REG - Cornerstone FS PLC - Interim Results
12/09/2023 07:00
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RNS Number : 0796M Cornerstone FS PLC 12 September 2023
Certain information contained within this Announcement is deemed by the
Company to constitute inside information as stipulated under the Market Abuse
Regulation (EU) No. 596/2014 ("MAR") as applied in the United Kingdom. Upon
publication of this Announcement, this information is now considered to be in
the public domain.
12 September 2023
Cornerstone FS plc
("Cornerstone" or the "Company" or the "Group")
Interim Results
Significant revenue growth, maiden six-month period of profitability and cash
generation
On track for FY 2023 to be significantly ahead of expectations
Cornerstone FS plc (AIM: CSFS), a foreign exchange and payments solutions
company offering multi-currency accounts to businesses and individuals through
its proprietary technology platform, is pleased to announce its unaudited
interim results for the six months ended 30 June 2023.
Financial Highlights
· Revenue increased by 90% to £3.6m (H1 2022: £1.9m) through the
continued expansion of the Group's payments capabilities and offering, and
on-going investment in the sales function
· Gross margin broadly stable at 61.0% (H1 2022: 61.7%)
· Maiden half-year adjusted(1) EBITDA of £0.2m (H1 2022: £0.5m loss)
driven by both revenue growth and careful management of the Group's cost base
· Operating profit of £0.1m (H1 2022: £3.0m loss)
· Profit before tax of £23k (H1 2022: £3.0m loss)
· Cash generated from operations of £0.1m (H1 2022: cash used in
operations of £0.1m)
· Cash and cash equivalents increased to £816k at 30 June 2023 (31
December 2022: £682k)
Operational Highlights
· Proportion of revenue accounted for by direct clients increased to
91% (H1 2022: 74%) reflecting the strategic decision to rationalise the
majority of the historic white label business
· Active customers(2) increased to 874 (period to 30 June 2022: 697)
· New counterparty partnerships established to broaden the number of
currencies and countries where the Group can transact - the Group can now pay
out to over 150 countries in 58 currencies
· Completed preparation for the introduction of the Consumer Duty
regulation in July 2023
Current trading and outlook
· The strong trading momentum experienced in the first half of the year
has continued into the second half
· With the continued advancements being made across the business and a
clear focus on Cornerstone's strategic growth priorities, the Group now
expects to report results for its full year 2023 significantly ahead of market
expectations, including achieving its first full year of positive adjusted
EBITDA
· The Board is confident that the Group's funding position is
comfortable and sufficient to support its existing growth plans
James Hickman, CEO of Cornerstone, said:
"It has been an excellent six months for Cornerstone, delivering substantial
revenue growth and achieving our first half-year period of profitability and
operating cash generation. This has been driven by our enhanced sales efforts
and focus on more fully commercialising our platform alongside important
action to carefully manage our cost base as we grow.
"We have also continued to execute on our strategy to augment our capabilities
by establishing further counterparty relationships and partnerships, and we're
particularly excited about the progress we've made towards expanding our
payment methods.
"With the strong trading momentum having continued into the second half of the
year, and with the benefits from our operational improvements still coming
through, we expect to report full year results significantly ahead of market
expectations, representing substantial year-on-year growth as well as a maiden
full year adjusted EBITDA.
"When combined with a large and supportive market backdrop, as global digital
payment transaction values expand and the on-going shift of payment
transactions away from banks to specialist firms continues, the Board has
great confidence in the future of the Group."
(1) Adjusted to exclude share-based compensation and transaction costs of
£0.2m and other operating income and profit on a disposal of a subsidiary of
£0.4m (H1 2022: £2.3m and £nil)
(2) Calculated as customers who traded through Cornerstone in the 12 months to
30 June 2023
Enquiries
Cornerstone FS plc +44 (0)203 971 4865
James Hickman, Chief Executive Officer
Judy Happe, Chief Financial Officer
SPARK Advisory Partners Limited (Nomad) +44 (0)203 368 3550
Mark Brady, Adam Dawes
Shore Capital (Broker) +44 (0)207 408 4090
Daniel Bush, Tom Knibbs (Corporate Advisory)
Guy Wiehahn (Corporate Broking)
Gracechurch Group (Financial PR) +44 (0)204 582 3500
Harry Chathli, Claire Norbury
About Cornerstone FS plc
Cornerstone FS plc (AIM: CSFS) is a foreign exchange and payments company
offering multi-currency accounts and payment solutions to businesses and
individuals. Headquartered in the City of London, Cornerstone combines a
proprietary technology platform with a high level of personalised service to
support clients with payments in over 150 countries in 58 currencies. With a
track record of over 12 years, Cornerstone has the expertise, experience and
expanding global partner network to be able to execute complex cross-border
payments. It is fully regulated by the Financial Conduct Authority as an
Electronic Money Institution. www.cornerstonefs.com
(http://www.cornerstonefs.com/)
Investor Presentation
James Hickman, CEO, and Judy Happe, CFO, will be presenting via Investor Meet
Company on 12 September 2023 at 11.00am BST.
