Source - LSE Regulatory
RNS Number : 7664T
Fintel PLC
21 March 2023
 

The following amendments have been made to the 'Full year results for the year ended 31 December 2022' announcement released on 21 March 2023 at 07:00 am under RNS No 5940T.

The ex-dividend date for the final dividend should have read as 18 May 2023 (previously stated as 22 May 2023)

The record date for the final dividend should have read as 19 May 2023 (previously stated as 23 May 2023)

All other details remain unchanged. The full amended text is shown below.

 

 

 

Fintel plc

 

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

 

Full year results for the year ended 31 December 2022

 

 A strong performance, strategic delivery, and confident outlook

 

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 2022. 

 

Financial highlights

2022

 

2021

 

Change

 

Alternative performance measures




Core1 revenue

£56.4m

£52.2m

8%

Core SaaS & subscription revenue

£36.8m

£34.3m

7%

Core adjusted EBITDA2

£18.6m

£17.1m

9%

Core adjusted EBITDA margin

32.9%

32.7%

20bps





Adjusted EBITDA

£19.4m

£18.3m

6%

Adjusted EBITDA margin

29.1%

28.6%

50bps

Adjusted EPS2

12.2p

10.5p3

16%

Cash conversion4

118%

116%

200bps


Statutory measures




Statutory revenue

£66.5m

£63.9m

4%

Statutory EBITDA

£16.7m

£25.0m

-33%

Statutory EPS

9.5p

15.7p

-39%

Net cash

£12.8m

£2.6m

392%

Dividend per share

3.25p

3.00p

8%

 

Financial highlights

 

·     Financial performance in line with Board expectations

·     Strong core revenue growth of 8% to £56.4m ahead of our medium-term target, underpinned by significant growth in Fintech and Research division

·     Solid adjusted EBITDA margin of 29.1% delivered alongside continued reinvestment into digital capabilities   

·     Improved quality of earnings across all divisions, with SaaS and subscription revenue growing 7% to £36.8m

·     Statutory EBITDA of £16.7m (FY21: £25m) and Statutory EPS 9.5 pence per share (FY21: 15.7 pence per share). FY21 results benefit from one off exceptional gains of £7.8m.

·     Net cash position of £12.8m (FY21: £2.6m) with Revolving Credit Facility ("RCF") fully repaid and undrawn since June 2022 driven by operating cash conversion of 118% (FY21: 116%)

·     Strong balance sheet with new and increased four year £80m RCF completed in December 2022, on more favourable terms, providing significant, flexible funding capacity for inorganic and organic growth opportunities arising in the market

·     Final dividend of 2.25 pence per share proposed, resulting in a full year dividend of 3.25 pence per share, an increase of 8% on prior year, reflecting the Group's strong business performance and cash generation

 

Strategic and operational highlights

 

·      Growth in recurring revenue across all three operating divisions:

  Continued growth in core SaaS and Subscription revenue across all three operating divisions, driven by demand for technology and insights services across customer base

  Significant progress in conversion to Distribution as a Service ("DaaS"): c.70% (target 60%) of Distribution Partner revenue converted to multi-year subscription agreements by 31 December 2022

·      Multiple growth drivers:

  Extension of core compliance offering with launch of comprehensive support package in response to the FCA Consumer Duty regulation

  Continued expansion of Defaqto's research and ratings platform to help intermediaries and product providers meet increasing regulatory requirements

  Major upgrade to proprietary financial planning technology with additional modules and new back office integration enhancing the intermediary software service offering

  Partner Portal phase two to launch in 2023 and intermediary member portal in development, streamlining access to service and technology platform

  Launch of Fintel Labs incubator to strengthen technology proposition and support innovation across the market

  Selective M&A pipeline expected to enhance growth in the medium term, underpinned by enhanced financial reserves and strong cashflow conversion

·      Industry recognition for business, staff and ESG strategy:

  Industry leading intermediary support service provider, winning Professional Adviser "Best Support Services for Advisers" award for an incredible, fifth consecutive year

  Rated as an "Outstanding Company to Work for" and included in the top 20 "Best Companies to Work for" in financial services by Best Companies

  ESG strategy shortlisted for "ESG Initiative of the Year" by ICA Compliance Awards, and further commitments outlined via launch of the 2023 Better Outcomes Plan

 

Appointment of new Chair

 

·     Phil Smith, currently Independent Non-Executive Director, to become Chair of Fintel following the Group's AGM on 18 May 2023; Ken Davy to remain on the Board as Non-Executive Director

·     Phil brings deep industry knowledge, leadership qualities and a wealth of business transformation experience, along with extensive expertise in digital delivery and alignment to the Company's values and strategic objectives

 

Current trading and outlook

 

·     Confident start to new financial year, consistent with the Board's expectations

·     Organic growth is expected to be driven by ongoing software adoption across our membership base, increased financial technology penetration, and continued adoption of DaaS product.

·     Selective M&A pipeline expected to enhance growth in the medium-term; significant funding to capitalise on market opportunities

·     Well positioned for strong and sustainable growth, underpinned by positive market dynamics and structural growth drivers, including Consumer Duty, increased demand for financial advice and regulatory change

 

Joint CEO, Matt Timmins commented:

 

"Fintel continues to deliver on its strategic plan of accelerating growth, digitisation and service expansion. During 2022 we delivered another set of strong financial results, while continuing to invest in our technology and services platform.

 

"We have started 2023 with real momentum, continuing to trade in line with expectations and progress our strategy at pace, forging multi-year strategic partnerships and developing our unique technology and service platform.

 

"As we look to the future, we are confident in our financial agility and growth strategy that is underpinned by our resilient and highly cash generative business. We are well positioned for strong and sustainable growth, inspiring better outcomes for all."

 

Notes

1Core business excludes revenues from panel management, surveying and employee benefits software up to the date of strategic disposal of Zest Technology ltd in 2021.

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.

3Excluding effects of a significant one-off impact of the change in corporation tax rates in the UK during 2021, EPS in 2021 would have been 12p on a comparable basis.

4Underlying 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 21 March 2023 via an online video conference facility. To register your attendance, please contact fintel@mhpgroup.com.

 

For further information please contact:

Fintel plc

Matt Timmins (Joint Chief Executive Officer)

Neil Stevens (Joint Chief Executive Officer)

David Thompson (Chief Financial Officer)

 

via MHP Group

Zeus (Nominated Adviser and Joint Broker)

Martin Green

Dan Bate

 

+44 (0) 20 3829 5000

Investec Bank (Joint Broker)

Bruce Garrow

David Anderson

Harry Hargreaves   

 

+44 (0) 20 7597 5970

MHP Group (Financial PR)

Reg Hoare

Robert Collett-Creedy

 

+44 (0) 20 3128 8147

Fintel@mhpgroup.com

 

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

 

 

CHAIR'S STATEMENT

 

Year in review

 

2022 was a year in which we transitioned to a post pandemic world whilst retaining more flexible ways of working. At the same time, our customers, their clients and our colleagues faced increasing pressures arising from macroeconomic uncertainty and the rising cost of living.

