RNS Release: 12 April 2022

MJ Hudson Group plc

Interim results for the six months ended 31 December 2021

48% revenue growth in the period; three transformative growth opportunities including key 2021 acquisition making contribution 12 months ahead of schedule

MJ Hudson Group plc ("MJ Hudson", the "Company" or the "Group"), the end-to-end solutions provider to the asset management industry, today announces its interim results for the six months ended 31 December 2021 ("H1 FY22").

Financial highlights

·      Revenue growth of 48% to £23.4m from £15.8m in H1 FY21 driven by strong organic growth (especially in ESG & Sustainability) and full contributions from successful acquisitions.

·      Fully diluted EPS (0.18)p (H1 FY21 (0.16)p.

·      Adjusted EBITDA increased 89% to £3.4m and adjusted EBITDA margin improved from 16% to 20%, owing to a more favourable business mix (both from H1 FY21).

·      Adjusted pre-tax profit before tax increased to £1.6m from £0.4m in H1 FY21 .

·      Adjusted fully diluted EPS increased to 0.9p (H1 FY21 0.2p).

·      Net debt rose to £13.0m excluding leases (H1 FY21 £1.6m net cash), in order to fund infrastructure investments, M&A, and to support accelerated growth in the Irish Super ManCo and ESG & Sustainability.

* Adjusted metrics remove pass-through revenues and certain costs (such as share based payments, M&A and financing costs, losses from discontinued businesses, and other exceptional costs); see notes below for further description and reconciliation of statutory loss before tax to adjusted profit before tax.

Operational highlights

·      Three transformative growth opportunities (ESG & Sustainability, the Irish Super ManCo, Luxembourg fund services), plus accelerating growth in the software and data business lines, more generally.

·      Strong new business activity, with several global market leaders engaging the Group's services, attracted by the Group's strong brand and mix of cutting-edge Data & Analytics tools and Outsourcing services.

·      An extremely productive pipeline, across the Group, with much converted, post-period, and more expected by year end; new engagements have emphasis on recurring revenues, supporting strong revenue generation into FY23, and beyond.

·      Acquisition of Saffery Champness Fund Services, a Guernsey-based fund administrator, providing scale to Channel Island operations.

·      A number of prestigious industry awards won, including for the ESG technology platform and for ESG & Sustainability advisory services.

Operational review

Performance in the period has been transformed through extremely strong (34%) organic revenue growth in the software-driven data and analytics businesses and in long-term recurring contract outsourcing services (21%). This has been further supported by the ability to now recognise full contributions from recent acquisitions in those same business areas. 

Following successful incubation, integration, and investment, the Group now has three transformative growth opportunities in ESG & Sustainability (acquired July 2019), the Irish Super ManCo (acquired in Feb 2021) and the incubated Luxembourg fund services business. Indeed, the investment into ESG & Sustainability, and fund services (including the Irish Super ManCo and the Luxembourg fund services team) has helped these two teams grow to be the Group´s largest business units, by staff numbers.

The power of the MJ Hudson brand and the unique combination of specialist digital tools and services continued to draw the largest firms in the industry into the Group's orbit, with 18 members of the FTSE 100 and several of the world's largest private equity firms already becoming clients by the end of the period and conversations ongoing with prospective clients of similar size and stature.

MJ Hudson's operating infrastructure has also been significantly upgraded, with the Group bringing key systems fully online and succeeding in attracting a large number of additional hires into its fastest growing business units, including ESG & Sustainability. There was industry recognition for MJ Hudson at industry awards, with the Group named a finalist for five Drawdown awards, winning three: Best ESG Advisory Services; Best ESG Technology (for its newly launched ESG Advantage digital platform); and Best Marketing and Communications Advisory. The Outsourcing division also picked up an award from Private Equity Wire, in March 2022, winning for Best ManCo Solution, in an award category voted on solely by the market.

