Acquisition of The Property Software Group ( PSG ) Analyst presentation. 19 April 2016

Transcription

1 Acquisition of The Property Software Group ( PSG ) Analyst presentation 19 April

2 1. Transaction highlights 2. PSG overview 3. Strategic rationale 4. Acquisition financing 5. Summary & outlook 6. Q&A 2

3 1. Transaction highlights 3

4 A perfect combination + 1 Market leader 2 Strong strategic fit 3 Earnings enhancing 4 PSG is the market-leading provider of software solutions to UK property professionals Its products are best-in-class and used by over 8,000 UK agency branches Provides essential workflow tools via cloud & desktop software products Developed new products that help agents generate revenues and offer enhanced services Undergoing rapid transition from desktop to SaaS with good traction on new products Furthers ZPG s mission to be the most effective partner for property professionals Creates the UK property industry s first end-to-end solution for professionals Including software, CRM, digital marketing, market insights and new revenue opportunities PSG has a strong management team with deep software & property market expertise Management team is committed and incentivised to stay with the Group for the long-term PSG has an impressive financial track record of high growth and profitability Expected to be earnings enhancing on an adjusted basis in the first full financial year following completion

5 Deal summary Acquisition terms Shareholder consideration Amount Funded by existing cash resources and a 50m extension to the Group s existing credit facility Payment date Financing Initial Consideration 47m At Completion Deferred Institutional and Management Consideration 22m 6 months from Completion Strong deleveraging profile due to high cash generation by the enlarged Group Expected to be earnings enhancing on an adjusted basis in first full financial year following completion Financial impact Management Deferred Consideration (Year 1) 3m Opening net debt ratio of c.2.2x the enlarged Group s EBITDA 12 months from Completion ZPG dividend policy to be maintained Transaction costs of c. 1.5m Additional interest costs of c. 1.5m p.a Management Deferred Consideration (Year 2) 3m Completion is conditional upon FCA authorisation 24 months from Completion Approval Total consideration 5 75m Completion expected within 60 business days

6 2. PSG overview 6

7 About PSG The UK property industry s #1 supplier of software and workflow solutions Used by over 40,000 estate and lettings agents across the UK 84% recurring subscription-based revenues, with a customer retention rate of over 97% Increasing SaaS-based revenue streams, providing strong future revenue visibility Strong track record of growth (c.25% Revenue and c.56% Adj. EBITDA CAGR ) Size of bubble represents no. of property branches 20 FYMar16 Revenue ( m) UK Property Software industry market share(2) 16 # #2 4 #3 #4 7 FYMar16 revenues of c. 15.9m and Adjusted EBITDA of c. 5.1m(1) Will continue to operate as a standalone brand and team will become an integral part of the enlarged Group #5 0-2,000 4,000 6,000 8,000 UK Agency Partners (Mar 16) Established 2007 Headquartered Banbury, UK CEO Mark Goddard Employees 237 (1) After adjusting for c. 1.2m of costs relating to product and platform development, advisory services, Chairman's remuneration and exceptional items relating to restructuring (2) PSG Management estimates 10,000

8 Product overview & market opportunity Established products Market leader New products Nascent Brands Referral comparison tool Agent & consumer engagement portal Product type CRM workflow tools FYMar16 Revenue c. 15.9m Negligible Key drivers Customers transitioning to higher yielding SaaS products focused on increased functionality and convenience Helping agents deliver enhanced services / first-mover advantage Migration to SaaS and new products underpin significant standalone future upside potential 8

9 3. Strategic rationale 9

10 Creating the first end-to-end solution for UK property professionals PSG s products are highly complementary to ZPG s existing portfolio Combining ZPG s leading marketing solutions with PSG s leading software solutions Enabling ZPG to provide an unrivalled offering to its partners The enlarged Group s offering will include software, CRM, digital marketing and market insights 10

11 And new revenue opportunities for ZPG partners 11 Comparison referrals via moveit Enhanced consumer engagement via mypropertyfile Online comparison tool enabling agents to provide adjacent services to their clients and earn referral fees Online toolkit allowing deeper interaction between agents and their clients throughout the entire property lifecycle Opportunity for ZPG s existing comparison partners Supports traditional agents and helps them provide digital solutions to consumers

12 Enhancing the Group s UK Agency relationships ZPG only c.10,000 Both c.3,000 PSG only c.5,000 # UK Agency partners ARPA ( ) ZPG c.13, PSG (3) c.8,000 c.165 c.18,000 c.331 Enlarged Group(4) 80% of total UK Agency market (1) ZPG s total number of UK Agency relationships will increase by c.40% to c.18, (1) (2) (3) (4) Based on an estimate total market size of 22,500 UK Agency branches ZPG data as at year end 30 September 2015 PSG data as at year end 31 March 2016 Represents the total number of unique UK Agency partners including portal and software subscribers (2)

13 Post acquisition integration approach Brand / Platform Product Management 13 PSG will continue to operate as a standalone brand and platform with integrated functionality from products across the enlarged Group ZPG intends to integrate complementary PSG products into its current offerings and provide a convenient and comprehensive solution for property professionals PSG key senior management are expected to remain with the business post-acquisition and have long term performance based incentive packages in place

14 4. Acquisition financing 14

15 Financing Funded in cash and the Group has secured a 50m extension of its current debt facility from its existing lenders under the same pricing terms, with a short-term increase in covenants Opening net debt ratio of c.2.2x the enlarged Group s EBITDA, which will increase in the shortterm to c.2.5x after payment of the uswitch earn-out The Group will maintain its current dividend policy of 35%-45% payout ratio Strong de-leveraging profile due to high cash generation by the enlarged Group Facility Type Five-year 200m revolving credit facility (until 2020) Covenants Interest cover (Adj EBITDA: Net finance charge) Leverage (Net debt: Adj EBITDA) At least 4:1 Up to and including 31 March 2017 test date: 3.25x debt to EBITDA; Up to and including 30 September 2017 test date: 3.00x debt to EBITDA; and from 31 December 2017 test date and thereafter: 2.50x debt to EBITDA Accounting impact 15 Total Group interest costs increased to c. 4.5m p.a The following income statement impacts will be treated as exceptional items: Amortisation charge of c. 3m p.a for intangible assets acquired as part of the transaction Transaction costs of c. 1.5m in FY16 will be treated as an exceptional item Consideration costs payable to Management Sellers of c. 4m in FY16, c. 3.5m in FY17 and 0.8m in FY18 Further charge of between 0-5m over three years as a result of a management performance incentive

16 5. Summary & outlook 16

17 Summary & outlook Acquisition of PSG, the UK s leading provider of property software solutions used in over 8,000 UK agency branches Highly attractive standalone business with significant upside from SaaS migration and new products Further upside by enabling ZPG to provide the UK property industry s first end-to-end solution for property professionals Expected to be earnings enhancing on an adjusted basis in the first full financial year following completion Completion is conditional upon either the cancellation of PSG s existing FCA Consumer Credit License or FCA approval of the change of control of PSG, whichever is the earlier The Board is pleased with current trading, especially the strong performance in the Comparison Services division as a result of energy supplier price cuts driving significant switching volumes The Group now expects full year results to be towards the higher end of market expectations 17

18 Q&A 18