basis of preparation
The consolidated financial statements have been prepared in accordance with
UK-adopted International Accounting Standards ("UK-adopted IAS").
The financial information for the year ended 31 December 2023 and the year
ended 31 December 2022 does not constitute the Group's statutory accounts for
those periods. Statutory accounts for the period ended 31 December 2022 have
been delivered to the Registrar of Companies. The statutory accounts for the
period ended 31 December 2023 will be delivered to the Registrar of Companies
following the Group's Annual General Meeting.
The auditors' reports on the accounts for 31 December 2023 and 31 December
2022 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 Board has concluded that it is appropriate to adopt the going concern
basis, having undertaken a rigorous review of financial forecasts and
available resources. The Directors have concluded that the Group will have
sufficient funds to meet its liabilities as they fall due. It is expected
that the group will operate comfortably within its financial loan covenants
for the foreseeable future including the 18-month period from the date of
approval of the financial statements to 30 September 2025, with significant
headroom to draw down if required.
The Group's financial risk management objectives as well as details of its
financial instruments and its exposure to interest, credit and liquidity risk
are described in the financial statements. Specific consideration has been
given to climate risk. None of these factors have a significant impact on the
Group's revenues, customer base or supply chain and therefore do not impact
the Group's ability to continue as a going concern.
At 31 December 2023 the Group reported a strong liquidity position with total
cash position of £12.7m, with net cash of £1.7m (2022: £12.8m) and £69m of
headroom in the £80m revolving credit facility. The Group reported total net
assets of £102.9m as at 31 December 2023 (2022: £97.8m). The Directors have
robustly tested the going concern assumption in preparing these financial
statements. The Directors' assessment takes into account the Group's strong
liquidity position at 31 December 2023. The Directors have identified revenue
as the most sensitive assumption in their going concern assessment. A number
of severe but plausible downside scenarios have been modelled which assess the
impact of increasingly severe reductions in revenue before any mitigating
actions are considered. In addition, a reverse stress test has been performed
to determine the extent to which revenue would need to decline throughout the
entire going concern period for either liquidity to be exhausted or covenants
breached. The Directors consider the significance of the reduction in revenues
required to breach covenants within the reverse stress test to be remote and
remain satisfied that the going concern basis of preparation is appropriate.
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
2022.
4 Revenue recognition
Revenue is recognised by reference to the five-step model set out in IFRS 15.
Revenue is recognised when an entity transfers goods or services to a
customer, measured at the amount to which the entity expects to be entitled.
Depending on whether certain criteria are met, revenue is recognised:
• over time, in a manner that depicts the entity's performance; or
• at a point in time, when control of the good or service is
transferred to the customer.
Revenue is measured at the fair value of consideration received or receivable
and represents amounts receivable for goods and services provided in the
normal course of business, net of discounts, VAT and other sales-related
taxes.
The Group reports revenue under the following categories and the basis of
recognition for each category is described below.
Division Revenue stream Performance obligations Revenue recognition accounting policy Timing of customer payments
Intermediary Services Membership Services Provision of compliance and business services to financial and intermediary The Group's membership is a subscription model, with income recognised in line Subscriptions are usually invoiced monthly in advance of the commencement of
firms. Specific services provided under subscription model: software as a with the access to the specific service provided (output method). the subscription period and collected in the same month by direct debit.
service, support, compliance visits, and learning and development. Membership services includes support and software and income recognised on an
over-time basis in line with the access to the services. Membership services
also includes specific services, such as, regulatory visits and learning and
development and revenue is recognised in line with the service to the
customer, at the point the service is provided.
Additional services Provision of additional compliance and business services provided on an Revenue from other membership services is recognised at the point at which the Compliance visits, file checks and website maintenance are collected monthly
ongoing or periodic basis: file checks, website hosting and maintenance, specific service is delivered, or across an agreed support period as by direct debit and billed when the service is delivered. Additional
credit checking and learning and development. necessary, based on the value agreed with the customer. Each service is services are typically on credit terms and customers pay according to terms.
assessed in line with IFRS 15 and revenue is recognised accordingly in line
with the provision of service.
Software licence income Provision (and support) of software licences to intermediary firms within our Revenue from software licences is recognised straight line over the licences Invoices are raised and collected by direct debit in the month in which the
network revenue is recognised as the performance obligation is satisfied over period. The nature of the licences is such that the Group is required to licence charge relates, prorated as necessary where agreements are signed mid
time. undertake activities which impact the software and its utility to its -month.
customers throughout the licence period.
Distributions Channels Marketing services revenues Provision of advertising, marketing services and event sponsorship to product Revenue is recognised in line with the service provided to the customer Invoices are typically raised on a monthly basis with a smaller number being
providers. (output method). raised quarterly. Customers pay according to agreed terms.
Distribution as a service ("Daas") Provision of analytics and broader consultative services to provider partners. Revenue is recognised in line with the service provided to the customer Invoices are typically raised on a monthly basis with a smaller number being
(output method). raised quarterly. Customers pay according to agreed terms.
Commission revenues Commission revenues from product provider distributions. Commission is recognised in full, following the confirmation of the sale by Commission revenues are typically received between one and four weeks after
the third-party provider, who is considered to be the principal, of underlying confirmation of the sale by the third-party provider.
mortgage and insurance related products. An element of commission is clawed
back if the policy holder cancels and a clawback provision is accounted for
accordingly.
Valuation services Surveys and valuation services provided to clients. Revenue is recognised at the point at which the service is delivered to the Business-to-business valuation services are paid in advance or on credit terms
customer, based on the agreed price. and customers pay according to these terms. Business-to-consumer is usually
paid up front.
