Equals Share Discussion Threads

[owenski] 25/9/2024 07:36

What is the likelihood of another rollover as the bidders still haven't got their pennies together. This whole process has been appalling. I noticed that James Thorne was perplexed by the time scales as well.

[masurenguy] 17/9/2024 07:45

James Thorne, from Columbia Threadneedle, comments on Equals @19.45.

[masurenguy] 13/9/2024 06:06

Dividend Update

Equals (AIM:EQLS) announces that as part of the Interim Results released on 10 September 2024, the Board declared an interim dividend of 1p per ordinary share. The dividend will be paid on 25 October 2024 to members on the register on 27 September. The ex-dividend date will be 26 September.

[jias] 11/9/2024 11:36

Thanks for sharing Simon Thompson's article Lammylover. I've bought more today. These are cheap irrespective of any bid materialising.

[lammylover] 11/9/2024 08:43

Just covered in Investors Chronicle by Simon Thompson as I predicted..

Published on September 11, 2024
by Simon Thompson
I would be mightily surprised if this week’s bumper interim results from Aim-traded Equals (EQLS: 115p) are not the fintech payments group’s last as a listed entity.

The fast-growing challenger brand in banking and international payments has received an indicative and fully financed cash offer of 135p a share from a bidding consortium consisting of private equity firm JC Flowers and TowerBrook Capital. It values the company at £276mn on a fully diluted basis.

The due diligence period has been protracted, but it must be approaching the end game for both sides as the bidders have now had sight of Equals' half-year results, as well as a third-quarter trading update. They make for a good read.

First-half transaction values hit a record £9.4bn, up 56 per cent year on year and more than double the level two years ago. Equals generated cash profit of £12.7mn on revenue of £60mn in the six-month period, with both metrics up a third. Moreover, the momentum has continued into the third quarter. Year-to-date revenue of £86.9mn is 38 per cent higher than at the same point in 2023 and net cash has increased from £20.5mn to £28.3mn since 30 June 2024, so highlighting the cash generation of the business.
Consensus forecasts suggest full-year cash profit of £26.4mn and an operating profit of £18.4mn on annual revenue of £123mn, so the indicative bid equates to a multiple of 9.4 times forecast cash profit to enterprise valuation. Moreover, momentum in the business is such that I wouldn’t bet against Equals delivering consensus cash profit of £32.3mn and operating profit of £22.8mn on revenue of £147mn in 2025, so the prospective cash profit multiple shrinks to 7.7 times.

I would be astonished if a formal bid isn’t made by the end of next month as the longer the bidders wait the less attractive it is for shareholders to accept the cash given the intrinsic value of the business is only increasing with time.

So, having first suggested buying the shares at 77p (Alpha Research: ‘A high tech fintech payments opportunity’, 8 April 2022), and last repeated that advice at 115p (‘Equals highlights strong credentials to bidders’, 3 July 2024), I feel there is strong potential for a quick-fire 20 per cent gain on the shares in a matter of weeks. Buy.

[kor_wraith] 10/9/2024 13:54

Equals have communicated in the past that their interest income is taken into account when negotiating fees with customers. Fees can increase if interest income decreases. Their customers aren't stupid.

[74tom] 10/9/2024 12:15

Oh and LOL and whoever literally sits on this board all day every day and downticks negative posts - the share price isn't listening :)

[74tom] 10/9/2024 12:09

Interest income should be valued at a far lower PE than core business income, hence why Alpha Group was trading at a PE of 12x before today's 14% fall.

If Equals core business is loss making as today's interims suggest, then there is no chance it should be valued at 22x current year earnings, let alone the 25x that the bidders have been contemplating for months on end.

Ps. I wasn't negative when I first posted back in April, I simply asked why they weren't disclosing what was surely material interest income. The number of aggressive responses & constant ramping from the usual suspects made me want to continue digging and posting analysis.

I have been proven correct so far, with the potential bid of 135p way below the levels speculated by the IC & Paul Hill and the shares trading at a 20% discount to that price.

What happens next will be fascinating.

[brummy_git] 10/9/2024 10:05

Another set of outstanding results from Equals today.

All the news & commentary here.

[melcul] 10/9/2024 09:53

Err, they said they would invest in S&M to continue to grow the business - so they have used interest earnings to do so. Assume it takes several months for a sales person to get active and a year to achieve payback. Seems a pretty sensible strategy to me. As for interest, they say (page 10) they have grown their balances to £620m and eared 3,76% on this. Assume a whole 1% cut in interest rates, that still yields £17m a year without any growth. As they have grown balances by close to £200m in 18 months, one must assume the growth will continue (look at the growth in solutions revenue, so lets say the balances grow to £720m at 2.76%, thats almost £20m again. Looks pretty sound to me and looking forward to me dividend! I dont care where they get their revenue from either.

[lammylover] 10/9/2024 09:09

Tom74 - on level 2, there's 5 separate market makers offering to buy your shares at 112p...what does that tell you?

[lammylover] 10/9/2024 09:07

Negative stuff 74tom. Why you hanging around here unless trying to get in cheaper.
Presumably hoping for lower entry price eh?

[74tom] 10/9/2024 08:59

I think II's will pull the plug after those results. At least they have openly admitted that they have used interest income to grow the cost base of the business. The problem is if those taps are turned off over the next 18 months they will be left with the enlarged cost base and reducing gross profit.

This would be an entirely different proposition if they had grown the cost base 10% and PBT was strongly ahead year on year.

