REG - Equals Group PLC - Interim Results
12/09/2023 07:00
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RNS Number : 0823M Equals Group PLC 12 September 2023
12 September 2023
Equals Group plc
('Equals' or the 'Group')
Interim Results
'Significant revenue growth, record Adjusted EBITDA and strong balance sheet'
Equals (AIM: EQLS), the fintech payments group focused on the Enterprise and
SME marketplaces, announces its interim results for the six months ended 30
June 2023 (the 'period' or 'H1-2023') and an update on trading for 49 trading
days for the period from 1 July 2023 to 8 September 2023 ('Q3-2023').
H1-2023: Financial Summary
H1-2023 H1-2022 Change
£ millions £ millions % (**)
Underlying transaction values 5,964 4,169 +43%
Revenue 45.0 31.4 +43%
Gross profit 23.6 14.9 +59%
Gross profit % 52.4% 47.4%
Adjusted EBITDA* 9.8 4.9 +102%
Operating profit 5.5 1.1
Profit after taxation 4.8 0.8
EPS (Basic, in pence) 2.64 0.38
Notes
* Adjusted EBITDA is defined as operating profit before: depreciation,
amortisation, impairment charges and share option charges and items of an
exceptional nature. EBITDA is defined as operating profit before depreciation
and amortisation.
**Percentages are calculated based on underlying rather than rounded figures.
H1-2023: Financial Highlights
· Record transaction values, with revenues up 43% to £45.0 million (H1-2022:
£31.4 million) including £13.6 million derived from the Solutions platform
(H1-2022: £6.3 million)
· Further improvements to gross profit margin, increasing to 52.4% from 47.4%
· Adjusted EBITDA* more than doubled to £9.8 million compared to same period
last year (H1-2022: £4.9 million)
· £17.9 million Cash at Bank up from £15.0 million at 31 December 2022 despite
£2.9 million spent on acquisitions
· Basic EPS rising to 2.64 pence from 0.38 pence in H1-2022
H1-2023: Operational and Product Highlights
· Acquisition of Oonex, now called Equals Money Europe, providing EU market
access
· Acquisition of Roqqett, an open banking platform, completed and now integrated
· Automation of 'payments out' flows yielding increased efficiencies
· Further investments into Compliance and Risk functions
· API integration to Equals Platform deployed, opening new distribution channels
Q3-2023 Trading (1 July 2023 to 8 September 2023) and Outlook
· Year-to-date revenue of £63.6 million, 39% ahead of the same period in 2022
· Revenues per day of £370k, compared to £265k in the same period in 2022
· Robust pipeline in Solutions underpinning further growth
· FairFX B2C card product moved to Equals Core platform
· Equals Money Europe integration progressing on plan
· Continued strong cash generation
· Proposed capital reduction being announced today to put the Company in a
position to pay dividends
· The Board intends to pay a maiden dividend of 1.5 pence in respect of the
financial year ending 31 December 2023*
* Dividend payment subject to, inter alia, capital reduction, shareholder and
court approvals.
Commenting on the Interim Results, Ian Strafford-Taylor, CEO of Equals Group
plc, said:
"This is an outstanding set of results with record revenues combining with
improved gross profit retention to yield enhanced profitability. These
results, coupled with our continued cash generation, enable us to announce our
intention, conditional, inter alia, upon the completion of the proposed
capital reduction, to pay our maiden dividend of 1.5 pence per share in
respect of the financial year 2023, while continuing our growth strategy. A
further announcement will be made in due course following the conclusion of
the capital reduction process.
"As well as strong financial performance, the Group completed its acquisition
of Oonex SA (subsequently renamed Equals Money Europe), a Brussels-based
payments services provider regulated by the National Bank of Belgium. This
acquisition enables Equals to widen its distribution and addressable markets
and the integration of the business is proceeding according to plan.
"The first half of 2023 saw strong growth which has continued into Q3 despite
an uncertain macroeconomic environment. Given the current trading, and a
robust sales pipeline, we look to the future with increased confidence, and we
expect to be ahead of expectations for the full year."
Analyst meeting
A conference call for analysts hosted by Ian Strafford-Taylor (CEO) and
Richard Cooper (CFO) will be held today at 9.30am. A copy of the Interim
Results presentation is available at the Group's website:
http://www.equalsplc.com.
For retail investors, an audio webcast of the conference call with analysts
will be available after 12pm today at:
https://stream.buchanan.uk.com/broadcast/64fb2da384cbf5eec802cac9
(https://stream.buchanan.uk.com/broadcast/64fb2da384cbf5eec802cac9) . In
addition, as previously announced, the Company will also be presenting the
Interim Results via the Investor Meet Company platform at 6pm today. Please
register at
https://www.investormeetcompany.com/equals-group-plc/register-investor
(https://www.investormeetcompany.com/equals-group-plc/register-investor) .
This announcement contains inside information.
- Ends -
For more information, please contact:
Equals Group plc
Ian Strafford-Taylor, CEO Tel: +44 (0) 20 7778 9308
Richard Cooper, CFO www.equalsplc.com (http://www.equalsplc.com)
Canaccord Genuity (Nominated Adviser & Joint Broker)
Max Hartley / Harry Rees Tel: +44 (0) 20 7523 8150
Peel Hunt LLP (Joint Broker)
Paul Shackleton / John Welch Tel: +44 (0) 20 7418 8900
Buchanan (Financial Communications)
Henry Harrison-Topham / Stephanie Whitmore / Toto Berger Tel: +44 (0) 20 7466 5000
equals@buchanan.uk.com (mailto:equals@buchanan.uk.com) www.buchanan.uk.com (http://www.buchanan.uk.com)
Chief Executive Officer's Report
The vision for the Group continues to be the simplification of global money
movement for business customers. Equals achieves this through its B2B
platforms, Equals Money being targeted at SME customers and Equals Solutions
which targets larger corporate opportunities. The Group's growth potential
is particularly strong given that the core building blocks of its platforms,
namely own-name multi-currency IBANs and bank-grade connectivity and
clearance, are highly complex and time consuming to replicate. This 'first
mover' advantage was achieved by the investments made in previous years and
will be continuously enhanced by the developments planned in the Group's
technical roadmap combined with further investments into direct connectivity
to payment networks.