Fintech and Research Fintech software solutions Provision (and support) of software licence contracts to providers of Revenue from software licences is recognised straight line over the licence Software licences are invoiced, either, monthly or quarterly, in advance with
financial products that enable them to research, launch and distribute period. The nature of the licences is such that the Group is required to payment terms applied.
relevant products to the market. The provision of software as a performance undertake activities which impact the software and its utility to its
obligation is a promise of 'right to access' the software satisfied over a customers throughout the licence period.
period of time.
Engage products are invoiced monthly and collected in the same month by
monthly direct debit.
Provision of Engage software to help financial adviser client recommendations.
Research - Risk Mappings, Fund Reviews and Rating Services Star Ratings - an independent and trusted industry standard for assessing the Revenue from star and risk ratings is recognised straight line over the agreed Revenue from star and risk ratings is billed on an annual basis in advance,
feature quality and comprehensiveness of a financial product or proposition. contractual period of the licence, which is typically one year. and customers pay according to agreed terms.
The Rating is licenced to product providers over a period of time allowing for
promotion of products with accompanying score.
Risk Ratings - an independent review of funds to enable advisers to match
portfolios to client's risk profiles, which is provided via a licenced Risk
Rating over an agreed period of time.
Contract assets
A contract asset is initially recognised for revenue earned from services for
which the receipt of consideration is conditional on successful completion of
the service and performance obligation. Upon completion of the service, the
amount recognised as accrued income is reclassified to trade receivables.
Contract liabilities
A contract liability is recognised if a payment is received or a payment is
due (whichever is earlier) from a customer before the Group transfers the
related goods or services. Contract liabilities are recognised as deferred
income until the Group delivers the performance obligations under the contract
(i.e. transfers control of the related goods or services to the customer) at
which point revenue is recognised in line with the delivery of the performance
obligation.
5 Critical accounting estimates and judgements
The Group makes certain estimates and judgements 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 judgements. The estimates and
judgements that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities are discussed below.
Acquisitions
Throughout the year four acquisitions were completed, each introducing
additional complexity, judgement, and disclosure requirements.
Acquisitions made during the period have multiple success-based contingent
consideration linked to financial performance. The contingent payments have
been fair valued at acquisition and revalued at the balance sheet date based
on the probability of success of each milestone. Due to the complexities and
uncertainties in the arrangements, management judgement has been used in
arriving at the fair values. For each acquisition, the fair value of
contingent consideration at the acquisition date represents the estimated most
likely pay-out based on management's forecast of future trading and
performance discounted at the Group's incremental borrowing rate.
In addition, the application of IFRS 3 requires us to identify and recognise
the assets acquired and liabilities assumed at their fair value. Judgement and
estimation has been applied in identifying and measuring the fair value of
separately acquired intangible assets using appropriate valuation methods.
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. The major source of estimation uncertainty relates to
the estimation of future cash flows, particularly for the value in use
calculations for the Fintech and Research CGU.
More information, including carrying values in respect of the Fintech and
Research CGU, is included in note 12.
Revenue
In the previous year, a significant judgement was disclosed in relation to the
presentation of revenue arising sales of software licences to member firms on
a "right to access" basis as principal. Following changes to the underlying
contractual arrangements in the year, such sales are now recognised as agent
and this is no longer considered to be an area of significant judgement.
6 Segmental information
During the year, the Company was domiciled in the UK and all revenue is
derived from external customers in the United Kingdom. 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
· Fintech and Research.
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 and Distribution as a
service ("DaaS") to financial institutions. This division of the Group also
undertakes survey panelling and surveying work for mortgage lenders.
The Fintech and Research segment provides proprietary advice technology;
independent ratings and reviews of products and funds.
The reportable segments are derived on a product/customer type basis.
Management has applied its judgement on the application of IFRS 8, with
operating segments reported in a manner consistent with the internal reporting
produced to the Chief Operating Decision Maker ("CODM").
For the purpose of making decisions about resource allocation and performance
assessment, it is the operating results of the three core divisions listed
above that are monitored by management and the Group's CODM, being the Fintel
plc Board. It is these divisions, therefore, that are defined as the Group's
reportable operating segments.
Segmental information is provided for gross profit and adjusted EBITDA, which
are the measures used when reporting to the CODM. The tables below present the
segmental information.
Intermediary Services Distribution Channels Fintech and Research Admin and support costs Group
Year ended 31 December 2023 £m £m £m £m £m
Revenue 22.4 20.2 22.3 - 64.9
Direct operating costs (11.5) (12.6) (8.1) - (32.2)
Gross profit 10.9 7.6 14.2 - 32.7
Administrative and support costs (12.2) (12.2)
Adjusted EBITDA 20.5
Operating costs (non-underlying) (4.4)
Impairment on disposal of operations (0.2)
Amortisation of other intangible assets (2.2)
Amortisation of development costs and software (1.3)
Depreciation (0.4)
Depreciation of leased assets (0.4)
Share option charge (1.5)
Operating profit 10.1
Net finance costs (0.5)
Profit before tax 9.6
Admin and
Intermediary Distribution Fintech and Support
Services Channels Research costs Group
Year ended 31 December 2022 £m £m £m £m £m
Revenue 23.5 23.1 19.9 - 66.5
Direct operating costs (14.0) (13.9) (7.4) - (35.3)
Gross profit 9.5 9.2 12.5 - 31.2
Administrative and support costs (11.8) (11.8)
Adjusted EBITDA 19.4
Operating costs (non-underlying) (0.7)
Impairment on disposal of operations (0.7)
Amortisation of other intangible assets (2.0)
Amortisation of development costs and software (1.1)
Depreciation (0.3)
Depreciation of leased assets (0.4)
Share option charge (1.3)
Operating profit 12.9
Net finance costs (0.5)
Profit before tax 12.4
When assessing the trading performance of individual operating segments,
central costs have been presented separately. The presentation of gross profit
by segment to provides an overview of the trading performance for each
operating segment.