 

In a time such as this, our role in helping the UK's retail financial services sector to deliver better outcomes to consumers has never been more crucial or more relevant. Against a backdrop of market volatility, 2022 has been another strong year for Fintel, both in terms of our financial results and in extending our opportunities for future growth.

 

We continue to deliver market-leading regulatory support to financial intermediaries, extending our core compliance offering with the launch of a comprehensive support package in response to the new FCA Consumer Duty regulation, and achieving the Professional Adviser "Best Support Services for Advisers" award for an incredible, fifth consecutive year.

 

We have significantly enhanced our proprietary adviser technology platform with a new back office integration and the launch of new modules, whilst further expanding our ratings portfolio to help financial intermediaries and product providers meet increasing regulatory requirements and better serve their clients.

 

SaaS and subscription revenue has grown across all operating divisions as demand for technology and insight services continues across our diverse customer base.

 

Significant progress has been made in the Distribution Channels division, through continued adoption of our Distribution as a Service ("DaaS") proposition, supporting product providers to design and deliver better products, and further enhancing our strategic partnerships.

 

Our business model of strong reoccurring income with most of the remainder being solid repeatable income, gives us tremendous visibility of and confidence in our overall revenues.

 

Technology and innovation remain central to our growth strategy, and I am delighted to announce the launch of Fintel Labs, designed to further strengthen our technology proposition whilst supporting innovation in the sector. We continue to deploy our high touch, high tech approach, and I believe that our technology platform will play a central role in shaping this new era of financial planning.

 

There could be no clearer demonstration of the robustness of our strategy, business model and cash conversion strengths, than our acquisition of Defaqto in 2019. Purchased for £74.3m (of which c.50% was borrowings) we have almost doubled its profits since acquisition whilst all borrowings have been repaid and the Group now has £12.8m surplus cash on balance sheet.

 

As a purpose-led organisation, a continuing focus for the Board is the positive impact we can have through our unique market position, and this year saw us continue to strengthen our environmental, social and governance ("ESG") commitments, aligning to supplementary external reporting standards and defining our Better Outcomes Plan, designed to deliver measurable benefits for our business, the financial sector and broader society.

 

As we progress at pace, the expertise and dedication of our team remains our driving force, and we were delighted to be awarded the accolade of "Outstanding Company to Work for" as voted for by our people, whilst also being rated as one of the top 20 "Best Companies to Work for" in the financial services sector. This is a testament to our people, our unique culture and our shared success, and I am confident that together we will continue to fulfil our purpose, achieve our strategic ambitions and deliver long-term value for all of our shareholders.

 

Financial performance and dividend

 

The underlying resilience of our business has been clearly demonstrated through our strong financial performance for FY22, despite the backdrop of a challenging macroeconomic environment.

 

Both our revenue and adjusted profit before tax continued to grow in line with the Board's expectations. This, coupled with continued strong cash flow conversion and balance sheet, enabled us to enhance our dividend policy, which resulted in an interim dividend of 1.0 pence per Ordinary Share, paid in November 2022. I am pleased to confirm that the Directors are recommending a final dividend of 2.25 pence per share payable on 19 June 2023, resulting in a full year dividend of 3.25 pence per share.

 

Progress against our strategy

 

Our strategic framework reflects our growth ambitions and the market opportunity as we continue to invest in and digitise our model, building secure long-term value creation for our stakeholders.

 

I am pleased to report that we continue to make significant strategic progress and deliver against our vision.

 

Board changes

 

May 2022 saw Phil Smith join the Board as an Independent Non-Executive Director, following a robust, independently run recruitment process. Phil was selected due to his industry knowledge, leadership qualities and wealth of business transformation experience, along with his deep expertise in digital delivery and alignment to the Company's values and strategic objectives. Phil complements the range of skills we have on the Board. I take this opportunity to thank the Board members for their support, diligence and commitment throughout the past 12 months.

 

Following Phil's appointment, our succession plans have been updated and, as indicated last year, I am pleased to announce that, with effect from our AGM, it is proposed that Phil becomes Chair of Fintel, whilst I will revert to being a Non-Executive Director. We are already working on this transition, and I am excited by the prospect of Phil taking our already successful Group to greater heights.

 

Outlook

 

As we leave the COVID-19 pandemic behind us, I am confident that our unique technology and service platforms coupled with the valuable expertise and immense knowledge of our people continue to provide a strong foundation for future growth.

 

I would like to express my deep gratitude to all my Fintel colleagues for their hard work, commitment and dedication to the Company. I am completely confident that the Company will continue to grow and thrive over the years to come.

 

Ken Davy

Non-Executive Chair

 

 

JOINT CHIEF EXECUTIVE OFFICERS' STATEMENT

 

Strategic delivery

 

2022

2024 target

8%

5-7%

33%

35-40%

65%

70-80%

Core revenue growth

 

We set our medium-term objective for core business revenue growth at 5-7% annually. In 2022 we are delighted to have outperformed our target range, delivering 8.0% core revenue growth (FY22: £56.4m; FY21: £52.2m). This was largely driven by significant revenue growth in our Fintech and Research division following accelerated deployment of our proprietary financial planning software and continued expansion of our research and ratings platform.

 

EBITDA margin

 

Earnings quality of the core business

 

Growth opportunity

 

Value generation

 

The cash-generative nature of our business, combined with recurring revenues from a diverse customer base ensure we create and maintain the financial, technology and skills capacity to deliver our strategic objectives.

 

Re-investment in our people, data and digital capabilities enables us to focus on developing new areas where we have proven our unique capabilities and established customer relationships.

 

Adjusted EPS was strong at 12.2 pence per share (FY21: 10.5 pence per share), increasing by 16% compared to the prior year. On a statutory basis EPS was 9.5 pence per share (FY21: 15.7 pence per share).

 

Strategic priorities

 

Our people

 

We continue to invest in our people as we seek to build on an engaging, inclusive workplace where everyone can thrive. In response to employee feedback we built on our wellbeing strategy with the introduction of a Flexible Benefits Platform and hiring a Head of Talent and Development, strengthening our commitment to internal mobility and progression. We have also enjoyed the contribution of our new Board colleague Phil Smith, who has bought valuable new skills and experience to the Board.