The ambition of Equals has never just been to operate within the UK, and we
were delighted to complete the acquisition of Oonex SA, (subsequently renamed
Equals Money Europe SA) on 4 July 2023. Through its regulation by the
National Bank of Belgium and strong links to both a Belgian bank (KBC) and a
Dutch bank (ING), this provides the Group with cross-EU reach for its
products, particularly Equals Solutions, which has already exceeded
management's expectations in terms of revenue growth and profitability.
In the period we also further enhanced the Group's product set via the
acquisition of Roqqett Limited, an open-banking payments platform. The
acquisition allows Equals to span the entire payment cycle for its B2B
customers by providing them with another method to get paid by their
customers, be that B2B or B2C. Roqqett has now been successfully integrated
into the FairFX card checkout process and is being sold to external customers.
The investments made by the Group since 2018 have been instrumental in driving
the current strong performance. These investments fall into two major
categories, namely internal product development and acquisitions. Investment
into internal product development remains vital to driving the business
forward and we anticipate keeping our spend in this area at a consistent level
going forwards. As will be illustrated in more detail in the CFO Review
which follows this Report, our investments into acquisitions have all been
successfully integrated and highly accretive.
The attractiveness of Equals' product set is illustrated by the growing volume
of transactions and load values across the Group's platform:
£ millions
H1-2021 H2-2021 H1-2022 H2-2022 H1-2023
Transaction value 2,424 *4,011 4,163 5,053 5,964
% growth on half year 25% 65% 4% 21% 18%
*H2-2021 shown here excludes the £114 million from the one-off material trade
announced on 28 October 2021.
This translates well to revenues which rose by 43% in H1-2023 to £45.0
million (H1-2022: £31.4 million).
Revenue by six-month period, in £ millions
H1-2021 H2-2021 H1-2022 H2-2022 H1-2023
Medium enterprises 8.1 11.8 10.3 12.1 14.0
Consumer and small business 6.1 6.7 7.7 9.0 8.5
White-label 2.4 5.4 7.2 7.8 8.9
Large enterprises 0.3 1.8 6.2 9.4 13.6
Material trade - 1.5 - - -
Total 16.9 27.2 31.4 38.3 45.0
Sales & Marketing
The composition of the Group's Sales and Marketing teams has shifted over
recent years reflecting Equals' pivot from a B2C to a B2B focus. B2B
customer acquisition requires strong processes for lead generation and
outbound sales augmented by high conversion websites and cost-effective
digital marketing. Equals has continued to strengthen its sales capability
by recruitment of experienced professionals capable of consultative selling.
In addition, the Group has hired people with specific sector expertise as well
as rolling out a regional sales model rather than solely basing in London.
In keeping with the same theme of 'face-to-face' sales, Equals has increased
its presence at industry trade shows and has salespeople consistently
travelling to meet customers. The direct sales efforts are augmented by a
sales operations team to ensure peak efficiency and conversion. Furthermore,
given the roll-out of API connectivity in H1 2023, the Group now has dedicated
resources within its Engineering team to onboard new customers.
Equals has significantly upgraded its approach to digital marketing with all
the Group's websites yielding increases in conversion and have rolled out new
digital marketing collateral for the Group's multi-currency IBAN products.
Equals' recruitment of top-quality digital marketing professionals has
transformed our capabilities across the website, SEO and PPC yielding
improvements in customer acquisition and ability to optimise by channel using
test and refine techniques.
Profitability
A 43% increase in revenues, improvement in gross profit margin, tight cost
control in a tough labour market, combined to result in adjusted EBITDA
doubling from £4.9 million in H1-2022 to £9.8 million in H1-2023. A
performance that as CEO, I am immensely proud of.
Dividend
Equals has today announced a proposed capital reduction to redeem around £25
million of its share premium account to create distributable reserves. The
proposed capital reduction is expected to be completed by mid Q4-2023. The
Board intends conditional, inter alia, upon the completion of the proposed
capital reduction, to pay a maiden dividend of 1.5 pence per share in respect
of the financial year 2023. A further announcement will be made in due
course following the conclusion of the capital reduction process.
Current trading and outlook
The Global macroeconomic environment continues to be challenging with high
inflation, high interest rates, concerns over China's economy and the conflict
in Ukraine all affecting confidence and business activity. Against this
market backdrop, Equals continues to grow strongly because it has a product
and capability suite that is hard to replicate.
In Q3 2023 to date, revenues continued to perform strongly reaching £63.6
million on a year-to-date basis as of 8 September 2023. This is 39% ahead of
the same period in 2022 and represents revenues per working day of £370k
compared to £265k per day in the prior year.
Equals has increased its addressable market by adding the capability for
customers to connect via API. Whilst these customers take longer to
on-board, due to the requirement to connect their systems directly to Equals
Core, they are typically larger in size, and we expect to drive future revenue
growth. The current pipeline for new Solutions customers, both via direct
login and API, is strong and with the new capabilities of Equals Money Europe,
the Board believes that going forwards Equals is well positioned to further
increase its addressable markets and distribution channels.
Given the strong current trading, and a robust sales pipeline, the Board looks
to the future with increased confidence, and we expect to be ahead of
expectations for the full year.
Ian Strafford-Taylor
Chief Executive Officer
12 September 2023
REVIEW OF THE CFO
Taking the financial information disclosed in the CEO's Report one step
further, I am pleased to present record Interim Results for the six months
ended 30 June 2023.
Totals may not sum due to rounding. Percentages are calculating on underlying
figures before rounding. Where costs cannot be accurately attributed to each
segment, they have been allocated on the basis of revenue.