Questions can be submitted pre-event via the Investor Meet Company platform up
until 9.00am BST the day before the meeting or at any time during the live
presentation.
Investors can sign up to Investor Meet Company for free and add to
meet Cornerstone via:
https://www.investormeetcompany.com/cornerstone-fs-plc/register-investor
(https://www.investormeetcompany.com/cornerstone-fs-plc/register-investor)
Operational Review
The six months to 30 June 2023 was a very strong period for the Group, with
revenue increasing by 90% to £3.6m (H1 2022: £1.9m) and the Group achieving
its maiden half-year profit and positive adjusted EBITDA. Importantly, the
Group also delivered its first interim cash inflow from operating activities.
This reflects the strategic and operational changes that were implemented
during the second half of 2022 and which continued into the current period.
The Group's focus has been on driving direct sales and fully commercialising
the platform, while maintaining tight control over costs. Key elements of this
have been growing the sales team and enhancing and expanding the Group's
offering, particularly through increasing the number of counterparties to
broaden the number of currencies and countries where it can transact, with the
objective of increasing the number of active customers, through customer
acquisition and retention, and value of payment transactions managed by the
Group.
Performance
The Group delivered significant growth in revenue to £3.6m (H1 2022: £1.9m),
reflective of a substantial increase in revenue generated by clients that the
Group serves directly. The proportion of total revenue that was accounted for
by direct clients was 91%, being £3.3m (H1 2022: £1.4m), compared with 74%
in H1 2022. Revenue generated through the Group's white label partners
accounted for total revenue of £319k (H1 2022: £501k). This is in line with
the Group's strategic decision to manage down almost all its historic white
label business - only maintaining a small number of accounts that meet
appropriate profitability thresholds. This commenced towards the end of 2022,
but primarily took place in the first half of the current year.
Active customers, calculated as customers who traded during the 12 months
ending 30 June 2023, increased to 874 compared with 697 for the 12 months to
30 June 2022, as the Group has continued its strategy of investing in its
sales team and payment capabilities.
By client type, there was an increase in revenue generated by both private
clients (primarily high net worth individuals) and corporate accounts.
Particularly strong growth was seen from private clients, with the proportion
of total revenue accounted for by private clients increasing to 62% (H1 2022:
45%) with corporate accounts contributing 38% (H1 2022: 55%). However, for the
majority of private client revenue, whilst the underlying transaction is with
an individual, the relationship is via a corporate that provides services to
the individual.
During the first half of 2023, transactions were conducted between 43
different currency pairs (H1 2022: 43), with 88% of transactions being between
various combinations of Sterling, Euros and US Dollars (H1 2022: 86%).
Enhancing our offer
A key strategic focus is the enhancement of the Group's offer, primarily
through growing its counterparty and partner network to expand its product
capabilities. At the same time, internal technology development continues, to
enhance the Group's platform as well as its service provision.
Expanding our product
A core element of the Group's strategy is to establish a global payments
network that will enable Cornerstone customers to be able to pay in from, and
pay out to, any jurisdiction and via any payment method. While it is still
relatively early days, important steps have been taken in implementing this
strategy.
New counterparty partnerships have been established, which enables the Group
to broaden the number of currencies and countries where it can transact, as
well as expanding the business sectors that it can serve. The Group can now
pay out to over 150 countries in 58 currencies.
To further support the expansion of its offer, the Group has established a new
offering, Cornerstone Solutions, that will focus on providing solutions to
clients that are harder to service, due to, for example, the sector in which
they operate. This will allow the Group to leverage some of its competitive
strengths - such as the high level of experienced, personalised service - and
open access to a further cohort of potential clients.
The Group has also made significant progress towards expanding its payment
method offering and is at an advanced stage with a potential partner. The
Group expects to be able to launch its first initiative in this respect during
the first quarter of next year.