Shares now flat for the day, I'll punt that they finish at 107p and if the bid is pulled then it'll head back towards 70/80p.

[ltinvest] 10/9/2024 08:11

Reads like quite a bullish report. Lots of talk about hiring new sales people to focus on expansion and growth. Europe now offers full platform capabilities. Could see growth accelerate now as they seem really focused on increasing the sales team and driving growth. No surprise the consortium are not bothered about the interim dividend payment 135p does seem like a steal now. They have also spent £1.2million on the strategic review so far which is only a temporary cost and will go straight to profits when it's done.

[darryn1] 10/9/2024 08:03

I see that the troll cambridge130 has disappeared since posting in 3802 that "This one is going down like Argentex. Alpha Group International wiping the floor with both of them". In the past 3 weeks the Alpha share price has fallen by 20% from £26 to £21.

[lammylover] 10/9/2024 07:59

There's been a big seller this morning dumping 50k and 25k chunks.
As soon as they are out, the share price will rise significantly in my view. I'm expecting Simon Thompson at Investors Chronicle (who is a fan of EQLS) to tip these strongly over the next few days, based on today's update.

[daveme] 10/9/2024 07:52

With such excellent results and plenty more growth on the horizon it would be a disgrace if EQLS is sold for 135p. Without this 10 month debacle EQLS would probably be 135p at least by now, especially after these results.

It is the ongoing SR that is controlling the price of this share regardless of how it is performing. Hence until the SR is resolved we might as well put these shares in a draw and forget about them.

[amt] 10/9/2024 07:33

Cash up 8m in two months.
Perhaps 2m working cap movement.
Anyway generating 3m per month.

[lammylover] 10/9/2024 07:32

Correct loglorry.

Clearly the takeover talks are now down to discussing the last fine details - hence why today's RNS states "The Consortium has confirmed that it does not intend to invoke this right in relation to the interim dividend declared today meaning that, should it proceed to make a formal offer for Equals, shareholders will be entitled to receive the interim dividend in addition to any offer consideration payable by the Consortium should it proceed to make a formal offer for Equals.

Its just a matter of time before the deal is done in my view.

[loglorry1] 10/9/2024 07:27

EQLS is not being run for profit it is being run for growth. Management are in growth phase and not trying to make big profits. This makes perfect sense because if you can grow at 33% with great gross margins it is absolutely the right strategy. 5x your top line and then costs make no difference.

The US buyers know this which is why the 135p bid will complete IMHO.

[74tom] 10/9/2024 06:22

It's not motoring at all, strip out the interest income and PBT is in decline;

They received interest income of £9.6m in H124 and reported a PBT of £6.5m, so the underlying business made a loss of £3.1m. In H123 they received interest income of £4.2m and reported a PBT of £5.8m, so made an underlying profit of £1.6m

So year on year the PBT performance of the underlying business has declined £4.7m

Admin costs have jumped to £23.8m from £14.3m...

I will be amazed if the prospective bidders pay 135p for this, it's a hot mess IMO.

[masurenguy] 10/9/2024 06:12

Another great set of results !

H1-2024: Financial Highlights

Record transaction values, with revenues up 33% to £60.0 million (H1-2023: £45.0 million) including £24.8 million derived from the Solutions platform (H1-2023: £13.6 million)

· B2B now represents 87% of total Revenue, up from 83%

· Further improvements to gross profit margin, increasing to 57.4% from 52.4%

· Adjusted EBITDA* increased by 30% to £12.7 million (H1-2023: £9.8 million)

· £1.9 million paid as a final dividend during the period (H1-2023: £ nil)

· £20.5 million Cash at Bank up from £18.7 million at 31 December 2023 despite £1.9 million spent on discharging the liabilities relating to the acquisitions made in FY-2023

· Basic EPS rising to 2.76 pence from 2.64 pence in H1-2023

· Interim dividend of 1.0 pence (H1-2023: 0.5 pence)

H1-2024: Operational and Product Highlights

· Completion of automated 'payment sending service' ('PSS') for outbound payments

· Equals Money Europe onboarded by tier-1 Banking partner to achieve functionality parity with Equals in UK

· Completion of remediation of Equals Money Europe for known pre-acquisition regulatory and compliance issues

· FairFX card product migrated to Equals core platform

Q3-2024 Trading (1 July 2024 to 6 September 2024)

· Year-to-date revenue of £86.9 million, up 38%, from £63.0 million on the same period in 2023

· Q3-24 revenue averaging £549k per day against £383k in the same period in 2023

· Cash at bank, £28.3 million at 6 September 2024

Commenting on the Interim Results, Ian Strafford-Taylor, CEO of Equals Group plc, said: "This has been another strong half for Equals, which continues to process transactions at record levels with SME clients and larger corporates recognising the value of our well-invested proposition. Indeed, our H1 total transaction values are 120% greater than that of two years ago, and 44% greater year-on-year, reflecting our sustained investment into product development and expansion of our addressable market. The operational leverage that this scale is providing is evident in our increased gross margin and the growth of the Group's profitability. Our strategy to continue growing the total addressable market continues to be aided by the white labelling of our product suite, meaning clients can operate as distribution partners for our platform. Our offering in Europe provides another growth opportunity that we are capitalising on. Management's laser focus on B2B as a route to market is fundamental to the growth of the business, not just at the top line but also in terms of profitability and cash generation. We will continue to invest in our platform and proposition in line with our objective to further broaden our addressable market. In the light of our strong performance to date in 2024, I am pleased to announce an interim dividend of 1 pence."