Fintel plc (LON:FNTL) trading update confirmed its 2021 results will meet or exceed expectations, the company is making “significant strategic progress” and is financially strong:
- 5% core revenue growth to £52.2m (Zeus forecast: £51.0m; 2020: £49.8m) and total revenue (including disposals) is “marginally ahead of expectations” at £63.9m (Zeus forecast: £61.0m; consensus: £61.6m; 2020: £61.0m).
- Adjusted EBITDA growth “in line with expectations” (consensus: £18.1m).
- £2.5m net cash at year end (Zeus forecast: £1.0m net cash; 2020: £19.4m net debt).
The update highlights Fintel’s key strategic progress, including:
- SaaS & subscription revenue continues to grow across all 3 divisions.
- Margins maintained whilst investing in Fintel’s “digital services platform”.
- New strategic partnerships (including 2,500 licences via Tatton).
- 13 Distribution as a Services (DaaS) multi-year subscription agreements, with institutional partners converting from previous annual contracts.
Results are scheduled to be announced on Tuesday 22 March.
Outlook from Matt Timmins, Joint CEO: “The rapid digitisation of our SaaS & subscription based business has continued, improving earnings quality and delivery of key services to customers. … The board is confident of continued strong trading and key strategic progress in 2022.”
Zeus view: We maintain our EBITDA, profit, adj EPS and DPS forecasts. We raise our group revenue forecast 4.7% to £63.9m, in line with today’s update.
Progress to management’s targets (see “Digital Transformation”, 13 January 2021) has been made:
– organic core revenues growth is within 5% to 7% p.a.
– SaaS, DaaS and Subscription revenue is rising to 80% of core revenue.
We expect Fintel’s full year results presentation to reveal its investment in digitisation and core EBITDA margin (excluding disposals and non-core business), enabling us to forecast core EBITDA margin progressing to 35% to 40% target.
Valuation: At 233p, Fintel is trading on 19x prospective “normal tax charge” adj EPS of 12p. Arguably this rating does not reflect the quality and growth of its core digital businesses which generate over 80% of Group revenues and over 90% of Group EBITDA.
In our opinion, should trade on a sales multiple 5x to 6x and ungeared PER multiple of 22x to 27x (i.e. 268p to 320p based on 2021 adj EPS of 12p; core sales of 51.6p with non-core and cash & investments of 10p per share).