Intermediary services includes revenue and costs from acquisitions made during
the year of £0.8m and £0.6m, with gross profit contribution of £0.2m.
Fintech and research includes revenue and costs of £0.7m and £0.5m, with
gross profit contribution of £0.2m. No acquisitions were made in 2022.
The statement of financial position is not analysed between the reporting
segments by management and the CODM considers the Group statement of financial
position as a whole.
No customer has generated more than 10% of total revenue during the year
covered by the financial information.
7 Operating profit
Operating profit for the year has been arrived at after charging:
Year ended Year ended
31 December 31 December
2023 2022
£m £m
Depreciation of tangible assets - owned 0.4 0.3
Depreciation of leased assets 0.4 0.4
Research expenditure 0.7 0.6
Underlying adjustments
Underlying adjustments include amortisation of other intangible assets and
operating and finance costs of a non-recurring nature.
Year ended Year ended
31 December 31 December
2023 2022
£m £m
Non-underlying costs - operating
M&A project costs 1.8 0.1
Transformation costs 1.5 0.5
Restructuring costs 0.7 -
Award related costs 0.4 -
Impairment on disposal of operations 0.2 0.7
Loan refinance costs - operating - 0.1
Non-underlying costs - finance
Loan refinance costs - finance - 0.1
Other underlying adjustments
Amortisation of other intangible assets 2.2 2.0
Underlying adjustments - before tax 6.8 3.5
The operating charge to the income statement in respect of non-underlying
items of £6.8m (2022: £3.5m) includes the following:
- operating expenses of £4.4m;
- £1.8m M&A-related costs - consisting of
professional advisory fees on completed and pipeline acquisitions,
- £1.5m transformation costs - implementation
costs to enhance Fintel's customer relationship management ("CRM") platform
and a new enterprise resource planning ("ERP") system both of which are
targeted to go live in April 2024;
- £0.7m employee restructuring, and
£0.4m award related costs.
- amortisation of other intangible assets of £2.2m - relating to
intangibles acquired on acquisition of Regulus Topco Limited, owner of Defaqto
Limited, Landmark Surveyors Limited, and 2023 acquired entities: Competent
Advisor, VouchedFor, AKG and MICAP; for which revenue arising from those
acquisitions is included in underlying; and
- impairment on disposal of operations of £0.2m relating to
contingent consideration recognised in respect of disposed Verbatim funds.
No other costs have been treated as non-recurring in the period. The above
adjustments have been excluded as they are not considered part of underlying
trade.
8 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 items that are non-cash items and also
items that are not considered part of ongoing underlying trade. Amortisation
of other intangible assets has been excluded on the basis that it is a
non-cash amount relating to acquisitions. 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 similarly titled performance
measures in other entities.
Adjusted EBITDA is calculated as follows:
Year ended Year ended
31 December 31 December
2023 2022
£m £m
Operating profit 10.1 12.9
Add back:
Depreciation (note 11) 0.4 0.3
Depreciation of leased assets (note 11) 0.4 0.4
Amortisation of other intangible assets (note 12) 2.2 2.0
Amortisation of development costs and software (note 12) 1.3 1.1
EBITDA 14.4 16.7
Add back:
Impairment on disposal of operations (note 7) 0.2 0.7
Share option charge 1.5 1.3
Operating costs (non-underlying) (note 7) 4.4 0.7
Adjusted EBITDA 20.5 19.4
Adjusted EBITDA of non-core surveying business 0.3 0.8
Core adjusted EBITDA 20.2 18.6
Non-underlying operating costs have been excluded as they are not considered
part of the underlying trade.
Share option charges have been excluded from adjusted EBITDA as a non-cash
item.
