ULS Technology : 24-Jun-2020 – Final Year Results

ULS Technology plc

("ULS", the "Group" or the "Company")

Final Results

A robust performance in the face of a challenging UK housing market; excellent progress by DigitalMove

ULS Technology plc (AIM: ULS), the provider of online technology platforms for the UK conveyancing and financial intermediary markets, announces its Full Year results for the 12-month period to 31 March 2020.

Financial Highlights

• • Revenue £28.3m (FY 2019: £30.0m)

• • Gross Margin £12.4m (FY 2019: £12.5m)

  • o Improved gross margin percentage to 44% ( FY 2019: 42%)

• • Underlying EBITDA1 £6.0m (FY 2019: £6.3m)

• • Underlying Profit Before Tax1 £4.8m (FY 2019: £5.4m)

• • Underlying EPS1 6.1p (FY 2019: 6.9p)

• • Cash flow from operating activities grew to £5m (FY 2019: £4.8m)

• • Net debt £3.4m (FY 2019: £2.9m)

1 before exceptional items and amortisation of intangibles arising on consolidation

Operating Highlights

• • Increased investment in and development of DigitalMove, which aims to transform the experience of buying and selling property for the entire value chain

  • o Over 10,000 cases have now used the platform

• • Continued strong introducer demand

  • o Over 3,500 intermediary advisers using ULS's platforms - up 18% on previous year

• • Further developed lender proposition, attracting new introducers

  • o Including Principality Building Society and a number of challenger banks

• • Strengthened Operational Team

  • o Appointed new Head of Sales for DigitalMove and a Group Conveyancing Director

Board Changes

• • Martin Rowland became Chairman following the retirement of Geoff Wicks. Martin joined the Board of ULS in November 2018, prior to which he spent 10 years in a variety of investment roles

• • Oliver Scott, a partner in the Company's largest shareholder, Kestrel Partners, joined the Board in January 2020 as a Non-Executive Director

Post Period End Highlights

• • Successful launch of Rapid Remortgage - the first of ULS's new customer and introducer driven products on our DigitalMove platform

• • Gone live with a challenger bank with a further one on the point of going live.

• • Imminent launch of Solicitor Portal, which will allow solicitors to use DigitalMove for non-ULS introduced business- opening up potentially significant new revenue streams for the Group

• • Signed a number of contracts with key mortgage networks

• • Quicker than expected rebound in the housing market with June conveyancing instructions run-rate for ULS ahead of June 2019

Steve Goodall, Chief Executive of ULS Technology plc, commented: "There is no doubting that this year was one of the most challenging to date with the housing market affected by Brexit and then COVID-19, which is still impactingmarket conditions. We have been focusing on positioning ourselves for when the market turns and we are delighted to see the rapid increase in ULS instructions as the market has burst back in to life in June.

"Our three key targets this year are to continue growing the number of advisers using our conveyancing comparison

platforms, deliver market-leading new products and launch DigitalMove into major new categories of business with long term potential across the home-moving value chain."

Enquiries:

ULS Technology plc

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Steve Goodall, CEO John Williams, CFO

Numis Securities Limited (Nomad & Broker)

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Stuart Skinner / Paul Gillam

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Chairman's statement

It has been a turbulent year with Brexit dominating for large parts of the year, a change in Prime Minister, a general election and finishing with the start of a pandemic. Much of this has created uncertainty in the housing market but we have continued to generate cash, grow the number of advisers using our platforms and develop innovative products such as DigitalMove.

Review of the year

Gross margin was broadly in line with the prior year as was reported profit before tax. We have continued to invest in the development of the business and this meant an increase in overheads but this was offset by lower exceptional costs resulting in operating profit that was broadly in line with the previous year.

We entered the year having lost a two high volume but low margin pieces of work and this has been offset by a wider range of lower volume work with better quality of earnings. This meant that although revenue fell the gross margin percentage increased largely offsetting each other.

During the year, we announced that we had not retained a significant contract with a direct to consumer introducer. While we were disappointed to lose this contract where we believed that we were providing an excellent proposition we have noticed an increase in instructions coming through other direct to consumer introducers that we work with since the loss of that contract. It also means that outside of Lloyds Banking group, we have a balanced portfolio of introducers, and do not have concentration concerns.

As we started the year we had recently launched the pilot of DigitalMove. Since then we have added many new features, had over 10,000 instructions started to be processed through it for a mixture of sale, purchase and remortgage work and had extensive positive feedback. DigitalMove transforms the way that the consumer interacts with the solicitor by providing an easy to use digital, secure portal, allowing all forms and communication to be processed digitally. So far it has only been available for customers choosing their solicitor through eConveyancer. However, we are shortly due to launch our Solicitor Portal which will allow solicitors to use DigitalMove wherever the work originates. Digital Move has been designed to transform the home moving and remortgage process, particularly relevant at a time when more people want to work and interact remotely.

We also continued to develop our lender proposition during the year and have continued to attract new introducers. Most notable was Principality Building Society who initially went live with our Fees Assist offering and are due to go live with our panel management offering shortly. At the year-end we were also in the process of onboarding two more lenders.

In December, we announced that we planned to increase spend to accelerate the development and roll-out of DigitalMove while ensuring we remained fully resourced to grow and develop our core conveyancing comparison proposition. We have commenced with this planned spend increase recruiting a number of additional staff members including building the sales team for DigitalMove who are already growing the sales pipeline. However, we have paused further headcount increases until the economic outlook is more certain.