TABLE 1: INCOME AND EXPENSE ACCOUNT
H1-2023 H1-2022 H2-2022
£ millions £ millions £ millions
Revenue (table 3) 45.0 31.4 38.3
Gross Profits (table 5) 23.6 14.9 18.8
Less: Marketing (1.2) (0.9) (0.9)
Contribution 22.4 13.9 17.9
Staff costs (9.2) (6.6) (7.8)
Property and office cost (0.5) (0.4) (0.5)
IT and telephone costs (1.4) (0.9) (1.1)
Professional Fees (0.7) (0.6) (0.7)
Compliance Fees (0.6) (0.4) (0.3)
Travel and other expenses (0.3) (0.2) (0.3)
Adjusted EBITDA 9.8 4.9 7.2
Less: Share option expense (0.7) (0.3) (0.6)
Less: Acquisition costs and exceptional items 0.0 0.0 (0.2)
EBITDA 9.1 4.6 6.4
IFRS 16 Depreciation (table 6) (0.3) (0.4) (0.4)
Other depreciation (table 6) (0.2) (0.2) (0.2)
Amortisation of acquired intangibles (table 7) (0.7) (0.6) (0.6)
Other amortisation (table 7) (2.5) (2.2) (2.2)
Contingent consideration credit / (cost) 0.2 0.0 (0.3)
(3.5) (3.5) (3.7)
Gain on disposal of Travel Cash CGU 0.4 0.0 0.0
EBIT 5.9 1.1 2.7
Lease interest (0.1) (0.1) (0.1)
Foreign exchange differences 0.0 0.0 (0.1)
Contingent consideration finance charges 0.0 (0.1) 0.0
(0.1) (0.2) (0.2)
PROFIT BEFORE TAXATION 5.8 0.9 2.6
Corporate and deferred taxation (1.0) (0.1) 0.2
PROFIT FOR THE YEAR 4.8 0.8 2.8
TABLE 2 - ADJUSTED EBITDA BRIDGE FROM H1-2022 TO H1-2023 (in £'000s)
H1-2022 Adjusted EBITDA 4,852
Add: 61% uplift in contribution H1-2023 8,477
Less: 39% increase in staff costs, reflecting higher planned headcount (23% up from (2,574)
H1-2022), higher quality hires and salary increases (around 8%)
47% increase in IT and communication costs - mainly hosting and telephone in (432)
line with transaction growth
35% increase in professional and compliance costs for enhanced procedures and (325)
consultation, proactively ahead of requirements
20% increase in property costs arising through service charge/utility (87)
inflation
48% increase in travel and entertaining costs incurred through ambassadorial (86)
initiatives and industry awareness events
H1-2023 9,825
Adjusted EBITDA
Uplift over H1-2022 4,973
% uplift over H1-2022 102%
Revenue
TABLE 3 - REVENUE BY CUSTOMER TYPE, IN £ MILLIONS
The table below shows the revenue for the last five periods of six months,
split by customer grouping and within than the type of business provided:
H1-2021 H2-2021 H1-2022 H2-2022 H1-2023
International Payments 6.0 8.7 6.9 8.0 9.2
Cards 2.1 3.1 3.4 4.1 4.8
Medium enterprises 8.1 11.8 10.3 12.1 14.0
International Payments 1.4 1.9 2.1 2.4 1.9
Cards 1.7 1.7 2.3 2.8 2.4
Banking 2.9 2.8 2.8 3.3 4.1
Consumer and small business 6.0 6.4 7.2 8.5 8.4
White Label 2.4 5.4 7.2 7.8 8.9
White-Label
Large enterprises ("Solutions") 0.3 1.8 6.2 9.4 13.6
Material trade - 1.5 - - -
Bureau de change 0.1 0.3 0.5 0.5 0.1
Total 16.9 27.2 31.4 38.3 45.0
COST OF SALES & GROSS PROFITS
Cost of sales comprises three principal component which are shown below. The
cost for staff commissions includes Employers National Insurance
contributions.
TABLE 4 - COST OF SALES
H1-2023 H1-2022 H2-2022
£ millions £ millions £ millions
Affiliate commissions 14.6 10.7 13.1
Staff commissions 1.8 1.7 1.9
Transactions costs and similar* 5.0 4.1 4.5
Total 21.4 16.5 19.5
*Transaction costs, includes bank charges and similar, and, will, if
applicable, include costs for any compensation associated with the FCA's newly
introduced Consumer Duty rules.
Gross profit margins differ between each business unit. The mix of product
(example: spot or forward FX) also influences the margin. Margins continue
to improve as the business mix changes, and, with increased 'purchasing power'
the Group should be able to improve margins further but probably not higher
than a full percentage point.
Gross profit ratios over the last five six-month periods are shown below:
Table 5 - GROSS PROFIT MARGIN OVER THE LAST FIVE SIX MONTH PERIODS
H1-2021 H2-2021 H1-2022 H2-2022 H1-2023
International Payments 64% 54% 59% 51% 57%
Cards 71% 68% 59% 66% 65%
Medium enterprises 66% 58% 58% 56% 59%
International Payments 79% 74% 71% 71% 68%
Cards 71% 71% 61% 64% 58%
Banking 72% 71% 75% 79% 85%
Consumer, and small business 73% 72% 69% 72% 74%
17% 11% 11% 13% 19%
White-Label
Large enterprises (Solutions) 33% 44% 47% 50% 54%
Material trade - 54% - - -
Bureau de change - 67% 40% 40% -
Total 60% 51% 47% 49% 52%
Staff costs
Staff costs shown, exclude staff commissions which are included in cost of
sales (see table 4).
Headcount numbers have moved from 285 as at 31 December 2022 to 323 as at 30
June 2023.
Performance related components, when combined with staff commissions included
in cost of sales are, in the aggregate, around 25% of the total cost of staff.
The charge to the P&L was £9.2 million, up 39% on H1-2022 (£6.6 million)
and 18% on H2-2022 (£7.8 million).
Gross of capitalisation of £2.4 million (H1-2022: £2.1 million), costs were
£11.7 million in H1-2023 (£8.8 million in H1-2022). The amounts
capitalised represent 21% of gross staff costs, decrease from 23% in H1-2022
largely due to an increased headcount not directly attributable to development
projects.
Capitalisation is now broadly in line with the amortisation charge relating to
capitalised software.
Professional fees and Compliance costs
Owing to an increasing cross-industry compliance burden, the Group has chosen
to report compliance and similar costs separate to other professional fees.