To be able to support customers with more of their business needs, the Group
has also formed strategic partnerships with specialised and alternative
lenders to offer a range of funding solutions. In particular, the Group
launched a lending platform in partnership with Swoop Finance ("Swoop"), which
enables the Group to seamlessly refer customers to a lending partner that it
has pre-vetted to ensure that they can meet the customers' requirements. This
service increases the Group's value to its customers while also providing
commission on referrals. It also enhances the Group's competitive offer to
potential customers who want to utilise Cornerstone's FX services (rather than
those of their traditional bank), but who are hesitant to move away from their
traditional bank as they require their lending facilities.
Improving our service
Cornerstone is committed to continuously improving the service that it
provides to its customers. During the period, this included making
enhancements to the user interface and user experience of the Group's
platform. The Group is also continuing development work to increase the
automation in transactional processes to increase the speed of payments as
well as working on enhancements to the onboarding process.
Actions such as these, which stem from one of the Group's core values of
always putting customers first, meant that the Group was well prepared for the
introduction of the Financial Conduct Authority's Consumer Duty regulation in
July 2023. During the period, the Group undertook a review of its operations
to ensure that it was fully compliant with the new regulation, which sets
higher and clearer standards for consumer protection across financial
services.
Financial Review
Revenue for the six months to 30 June 2023 increased by 90% to £3.6m compared
with £1.9m for the first half of the previous year. This growth reflects the
strategic and operational changes that were implemented during the second half
of 2022 and which continued into the current period focusing on driving direct
sales and fully commercialising the platform. The Group also benefited from
full six-month contributions from Capital Currencies and Pangea FX, which were
acquired in H1 2022 and H2 2022, respectively.
Gross margin for the first half of 2023 was 61.0% (H1 2022: 61.7%). Whilst the
proportion of revenue derived from white label partners has declined to 9%
(from 26% in H1 2022), the gross margin benefit of this was offset by a change
in commission arrangements with Robert O'Brien, the General Manager APAC and
Middle East, which were previously agreed at enhanced levels in 2023 compared
with the prior year. As announced on 8 March 2023, Mr. O'Brien agreed to vary
and extend certain elements of his compensation package, decreasing his
commission share on certain established revenue streams and increasing his
share of the profitability of the Dubai office. This was immediately
beneficial for the Group and, as a result of this change, the Group generated
stronger gross margin in the second quarter of 2023 compared with the first
quarter.
As a result of gross margin remaining at a broadly consistent level, combined
with the significant growth in revenue, gross profit increased by 88% to
£2.2m (H1 2022: £1.2m).
Operating expenses were reduced to £2.2m in H1 2023 compared with £4.1m for
the first half of the previous year. This primarily reflects a reduction of
£2.1m in share-based (non-cash) compensation to £173k (H1 2022: £2.2m)
following the Company reaching an agreement in H2 2022 with Mr. O'Brien and
the Asia team to vary the terms of their incentivisation agreement pursuant to
which they received £nil share-based compensation during the period (H1 2022:
£2.1m). The Group also recognised a £0.2m profit during the period from the
disposal of its subsidiary, Avila House Ltd. ("Avila House"), with the share
purchase agreement having been entered in December 2022 and completed during
the period under review. Together with the reduced share-based compensation,
this more than offset the increase in other administrative expenses to £2.0m
(H1 2022: £1.7m) and amortisation of intangible assets to £0.3m (H1 2022:
£0.2m). The Group has maintained tight control over operating costs and the
increase in other administrative expenses primarily relates to additional
sales team hires and the impact of the acquisitions of Capital Currencies and
Pangea FX. Amortisation was higher due to the acquired customer lists from the
2022 acquisitions, combined with the cumulative impact of internally developed
software additions that have been capitalised since 2020 with an amortisation
period of three years.
The Group generated other operating income of £0.2m (H1 2022: £nil) based on
interest on client cash balances (see note 3 to the financial statements).
As a result of the increased gross profit and other operating income and
reduced operating expenses, the Group generated a profit from operations of
£0.1m compared with a loss from operations of £3.0m for the first half of
2022.
Net finance costs were £115k (H1 2022: £49k), which was primarily related to
interest on loan notes due to Mr. O'Brien (principal balance of £2.0m) and in
respect of the Pangea FX acquisition (principal balance of £0.2m), both of
which have a fixed coupon rate of 6% p.a.
As a result, the Group generated a maiden profit before tax of £23k in the
six-month period compared with a loss before tax of £3.0m for the first half
of 2022. Earnings per share on a basic and diluted basis were 0.06 pence (H1
2022: loss of 13.05 pence per share), which was achieved despite an increase
in the weighted average number of ordinary shares in issue to 55,791,324 (H1
2022: 23,143,117).
