Half-year Report
10/11/2022 07:00
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RNS Number : 9000F Smoove PLC 10 November 2022
Smoove plc
(The "Group" or the "Company" or the "Group")
Half Yearly Report
Smoove plc (AIM: SMV), the customer focused technology and services business
aiming to revolutionise home moving and ownership, announces its interim
results for the six months ended 30 September 2022 (the "Period").
Financial Highlights
· Revenue increased by 4% to £10.6m (H1 2021: £10.2m)
· Gross margin of 38.4% (H1 2021: 40.0%) reflecting changes in business
mix
· Underlying Loss before Tax(1) of £(3.0)m (H1 2021: £(1.5)m)
reflecting increased investment in eConveyancer and new product areas
· EBITDA Loss of £(2.6m) (H1 2021: £(1.0)m)
· Adjusted basic loss per share(1) of (4.6)p (H1 2021: (2.4)p)
· Cash balance of £17.0m as of 30 September 2022 with no debt
1 Before exceptional costs and impairments.
Operating Highlights
· Success in developing eConveyancer remortgage segment - offsetting
much of the market decline in the number of housing transactions
· Significant progress in improving the eConveyancer user interface,
part of a pipeline of measures to increase conversion and instruction volumes
including the development of improved APIs
· Launch of Smoove Start, the Group's product for estate agents. 30
branches across 18 firms signed up, exceeding management expectations
· Contracts agreed with nine Consultant Conveyancing Lawyers ("CCLs")
after the Period end enabling the launch of Smoove Complete
· The Group undertook a number of cost reduction initiatives to align
cost base with product development and growth strategy
· Conveyancing instructions for the Period grew by 40% to 39,839 (H1
2021 28,497)
· Conveyancing completions for the Period increased by 42% to 26,354 (H1
2021 18,600)
· Volume growth was concentrated in lower yielding remortgage cases
(+167% year-on-year)
· Re-contracting with Lloyds Banking Group for the provision of
conveyancing services for a further two years
· Full integration of DigitalMove into our conveyancing offering, with
DigitalMove now having successfully enabled over 100,000 transactions
· Proposed tender offer to return up to £5m to shareholders to be
launched as soon as practicable
Jesper With-Fogstrup, CEO of Smoove plc, commented:
"We have made significant progress in delivering key aspects of our strategy
in the last six months.
"Our market leading conveyancing offer, eConveyancer, has performed well
despite the volatility in the property sector in recent months as we have
capitalised on increased remortgage activity. We have at the same time
invested in the development of the user interface which will create a more
immersive and responsive experience for our partners with a view to increasing
conversion and instructions.
"The roll out of Smoove Start, our digital solution for estate agents, has
been particularly pleasing given the initial results and the important
position they play in influencing decisions in the home ownership process.
With Smoove Complete we have an exciting opportunity to disrupt the
conveyancing industry using our technical and conveyancing expertise to create
a new model that benefits everyone.
"The economic climate has made trading conditions difficult, but we have been
able to mitigate some of the impacts with our strong position in the
remortgage sector. Confidence in our products and services was reinforced as
we secured the re-contracting with Lloyds Banking Group for the provision of
conveyancing services for a further two years.
"The progress we have made both in eConveyancer and the new businesses of
Smoove Start and Smoove Complete shows that we are creating touchpoints across
all aspects of homeownership while diversifying our revenue streams. I am
confident that we have the right strategy and plan in place to build on the
successes of the first six months of this financial year."
Capital Markets Day, Tuesday 22 November
The Company confirms that it will be hosting a Capital Markets Day on the
afternoon of Tuesday 22 November 2022 at 2.30pm.
The event will be an opportunity to learn more about Smoove and its product
portfolio. The team will also provide commentary on market trends and the
broader opportunity.
Analysts and institutional investors are welcome to attend the event in the
City of London and should contact smoove@walbrookpr.com in order to register
their interest.
Retail Investor Presentation
Management will be providing the same presentation and hosting a remote
investor Q&A session for retail investors in due course. Investors can
sign up for free and register to meet SMV via the following
link: https://www.investormeetcompany.com/smoove-plc/register-investor
(https://www.investormeetcompany.com/smoove-plc/register-investor)
Investors who have already registered on the Investor Meet Company platform to
meet the Company will automatically be invited.
