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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Fairfx Group Plc | LSE:FFX | London | Ordinary Share | GB00BLS0XX25 | ORD 1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 124.50 | 124.00 | 125.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
TIDMEQLS
RNS Number : 6372L
Equals Group PLC
14 September 2021
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS DEFINED IN ARTICLE 7 OF THE MARKET ABUSE REGULATION NO. 596/2014 ("MAR")
14 September 2021
Equals Group plc
('Equals' or the 'Group')
Interim Results
Strong B2B growth underpins strategic move from both retail and travel FX.
Adjusted EBITDA significantly ahead of expectations and operationally cash generative.
Equals (AIM: EQLS) , the fintech payments group focused on the SME marketplace, announces its interim results for the six months ended 30 June 2021 (the 'period' or 'H1-2021').
H1-2021 Financial Highlights
GBPmillions H1-2021 H1-2020 H2-2020 Underlying transaction values 2,308 1,560 1,933 - B2B 1,996 1,209 1,633 - B2C 312 351 299 Revenue 16.9 13.8 15.2 - B2B 11.6 9.2 11.0 - B2C 5.3 4.6 4.2 Gross profit 10.2 8.7 9.6 Adjusted EBITDA* 1.6 0.7 0.5 Operational cash in/(out) flows 0.8 (2.8) 0.4 Cash at bank 10.1 7.9 10.0
Totals may not sum due to rounding. Percentages are calculated on underlying figures before rounding. Where costs cannot be accurately attributed to each segment, they have been allocated on the basis of revenue.
* Group revenue increased by 23% to GBP16.9 million (H1-2020: GBP13.8 million) * B2B revenue increased YoY by 25% to GBP11.6 million as the Group continued its focus on SMEs * B2B in Q3-2021 represents over 80% of total revenue up from 67% in H1-2020 * Gross profit increased by 17% to 10.2 million, broadly reflecting the YoY increase in revenue * Contribution increased by 24% to GBP9.8 million (H1-2020: GBP7.9 million), and contribution margin consistent at 58% * Gross operating expenditure lower by 14% on H2-2020 through strategic tight control of costs * Adjusted EBITDA(*) increased by 128% to GBP1.6 million (H1-2020: GBP0.7 million) * Non-Adjusted EBITDA of GBP0.8 million with GBP0.6 million of exceptional costs (H1-2020: GBP0.5 million loss with GBP1.0 million of exceptional costs).
Post period-end trading update ('Q3-2021' 1 July 2021 to 10 September 2021)
-- Revenues of GBP9.2 million up 58% from GBP5.8 million on same period last year -- Q3-2021 - already a record quarter with 14 business days remaining -- B2B revenues continue to drive growth - now greater than 80% of overall book
-- Equals Solutions, the new multicurrency product aimed at larger businesses, contributed GBP1.2 million of revenue, or 13% of total, in Q3-2021 to date
-- GBP12.3 million of Cash at bank and in hand with net liquidity of GBP10.2 million as at 10 September 2021.
Commenting on the Interim Results, Ian Strafford-Taylor, CEO of Equals Group plc, said: "The planned pivoting away from retail and travel towards B2B has paid-off spectacularly in H1-2021. This trading performance and momentum has sustained since the period end and is being supported by fast growing revenues amounting to GBP9.2 million in the period from 1 July to 10 September, making this a record quarter with 14 business days left to run, with numerous new first-rate customers, and strong take-up of our enlarged product suite. Whilst, like other businesses we have seen market-forces led cost pressures, particularly in staff and IT, we have contained these robustly, sought further efficiencies and have grown revenue at a much faster pace.
"Equals finds itself with a unique position in the FinTech sector as, not only are we generating operational cash, but we remain very well-funded for both re-investment in product and marketing to drive further profitable revenue growth."
Analyst meeting
A conference call for analysts hosted by Ian Strafford-Taylor (CEO) and Richard Cooper (CFO) will be held today at 0930am. A copy of the Interim Results presentation is available at the Group's website: http://www.equalsplc.com .
For retail investors, a n audio webcast of the conference call with analysts will be available after 12pm today: https://webcasting.buchanan.uk.com/broadcast/6114eb77c97de6636c2d8e9d
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.