The sole acquisition made in the period was that of Saffery Champness Fund Services Limited, a Guernsey based fund administration business, adding more scale to the Group's services in this field. In addition, FidesIQ, a joint venture with SmartCats, in the Data & Analytics division, was launched. . This joint venture is a FinTech and advisory business that helps pension funds improve the way they monitor and evaluate the success of the investment decisions they make and the advice they receive. The integration of acquisitions made earlier in the financial year remains on track, with contributions from the Irish Super ManCo trading twelve months ahead of expectations.

Market tailwinds supporting the further growth of the Group remain. The Group provides the "picks and shovels" to the fast-growing alternative assets segment within asset management. Oversight and regulation is increasing, as this segment grows, creating greater need for the Group's specialist advice, services and tools. This is all supported by the global trend towards outsourcing.  

Financial summary and key performance indicators

Where Group performance has been presented on an adjusted basis, this is to give a clearer picture of the underlying performance of the business, by removing pass-through revenues and exceptional costs. A reconciliation to statutory results is presented within this statement. The Group includes non-GAAP measures where it is deemed useful and necessary.

1.        Adjusted results exclude discontinued businesses (revenue £0.1m - H1 FY21 £0.1m)

2.        Revenue under IFRS includes all revenues received by the Group. Within the Group's FMS subdivision (Outsourcing) a material proportion of revenue is typically passed through to clients as a specific payment linked to the performance of the clients' funds. This is reflected in direct costs of sales. In managing the business and looking at underlying trends for the Group as a whole, management considers that these payments can have a distorting effect. Underlying revenue is a measure defined to specifically excludes these items. It provides a more representative metric, especially in relation to the value created by the Group, its underlying growth and the operating efficiency of its activities. These pass-through revenues have increased in the period due to a significant new Luxembourg AIFM client's first billing.

3.        Adjusted EBITDA is segment profit / (loss) before share based payments including LTIP expense, discontinued business losses, and M&A and financing costs. Underlying adjustments are explained in more detail below.

4.        Adjusted profit before tax is calculated by taking adjusted operating profit less finance expenses.

5.        Adjusted EPS takes the adjusted profit after tax divided by the weighted average shares outstanding at the period end.

Commenting on the results, CEO of MJ Hudson, Matthew Hudson, said:

"Our continued growth is built on a determined effort to translate our growing market reputation and expertise into better quality revenues. While some lower margin advisory services suffered from the lingering, albeit diminished, overhang of Covid-19, we have, in line with our longer-term strategy, focussed on accelerating our high-margin Data & Analytics solutions and scaling up our annuity-style outsourcing services. Our award-winning ESG & Sustainability business unit is leading our growth, successfully working together with other teams within the Group to deliver unique combinations of services to our growing list of clients.

Supported by a strong brand, we have built a robust pipeline of new business, particularly in Outsourcing and Data & Analytics, and with an emphasis on subscription and other recurring revenues, as well as multi-service engagements. This includes large mandates, closed post-period, and more we expect to close both during the current financial year, and beyond. The board remains confident in management's ability to continue growing the business in the second half and (per our January trading update), expects the Company to deliver strong growth at the upper end of market guidance."

A briefing for analysts will be held at 9.30am, this morning via a Zoom video call. Registration is through mjhudson@buchanan.uk.com.

For further information contact:

This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation

About MJ Hudson

MJ Hudson (AIM:MJH) is the end-to-end solutions provider to the US$100 trillion+ asset management industry, specialising in its fastest growing segment, private markets (including private equity and venture capital). 

The Company offers investors access to the growth in private markets as a tech-enabled 'picks and shovels' play. 

Founded in 2010, by CEO Matthew Hudson (a private markets lawyer and former fund manager), MJ Hudson was admitted to the AIM market of the London Stock Exchange in 2019. The Group has grown to more than 300 professionals, serving more than 1,000 clients, across the globe, including some of the industry's largest players and 18 of the FTSE 100.