Adjusted operating profit is calculated as follows:
Year ended Year ended
31 December 31 December
2023 2022
£m £m
Operating profit 10.1 12.9
Add back:
Impairment on disposal of operations (note 7) 0.2 0.7
Operating costs (non-underlying) (note 7) 4.4 0.7
Amortisation of other intangible assets (note 12) 2.2 2.0
Adjusted operating profit 16.9 16.3
Adjusted profit before tax is calculated as follows:
Year ended Year ended
31 December 31 December
2023 2022
£m £m
Profit before tax 9.6 12.4
Add back:
Impairment on disposal of operations (note 7) 0.2 0.7
Operating costs (non-underlying) (note 7) 4.4 0.7
Finance cost (non-underlying) - 0.1
Amortisation of other intangible assets (note 12) 2.2 2.0
Adjusted profit before tax 16.4 15.9
Adjusted profit after tax is calculated as follows:
Year ended Year ended
31 December 31 December
2023 2022
£m £m
Profit after tax 7.4 10.1
Add back:
Impairment of contingent consideration (note 7) 0.2 0.7
Operating costs (non-underlying) (note 7), net of tax 3.7 0.5
Amortisation of other intangible assets (note 12), net of deferred 1.7 1.6
tax
Profit attributable to non-controlling interests (0.3) (0.3)
Adjusted profit after tax 12.7 12.6
Free cash flow conversion is calculated as follows:
Year ended Year ended
31 December 31 December
2023 2022
£m £m
Adjusted operating profit 16.9 16.3
Adjusted for:
Depreciation of tangible assets 0.4 0.3
Depreciation of leased assets 0.4 0.4
Amortisation of development costs and software 1.3 1.1
Share option charge 1.5 1.3
Research and development benefit (0.1) -
Net changes in working capital (0.7) 1.8
Purchase of property, plant and equipment (0.3) (0.2)
Development expenditure (4.5) (1.7)
Underlying cash flow from operations 14.9 19.3
Underlying operating cash flow conversion 88% 118%
Net interest paid (0.3) (0.2)
Income tax paid (2.8) (4.8)
Payments of lease liability (0.5) (0.5)
Free cash flow 11.3 13.8
Adjusted EBITDA 20.5 19.4
Free cash flow conversion 55% 71%
9 Finance income and expense
Finance income
Year ended Year ended
31 December 31 December
2023 2022
£m £m
Bank interest 0.3 -
Finance expense
Year ended Year ended
31 December 31 December
2023 2022
£m £m
Interest payable on financial liabilities at amortised cost 0.7 0.3
Finance charge on lease liability 0.1 0.1
Loan refinance costs (non-underlying) - 0.1
0.8 0.5
10 Earnings per share
Year ended Year ended
31 December 31 December
Basic earnings per share 2023 2022
Profit attributable to equity shareholders of the parent (£m) 7.1 9.8
Weighted average number of shares in issue 103,776,394 103,184,717
Basic profit per share (pence) 6.8 9.5
Year ended Year ended
31 December 31 December
Diluted earnings per share 2023 2022
Profit attributable to equity shareholders of the parent (£m) 7.1 9.8
Weighted average number of shares in issue 103,776,394 103,184,717
Diluted weighted average number of shares and options for the year 532,069 790,867
104,308,463 103,975,584
Diluted profit per share (pence) 6.8 9.4
Weighted average number of shares in issue has been adjusted for potentially
dilutive share options arising from the share scheme detailed in note 16. 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.
Year ended Year ended
31 December 31 December
Adjusted basic earnings per share 2023 2022
Adjusted profit after tax (note 8) (£m) 12.7 12.6
Weighted average number of shares in issue 103,776,394 103,184,717
Adjusted earnings per share (pence) 12.2 12.2
11 Property, plant and equipment
Leased assets Owned assets
Plant and Office
Property equipment Total equipment Total
Group £m £m £m £m £m
Cost
At 1 January 2022 4.0 0.9 4.9 2.7 7.6
Additions - 0.1 0.1 0.2 0.3
Revaluation of lease (1.1) - (1.1) - (1.1)
At 31 December 2022 2.9 1.0 3.9 2.9 6.8
Acquisitions 0.3 - 0.3 0.1 0.4
Additions - 0.1 0.1 0.3 0.4
Disposals - - - (0.7) (0.7)
At 31 December 2023 3.2 1.1 4.3 2.6 6.9
Depreciation and impairment
At 1 January 2022 0.7 0.6 1.3 1.4 2.7
Depreciation charge for the year 0.3 0.1 0.4 0.3 0.7
At 31 December 2022 1.0 0.7 1.7 1.7 3.4
Depreciation charge for the year 0.3 0.1 0.4 0.4 0.8
Disposals - - - (0.7) (0.7)
At 31 December 2023 1.3 0.8 2.1 1.4 3.5
Net book value
At 31 December 2023 1.9 0.3 2.2 1.2 3.4
At 31 December 2022 1.9 0.3 2.2 1.2 3.4
Leased property includes the Group's head office for which the lease was
entered into during 2020. The lease had a non-cancellable term of 10 years,
and also contained an option to extend the lease for a further 5 years beyond
the non-cancellable term, and an option to purchase the building, exercisable
until January 2023. Management originally expected to exercise the purchase
option, but during 2022 reassessed the likelihood of calling in the option to
buy. The purchase option has now lapsed unexercised. The lease was therefore
revalued during the prior year when this reassessment was made, resulting in a
reduction of the lease liability and right-of-use asset of £1.1m. Following
the change, the lease asset is being depreciated across the non-cancellable
term of the lease.
Plant and equipment includes IT equipment and motor vehicles.
12 Intangible assets
Goodwill Brand Intellectual property Customer relationships Total other intangible assets Development expenditure Total
Group £m £m £m £m £m £m £m
Cost
At 1 January 2022 72.4 3.1 24.4 - 27.5 3.8 103.7
Additions - - - - - 1.7 1.7
At 31 December 2022 72.4 3.1 24.4 - 27.5 5.5 105.4
Additions - - - - - 4.5 4.5
Acquisitions 16.7 1.0 3.0 1.3 5.3 - 22.0
At 31 December 2023 89.1 4.1 27.4 1.3 32.8 10.0 131.9
Amortisation and impairment
At 1 January 2022 0.2 0.8 4.9 - 5.7 1.2 7.1
Charge in the year - 0.3 1.7 - 2.0 1.1 3.1
At 31 December 2022 0.2 1.1 6.6 - 7.7 2.3 10.2
Charge in the year - 0.3 1.8 0.1 2.2 1.3 3.5
At 31 December 2023 0.2 1.4 8.4 0.1 9.9 3.6 13.7
Net book value
At 31 December 2023 88.9 2.7 19.0 1.2 22.9 6.4 118.2
At 31 December 2022 72.2 2.0 17.8 - 19.8 3.2 95.2
Capitalised development expenditure relates to the development of the software
platform in Defaqto Limited. The carrying amount of goodwill is allocated
across operating segments, which are deemed to be cash-generating units
("CGUs") as follows:
31 December 31 December
2023 2022
£m £m
Intermediary Services 24.4 12.7
Distribution Channels 11.5 11.5
Fintech and Research 53.0 48.0
88.9 72.2
The Group has determined that each segment is a cash-generating unit ("CGU")
as this is the lowest aggregation of assets that generate largely independent
cash inflows.
