SimplyBiz Group PLC (The) Half-Year Results

Data : 10/09/2019 @ 08:01
Fonte : UK Regulatory (RNS & others)
Titolo : The Simplybiz Group Plc (SBIZ)
Quotazione : 225.0  13.0 (6.13%) @ 17:29
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SimplyBiz Group PLC (The) Half-Year Results

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RNS Number : 7349L

SimplyBiz Group PLC (The)

10 September 2019

10 September 2019

The SimplyBiz Group plc

("SimplyBiz", the "Company" or the "Group")

Half-year results for the six months ended 30 June 2019

Strong growth in revenue and adjusted EBITDA

SimplyBiz (AIM: SBIZ), the independent provider of compliance and business services to financial advisers and financial institutions in the UK, today announces its unaudited results for the six months ended 30 June 2019.

Financial highlights:

   --     Group Revenue up 20% to GBP29.1m (H1 FY18: GBP24.2m) 
   --     Operating profit up to GBP3.2m (H1 FY18: GBP1.3m) 
   --     Adjusted EBITDA*(1) up 30% to GBP6.8m (H1 FY18: GBP5.2m) 
   --     Adjusted EBITDA*(1) margin increased to 23.4% (H1 2018: 21.6%) 
   --     Adjusted profit after tax*(1) increased 41% to GBP4.9m 
   --     Adjusted earnings per share (EPS) *(1) increased by 8% to 5.52p 
   --     Group net debt of GBP30.1m at 30 June 2019 
   --     Interim dividend of 1.41p per share 

Operational highlights:

-- Acquisition and integration of Defaqto increases customer base to almost 6,000 intermediary firms and over 350 financial institutions

   --     Centra financial planning software surpasses 3,000 users, up from 2,300 at 31 December 2018 
   --     Mortgage completions increased by 19% to GBP7.4bn in H1 2019 
   --     Important contract wins in both divisions including Nucleus and Vanguard. 
   --     Awarded Service Company of the Year by both Money Marketing and Professional Adviser 

Matt Timmins, Joint CEO of The SimplyBiz Group plc, said:

"The Group has delivered a positive first half performance, and we are delighted to have completed the acquisition of Defaqto in March 2019. The integration of the business is progressing well and in line with management expectations.

"As well as delivering the acquisition of Defaqto, which has made a strong contribution to revenue and profit, we have continued to grow the organic*(2) revenues and adjusted EBITDA of the Group, with increasing average revenues per member, an expanded membership base, and an enlarged service offering more than offsetting the impact of a slowdown in the housing market.

"The Board is pleased to declare an interim dividend of 1.41 pence per share in line with our dividend policy and remains confident of delivering against full year earnings expectations.

"I would like to thank everyone in the enlarged SimplyBiz team for their dedication in delivering a successful first half of 2019."

*(1) Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation of intangible assets arising on acquisition and operating exceptional costs. Adjusted profit before and profit after tax exclude operating exceptional costs, exceptional finance charges and amortisation of intangible assets arising on acquisition. In the current year the measures have also been adjusted for the impact of adopting IFRS 16. A reconciliation of these metrics to GAAP measures is provided in note 5. Adjusted earnings per share is calculated based on adjusted profit after tax, as shown in note 11.

*(2) Organic growth is defined as the year on year increase in a financial metric, excluding the impact of acquisitions.

For further information please contact:

 
 SimplyBiz                                 via Instinctif Partners 
 Matt Timmins (Joint Chief Executive 
  Officer) 
  Neil Stevens (Joint Chief Executive 
  Officer) 
  Gareth Hague (Group Finance Director) 
 
 Zeus Capital (Nominated Adviser 
  and Joint Broker)                        +44 (0) 20 3829 5000 
 Martin Green 
  Andrew Jones 
  Pippa Hamnett 
 
 Peel Hunt (Joint Broker) 
  Guy Wiehahn 
  Andrew Buchanan 
  Rishi Shah                               +44 (0) 20 7418 8900 
 
 Instinctif Partners                       +44 (0)20 7457 2831 / 
                                            SimplyBiz@instinctif.com 
 Catherine Wickman 
  Katie Bairsto 
 

Notes to editors

Serving almost 6,000 intermediary firms, The SimplyBiz Group plc is an independent provider of compliance, distribution and technology services to financial intermediaries and financial institutions

The Group provides compliance and business services to over 3,700 firms of financial advisers, including directly authorised IFAs, directly authorised mortgage advisers, workplace consultants and directly authorised consumer credit brokers. With the acquisition of Defaqto, the Group also provides a fintech platform to 2,300 firms, comprising 8,500 advisers.

Through its Distribution Channels, the Group provides marketing and promotion, product panelling and co-manufacturing services to more than 350 financial institutions. Defaqto also provides independent ratings of 21,000 financial products and funds, licenced by 230 brands.

For more information, please visit: www.simplybizgroup.co.uk/

Analyst presentation

An analyst briefing is being held at 10.30am on 10 September 2019 at the offices of Instinctif Partners, 65 Gresham Street, London, EC2V 7NQ. To register your attendance please contact SimplyBiz@instinctif.com

JOINT CHIEF EXECUTIVES' STATEMENT

Overview

During the six months to 30 June 2019, the Group delivered a strong operational and financial performance, comprising the acquisition of Defaqto and continued organic growth.

Revenue growth of 20.2% to GBP29.1m included a GBP4.2m revenue contribution from the acquisition of Defaqto (from 21 March 2019). The headline organic revenue growth of 3.0% included double-digit growth in several key income lines that deliver strong and sustainable future revenue streams, notably software licence income, membership income and marketing service agreements, which more than offset the reduced business received by the Group's Panel Manager and Surveying businesses as a result of an industry -wide reduction in the volume of housing transactions.

Adjusted EBITDA increased by GBP1.6m to GBP6.8m, representing a strong and sustainable 23.4% (2018: 21.6%) margin. The increase in EBITDA margin reflects the inclusion of Defaqto's higher margin revenues, as well as a continuation in the margin growth of the organic business (defined as the Group prior to the impact of the current year acquisition).

Divisional Performance

The Intermediary Services Division provides compliance and business services to over 3,700 individual intermediary firms through a comprehensive membership model. Our members, including Financial advisers, mortgage advisers, and consumer credit broker firms, conduct regulated activities that require authorisation and regulation by the FCA.