 

Our people are the backbone of our Company and the driving force behind everything that we achieve. We were delighted to be recognised as an "Outstanding Company to Work for" and included in the top 20 "Best Companies to Work for" in financial services by Best Companies. We would like to thank each and every one of our colleagues for their continued effort and impact in making us the business we are today.

 

Outlook

 

Matt Timmins and Neil Stevens

Joint Chief Executive Officers

 

 

FINANCIAL REVIEW

Year ended 31 December 2022

 


Year ended

Year ended


31 December

31 December


2022

2021

 

£m

£m

Group revenue

66.5

63.9

Expenses

(47.1)

(45.6)

Adjusted EBITDA

19.4

18.3

Adjusted EBITDA margin %

29.1%

28.6%

Depreciation

(0.3)

(0.3)

Depreciation of lease asset

(0.4)

(0.6)

Amortisation of development expenditure and software

(1.1)

(1.5)

Adjusted EBIT

17.6

15.9

Operating costs of an exceptional nature

(0.7)

-

Gain on sale of subsidiary

-

4.3

(Impairment)/gain on sale of operations

(0.7)

3.5

Share option charges

(1.3)

(1.1)

Amortisation of other intangible assets

(2.0)

(2.0)

Net finance costs including exceptional finance costs

(0.5)

(0.7)

Profit before tax

12.4

19.9

Taxation

(2.3)

(4.3)

Profit after tax

10.1

15.6

Adjusted earnings per share** ("EPS")

12.2

10.5

 

**  Adjusted EPS excludes operating exceptional 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 performed well during 2022, with core revenue growth of 8%, outperforming our medium-term core revenue growth target of 5-7%. 

 

Divisional performance

 

Intermediary Services

 

·     Average revenue per customer ("ARPC") of £7,807 (FY21: £7,026) - an increase of 11.1%;

·     Membership fee income of £11.5m (FY21: £10.9m) - an increase of 5.5%;

·     Software licence income of £6.3m (FY21: £6.0m) - an increase of 5.0%;

·     Additional services income of £5.7m (FY21: £5.2m) - an increase of 9.6%; and

·     Gross profit* of £9.5m (FY21: £7.4m) with gross profit margin** of 40.4% (FY21: 30.8%). The improved margin reflects increased investment in our delivery platform, a broadened user base and a consequential uplift in ARPC. Excluding the impact of the prior year sale of Zest Technology, comparable gross profit margin was 34.1% during 2021. 

 

*    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

 

·     Core commission revenues of £8.1m (FY21: £8.3m). Allowing for the disposal of Verbatim during 2021, core commission revenues have increased by 22.7% on a comparable basis, largely driven by strong lending performance in the year. Core commission revenues in 2021 include Verbatim revenues of £1.7m to September 2021, being the date of the strategic disposal;

·     Marketing services revenues of £4.9m (FY21: £5.1m);

·     Non-core panel management and valuation services revenues of £10.1m (FY21: £9.8m); and

·     Gross profit of £9.2m (FY21: £10.9m) with gross profit margin of 39.8% (FY21: 47.2%). Adjusting for the impact of the Verbatim disposal, prior year gross profit margin is 38.4% on a like-for-like basis. The year on year increase in margin on a like-for-like basis is reflective of strong lending performance in mortgages balanced by increased activity in non-core surveying business at lower margins, and the increased cost of delivering more in-person events as opposed to virtual events seen during periods of COVID lockdown throughout 2021.

  

Fintech and Research

 

In 2022 we further enhanced our fintech and research capabilities, including:

·     Enhancements to financial planning software platform including new back office integration and launch of new cashflow modelling and fund analysis modules;

·     Expansion of ratings portfolio coverage, including launch of new Diamond Ratings for investment trusts; and

·     Defaqto ESG research platform expanded to cover 110 retail investment funds.

 

In 2022 Fintech and Research division delivered:

·      Software revenue of £9.5m (FY21: £8.0m) - an increase of 18.8%;

·      Product ratings revenue of £8.9m (FY21: £8.0m) - an increase of 11.2%;

·      Other income of £1.5m (FY21: £0.8m) from consultancy and ad hoc work; and

·      A strong gross profit margin of 62.8% (FY21: 64.3%).

 

Profitability

 

Exceptional items

 

·    Operating expenses (£0.7m): £0.5m "Transformation costs" which includes implementation costs to enhance Fintel's customer relationship management platform ("CRM") and a new enterprise resource planning system ("ERP"), £0.1m debt refinance and £0.1m M&A costs; and

·    Impairment on disposal of operations (£0.7m) relating to impairment of the contingent consideration recognised in respect of the Verbatim funds.

 

Share-based payments

 

Financial income and expense

 

Taxation

 

Earnings per share

 

Cash flow and closing cash position

 

Debt refinancing

 

During the year, the Board conducted a planned reassessment of the Group's available financial resources as the RCF entered the final 18-month period until maturity. The Board decision included extending the existing RCF to provide additional debt funding for both organic growth and strategic acquisitions. A new four-year RCF was arranged, increasing our borrowing capacity to £80m. In doing so, the banking syndicate was increased from two to three banks, more favourable terms were achieved including a reduction in overall leverage-based margin grid from 150bps-260bps to 150bps-240bps, the option of a £20m accordion, and the retention of existing leverage covenants. 

 

Capital allocation

 

The Group's priority is to execute targeted growth through digitisation, growing revenue, margin and quality of earnings. Strategic initiatives include organic investment in enhancing and broadening our product offering; and inorganic investment, such as complementary partnerships and strategically aligned acquisitions. The Group manages its capital structure through regular review by the Board. 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

 

FRC Audit Quality Review

 

As part of its process for monitoring the standards of audit work, the Audit Quality Review team of the Financial Reporting Council (FRC) reviewed EY's audit of the Group accounts for the year ended 31 December 2021, with the FRC report received in November 2022. There were no key findings to report.

