Half-year Report

RNS Number : 7526P

ULS Technology PLC

22 November 2016

 

ULS Technology plc

(The "Group" or the "Company")

Half Yearly Report

ULS Technology plc (AIM: ULS), the provider of online B2B platforms for the UK conveyancing and financial intermediary markets, announces its half yearly results for the six months to 30 September 2016.

During the period the Company has further increased its market share, resulting in increased revenue, profits and dividend payments.

Financial Highlights

·     Revenue increased slightly to £9.78m (H1 2016: £9.76m)

·     Underlying Operating Profit¹ increased by 4% to £1.95m (H1 2016: £1.88m)

·     Adjusted EPS^1,2 increased by 5% to 2.40p (H1 2016: 2.28p)

·     Net cash and equivalents of £3.7m as at 30 September 2016 (FY 2016: £2.7m)

·     Interim dividend of 1.10p per share, an increase of 5% on the same period last year

1. Before acquisition intangibles, amortisation and exceptional costs relating to the acquisition of Legal-Eye Limited

2. Based on the number of shares in issue at the end of the period

Operating Highlights

·     Increased market share in difficult market conditions

·     Signed a number of new customer contracts, with both financial intermediaries and  mortgage lenders

·     Appointment of new Managing Director for Legal Eye

·     Estate agency performance comparison service (estateagent4me) now promoted by HomeOwners Alliance

Ben Thompson, Chief Executive of ULS Technology plc, commented:

"I am pleased that we have made good progress in the first half of the year, especially given the unusual market challenges we faced, firstly due to the changes made to the Buy to Let market and secondly the EU referendum.

"We successfully outperformed our competition in the conveyancing comparison market, growing both our B2B customer base and our direct to consumer channels.

"Market conditions have recovered well after the initial referendum shock, and although much remains unknown about the wider economic environment, we are expecting stronger activity in the second half of the year.

"I am very pleased by our strong performance during the period and remain excited by our growth prospects with an encouraging pipeline of new activity. I am therefore confident that we will continue to grow our existing customer relationships while adding further new channels to market to expand our market share. I remain excited about the Group's future and its scope to continue to grow profitably."

 

 Enquiries:

ULS Technology plc		Tel: [phone]
Peter Opperman, Chairman
Ben Thompson, CEO
John Williams, Finance Director
Numis Securities Limited (Nomad & Broker)		Tel: [phone]
Stuart Skinner / Paul Gillam, Corporate Advisory
Michael Burke, Corporate Broking
Walbrook PR Limited	[e-mail] or Tel: [phone]
Paul Cornelius
Helen Cresswell Paul Whittington Nick Rome

Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) prior to its release as part of this announcement.

 

Chief Executive's Report

This was a successful period for the Company, improving on all its headline financial metrics despite a difficult market backdrop. The UK government's changes to the taxation of buy-to-let properties and landlords' income led to a slow-down in that part of the market at the start of the year, and the EU referendum led to a quiet summer, with transaction volumes reduced significantly.

Given the volatile market environment, the Board is delighted that the Company has outperformed its competitors and secured new relationships that lay the foundations for further growth in market share.

The Company has recently had success in winning new work from mortgage lenders; this is an area that the Company intends to expand further into, by helping lenders reduce their risk exposure and costs, and through tailoring a better all-round experience for their customers.

Legal Eye

Paul Saunders commenced his role as Managing Director of Legal Eye this month and will immediately focus on growing Legal Eye's pipeline of new business opportunities. Paul's strong background and experience will help to further strengthen quality and risk management as a central element of ULS's eConveyancing value proposition.

HomeOwners Alliance

Since investing in HomeOwners Alliance ("HOA") in March 2016, the Company has successfully completed the integration of a tailored version of eConveyancer into HOA's website. The relationship with HOA has opened up the potentially highly lucrative direct-to-customer sales channel for ULS and there is significant scope to build on the strong traction achieved to date.

In addition, Estateagent4me, the first website to rank the performance of all types of estate agencies, has been embedded into the HOA website and HOA will start to promote this more widely throughout the second half of the year.

Strategy

The Company continues to focus on securing new relationships for its core conveyancing comparison service, and growing market share. The Company is committed to retaining and growing its existing relationships, which remain strong. This organic growth strategy is embedded throughout ULS and the Board believes that there is significant upside potential from both existing and pipeline relationships.