Such costs, including onboarding systems, have risen due to a combination of
greater business activity and the Group's desire to fast-track business
applications proactive with regulation but not at the expense of quality.
Professional fees have risen in line with trends widely reported in the
national press, most notably the provision for cost of the audit noting
increased acquisition activity and implantation of enhanced systems.
Depreciation
Tangible fixed assets are depreciated over the anticipated useful life with a
maximum of 60 months (other than leasehold improvements which is a maximum of
120 months).
TABLE 6 - DEPRECIATION
H1-2023 H1-2022
£'000s £'000s
IFRS 16 depreciation 332 445
Other depreciation 193 187
525 632
Based upon the expenditure incurred to 31 December 2022, the total
depreciation charges for assets in FY-2023 will be:
£'000s
IFRS 16 depreciation 668
Other depreciation 375
1,043
Amortisation
Intangible assets acquired on acquisition are amortised over their estimated
useful lives, with a maximum of 60 months for brands and a maximum of 108
months for customer relationships. The charge to amortisation for the year can
be analysed as follows:
TABLE 7 - COMPONENTS OF AMORTISATION CHARGES
H1-2023 H1-2022
£'000s £'000s
Amortisation charge arising from the capitalisation of internally developed
software in the following years:
2018 and earlier 272 458
2019 831 831
2020 447 447
2021 288 267
2022 377 86
H1-2023 123 -
2,338 2,089
Amortisation charge for other intangibles 141 128
2,479 2,217
Amortisation of acquired intangibles 686 641
Total amortisation charge 3,165 2,858
Based upon expenditure to 31 December 2022, the total amortisation charges for
FY-2023 are expected to be:
£'000
Internally developed software 4,953
Other intangible assets 267
Acquired intangibles 984
6,204
Operating result
The Group made a profit before taxation of £5.8 million in H1-2023, compared
to £0.9 million in H1-2022.
Taxation, incorporating R&D credits
The Group has recognised a net tax charge of £1,031k (H1-2022: £37k) of
which £nil (H1-2022: £40k) relates to an R&D tax credit repayment.
At 31 December 2022 the Group had utilisable tax losses of £17.6 million. The
White-Label business, Equals Connect Ltd, is profitable and tax paying, as
until 3 October 2022 its profits could not be offset against other group
company losses. At 30 June 2023 it is estimated that the Group has utilisable
tax losses of £13.5 million.
TABLE 8 - BALANCE SHEET
This table shows a compressed 'balance sheet' for the Group. This splits-out
(from the statutory disclosure) certain current assets arising from the
acquisitions being made.
30.06.2023 30.06.2022 31.12.2022
£'000s £'000s £'000s
Internally generated software - cost 28,723 23,617 26,001
Internally generated software - accumulated amortisation (15,749) (11,065) (13,411)
12,974 12,552 12,590
Other non-current assets (other than 'right to use') 22,965 19,066 18,558
IFRS 16 assets, less IFRS 16 liabilities (635) (976) (830)
35,304 30,642 30,318
Liquidity (per Table 11) 16,621 12,825 14,321
Accrued Income and Trade Debtors 5,577 4,245 4,246
R&D rebates - 438 -
Prepayments 1,627 1,411 1,345
Working Capital advances to Roqqett - - 830
Other Sundry Debtors 164 190 189
Inventory of card stock 237 148 292
Accounts payable (2,616) (2,308) (2,070)
Affiliate commissions (3,061) (2,905) (2,563)
PAYE and Vat (849) (652) (816)
Staff commissions and accrued bonuses (1,436) (1,150) (1,690)
Other accruals and other creditors (2,050) (1,442) (1,938)
14,214 10,800 12,145
Working Capital and prepaid advances to Oonex 1,248 - -
Deferred consideration receivable arising from the disposal of the bureau de 100 - -
change
15,562 10,800 12,145
Earn-out balances due (Table 9) (4,605) (303) (2,025)
Net corporation and deferred tax 986 1,148 1,639
Net value of forward contracts 827 511 827
(2,793) 1,356 441
NET SHAREHOLDER FUNDS 48,073 42,798 42,904
INVESTMENTS
The Group invests in its future in two principal ways:
a. Product development, which is capitalised and can result in R&D
credits from the UK government.
b. Acquisitions of companies or businesses.
A. Product development
Over the period since January 2018, a total of £28.9 million has been
invested in product development of which £15.7 million has already been
amortised, more than 54%. In H1-2023 a total of £2.7 million was
capitalised of which £2.4 million related to staff costs and £0.3 million to
third party software.
Until the year ended 31 December 2022, the Group received £6.3 million in
cash from the UK government in respect of R&D claims and under IAS 12,
this has to be accounted for through the charge (or credit) to Corporation
tax.
For each £100,000 of product development capitalised now, the effect of the
UK government's R&D scheme means that at current rates of corporation tax,
the effective P&L cost to the Group is only £78,500.
The amortisation profile of the investments made is shown in Table 7.
The Group's intellectual property comprises these investments, and registered
trademarks in various jurisdictions.
B. Acquisitions
Table of acquisitions since 1 January 2019
Table 9 below shows the financial position relating to acquisitions in and
after 2019, including Roqqett Limited and Hamer & Hamer Limited acquired
in the six month period ended 30 June 2023.