- Ends -
For more information, please contact:
Equals Group plc Ian Strafford-Taylor, CEO Tel: +44 (0) 20 7778 Richard Cooper, CFO 9308 www.equalsplc.com Canaccord Genuity (Broker) Bobbie Hilliam Tel: +44 (0) 20 7523 Alex Aylen (Sales) 8150 Buchanan (Financial Communications) Henry Harrison-Topham / Steph Whitmore Tel: +44 (0) 20 7466 / Toto Berger 5000 equals@buchanan.uk.com www.buchanan.uk.com
Chief Executive Officer's Report
The results for H1-2021 clearly demonstrate the success of the pivot of the Group from a B2C travel money business to a B2B focused operation. Recent years have seen significant investments into both the technology platforms and direct connectivity to payments networks. These initiatives form the essential building-blocks to move the Group from being product-led towards being more platform-led, with aim of providing simple-to-use solutions to the corporate sector. As evidenced by this set of results, the pay-back from these investments is now coming through and, encouragingly, is even more visible in the post period trading.
The investments made have allowed the Group to develop the capability for all customers to have a multi-currency account in their name defined by a unique IBAN; this being an internationally recognised standard to define an account. This capability underpins the Equals Money proposition for a range of products on one platform with simplicity of movement of money between products, targeted at the SME sector. In addition, the same infrastructure drives the Equals Solutions product which is aimed at larger corporates with significant international flows and high transaction volumes. Equals Solutions comprises a multi-currency account for collections and payments connected to SWIFT, International Payments platforms and UK domestic networks providing FX and payment capabilities combined with multiple levels approval protocols, all via one platform and login. Equals Solutions came on stream in June 2021 and is now contributing strongly in the third quarter, as can be seen in the post period end figures.
The 'own-name' multi-currency IBAN capability will drive sustainable and recurring platform-related revenues and growth through both Equals Money and Equals Solutions and thereby provide further growth to the individual product lines of International Payments, Cards and Banking services. The revenues from these platforms are both transactional and fee-based, thereby improving the earnings mix. Continual improvements to the functionality of the overall payment platform and direct connectivity to additional payments networks furthers the capabilities of the platform. Concurrently, more straight-through-processing ('STP') capabilities are being added which increases efficiency and processing capacity. The Group will also be enhancing the alignment of its service levels to its pricing and revenue generation and moving more transactions towards customer 'self-serve' where appropriate, further enhancing capacity and thereby operational gearing.
Operational improvements made by the Group in H1-2021 include:
- Significantly enhanced International Payments platform for self-serve customers 'Pay Platform'
- New internal dealing platform for International Payments - 'Exchange Platform' - Continued roll-out of HubSpot CRM system aided by 'Sales Enablement' team - New Equals Money website to better convert inbound B2B traffic - STP for onboarding for both B2B and B2C customers via TruNarrative platform - Joining the 'Confirmation of Payee' scheme for UK Payments - Launch of 'Linked Cards' for FairFX B2C cards platform
- Implementation of automated reconciliations utilising Kani-payments platform, resulting in operational efficiencies and reducing credit risk
- Further upgrades to our compliance capabilities and personnel, enabling faster onboarding of new customers
Financial Overview for H1-2021
A summary of the Group's underlying transaction values is shown below:
Underlying transaction values
GBPmillions International Corporate Cash & retail Banking Total Payments Expenses cards Services B2B H1-2021 1,355 149 2 490 1,996 H1-2020 818 93 12 286 1,209 % Change on year 66% 60% (83)% 71% 65% B2C H1-2021 228 - 4 80 312 H1-2020 237 - 36 78 351 % change on year (4)% - (89)% 3% (11)% TOTALS H1-2021 1,583 149 6 570 2,308 H1-2020 1,055 93 48 364 1,560 % change on year 50% 60% (88)% 57% 48%
Overall transaction values were up 48% on H1-2020, driven by a 65% increase in the B2B sector as more customers were on boarded and more products were offered. Unsurprisingly, B2C volumes remained subdued due to travel impediments caused by the Covid-19 pandemic.