The Company's efforts continue to be prioritised around tailoring technology solutions that its existing and prospective business partners require, as well as continually refining its solutions to ensure that its end customers receive the best possible experience when moving home. Conveyancing today still requires a degree of paperwork and manual intervention and the Board is determined to simplify this as much as possible to ensure that customers benefit from a process that they properly understand, and one that ideally can be completed more quickly and painlessly than is the case across the wider sector today.

The Company will continue to consider potential acquisitions that would either directly or indirectly accelerate the Board's growth strategy.

Interim Dividend

The Company is pleased to announce that it will pay an interim dividend of 1.10 pence per share; this is a five per cent increase on the dividend paid for the six months to 30 September 2015. The dividend record date is 2 December 2016 and the dividend is expected to be paid on 16 December 2016.

Board Changes

Nigel Hoath stepped down as Non-Executive Director at this year's AGM in August.

Outlook

Market conditions have improved after the initial referendum shock, and although much remains unknown about the wider economic environment, the Board is expecting a more normal level of activity in the second half of the year.

The Company will continue to target market share growth, both via new relationships and securing increased work from existing customers.  The Board remains excited about the Company's future and expects it to meet the Board's expectations for the full year.

Ben Thompson

Chief Executive Officer

 

UNAUDITED INCOME STATEMENT

Six months to 30 September 2016

		Note		6 months to 30 Sep 2016		6 months to 30 Sep 2015		Year ended 31 Mar 2016
				Unaudited		Unaudited		Audited
				£'000s		£'000s		£'000s
Revenue		3		9,778		9,755		20,658
Cost of sales				(5,577)		(5,408)		(11,997)
Gross profit				4,201		4,347		8,661
Administrative expenses				(2,291)		(2,509)		(4,901)
Operating profit before exceptional expenses				1,910		1,838		3,760
Exceptional administrative expenses		4		-		(204)		(385)
Operating profit		3		1,910		1,634		3,375
Finance income				7		3		9
Finance costs				(22)		(34)		(63)
Share of loss of associate				(10)		-		-
Exceptional Finance costs		4		(143)		(116)		(240)
Profit on ordinary activities before taxation				1,742		1,487		3,081
Tax on profit on ordinary activities				(328)		(368)		(704)
Profit for the financial period				1,414		1,119		2,377
Basic earnings per share (£)		5		0.0218		0.0173		0.0367
Diluted earnings per share (£)		5		0.0208		0.0165		0.0351

UNAUDITED STATEMENT OF COMPREHENSIVE INCOME

Six months to 30 September 2016

				6 months to 30 Sep 2016		6 months to 30 Sep 2015		Year ended 31 Mar 2016
				Unaudited		Unaudited		Audited
				£'000s		£'000s		£'000s
Profit  for the period				1,414		1,119		2,377
Total comprehensive income for the period				1,414		1,119		2,377

 

UNAUDITED BALANCE SHEET

At 30 September 2016

	Note		30 Sep 2016		30 Sep 2015		31 Mar 2016
			Unaudited		Unaudited		Audited
			£'000s		£'000s		£'000s
NON-CURRENT ASSETS
Intangible assets			3,025		3,059		2,945
Goodwill			4,524		4,524		4,524
AFS financial assets			100		100		100
Investment in Associates			565		-		575
Property, plant and equipment			601		568		485
Long-term receivables			100		-		100
Prepayments			112		204		181
			9,027		8,455		8,910
CURRENT ASSETS
Inventory			40		32		22
Trade and other receivables			1,642		874		1,301
Cash and cash equivalents			3,710		3,969		3,781
			5,392		4,875		5,104
TOTAL ASSETS	3		14,419		13,330		14,014
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF THE COMPANY
Share capital	6		259		259		259
Share premium account			4,585		4,530		4,585
Capital redemption reserve			113		113		113
Share based payment reserve			100		50		80
Retained earnings			3,394		2,081		2,148
TOTAL EQUITY			8,451		7,033		7,185
NON-CURRENT LIABILITIES
Borrowings			-		530		170
Contingent consideration	8		918		1,588		852
Deferred taxation			468		479		438
			1,386		2,597		1,460
CURRENT LIABILITIES
Trade and other payables			4,210		2,540		4,234
Borrowings			-		720		720
Current tax payable			372		440		415
			4,582		3,700		5,369
TOTAL LIABILITIES	3		5,968		6,297		6,829
TOTAL EQUITY AND LIABILITIES			14,419		13,330		14,014

 