 

Accounting policies

 

Going concern

 

David Thompson

 

Chief Financial Officer

 

 

Consolidated statement of profit or loss and other comprehensive income

for the year ended 31 December 2022




2022

2022


2021

2021



2022

Underlying

Year ended

2021

Underlying

Year ended



Underlying

Adjustments*

31 December

Underlying

adjustments

31 December

 

Note

£m

£m

£m

£m

£m

£m

Revenue

6

66.5

-

66.5

63.9

-

63.9

Operating expenses

7-8

(50.2)

(0.7)

(50.9)

(49.1)

-

(49.1)

Amortisation of other intangible assets

12

-

(2.0)

(2.0)

-

(2.0)

(2.0)

Gain on disposal of subsidiary


-

-

-

-

4.3

4.3

(Impairment)/gain on disposal of operations

 

-

(0.7)

(0.7)

-

3.5

3.5

Group operating profit


16.3

(3.4)

12.9

14.8

5.8

20.6

Finance expense

9

(0.4)

(0.1)

(0.5)

(0.7)

-

(0.7)

Profit before taxation


15.9

(3.5)

12.4

14.1

5.8

19.9

Taxation

 

(2.9)

0.6

(2.3)

(3.6)

(0.7)

(4.3)

Profit for the financial year

 

13.0

(2.9)

10.1

10.5

5.1

15.6

Profit attributable to shareholders:








Owners of the Company




9.8



15.4

Non-controlling interests

 

 

 

0.3

 

 

0.2

 

 

 

 

10.1

 

 

15.6

Earnings per share - adjusted (pence)

10



12.2p



10.5p

Earnings per share - basic (pence)

10



9.5p



15.7p

Earnings per share - diluted (pence)

10

 

 

9.4p

 

 

15.7p

 

There are no items to be included in other comprehensive income in the current year or preceding year.

 

Consolidated statement of financial position

as at 31 December 2022



31 December 2022


31 December 2021

 

Note

£m

£m

 

£m

£m

Non-current assets







Property, plant and equipment

11

1.2



1.3


Lease assets

11

2.2



3.6


Intangible assets and goodwill

12

95.2



96.6


Trade and other receivables

 

1.6

 

 

2.6

 

Total non-current assets

 

 

100.2

 

 

104.1

Current assets







Trade and other receivables


10.6



9.8


Current tax asset


0.4



-


Cash and cash equivalents

 

12.8

 

 

9.4

 

Total current assets

 

 

23.8

 

 

19.2

Total assets

 

 

124.0

 

 

123.3

Equity and liabilities







Equity







Share capital

14

1.0



1.0


Share premium account

14

66.8



65.6


Other reserves

16

(51.3)



(52.3)


Retained earnings

 

80.8

 

 

73.9

 

Equity attributable to the owners of the Company



97.3



88.2

Non-controlling interest

 

 

0.5

 

 

0.3

Total equity

 

 

97.8

 

 

88.5

Liabilities







Current liabilities







Trade and other payables


18.6



17.0


Lease liabilities

13

0.4



0.4


Current tax liabilities

 

-

 

 

2.0

 

Total current liabilities

 

 

19.0

 

 

19.4

Non-current liabilities







Loans and borrowings

13

-



6.8


Lease liabilities

13

1.8



3.2


Deferred tax liabilities

 

5.4

 

 

5.4

 

Total non-current liabilities

 

 

7.2

 

 

15.4

Total liabilities

 

 

26.2

 

 

34.8

Total equity and liabilities

 

 

124.0

 

 

123.3

 

Consolidated statement of changes in equity

for the year ended 31 December 2022

 

Share
capital
£m

Share
premium
£m

Other
reserves
£m

Non-

controlling
interest
£m

Retained
earnings
£m

Total
equity
£m

 

Balance at 1 January 2021

1.0

64.8

(52.2)

0.2

61.0

74.8

 

Total comprehensive income for the year







 

Profit for the year

-

-

-

0.2

15.4

15.6

 

Total comprehensive income for the year

-

-

-

0.2

15.4

15.6

 

Transactions with owners, recorded directly in equity







 

Issue of shares

-

0.8

-

-

(0.1)

0.7

 

Dividends

-

-

-

(0.1)

(3.7)

(3.8)

 

Share option charge

-

-

1.1

-

-

1.1

 

Tax on share options exceeding profit or loss charge

-

-

0.1

-

-

0.1

 

Release of share option reserve on exercise

-

-

(1.3)

-

1.3

-

 

Total contributions by and distributions to owners

-

0.8

(0.1)

(0.1)

(2.5)

(1.9)

 

Balance at 31 December 2021

1.0

65.6

(52.3)

0.3

73.9

88.5

 

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

 

 

 

Consolidated statement of cash flows

for the year ended 31 December 2022



Year ended

Year ended



31 December

31 December



2022

2021

 

Note

£m

£m

Net cash generated from operating activities

17

15.6

17.1

Cash flows from investing activities




Purchase of property, plant and equipment


(0.2)

(0.2)

Development expenditure


(1.7)

(1.6)

Net proceeds from sale of subsidiary


-

8.7

Net proceeds from sale of operations

 

-

2.4

Net cash flows (used in)/from investing activities

 

(1.9)

9.3

Cash flows from financing activities




Finance costs


(0.2)

(0.5)

Loan repayments made


(7.0)

(23.0)

Transaction costs related to borrowing


(0.5)

-

Payment of lease liability


(0.5)

(0.8)

Issue of share capital


1.2

0.8

Dividends paid

 

(3.3)

(3.8)

Net cash flows used in financing activities

 

(10.3)

(27.3)

Net increase/(decrease) in cash and cash equivalents


3.4

(0.9)

Cash and cash equivalents at start of year

 

9.4

10.3

Cash and cash equivalents at end of year

 

12.8

9.4

 

Operating costs of an exceptional nature, as per note 7, are included in net cash generated from operating activities.

In 2021, net proceeds of £8.7m from sale of wholly owned subsidiary Zest Technology Limited, disposed of on 21 July 2021, is included in net cash from investing activities.

In 2021, net proceeds of £2.4m from sale of operations within 100% owned subsidiary SimplyBiz Investments Limited (formerly Verbatim Investments Limited) is included in net cash from investing activities.  

 

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 2022 and the year ended 31 December 2021 does not constitute the Group's statutory accounts for those periods. Statutory accounts for the period ended 31 December 2021 have been delivered to the Registrar of Companies. The statutory accounts for the period ended 31 December 2022 will be delivered to the Registrar of Companies following the Group's Annual General Meeting.

 

The auditors' reports on the accounts for 31 December 2022 and 31 December 2021 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 robustly tested the going concern assumption in preparing these financial statements, taking into account the Group's strong liquidity position at 31 December 2022 and a number of severe but plausible downside scenarios have been modelled, which collectively would be considered remote, and remain satisfied that the going concern basis of preparation is appropriate.

 

Specific consideration has been given to the recent events in Ukraine. As a UK only Group we are not directly impacted by the Russia-Ukraine conflict and we will remain alert as impacts becomes clearer.

 

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 2021.

 

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 firms.  Specific services provided under subscription model:  software as a service, support, compliance visits, and learning and development. 

The Group's membership is a subscription model, with income recognised in line with the access to the specific service provided (output method).   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.