Enquiries:
Smoove plc Via Walbrook PR
Jesper With-Fogstrup, Chief Executive Officer
Michael Cress, Chief Financial Officer
Panmure Gordon (UK) Limited Tel: +44 (0)20 7886 2500
(NOMAD and Broker)
Dominic Morley
Erik Anderson
Walbrook PR Limited smoove@walbrookpr.com or Tel: 020 7933 8780
Tom Cooper
Nick Rome
Certain information contained in this announcement would have constituted
inside information (as defined by Article 7 of Regulation (EU) No 596/2014)
prior to its release as part of this announcement.
About Smoove:
Smoove's (hellosmoove.com) mission is to revolutionise the home moving and
owning process for everyone involved. The Company's cornerstone cloud-based
platforms provide significant leverage for growth with strong, established
client bases and routes to market - including mortgage brokers, conveyancers,
estate agents and lenders.
eConveyancer (https://econveyancer.com/ (https://econveyancer.com/) ) is one
of the leading distribution channels for conveyancing in the UK, bringing
consumers and legal professionals together via comparison services, which
provide solutions for home movers and the remortgage market.
The Company's existing platforms have been designed with a view to adding
services, and increasing reach. The Board believes that the Company is well
placed to create attractive returns as functionality increases.
CHIEF EXECUTIVE OFFICER'S REPORT
The last six months has been a period of delivering key initiatives of our
strategy including notable progress across our major business segments:
eConveyancer, Smoove Start and Smoove Complete.
Our core offering, eConveyancer, which brings consumers and legal
professionals together via a comparison service, has delivered stable revenue
with a significant change in mix. We have positioned eConveyancer to capture
a significant share of remortgage work with completions in this area up 167%
year-on-year during the Period ending 30 September 2022. This progress in
the remortgage segment has enabled the Group to offset much of the
year-on-year decline in transactional cases, part of which is attributable to
the expiry of the stamp duty holiday in the first half of last year.
We have made significant progress in improving the eConveyancer user
interface. This includes using modern design principles to remove blockers
and creating a more responsive offer. We plan to roll this out gradually
over the coming months and expect it to increase conversion and instruction
volumes. We aim to increase instruction volumes further by developing new
APIs which will allow for greater integration and easier workflow between our
platform and those of our introducers.
We have also fully integrated DigitalMove into the proposition we offer our
extensive, and growing panel of introducers and conveyancers, and have
recently reached a key milestone with 100,000 completed DigitalMove cases. We
continue to receive extremely positive feedback from those who use the
DigitalMove feature with over 70% of users scoring it very good or good and
many conveyancing clients citing several efficiency savings which make their
service more effective.
Confidence in our market leading conveyancing offer was reinforced with a
number of major contractual wins including re-contracting with Lloyds Banking
Group for the provision of services for a further two years.
Following a successful pilot, we launched the full market roll out of our
digital onboarding platform, Smoove Start, which helps estate agents and their
clients streamline and speed up administrative tasks involved in a property
transaction. Smoove Start collates all key tasks under one roof when
onboarding a new buyer or seller, including ID and AML checks, EPCs and title
deeds. Not only does this avoid the administration burden of multiple
systems and chasing clients, but it also ensures that a buyer is better
informed about a property at the very outset. As well as bringing improved
transparency and efficiency to the process, Smoove Start provides tools to
agents to aid their compliance with the increased regulatory requirements they
face.
I am pleased that we have exceeded our initial targets for the number of
estate agent branches signing up to the service, with 30 branches contracted
across 18 estate agency firms. Smoove Start is also beginning to act as an
Introducer channel to eConveyancer for conveyancing services with estate
agents being ideally placed to recommend a conveyancer to consumers and
consumers seeing estate agents as a trusted source for that referral.