Membership fee income in the organic business increased by 12.9% to GBP5.1m, compared to H1 2018, with average membership fees growing by 5.3% to GBP221.26 per month as at 30 June 2019 (31 December 2018: GBP210.18). Membership numbers at 30 June 2019 were 3,704, as compared to 3,629 at 30 June 2018 and 3,726 at 31 December 2018. Since the IPO, the Group has pursued a strategy of focussing on the recruitment of larger firms, and while the number of firms joining has remained consistent with prior periods, and the average income per member has increased as a result of this strategy, the Group has also experienced an increase in the number of customers lost during the period, particularly in the nascent Consumer Credit market.

Increased regulation is a tailwind for our business. New regulation creates opportunities for the Group to engage and provide support to its members through additional paid-for service offerings. Additional services income increased by 9.0% to GBP2.4m (GBP2.2m in H1 2018). To further enhance our service proposition, the Group invested in expanding the Compliance and Policy teams during H2 2018 and H1 2019, ensuring that the Group is well placed to support members through the impending Senior Managers & Certification Regime ("SM&CR") and beyond.

In March 2018, the Group launched 'Centra', an end-to-end financial planning system in partnership with Defaqto, that brings together a number of existing advisor software tools into one integrated service. Strong growth in the number of Centra users has continued, with over 3,000 users creating over GBP4bn of annualised run rate of client recommendations through our software platform. As well as providing our members with industry leading software, and enabling face to face engagement with the members through training workshops, the introduction of Centra has continued to support the Group's software licence income, whereby the Group is able to provide its members with a customised version of the sector's leading third party specialist practice management and Customer Relationship Management ('CRM') applications at attractive rates. Software licence users increased from 3,504 at 30 June 2018 to 4,106 (30 June 2019), contributing to a 25.6% increase in software licence income from H1 2018.

Revenues in Zest Technologies, the Group's employee benefits software solution, reduced from GBP2.6m in H1 2018 to GBP1.7m in H1 2019, with the prior period including GBP0.9m of 'discontinuing' revenues from customers not moving over to the new platform. Since the launch of the Zest platform in November 2017, feedback has been very positive and the Group has seen positive recent momentum in securing several new contracts with companies such as Unum, Taylor Wimpey and Aviva.

The Distribution Channels Division continues to provide a highly effective, efficient distribution channel for c.135 financial institutions to reach an otherwise fragmented independent intermediary sector. The Group generates revenue from product providers when it successfully engages its membership in the channels offered.

The Group's extensive events programme has been developed to cater for the needs of its members and allows product providers to deliver engaging information that will enhance advisers' knowledge and continue to improve customer outcomes. In addition to events and seminars, the Group also distributed a broad suite of electronic and printed materials, delivering product provider brand and product communications to our relevant members. Income in the period from marketing service agreements with our product provider clients increased by 17.1% to GBP3.6m, from GBP3.0m in H1 2018.

The Group has launched its Insights product during the period, and the interest amongst fund managers has been positive, with the first contract signed in July 2019, and several others well progressed.

SimplyBiz Mortgages is the UK's third largest mortgage club, with over 1,700 members benefitting from access to a dedicated support service and preferred products from key lenders. Mortgage completions through the club increased by 18.6% to GBP7.4bn in H1 2019, resulting in an 8.8% increase in income to GBP1.6m.

The slowdown in housing transactions in the UK reduced the volume of business received by the Group's Panel Manager and Surveying businesses, decreasing income by cGBP0.6m compared to H1 2018. As a result of our flexible operating model, the Group was able to mitigate the impact of the reduced revenue to less than a GBP0.1m decline in EBITDA from this area. The Group's operating model retains further capacity to mitigate reductions in volume, should the market worsen.

During the period, assets under management within the Group's packaged investment service Verbatim, increased from GBP600m at 31 December 2018, to GBP640m at 30 June 2019, generating revenues of GBP1.1m, a 14.4% increase from H1 2018.

Defaqto contributed GBP4.2m of revenue in the three months post acquisition, with GBP1.4m from its Ratings product, GBP1.4m from the Matrix and Compare products and GBP1.2m from the 'Engage' software platform and data services. The majority of Ratings products are sold in February each year, with revenue recognised over the following 12-month period, providing strong future revenue visibility.

Strategy

The Group's growth strategy focuses on both organic and acquisitive growth. Organic growth is expected to be driven by growth in the Group's service offering to members, its average revenue per member and its membership base. The integration of Defaqto and the Group's enhanced ability to provide products and services through a scalable, technology led platform, will help to further improve the Group's strong and sustainable EBITDA margin.

Management will also continue to pursue selective acquisitions to enhance the scale of the Group, building on its proven ability to execute and integrate acquisitions.

FINANCIAL REVIEW

 
 Six months ended                     June 2019   June 2019   June 2018   June 2018 
                                        GBP'000     GBP'000     GBP'000     GBP'000 
-----------------------------------  ----------  ----------  ----------  ---------- 
 Group Revenue                                       29,086                  24,207 
 Operating Expenses                    (21,091)                (18,839) 
 Impact of IFRS 16 accounting             (385)                       - 
  standard * 
 Share option charges                     (307)                   (132) 
 Amortisation of development              (490)                       - 
  expenditure 
 Underlying operating expenses                     (22,273)                (18,971) 
 Adjusted EBITDA                                      6,813                   5,236 
 Adjusted EBITDA margin %                             23.4%                   21.6% 
 Operating costs of an exceptional 
  nature                                            (2,997)                 (3,790) 
 Impact of IFRS 16 accounting                           385                       - 
  standard * 
 EBITDA                                               4,201                   1,446 
 Depreciation                                         (133)                   (129) 
 Depreciation of lease asset                          (321)                       - 
 Amortisation of other intangible 
  assets                                              (554)                    (62) 
 Minority interest                                     (11)                       - 
 Net finance costs                                    (521)                 (2,410) 
 Profit / (loss) before tax                           2,661                 (1,155) 
 Taxation                                           (1,234)                   (570) 
 Profit / (loss) after tax                            1,427                 (1,725) 
 
 Adjusted EPS                                         5.52p                   5.12p 
 Revenue growth (%)                                   20.2% 
 Adjusted EBITDA growth (%)                           30.1% 
 
 

*Added back to current year, to provide comparability to prior year operating expenses and adjusted EBITDA.

