Fintel posts strong H1 2024, strategic M&A poised to drive future growth

Fintel (FNTL) Follow | FNTL, a provider of fintech and support services to the UK financial sector, announced its final results for the 6 months ended June 30, 2024 (H1 2024).

Fintel's core revenue increased by 13% to £31.2m from £27.6m a year ago while core adjusted EBITDA rose by 5% to £9.3m. Core SaaS and subscription revenue was up 6% to £20.0m year-on-year while statutory revenue increased by 12.5% to £35.7m. Adjusted EBITDA similarly increased by 7% to £9.6m.  Adjusted EPS stayed flat at 5.0p/share, maintaining profitability and offsetting the impact of last year's increase in the UK corporate tax rate to 25%.

FNTL ended the half with a gross cash position of £7.4m, down from £13.3m a year ago, after £6.2m was deployed into multiple acquisitions and £2.5m was invested in product development. Net debt was £8.6m with a debt-to-EBITDA ratio of 0.4x. The company had £64.0m of headroom in its £80.0 revolving credit facility. An interim dividend of 1.2p was declared, up 9% from last year.

Operationally, the fintech provider completed 4 acquisitions YTD - Threesixty Services, Synaptic Software, ifaDASH, and Owen James, alongside the conditional acquisition of Rayner Spencer Mills Research, and minority investment in Mortgage Brain. Additionally, FNTL completed phase 1 development of the Matrix 360 enhancement of its market intelligence software Defaqto Matrix, and launched Fintel IQ - a technology and workflow platform enabling a seamless advice process for large intermediary firms.

Matt Timmins, Joint CEO, commenting: "With our strategic foundations firmly in place, we are strongly positioned to capitalise on the growth opportunities across our extensive family of brands, underpinned by the strength of our balance sheet.

Current trading is robust, and we are confident of meeting our full year revenue expectations, as we continue to inspire better outcomes for retail financial services."

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Fintel reports strong trading and positive momentum in H1, in line with management expectations. The fintech provider continued its aggressive M&A strategy with 4 acquisitions announced year-to-date, totalling 8 in the past 12 months, in line with its objective to significantly expand its IP, capabilities and quality datasets within its core markets.

The acquisitions boosted core EBITDA and core revenue in H1, up 5% and 13% respectively. Despite heavy investment, the group ended the half with a robust cash position of £7.4m and £64m of headroom within its £80m revolving credit facility. The strong balance sheet, combined with strong cash generation and reliable recurring revenues, position FNTL well for continued expansion and more M&A.

Profitability remained constant with adjusted EPS at 5.0p/share despite last year's increase in the UK corporate tax rate from 19% to 25%. SaaS and subscription revenue was up 6% to £20m, now representing 65% of core, reflecting the positive impact of the 4 acquisitions. FNTL maintains strong visibility of earnings and recurring revenues, with continued M&A expected to facilitate further organic growth through expansion of services, cross-selling, and other synergistic opportunities.

Trading into H2 remains in line with expectations, with growth in fintech software revenue and software license sales offsetting pressures in the UK housing market. Additionally, with interest rates set to adjust positively in 2024, Fintel is well-positioned to benefit from a recovery in the mortgage market. The group expressed confidence in meeting revenue expectations for the full year.

We expect near-term growth to be driven by ongoing software adoption across FNTL's customer base, further penetration across the wider market, synergies from recent acquisitions, and more M&A. Growth may be further accelerated by structural drivers, including regulatory pressure, the FCA Consumer Duty, and robust demand for technology and data.

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