On an adjusted basis (to exclude share-based compensation and transaction
costs, as well as the other operating income and profit from the disposal of
Avila House), the Group generated a first half-year period of positive EBITDA
of £0.2m, compared with an adjusted EBITDA loss of £0.6m for H1 2022.
The Group was cash flow positive for the first six months of 2023. Cash
generated by operating activities was £0.1m (H1 2022: £0.1m used in
operating activities) based on the improved trading performance. Cash
generated by investing activities was £85k (H1 2022: £0.8m used in investing
activities) as the proceeds from the disposal of Avila House offset the
acquisition of intangible assets, property, plant and equipment principally
associated with the continued investment in developing the Group's proprietary
platform. Cash from operating and investing activities more than offset cash
used in financing activities, which consisted of £66k in interest and similar
charges (H1 2022: £nil).
As a result, as of 30 June 2023, the Group had increased cash and cash
equivalents of £816k (31 December 2022: £682k).
As announced on 8 March 2023, the Group agreed to further vary the
incentivisation arrangement with Mr. O'Brien as well as the settlement
arrangement with Craig Strong, Director of Capital Currencies. The repayment
date of Mr. O'Brien's loan note has been extended to 31 July 2026 and the
payment dates of Mr. Strong's earn-out consideration have both been extended
by a year.
The Group's emerging adjusted EBITDA, and profit generation, together with its
current cash balances give the Board confidence in the strength of the
Company's balance sheet and is comfortable that the Group has sufficient
resources to support its existing growth plans.
Outlook
The strong trading momentum that was experienced in the first half of the year
has continued into the second half.
The strong growth being generated reflects the advancements being made across
the business as the Group realises the benefits of the enhancements made to
its operations and offering towards the end of 2022 and to date in 2023. With
the continued strengthening of its sales team, and a clear focus on
Cornerstone's strategic growth priorities, the Group expects this revenue
trend to be sustained throughout the year.
As a result, and with the continued careful management of the cost base, the
Group now expects to report results for its full year 2023 significantly ahead
of market expectations, including achieving its first full year of positive
adjusted EBITDA.
Cornerstone FS plc
Consolidated Statement of Comprehensive Income
Unaudited 6 months to 30 June 2023 Unaudited 6 months to 30 June 2022 Audited 12
months to 31 Dec 2022
Notes £ £ £
Revenue 3,601,842 1,896,073 4,821,996
Cost of sales (1,405,919) (727,081) (1,885,503)
Gross profit 2,195,923 1,168,992 2,936,493
Share-based compensation 5 (172,679) (2,243,258) (4,284,039)
Further adjustments to adjusted EBITDA (see below) (63,306) (183,509) (500,529)
Other administrative expenses (2,005,647) (1,718,910) (3,805,812)
Total administrative expenses (2,241,632) (4,145,677) (8,590,380)
Other operating income 1 183,506 - 30,647
Adjusted EBITDA / (EBITDA loss) 190,275 (549,918) (869,319)
Stated after the add-back of:
- other operating income (183,506) - (30,647)
- share-based compensation 5 172,679 2,243,258 4,284,039
- transaction costs 4,500 12,600 99,365
- (profit) on disposal of subsidiary 7 (207,480) - -
- amortisation of intangible assets 6 256,707 166,046 386,542
- depreciation of property, plant and equipment 9,579 4,863 14,622
Profit / (loss) from operations 2 137,797 (2,976,685) (5,623,240)
Finance and other income 3 - 10 18
Finance costs 3 (114,550) (49,280) (163,975)
Profit / (loss) before tax 23,247 (3,025,955) (5,787,197)
Income tax 11,699 6,699 175,365
Profit / (loss) for the financial period 34,946 (3,019,256) (5,611,832)
Total comprehensive profit / (loss) for the period 34,946 (3,019,256) (5,611,832)
Profit / (loss) per share from continuing operations:
Basic & diluted (pence) 4 0.06 (13.05) (17.26)
Cornerstone FS plc
Consolidated Statement of Financial Position
Unaudited as at 30 June 2023 Unaudited as at 30 June 2022 Audited as at
31 Dec 2022
Notes £ £ £
ASSETS
Non-current assets
Intangible assets and goodwill 6 2,180,104 2,106,268 2,315,637
Tangible assets 30,923 34,256 39,677
2,211,027 2,140,524 2,355,314
Current assets
Trade and other receivables 8 1,503,464 415,216 1,339,110
Cash and cash equivalents 816,176 283,075 682,346
2,319,640 698,291 2,021,456
TOTAL ASSETS 4,530,667 2,838,815 4,376,770
Equity
Share capital 5 574,171 236,837 480,362
Share premium 6,191,748 3,906,533 5,496,829