Several factors have contributed to the Group's success, to date, and support strong growth expectations, for the future: 

1.   Private markets are growing fast, and MJ Hudson provides the picks and shovels

2.   As private markets grow, so do scrutiny and regulation, increasing the need for the Group's specialist advice and services, particularly in areas like ESG, where it has award-winning solutions

3.   As it evolves, the sector is increasingly embracing technology, data, and analytics, where MJ Hudson has market-leading and award-winning tools and in which it continues to invest

4.   The Group's multi-service approach creates multiple client touchpoints, building stronger, longer-term relationships, and making it easier to sell in additional MJ Hudson services

5.   Performing these services generates vast amounts of data, which MJ Hudson aggregates and analyses, in order to further support its clients, by developing next-generation tools and fine-tuning existing services

For more information, please visit our website: www.mjhudson.com/investors  

LinkedIn: www.linkedin.com/company/mj-hudson/
Twitter: www.twitter.com/MJHudsonCorp

Chief Executive's statement

MJ Hudson, the end-to-end solutions provider to the asset management industry, is pleased to report its interim results for the six months ended 31 December 2021.

Underlying revenues grew by 50%, compared with the same period last year and adjusted EBITDA increased to £3.4m (H1 FY21: £1.8m). Adjusted pre-tax profits increased to £1.6m (H1 FY21 £0.4m) with EPS of 0.9p (H1 FY21: 0.2p). Organic revenue grew by 7% in the period (H1 FY21 - 4%), with organic revenue for Outsourcing and Data & Analytics growing21% and 34%, respectively. However, Advisory organic revenue contracted by 16% during the period, as explained, below.

During the period, the Group continued its strategy of focussing on higher margin business units in the Outsourcing and Data & Analytics divisions. For H1 FY22, Advisory revenue represented 25% of the total compared with 45% in the prior period; Outsourcing is now the single largest division by revenue, accounting for 45% of the Group in H1 FY22, with Data & Analytics increasing to 30%.

Adjusted EBITDA margins increased to 20.0% (H1 FY21 - 15.9%), even as the Group continued to invest into growth, in order to take advantage of opportunities to scale ESG & Sustainability and the Irish Super ManCo, as well as other areas of the business. Once these major investments into personnel, systems and infrastructure complete (expected to be in FY23), margins are anticipated to improve yet further.

During the reporting period, the Group acquired Saffery Champness Fund Services, a Guernsey based fund administration provider. Following regulatory approval, the entity was renamed MJ Hudson Fund Services Guernsey Limited and was consolidated from the beginning of November 2021. As a result, the first meaningful contribution from this business line will be generated in the second half of FY 2022.

Net debt was £13.0m at the end of the period (excluding lease liabilities) compared with £1.6m net cash in December 2020, The extra funding was used to support planned infrastructure investments and to support accelerated growth in the Irish Super ManCo and ESG & Sustainability. As at the end of December 2021, LTM net debt/adjusted EBITDA was 1.8x.

Segment adjusted performance

*Outsourcing division results include Luxembourg, Fund Administration and Regulatory Consulting business which were previously included

under Organic Investments. To aid comparison the FY21 comparatives have been added to Outsourcing also.

**Adjusted EBITDA takes the segment profit from the segment note and adds back share based payments and LTIP expense and losses from discontinued operations.

Performance for the individual segments is as follows:

Data & Analytics (30% of Group revenue)

This division achieved 89% revenue growth and 34% organic revenue growth. Adjusted EBITDA margin increased to 27.5% from 22.2%. The MJ Hudson ESG & Sustainability business saw 49% organic sales growth compared to H1 FY2021, in response to sustained customer demand and the launch of the ESG Advantage software product. The fund performance analytics business, acquired in December 2020, is now fully integrated and delivering encouraging revenue at high margin, due to the automated nature of its business model. It is also proving to be a valuable point of entry to the Group for US based and other blue chip alternative funds. The quantitative solutions business was successfully integrated in the review period (acquired late June 2021).