In the last six months we have carried out extensive research on how best to
use our unique assets and expertise to radically change the conveyancing
experience for consumers, conveyancers and other stakeholders. Smoove
Complete is a co-working platform that is designed to bring together
self-employed conveyancers who are aligned to our vision of transforming and
improving the home moving journey for everyone. Through our acquisition of
Amity Law, we are able to provide a framework for them to operate within an
optimised digital and legal environment while allowing us to build a community
of Conveyancing Consultant Lawyers ("CCLs"). We are looking to marry our
digital platforms with the growing trend post-pandemic for more flexible ways
of working to create a model that works across the industry. We welcomed our
first CCL to Smoove Complete after the Period end and have a contracted
pipeline of eight additional conveyancers who will join over the coming
months. We will be looking to build scale subject to generating further
proof points on the return on investment that the model could deliver.
Chief Financial Officer's Report
Compared with the comparable prior year period, the six month Period ending 30
September 2022 was characterised by strongly growing transaction volumes
coupled with broadly flat revenue and gross profit. The combination of these
two trends arises from a pronounced shift in mix towards remortgage cases
which are less lucrative for the Group than transactional (purchase and sale)
work. Revenue for the Period increased by 4% year-on-year, or 2% excluding the
effect of the acquisition of Amity Law Limited, which completed in October of
last year. Gross profit was flat year-on-year. Smoove Start, the Group's
product for estate agents launched during the Period. We are pleased with
the levels of branch acquisition within Smoove Start, but because the product
launched late in the Period, the effect on the Group's results is negligible.
The loss before tax for the Period has widened from £1.5 million for the six
months to 30 September 2021 to £3.0 million because of higher administrative
expenses. These higher costs reflect investments in both the core eConveyancer
business and in new product areas such as Smoove Start. At the announcement
of full year results on 22 August 2022 the Group announced that it was
undertaking a series of cost reduction initiatives. As a result,
administrative expenses peaked in Q1 of the current financial year and are
expected to decline continuously into the first half of the next financial
year.
Key performance indicators
Completions for the Period increased by 42% year-on-year. The divergence
between this strong growth and stable revenue occurs because volume growth was
concentrated in lower yielding remortgage cases (which increased by 167%
year-on-year) rather than in more lucrative transactional work (which declined
by 22% year-on-year). The year-on-year comparison for transactional cases
is distorted by the stamp duty holiday and associated taper, both of which
fell entirely within the first half of last year. Transactional
instructions are less distorted by the stamp duty holiday and were down by a
more modest 13% year-on-year. The sheer scale of the increase in volumes
highlights the depth and dynamism of Group's relationships with introducers,
however the shift in mix towards remortgages has also driven a lower gross
margin as percentage of revenue during the Period. The Board anticipates
that these relationships will deliver a greater profit return in future when
the market environment shifts back towards transactional cases.
INSTRUCTIONS AND COMPLETIONS BY SEGMENT
6 months to 6 months to Year to
30 Sep 2022
30 Sep 2021
31 Mar 2022
Instructions
Transactional 16,517 18,888 35,917
Remortgage 23,322 9,609 30,477
Total 39,839 28,497 66,394
Completions
Transactional 9,568 12,323 21,837
Remortgage 16,786 6,277 15,128
Total 26,354 18,600 36,965
Non-IFRS Profit Measures
The table below calculates two non-IFRS measures of profitability, Underlying
loss before taxation and EBITDA. These additional measures have the benefit
of excluding major non-cash items, such as impairment charges. In addition,
the Board believe that EBITDA is a metric that is commonly used by the Group's
investors. Profit before taxation and EBITDA are closely correlated, which
in part, reflects modest levels of capitalised software development cost.
During the Period Group's capitalised software development expenditure was
£309,000 (H1 2021: £132,000) which equates to 2.9% of revenue (H1 2021:
1.3%).
Calculation of Non-IFRS profit measures 6 months to 6 months to Year to
30 Sep 2022
30 Sep 2021
31 Mar 2022
£'000 £'000
£'000
Loss before taxation (PBT) (2,998) (1,549) (5,365)
Impairment of investment - - 503
Underlying loss before taxation (2,998) (1,549) (4,862)
(Underlying PBT)
Finance income (69) (10) (25)
Finance costs 14 16 102
Amortisation 276 374 683
Depreciation 144 165 329
Underlying EBITDA (2,633) (1,004) (3,773)
Cash
The Group held significant cash reserves of £17.0 million at the Period end.