Share-based payment reserve 620,006 4,635,968 1,489,765
Merger relief reserve 5,557,645 5,557,645 5,557,645
Contingent consideration reserve 999,859 891,784 950,920
Reverse acquisition reserve (3,140,631) (3,140,631) (3,140,631)
Retained earnings (10,406,693) (10,847,482) (10,924,791)
TOTAL EQUITY 396,105 1,240,654 (89,901)
Non-current liabilities
Loan notes 10 2,172,578 - 2,172,578
Deferred tax liability 88,117 57,608 99,816
2,260,695 57,608 2,272,394
Current liabilities
Trade and other payables 9 1,873,867 1,524,477 1,969,277
Loan notes 10 - - 225,000
Deferred tax liability - 16,076 -
1,873,867 1,540,553 2,194,277
TOTAL EQUITY AND LIABILITIES 4,530,667 2,838,815 4,376,770
Cornerstone FS plc
Consolidated Statement of Changes in Equity
Share capital Share premium Share-based payment reserve Merger relief reserve Contingent consideration reserve Reverse acquisition reserve Retained earnings Total
£ £ £ £ £ £ £ £
At 1 January 2022 202,776 3,074,355 2,392,710 5,557,645 - (3,140,631) (7,828,230) 258,625
Issue of shares 34,061 868,538 - - - - - 902,599
Cost of raising equity - (36,360) - - - - - (36,360)
Deferred equity-based consideration - - - - 891,784 - - 891,784
Share-based payments - - 2,243,258 - - - (2,243,258) -
Other comprehensive loss - - - - - - (775,994) (775,994)
At 30 June 2022 236,837 3,906,533 4,635,968 5,557,645 891,784 (3,140,631) (10,847,482) 1,240,654
Share-based payments 176,362 1,036,696 - - - - - 1,213,058
Cost of raising equity - (50,950) - - - - - (50,950)
Deferred equity-based consideration - - - - 59,136 - - 59,136
Share-based payments - - 2,040,781 - - - - 2,040,781
Settlement of equity-based incentives 67,163 604,550 (5,186,984) - - - 2,515,271 (2,000,000)
Other comprehensive loss - - - - - - (2,592,580) (2,592,580)
At 31 December 2022 480,362 5,496,829 1,489,765 5,557,645 950,920 (3,140,631) (10,924,791) (89,901)
Issue of shares 35,299 194,143 - - - - - 229,442
Deferred equity-based consideration - - - - 48,939 - - 48,939
Share-based payments - - 172,679 - - - - 172,679
Settlement of equity-based incentives 58,510 500,776 (1,042,438) - - - 483,152 -
Other comprehensive income - - - - - - 34,946 34,946
574,171 6,191,748 620,006 5,557,645 999,859 (3,140,631) (10,406,693) 396,105
At 30 June 2023
Cornerstone FS plc
Consolidated Cash Flow Statement
Unaudited six months to 30 June 2023 Unaudited six months to 30 June 2022 Audited 12 months to 31 Dec 2022
£ £ £
Profit / (loss) before tax 23,247 (3,025,955) (5,787,197)
Adjustments to reconcile profit before tax to cash generated from operating
activities:
Finance income - (10) (18)
Finance costs 114,550 49,280 163,975
Share-based compensation 172,679 2,243,258 4,284,039
Other equity settled share-based payments - 32,595 32,595
Profit on disposal of subsidiary (207,480) - -
Depreciation and amortisation 266,286 170,909 401,164
(Increase) / decrease in trade and other receivables (164,354) 78,028 (845,866)
(Decrease) / increase in trade and other payables (90,969) 312,676 757,250
Cash generated / (used) in operations 113,959 (139,219) (994,058)
Income tax received - - 158,188
Cash generated / (used) in operating activities 113,959 (139,219) (835,870)
Investing activities
Acquisition of property, plant and equipment (824) (2,994) (17,198)
Acquisition of intangible assets (213,694) (228,484) (422,713)
Proceeds from disposal of subsidiary 300,000 - -
Acquisition of subsidiary, net of cash acquired - (527,984) (552,128)
Cash generated / (used) in investing activities 85,482 (759,462) (992,039)
Financing activities
Shares issued (net of costs) - 833,644 1,992,694
Loans received - - 225,000
Interest and similar income - 10 18
Interest and similar charges (65,611) - (55,559)
Cash (used in) / generated from financing activities (65,611) 833,654 2,162,153
Increase / (decrease) in cash and cash equivalents 133,830 (65,027) 334,244
682,346 348,102 348,102
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period 816,176 283,075 682,346
Cornerstone FS plc
Notes to the financial statements
1. General information and basis of preparation
Cornerstone FS plc is a public limited company, incorporated and domiciled in
England. The Company was admitted to trading on AIM, London Stock Exchange's
market for small and medium size growth companies, on 6 April 2021. The
registered office of the Company is The Old Rectory, Addington, Buckingham,
England, MK18 2JR, and its principal business address is 75 King William
Street, London, EC4N 7BE. Cornerstone FS plc is a foreign exchange and
payments company offering multi-currency accounts to businesses and
individuals using a proprietary cloud-based multi-currency payments platform.
