Half Year Results for the Six Months ended 30 June 2024

Strong performance; strategic expansion to accelerate future growth

Fintel (AIM: FNTL), the award-winning provider of fintech and support services to the UK Retail Financial Services sector, today announces its unaudited results for the six months ended 30 June 2024.

"Fintel delivered a strong financial performance during the first half of 2024, whilst continuing to expand strategically through further acquisitions and organic investments. 

"Completing four acquisitions year-to-date, totalling eight in the last twelve months, we have significantly enhanced our scale, capabilities and IP, whilst accelerating investment into our core propositions and technology offering.

"With our strategic foundations firmly in place, we are strongly positioned to capitalise on the growth opportunities across our extensive family of brands, underpinned by the strength of our balance sheet.

"Current trading is robust, and we are confident of meeting our full year revenue expectations, as we continue to inspire better outcomes for retail financial services."

Matt Timmins, Joint CEO

Financial highlights

• Core¹ revenue growth to £31.2m (HY23: £27.6m), up 13%
• Increased SaaS & Subscription revenue of £20.0m (HY23: £18.8m), up 6% representing 65% of core revenue
• Core adjusted EBITDA² increased to £9.3m (HY23: £8.8m), up 5%
• Gross cash of £7.4m (FY23: £12.7m; HY23: £13.3m), following deployment of £6.4m into strategic acquisitions, and ongoing organic investment into product development of c.£2.5m in the period, underpinned by continued strong cash conversion of 101% (HY23: 104%)
• Net debt of £8.6m (HY23: net cash of £13.3m); comfortable leverage with net debt to EBITDA ratio of 0.4x and £64m of headroom in £80m Revolving Credit Facility
• Four acquisitions completed in FY23 with a further three completed during HY24, delivering combined core revenues of £4.8m in the period
• Statutory revenue of £35.7m (HY23: £31.7m), up 13%
• Adjusted EBITDA² increased to £9.6m (HY23: £9.0m), up 7%
• Solid adjusted EBITDA² margin of 26.8% (HY23: 28.3%), down 150bps, during a period of organic and inorganic investment
• Adjusted EPS² consistent at 5.0 pence per share (HY23: 5.0 pence per share) demonstrating continued strong profitability, offsetting the impact of UK wide increase in corporation tax rate from 19% to 25% on 1 April 2023
• Interim dividend of 1.2p (HY23: 1.1p) announced, up 9%, recognising the strength of the underlying business and confident outlook

Strategic and operational highlights

• Strong visibility of earnings, recurring revenues and earnings quality
  • SaaS & Subscription revenue grew 6% to £20m (HY23: £18.8m), representing 65% of core revenues (HY23: 68%), which reflects the impact of acquisitions over the period

• Leveraging of enhanced technology and data footprint to inform investment in and scaling of core propositions, driving recurring revenues and further organic growth
• • Intermediary Services
    • Enhanced membership technology
    • Upgraded financial planning software
    • Extended consumer duty support, with launch of new event series and training courses
• • Distribution Channels
    • Expanded DaaS proposition into the employee benefits sector
    • Further growth of Strategic Asset Allocation through extended partnerships including Invesco, and Legal and General
    • Enhanced DaaS proposition with development of a mortgage portal delivering industry insights
• • Fintech & Research
    • Expanded product ratings proposition, with launch of new model portfolio comparison tool, and customer insights portal
    • Scaled consumer proposition with new distribution partnership with The Times, providing features and rates insights
    • Continued investment in market and competitor intelligence software Matrix 360
• M&A and strategic investments expanding capabilities and offering
  • Completion of Fintel IQ capability set, with strong initial demand
  • Four acquisitions completed year-to-date
    • Threesixty Services, a provider of compliance and business support services
    • ifaDASH, a reg-tech solution provider
    • Owen James, the leading provider of strategic engagement events
    • Synaptic Software, an independent provider of financial adviser planning and research software
  • One conditional acquisition announced post period end, subject to regulatory approval
    • Rayner Spencer Mills Research, one of the most recognised fund ratings and research agencies in the UK
  • Minority investment in Mortgage Brain, one of the leading providers of technology to the mortgage industry, alongside a new distribution agreement

Current trading and outlook

The business continues to trade well, and the Board is confident that revenue expectations will be met based on key structural drivers:

• Continued organic growth expected with expansion of proposition and synergistic opportunities from recent acquisitions 

• Positive market dynamics including regulatory pressure, demand for data and insights, and ongoing need for integrated technology  

• The initial cut in interest rates has not yet filtered through to our mortgage business, however we are well placed to benefit from a recovery as further cuts are implemented 

We will incur some additional staff costs in H2 2024, which will impact underlying EBITDA this year. This is partly relating to additional investment in Matrix 360 and Enterprise sales, as we work on realising revenue synergies from our acquired portfolio; and also relating to the initial realisation of future cost synergies across the business following the acquisitions. This will likely result in the underlying FY24 EBITDA being marginally lower than expectations although it is expected that these synergies will benefit FY25 and beyond.

In terms of specific transaction related activity in H2, we expect the acquisition of threesixty to increase FY24 revenue by c.£3.0m. We also expect an EBITDA contribution of £150k for the rest of the year. The purchase price was £14.6m, albeit the business had £2.7m cash in hand resulting in an increase in net borrowing of c.£12m, which will in turn incur additional borrowing costs of c.£420,000 in H2.

In addition, our commitment to the CRM market remains strategically important and we are looking to optimise the timing of triggering our equity options over minority investments to attain best value for Fintel shareholders. As a result, we are likely to exercise the second equity call option for Plannr, taking us to 49% ownership, at a cost of c.£3.5m. As Plannr approaches its break-even point in mid-2025 based on recent sales trajectory, we believe it is right to exercise the call option in the window. This will require us to consolidate the relevant proportion of its near-term losses, forecast at c.£150k in Q4 2024.  This will also incur additional borrowing costs of c.£150k in Q4 2024.

The Group had utilised £16m of the Revolving Credit Facility as at 30 June 2024. We expect to have borrowed an additional £20m to fund threesixty, Plannr and the first round of deferred consideration, taking total gross borrowings to £36m from our £80m facility. With cash balances on hand, this equates to approximately £30m of net debt, which would represent a net debt to EBITDA ratio of c.1.34x at the end of FY24, which would then start to deleverage due to our significant ongoing cash generation.

Notes

¹Core business excludes revenues from panel management and surveying.

²Core 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.

³Underlying operating cash flow conversion is calculated as underlying cash flow from operations (adjusted operating profit, adjusted for changes in working capital, depreciation, amortisation, CAPEX and share-based payments) as a percentage of adjusted operating profit.

Analyst presentation

An analyst briefing is being held at 9:30am on 17 September 2024 via an online video conference facility. To register your attendance, please contact fintel@mhpgroup.com.

For further information please contact:

Notes to Editors

Fintel is a UK fintech and support services business, combining award-winning intermediary business support services, and leading research, ratings and fintech businesses.

Fintel provides technology, compliance and regulatory support to thousands of intermediary firms, 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