Revenue

Revenue grew by 20.2% to GBP29.1m, reflecting a GBP4.2m contribution from the acquisition of Defaqto (from 21 March 2019) and GBP0.7m (3.0%) of organic growth.

The Distribution Channels Division contributed 60% of revenue in the period, compared to 54% in H1 2018, as a result of the Defaqto acquisition.

Adjusted EBITDA and Adjusted EBITDA margin

Underlying operating expenses exclude costs of an exceptional nature, depreciation (of tangible fixed assets and lease assets), amortisation of assets arising from acquisitions and minority interest charges. Given the inclusion of Defaqto and a second reporting period post IPO, the calculation of adjusted EBITDA has been amended to include both share option charges and amortisation of development costs. To aid comparability in the current year, the Group has also excluded the beneficial impact on conversion to IFRS 16 Leases, given that there has been no restatement of the prior year on transition.

Underlying operating expenses increased by GBP3.3m (17.4%) to GBP22.3m, as compared to H1 2018. Defaqto contributed GBP2.5m (including GBP0.2m of amortisation of development costs) of the increase, with organic growth in operating expenses of 4.2%. Reductions in operating expenses within valuation services and employee benefit software, both attached to reducing revenues, have been offset by increased software licence costs aligned to the increased revenues, investment in our compliance proposition and the inclusion of share option charges and amortisation of development costs in this metric. Excluding the latter two items, organic operating expenses increased by 2.0%.

Adjusted EBITDA is used by management as a key measure of financial performance to understand the underlying performance of the Group. Adjusted EBITDA growth of GBP1.6m (30.1%) included GBP0.3m of organic growth (5.0%), and GBP1.9m from the post-acquisition trading of Defaqto, offset by the inclusion of share-based payments and amortised development expenditure in this measure.

Operating costs of an exceptional nature

Operating costs of an exceptional nature include GBP2.5m of professional fees in respect of the equity raise and acquisition of Defaqto, GBP0.4m of loss of office costs and GBP0.1m of restructuring costs.

Share based payments

Share based payment charges of GBP0.3m (H1 2018: GBP0.1m) have been recognised in respect of the options in issue. The increase in the charge reflects the full period of issue in H1 2019 and additional Save as You Earn options issued in H2 2018.

Financial income and expense

Finance expense in H1 2018 included one off charges of GBP1.6m on early settlement of the retired debt and share warrant, held prior to the IPO.

Taxation

The tax charge for the period has been accrued using the tax rate that would be applicable to the total earnings chargeable to tax. The tax charge includes a deferred tax credit of GBP0.1m, as the deferred tax liability which arose on the intangible assets acquired from the Defaqto deal begins to be released into the P&L.

Earnings per share

Earnings per share has been calculated based on the weighted average number of shares in issue in both periods.

Dividend

The Group remains committed to the dividend policy set out at IPO in its Admission Document of paying one third of retained profits as a dividend, payable one third at interim and two thirds as a final dividend. The Board declares an interim dividend of 1.41p per share in respect of the trading for the 12-month period to 31 December 2019. The dividend will be paid on 24 October 2019, to Shareholders on the register on 20 September 2019, with an ex-dividend date of 19 September 2019.

Cash flow and Closing Net Cash

As at 30 June 2019, the Group has net debt of GBP30.1m, compared to GBP31.1m at the point of the Defaqto acquisition and GBP6.2m of net cash at 31 December 2018. Since the acquisition of Defaqto, the Group has generated free cash flow of GBP4.0m, paid the scheduled FY18 final dividend of GBP1.6m and repaid GBP3.0m of the Revolving Credit Facility in June 2019.

OUTLOOK

Trading has continued in line with the Board's expectations, since the end of the period. The Group remains on track to achieve market expectations for earnings for the full year.

Matt Timmins and Neil Stevens

Joint Chief Executive Officers

Consolidated statement of profit or loss and other comprehensive income

for the six months ended 30 June 2019

 
 
 
                                     Note        6 months    6 months 
                                                    ended       ended 
                                             30 June 2019     30 June 
                                                                 2018 
                                                   GBP000      GBP000 
 
Revenue                                 7          29,086      24,207 
 
Operating expenses                      8        (25,350)    (22,890) 
Amortisation of other intangible 
 assets                                12           (554)        (62) 
 
Operating profit                                    3,182       1,255 
Finance income                          9              41          41 
Finance costs                           9           (562)     (2,451) 
 
Profit / (loss) before 
 taxation                                           2,661     (1,155) 
 
Taxation                               10         (1,234)       (570) 
 
Profit / (loss) for the 
 financial period                                   1,427     (1,725) 
 
 
Profit / (loss) attributable 
 to: 
    Owners of the Company                           1,438     (1,725) 
    Non-controlling interests                        (11)           - 
 
                                                    1,427     (1,725) 
 
 
Earnings per share - basic             11           1.62p     (2.56p) 
Earnings per share - diluted           11           1.60p     (2.55p) 
 

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

Consolidated Statement of Financial Position

As at 30 June 2019

 
                                                                                Audited 
                                                 Unaudited      Unaudited   31 December 
                                       Note   30 June 2019   30 June 2018          2018 
                                                    GBP000         GBP000        GBP000 
Assets 
Non-current assets 
Property, plant & equipment                            492            439           375 
Lease asset                               4          1,511              -             - 
Intangible assets                        12        106,644         23,111        23,137 
 
Total non-current assets                           108,647         23,550        23,512 
 
Current assets 
Trade and other receivables                         11,023          9,065         8,712 
Deferred tax asset                                     116             34           116 
Cash and cash equivalents 
 -unrestricted                                      11,010         10,691        13,291 
Cash and cash equivalents 
 - restricted                                          545            545           545 
 
Total current assets                                22,694         20,335        22,664 
 
Total assets                                       131,341         43,885        46,176 
 
 
Equity and liabilities 
Equity attributable to the 
 owners of the Company 
Share capital                            14            968            765           765 
Share premium account                    14         73,148         36,791        36,791 
Other reserves                           15       (60,749)       (61,255)      (61,067) 
Retained earnings                                   49,939         46,257        50,081 
 