Subscriptions are usually invoiced monthly in advance of the commencement of the subscription period and collected in the same month by direct debit. 

Additional services

Provision of additional compliance and business services provided on an ongoing or periodic basis: file checks, website hosting and maintenance, credit checking and learning and development. 

Revenue from other membership services is recognised at the point at which the specific service is delivered, or across an agreed support period as necessary, based on the value agreed with the customer.   Each service is assessed in line with IFRS 15 and revenue is recognised accordingly in line with the provision of service.

Compliance visits, file checks and website maintenance are collected monthly by direct debit and billed when the service is delivered.  Additional services are typically on credit terms and customers pay according to terms. 

Software licence income

Provision (and support) of software licences to intermediary firms within our network revenue is recognised as the performance obligation is satisfied over time. 

Revenue from software licences is recognised straight line over the licences period. The nature of the licences is such that the Group is required to undertake activities which impact the software and its utility to its customers throughout the licence period.

Invoices are raised and collected by direct debit in the month in which the licence charge relates, prorated as necessary where agreements are signed mid -month. 

Distributions Channels

Marketing services revenues

Provision of advertising, marketing services and event sponsorship to product providers.

Revenue is recognised in line with the service provided to the customer (output method). 

Invoices are typically raised on a monthly basis with a smaller number being 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 (output method). 

Invoices are typically raised on a monthly basis with a smaller number being 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 the third-party provider, who is considered to be the principal, of underlying 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. 

Commission revenues are typically received between one and four weeks after confirmation of the sale by the third-party provider.

Valuation services

Surveys and valuation services provided to clients.

Revenue is recognised at the point at which the service is delivered to the customer, based on the agreed price. 

Business-to-business valuation services are paid in advance or on credit terms 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 financial products that enable them to research, launch and distribute relevant products to the market.  The provision of software as a performance obligation is a promise of 'right to access' the software satisfied over a period of time. 

 

Provision of Engage software to help financial adviser client recommendations.

Revenue from software licences is recognised straight line over the licence period. The nature of the licences is such that the Group is required to undertake activities which impact the software and its utility to its customers throughout the licence period.

Software licences are invoiced, either, monthly or quarterly, in advance with payment terms applied.

 

Engage products are invoiced monthly and collected in the same month by monthly direct debit. 

Research - Risk Mappings, Fund Reviews and Rating Services

Star Ratings - an independent and trusted industry standard for assessing the feature quality and comprehensiveness of a financial product or proposition.  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.

Revenue from star and risk ratings is recognised straight line over the agreed contractual period of the licence, which is typically one year. 

Revenue from star and risk ratings is billed on an annual basis in advance, and customers pay according to agreed terms.

 

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.

Revenue

Revenue is generated from sales of software licences to Member Firms on a "right to access" basis. Where the Group is a value-added re-seller of software licences to Member Firms the key judgement is determining whether the Member Firm is a customer of the Group. Considering the nature of the Group's re-sale of software licences, judgement is required by management to ascertain the appropriate agent versus principal classification.

The key criterion in this determination is whether the value-added re-seller has ability to direct control of the physical service prior to transfer to the customer. When the Group has control of third-party goods or services prior to delivery to a customer, then the Group is the principal in the sale to the customer. As a principal, receipts from customers and payments to suppliers are reported on a gross basis in revenue and cost of sales. If the Group does not have control of third-party goods or services prior to transfer to a customer, then the Group is acting as an agent for the other party and revenue in respect of the relevant obligations is recognised net of any related payments to the supplier and reported revenue represents the margin earned by the Group.

The evaluation of control principally considers the ability to direct the use of and obtain substantially all of the remaining benefits of the provided asset or service. In respect of the re-sale of software licences, management has determined that the Group is the principal in the arrangement. The key factors in arriving at this conclusion are: the Company is responsible for fulfilling the software service by providing the licences directly to the customer, the Company carries inventory risk in the form of a requirement to acquire a minimum number of licences, the Company sells a modified version of the software that incorporates the Company's intellectual property, and the Company directly negotiates the listed selling price with the provider, whilst also having the option to discount this price to the end customer.

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.

 

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, product panelling and co-manufacturing services 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 for over 8,000 users; independent ratings and reviews of over 14,000 financial products and funds, licensed by over 300 brands; and research of over 43,000 financial 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 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 of an exceptional nature





(0.7)

Gain on disposal of subsidiary





-

Impairment/Gain 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 lease assets





(0.4)

Share option charge

 

 

 

 

(1.3)

Operating profit

 

 

 

 

12.9

Net finance costs

 

 

 

 

(0.5)

Profit before tax

 

 

 

 

12.4

 

 





Admin and



Intermediary

Distribution

Fintech and

support



Services

Channels

Research

costs

Group

Year ended 31 December 2021

£m

£m

£m

£m

£m

Revenue

24.0

23.1

16.8

-

63.9

Direct operating costs

(16.6)

(12.2)

(6.0)

-

(34.8)

Gross profit

7.4

10.9

10.8

-

29.1

Administrative and support costs

 

 

 

(10.8)

(10.8)

Adjusted EBITDA





18.3

Gain on disposal of subsidiary





4.3

Gain on disposal of operations





3.5

Amortisation of other intangible assets





(2.0)

Amortisation of development costs and software





(1.5)

Depreciation





(0.3)

Depreciation of lease assets





(0.6)

Share option charge

 

 

 

 

(1.1)

Operating profit

 

 

 

 

20.6

Net finance costs

 

 

 

 

(0.7)

Profit before tax

 

 

 

 

19.9

 

 

In determining the trading performance of the operating segments central costs have been presented separately in the current period. Segmental performance in the prior period has been presented consistently on the same basis.

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


2022

2021

 

£m

£m

Depreciation of tangible assets - owned

0.3

0.3

Depreciation of lease assets

0.4

0.6

Research expenditure

0.6

0.5

 

Underlying adjustments

Underlying adjustments include amortisation of other intangible assets and operating and finance costs of an exceptional nature.


Year ended

Year ended


31 December

31 December


2022

2021

 

£m

£m

Exceptional costs - operating



Gain on disposal of subsidiary

-

(4.3)

Impairment/(gain) on disposal of operations

0.7

(3.5)

Transformation

0.5

-

Loan refinance

0.1

-

M&A project costs

0.1

-

Exceptional costs - finance

Loan refinance costs

0.1

-

Other underlying adjustments

Amortisation of other intangible assets

2.0

2.0

Underlying adjustments - before tax

3.5

(5.8)

 

Underlying adjustments include the following:

An impairment of contingent consideration in relation to the earlier disposal of Simply Biz Investments Limited on 15th September 2021, implementation costs of our new CRM and ERP system, M&A pipeline costs, and legal and professional fees relating to the new revolving credit facility entered into during the year.

