ULS.L Regulatory News (ULS)

ULS Technology plc

(The "Group" or the "Company")

Half Yearly Report

"Gains in market share drive increases in revenue, profits and dividends"

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 2018.

The Group continued to increase its market share and grow revenue and profits during the period despite housing market transactions being lower year-on-year.

Financial Highlights

· Revenue increased by 3% to £15.79m (H1 2017: £15.28m)

· Underlying Profit before Tax1 increased by 6% to £2.89m (H1 2017: £2.74m)

· Adjusted basic EPS1 increased by 7% to 3.73p (H1 2017: 3.49p)

· Net debt and equivalents of £3.4m as at 30 September 2018 (FY 2017: £2.3m)

o Payment of contingent consideration of £2.9m in the period

· Interim dividend of 1.20p per share, an increase of 4% on the same period last year

1. Before acquisition intangibles, amortisation and exceptional costs. Exceptional costs of £0.32m relate to the NPV movement in the estimated earn-out payable for the acquisition of CAL.

Operating Highlights

· Further growth in market share particularly, within the re-mortgage transaction segment

· Continued expansion of the sales team, focusing on intermediary market

· Key elements of "DigitalMove" project fully developed and ready for launch in January 2019

Post Period Events

· New conveyancing Services agreed with Hunters Estate Agents and Which? Mortgage Advisers

o Further strengthening customer base and routes to market

· Strengthening of the Board with Martin Rowland joining as a NED

o Adds significant expertise and knowledge base

Steve Goodall, Chief Executive of ULS Technology plc, commented:

"We are pleased with our performance in the first half of the year especially given the wider economic environment. We once again outperformed the market in both transactional and re-mortgage volumes.

"We also increased our sales resource during the period and have concentrated both on increasing the number of advisers who use our systems and how often they use them. We will continue to focus in this area over the coming months and expect these efforts to continue to deliver new contract wins.

"We have a number of new products in development and have many active conversations with various parties throughout the industry, where there is widespread interest in how to improve the customer journey. We are particularly excited about DigitalMove, which will be launched in January 2019 and will be a major step forward in the way that many consumers interact with their conveyancer."

 Enquiries:

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 has been my first reporting period as CEO of the Group and it has been a successful one in the face of market uncertainty on many fronts. Over the last decade or so, we have forged close working relationships with a growing number of the most successful mortgage intermediaries and lenders. These relationships, together with our continued investment in technology and customer service, have underpinned our strong performance during the period.

It has therefore been an exciting time to take on the CEO role. There is a real desire in the markets in which we operate to make the home-moving experience better for everyone. We are helping to drive this process and are having discussions with a variety of parties across the industry as to how we can make this happen. These developments have the potential to underpin organic growth and the overall health of the Group for many years to come.

A prime driver behind this will be our launch of DigitalMove in January 2019. DigitalMove is a customer focussed online platform that enables the customer to communicate with their conveyancer in a user-friendly, digital environment which is safe and secure with the potential to take weeks off the house-moving process. Following the planned launch, we are working to a roadmap of product enhancements that will be rapidly delivered and rolled out across all of our distribution base and beyond as DigitalMove has the potential to open up new markets and new customers for the Group as well as enhancing the home-moving experience for our existing customers.

Strategy

The Group's strategy remains to grow market share and value though focusing on continual improvement, innovation and quality, while being alive to potential acquisitions.

The tactics to achieve this strategy are:

· Focus on our distribution. We have an enviable list of distributors who promote our platforms and we have increased resource to ensure there is complete focus on our distribution. This guarantees that we are in regular contact with them and that they receive the service and products that they need and expect.

· Product development. The Group has always been innovative. However, during this year we have significantly increased resource in our product development team as we look to accelerate delivery of new products. This will accelerate the launch and development of DigitalMove, as well as other new products for lenders and New Build, without compromising enhancements to our existing comparison platforms.

· Acquisitions. Although not completing any acquisitions in the reporting period it remains a key part of our growth strategy and we will continue to seek and pursue opportunities.

Non-IFRS Profit Measures

In the Financial Highlights above we show the movement in Underlying Profit before Tax. This is a non-IFRS profit measure and the table below shows how that measure is arrived at from IFRS profit.