Total equity                                        63,306         22,558        26,570 
 
Liabilities 
Current liabilities 
Financial liabilities - borrowings       13              -         10,010         7,433 
Trade and other payables                            18,176          9,130        10,254 
Income tax liabilities                               1,315            446           496 
 
Total current liabilities                           19,491         19,586        18,183 
 
Non-current liabilities 
Financial liabilities - borrowings       13         41,615              -             - 
Trade and other payables                                 -          1,125           725 
Lease liability                           4          1,450              -             - 
Deferred tax liabilities                             5,479            616           698 
 
Total non-current liabilities                       48,544          1,741         1,423 
 
Total liabilities                                   68,035         21,327        19,606 
 
Total equity and liabilities                       131,341         43,885        46,176 
 
 

Consolidated statement of changes in equity

 
                                            Share     Share     Other  Retained    Total 
                                          capital   premium   reserve  earnings   equity 
                                           GBP000    GBP000    GBP000    GBP000   GBP000 
 
Balance at 1 January 2018                      10    52,544  (61,387)     2,982  (5,851) 
Total comprehensive income for 
 period                                         -         -         -   (1,725)  (1,725) 
 
Transactions with owners, recorded 
 directly in equity 
Issue of share capital                        176    29,826         -         -   30,002 
Bonus issue of shares                         579     (579)         -         -        - 
Transfer to retained earnings                   -  (45,000)         -    45,000        - 
Share option charge                             -         -       132         -      132 
 
Total contributions by and distribution 
 to owners                                    755  (15,753)       132    45,000   30,134 
 
Balance at 30 June 2018                       765    36,791  (61,255)    46,257   22,558 
Total comprehensive income for 
 period                                         -         -         -     4,574    4,574 
 
Transactions with owners, recorded 
 directly in equity 
Share option charge                             -         -       188         -      188 
Dividends                                       -         -         -     (750)    (750) 
 
Total contributions by and distribution 
 to owners                                      -         -       188     (750)    (562) 
 
Balance at 31 December 2018                   765    36,791  (61,067)    50,081   26,570 
 
Total comprehensive income for 
 period                                         -         -         -     1,427    1,427 
 
Transactions with owners, recorded 
 directly in equity 
Issue of share capital                        203    36,357         -         -   36,560 
Dividends                                       -         -         -   (1,569)  (1,569) 
Share option charge                             -         -       307         -      307 
Minority Interest                               -         -        11         -       11 
 
Total contributions by and distribution 
 to owners                                    203    36,357       318   (1,569)   35,309 
 
Balance at 30 June 2019                       968    73,148  (60,749)    49,939   63,306 
 
 

Consolidated statement of cash flows

for the 6 months ended 30 June 2019

 
 
                                                  6 months    6 months 
                                                     ended       ended 
                                                   30 June     30 June 
                                                      2019        2018 
                                                    GBP000      GBP000 
 
Net cash generated from / (used in) operating 
 activities (note 17)                                2,214       (530) 
 
Cash flows from investing activities 
   Finance income                                       41          41 
   Purchase of property, plant and equipment          (42)        (46) 
   Development expenditure                           (930)       (437) 
   Acquisitions, net of cash received             (47,099)     (2,333) 
 
Net cash used in investing activities             (48,030)     (2,775) 
 
Cash flows from financing activities 
   Finance costs                                     (475)       (922) 
   Loan repayments made                           (27,676)    (36,193) 
   Drawdown of loans                                37,500      10,093 
   Transaction costs related to borrowing            (420)           - 
   Payment of lease liability                        (385)           - 
   Issue of share capital                           36,560      30,020 
   Dividends paid                                  (1,569)           - 
 
Net cash generated from financing activities      43,535         2,998 
 
   Net decrease in cash and cash equivalents       (2,281)       (307) 
   Cash and cash equivalents at start of 
    period                                          13,836      11,543 
 
Cash and cash equivalents at end of period          11,555      11,236 
 
 

NOTES TO THE INTERIM FINANCIAL INFORMATION

   1.             Reporting entity 

The SimplyBiz Group plc is a company domiciled in the UK. These condensed consolidated interim financial statements ('interim financial statements') as at and for the six months ended 30 June 2019 comprise the Company and its subsidiaries (together referred to as 'the Group'). The Group is primarily involved in the provision of compliance and business services to financial advisers, including directly authorised IFAs, directly authorised mortgage advisers, workplace consultants and directly authorised consumer credit brokers. It also provides marketing and promotion, product panelling and co-manufacturing services to more than 135 financial institutions, through access to its membership.

   2.             Basis of accounting 

These interim financial statements have been prepared in accordance with IAS 34 Interim financial reporting and should be read in conjunction with the Group's last annual consolidated financial statements as at and for the year ended 31 December 2018 ('last annual financial statements'). They do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the Group's financial position and performance since the last annual financial statements.

The financial information set out in these interim financial statements for the six months ended 30 June 2019 and the comparative figures for the six months ended 30 June 2018 are unaudited. The comparative financial information for the period ended 31 December 2018 in this interim report does not constitute statutory accounts for that period under 435 of the Companies Act 2006.

Statutory accounts for the period ended 31 December 2018 have been delivered to the Registrar of Companies. The auditors' report on the accounts for 31 December 2018 was 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.

The interim financial statements comprise the financial statements of the Group and its subsidiaries at 30 June 2019. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtained control, and continue to be consolidated until the date when such control ceases.

The interim financial statements incorporate the results of business combinations using the acquisition method. In the consolidated balance sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date.

This is the first set of the Group's financial statements in which IFRS 16 has been applied. Changes to significant accounting policies are described in note 4.

These interim financial statements were authorised for issue by the Company's Board of Directors on 5 September 2019.

   3.             Use of Judgements and Estimates 

In preparing these interim financial statements, management has made judgements and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements, except for the new significant judgements related to lessee accounting under IFRS 16, as described in note 4.

   4.             Changes in significant accounting policies 

Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the last annual financial statements. The policy for recognising and measuring income taxes in the interim period is described in note 10. The changes in accounting policies are also expected to be reflected in the Group's consolidated financial statements as at and for the year ended 31 December 2019.