Revenues
GBP000s International Corporate Cash Banking Rebates Total Payments Expenses & retail Services and other cards income H1-2021 B2B 7,849 2,132 33 1,493 72 11,579 B2C 2,275 - 1,409 1,366 276 5,326 -------------- ---------- ---------- ---------- ----------- ------- H1-2021 10,124 2,132 1,442 2,859 348 16,905 -------------- ---------- ---------- ---------- ----------- ------- B2B mix 78% 100% 2% 52% 21% *68% H1-2020 B2B 6,242 1,310 230 1,282 177 9,241 B2C 1,991 - 1,229 1,222 89 4,531 -------------- ---------- ---------- ---------- ----------- ------- H1-2020 8,233 1,310 1,459 2,504 266 13,772 -------------- ---------- ---------- ---------- ----------- ------- B2B mix 76% 100% 16% 51% 67% 67% % change on year B2B 26% 63% (86)% 16% (59)% 25% B2C 14% - 15% 12% 210% 18% -------------- ---------- ---------- ---------- ----------- ------- Aggregate 23% 63% (1)% 14% 31% 23% -------------- ---------- ---------- ---------- ----------- -------
*Excluding fee sweeps in retail cards, underlying B2B:B2C revenue mix was 72%:28%
H1-2021 showed strong B2B growth in transaction volumes and revenues across all product lines of International Payments, the Corporate Spend platform and Banking Services. This growth has accelerated in July, August and September 2021 as the benefits of the own-name IBAN capabilities are feeding through to Equals Solutions. In contrast, whilst B2C volumes and revenues contracted somewhat, this was against the background of lockdown conditions where Q1-2020 was not affected in the same way.
For H1-2021 in more detail:
Group turnover - representing the quantum of underlying transactions through its platforms, grew by 48% overall and by 65% in the B2B segment.
Group revenues - GBP16.9 million up 23% (H1-2020: GBP13.8 million) and within that, the B2B segment grew by 25%. As Covid-19 travel impediments begin to ease, there remains considerable upside, for example in H1-2019, over GBP6.8 million revenue was earned at an aggregate margin of just over 50%.
When expressed as revenue over turnover, the Group's margin averaged 73 basis points ('bps') against 88 bps in H1-2020. The Board is comfortable with this change, as it had already anticipated the product shift would increase turnover but at a lower margin. This was more evidenced in Banking Services where the aggregate return reduced to 50 bps from 69 bps in H1-2020.
The Equals Spend B2B expense platform, whose customers are corporates, continues to recover strongly from the impact of the pandemic with revenues 63% higher than H1-2020 and 21% higher than H2-2020.
Gross profit - at GBP10.2 million was up 17% (H1-2020: GBP8.7 million).
Contribution - (gross profits less marketing expenditure) rose by 24% to GBP9.8 million (H1-2020: GBP7.9 million).
Operating expenditure above adjusted EBITDA was GBP8.2 million, 5% lower than H2-2020 (H2-2020: GBP8.7 million) reflecting the continued cost reduction programme, but 13% higher than the 'furlough-subsidised' H1-2020 (H1-2020: GBP7.3 million).
Current Developments
The trading period post H1-2021 to-date has shown further acceleration in revenues with B2B again the driving force and all product lines moving forward strongly. Equals Solutions, which produced GBP0.3 million of revenues in H1-2021 has contributed GBP1.2 million in the post H1-2021 period and is primed to grow further as the Group has a strong customer pipeline.
H2-2021 is anticipated to continue in the same strategic direction as the first half with continued investments, (albeit at much lower levels than the peak in 2019), in the technology platform and connectivity to payments networks focussed on the B2B customer. This will be augmented by increased resources applied to sales and marketing to drive new customers on to the platform and products.
Key functionality and platform enhancements are planned for both Equals Money and Equals Solutions as well as the underlying products of Payments, Cards and Banking Services. Operational improvements towards full STP will also be delivered, increasing efficiency, and creating more capacity.
Future plans and opportunities
The strategic direction of the Group remains clearly focussed on the B2B customer segment with Equals Money being targeted at the SME base and Equals Solutions at the larger corporate opportunities. The growth potential, now that we have assembled the core capabilities of own-name IBAN and bank-grade connectivity and clearance, is extremely strong due to the complexity and time required to replicate our capabilities.
The Group will continue to look for growth opportunities and can do so with a strong balance sheet and cash position. The Group will examine overseas expansion beyond its current predominantly UK-centric customer base and will also consider further acquisition opportunities.
Board composition, senior executive changes and employees
On 9 April 2021 the Board was strengthened by the appointment of Christopher Bones as a Non-Executive Director of the Company and new Chair of the Remuneration Committee. Three senior members of the executive team left the Group during the period and I thank them for their time whilst at Equals. The Group took on a leading Head of Compliance to complement the already strong operational team, and the CFO, Richard Cooper, recruited a new deputy to enable him to work even more closely with myself on corporate opportunities.