These services are primarily delivered directly on a SaaS basis to UK-based
SMEs and high-net worth individuals (private clients).
The consolidated financial information contained within these financial
statements is unaudited and does not constitute statutory accounts within the
meaning of Section 434 of the Companies Act 2006. While the financial figures
included in this interim report have been prepared in accordance with IFRS
applicable to interim periods, this interim report does not contain sufficient
information to constitute an interim financial report as defined in IAS 34.
Financial information for the year ended 31 December 2022 has been extracted
from the audited financial statements for that year. With the exception of an
additional accounting policy for other operating income included below, the
accounting policies applied by the Group in this consolidated interim
financial report are the same as those applied by the Group in its
consolidated financial statements as at and for the year ended 31 December
2022.
The consolidated financial statements incorporate the financial statements of
the Company and its subsidiary undertakings. Entities are accounted for as
subsidiary undertakings when the Group is exposed to or has rights to variable
returns through its involvement with the entity and it has the ability to
affect those returns through its power over the entity.
Details of subsidiary undertakings and % shareholding:
Cornerstone Payment Solutions Ltd
- 100% owned by the Company
Cornerstone Middle East FZCO
- 100% owned by the Company
Capital Currencies Limited
- 100% owned by the Company
Pangea FX
Limited
- 100% owned by the Company
On 26 April 2023, the Group completed the sale of Avila House Ltd (formerly
100% owned by Cornerstone Payment Solutions Ltd). The results of Avila House
were consolidated up to the date of disposal.
Other operating income
Other operating income represents interest generated from client cash
balances. The recent changes to the interest rate environment has meant that
these accounts can be interest bearing, whilst maintaining the safeguarding
requirements. Under the terms of the Group's Electronic Money Licence, the
Group is not able to pass any of the interest earned back to the clients.
Whilst the increased interest stream is a positive boost for the Group and a
natural by-product of its increasingly diversified product offering, the Group
is mindful that aspects of its dynamics are driven by macroeconomics beyond
its control. The Group has therefore chosen to recognise interest income on
client balances as 'other operating income', not revenue on the face of the
Consolidated Statement of Comprehensive Income. For the same reason, interest
income has been excluded from the presentation of adjusted EBITDA.
Interest earned on Cornerstone's own cash is recognised within finance and
other income in the Consolidated Statement of Comprehensive Income.
Going concern
During the period ended 30 June 2023, the Group made a profit of £34,946; its
maiden period of profitability. As at 30 June 2023, the Group's Statement of
Financial Position showed cash and cash equivalents of £816,176. The trading
position of the Group has strengthened during 2023 with continued revenue
growth coupled with a strong focus on cost control. As a result, the Group
expects to begin generating a recurring cash inflow before financing
activities during the second half of 2023.
The Board continues to closely monitor the Group's performance and considers a
range of risks that could affect the future performance and position of the
Group. The Board considers the Group has a reasonable expectation that it has
adequate resources to continue to operate for the foreseeable future and
therefore the financial statements are prepared on a going concern basis.