Exceptional finance costs of £0.1m comprise acceleration of unamortised arrangement fees relating to the extinguishment of the existing RCF facility.

Amortisation of other intangible assets relates to intangibles acquired on acquisition of Regulus Topco Limited, owner of Defaqto Limited, and Landmark Surveyors Limited. 

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 in prior periods. 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


2022

2021

 

£m

£m

Operating profit

12.9

20.6

Add back:



     Depreciation (note 11)

0.3

0.3

     Depreciation of lease assets (note 11)

0.4

0.6

     Amortisation of other intangible assets (note 12)

2.0

2.0

     Amortisation of development costs and software (note 12)

1.1

1.5

EBITDA

16.7

25.0

Add back:



     Gain on disposal of subsidiary

-

(4.3)

     (Gain)/impairment on disposal of operations

0.7

(3.5)

     Share option charge

1.3

1.1

     Operating costs of exceptional nature (note 7)

0.7

-

Adjusted EBITDA

19.4

18.3

Adjusted EBITDA of non-core surveying business

0.8

1.2

Core adjusted EBITDA

18.6

17.1

 

Operating costs of an exceptional nature 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


2022

2021

 

£m

£m

Operating profit

12.9

20.6

Add back:



     Gain on disposal of subsidiary

-

(4.3)

     (Gain)/impairment on disposal of operations

0.7

(3.5)

     Operating costs of exceptional nature (note 7)

0.7

-

     Amortisation of other intangible assets (note 12)

2.0

2.0

Adjusted operating profit

16.3

14.8

 

 

Adjusted profit before tax is calculated as follows:


Year ended

Year ended


31 December

31 December


2022

2021

 

£m

£m

Profit before tax

12.4

19.9

Add back:



     Gain on disposal of subsidiary

-

(4.3)

     (Gain)/impairment on disposal of operations

0.7

(3.5)

     Operating costs of exceptional nature (note 7)

0.7

-

     Finance cost of exceptional nature

0.1

-

     Amortisation of other intangible assets (note 12)

2.0

2.0

Adjusted profit before tax

15.9

14.1

 

 

Adjusted profit after tax is calculated as follows:


Year ended

Year ended


31 December

31 December


2022

2021

 

£m

£m

Profit after tax

10.1

15.6

Add back:



     Gain on disposal of subsidiary, net of tax

-

(4.3)

     Gain on disposal of operations, net of tax

-

(2.4)

     Impairment of contingent consideration

0.7

-

     Operating costs of exceptional nature (note 7), net of tax

0.5

-

     Amortisation of other intangible assets (note 12), net of deferred tax

1.6

1.6

     Profit attributable to non-controlling interests

(0.3)

(0.2)

Adjusted profit after tax

12.6

10.3

 

 

Free cash flow conversion is calculated as follows:


Year ended

Year ended


31 December

31 December


2022

2021

 

£m

£m

Adjusted operating profit

16.3

14.8

Adjusted for:



     Depreciation of tangible assets

0.3

0.3

     Depreciation of lease assets

0.4

0.6

     Amortisation of development costs and software

1.1

1.5

     Share option charge

1.3

1.1

     Net changes in working capital

1.8

0.6

     Purchase of property, plant and equipment

(0.2)

(0.2)

     Development expenditure

(1.7)

(1.6)

Underlying cash flow from operations

19.3

17.1

Underlying operating cash flow conversion

118%

116%

     Net interest paid

(0.2)

(0.5)

     Income tax paid

(4.8)

(1.8)

     Payments of lease liability

(0.5)

(0.8)

     Free cash flow

13.8

14.0

     Adjusted EBITDA

19.4

18.3

Free cash flow conversion

71%

77%

 

 

9 Finance expense


Year ended

Year ended


31 December

31 December


2022

2021

 

£m

£m

Interest payable on financial liabilities at amortised cost

0.3

0.6

Finance charge on lease liability

0.1

0.1

 

0.4

0.7

 

 

 

 

10 Earnings per share


Year ended

Year ended


31 December

31 December

Basic earnings per share

2022

2021

Profit attributable to equity shareholders of the parent (£m)

9.8

15.4

Weighted average number of shares in issue

103,184,717

97,728,610

Basic profit per share (pence)

9.5

15.7

 


Year ended

Year ended


31 December

31 December

Diluted earnings per share

2022

2021

Profit attributable to equity shareholders of the parent (£m)

9.8

15.4

Weighted average number of shares in issue

103,184,717

97,728,610

Diluted weighted average number of shares and options for the year

790,867

950,770

 

103,975,584

98,679,380

Diluted profit per share (pence)

9.4

15.7

 

Weighted average number of shares in issue has been adjusted for potentially dilutive share options arising from the share scheme detailed in note 15. In addition, the exercise price of 494,118 options issued to Members (intermediary customers) were less than the share price, making them "in the money". They have therefore been included in the diluted weighted average number of shares above.

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

2022

2021

Adjusted profit after tax (note 8) (£m)

12.6

10.3

Weighted average number of shares in issue

103,184,717

97,728,610

Adjusted earnings per share (pence)

12.2

10.5

 

 

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 2021

5.2

0.9

6.1


2.8

8.9

Additions

0.1

0.2

0.3


0.2

0.5

Disposals

(1.3)

(0.2)

(1.5)

 

(0.3)

(1.8)

At 31 December 2021

4.0

0.9

4.9


2.7

7.6

Additions

-

0.1

0.1


0.2

0.3

Disposals

-

-

-


-

-

Revaluation of lease

(1.1)

-

(1.1)

 

-

(1.1)

At 31 December 2022

2.9

1.0

3.9

 

2.9

6.8

Depreciation and impairment







At 1 January 2021

0.5

0.6

1.1


1.3

2.4

Depreciation charge for the year

0.4

0.2

0.6


0.3

0.9

Disposals

(0.2)

(0.2)

(0.4)

 

(0.2)

(0.6)

At 31 December 2021

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

Disposals

-

-

-

 

-

-

At 31 December 2022

1.0

0.7

1.7

 

1.7

3.4

Net book value







At 31 December 2022

1.9

0.3

2.2

 

1.2

3.4

At 31 December 2021

3.3

0.3

3.6

 

1.3

4.9

 

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 year which resulted in a reduction of the lease liability and right-of-use asset of £1.1m. 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

Total other

 intangible

assets

Development

expenditure

Total

Group

£m

£m

£m

£m

£m

£m

Cost







At 1 January 2021

76.2

3.1

24.4

27.5

7.5

111.2

Additions

-

-

-

-

1.6

1.6

Disposals

(3.8)

