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SimplyBiz Group Plc

SimplyBiz Group Delivering on investment case

SimplyBiz Group (LON:SBIZ) maiden full year results reveal strong profitable growth:

Revenues grew 15.0% to £50.7m including £3.7m contribution from the Landmark acquisition; excluding this acquisition and Zest which is being replatformed, the underlying revenue growth was 10.3%.

Operational gearing increased adj EBITDA & adj profit margins & growth: adj EBITDA rose 19.7% to £11.4m (Zeus forecast: £11.0m), adj PBT rose 67% to £10.0m (Zeus forecast: £10.0m) and adj PAT reached £8.6m (7.5% above Zeus forecast of £8.0m).

8.5% membership growth: adding 293 new members in 2018 (1H17: 151; 2H17: 66; 1H18: 195; 2H18: 98). YoY membership growth has risen from 8.0% on 30 June 2018 to 8.5% at year end.

Strategic Partners appreciate SimplyBiz’s membership. In recent months Vitality Invest and Guardian Financial Services have chosen SimplyBiz to support their launches in the UK. Increased member penetration and activity drives growth for both Partners and SimpleBiz.

Capital light business model has strong cash conversion. SimplyBiz delivered cash conversion (post tax operating cashflow/EBITDA) of 95% (2017: 105%).

Final dividend of 2.05p makes a total of 3.03p for the 9 months post IPO (16.5% above Zeus forecast: 2.6p). The group’s policy is to distribute a third of adj EPS of 11.9p (13.3% above Zeus forecast 10.5p) time apportioned.

SimplyBiz outlook statement refers to “continued growth” in 2019.

Zeus view: SimplyBiz has delivered better than expected growth in membership, in line revenue (within 1% of our forecast) and better than expected adj EBITDA, adj PAT and adj EPS growth. The cash flow, net cash and DPS are consequentially better than we had forecast.
These better than expected results enable us to re-iterate our forecasts with confidence. We also note the improved financial position as reflected in the balance sheet.

Valuation: At 180p SBIZ is trading on a current year PER of 14.0x and PEG of 0.86x. We expect SimplyBiz to provide investors with higher than market earnings growth and defensive qualities. The business carries no regulated advice risk. The combination of 8% pa revenue growth, operational benefits of scale and acquisitions delivers high real double-digit shareholder returns. SimplyBiz is an attractive long-term holding: a growth stock with defensive attractions.

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