Underlying Profit before Tax

Underlying Profit after Tax

We believe that providing details of how these non-IFRS profit measures are calculated by reference to the IFRS profit number helps aid the understanding of the movement in the IFRS number as well as giving an indication to the long-term profitability and cash generating ability of the Group.

Interim Dividend

The Company is pleased to announce that it will pay an interim dividend of 1.20 pence per share; this is a four per cent increase on the dividend paid for the six months to 30 September 2018. The dividend record date is 14 December 2018, and the dividend is expected to be paid on 4 January 2019.

Board Changes

We have recently announced the appointment of Martin Rowland as Non-Executive Director. Martin will Chair the Audit Committee as well as being a member of the Remuneration and Nominations Committees.

Outlook

The macro-economic environment for the last few months has been uncertain. This has fed through to a reduction in housing activity. The feeling in the market is that some potential house buyers are sitting on their hands until there is greater clarity over economic prospects and house prices before entering the market. It seems certain that Brexit is the main driver behind this uncertainty. As things become clearer during 2019, we expect market activity to return to normal levels.

The medium-term prospects for technology providers to the housing market remain positive and therefore we will continue to invest in both sales and product to deliver long-term profitable growth.

Steve Goodall

Chief Executive Officer

UNAUDITED INCOME STATEMENT

Six months to 30 September 2018

UNAUDITED STATEMENT OF COMPREHENSIVE INCOME

Six months to 30 September 2018

UNAUDITED BALANCE SHEET

At 30 September 2018

UNAUDITED STATEMENT OF CHANGES IN EQUITY

Six months to 30 September 2018

UNAUDITED STATEMENT OF CASH FLOWS

Six months to 30 September 2018

Notes to the financial information

Six months to 30 September 2018

1. GENERAL

The interim financial information for the six months to 30 September 2018 is unaudited and was approved by the Directors of the Company on 28 November 2018. 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 significant seasonality or cyclicality.

A dividend of £741,273 has been paid in the six months ended 30 September 2018 (six months to 30 September 2017: £711,195).

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 2018.

IFRS 15 'Revenue from Contracts with Customers' is effective for annual periods beginning on or after 1 January 2018 and is therefore applicable to these accounts. However, the change in accounting standard from IAS 18 has had no impact on these accounts.

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 2019, 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 2018 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 of similar services which makes up the Group's Comparison Services segment represents more than 95% of the total business. Additionally, the Board reviews Group consolidated numbers when making strategic decisions and, as such, the Group considers that it has one reportable operating segment. All sales are made in the UK. 

4. EXCEPTIONAL EXPENSES

Exceptional Administrative Expenses

Exceptional Finance Costs

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

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

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:

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:

b) Share based payments

During the period the Group granted 527,500 options with an exercise price of £1.3425 per share and 637,500 options with an exercise price of £1.3325 per share.

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.

7. BORROWINGS

In December 2016, the Group took out a 5-year term loan for £5 million and a £2 million revolving cash flow facility. Both had an initial interest rate of 1.90% above LIBOR but this has reduced to 1.55% above LIBOR during the period as certain financial criteria were met. The term loan is subject to repayments of £250,000 plus accrued interest quarterly.

Loans are secured by way of fixed and floating charges over all assets of the Group. 

8. CONTINGENT CONSIDERATION

In December 2016, the Group acquired 100% of the issued ordinary share capital of Conveyancing Alliance Holdings Limited and its 100% subsidiary Conveyancing Alliance Limited (together referred to as "CAL"), companies incorporated in England and Wales. Part of the consideration is contingent based on a range of between 0.5 and 1.75 times annualised PBT of CAL for the period between completion to 31 March 2018 and also for the 12 months ending 31 March 2019. A first payment of £2,935,000 relating to this contingent consideration was paid in July 2018. The estimated remaining undiscounted value of this element of the consideration is £2,337,000 (£5,272,000 as at 31 March 2018). There is a cap on the contingent consideration payable and the current estimate is for the cap to be reached.

The amounts shown in the balance sheet are at net present value and the movement arising on this is shown below

The end of period contingent consideration liability of £2,063,000 is all included within trade and other payables as a current liability.