ULS Technology (ULS) is benefiting from rapid growth and we think its ambitious market share targets, coupled with efforts to secure new business and expand through acquisitions, means there should be plenty more to come.
- Strong order book
- Growing market share
- Net cash
- Broadening distribution channels
- Vulnerable to a downturn in transactional volume
- Modest dividend
ULS operates an online business-to-business (B2B) platform that centres on generating income from conveyancing services in the housing sector. The platform is used by the likes of Lloyds, TSB and Halifax, and helps potential housebuyers through the buying process. Solicitors sign up to be on the platform and ULS takes a fee for any conveyancing work that the firms pick up.
There is an ongoing drive to establish new relationships with existing and new mortgage lenders, in particular with the new challenger banks, but other revenue streams are also being developed.
Fees from B2B conveyance work still represents the bulk of the business, but other services are being placed on its platform that should lead to significant cross-selling opportunities. In March last year it acquired a 35 per cent stake in HomeOwners Alliance (HOA), which operates a property website offering third-party services for homeowners, and was on course to receive around 5m visits in 2016. Since buying its stake, ULS has integrated a tailored version of eConveyancer, a conveyancing service, into HomeOwners Alliance, which introduces the business to the business-to-consumer (B2C) market.
| ULS TECHNOLOGY (ULS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 107p | MARKET VALUE: | £69m | |
| TOUCH: | 105.5-107p | 12-MONTH HIGH: | 109p | LOW: 54p |
| FORWARD DIVIDEND YIELD: | 2.1% | FORWARD PE RATIO: | 17 | |
| NET ASSET VALUE: | 13p* | NET CASH: | £3.7m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m)** | Earnings per share (p)** | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 16.3 | 2.3 | na | nil |
| 2015 | 16.1 | 2.9 | 3.5 | 1.34 |
| 2016 | 20.7 | 3.8 | 4.5 | 2.1 |
| 2017** | 22.3 | 4.4 | 5.3 | 2.2 |
| 2018** | 28.1 | 5.2 | 6.2 | 2.3 |
| % change | +26 | +18 | +17 | +5 |
Normal market size: 5,000 Matched bargain trading Beta: 0.36 *Includes intangibles of £7.5m, or 12p a share **Numis forecasts, adjusted PTP and EPS figures | ||||
Further enhancements have been made to the HOA website with the integration of estateagent4me. This is a website that ranks the performances of all types of estate agencies, using different metrics such as the success rate of completed sales in relation to the number of properties on the book, length of time to sell, and what percentage of properties achieved the asking price. A facility for will writing has also been introduced through two partners. This allows more than 400 mortgage advisers to compare will writing and other estate planning services through ULS for new and existing customers.
And in December last year ULS acquired Conveyancing Alliance, a leading B2B technology platform, which operates under three brands that are targeted at conveyancing in the estate agent and mortgage broking sectors. This gives ULS access to conveyancing from the estate agent sector.
The business model throws off a lot of cash, so that despite these investments the group still has a net cash position. Recent economic uncertainty has had a detrimental effect on transactional volumes within the housing market, and this will have an effect on revenue generated from conveyancing. However, ULS's growth shouldn't be too constricted by transaction levels given the scope it has to continue to increase its market share through a mixture of organic growth and acquisition. Its aim is to ultimately take its share of the market (based on referrals as a percentage of transactions) from under 2 per cent to over 10 per cent.