-

-

-

(5.3)

(9.1)

At 31 December 2021

72.4

3.1

24.4

27.5

3.8

103.7

Additions

-

-

-

-

1.7

1.7

Disposals

-

-

-

-

-

-

At 31 December 2022

72.4

3.1

24.4

27.5

5.5

105.4

Amortisation and impairment







At 1 January 2021

0.2

0.5

3.2

3.7

1.9

5.8

Charge in the year

-

0.3

1.7

2.0

1.5

3.5

Disposals

-

-

-

-

(2.2)

(2.2)

At 31 December 2021

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

Disposals

-

-

-

-

-

-

At 31 December 2022

0.2

1.1

6.6

7.7

2.3

10.2

Net book value







At 31 December 2022

72.2

2.0

17.8

19.8

3.2

95.2

At 31 December 2021

72.2

2.3

19.5

21.8

2.6

96.6

 

Capitalised development expenditure relates to the development of the software platform in Defaqto Limited and Zest Technology Limited.

In 2021, the Group sold Zest Technology Limited for total consideration of £10.0m which had a development expenditure carrying value of £3.1m and associated goodwill carrying value of £2.4m. The associated goodwill is deemed to be an accurate apportionment of the total goodwill attributable to the Intermediary Services operating segment..

Furthermore, in 2021, the Group disposed of its operations within its 100% owned subsidiary Simply Biz Investments Limited (formerly Verbatim Investments Limited) which accounted for all trade within the subsidiary for a total consideration of £5.4m. As such, associated goodwill in the subsidiaries operating segment, Distribution Solutions, of £1.4m has been disposed of. This is deemed to be an accurate apportionment of goodwill associated with the subsidiary.

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


2022

2021

 

£m

£m

Intermediary Services

12.7

12.7

Distribution Channels

11.5

11.5

Fintech and Research

48.0

48.0

 

72.2

72.2

 

Goodwill is determined to have an indefinite useful economic life. The Group has determined that, for the purposes of impairment testing, each segment is a cash-generating unit ("CGU"). 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 15.2% to 16.0%; 2021: range of 12.8% to 13.7%), annual adjusted EBITDA growth rate (range of 4.0% to 8.0%; 2021: 6.0% to 11%) and the terminal growth rate 2.0% (2021: 2.0%). The discount rate is based on the Group's pre-tax cost of capital, which is compared with other discount rates in the sector, considered to be a reasonable market participant's rate. 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 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.


Group

Company

Group

Company


31 December

31 December

31 December

31 December


2022

2022

2021

2021

 

£m

£m

£m

£m

Current





Secured bank loan

-

-

-

-

Lease liability

0.4

-

0.4

-


0.4

-

0.4

-

Non-current





Secured bank loan

-

-

6.8

6.8

Lease liability

1.8

-

3.2

-

 

1.8

-

10.0

6.8

       

Changes in liabilities from financing activities:


Loans and

Lease


borrowings

liability

 

£m

£m

Balance at 1 January 2021

29.7

5.1

Cash flows [(i)]

(23.5)

(0.8)

New leases

-

0.3

Disposed leases

-

(1.1)

Other non-cash changes [(i)]

0.6

0.1

Balance at 31 December 2021

6.8

3.6

Cash flows [(i)]

(7.1)

(0.5)

New leases

-

0.1

Revalued leases

-

(1.1)

Other non-cash changes [(i)]

0.3

0.1

Balance at 31 December 2022

-

2.2

 

(i) Cash flows and other non-cash changes.

Cash flows on bank loans include £7.0m net borrowings repaid (2021: £23.0m) and interest payments made of £0.1m (2021: £0.5m). Cash flows from lease liabilities include £0.5m of lease payments (2021: £1.0m).

Other non-cash changes on bank loans include interest charges of £0.3m (2021: £0.6m). Other non-cash changes on lease liabilities include interest charges of £0.1m (2021: £0.1m).

 

14 Capital and reserves

Share capital


Ordinary

 

Shares

Number of fully paid shares (nominal value £0.01):


At 1 January 2021

96,806,612

Issue of share capital

6,072,218

At 31 December 2021

102,878,830

Issue of share capital

770,115

At 31 December 2022

103,648,945

 

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 detailed in note 28.

In 2021 the Company issued 5,232,335 new Ordinary Shares of 1 pence each in the Company ("MIP Shares") following the conversion of Ordinary Shares of Simply Biz Limited (the "A Shares") as prescribed under the Management Incentive Plan (the "MIP").  The A Shares were subscribed for an IPO and vested and became exercisable from 4 April 2021 in accordance with the rules of the MIP.  The remaining 839,883 shares issued during the year relate to the open share options.

 

 


Share


premium

 

£m

At 1 January 2021

64.8

Issue of share capital

0.8

At 31 December 2021

65.6

Issue of share capital

1.2

At 31 December 2022

66.8

 

15 Share-based payment arrangements

At 31 December 2022, the Group had the following share-based payment arrangements.

Issued in 2018

Company Share Option Plan ("CSOP")

On 4 April 2018, the Group established the Company Share Option Plan ("CSOP"), which granted share options to certain key management personnel. The CSOP consists of two parts, and all options are to be settled by physical delivery of shares. The terms and conditions of the share option schemes granted during the year ended 31 December 2018 are as follows:



Number


Contractual

Scheme

Grant date

of awards

 Vesting conditions

life of options

Approved Scheme

4 April 2018

229,412

 3 years' service from grant date

3 to 10 years

Unapproved Scheme

4 April 2018

250,000

 3 years' service from grant date

3 to 10 years

 

During 2022, no awards (2021: no awards) under the above plans have been forfeited as a result of bad leavers.

Management Incentive Plan ("MIP")

On 4 April 2018, the Group established the Management Incentive Plan ("MIP") which invited eligible employees to subscribe for A Shares in the Company's subsidiary Simply Biz Limited. Participants have a put option to sell the A Shares to the Company in exchange for Ordinary Shares of the Company at any point between three years and ten years after the date of grant, provided that they are still employed (or treated as a good leaver) and an equity hurdle is met. The terms and conditions of the MIP are as follows:


Number


Contractual

Grant date

of awards

Vesting conditions

life of options

4 April 2018

 

 

2,250

 

 

3 years' service from grant date, subject to an equity hurdle of 40% above the IPO market capitalisation

3 to 10 years

 

 

 

In 2021, the MIP has been satisfied in the year via an allotment of 5,232,335 new Ordinary Shares at 1 pence each. No further awards will be made under the MIP and the scheme is now closed.