The recoverable amounts for the CGUs are predominantly based on value in use,
which is calculated on the cash flows expected to be generated using the
latest projected data available over a five-year period, plus a terminal value
estimate.
The key assumptions in the value in use calculation are the pre-tax discount
rate (range of 16.13% to 17.07%; 2022: range of 15.2% to 16.0%), annual
adjusted EBITDA growth rate (range of 3.0% to 7.0%; 2022: 4.0% to 8.0%) and
terminal growth rate 2.0% (2022: 2.0%). The discount rate is based on the
individual CGUs pre-tax cost of capital. The projected EBITDA growth rate is
built upon the Board-approved budget and plan, taking into account historical
trends. The terminal growth rate is based on the expected growth rate into
perpetuity and the expected long-term growth rate of the UK economy.
The Directors have reviewed the recoverable amounts of the CGUs and conclude
that the carrying value remains substantiated. Any set of reasonably possible
assumptions would not result in the carrying value exceeding the recoverable
amount.
13 Fixed asset investments
31 December 31 December
2023 2022
£m £m
At 1 January 2023 - -
Additions 1.2 -
At 31 December 2023 1.2 -
Group investments are those in which Fintel does not hold significant
influence.
In March 2023, the Group paid £1m to acquire a 25% stake in Plannr
Technologies Limited ("Plannr"). As the Group holds no voting rights and does
not have the ability to influence strategic decision-making, management does
not consider the Group to exert significant influence over Plannr. The
transaction has been accounted for in accordance with IFRS 9.
In July 2023 the Group exercised its right under the convertible loan note
with Cardan Financial Group Limited ("Cardan") to convert the outstanding loan
into shares representing a 9.9% equity stake. The loan balance at conversion
totalled £0.2m, with the equity stake being measured at the same value.
Management do not deem the Group to have significant influence over Cardan and
have accounted for the transaction under IFRS 9.
The Directors consider the carrying value of investments to be supported by
future cash flows of the businesses.
14 Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group's and
Company's interest-bearing loans and borrowings.
31 December 31 December
2023 2022
£m £m
Current
Secured bank loan - -
Lease liability 0.4 0.4
0.4 0.4
Non-current
Secured bank loan 10.7 -
Lease liability 1.5 1.8
12.2 1.8
Changes in liabilities from financing activities:
Loans and Lease
borrowings liability
£m £m
Balance at 1 January 2022 6.8 3.6
Cash flows (7.1) (0.5)
New leases - 0.1
Revalued leases - (1.1)
Other non-cash changes 0.3 0.1
Balance at 31 December 2022 - 2.2
Cash flows (0.5) (0.5)
New leases - 0.1
Loan drawdown 11.0 -
Other non-cash changes 0.2 0.1
Balance at 31 December 2023 10.7 1.9
Loans and borrowings
Cash flows on loans and borrowings include £11.0m RCF drawdown (2022: repaid
£7.0m) and interest payments made of £0.5m (2022: £0.1m).
Other non-cash changes on bank loans include interest charges of £0.7m
(2022: £0.3m), offset by a prepaid arrangement fee of £0.5m.
Lease liabilities
Cash flows from lease liabilities include £0.5m of lease payments (2022:
£0.5m). Other non‑cash changes on lease liabilities include interest
charges of £0.1m (2022: £0.1m).
15 Capital and reserves
Share capital
Ordinary
Shares
Number of fully paid shares (nominal value £0.01):
At 1 January 2022 102,878,830
Issue of share capital 770,115
At 31 December 2022 103,648,945
Issue of share capital 199,740
At 31 December 2023 103,848,685
In 2023, the Company issued 199,740 new Ordinary Shares to the open share
option schemes detailed in note 28.
In 2022, the Company issued 494,118 new Ordinary Shares of 1 pence each in the
Company to satisfy certain share entitlements of members who had elected to
exercise their options pursuant to the Members Share Option Plan ("MSOP"). The
remaining 275,997 shares were issued during the year to the open share option
schemes.
Share
premium
£m
At 1 January 2022 65.6
Issue of share capital 1.2
At 31 December 2022 66.8
Issue of share capital 0.2
At 31 December 2023 67.0
16 Share-based payment arrangements
At 31 December 2023, the Group had the following share-based payment
arrangements.
Issued in 2021
Value Builder Plan (Tranche 1)
On 1 May 2021, the Group established the Value Builder Plan (the "VB Plan")
which creates a Value Pot consisting of a fixed allocation of 100 notional
units. The units are to be settled at the discretion of the Remuneration
Committee ("RemCo") in either Fintel Ordinary Shares or cash, subject to a
growth in market capitalisation and a floor of earnings per share ("EPS")
growth.
Number Contractual
Grant date of awards Vesting conditions life of options
1 May 2021 100 3 years' service from grant date, subject to achieving a percentage growth in 3 to 10 years
EPS of RPI over the performance period plus 3%
The scheme has been accounted for as an equity-settled scheme in line with the
Group's expectation of final settlement. The Group has a past practice of
settling similar schemes as via equity.
Save As You Earn ("SAYE") scheme
On 1 July 2021, the Group established the 2021 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.
293,362 options were issued under the scheme, with an exercise price of
£1.76. The fair value of the shares at date of grant (1 July 2021) was
£0.84, and the share options are due to vest in three years.
