Simplybiz scores revenue gains but IPO charges damage profits

The Simplybiz Group's shares climbed on Tuesday as the company reported higher annual revenue, though profits were lower after IPO related charges did damage.

For the year-ended 31 December, the supplier of compliance and business services to the finance industry achieved revenue of £50.7m, an increase of 15% compared to the year before, and "strong" adjusted EBITDA growth of 20% to £11.4m which the company said reflected "a prudent approach to cost control and the business' ability to generate operational leverage from its platform".

However, profit before tax dropped by 40% to £2.8m after operating expenses increased by 24% to £43.8m after IPO related costs of £3.6m.

Adjusted profit after tax, which excludes operating exceptional costs, exceptional finance charges, amortisation and share based payment charges, exceeded expectations as it increased by 62% to £8.6m.

Ken Davy, chairman of SimplyBiz, said: "I'm delighted to report a strong performance for 2018, in a transformational year which saw the group's successful admission to AIM and continued momentum in its organic and inorganic growth strategy. With our impressive revenue growth, well-supported by a number of structural drivers, the strength of the group's regulation and capital light operating model is clearly demonstrated by a significant increase in EBITDA margin."

Meanwhile, group membership numbers increased by 8.5% to 3,726 and the AIM traded company also benefited from a £3.7m contribution from the acquisition of Landmark Surveyors in January of last year.

"The continued growth in membership numbers is testament to the value of our proposition as individuals and businesses continue to adapt to an increasingly complex and highly regulated intermediary market. Having successfully deleveraged the business, our balance sheet strength ensures we have a strong platform from which we can take advantage of the significant market opportunities we see," said Davy.

A note from analysts at Peel Hunt said: "In summary, our view is that SimplyBiz offers exposure to many of the favourable trends with the retail financial services sector, with a high quality of recurring income and limited market sensitivity. The business model is to sit between independent intermediaries and product providers, providing a range of essential services."

The Simplybiz Group's shares were up 6.15% at 190.06p at 1237 GMT.