TABLE 9 - EARNOUTS
Hermex Casco Effective Roqqett Limited Hamer & Hamer Total
Acquisition date 09.08.2019 19.11.2019 15.10.2020 06.01.2023 24.03.2023
£'000s £'000s £'000s £'000s £'000s £'000s
Acquisition price booked at acquisition 2,000 2,236 1,575 - - 5,811
Earn outs paid by 31.12.2020 (2,000) (1,733) (125) - - (3,858)
Revaluation of asset based on performance - 793 - - - 793
Gross outstanding at 31.12.2020 - 1,296 1,450 - - 2,746
Paid during 2021 - (741) (368) - - (1,109)
Further change in consideration - 46 - - - 46
Gross Outstanding at 31.12.2021 - 601 1,082 - - 1,683
Paid during 2022 - (601) (1,082) - - (1,683)
Purchase of the remainder of the NCI - 2,955 - - - 2,955
Initial consideration paid by 31.12.2022 - (930) - - - (930)
Gross Outstanding at 31.12.2022 - 2,025 - - - 2,025
Acquisition price booked at acquisition - - - 2,250 3,200 5,450
Less acquired gross liabilities - - - (831) - (831)
Initial Consideration Paid during H1-2023 - - - (169) (1,500) (1,669)
Deferred Consideration on receipt of R&D claim paid during H1-2023 - - - (215) - (215)
Revaluation of asset based on performance - (155) - - - (155)
Gross Outstanding at 30.06.23 - 1,870 - 1,035 1,700 4,605
Due in remainder of 2023 - 1,087 - 1,035 - 2,122
Due in or after 2024 - 783 - - 1,700 2,483
Total consideration 2,000 5,875 1,575 1,419 3,200 14,069
Roqqett
Following regulatory approval from the FCA on 6 January 2023, the acquisition
of Roqqett Limited, an open-banking platform was completed on 9 January
2023. Total consideration is up to £2.2 million less the gross liabilities
of £0.8 million totalling £1.4 million. A total of £384k had been settled
by 30 June 2023. Two instalments with combined liability of just over £1
million will be due depending on certain deliverables.
Hamer & Hamer
On 24 March 2023 the Group acquired Hamer & Hamer, an authorised payment
institution regulated by the FCA for an initial consideration of £1.5
million. The business focuses on the SME segment. The deferred consideration
based upon future performance targets, is £1.7 million, giving a total
consideration of up to £3.2 million. In the case of super performance, the
sellers could earn a further £1.0 million which would be charged to the
income statement.
Oonex SA
On 27 March 2023, the Group announced that it had entered into an agreement to
acquire the entire share capital of Oonex SA, an authorised payment
institution licenced in Belgium. Oonex SA (subsequently renamed as Equals
Money Europe SA) provides card acquiring services and is a Principal Member of
Mastercard allowing it to issue debit cards across the EEA. Additionally,
Oonex SA is a SWIFT and SEPA member and provides direct Payment Accounts
('IBANs') from Belgium to companies and individuals worldwide.
On 4 July 2023 the National Bank of Belgium consented to this acquisition.
The total consideration agreed was for five million shares in Equals Group Plc
with 3,938,294 issued in July 2023 and 1,061,706 deferred until 4 January
2024. The Group also assumed the liabilities of Oonex SA and various
associated entities for around €6 million. These are expected to be
treated as a loan repayable out of the future profits of Equals Money Europe
SA.
C. Disposals
On 14 March 2023, the Group disposed of its Bureau de Change to an unrelated
third party for an initial £250,000 with a further £100,000 receivable based
upon performance. A gain on disposal of £379,723 has been recognised in
these financial statements.
Share capital
The number of shares in issue at 1 January 2023 was 180,712,473. This
increased in the year through the exercise of 333,334 share options, and
747,488 shares at nominal value were issued pursuant to the 2022 SIP, thus the
number of shares outstanding at 30 June 2023 was 181,793,295. A further
3,938,294 shares were issued and admitted to trading, pursuant to the
acquisition of Oonex SA, thus at the date of this report the number of shares
in issue is 185,731,589.
Share options
At 1 January 2023, the Company had 16,141,058 options outstanding. 333,334
of these were exercised in 2023, and 36,512 were cancelled. After the 30
June 2023 but before the date of this announcement, a further 500,000 share
options lapsed, thus, at the date of signing of these financial statements,
there were 15,271,212 options, representing 8.2% of the issued share capital.
The cost of external advice for these schemes amounted to £15k in the period
(H1-2022: £31k)
Earnings per share
Earnings per share are reported/calculated in accordance with IAS 33. For
non-diluted, the result after tax is divided by the average number of shares
in issue in the year. The average number of shares in the period was
181,533,904 (H1-2022: 179,890,374).
The calculation of diluted EPS is based on the result after tax divided by the
number of actual shares in issue (above) plus the number of options where the
fair value exceeds the weighted average share price in the year. The fair
value of options is measured using Black-Scholes and Monte-Carlo. It should
be noted that in accordance with Accounting Standards, this calculation is
based on fair value, not the difference between the market price at the end of
the year or the weighted average price and the exercise price. The weighted
average price was 91 pence (H1-2022: 78 pence), the number of options
exceeding the fair value was 8,089,807 (H1-2022: 6,537,453).
The basic and diluted EPS are shown below:
Basic Basic Diluted Diluted
H1-2023 H1-2022 H1-2023 H1-2022
Profit / (loss) per share (in pence) 2.64 0.38 2.52 0.36
Adjusted earnings and adjusted EPS
We have observed that the analyst community prepares EPS calculations on a
number of different bases. To try and harmonise these we have prepared below
a basis which hopefully offers consistency:
H1-2023 H1-2022
£'000s £'000s
P&L YTD Attributable to owners of Equals Group PLC 4,788 675
Add back:
- Share option charges 741 290
- Amortisation of acquired intangibles. 686 641
Adjusted earnings 6,215 1,606
The resulting earnings per share are shown below:
Basic Basic Diluted Diluted
H1-2023 H1-2022 H1-2023 H1-2022
Adjusted profit per share (in pence) 3.42 0.89 3.27 0.86
CASH STATEMENT
The movement in the cash position is shown in the table below, splitting out
trading from M&A activities:
TABLE 10 - CASHFLOW H1-2023 H1-2022 H2-2022
£'000s £'000s £'000s
Adjusted EBITDA 9,825 4,852 7,268
Lease payments (principal and interest) (488) (371) (598)
R&D tax receipts relating to qualifying Equals expenditure in prior - - 400
periods
Acquisition costs - - (164)
Internally developed software capitalised for R&D:
- Staff (2,449) (2,051) (2,140)
- IT Costs (273) (164) (244)
Purchase of other intangible assets less disposals (284) (307) (138)
Purchase of other non-current assets (252) (122) (149)
Movement in working capital (551) 2,926 (1,780)
5,528 4,763 2,455
M&A activities:
- Net acquired consideration, and earn-outs (1,669) (1,380) (1,233)
- Associated costs capitalised in acquisition (29) - -
Costs relating to acquisitions after the balance sheet date (319) - -
Loans in advance of acquisition:
- Oonex (729) - -
- Roqqett - - (830)
(2,746) (1,380) (2,063)
Funds from exercise of share options 97 193 -
External funding repaid (CBILS) - (228) (1,800)
NET CASHFLOWS 2,879 3,348 (1,408)
Balance at 1(st) January / 1(st) July 15,044 13,104 16,452
Balance at 30(th) June / 31(st) December 17,923 16,452 15,044
Cash per share 9.9 pence 9.1 pence 8.3 pence
Working capital movements commonly comprise:
· Timing differences between accrued and paid affiliate commissions
· Timing differences between accrued and paid performance related pay
· Timing difference between accrued expenses and the settlement of
subsequent invoices
· Profit transfers from the Client ledgers
· Margin calls (or releases) from liquidity providers
The Group enhances its reputation by aiming to pay all suppliers on the
invoice due date.