During 2023, 14,503 (2022: 69,838) shares have been forfeited as a result of
bad leavers. An assumed retention rate of 75% (2022: 75%) has been applied at
31 December 2023 on the outstanding shares.
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 Monte Carlo model for the VB Plan, and the Black Scholes
model for the SAYE scheme. The following inputs were used in the measurement
of the fair values at grant date of the share-based payment plans:
Save As You Value Builder
Earn scheme Plan
Fair value at grant date £0.84 £37,000
Share price at grant date £2.33 £2.17
Exercise price £1.76 £nil
Expected volatility 45% 45%
Option life (expected weighted average life) 3 2.42
Expected dividends 2% 2%
Risk-free interest rate (based on government bonds) 0.18% 0.46%
There were no schemes issued in 2022.
Issued in 2023
Growth Share Plan
On 18 August 2023, the Group implemented a new long-term incentive plan, the
Growth Share Plan. The Plan creates a distributable Value Pot, the size of
which is determined as being a proportion of total shareholder value of the
Company.
The size of the Value Pot to be received by the beneficiaries will be
dependent on the average market capitalisation in the first quarter following
the end of each five-year vesting period, subject to an individual
participant's continued employment over the vesting period (or their having
become a "Good Leaver").
The Value Pot for each award under the Plan will be granted at the discretion
of the Remuneration Committee ("RemCo"), with each participant acquiring a
fixed number of partly paid B Shares, C Shares and/or D Shares in an
intermediary holding company, Fintel Group Holdings Limited. Subject to
continued service, the Growth Shares on vestiture will be transferable into
Fintel shares to the extent the relevant Value Pot has been earned.
The RemCo will have full discretion to amend the terms of the Plan to take
account of, for example, corporate activities such as acquisitions to ensure
the market capitalisation hurdles remain appropriate.
On 16 August 2023, the 2023 Awards were allocated under the Plan. The
Measurement Period for the 2023 Awards will be the first quarter following the
end of the five-year vesting period to 31 December 2027, being the period from
1 January 2028 to 31 March 2028.
The Value Pot under the 2023 Awards is comprised as follows:
Tier Market capitalisation at end of performance period Proportion of Shareholder Value tranche distributed in Value Pot Total number of Growth Shares in Growth Share class
Tier 1 Between £275m and £300m 8% 163 B Shares
Tier 2 Between £300m and £400m 15% 419 C Shares
Tier 3 Between £400m and £425m 20% 418 D Shares
Value will only accrue to the beneficiaries within each tier to the extent
that average market capitalisation in the Measurement Period is above the
minimum market capitalisation for that tier. The return thresholds will
exclude dividends paid to shareholders.
The scheme has been accounted for as an equity-settled scheme in line with the
Group's expectation of final settlement. The Group has a past practice of
settling similar schemes as via equity.
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 for the
Growth Share Plan has been measured using the Monte Carlo model. The following
inputs were used in the measurement of the fair values at grant date of the
share-based payment plans:
Value Builder
Plan
B Shares C Shares D Shares
Fair value at grant date £2,745 £6,190 £1,587
Share price at grant date £2.15 £2.15 £2.15
Exercise price £nil £nil £nil
Expected volatility 42% 42% 42%
Option life (expected weighted average life) 5 5 5
Expected dividends 1.5% 1.5% 1.5%
Risk-free interest rate (based on government bonds) 4.6% 4.6% 4.6%
Reconciliation of outstanding share options
The number and weighted average exercise prices of share options under the
share option programmes were as follows:
Weighted Weighted
average average
Number of exercise price Number of exercise price
options 31 December options 31 December
31 December 2023 31 December 2022
2023 £ 2022 £
Outstanding at 1 January 731,051 1.16 1,112,782 1.27
Forfeited during the year (30,533) 0.64 (103,763) 0.33
Exercised during the year (201,209) 1.13 (277,968) 0.42
Granted during the year - - - -
Outstanding at 31 December 499,309 1.14 731,051 1.16
Exercisable at 31 December 320,615 1.07 528,688 1.11
The options outstanding at 31 December 2023 had an exercise price in the range
of £0.01 to £1.93 (2022: £0.01 to £1.93) and a weighted average
contractual life of 1.6 years (2022: 2 years).
The weighted average share price at date of exercise for option shares issued
during the year was £1.99 (FY22: £2.01).
Other share plans
The Group has several other share-based payment arrangements, all of which
have fully vested, and there are only a few outstanding shares in each scheme.
17 Other reserves
Merger Share option
reserve reserve Total
Group £m £m £m
At 1 January 2022 (53.9) 1.6 (52.3)
Share option charge - 1.3 1.3
Release of share option reserve - (0.3) (0.3)
At 31 December 2022 (53.9) 2.6 (51.3)
Share option charge - 1.5 1.5
Release of share option reserve - (0.2) (0.2)
At 31 December 2023 (53.9) 3.9 (50.0)
18 Notes to the cash flow statement
Year ended Year ended
31 December 31 December
2023 2022
£m £m
Cash flow from operating activities
Profit after taxation 7.4 10.1
Add back:
Finance income (0.3) -
Finance cost 0.8 0.4
Taxation 2.2 2.3
10.1 12.8
Adjustments for:
Amortisation of development expenditure and software (note 12) 1.3 1.1
Depreciation of lease asset 0.4 0.4
Depreciation of property, plant and equipment 0.4 0.3
Amortisation of other intangible assets 2.2 2.0
Share option charge 1.5 1.3
Research and development benefit (0.1) -
Impairment on sale of operations 0.2 0.7
Operating cash flow before movements in working capital 16.0 18.6
Decrease in receivables 0.4 0.1
Increase/(decrease) in trade and other payables (1.1) 1.7
Cash generated from operations 15.3 20.4
Income taxes paid (2.8) (4.8)
Net cash generated from operating activities 12.5 15.6
19 Subsequent events
On 26 January 2024 the Group acquired 100% of the issued shares of Adv Data
Holding Limited along with its wholly owned trading subsidiary Synaptic
Software Limited (a provider of independent adviser planning and research
software), and 100% of the issued shares of Owen James Group Ltd along with
its wholly owned trading subsidiary Owen James Events Limited (a leading
provider of strategic engagement events in UK financial services).
