ULS Technology revenues slide as it focusses on core business

(Sharecast News) - Conveyancing and financial intermediary software company ULS Technology reported a 31% fall in revenue in its first half on Tuesday, to £10.06m, which it said was in line with the overall market.
The AIM-traded firm said its gross margin fell to 42.7% for the six months ended 30 September, from 43.9% a year earlier, which it put down to changes in its business mix.

Underlying EBITDA fell to £1.0m from £3.3m, while its underlying Profit before tax was £0.33m, falling from £2.78m.

ULS said its adjusted basic earnings per share declined to 0.51p from 3.6p, while its net debt reduced to £1.9m as at 30 September, from £3.4m at the end of the 2019 financial year.

Part of that improvement was due to its use of the government's VAT deferral scheme, worth £0.6m, which would be repaid in March 2021 and which did not show as debt.

Its proforma cash balances following the sale of CAL totalled £25m, while the board reported positive cash from operating activities of £2.1m.

Operationally, the company said it saw an increase in brokers actively using its platforms to 3,917, which was a rise of 9% over the six month period and 21% against September 2019.

More than 20,000 cases had now been instructed through its 'DigitalMove' platform, compared to around 3,000 12 months ago.

The 'DigitalMove Solicitor Portal' was launched as a pilot in the period, while the appointment of a new chief executive officer, Jesper With-Fogstrup, was confirmed, with With-Fogstrup to start in the new year.0

Since the period ended, ULS had disposed of its wholly-owned subsidiaries Conveyancing Alliance Holdings and Conveyancing Alliance Limited (CAL) for cash of £27.3m .

The board said the proceeds would be used to repay debt, leaving around £25m cash on the balance sheet to invest in a digital platform aimed at "revolutionising" home moving and ownership.

Its continuing operations remained profitable at an EBITDA level immediately post-transaction.

"We are pleased with our performance in the first half of the year in an unprecedented housing market which virtually came to a standstill in the first two months of the period in terms of existing pipeline and, in particular, new instructions," said chairman Martin Rowland.

"While the market has since come bouncing back to life with the number of instructions above pre-Covid levels, the lag between instruction and completion means that this will benefit the second half rather than the first.

"That said, our ability to make a profit and generate cash in the period against this backdrop, highlights the strength of the company's model and relationships. Importantly, given the volume of instructions, we are now seeing an increasing run-rate of revenue and have good visibility of higher revenues over the coming months."

Rowland said the post-period sale of CAL was a "pivotal moment" for ULS, providing the capital to help it achieve its vision of building a digital platform that would "transform" the home moving and home owning process for consumers.

"The broader functionality that we plan to offer and scale of opportunity we envisage provides a strong backdrop for future growth opportunities."

At 1117 GMT, shares in ULS Technology were down 11.26% at 77.2p.