TABLE 11 - LIQUIDITY H1-2023 H1-2022
£'000s £'000s
Cash at bank 17,923 16,452
Balances with liquidity providers 2,863 1,499
Pre-funded balances with card provider 759 884
Gross liquid resources 21,545 18,835
Customer balances not subject to safeguarding (4,924) (4,210)
CBILS loan - (1,800)
(4,924) (6,010)
Net position 16,621 12,825
The Group has its principal banking and deposit arrangements with Barclays,
NatWest, Citibank and Blackrock. As a member of RTGS, the Group also holds
interest-earning balances with the Bank of England.
Richard Cooper
Chief Financial Officer
12 September 2023
INTERIM CONSOLIDATED statement OF COMPREHENSIVE INCOME
FOR THE six-month period ENDED 30 june 2023
Period end Period end Year end 31
30 June 2023 30 June 2022 December
Unaudited Unaudited 2022
Audited
Note £000 £000 £000
Revenue on currency transactions 40,983 28,505 63,541
Banking revenue 4,045 2,868 6,141
Revenue 2 45,028 31,373 69,682
Direct costs 2 (21,425) (16,507) (36,027)
Gross profit 23,603 14,866 33,655
Administrative expenses 3 (14,395) (10,314) (22,576)
Depreciation (525) (632) (1,211)
Amortisation charge (3,165) (2,858) (6,008)
Acquisition costs - - (164)
Total operating expenses (18,085) (13,804) (29,959)
Operating profit 5,518 1,062 3,696
Other income and expenses:
Gain on the sale of the Cash CGU 9 380 - -
Finance costs 8 (79) (177) (280)
Profit before tax 5,819 885 3,416
Tax charge / (credit) 4 (1,031) (37) 135
Profit after tax 4,788 848 3,551
Memo: Profit is attributable to:
Owners of Equals Group Plc 4,788 675 3,237
Non-controlling interest - 173 314
Other comprehensive income:
Exchange differences arising on translation of foreign operations - 1 -
4,788 849 3,551
Profit per share
Basic 2.64p 0.38p 1.80p
Diluted 2.52p 0.36p 1.73p
All income and expenses arise from continuing operations.
INTERIM CONSOLIDATED statement OF FINANCIAL POSITION
FOR THE six-month period ENDED 30 june 2023
As at 30 June 2023 As at 30 June 2022 As at 31 December 2022
Unaudited Unaudited Audited
Note £000 £000 £000
ASSETS
Non-current assets
Property, plant and equipment 1,215 1,193 1,139
Right of use assets 3,171 4,067 3,367
Intangible assets and goodwill 34,724 30,425 30,008
Deferred tax assets 1,171 1,287 1,831
40,281 36,972 36,345
Current assets
Inventories 237 148 292
Trade and other receivables 13,413 8,228 10,274
Current tax assets - 439 -
Derivative financial assets 5,616 2,593 5,616
Cash and cash equivalents 17,923 16,452 15,044
37,189 27,860 31,226
TOTAL ASSETS 77,470 64,832 67,571
EQUITY AND LIABILITIES
Equity attributable to equity holders
Share capital 6 1,818 1,807 1,807
Share premium 6 53,498 53,405 53,405
Share based payment reserve 4,143 2,455 3,231
Other reserves 8,609 8,610 8,609
Retained deficit (19,995) (23,915) (24,148)
Equity attributable to owners of Equals Group Plc 48,073 42,362 42,904
Non-controlling interest - 436 -
48,073 42,798 42,904
Non-current liabilities
Borrowings 7 - 1,600 -
Right of use (lease) liabilities 3,063 4,224 3,417
3,063 5,824 3,417
Current liabilities
Borrowings 7 - 200 -
Trade and other payables 20,617 12,970 15,489
Current tax liabilities 185 139 192
Right of use (lease) liabilities 743 819 780
Derivative financial liabilities 4,789 2,082 4,789
26,334 16,210 21,250
TOTAL EQUITY AND LIABILITIES 77,470 64,832 67,571
INTERIM CONSOLIDATEd STATEMENT OF changes in equity
For the SIX-MONTH period ended 30 june 2023
Group Share capital Share premium Share based payment Retained deficit Other reserves Total attributable to owners of Equals Group Plc Non-controlling interest Total
£000 £000 £000 £000 £000 £000 £000 £000
At 1 January 2022 1,793 53,218 1,858 (24,590) 8,609 40,888 263 41,151
Income for the period and total comprehensive income - - - 675 - 675 173 848
Exchange differences arising on translation of foreign operations - - - - 1 1 - 1
Acquisition of the remaining NCI - - - - - - - -
Share based payment charge - - 259 - - 259 - 259
Movement in deferred tax on share-based payment charge - - 338 - - 338 - 338
New shares issued 14 187 - - - 201 - 201
At 30 June 2022 1,807 53,405 2,455 (23,915) 8,610 42,362 436 42,798
Income for the period and total comprehensive income - - - 2,562 - 2,562 141 2,703
Exchange differences arising on translation of foreign operations - - - - (1) (1) - (1)
Acquisition of the remaining NCI - - - (2,902) - (2,902) (577) (3,479)
Share based payment charge - - 665 - - 665 - 665
Movement in deferred tax on share-based payment charge - - 218 - - 218 - 218
Share options exercised in year - - (107) 107 - - - -
New shares issued - - - - - - - -
At 31 December 2022 1,807 53,405 3,231 (24,148) 8,609 42,904 - 42,904
Income for the period and total comprehensive income - - - 4,788 - 4,788 - 4,788
Exchange differences arising on translation of foreign operations - - - - - - - -
Purchase of Roqqett reserves - - - (666) - (666) - (666)
Purchase of Hamer & Hamer reserves - - - 31 - 31 31
Share based payment charge - - 726 - - 726 - 726
Movement in deferred tax on share-based payment charge - - 186 - - 186 - 186
New shares issued 11 93 - - - 104 - 104
At 30 June 2023 1,818 53,498 4,143 (19,995) 8,609 48,073 - 48,073
Other reserves comprise:
Merger reserve Arising on reverse acquisition from Group reorganisation.