Final dividend

Due to the current COVID-19 situation, the Board has decided not to propose a final dividend. This is in order to preserve cash in order to give the Group as much room to manoeuvre as possible in uncertain circumstances.

Board changes

Geoff Wicks stepped down as Chairman in February this year when I became Chairman. Geoff joined the Board as Non-Executive Director when the Group floated in 2014 before becoming Chairman in 2017. I would like to thank Geoff for the support and guidance he has given to the Group. His extensive knowledge and experience was highly valued by the Board.

Oliver Scott joined the Board in January this year as Non-Executive Director. As a partner at our largest shareholder Kestrel Partners, Oliver brings a new perspective to the Board as well as a wealth of experience. I believe that this diversity of view is important and Oliver is a valuable addition.

Outlook

It is difficult to talk about the outlook for the business without obviously mentioning COVID-19. As we went into lockdown there was around a 90% fall in transactional conveyancing instructions although remortgage instructions held up a lot better. Meanwhile completions fell to a lesser extent as a surprising number of people who had already reached the instruction point found ways to still complete their house sale or purchase. The housing market has been one of the first to come out of lockdown and instructions and volumes are already starting to recover towards pre-lockdown levels. It will remain an uncertain market for many months to come and it will take some time for volumes to sustainably return to pre-COVID levels but the recovery in volumes post the easing of the lockdown for the housing market has been better than anticipated.

We are delighted with the progress of DigitalMove with over 10,000 instructions having gone into the platform. Our Solicitor Portal will launch this year and will enable solicitors beyond those on our comparison platforms to use DigitalMove, giving the Group access to a substantial new source of conveyancing transactions and creating, what we expect to be, a significant new revenue stream.

We have also worked hard to develop and grow our sales teams and continually improve the products they have to sell; this has generated material growth in the number of advisers using our platforms to provide conveyancing choice to their customers. We have continued to keep the sales teams working during the lockdown to provide a full business as usual service so that we come through this period as a stronger business.

Martin Rowland

Chairman

ULS Technology plc

23 June 2020

Chief Executive's statement

With Brexit, a Conservative leadership contest, a second General Election in two years, a Labour leadership battle and the start of a pandemic it was a busy year with plenty going on politically to sway house market sentiment and confidence.

Evolving political, economic, social and technology trends continue to support and challenge our business in equal measure. An ageing population and too little housing stock affect the liquidity in the housing market but support house prices. Historic low interest rates, questions of affordability, and government support for sectors such as New Build and First-time buyers all contribute to shape the market within which we operate. But our technology is aligned with society's demand for greener remote digital solutions and the results of the roll out to date of

DigitalMove have been impressive.

ULS has performed well in this context and I am pleased to say has the right portfolio of offerings to make the most of our market leading share of the conveyancing comparison market. We will continue to look to invest and grow in our core market while using this to springboard our Digital services and other products into other parts of the value chain.

A business in transition

Last year we launched DigitalMove into the market. Funded entirely from existing cash flows, DigitalMove has already delivered over 10,000 cases shaving as much as 20% off the time it takes to complete a purchase and sale. The ramifications of this for the entire industry are profound. Quicker transactions mean quicker payments and happier home-movers. The lack of uncertainty about the progress of transactions in addition to the security of the platform means everyone can know when a task or activity has been completed.

Our intention is to roll-out the delivery across the value chain and into additional conveyancing firms that are not currently part of our platforms thereby securing additional transactions for the Group. We had always believed DigitalMove offered a digital conveyancing solution that is unrivalled in the market and the evidence to date has shown that this is exactly the case.

While DigitalMove presents a proposition for the entire value chain, our conveyancing comparison platforms provide complementary propositions for the conveyancing market that are a crucial part of the current support for our developing business. We recognise this and part of managing this transition is that the right people have to be in the right positions. We appointed a new Head of Sales for DigitalMove and I am delighted to say Mark Snape, Managing Director of our subsidiary CAL, has also taken on the role of Group Conveyancing Director. This new structure means that our push of products and services to the many sectors in which we operate is control led and technology resources effectively deployed to support the right development for the business.

Going forward

The political certainty provided by last December's general election boosted housing market confidence during

January and February. A sharp uptick in sales was seen across the UK, with even the prime central London market seeing prices climb for the first time in five years. These positive trends were expected to have continued through 2020. The arrival of COVID-19 put this recovery on hold although we are already seeing a quick recovery.

Our view at the beginning of 2020 was that the volume of UK residential transactions for 2020-21 would be around 5% higher than the five-year average - around 1.26 million compared with the 1.18 million seen in 2019-20 but the lockdown will obviously have a dramatic impact. Sales will continue to recover in the second half of the year and I believe will total around 735,000 for the full year, around a 38% decline from the level seen in 2019-20. We do expect the revival in activity to continue, with volumes in the following year expected to be above the level seen in 2020-21 but this expansion may not fully offset the drop in 2020-21 as the economy and the housing market takes a while to recover from the shock of the pandemic. The pandemic has accelerated a push to digital solutions that has substantiated our view that to outperform our competitors we cannot rely on the market alone to deliver the business, we need to shape it ourselves.