Outsourcing (45% of Group revenue)

This division achieved 126% revenue growth and 21% organic revenue growth. Luxembourg AIFM, fund administration, and regulatory consulting, which were previously classified as Organic Investments in FY21 have all now moved to Outsourcing from FY22, reflecting the maturity of these businesses. Overall growth has been driven by the Irish Super ManCo, acquired in February 2021. In this business, AUM increased from €6bn at time of acquisition to €50bn at half year stage and this has increased further since December, as a result of significant client wins. Organic growth has been strongest in the Luxembourg AIFM business and UK fund administration team, in the period. Adjusted EBITDA margin improved from 11.8% to 18.2% with gains coming from the former Organic Investments and the impact of the Irish Super ManCo.         

Advisory (25% of group revenue)

This division, which comprises the law firm and the Investment Advisory business, experienced a 16% reduction in revenue. This was primarily owing to a restructuring of the law firm, last year, which saw three partners leave, resulting in H1 FY21 revenues falling 15.7% (£0.8m) compared to the same period in the previous year. This revenue dip is expected to be temporary: two law partners have since joined, and they are beginning to make good progress. In the Investment Advisory business, one client in the public sector renegotiated its engagement with the Group, resulting in some revenue loss from that client, and reduced EBITDA margins of 14.0%, compared to 15.7% in H1 FY21. However, the business has since seen a number of new client successes, with a large multi-year contract awarded by the ACCESS pool announced after the period end. This will shape results for the full year FY22 and beyond.

Incubation activities have previously been reported within a fourth category, Organic Investments. As set out above, these businesses have achieved profitability and they are now reported within Outsourcing. Historically, the Group has set up Organic Investments in circumstances where - by way of services or geography - there is a compelling investment case, but where M&A opportunities are unattractive or otherwise do not pass due diligence processes. This has been a successful route to growth for the Group.

New business activity

The Group continues to attract ever larger clients, with a number of notable wins in the period, as reported in the Group's trading update of January 31:

1.     The ESG & Sustainability and IR & Marketing Solutions teams jointly won several mandates to provide technical and marketing services to a range of private markets fund managers. This combined service has since been shortlisted as Specialist Adviser of the Year at the Private Equity Awards 2022

2.     The Luxembourg fund services team won a mandate from a $600bn global fund manager, including ESG & Sustainability services

3.     The law firm was instructed on a series of investments made by a FTSE 100 asset manager

4.     The investment consulting team won a multi-year, multi-million-pound private markets mandate from a £35bn local government pension scheme pool

5.     The Irish Super ManCo has secured major clients, including a £20bn+ multi-strategy asset management house, pushing assets under management ("AUM") above €50bn. The team in Ireland is generating record revenue levels and is an exciting area of growth, moving into the second half of the year

Post period, the Group has executed on several of the major contracts from its H1 FY22 pipeline, including a global investment bank and a top-5 global private equity house. The Group continues to prioritise engagements including the provision of multiple services and recurring revenues.

The Group continued to invest in marketing and business development and a strong pipeline built during the period has seen record revenues achieved in several business units since period-end.

Acquisitions

During the period, the Group acquired Saffery Champness Fund Services Limited, a Guernsey based fund administration business, from the accountancy group Saffery Champness. This has provided greater scale to the Group's multi-jurisdictional fund administration business, within the Outsourcing division. The acquired business generated revenues of £1.4m for the twelve-month period to March 2021 with an EBITDA margin comparable with the Group´s Outsourcing division on a pro forma basis.

One of MJ Hudson's strengths has proven to be its ability to scale acquisitions, once they have been integrated into the Group. For example, the ESG & Sustainability team and the North American IR & Marketing Solutions team, have both grown rapidly since acquisition in 2019 and 2020, respectively, and are expecting to continue on this trajectory. The Irish Super ManCo business acquired in February 2021 continues to progress well, trading twelve months ahead of plans set at the time of acquisition. The cross-selling opportunities and strong brand of MJ Hudson both provide a good catalyst for specialist, owner managed businesses to flourish. The portfolio of businesses acquired in calendar 2021 grew revenue at an average of 36% in the six months to Dec 2021, compared with their periods prior to consolidation.

