REG - Fintel PLC - Trading Update, Acquisition and Notice of Results

FintelAnnouncement

30/01/2024 07:00

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RNS Number : 2838B  Fintel PLC  30 January 2024

30 January 2024

 

Fintel plc

 

("Fintel", the "Company", the "Business" or the "Group")

 

Year End Trading Update, Acquisition and Notice of Full Year Results

 

Resilient financial performance and significant acquisitive growth

 

Fintel (AIM: FNTL), the leading provider of fintech and support services to
the UK Retail Financial Services sector, today announces a trading update for
the year ended 31 December 2023, the acquisition of Owen James Events ("Owen
James"), the leading provider of strategic engagement events in the UK
financial services industry, and the successful completion of the acquisition
of Synaptic Software following regulatory approval.

 

Financial highlights

 

·      Resilient performance, with full year results expected to be in
line with Board expectations

·      Adjusted EBITDA(1) growth of c.6% to £20.5m (FY22: £19.4m), in
a period of continued investment in our core products and services

·      Strong balance sheet with £12.7m of cash, and £69m of headroom
in our £80m Revolving Credit Facility

·      Net cash position(2) of £1.7m (FY22: £12.8m), having invested
significantly in four acquisitions

·      Core(3) revenue increased to £56.6m (FY22: £56.4m); (LfL(4):
FY23: £51.7m; FY22: £50.2m), slightly ahead of the same period last year and
up c.0.3%.

·      Core SaaS & Subscription revenue up c.2% to £37.6m (FY22:
£36.8m); up c.8% on a like-for-like basis excluding the changed software
reseller revenues and acquisitions (FY23: £33.0m; FY22: £30.6m)

 

Financial performance - revenue

Our core business continued to perform well, growing 5.6% excluding volatility
in mortgage related commissions. 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.

As notified in our half year results, core organic revenue was impacted by the
change to the accounting treatment of our largest software reseller agreement.
Whilst the EBITDA contribution from this contract remains resilient at
historical levels, the statutory accounting treatment applied since May 2023
now represents purely a net revenue and profitability position.

We completed four acquisitions throughout 2023 and the combined core revenue
on those acquisitions recognised in the period was £1.5m. A further two
acquisitions were completed in January 2024.

The non-core business performed in line with expectations against the UK
housing market backdrop, with revenues of £8.4m in the year (FY22: £10.1m).
Combined with the core business, statutory revenue was £64.9m (FY22:
£66.5m).

 

                                                         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(4)            £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     100%
 Total core revenue                                      £56.6m     £56.4m     £0.2m     0.3%

 

 

Regulatory approval received to complete acquisition of Synaptic Software

 

·      As announced on 5 December 2023, we conditionally agreed to
acquire Synaptic Software for a net upfront cash consideration of £3.5m
subject to FCA approval

·      We are pleased to announce that regulatory approval was received
in late January 2024 and the acquisition fully completed shortly thereafter

·      We have agreed to invest £0.5m of development expenditure to
enhance and integrate its products into the wider Fintel platform of service
offerings

 

Acquisition of Owen James Events

 

·      Acquisition of Owen James via Fintel IQ, Fintel's technology and
knowledge platform

o  Owen James is the leading provider of strategic engagement events in UK
financial services

o  Owen James will continue to operate independently within Fintel IQ, while
benefitting from Fintel's investment and wide network within the UK financial
services market

o  The acquisition will extend Fintel's flagship industry events programme
and data and insights strategy through Owen James' unique market position

o  Completed in late January 2024, the transaction was funded entirely from
cash reserves with a net upfront cash consideration of £0.7m representing an
EBITDA multiple of 3.8 times. In addition, up to £1.6m contingent earnout is
based on certain trading criteria being delivered in the first three years of
ownership

o  The acquisition is in line with Fintel's strategy to enter key
adjacencies, expand its service platform, and connect a fragmented UK retail
financial services market

 

Operational highlights

 

·      Continued growth in the underlying core SaaS and Subscriptions
revenue, with diversified customer base providing resilience and offsetting
mortgage market headwinds

·      Operating cost management throughout 2023 has been dynamic in
response to market volatility, enabling protection and enhancement of margins,
whilst providing the capacity for organic and inorganic investments into our
future growth

·      Six acquisitions completed during the past twelve months:

o  Owen James - January 2024

o  Synaptic Software - January 2024

o  VouchedFor - November 2023

o  AKG - November 2023

o  Competent Adviser - July 2023

o  Micap - July 2023

·      These acquisitions are in line with the Company's strategy to
expand into adjacent markets, adding scale, IP and quality data sets to help
the market understand and improve the suitability and appeal of financial
products

 

Outlook

The core business continues to deliver resilient earnings in line with Board
expectations for FY23, with the ongoing pressures in the UK housing market
largely offset by ongoing growth in fintech software revenue and software
license sales.

Fintel's market leading position and diverse customer base provide resilience
against these macroeconomic headwinds. With expectations that interest rates
and market activity will adjust positively in 2024, we are well placed to
benefit from a recovery in the mortgage market.

We continue to benefit from structural drivers including increasing regulatory
requirements as a result of the FCA Consumer Duty regulation, being well
positioned to support both financial intermediaries and product providers in
evidencing suitability during the financial product development and sales
lifecycle.

Our sustainable growth is complemented by strategic investments to improve and
expand our offering, allowing us to better support our customers as they
navigate an evolving UK financial services market. We maintain a strong
M&A pipeline to continue to acquire complementary service offerings to our
growing platform of services, underpinned by significant headroom in our £80m
revolving Credit Facility.

Our strategy of creating a wider support platform for UK retail financial
services will continue to enhance our future earnings, proposition and growth
opportunities.

 

Matt Timmins, Joint CEO of Fintel plc, said:

"In 2023 we made significant strategic progress, increased our scale, and
reach through the acquisition of four businesses to our platform, and
delivered a resilient financial performance in line with expectations. We have
demonstrated continued evidence of our capacity and ability to drive organic
growth, source and execute complementary acquisitions, and invest in our
technology and data propositions.

 

"In line with our strategy, we are completely focused on consolidating a
fragmented market to enhance our scale, proposition, and IP, as we continue to
inspire better outcomes for UK retail financial services. Today, we welcome
yet another market leader in Owen James Events, a business with huge
potential, and our sixth acquisition in twelve months.

 

"We are confident of delivering further progress in the year ahead as we
continue to scale our proposition, realise our very active M&A pipeline
and invest in our service and technology platform, with our growth underpinned
by recuring incomes and positive structural market drivers."

 

Notice of Full Year Results

 

Fintel intends to announce its Full Year Results for the year ended 31
December 2023 on 19 March 2024.

 

 

Footnotes

(1)Adjusted EBITDA is earnings before interest, tax, depreciation,
amortisation, share option charges and exceptional operating costs.

(2) Net cash position excludes any adjustment under IFRS16 "Lease Accounting"
and compares gross cash balances to gross borrowings under the Group's £80m
Revolving Credit Facility.(

3)Core business excludes revenues from panel management and surveying.

(4)Like-for-like basis strips out the impact of acquisitions and the changes
in revenue recognition of a software reseller agreement.

 

 

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

 Harry Hargreaves

 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)

 

 

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