On 15(th) March 2024 the Group acquired 70% of the issued share capital of
Newdez Limited for initial consideration of £0.5m. The deal will assist
with digitising our compliance proposition and includes contingent
consideration based on performance over a two-year period and an option to
acquire remaining shares.
20 Acquisitions
Acquisitions completed in the year ended 31 December 2023
MI Capital Research Limited ("MICAP")
On 7 July 2023 the Group acquired 100% of the issued shares of MICAP, which is
a provider of independent research and advice tools for tax-advantaged
investment products. This strategic acquisition will extend the Group's reach
into the tax-advantaged market, expanding both its data footprint and research
capabilities to further enhance scale and IP, whilst further growth is
expected from strong customer and proposition adjacencies. Upfront cash
consideration of £3.0m was paid upon completion. Deferred consideration of
£1.0m, together with interest at a variable annual rate of approximately
1.5%, is payable one year after acquisition. Contingent consideration, capped
at £0.5m, based upon certain revenue-based criteria over the year following
acquisition is payable at the end of the earn-out year. The fair value of
total consideration at the acquisition date was £4.4m. On acquisition,
acquired intangibles were recognised relating to customer related intangibles
(£0.6m), brand name (£0.2m), and intellectual property (technology) related
intangibles (£0.3m). The residual goodwill of £3.7m represents the expertise
of the acquired workforce and the ability to leverage this into some of the
Group's businesses, together with the ability to exploit the Group's existing
customer base. MICAP contributed revenue of £0.5m and profit before taxation
of £0.1m to the Group for the period from 7 July 2023 to 31 December 2023.
Had the acquisition been made at the beginning the financial year, revenue
would have been £1.2m and profit before taxation would have been £0.3m. The
amount of goodwill expected to be deductible for tax purposes in respect of
this acquisition is £nil.
Competent Adviser Limited ("Competent Adviser")
On 14 July 2023 the Group acquired 100% of the issued shares of Competent
Adviser, which through its dynamic learning platform enables financial
advisers to meet increasing regulatory competency requirements. This
acquisition will enable the Group to further extend its support services
offering to financial advisers. Upfront cash consideration of £3.0m was paid
upon completion. Contingent consideration based upon certain revenue-based
criteria, and by the meeting of certain non-financial criteria (not linked to
employment) by the former owners over the year following acquisition is capped
at £0.45m and is payable at the end of the earn-out year. The fair value of
total consideration at the acquisition date was £3.2m. On acquisition,
acquired intangibles were recognised relating to intellectual property
(technology) related intangibles (£1.1m), customer-related intangibles
(£0.1m), and brand name (£0.1m). The residual goodwill of £1.4m represents
the expertise of the acquired workforce and the ability to leverage this into
some of the Group's businesses, together with the ability to exploit the
Group's existing customer base. Competent Adviser contributed revenue of
£0.3m and profit before taxation of £0.2m to the Group for the period from
14 July 2023 to 31 December 2023. Had the acquisition been made at the
beginning the financial year, revenue would have been £0.6m and profit before
taxation would have been £0.4m. The amount of goodwill expected to be
deductible for tax purposes in respect of this acquisition is £nil.
AKG Group Limited
On 25 October 2023 the Group acquired 100% of the issued shares of AKG Group
Limited along with its wholly owned trading subsidiary AKG Financial Analytics
Ltd (together "AKG"). AKG is a leading provider of independent assessments and
ratings of financial strength for a range of organisations including life
insurance companies, investment platforms, and discretionary fund managers.
The Group will accelerate the reach and growth of the company, providing
increased growth opportunities for customers and enhancing its value to
consumers. Upfront cash consideration of £1.6m was paid upon completion.
Contingent consideration based upon a multiple of recurring revenue over the
three years ending 31 December 2026, is capped at £0.2m in total and is
payable at the end of each earn-out year. Further contingent consideration
will become payable upon the future sale of a long-term property lease for
which AKG is the lessee. Contingent consideration in respect of the property
disposal is payable if a sale is completed within three years of the
acquisition and will not exceed the proceeds of the sale. The proportion of
the sales proceeds payable to the former owners in the event of a sale of the
property reduces over the earn-out period. The fair value of total
consideration at the acquisition date was £2.0m. On acquisition, acquired
intangibles were recognised relating to customer-related intangibles (£0.3m)
and brand name (£0.2m). The residual goodwill of £1.2m represents the
expertise of the acquired workforce and the ability to leverage this into some
of the Group's businesses, together with the ability to exploit the Group's
existing customer base. AKG contributed revenue of £0.2m and profit before
taxation of £0.1m to the Group for the period from 25 October 2023 to 31
December 2023. Had the acquisition been made at the beginning the financial
year, revenue would have been £0.9m and loss before taxation would have been
£0.1m. The amount of goodwill expected to be deductible for tax purposes in
respect of this acquisition is £nil.