UNAUDITED STATEMENT OF CHANGES IN EQUITY

Six months to 30 September 2016

	Share capital	Share premium	Capital redemption reserve	Share based payment reserve	Retained earnings	Total equity
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
For the period ended 30 September 2016
At 1 April 2016	259	4,585	113	80	2,148	7,185
Profit for the period	-	-	-	-	1,414	1,414
Share-based payments	-	-	-	20	-	20
Dividends paid	-	-	-	-	(168)	(168)
At 30 September 2016	259	4,585	113	100	3,394	8,451
For the period ended 30 September 2015
At 1 April 2015	259	4,530	113	23	1,609	6,534
Profit for the period	-	-	-	-	1,119	1,119
Share-based payments	-	-	-	27	-	27
Dividends paid	-	-	-	-	(647)	(647)
At 30 September 2015	259	4,530	113	50	2,081	7,033
For the year ended 31 March 2016
At 1 April 2015	259	4,530	113	23	1,609	6,534
Profit for the year	-	-	-	-	2,377	2,377
Issue of shares	-	55	-	-	-	55
Share-based payments	-	-	-	57	-	57
Payment of dividends	-	-	-	-	(1,838)	(1,838)
At 31 March 2016	259	4,585	113	80	2,148	7,185

 

UNAUDITED STATEMENT OF CASH FLOWS

Six months to 30 September 2016

		6 months to 30 Sep 2016		6 months to 30 Sep 2015		Year ended 31 Mar 2016
		Unaudited		Unaudited		Audited
		£'000s		£'000s		£'000s
Cash flows from operating activities
Profit before taxation		1,742		1,487		3,081
Finance income		(7)		(3)		(9)
Finance costs		165		150		303
Loss/(profit) on disposal of plant and equipment		2		-		(1)
Amortisation		234		232		486
Depreciation		131		115		228
Share of loss of associate		10		-		-
Share-based payments		20		27		57
Tax paid		(342)		(276)		(678)
		1,955		1,732		3,467
Changes in working capital
(Increase) / decrease  in inventories		(18)		(3)		7
(Increase) / decrease in trade and other receivables		(272)		(189)		(693)
Increase in trade and other payables		42		936		1,894
Cash inflow from operating activities		1,707		2,476		4,675
Cash flows from investing activities
Purchase of intangible software assets		(313)		(145)		(285)
Purchase of property, plant and equipment		(253)		(18)		(51)
Disposal of property, plant and equipment		4		-		4
Acquisition of associates/ investments		-		-		(575)
Interest received		7		3		9
Net cash used in investing activities		(555)		(160)		(898)
Cash flows from financing activities
Share issue proceeds		-		-		55
Dividends paid		(168)		(647)		(1,838)
Interest paid		(165)		(150)		(303)
Repayment of loans		(890)		(360)		(720)
Net cash used in from financing activities		(1,223)		(1,157)		(2,806)
Net (decrease)/increase in cash and cash equivalents		(71)		1,159		971
Cash and cash equivalents at beginning of period		3,781		2,810		2,810
Cash and cash equivalents at end of period		3,710		3,969		3,781

 

Notes to the financial information

Six months to 30 September 2016

1.    GENERAL

The interim financial information for the six months to 30 September 2016 is unaudited and was approved by the Directors of the Company on 21 November 2016.  The condensed financial information set out above does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.

The Company's operations are not subject to seasonality or cyclicality.

A dividend of £168,101 has been paid in the six months ended 30 September 2016 (six months to 30 September 2015: £647,279).

2.    ACCOUNTING POLICIES

The interim financial information in this report has been prepared on the basis of the accounting policies set out in the Group's most recent annual financial statements for the year ended 31 March 2016.

IFRS is subject to amendment and interpretation by the International Accounting Standards Board ("IASB") and the IFRS Interpretations Committee and there is an on-going process of review and endorsement by the European Commission.

The financial information has been prepared using accounting policies that the Directors expect to be applicable as at 31 March 2017, with the exception of IAS 34.

The Directors have adopted the going concern basis in preparing the financial information.  In assessing whether the going concern assumption is appropriate, the Directors have taken into account all relevant available information about the foreseeable future. 

The condensed financial information for the period ended 31 March 2016 set out in this interim report does not comprise the Group's statutory accounts as defined in section 434 of the Companies Act 2006.

3.    SEGMENT REPORTING

Management identifies its operating segments based on the Group's service lines, which represent the main product and services provided by the Group. The Group's three main operating segments are:

·     Comparison services

·     Compliance consultancy for the legal sector

·     All other segments which includes head office functions

Any inter-segment indebtedness is excluded when arriving at the assets and liabilities for each segment. Consolidation items such as goodwill and intangibles sit within 'Other'.