At the presentation of financial results on 22 August 2022 the Group
announced that it intended a return of capital to shareholders of up to £5
million via a tender offer. The necessary shareholder resolutions
authorising the tender offer were approved at the Group's Annual General
Meeting on 27 September. The Board remains committed to executing the tender
offer and believes that the return of value achieves an appropriate balance
between an immediate return to shareholders and investments in new products
and business improvements.
Outlook
Signs of a slowdown in the property market are starting to emerge, as banks
take a more cautious approach to lending and potential home buyers delay
purchases in the face of much higher borrowing costs and the additional
affordability challenges presented by the cost-of-living crisis. Property
portals are already reporting a downward shift in activity and prices
following two years of record high asking prices as a result of the stamp duty
holiday and changing consumer behaviour during the pandemic.
Although increases in the Bank of England's base rate had been anticipated for
some time, the government's fiscal event on 23 September 2022 led to a rapid
increase in mortgage rates and significant instability in the mortgage market
as products were rapidly withdrawn and repriced. As a result, the outlook
for house prices and transaction levels is less certain than before.
We are undertaking a number of measures to position the Group for this climate
of increased economic uncertainty. Our investments in eConveyancer aim to
further expand and diversify our base of introducers and increase their
productivity in providing instructions. We will build on our success in
developing the remortgage segment by taking steps to increase yields per
conveyancing case. At the same time, we are continuing our drive to lower
the cost base as indicated during the announcement of full year results on 22
August 2022. Our new propositions, Smoove Start and Smoove Complete, are
performing ahead of our expectations and have very exciting prospects. The
Board believes that these new propositions will make the Group more resilient
over the long term by diversifying sources of revenue. Our future
investments in these businesses will be subject to continued validation of
market demand for the propositions.
The progress we have made both in eConveyancer and the new businesses of
Smoove Start and Smoove Complete shows that we are creating touchpoints across
all aspects of homeownership while diversifying our revenue streams. I am
confident that we have the right strategy and plan in place to build on the
successes of the first six months of this financial year.
Jesper With-Fogstrup
CEO
UNAUDITED INCOME STATEMENT
Six months to 30 September 2022
Note 6 months to 30 Sep 2022 6 months to 30 Sep 2021 Year ended 31 Mar 2022
Unaudited Unaudited Audited
£'000s £'000s £'000s
Revenue 10,649 10,223 19,168
Cost of sales (6,565) (6,129) (11,407)
Gross profit 4,084 4,094 7,761
Administrative expenses (7,184) (5,673) (12,577)
Operating loss (3,100) (1,579) (4,816)
Finance income 69 10 25
Finance costs (14) (16) (102)
Share of results of associates 47 36 31
Impairment of associate (503)
Loss before tax (2,998) (1,549) (5,365)
Tax expense 13 19 248
Total loss for the financial period (2,985) (1,530) (5,117)
Loss per share
Basic loss per share (£) 3 (0.0460) (0.0236) (0.0789)
Diluted loss per share (£) 3 (0.0460) (0.0236) (0.0789)
UNAUDITED BALANCE SHEET
At 30 September 2022
Note 30 Sep 2022 30 Sep 2021 31 Mar 2022
Unaudited Unaudited Audited
£'000s £'000s £'000s
NON-CURRENT ASSETS
Intangible assets 1,466 1,557 1,432
Goodwill 4,745 4,524 4,745
Investment in associates 202 663 155
Property, plant and equipment 1,470 1,688 1,572
Long-term receivables 100 100 100
Prepayments 99 92 94
8,082 8,624 8,098
CURRENT ASSETS
Trade and other receivables 1,648 1,478 1,545
Current tax receivable 291 249 291
Cash and cash equivalents 16,975 23,060 20,027
