# Fintel core revenue growth is higher than Zeus forecast

- Link: https://www.directorstalkinterviews.com/fintel-core-revenue-growth-is-higher-than-zeus-forecast/4121075111
- Published: 2022-07-29T07:17:15+01:00
- Author: Amilia Stone

**Fintel plc **(LON:FNTL), the leading provider of Fintech and support services 
to the UK retail financial services sector, has released a trading update for the
six months to 30 June 2022, which reveals: Core revenue grew c.9% to £27.1m, (2H21:
£24.9m)

¨ Total revenue (i.e. including surveying) grew 2% to £32.2m, (2H21: £31.7m)

¨ Adjusted EBITDA rose 5% to £8.7m (2H21: £8.3m)

¨ Adjusted EBITDA margin improved to 27.0% (1H20: 26.1%)

¨ Significant financial resources with £7.6m cash and undrawn £45m RCF

¨ Underlying operating cash flow conversion expected to exceed 120% (2H21: 135%)

Conversion of existing revenues to Distribution as a Service (“Daas”) has “seen 
a greater proportion of these revenues recognised in H1 … on a full year basis, 
the current core revenue expectation is trading at the upper end of the range of
medium term objective” of 5 to 7%.

Digitisation including conversion of contracts to DaaS, has raised SaaS and subscription
income to c.66% of Fintel’s Core revenues.

Matt Timmins, Joint CEO confirms that trading is “in line with Fintel’s strategic
goals and Board expectations. Growth in Fintel’s Core business has been strong and
in-line with the top end of Fintel’s medium-term objectives communicated in Fintel’s
CMD (Dec20) with the balance of new revenues continuing to come through SaaS and
subscriptions.”

Interim results will be released on 20 September 2022.

**Zeus view**: Core revenue growth is higher than we forecast. DaaS revenue is less
seasonal than previous contracts: so, 9% growth in core revenue in 1H is consistent
with 7% growth in core revenue for the full year. We raise our forecast for 2022E
core revenue by 5.5% from £53.1m to £56.0m. For 2023E and 2024E we expect core revenue
growth at the bottom of medium term objective of 5% to 7% (i.e. 5%): so we raise
our 2023E core revenue by 4.8% to £58.8m and 2024E core revenue by 4.3% to £61.7m.

Non-core surveying (including panel management) generated £5.1m of revenue (1H21:
£5.1m); last year’s non-core revenue also included £1.7m from Zest, which was then
sold.

Overall, we leave our forecasts including non-core revenue and profit unchanged.
When non-core has been sold, the profitability of the core business will become 
clearer.

**Valuation**: Fintel is trading on PER of 17x, EV/EBITDA of 10x and only 3x revenue.

Fintel is a digital business trading on an analogue rating. A credible rating for
a SaaS and subscription business, growing at 5% to 7% pa, and operating on EBITDA
margin of 35% to 40%, would be: revenue multiple of 4x, EBITDA multiple of 10x to
11x and PER of circa 18x.

**Summary financials**

| Price | 202p | 
| Market Cap | £209.1m | 
| Shares in issue | 103.2m | 
| 12m Trading Range | 189p– 254p | 
| Next Event | Interims: 20 September |

**Financial forecasts**

| Yr end Dec (£’m) | 2021A | 2022E | 2023E | 2024E | 
| Core revenue | 52.3 | 56 | 58.8 | 61.7 | 
| Core/total (%) | 82 | 90 | 90 | 90 | 
| Revenue | 63.9 | 62.1 | 65.1 | 68.2 | 
| yoy growth (%) | 5 | -5 | 4 | 4 | 
| Core EBITDA | 17.1 | 18.1 | 19.9 | 21.9 | 
| Core EBITDA margin (%) | 33 | 34 | 36 | 37 | 
| EBITDA | 18.3 | 19 | 20.8 | 22.7 | 
| EBITDA margin (%) | 29 | 31 | 32 | 33 | 
| EPS (p) basic adj. | 11.6 | 12 | 12.4 | 13.4 | 
| EPS (p) ful dil. Adj. | 11.5 | 12 | 12.4 | 13.4 | 
| DPS (p) | 3 | 3.2 | 3.3 | 3.5 | 
| Net cash/(debt) | 2.6 | 11.4 | 22.3 | 34.1 | 
| P/E | 17.5 | 16.8 | 16.2 | 15.1 | 
| EV/EBITDA | 11.2 | 10.4 | 9 | 7.7 | 
| Div yield (%) | 1.5 | 1.6 | 1.6 | 1.7 | 
| EV/revenue | 3.2 | 3.2 | 2.9 | 2.6 |

Source: Audited Accounts and Zeus estimates

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