Amortisation of other intangible assets is charged to the statement of profit or loss on a straight-line basis over their estimated useful lives. The basis for choosing these useful lives is with reference to the period over which they can continue to generate value for the Group. The estimated useful lives have been updated in the period to be:

   --      Brand                                     15 years 
   --      Intellectual property          8 - 15 years 

The Group has initially adopted IFRS 16 Leases from 1 January 2019. A number of other new standards are effective from 1 January 2019, but they do not have a material effect on the Group's financial statements.

IFRS 16 introduced a single, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognised right of use assets representing its right to use the underlying asset and lease liabilities representing it obligation to make lease payments. The Group has applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 January 2019. Accordingly, the comparative information presented for 2018 has not been restated - i.e. it is presented, as previously reported, under IAS 17 and related interpretations. The details of the change in accounting policy is described below.

Definition of a lease

Previously, the Group determined at contract inception whether an arrangement was or contained a lease under IFRIC 4 Determining whether an arrangement contains a lease. The Group now assesses whether a contract is or contains a lease based on the new definition of a lease. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

On transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applied IFRS 16 only to contracts that were previously identified as a lease. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed. Therefore, the definition of a lease under IFRS 16 has been applied only to contracts entered into or changed on or after 1 January 2019.

As a lessee

The Group leases many assets, including predominately properties and vehicles. As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Group recognises right of use assets and lease liabilities for most leases - i.e. these leases are on-balance sheet. The Group has assessed the exemption allowable to low-value assets and considered that no categories of asset meet these criteria.

The Group presents right of use assets that do not meet the definition of investment property in 'property, plant and equipment', the same line item as it presents underlying assets of the same nature that it owns. The carrying amounts of right-of-use assets are as below:

 
                        Office  Properties  Vehicles   Total 
                     equipment 
                        GBP000      GBP000    GBP000  GBP000 
At 1 January 2019           37         360       169     566 
At 30 June 2019             78       1,163       270   1,511 
 
 

The Group presents lease liabilities separately on the face of the Balance Sheet.

Significant accounting policies

The Group recognises a right of use asset and a lease liability at the lease commencement date. The right of use asset is initially measured at cost, and subsequently at cost less any accumulated deprecation and impairment losses, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease, or, if that rate cannot be readily determined, the Group incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under residual value guarantees, or as appropriate, changes in the assessment of whether a purchase or an extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

The Group has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right of use assets recognised.

Transition

Previously, the Group classified property leases as operating leases under IAS 17. The leases run for differing periods and some leases include options to renew the lease and / or rent-free periods.

At transition, for leases classified as operating leases under IAS 17, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group's incremental borrowing rate as at 1 January 2019. Right of use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.

The Group used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under ISA 17:

-- Excluded initial direct costs from measuring the right of use asset at the date of initial application.

-- Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

On transition to IFRS 16, financial commitments of GBP1,246,000 as at 31 December 2018, previously disclosed, were considered to not meet the IFRS 16 criteria and therefore not recognised as right to use assets.

Impacts on financial statements

As a result of initially applying IFRS 16, in relation to the leases that were previously classified as operating leases, the Group recognised GBP566,000 of right of use assets and GBP566,000 of lease liabilities, after deduction of GBP5,000 discounting impact at the incremental borrowing rate of 3.1%. On acquisition of Defaqto the Group recognised GBP206,000 of right of use assets and lease liabilities on the opening balance sheet, and has subsequently recognised GBP1,060,000 in respect of new lease arrangements.

The Group has also recognised depreciation and interest costs, instead of operating lease expenses. During the six months ended 30 June 2019, the Group recognised GBP321,000 of depreciation charges and GBP3,000 of interest costs from these leases.

   5.             Going concern 

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Joint Chief Executives' statement.

The Directors have considered these factors, the likely performance of the business and possible alternative outcomes and the financing activities available to the Group. Having taken all of these factors into consideration, including the impact on covenants relating to the external borrowing facility, the Directors confirm that forecasts and projections indicate that the Group and its Parent Company have adequate resources for the foreseeable future and at least for the period of 12 months from the date of signing the half year report. Accordingly, the financial information has been prepared on the going concern basis.

   6.             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 one off items that are not considered part of on-going trade.

Adjusted EBITDA is calculated as follows:

 
 
                                                 6 months     6 months 
                                                 ended 30     ended 30 
                                                June 2019    June 2018 
                                                   GBP000       GBP000 
Operating profit                                    3,182        1,255 
add back: 
    Depreciation                                      133          129 
    Depreciation of IFRS 16 lease asset               321            - 
    Impact of IFRS 16 Leases accounting             (385)            - 
    Amortisation of other intangible assets 
     (note 12)                                        554           62 
    Operating costs of exceptional nature 
     (note 8)                                       2,997        3,790 
    Minority interest                                  11            - 
 
Adjusted EBITDA                                     6,813        5,236 
 
 

The impact of applying IFRS 16 has been adjusted for to provide comparability to the prior year, given that the standard has been applied under the modified retrospective approach.

Adjusted profit before tax is calculated as follows:

 
 
                                                 6 months     6 months 
                                                 ended 30     ended 30 
                                                June 2019    June 2018 
                                                   GBP000       GBP000 
Profit / (loss) before tax                          2,661      (1,155) 
add back: 
    Operating costs of exceptional nature 
     (note 8)                                       2,997        3,790 
    Finance costs of exceptional nature 
     (note 9)                                           -        1,635 
    Impact of IFRS 16 Leases accounting, 
     net of depreciation                             (64)            - 
    Amortisation of other intangible assets 
     (note 12)                                        554           62 
    Minority interest                                  11            - 
 
Adjusted profit before tax                          6,159        4,332 
 
 

Finance costs of an exceptional nature in 2018 represent the one-off costs incurred on settlement of the previous loan facility and associated share warrant, including the accelerated release of capitalised arrangement fees.

Adjusted profit after tax is calculated as follows:

 
 
                                                 6 months     6 months 
                                                 ended 30     ended 30 
                                                June 2019    June 2018 
                                                   GBP000       GBP000 
Profit / (loss) after tax                           1,427      (1,725) 
add back: 
    Operating costs of exceptional nature 
     (note 8)                                       2,997        3,790 
    Finance costs of exceptional nature, 
     net of tax (note 9)                                -        1,324 
    Impact of IFRS 16 Leases accounting, 
     net of depreciation and tax                     (51)            - 
    Amortisation of other intangible assets 
     (note 12)                                        554           62 
    Minority interest                                  11            - 
    Deferred tax credit on other intangible 
     assets                                          (83)            - 
 
Adjusted profit after tax                           4,855        3,451 
 
 

Finance costs of an exceptional nature, net of tax, represent the one-off costs incurred on settlement of the previous loan facility and associated share warrant, including the accelerated release of capitalised arrangement fees in 2018.