2. Profit / (loss) from operations
Unaudited six months to 30 June 2023 Unaudited six months to 30 June 2022 Audited 12 months to 31 Dec 2022
£ £ £
Profit / (loss) from operations is stated after charging:
Share-based compensation 172,679 2,243,258 4,284,039
Transaction costs 4,500 12,600 99,365
Expensed software development costs 33,189 53,473 86,941
Depreciation of property, plant and equipment 9,579 4,863 14,622
Amortisation of intangible assets 256,707 166,046 386,541
Short-term (2018 IAS 17 operating) lease rentals 137,236 93,363 252,308
3. Interest and similar items
Unaudited six months to 30 June 2023 Unaudited six months to 30 June 2022 Audited 12 months to 31 Dec 2022
£ £ £
Total finance and other income
Bank interest receivable - 10 18
Total finance costs
Unwinding of discount 48,939 49,280 108,416
Loan note interest 65,129 - 53,500
Other interest payable and charges 482 - 2,059
114,550 49,280 163,975
In the audited financial statements for the year ended 31 December 2022,
interest on client cash balances of £37,929 was included within finance and
other income and interest charges related to client balances of £7,282 were
included within finance costs. As a result of the appreciation in interest
rates, combined with the continued growth of the Group's client balances
following its authorisation as an Electronic Money Institution in August 2021
and commensurate with its growth in revenue, interest on client cash balances
has materially grown since the year ended 31 December 2022. As a result,
interest on client cash balances for the six months ended 30 June 2023 of
£183,506 has been classified as other operating income. For consistency
purposes, and to aid comparison, the comparatives related to client balances
for the year ended 31 December 2022 have also been reclassified from finance
income and finance costs to other operating income. No interest income or
interest charges on client balances were recognised in the six-month period
ended 30 June 2022.
4. Earnings per share
The earnings per share of 0.06 pence is based upon the profit of £34,946 (six
months to June 2022: loss of £3,019,256; year ended 31 December 2022: loss of
£5,611,832) and the weighted average number of ordinary shares in issue for
the period of 55,791,324 (30 June 2022: 23,143,117; 31 December 2022:
32,506,335).
The prevailing share price of the Company's shares during the period means
that the effect of any outstanding warrants and options would be considered
anti-dilutive (due to their strike price exceeding the average share price in
the period), and is ignored for the purposes of the loss per share
calculation.
5. Share capital
Allotted, called up and fully paid
Ordinary shares Share capital
No. £
Ordinary shares of £0.01 each as at 1 January 2022 20,277,582 202,776
Issue of new shares of £0.01 each 3,406,034 34,061
Ordinary shares of £0.01 each at 30 June 2022 23,683,616 236,837
Issues of new shares of £0.01 each 24,352,583 243,525
Ordinary shares of £0.01 each at 31 December 2022 48,036,199 480,362
Issues of new shares of £0.01 each 9,380,902 93,809
Ordinary shares of £0.01 each at 30 June 2023 57,417,101 574,171
The following changes in share capital have taken place in six months ended 30
June 2023:
- On 13 January 2023, 806,182 ordinary shares were issued at a price
of £0.06501 settling the share-based remuneration for former non-executive
board members and company secretary in respect of the year ended 31 December
2021
- On 3 February 2023, 5,113,182 ordinary shares were issued at a
price of £0.100 being the final equity settlement with Robert O'Brien related
to his share-based incentivisation agreement and following receipt of approval
from the Financial Conduct Authority ("FCA") for Mr. O'Brien to take his
shareholding in the Company above 10%
- On 3 February 2023, 3,461,538 ordinary shares were issued at a
price of £0.065 upon conversion of a loan note held by Mark Horrocks and
following receipt of approval from the FCA for Mr. Horrocks to take his
shareholding in the Company above 10%
Options
On 13 January 2023, the Company granted 3,049,180 options under its
equity-settled share-based remuneration schemes for employees with a weighted
average exercise price of £0.13 and a vesting period between 1 and 3 years.
The Black-Scholes model was used for calculating the cost of options. The
model inputs for the options issued were:
Share price at grant date - £0.08
Risk-free
rate -
2.7%
Expected Volatility -
129.5%
Contractual
life - 5
years
During the period 248,360 options were forfeited (H1 2022: 200,000) at a
weighted average exercise price of £0.20 per share. Additionally, 63,114
warrants with an exercise price of £0.61 expired during the period (H1 2022:
nil).
Share-based compensation charge
The Group's share-based compensation charge for the period ended 30 June 2023
of £172,679 (H1 2022: £2,243,258) consists of £49,115 (H1 2022: £67,978)
in respect of warrants (including the impact of warrant expirations),
£123,564 (H1 2022: credit of £13,395) in respect of share options granted
under the Company's share option scheme (including the impact of option
forfeitures) and £nil in respect of the share-based incentivisation agreement
with Robert O'Brien & his team (H1 2022: £2,138,378) and equity-settled
share-based payments related to the non-executive Board member's service
agreements (H1 2022: £50,297).