Contingent consideration reserve Arising on equity based contingent consideration on acquisition of
subsidiaries.
Foreign currency reserve
Arising on translation of foreign operations
INTERIM Consolidated statement of cash flows
FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2023
Six month period ended Six month period ended Six month period ended
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£000 £000 £000
Operating Activities
Profit for the period 5,819 885 2,531
Adjustments for:
Depreciation 525 632 579
Amortisation 3,165 2,858 3,150
Share based payment charge 726 259 665
(Increase) in trade and other receivables (3,431) (188) (9,732)
Decrease in net derivative financial assets / liabilities - - (3,023)
Increase in trade and other payables 5,356 1,561 8,146
Increase in derivative financial liabilities - - 2,707
Decrease / (increase) in inventories 55 20 (144)
Finance costs 79 177 103
Net cash inflow 12,294 6,204 4,982
Tax receipts - - 400
Tax paid (192) - (61)
Net cash inflow from operating activities 12,102 6,204 5,321
Cash flows from investing activities
Acquisition of property, plant and equipment (401) (122) (149)
Acquisition of intangibles (3,005) (2,323) (2,733)
Acquisition of subsidiary, net of cash acquired (5,425) - -
Net cash used in investing activities (8,831) (2,445) (2,882)
Cash flows from financing activities
Principal elements of lease payments (415) (297) (540)
Interest paid on finance lease (73) (82) (87)
Interest paid (8) (33) (14)
Repayment of borrowings - (200) (1,800)
Acquisition of the remaining non-controlling interest - - (1,405)
Proceeds from issuance of ordinary shares 104 201 (1)
Net cash used in financing activities (392) (411) (3,847)
Net increase / (decrease) in cash and cash equivalents 2,879 3,348 (1,408)
Cash and cash equivalents at the beginning of the period 15,044 13,104 16,452
Cash and cash equivalents at end of the period 17,923 16,452 15,044
CONSOLIDATED NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2023
1. Basis of preparation
The principal accounting policies applied in the preparation of the Group and
Interim Consolidated financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise
stated. The financial statements have been prepared on a historical cost
basis with the exception of derivative financial instruments which are
measured at fair value through profit or loss.
These financial statements are prepared in accordance with UK-adopted
International Accounting Standards in conformity with the requirements of the
Companies Act 2006. The financial statements are presented in sterling, the
Group's presentational currency.
The unaudited consolidated Interim financial statements have been prepared in
accordance with the AIM rules and consistently with the basis of preparation
and accounting policies set out in the accounts of the Group for the period
ended 31 December 2022. The information set out herein is abbreviated and
does not constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006. These interim consolidated financial statements do
not include all disclosures which would be required in a complete set of
financial statements and should be read in conjunction with the 2022 Annual
Report.
The Company is a limited liability company incorporated and domiciled in
England and Wales and whose shares are quoted on AIM, a market operated by The
London Stock Exchange.
a) Critical judgements and estimates
IFRS requires management to make estimates, judgements and assumptions that
affect the application of the Group's accounting policies and the reported
amounts of assets, liabilities, income and expenses. These estimates are
based on the Directors best knowledge and past experience. The existing
critical judgements and estimates set out in note 3.26 of the Group's annual
report for the year ended 31 December 2022 have been reviewed in preparing
these Interim consolidated financial statements and the Directors believe they
remain relevant.
b) Going concern
The Board continues to closely monitor its performance and considers a range
of risks that could affect the future performance and position of the Group.