   7.             Segmental Information 

During the year, the Company was domiciled in the UK and as such all revenue is derived from external customers in the United Kingdom.

The Group has two operating segments, which are considered to be reportable segments under IFRS. The two reportable segments are:

   --      Intermediary Services; and 
   --      Distribution Channels. 

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 consumer credit brokers.

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. Through the acquisition of Defaqto, this operating segment also now provides independent ratings of financial products and data services to financial institutions.

The reportable segments are strategic business units that offer different products and services. Operating segments are reported in a manner consistent with the internal reporting produced to the chief operating decision makers.

The tables below present the segmental information for the periods ended 30 June 2019 and 2018.

 
                                                       6 months   6 months 
                                                       ended 30   ended 30 
                                                           June       June 
                                                           2019       2018 
                                                         GBP000     GBP000 
Intermediary Services 
Revenue                                                  11,599     11,185 
Operating expenses, before amortisation and 
 depreciation                                           (9,691)    (8,835) 
 
Intermediary Services (pre operating exceptional 
 costs)                                                   2,387      2,350 
Operating costs of exceptional nature                   (1,195)    (1,751) 
 
Intermediary Services                                     1,192        599 
 
Distribution Channels 
Revenue                                                  17,487     13,022 
Operating expenses, before amortisation and 
 depreciation                                          (11,400)   (10,004) 
 
Distribution Channels (pre operating exceptional 
 costs)                                                   5,608      3,018 
Operating costs of exceptional nature                   (1,802)    (2,039) 
 
Distribution Channels                                     3,806        979 
 
Divisional performance (after operating exceptional 
 costs)                                                   4,998      1,578 
 
Amortisation of development expenditure                   (490)          - 
Amortisation of other intangible assets                   (554)       (62) 
Depreciation                                              (133)      (129) 
Depreciation of lease asset                               (321)          - 
Share option charges                                      (307)      (132) 
Minority Interest                                          (11)          - 
 
Operating profit                                          3,182      1,255 
 
 

The Defaqto group has been run as one operating segment and whilst its customer base fall into the Group's reporting segments, historical performance was not measured in this way and costs could not be appropriately allocated to each customer base. Therefore, since the majority of the Defaqto group revenues fall within the Distribution customer base the performance has been reported in the Distribution Channel reporting segment. This includes revenues of GBP1.2m relating to Intermediary Services.

In determining the trading performance of the operating segments central costs are allocated based on the divisional contribution of revenue to the Group.

The statement of financial position is not analysed between reporting segments for management and the chief decision-makers consider the Group statement of financial position as a whole.

No customer has generated more than 10% of total revenue during the period covered by the financial information.

   8.             Operating Profit 

Operating profit for the period has been arrived at after charging:

 
                                          6 months ended  6 months ended 
                                            30 June 2019    30 June 2018 
                                                  GBP000          GBP000 
 
Depreciation of tangible assets                      133             129 
Depreciation of lease asset                          321               - 
Operating costs of exceptional nature: 
     Restructuring costs                              59              65 
     Professional fees for acquisitions            2,549             120 
     Loss of office expense                          389               - 
     Fees in relation to IPO process                   -           3,605 
 
                                                   2,997           3,790 
 
 

Professional fees for acquisitions relate to the purchase of Defaqto in 2019, and Landmark Surveyors in 2018. Loss of office expense relates to the redundancy of a senior employee, and restructuring costs in 2018 and 2019 relate to a programme of restructuring in a single legal entity. Fees in relation to the IPO process include professional fees incurred on listing on AIM in April 2018.

   9.             Finance Expense and Income 
 
                                                    6 months ended  6 months ended 
                                                      30 June 2019    30 June 2018 
                                                            GBP000          GBP000 
Finance Expense 
Bank interest payable                                        (559)           (816) 
Finance charge on lease liability                              (3)               - 
Fair value loss on financial instruments                         -           (345) 
Accelerated arrangement fees on settlement 
 of previous loan                                                -           (775) 
Accelerated implied interest charge on settlement 
 of previous loan                                                -           (515) 
 
                                                             (562)         (2,451) 
Finance Income 
Bank interest receivable                                        41              41 
 
                                                                41              41 
 
Net finance expense                                          (521)         (2,410) 
 
 
   10.          Taxation 
 
                            6 months ended  6 months ended 
                              30 June 2019    30 June 2018 
                                    GBP000          GBP000 
 
Current tax charge                   1,291             570 
Deferred tax credit                   (57)               - 
 
Tax charge for the period            1,234             570 
 
 

Current income tax expense is recognised at an amount determined by multiplying the profit / (loss) before tax for the interim reporting period by management's best estimate of the weighted-average annual income tax rate for the full financial year, adjusted for the tax effect of certain items recognised in full in the interim period. As such, the effective tax rate in the interim financial statements may differ from management's estimate of the effective tax rate for the annual financial statements.

   11.          Earnings per share 
 
 
  Basic Earnings Per Share ('EPS')               6 months        6 months 
                                                    ended           ended 
                                             30 June 2019    30 June 2018 
                                                   GBP000          GBP000 
 
Profit / (loss) attributable to equity 
 shareholders of the parent                         1,427         (1,725) 
 
Weighted average number of shares 
 in issue                                      87,867,713      67,352,894 
 
Basic profit / (loss) per share (pence)             1.62p         (2.56p) 
 
 

Earnings per share has been calculated based on the weighted average number of shares in issue in both periods.

 
 
  Diluted Earnings Per Share                       6 months        6 months 
                                                      ended           ended 
                                               30 June 2019    30 June 2018 
                                                     GBP000          GBP000 
 
Profit / (loss) attributable to equity 
 shareholders of the parent                           1,427         (1,725) 
 
Weighted average number of shares in 
 issue                                           87,867,713      67,352,894 
Diluted weighted average number of shares 
 and options for the period                       1,203,045         431,223 
 
                                                 89,070,758      67,784,117 
 
Diluted profit / (loss) per share (pence)             1.60p         (2.55p) 
 
 

An adjusted EPS has been calculated below based on the adjusted profit after tax, which removes one of items not considered to be part of underlying trading.