 

	Comparison	Compliance	Other	Total
	£'000s	£'000s	£'000s	£'000s
For the period ended 30 September 2016
Revenue	9,327	451	-	9,778
Operating Profit	1,951	121	(162)	1,910
Total Assets	7,155	616	6,648	14,419
Total Liabilities	3,470	186	2,312	5,968
For the period ended 30 September 2015
Revenue	9,263	492	-	9,755
Operating Profit	2,084	197	(647)	1,634
Total Assets	5,502	473	7,355	13,330
Total Liabilities	2,589	189	3,519	6,297
For the year ended 31 March 2016
Revenue	19,657	1,001	-	20,658
Operating Profit	4,191	394	(1,210)	3,375
Total Assets	5,745	604	7,665	14,014
Total Liabilities	3,280	168	3,381	6,829

4.    EXCEPTIONAL EXPENSES

Exceptional Administrative Expenses                                           

	6 months to 30 Sep 2016		6 months to 30 Sep 2015		Year to 31 Mar 2016
	£'000		£'000		£'000
Adjustment to expected deferred consideration	-		204		333
Acquisition expenses	-		-		52
	204		204		385

Exceptional Finance Costs                                  

	6 months to 30 Sep 2016		6 months to 30 Sep 2015		Year to 31 Mar 2016
	£'000		£'000		£'000
Change in NPV of contingent consideration	143		116		240
	143		116		240

 

5.    EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Basic and diluted earnings per share                                             

	6 months to 30 Sep 2016		6 months to 30 Sep 2015		Year to 31 Mar 2016
	£		£		£
Total basic earnings per share	0.0218		0.0173		0.0367
Total diluted earnings per share	0.0208		0.0165		0.0351

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

	6 months to 30 Sep 2016		6 months to 30 Sep 2015		Year to 31 Mar 2016
	£'000s		£'000s		£'000s
Earnings used in the calculation of total basic and diluted earnings per share	1,414		1,119		2,377

Number of shares	6 months to 30 Sep 2016		6 months to 30 Sep 2015		Year to 31 Mar 2016
	Number		Number		Number
Weighted average number of ordinary shares for the purposes of basic earnings per share	64,828,057		64,727,875		64,735,539

Taking the Group's dilutive potential ordinary shares into consideration in respect of the Group's weighted average number of ordinary shares for the purposes of diluted earnings per share, is as follows:

Number of shares	6 months to 30 Sep 2016		6 months to 30 Sep 2015		Year to 31 Mar 2016
Potential dilutive effect of share options and warrants	3,150,171		2,936,732		3,039,893
Weighted average number of ordinary shares for the purposes of diluted earnings per share	67,978,228		67,664,607		67,775,432

6.    SHARE CAPITAL

a)    Share Capital

The Company has one class of Ordinary share with 0.4p nominal value per share which carries no right to fixed income nor has any preferences or restrictions attached. No new shares were issued in the period

 

Issued and fully paid:

	30 Sep 2016		30 Sep 2015		31 Mar 2016
	£'000s		£'000s		£'000s
Ordinary shares of 0.40p each	259		259		259

	30 Sep 2016		30 Sep 2015		31 Mar 2016
	Number		Number		Number
At beginning of the period	64,828,057		64,727,875		64,727,875
New Share Issue	-		-		100,182
	64,828,057		64,727,875		64,828,057

b)    Share based payments

During the period the Group granted no new options.

All options in issue vest in 3 equal tranches, three, four, and five years after date of grant. The options are settled in equity once exercised. If the options remain unexercised after a period of 10 years from the date of grant, the options expire. Options are forfeited if the employee leaves the Group before the options vest.

At the end of the period, there were 2,802,800 options outstanding with a weighted average exercise price of £0.43 per share

7.    BORROWINGS

In July 2014, the Group took out a bank loan of £4 million, of which £1,850,000 was repaid in August 2014. The remaining balance was repayable in quarterly instalments of £180,000 with quarterly interest payments charged at 2.75% over base rate. During the period, the Group took the decision to make early repayment and the facility was repaid in full on 30 September 2016.

8.    DEFERRED CONSIDERATION

On 27 February 2015, the Group acquired 100% of the issued ordinary share capital of Legal-Eye Limited, a company incorporated in England and Wales. Part of the consideration was deferred with payments of £1,080,000 due in each of October 2016 and October 2017. The amounts shown in the balance sheet are at net present value and the movement arising on this is shown below

	30 Sep 2016
	£'000s
At beginning of the period	1,841
Change in NPV due to movement in time	143
At end of the period	1,984

 

END

 

 

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