Fintel reports continued growth, ongoing M&A in interim results

Fintech specialist Fintel (FNTL) Follow | FNTL announced unaudited consolidated results for the 6 months ended June 30 2023.

Fintel's core revenues increased 4% to £27.6m on a like for like (LFL) basis from last year while core adjusted EBITDA was up 8% to £8.8m. SaaS and subscription revenue - which now represents 68% of core revenue - was also up 6% to £18.8m.

Strong cash conversion of 104% yielded a cash position of £13.3m, 75% higher than last year's £7.6m. Together with an undrawn £80m revolving credit facility, this gives the fintech provider significant flexibility and headroom to pursue further M&A opportunities.

Adjusted EBITDA was up 3% to £9.0m, reflecting significant investment during the period. Adjusted EBITDA margin was 28.3%, up 130bps from 27% last year, driven by a more diversified revenue mix and growth of higher-margin revenues.

Statutory revenue was down 2% to of £31.7m, reflecting both new net revenue recognition on major contract extensions, and reduced activity in non-core business. Adjusted EPS was down 6% to 5p from 5.3p last year, largely as a result of the UK's increase in corporate tax rate from 19% to 25%.

As a result of the largely positive results, Fintel proposed an interim dividend of 1.1p.

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A positive set of interim results from Fintel, showing growth in its core revenues, including the ever-increasing SaaS revenue stream, core adjusted EBITDA, margins, and a much improved cash position. Fintel's growth reflects increased investment in its technology and service platform as well as a successful M&A strategy. Trading remains encouraging and in line with management expectations, with a healthy M&A pipeline set to accelerate growth.

Specifically, expected to accelerate future growth are the completed during the period acquisitions of MICAP by Fintel's Defaqto, acquisition of Competent Adviser, and investment in Plannr through the Fintel Labs technology incubator. These M&A moves should help further develop Fintel's technology proposition and extend its reach into the tax-advantaged and compliance markets. Fintel also strengthened its distribution agreement with BlackRock in August as the latter's MyMap funds joined Fintel's Risk Controlled investment solutions. 

Fintel kept improving earnings quality during the period, helping future visibility. Solid growth in core SaaS and subscription revenue - now accounting for 68% of core revenue - is encouraging, as is progress in conversion to Distribution as a Service (DaaS) with 79% of distribution partner revenue converted to multi-year subscription agreements, compared to HY22's 60%.

Despite heavy investment, Fintel ended the half-year with a cash position of £13.3m, driven by continued robust operating cashflow conversion, which exceeded 100% of operating profit. Alongside an undrawn 4-year £80m Revolving Credit Facility, the company has significant firepower to fund organic investment and further M&A opportunities.

Fintel's long-term growth prospects are underpinned by regulatory and structural changes in the UK financial services market, not least the increased regulatory burden around consumer duty and the rising adoption of technology and data-driven services. With a strong balance sheet and a robust M&A pipeline to complement recent acquisitions, the company looks well-positioned for future growth.

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