18,914 24,787 21,863
TOTAL ASSETS 26,996 33,411 29,961
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF THE COMPANY
Share capital 4 259 259 259
EBT reserve (298) (375) (298)
Share premium 4,609 4,609 4,609
Capital redemption reserve 113 113 113
Share based payment reserve 532 468 474
Retained earnings 16,660 23,354 19,645
TOTAL EQUITY 21,875 28,428 24,802
NON-CURRENT LIABILITIES
Lease liabilities 936 1,099 1,012
Deferred taxation 66 260 79
1,002 1,359 1,091
CURRENT LIABILITIES
Trade and other payables 3,967 3,460 3,918
Lease liabilities 152 164 150
4,119 3,624 4,068
TOTAL LIABILITIES 5,121 4,983 5,159
TOTAL EQUITY AND LIABILITIES 26,996 33,411 29,961
UNAUDITED STATEMENT OF CHANGES IN EQUITY
Six months to 30 September 2022
Share- based payment reserve
Capital redemption reserve
Share capital EBT reserve Share premium Retained earnings Total equity
£'000s £'000s £'000s £'000s £'000s £'000s £'000s
For the period ended 30 September 2022
At 1 April 2022 259 (298) 4,609 113 474 19,645 24,802
Loss for the period - - - - - (2,985) (2,985)
Total comprehensive loss - - - - - (2,985) (2,985)
Share-based payments - - - - 58 - 58
Total transactions with owners - - - - 58 - 58
At 30 September 2022 259 (298) 4,609 113 532 16,660 21,875
For the period ended 30 September 2021
At 1 April 2021 259 (397) 4,609 113 416 24,913 29,915
Loss for the period - - - - - (1,530) (1,530)
Total comprehensive loss - - - - - (1,530) (1,530)
Purchase of shares by EBT - (48) - - - - (48)
Exercise of options - 70 - - (12) (29) 29
Share-based payments - - - - 62 - 62
Total transactions with owners - 22 - - 50 (29) 43
At 30 September 2021 259 (375) 4,609 113 468 23,354 28,428
Share- based payment reserve
Capital redemption reserve
Share capital EBT reserve Share premium Retained earnings Total equity
£'000s £'000s £'000s £'000s £'000s £'000s £'000s
For the year ended 31 March 2022
At 1 April 2021 259 (397) 4,609 113 418 24,913 29,915
Loss for the period - - - - - (5,117) (5,117)
Total comprehensive loss - - - - - (5,117) (5,117)
Purchase of shares by EBT - (345) - - - - (345)
Exercise of options - 444 - - (52) (151) 241
Share-based payments - - - - 108 - 108
Total transactions with owners - 99 - - 56 (151) 4
At 31 March 2022 259 (298) 4,609 113 474 19,645 24,802
UNAUDITED STATEMENT OF CASH FLOWS
Six months to 30 September 2022
6 months to 30 Sep 2022 6 months to 30 Sep 2021 Year ended 31 Mar 2022
Unaudited Unaudited Audited
£'000s £'000s £'000s
Cash flows from operating activities
Loss before taxation (2,998) (1,549) (5,365)
Finance income (69) (10) (25)
Finance costs 14 16 102
Loss on disposal of plant and equipment - - 63
Share of profit of associate (47) (36) (31)
Impairment of investment in associate - - 503
Amortisation 276 374 683
Depreciation 144 165 329
Share-based payments 58 62 108
Tax paid - - (23)
(2,622) (978) (3,656)
Changes in working capital
(Increase) / decrease in trade and other receivables (303) (7) 14
Increase in trade and other payables 244 211 413
Net cash used in operating activities (2,681) (774) (3,229)
Cash flows from investing activities
Purchase of intangible software assets (309) (132) (316)
Purchase of property, plant and equipment (42) (22) (97)
Acquisition of subsidiary (net of cash acquired) - - (135)
Interest received 69 7 25
Net cash used in investing activities (282) (147) (523)
Cash flows from financing activities
Lease payments (89) (76) (192)
Repayment of loan to associate - 100 100
Share transactions by EBT - (19) (105)
Net cash (used in) / generated from financing activities (89) 5 (197)
Net decrease in cash and cash equivalents (3,052) (916) (3,949)
Cash and cash equivalents at beginning of period 20,027 23,976 23,976
Cash and cash equivalents at end of period 16,975 23,060 20,027
Notes to the financial information
Six months to 30 September 2021
1. GENERAL
The interim financial information for the six months to 30 September 2022 is
unaudited and was approved by the Directors of the Company on 9 November 2022.