6. Intangible assets
Internally developed software Goodwill Regulatory licenses Total
£ Software costs Customer relationships £ £ £
£ £
COST
As at 1 January 2023 1,070,198 15,611 615,756 1,086,262 92,520 2,880,347
Additions 213,694 - - - - 213,694
Disposal (note 8) - - - - (92,520) (92,520)
At 30 June 2023 1,283,892 15,611 615,756 1,086,262 - 3,001,521
AMORTISATION
As at 1 January 2023 458,691 15,611 90,408 - - 564,710
Charge for the period 195,132 - 61,575 - - 256,707
As at 30 June 2023 653,823 15,611 151,983 - - 821,417
NET BOOK VALUE
At 30 June 2023 630,069 - 463,773 1,086,262 - 2,180,104
At 30 June 2022 582,621 - 387,808 1,043,319 92,520 2,106,268
At 31 December 2022 611,507 - 525,348 1,086,262 92,520 2,315,637
7. Disposal of Avila House Ltd
On 26 April 2023, the Group completed the sale of Avila House Ltd ("Avila
House") to Aspire Commerce Ltd and received £300,000 in cash consideration
following the receipt of regulatory approval for the transaction from the FCA.
Immediately prior to the disposal, the net assets of Avila House were £nil
(31 December 2022: net liabilities of £1,331), but upon its acquisition by
the Group in October 2020, the Group had previously recognised an intangible
asset of £92,520 related to the small e-money institution license held by
Avila House. The profit on disposal recognised by the Group upon the sale of
Avila House was therefore £207,480.
8. Trade and other receivables
Unaudited as at 30 June 2023 Unaudited as at 30 June 2022 Audited as at 31 Dec 2022
£ £ £
Trade receivables 347,655 94,182 221,669
Prepayments and accrued income 152,238 71,670 131,010
Derivative financial assets at fair value 674,424 200,653 635,473
Other receivables 52,523 32,525 53,062
Taxes and social security 276,624 16,186 297,896
Total trade and other receivables 1,503,464 415,216 1,339,110
9. Trade and other payables
Unaudited as at 30 June 2023 Unaudited as at 30 June 2022 Audited as at 31 Dec 2022
£ £ £
Trade payables 216,298 505,565 362,035
Derivative financial liabilities at fair value 767,557 171,724 563,676
Other taxes and social security 391,513 237,651 515,750
Other payables and accruals 498,499 609,537 527,816
Total trade and other payables 1,873,867 1,524,477 1,969,277
10. Loan Notes
Unaudited as at 30 June 2023 Unaudited as at 30 June 2022 Audited as at 31 Dec 2022
£ £ £
CURRENT - - 225,000
Convertible loan notes
NON-CURRENT 2,172,578 - 2,172,578
Loan notes
As described in note 5, on 3 February 2023 the current convertible loan note
of £225,000, issued pursuant to the Company's fundraising on 5 August 2022,
was converted to 3,461,538 ordinary shares at a price of £0.065 for Mr.
Horrocks to take his shareholding in the Company above 10%.
The non-current non-convertible loan notes comprise £2,000,000 issued to
Robert O'Brien (repayable on 31 July 2026) and £172,578 of deferred
consideration in relation to the acquisition of Pangea FX Limited (repayable
on 31 August 2024). Both loan notes have a 6% coupon rate payable quarterly in
arrears. The Pangea FX Limited loan note is payable contingent upon achieving
future revenue targets over a period of two years from the acquisition date.
Based on current and forecast performance it has been assumed that the loan
notes will be paid in full.
11. Related party transactions
During the period ended 30 June 2023, the Group generated revenue of
£1,503,740 under a referral agreement with Atlantic Partners Asia ("APA"), a
significant shareholder in the Company (H1 2022: £625,499). As at 30 June
2023, APA owed the Group £338,155 (30 June 2022: £82,978).
During the period ended 30 June 2023, the Group incurred charges of £60,000
(H1 2022: £nil) under a computer services agreement with JF Technology (UK)
Ltd of whom Stephen Flynn (a former Director of the Company and a significant
shareholder) is a director and a majority shareholder.
As at 30 June 2023, an amount of £8,750 remained due to the Group from Terry
Everson, a former director of Cornerstone Payment Solutions Ltd (30 June 2022:
£8,750).
The transactions with Robert O'Brien and Mark Horrocks are disclosed in notes
5 and 10.
12. Events after the reporting date
None
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