Vouchedfor Ltd ("Vouchedfor")
On 1 November 2023 the Group acquired 100% of the issued shares of Vouchedfor,
which is a leading review site for financial advisers, mortgage advisers,
solicitors, and accountants serving over 5,000 intermediary customers. This
acquisition further extends the Group's industry-leading portfolio of ratings
and reviews for financial services and professionals. Upfront cash
consideration of £7.5m was paid upon completion. Contingent consideration
based upon a multiple of recurring revenue over the two years ending 31
December 2025 is capped at £10.0m in total and is payable at the end of each
earn-out year, The fair value of total consideration at the acquisition date
was £12.2m. On acquisition, acquired intangibles were recognised relating to
intellectual property (technology) related intangibles (£1.6m), brand name
(£0.5m), and customer-related intangibles (£0.3m). The residual goodwill of
£10.4m represents the expertise of the acquired workforce and the ability to
leverage this into some of the Group's businesses, together with the ability
to exploit the Group's existing customer base. Vouchedfor contributed revenue
of £0.5m and profit before taxation of £0.1m to the Group for the period
from 1 November 2023 to 31 December 2023. Had the acquisition been made at the
beginning the financial year, revenue would have been £2.8m and profit before
taxation would have been £0.1m. The amount of goodwill expected to be
deductible for tax purposes in respect of this acquisition is £nil.
The fair values of the assets and liabilities acquired during the year ended
31 December 2023 are summarised below:
MICAP Competent VouchedFor Total
Adviser AKG
During the year ended 31 December 2023 £m £m £m £m £m
Brands 0.2 0.1 0.2 0.5 1.0
Customer relationships 0.6 0.1 0.3 0.3 1.3
Intellectual property 0.3 1.1 - 1.6 3.0
Property, plant and equipment - - 0.4 - 0.4
Trade and other receivables 0.1 0.1 0.3 0.4 0.9
Trade and other payables (0.4) (0.2) (0.5) (0.9) (2.0)
Net cash 0.2 0.9 0.2 0.5 1.8
Deferred tax liability (0.3) (0.3) (0.1) (0.6) (1.3)
Fair value of assets acquired 0.7 1.8 0.8 1.8 5.1
Goodwill 3.7 1.4 1.2 10.4 16.7
Consideration 4.4 3.2 2.0 12.2 21.8
Satisfied by fair values of:
Cash consideration 3.0 3.0 1.6 7.5 15.1
Deferred consideration 1.0 - - - 1.0
Contingent consideration 0.4 0.2 0.4 4.7 5.7
4.4 3.2 2.0 12.2 21.8
Less: net cash acquired (0.2) (0.9) (0.2) (0.5) (1.8)
Transaction costs and expenses 0.1 0.1 0.1 0.3 0.6
Total committed spend on acquisitions completed in the year
4.3 2.4 1.9 12.0 20.6
For each acquisition the fair value of contingent consideration at the
acquisition date represents the estimated most likely pay-out based on
management's forecast of future trading and performance discounted at the
Group's incremental borrowing rate. The fair value of deferred consideration
at the acquisition date represents the amount payable discounted at the
Group's incremental borrowing rate.
Contractual deferred and contingent consideration does not pertain to
post-acquisition services, and none of the contingent and deferred
consideration is contingent upon reemployment.
The fair value of trade receivables within trade and other receivables is
£0.8m. The gross contractual amount for trade receivables is £0.8m, all of
which other than an immaterial amount is expected to be collectible.
The cash outflow in the year in respect of acquisitions completed during the
year comprised:
MICAP Competent VouchedFor Total
Adviser AKG
During the year ended 31 December 2023 £m £m £m £m £m
Cash consideration 3.0 3.0 1.6 7.5 15.1
Less: net cash acquired (0.2) (0.9) (0.2) (0.5) (1.8)
Net investing cash outflow in respect of acquisitions completed in the year 13.3
2.8 2.1 1.4 7.0
Transaction costs and expenses paid 0.1 0.1 0.1 0.3 0.6
Total cash outflow in respect of acquisitions completed in the year 13.9
2.9 2.2 1.5 7.3
Acquisitions completed since the year ended 31 December 2023
The fair value and purchase price allocation work on the following
acquisitions made since the year end is at an early stage and will not be
completed until after the approval and issue of these financial statements.
Adv Data Holding Limited
On 26 January 2024 the Group acquired 100% of the issued shares of Adv Data
Holding Limited along with its wholly owned trading subsidiary Synaptic
Software Limited (together "Synaptic Software"). Synaptic Software is a
provider of independent adviser planning and research software. This
acquisition will extend and cement the Group's central market position as a
provider of technology, research, and consulting services to the adviser
market. Cash consideration of £5.1m was paid upon completion. There is no
contingent consideration.
Owen James Group Ltd
On 26 January 2024 the Group acquired 100% of the issued shares of Owen James
Group Ltd along with its wholly owned trading subsidiary Owen James Events
Limited (together "Owen James"). Owen James is a leading provider of strategic
engagement events in UK financial services. This acquisition will extend the
Group's flagship industry events programme, and data and insights strategy.
Cash consideration of £0.8m was paid upon completion, with a further £0.1m
payable two months later upon successful completion of an integration plan.
Contingent consideration based upon certain revenue-based criteria over the
three years following acquisition is capped at £1.5m in total and is payable
at the end of each earn-out year.
Newdez Limited
On 15th March 2024 the Group acquired 70% of the issued share capital of
Newdez Limited for initial consideration of £0.5m. The deal will assist
with digitising our compliance proposition and includes contingent
consideration based on performance over a two-year period and an option to
acquire remaining shares.
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