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 Black Scholes model for the unapproved CSOP scheme, and the Monte Carlo model for the MIP and approved CSOP scheme.

The following inputs were used in the measurement of the fair values at grant date of the share-based payment plans:




Management


Approved

Unapproved

Incentive

 

CSOP

CSOP

Plan

Fair value at grant date

£0.64

£1.59

£290.22

Share price at grant date

£1.70

£1.70

£1.70

Exercise price

£1.70

£0.01

£1.79

Expected volatility

40%

40%

40%

Option life (expected weighted average life)

3

3

3

Expected dividends

2%

2%

2%

Risk-free interest rate (based on government bonds)

1.2%

1.2%

1.2%

 

Save As You Earn ("SAYE") scheme

On 24 September 2018, the Group established the 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.

537,618 options were issued under the scheme, with an exercise price of £1.70. The fair value of the shares at date of grant (1 December 2018) was £0.70, and the share options are due to vest in three years. Expected volatility, dividends and the risk-free interest rate have been assumed to be consistent with the approved 2019 CSOP scheme noted above.

During 2022, 16,378 (2021: 4,397) shares have been forfeited as a result of bad leavers. The scheme has now fully vested.

 

Issued in 2019

Company Share Option Plan ("CSOP")

In September 2019, the Group established an additional Company Share Option Plan ("CSOP"), which granted share options to certain key management personnel. The CSOP consists of two parts, and all options are to be settled by physical delivery of shares. The terms and conditions of the share option schemes granted during the year ended 31 December 2019 are as follows:



Number


Contractual

Scheme

Grant date

of awards

 Vesting conditions

life of options

Approved Scheme

26 September 2019

15,564

 3 years' service from grant date

3 to 10 years

Unapproved Scheme

26 September 2019

61,302

 2 years' service from grant date

3 to 10 years

Unapproved Scheme

26 September 2019

90,791

 1.52 years' service from grant date

3 to 10 years

 

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 Black Scholes model.

The following inputs were used in the measurement of the fair values at grant date of the share-based payment plans:


Approved

Unapproved

Unapproved

 

 

CSOP

CSOP

CSOP

Fair value at grant date

£0.54

£1.84

£1.86

 

Share price at grant date

£1.93

£1.93

£1.93

 

Exercise price

£1.93

£0.01

£0.01

 

Expected volatility

45%

45%

45%

 

Option life (expected weighted average life)

3

2

1.52

 

Expected dividends

2%

2%

2%

 

Risk-free interest rate (based on government bonds)

1.3%

1.3%

1.3%

 

 

Save As You Earn ("SAYE") scheme

On 26 September 2019, the Group established the 2019 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.

375,145 options were issued under the scheme, with an exercise price of £1.58. The fair value of the shares at date of grant (1 December 2019) was £0.70, and the share options are due to vest in three years. Expected volatility, dividends and the risk-free interest rate have been assumed to be consistent with the approved CSOP scheme noted above.

During 2022, 17,547 (2021: 28,027) shares have been forfeited as a result of bad leavers. The scheme has now vested and scheme participants have six months to exercise their options.

Issued in 2020

Company Share Option Plan ("CSOP")

In March 2020, the Group established an additional Company Share Option Plan ("CSOP"), which granted share options to certain key management personnel. The scheme is an Unapproved Scheme with a grant date of 11 March 2020. 218,084 options were issued. The terms and conditions of the share option schemes granted during the year ended 31 December 2020 are as follows:


Unapproved

 

CSOP

Fair value at grant date

£1.77

Share price at grant date

£1.82

Exercise price

£0.01

Expected volatility

45%

Option life (expected weighted average life)

1.07

Expected dividends

2%

Risk-free interest rate (based on government bonds)

1.0%

 

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 EPS of RPI over the performance period plus 3%

3 to 10 years

 

 

 

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 2022, 69,838 (2021: 28,027) shares have been forfeited as a result of bad leavers. An assumed retention rate of 75% (2021: 75%) has been applied at 31 December 2022 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%

 

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

2022

31 December

2021

 

2022

£

2021

£

Outstanding at 1 January

1,112,782

1.27

1,495,431

0.98

Forfeited during the year

(103,763)

0.33

(63,979)

1.65

Exercised during the year

(277,968)

0.42

(612,032)

0.77

Granted during the year

 -

 -

293,362

1.76

Outstanding at 31 December

731,051

1.16

1,112,782

1.27

Exercisable at 31 December

528,688

1.11

524,745

0.81

 

The options outstanding at 31 December 2022 had an exercise price in the range of £0.01 to £1.93 (2021: £0.01 to £1.93) and a weighted average contractual life of 2 years (2021: 2.1 years).

 

16 Other reserves






Merger

Share option



reserve

reserve

Total

Group

£m

£m

£m

At 1 January 2021

(53.9)

1.7

(52.2)

Share option charge

-

1.1

1.1

Release of share option reserve

-

(1.3)

(1.3)

Tax on share options exceeding profit or loss charge

-

0.1

0.1

At 31 December 2021

(53.9)

1.6

(52.3)

Share option charge

-

1.3

1.3

Release of share option reserve

-

(0.3)

(0.3)

Tax on share options exceeding profit or loss charge

-

-

-

At 31 December 2022

(53.9)

2.6

(51.3)

 

17 Notes to the cash flow statement


Year ended

Year ended


31 December

31 December


2022

2021

 

£m

£m

Cash flow from operating activities



Profit after taxation

10.1

15.6

Add back:



     Finance income

-

-

     Finance cost

0.4

0.7

     Taxation

2.3

4.3

 

12.8

20.6

Adjustments for:



     Amortisation of development expenditure and software (note 12)

1.1

1.5

     Depreciation of lease asset

0.4

0.6

     Depreciation of property, plant and equipment

0.3

0.3

     Amortisation of other intangible assets

2.0

2.0

     Share option charge

1.3

1.1

     Profit on sale of subsidiary

-

(4.3)

     Loss/(profit) on sale of operations

0.7

(3.5)

Operating cash flow before movements in working capital

18.6

18.3

Decrease/(increase) in receivables

0.1

(0.6)

Increase in trade and other payables

1.7

1.2

Cash generated from operations

20.4

18.9

Income taxes paid

(4.8)

(1.8)

Net cash generated from operating activities

15.6

17.1

 

 

18 Subsequent events

 

On 8 March 2023, Fintel Labs Limited acquired a non-controlling interest in a financial technology business, acquiring 25% of Ordinary Shares in exchange for £1.0m consideration. The acquisition forms part of our strategy to foster innovation in the sector by supporting emerging businesses.

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