 
 
  Adjusted basic Earnings Per Share          6 months        6 months 
                                                ended           ended 
                                         30 June 2019    30 June 2018 
                                               GBP000          GBP000 
 
Adjusted profit after tax (note 6)              4,855           3,451 
 
Weighted average number of shares 
 in issue                                  87,867,713      67,352,894 
 
Adjusted earnings per share (pence)             5.52p           5.12p 
 
 
   12.          Intangible assets 
 
                                  Intangible Assets 
                  Goodwill   Brand  Software  Intellectual   Development    Total 
                                                  property   expenditure 
                    GBP000  GBP000    GBP000        GBP000        GBP000   GBP000 
Cost 
At 1 January 
 2018               16,250       -         -             -         2,133   18,383 
Additions            3,520     115         -           897           436    4,968 
 
At 30 June 2018     19,770     115         -           897         2,569   23,351 
Additions                -       -         -             -           221      221 
 
At 31 December 
 2018               19,770     115         -           897         2,790   23,572 
Additions           54,737   2,904         -        23,551           930   82,122 
Acquisition              -       -        34             -         2,395    2,429 
 
At 30 June 2019     74,507   3,019        34        24,448         6,115  108,123 
 
Amortisation 
 and impairment 
At 1 January 
 2018                  178       -         -             -             -      178 
Charge in the 
 period                  -       6         -            56             -       62 
 
At 30 June 2018        178       6         -            56             -      240 
Charge in the 
 period                  -       6         -            56           133      195 
 
At 31 December 
 2018                  178      12         -           112           133      435 
Charge in the 
 period                  -      60         4           490           490    1,044 
 
At 30 June 2019        178      72         4           602           623    1,479 
 
Net book value 
At 30 June 2019     74,329   2,947        30        23,846         5,492  106,644 
 
At 31 December 
 2018               19,592     103         -           785         2,657   23,137 
 
At 30 June 2018     19,592     109         -           841         2,569   23,111 
 
 

Intellectual property is a single asset covering the three elements of customer relationships, technology and data.

   13.          Borrowings 
 
                             30 June 2019  30 June 2018 
                                   GBP000        GBP000 
Secured bank loan: 
Current                                 -        10,093 
Non-current                        42,000             - 
Less loan arrangement fees          (385)          (83) 
 
                                   41,615        10,010 
 
 

On 5 April 2018, the Group repaid its previous loan in full and drew down GBP10.1m from a new GBP15.0m Revolving Credit Facility ('RCF') provided by Yorkshire Bank. The previous loan was due to be settled in June 2022. On settlement of the loan, GBP776k of capitalised loan arrangement fees were accelerated into the profit and loss account, along with GBP515k of implied interest (due to the discounting of the amount repayable to the present date). GBP90k of loan arrangement fees were incurred on the new RCF, which have been capitalised and amortised over 3 years.

On 21 March 2019, the Group repaid the loan facility provided by Yorkshire Bank and drew down GBP45.0m from an RCF provided in two equal amounts of GBP22.5m from Yorkshire Bank and NatWest. The RCF is a four year facility, with the option of a one year extension. The margin payable on the RCF is based on the net leverage of the Group with a range of 1.5% to 2.6% above LIBOR.

On 21 June 2019, the Group repaid GBP3.0m of the RCF.

   14.          Share Capital & Share Premium 

Share capital

 
                               Ordinary     Ordinary      Ordinary     Ordinary    Ordinary 
                               A shares     B shares      C shares     D shares      Shares         Total 
Number of fully 
 paid shares: 
At 1 January 2018             8,349,148      332,232     1,331,112      230,899           -    10,243,391 
Repurchase of 
 shares and cancellation              -            -             -      (1,093)           -       (1,093) 
Bonus issue of 
 shares                      75,142,332    2,990,088    11,980,008    2,068,254           -    92,180,682 
Share consolidation        (75,142,332)  (2,990,088)  (11,980,008)  (2,068,254)           -  (92,180,682) 
Bonus issue of 
 shares                      45,295,619    1,802,410     1,275,069      208,043           -    48,581,141 
Share conversion           (53,644,767)  (2,134,642)   (2,606,181)    (437,849)  58,823,439             - 
Issue of share 
 capital                              -            -             -            -  17,647,149    17,649,149 
 
At 30 June 2018                       -            -             -            -  76,470,588    76,470,588 
Issue of share                        -            -             -            -           -             - 
 capital 
 
At 31 December 
 2018                                 -            -             -            -  76,470,588    76,470,588 
 
Issue of share 
 capital                              -            -             -            -  20,311,708    20,311,708 
 
At 30 June 2019                       -            -             -            -  96,782,296    96,782,296 
 
 

During 2018 the Company bought back and cancelled 26,075 D ordinary shares. On 5 December 2018, the company issued 281,380 B ordinary shares.

During 2018, prior to the IPO listing, the Company bought back and cancelled 1,093 D ordinary shares.

As part of the IPO process, the following share restructuring took place on 4 April 2018:

-- An initial bonus issue of shares in the ratio of 9 new shares to 1 existing share was issued across all share categories.

   --      A share consolidation across all share categories, at a rate of 10 shares to 1. 
   --      A second bonus issue of shares across all share categories at differing share ratios. 

-- A conversion of all categories of shares, in a ratio of 1 to 1, into a new category of Ordinary shares.

In addition to the above, an issue of 17,647,149 new ordinary shares was made on 4 April 2018, and the Company undertook a reduction of its share capital by cancelling GBP45,000,000 of its share premium account.

On 21 March 2019, the Company issued 20,311,708 new shares as part of the funding for the acquisition of Defaqto (note 18).

The nominal value of the Ordinary Shares is GBP0.01.

