ULS Technology : 28-Nov-17 ULS Interims (PDF document)

28 November 2017

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

ULS Technology plc (AIM: ULS), the provider of online B2B pla�orms for the UK conveyancing and financial intermediary markets, announces its half yearly results for the six months to 30 September 2017.

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

� Revenue increased by 56% to £15.28m (H1 2017: £9.78m)

� Organic revenue growth of 22%

� Underlying Opera�ng Profit1 increased by 44% to £2.81m (H1 2017: £1.95m)

� Adjusted EPS1,2 increased by 45% to 3.48p (H1 2017: 2.40p)

� Net debt and equivalents of £2.3m as at 30 September 2017 (FY 2017: net cash £3.7m)

� Interim dividend of 1.15p per share, an increase of 5% on the same period last year

1. Before acquisition intangibles, amortisation and exceptional costs. Exceptional costs of £1.87m primarily relate to an upgrade in the estimated earn-out payable for the acquisition of CAL

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

� Con�nued expansion of market share of housing transac�ons, both organically and within the acquired CAL business

� Signed a number of new customer contracts, most notably with mortgage lenders

� CAL now successfully integrated into Group, delivering a strong H1 trading performance

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

"This has been a strong first half for ULS. Once again, we have increased our market share and financial results against the backdrop of a housing market that has become quiet, rela�ve to longer term averages.

"We have had successes across all relevant market segments, including with intermediaries, through self-serve channels and through achieving new growth in estate agency related conveyancing. Most notably, we are winning new conveyancing work from mortgage lenders - and now work for eight lenders (vs. four lenders two years ago) and con�nue to target further new growth over the coming months and years.

"Another standout performance over the last six months has been how quickly CAL has se�led into ULS and specifically how well they have worked with us post-acquisi�on and performed so strongly in their estate agent and mortgage broker markets.

"I remain excited about the Group's prospects and our ability to con�nue to increase our conveyancing market share, growing our client base by providing outstanding choice and service. The quality of our products and customer base signify the strength of our opera�ons and reflect our con�nued efforts to deliver value for shareholders."

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.

This has been a successful reporting period for the Company, despite 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 underpinned our strong performance during the period.

In addition to winning new relationships during the period we identified and will continue to pursue new growth opportunities in existing and adjacent new markets. These include estate agency related conveyancing and providing additional services to more mortgage lenders, through the provision of innovative technology solutions. Successful deployment of this strategy will enable ULS to continue its track record of delivering strong financial growth and increasing shareholder value.

Furthermore, while we are a leading technology platform in this sector, it is worth noting that we still only command less than 5% share of the conveyancing market. We believe that our clear strategy will enable us to execute on this growth opportunity.

Since acquiring CAL in December 2016, we have established a very strong working relationship with them and have also realised the synergies identified at outset.

CAL has built up some good momentum with estate agents, providing a bespoke technology platform to enable customers using an estate agent to have the best possible conveyancing experience. Most notably, CAL has enjoyed very strong success in continuing to build up their portfolio of smaller mortgage brokers, enticing them with highly competitive technology, pricing and good service.

CAL enables ULS to accelerate and grow its penetration of these two specific market segments, contributing to a greater Group market share of conveyancing.

During this 6 months reporting period, CAL has delivered £3.4 million in revenue and over 10,000 conveyancing completions. This represents a growth in completions of 44% over the same period in the previous year.

This better than expected performance has led to the Group increasing its estimate of the earnout payable to the maximum of £5.3 million (undiscounted).

ULS took on a £7 million debt facility to fund the purchase of CAL through a mixture of term loan and rolling credit facility. Continued strong cash generation saw net debt at the end of the period fall to

£2.35 million.

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 considerable degree of paperwork and manual intervention. 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.

The Company is pleased to announce that it will pay an interim dividend of 1.15 pence per share; this is a five per cent increase on the dividend paid for the six months to 30 September 2017. The dividend record date is 8 December 2017, and the dividend is expected to be paid on 22 December 2017.

I am pleased to announce that Geoff Wicks, a current Non-Executive Director, is taking on the role of Chairman with immediate effect. Geoff has been a member of the Board since we listed on AIM in 2014. He has provided excellent support to and scrutiny of the Board and I am sure will continue in this vein as Chairman.

Peter Opperman will be stepping down from his role as Chairman but will remain on the Board as a Non-Executive Director. Peter has provided outstanding support and guidance to the Board over the last six years as well as significant amounts of his time. I am delighted that he is remaining on the Board and that the Group continues to benefit from his expertise.

Housing transaction numbers look set to remain below long-term historical averages and broadly consistent with levels seen over the last few years. However, last week's budget looked positive for the housing market and the stamp duty relief for first-time buyers should increase transaction volumes.

In terms of activity, there has already been a shift away from buy-to-let investors towards first time buyers and there are fewer cash buyers too. This change in market shape ought to provide ULS with comparatively more new opportunities to grow its numbers.

With a relatively low market share compared to leaders in other parallel markets, ULS has confidence it can strive for and secure incremental market share growth over future months and years.