The condensed financial information set out above does not constitute
statutory accounts within the meaning of Section 434 of the Companies Act
2006.
The Company's operations are subject to some seasonality and also some
cyclicality both in line with the housing market.
No dividend has been paid in the six months ended 30 September 2022 (six
months to 30 September 2021: £nil).
2. ACCOUNTING POLICIES
The interim financial information in this report has been prepared on the
basis of the accounting policies set out in the Group's most recent annual
financial statements for the year ended 31 March 2022.
IFRS is subject to amendment and interpretation by the International
Accounting Standards Board ("IASB") and the IFRS Interpretations Committee and
there is an on-going process of review and endorsement by the UK Endorsement
Board since January 2021 (previously the European Commission).
The financial information has been prepared using accounting policies that the
Directors expect to be applicable as at 31 March 2023. IAS 34 has not been
applied in the preparation of these interim financial statements.
The Directors have adopted the going concern basis in preparing the financial
information. In assessing whether the going concern assumption is appropriate,
the Directors have taken into account all relevant available information about
the foreseeable future. In making this assessment the Directors have
considered a range of possible scenarios concerning the housing market and
background macroeconomic conditions. The Directors note the substantial cash
balance that the group holds and, while the group is currently making a loss
as planned to support product development, they assess that the cash balance
is sufficient to support these losses until the group returns to
profitability.
The condensed financial information for the period ended 31 March 2022 set out
in this interim report does not comprise the Group's statutory accounts as
defined in section 434 of the Companies Act 2006.
3. LOSS PER SHARE
Basic loss per share is calculated by dividing the loss attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period.
Basic and diluted loss per share
6 months to 30 Sep 2022 6 months to 30 Sep 2021 Year to
31 Mar 2022
£ £ £
Total basic loss per share (0.0460) (0.0236) (0.0789)
Total diluted loss per share (0.0460) (0.0236) (0.0789)
The loss used in the calculation of earnings per share are as follows:
6 months to 30 Sep 2022 6 months to 30 Sep 2020 Year to
31 Mar 2022
£'000s £'000s £'000s
Loss used in the calculation of total basic and diluted loss per share (2,985) (1,536) (5,117)
The weighted average number of ordinary shares used in all of the calculations
of loss per share were as follows:
Number of shares 6 months to 30 Sep 2022 6 months to 30 Sep 2021 Year to
31 Mar 2022
Number Number Number
Weighted average number of ordinary shares for the purposes of basic earnings 64,871,276 64,871,276 64,871,276
per share
Due to the losses incurred during the reporting periods, a diluted loss per
share has not been calculated as this would serve to reduce the basic loss per
share. There were 3,280,258 (30 Sep 2021: 4,454,606) share options outstanding
at the reporting date that could potentially dilute basic earnings per share
in the future.
4. SHARE CAPITAL
a) Share Capital
The Company has one class of Ordinary share with 0.4p nominal value per share
which carries no right to fixed income nor has any preferences or restrictions
attached.
No new shares were issued in the current or prior periods.
Issued and fully paid:
30 Sep 2022 30 Sep 2021 31 Mar 2022
£'000s £'000s £'000s
Ordinary shares of 0.40p each 259 259 259
30 Sep 2022 30 Sep 2021 31 Mar 2022
Number Number Number
At the beginning and end of the period 64,871,276 64,871,276 64,871,276
b) Share based payments
Options in issue vest in 3 equal tranches, three, four, and five years or in
one tranche three year after date of grant. The options are settled in equity
once exercised. If the options remain unexercised after a period of 10 years
from the date of grant, the options expire. Options are forfeited if the
employee leaves the Group before the options vest.
Weighted average exercise price
Number of options
£
Outstanding at 1 April 2022 3,656,960 0.79
Lapsed (376,702) 0.64
Outstanding at 30 September 2022 3,280,258 0.81
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