Net debt

Net debt was £13.0m as at the end of December 2021. In August 2021, the Group borrowed an additional £7m from Santander under the terms of its five-year loan facility. This was to fund infrastructure investments and M&A, and to support accelerated growth in ESG & Sustainability and the Irish Super ManCo business, which is significantly ahead of the business targets set at acquisition. No further funding extension is expected as this business is now capitalised at the maximum required level of €10m. In January 2022, the Group borrowed a further £3m to accelerate investment into growth and technology.

As set out above, LTM net debt/adjusted EBITDA, as at the end of December 2021, was 1.8x. For the full year FY22, this metric will be impacted by the additional borrowing, in January 2022, set out above, but is expected to be tempered by a full EBITDA contribution from recent acquisition and the continued growth of the Group. Management expects to continue to manage this metric within growth company norms.

Reconciliation of adjusted financial measures and statutory results

*** Fair value movements includes gains and losses on deferred consideration and investments. In H1 FY2022, the 1.2m adjustment primarily related to deferred consideration fair value loss (H1 FY2021 benefitted from £0.9m fair value gain on investments).

Adjusted financial measures are presented to provide additional information to best represent the performance of the business. In particular:

·      fundraising and acquisition costs of £1.1m (H1 FY21 £1.3m) include the fees relating to the fundraising from Santander in the period (see Net Debt section above) and the Saffrey Champness Fund Services Limited acquisition;

·      non-recurring costs of £0.6m (H1 FY21 £0.7m) are one-off in nature and comprise reorganisation and office wind-down costs of £0.5m and professional fees of £0.1m;

·      share based payment and LTIP charges primarily relate to share based schemes that were established at the time of the IPO; and

·      discontinued business losses represent the loss from individual entities that have either been wound up in the year or management has concluded will be discontinued in the near future due to lack of productivity. This is a non-IFRS alternative financial measure.

Cashflow

Net cash expended from operating activities improved to £(0.3)m from £(1.2)m in H1 FY21. On an underlying basis, net cash generated from operating activities increased from £0.9m (H1 FY21) to £1.4m.

The investment into the growth of the group has continued and net cash used in investing activities was £5.3m (H1 FY21 £5.7m).

Cash and cash equivalents at end of period were £11.3m (H1 FY21 £4.9m).

Dividend

The Group made a dividend payment for the financial year FY21 in January of 2022. The Group intends to repeat this approach in the current year and will pay a single dividend in respect of FY22 in January 2023. Per previous guidance, whereas the prior year dividend was in respect of the six-month period to June 2021, the payment for FY22 will be in respect of the full twelve-month period to June 2022. Going forward, and as communicated upon IPO, management is committed to a progressive dividend policy, which reflects the sustainable growth in the business.

Board

The Board of MJ Hudson was appointed prior to the Company´s admission to AIM, in December of 2019, and has been unchanged, since that date. Its composition satisfies the requirements for a company registered in Jersey, as well as its obligations under the AIM rules, and the guidance set out under the QCA code. The structure of the Board is reviewed on a continuing basis, both in this context and given its wider responsibilities. In a separate release today, we have announced, the appointment of former Senior Independent Director, Mr Geoffrey Miller, to the position of Non-Executive Chair of the Board, effective 1 May 2022, and the promotion of the COO, Mr Odi Lahav, to the position of Executive Director of the Board, subject to standard NOMAD due diligence. At the same time, Mr Charles Spicer, the current Chair, replaces Mr Miller as the Senior Independent Director and will chair the Remuneration Committee. These changes are consistent with the Company´s transformation since its admission to AIM, as demonstrated by these interim results, and with its high growth potential.

Current trading and outlook

The strong trading reported in the Group´s January update has continued in recent months. As a consequence, the Board expects to deliver growth for the full year to June 2022 at the upper end of market forecasts. Whilst significant investment will continue into areas of growth in FY23, it is expected that the following years will see margins increase, as the revenue mix shifts further towards Outsourcing and Data & Analytics and infrastructure projects complete.

12 April 2022

MJ HUDSON GROUP PLC

Consolidated statements of comprehensive income