The Board considers it 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. Segmental Analysis
Based on previously identified cash generating units, the segmental results
were as follows:
Unaudited Currency International Payments Solutions Travel Cash Banking Central Total
Cards
6 months ended 30 June 2023 £000 £000 £000 £000 £000 £000 £000
Segment revenue 7,205 19,986 13,587 129 4,121 - 45,028
Direct costs (2,650) (11,775) (6,230) (90) (680) - (21,425)
Gross profit 4,555 8,211 7,357 39 3,441 - 23,603
Administrative expenses - - - - - (14,395) (14,395)
Depreciation - - - - - (525) (525)
Amortisation - - - - - (3,165) (3,165)
Gain on the sale of the cash CGU - - - 380 - - 380
Finance costs - - - - - (79) (79)
Profit / (loss) before tax 4,555 8,211 7,357 419 3,441 (18,164) 5,819
Current assets - - - - 3,143 34,046 37,189
Non-current assets 5,323 22,035 - - 2,371 10,552 40,281
Total liabilities - - - - (1,904) (27,493) (29,397)
Total net assets 5,323 22,035 - - 3,610 17,105 48,073
Unaudited Currency International Payments Solutions Travel Cash Banking Central Total
Cards
6 months ended 30 June 2022 £000 £000 £000 £000 £000 £000 £000
Segment revenue 5,645 16,242 6,204 478 2,804 - 31,373
Direct costs (2,059) (10,183) (3,343) (239) (683) - (16,507)
Gross profit 3,586 6,059 2,861 239 2,121 - 14,866
Administrative expenses - - - - - (10,314) (10,314)
Depreciation - - - - - (632) (632)
Amortisation - - - - - (2,858) (2,858)
Finance costs - - - - - (177) (177)
Profit / (loss) before tax 3,586 6,059 2,861 239 2,121 (13,981) 885
Current assets - - - - 2,634 25,226 27,860
Non-current assets 5,120 18,051 - 178 2,434 11,189 36,972
Total liabilities - - - - (1,952) (20,082) (22,034)
Total net assets 5,120 18,051 - 178 3,116 16,333 42,798
Audited Currency International Payments Solutions Travel Cash Banking Central Total
Cards
6 months ended 31 December 2022 £000 £000 £000 £000 £000 £000 £000
Segment revenue 6,894 18,115 9,432 531 3,337 - 38,309
Direct costs (2,559) (11,179) (4,746) (314) (722) - (19,520)
Gross profit 4,335 6,936 4,686 217 2,615 - 18,789
Administrative expenses - - - - - (12,262) (12,262)
Depreciation - - - - - (579) (579)
Amortisation - - - - - (3,150) (3,150)
Acquisition costs - - - - - (164) (164)
Finance costs - - - - - (103) (103)
Profit / (loss) before tax 4,335 6,936 4,686 217 2,615 (16,258) 2,531
Current assets - - - - 2,343 28,883 31,226
Non-current assets 5,341 17,975 - 128 4,372 8,529 36,345
Total liabilities - - - - (2,287) (22,380) (24,667)
Total net assets 5,341 17,975 - 128 4,428 15,032 42,904
3. Operating profit
Operating profit is stated after charging the following operating expenses:
6 months ended 30 June 2023 6 months ended 30 June 2022 12 months ended 31 December 2022
Unaudited Unaudited Audited
£000 £000 £000
Marketing costs 1,206 790 1,858
Staff costs 9,194 6,620 14,406
Property and office costs 517 430 932
Audit fees 231 180 350
Compliance costs 552 358 683
Other professional fees 460 380 851
IT and telephone cost 1,351 925 2,012
Travel and similar 257 329 440
Foreign exchange loss 30 10 71
Share option charge and other share option related costs 741 291 970
Contingent consideration (155) - -
Other costs 11 1 3
Administrative costs 14,395 10,314 22,576
Depreciation of right of use assets 331 445 822
Depreciation of property, plant and equipment 194 187 389
Amortisation charge 3,165 2,858 6,008
Acquisition costs - - 164
Total operating expenses 18,085 13,804 29,959
4. Taxation
6 months ended 6 months ended 30 June 2022 12 months ended
30 June 2023 Unaudited 31 December 2022
Unaudited Audited
£000 £000 £000
Current year R&D credit - (40) -
Current year corporation tax charge 185 78 192
Current tax credit 185 38 192
Origination and reversal of temporary differences 38 (8) (203)
Recognition of previously unrecognised deductible temporary differences 808 7 (124)
Deferred tax credit 846 (1) (327)
Total tax charge / (credit) 1,031 37 (135)
5. Earnings per share
Basic earnings per share is calculated based on the £4,788k profit
attributable to owners of Equals Group plc (H1-2022: £675k) divided by the
weighted average number of shares of 181,533,904 in the period (H1-2022:
179,768,562), giving a result of 2.64 pence per share (H1-2022: 0.38 pence per
share).
6. Share capital
6 months ended 30 June 2023 6 months ended 30 June 2023 6 months ended 30 June 2022 12 months ended 31 December 2022
Unaudited Unaudited Unaudited Audited
No. £000 £000 £000
Authorised, issued and fully paid-up ordinary shares of £0.01 each
As at start of period 180,712,473 1,807 1,793 1,793
Issued during the period under share options 333,334 3 7 7
Issued during the period under the SIP 747,488 8 7 7
As at end of period 181,793,295 1,818 1,807 1,807
On 6 April 2023, Equals Group Plc issued 333,334 ordinary shares of 1p each,
for total consideration of £96,667. Of which £93,333 (28p per share) was
allocated to the Share Premium reserve, in order to satisfy the exercise of
share options by a Director of the Group. Those shares have been retained by
the Director. As part of the longer-term incentive plans for members of
staff, on 20 January 2023, 747,488 shares were issued under a Share Incentive
Plan and placed into trust for 188 eligible employees. The shares will
remain in trust until the vesting conditions are met at the end of the holding
period on 20 January 2026.
7. Borrowings
2023 2022
£000 £000
Loan debenture - 1,800
Under the Coronavirus Business Interruption Loan Scheme (CBILS) to further
support working capital, on 23 December 2020, the main trading subsidiary of
the Company, FairFX plc, entered into a £2.0 million loan agreement with the
Royal Bank of Scotland ('RBS').
The loan was originally for a six-year period, to mature on December 2026, at
the Bank Base rate + 2.53% and could be repaid early at any point without
penalty, and indeed the outstanding loan of £1.8 million was repaid in full
in August 2022.
8. Finance costs
Finance costs comprise: the unwind of discount on the lease liability under
IFRS 16; the unwind of discount on deferred consideration in respect of
business and company acquisitions made by the Group and other financing
interest costs.
9. Sale of the Cash CGU
The Cash CGU together with its property lease, staff and cash stock was
disposed on 14 March 2023 for a total consideration £0.4 million. Of which,
£0.1 million is a deferred consideration receivable upon a future negotiation
with the property lease.
10. Post Balance Sheet Events
The Group completed the acquisition of Oonex S.A on 4 July 2023 following
unconditional approval on 6 June 2023 from the National Bank of Belgium. A
total of 3,938,294 shares were issued and admitted to trading, a further
1,061,706 shares subject to adverse warranty claims should be issued by 4
January 2024. The acquisition process was initiated on 24 March 2023 when
the Share Purchase Agreement (SPA) was signed.
The Group made payments totalling €2.9 million to address known and initial
liabilities on completion. Payments were made by way of loans to the
subsidiary.
Since completion a further €0.6 million was injected to settle
pre-acquisition liabilities. The Group expects to loan Oonex SA a further
€0.8 million for the period 1 September to 31 December 2023 but declining
over time as the remediation project progresses. On 9 August 2023 the company
was renamed from Oonex SA to Equals Money Europe SA.
- ENDS -
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