Share Premium

 
                                         Share 
                                       Premium 
                                       GBP'000 
At 1 January 2018                       52,544 
Issue of share capital                  29,826 
Transfer to retained earnings         (45,000) 
Bonus issue                              (579) 
 
At 30 June 2018 and 31 December 
 2018                                   36,791 
Issue of share capital                  36,357 
 
At 30 June 2019                         73,148 
 
 
   15.          Other reserves 
 
                             Merger      Capital                      Share      Total 
                            Reserve   redemption  Non-controlling    Option      Other 
                                         reserve         interest   Reserve   Reserves 
                            GBP'000      GBP'000          GBP'000   GBP'000    GBP'000 
At 1 January 2018          (61,395)            8                -         -   (61,387) 
Share option charge               -            -                -       132        132 
 
At 30 June 2018            (61,395)            8                -       132   (61,255) 
Share option charge               -            -                -       188        188 
 
At 31 December 2018        (61,395)            8                -       320   (61,067) 
Share option charge               -            -                -       307        307 
Minority interest charge          -            -               11         -         11 
 
At 30 June 2019            (61,395)            8               11       627   (60,749) 
 
 
   16.          Share-based payment arrangements 

At 30 June 2019, the Group had the following share-based payment arrangements.

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 are as follows:

 
 Scheme            Grant Date     Number of   Vesting conditions   Contractual 
                                   awards                           life of options 
----------------  -------------  ----------  -------------------  ----------------- 
 Approved Scheme   4 April 2018   229,412     3 years' service     3 to 10 years 
                                               from grant 
                                               date 
 Unapproved        4 April 2018   250,000     3 years' service     3 to 10 years 
  Scheme                                       from grant 
                                               date 
----------------  -------------  ----------  -------------------  ----------------- 
 

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 SimplyBiz 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 3 years and 10 years after the date of grant, provided that they are still employed and an equity hurdle is met. The terms and conditions of the MIP are as follows:

 
 Grant Date     Number of awards   Vesting conditions   Contractual life 
                                                         of options 
-------------  -----------------  -------------------  ----------------- 
 4 April 2018   2,250              3 years' service     3 to 10 years 
                                    from grant date, 
                                    subject to an 
                                    equity hurdle 
                                    of 40% above 
                                    the IPO price. 
-------------  -----------------  -------------------  ----------------- 
 

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.

 
                                   Approved   Unapproved   Management 
                                       CSOP         CSOP    incentive 
                                                                 plan 
--------------------------------  ---------  -----------  ----------- 
 Fair value at grant date           GBP0.64      GBP1.59    GBP290.22 
 Share price at grant date          GBP1.70      GBP1.70      GBP1.70 
 Exercise price                     GBP1.70      GBP0.01     GBP1.785 
 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 GBP1.70. The fair value of the shares at date of grant (1 December 2018) was GBP0.70, 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.

   17.          Notes to the cash flow statement 
 
 
                                                   6 months    6 months ended 
                                                   ended 30      30 June 2018 
                                                  June 2019 
                                                     GBP000            GBP000 
Cash flow from operating activities 
Profit / (loss) after taxation                        1,427           (1,725) 
Add back / (deduct): 
Finance income                                         (41)              (41) 
Finance cost                                            562             2,451 
Taxation                                              1,234               570 
 
                                                      3,182             1,255 
 
Adjustments for: 
Amortisation of development expenditure                 490                 - 
Depreciation of property, plant and equipment           133               129 
Depreciation of lease asset                             321                 - 
Amortisation of other intangible assets                 554                62 
Share option charge                                     307               132 
Minority interest                                        11                 - 
 
Operating cash flow before movements in 
 working capital                                      4,998             1,578 
 
Decrease / (increase) in receivables                    480           (1,301) 
Decrease in trade and other payables                (2,906)             (581) 
 
Cash generated from / (used in) operations            2,572             (304) 
Income taxes paid                                     (358)             (226) 
 
Net cash generated from / (used in) operating 
 activities                                           2,214             (530) 
 
 
   18.          Acquisitions 

On 21 March 2019, the Group purchased 100% of the share capital of Regulus Topco Limited, owner of Defaqto, a financial services tech business for total consideration of GBP51.4m. Acquired borrowings of GBP24.7m were settled soon after completion of the transaction.

The acquisition of Defaqto creates a single fintech and support service group, which will benefit from an increased number and range of distribution channels. In the period to 30 June 2019, Defaqto contributed revenue of GBP4.2m and adjusted EBITDA of GBP2.0m. If the acquisition had occurred on 1 January 2019, management estimates that revenue would have been GBP7.0m and adjusted EBITDA of GBP3.2m.

The Group incurred acquisition related costs of GBP2.5m relating to external legal, broker and professional fees. These costs have been included in 'operating expenses' in the consolidated statement of profit or loss and other comprehensive income and analysed separately as 'operating costs of an exceptional nature' in note 8.

The following fair values have been determined provisionally, based on the Group's preliminary assessment. The Group will continue to review the fair values during the measurement period.

 
                                          Book value   Fair value  Provisional 
                                                       adjustment   Fair Value 
                                             GBP'000      GBP'000      GBP'000 
Net assets acquired 
Property, plant & equipment                      213            -          213 
Lease asset                                      206            -          206 
Other intangible assets - 
 software                                         34            -           34 
Capitalised development costs                  2,395            -        2,395 
Trade and other receivables                    2,791            -        2,791 
Income tax receivable                            114            -          114 
Cash and cash equivalents                      5,030            -        5,030 
Trade and other payables                     (3,281)            -      (3,281) 
Deferred revenue                             (7,360)            -      (7,360) 
Borrowings                                  (24,676)            -     (24,676) 
Lease liability                                (206)            -        (206) 
Intangible assets - Brands                         -        2,904        2,904 
Intangible assets - Intellectual 
 property                                          -       23,551       23,551 
Net deferred tax liability                     (341)      (4,497)      (4,838) 
 
                                            (25,081)       21,958      (3,123) 
 
Consideration paid 
Cash price paid                                            43,894 
Shares issued                                               7,489 
 
Total Consideration                                                     51,383 
 
Goodwill                                                                54,506 
 
 

Goodwill acquired on the acquisition relates to the assembled workforce and the synergies expected to be achieved from integrating the company into the Group's existing business.

In addition to the above, and additional payment was made in the period with respect to the acquisition of Landmark Surveyors, resulting in an increase in goodwill of GBP25,000.

   19.          Subsequent Events 

No material subsequent events have arisen since the balance sheet date.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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