The Group's employees continue to be its greatest strength. The loyalty, commitment, and hard work the Group has seen in 2020 and now in 2021 has been tremendous and deserves to be acknowledged. I would like to take this opportunity to personally thank every colleague for everything they have done for the Company. We are proud to train and promote from within as well as seeking fresh talent from elsewhere.
Whilst the Group continues to seek efficiencies and has a strong cost-control culture, the Board intends to invest these gains in further capacity for growth rather than reductions in staff numbers. This in turn will benefit investors as Equals will have strong operational gearing as it grows, with its cost base increasing at a lower rate than transactions and revenues.
The labour market in the UK, particularly in the fintech space, is extremely competitive and the Group is actively implementing enhanced employee retention measures including share ownership and LTIP schemes.
Equals wholeheartedly embraces ESG initiatives and takes Equality, Diversity and Inclusivity (EDI) extremely seriously. Our EDI strategy, which covers not only employees but also customers, includes an internal EDI network populated with elected representatives and regular employee surveys and this is a key objective for all Executive Committee members and forms part of their appraisal.
Outlook
Equals has a strong outlook as a consequence of the investments it has made in preceding years to create a payments platform comprising International and Domestic Payments, Card Payments and Banking Services underpinned by exceptional technology and direct connections to multiple payment networks and we look forward to the future with confidence.
Ian Strafford-Taylor
Chief Executive Officer
14 September 2021
Chief Financial Officer's Report
The Group continues to present extracts from the primary statements in an alternative format and explain the major movements to the prior periods or year along with issues of accounting impact and judgement. The periods most relevant to the primary statements have been presented. Full period disclosures are made in the Consolidated Interim Financial Statements. The report is in three sections:
A - Income and Expenditure Account
B - Balance Sheet
C - Cash Flow
Transactions with business customers are reported as 'B2B' and transactions with retail customers reported as 'B2C'.
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.
A: Income and Expenditure account and notes
The table presented here shows both the underlying expenditure and that which is reported in the Income and Expenditure account. For example, staff costs are shown both gross and net of software capitalised.
Table 1: Income and Expenditure account
GBP000's H1-2021 H1-2020 H2-2020 FY-2020 Revenue 16,905 13,772 15,188 28,960 Less: Variable costs (6,685) (5,034) (5,636) (10,670) -------- -------- -------- --------- Gross profit 10,220 8,738 9,552 18,290 Marketing costs (392) (799) (407) (1,206) Contribution 9,828 7,939 9,145 17,084 -------- -------- -------- --------- Other operating costs Staff costs incurred (7,943) (8,366) (9,159) (17,525) Furlough credit 34 324 222 546 -------- -------- -------- --------- Net staff costs incurred (7,909) (8,042) (8,937) (16,979) Separately reported items (table 4) 613 343 990 1,333 Acquisition costs - - 83 83 Capitalised internal software 1,191 2,241 1,761 4,002 -------- -------- -------- --------- Net staff costs (6,105) (5,458) (6,103) (11,561) -------- -------- -------- --------- Property & office costs incurred (1,076) (997) (1,104) (2,101) Capitalised internal software - 45 - 45 IFRS16 adjustment 586 515 548 1,063 -------- -------- -------- --------- Net property & office costs (490) (437) (556) (993) -------- -------- -------- --------- IT & telephone costs incurred (1,022) (759) (959) (1,718) Capitalised internal software 148 210 209 419 -------- -------- -------- --------- Net IT & telephone costs (874) (549) (750) (1,299) -------- -------- -------- --------- Professional fees incurred (712) (743) (949) (1,692) Acquisition costs - - 48 48 Separately reported items 3 102 114 216 -------- -------- -------- --------- Net professional fees (709) (641) (788) (1,429) -------- -------- -------- --------- Travel (50) (157) (76) (233) Bad debt provisions - - (357) (357) Other costs (1) (25) (23) (48) Net other operating costs (8,229) (7,267) (8,653) (15,920) -------- -------- -------- --------- Adjusted EBITDA* 1,599 672 492 1,164 -------- -------- -------- --------- Separately reported items: Senior management restructuring (616) - - - Covid-19 related costs - (445) (1,119) (1,564) Wirecard related costs - (530) (540) (1,070) Separately reported items (616) (975) (1,659) (2,634) ------ ------ -------- -------- Acquisition costs - - (130) (130) Share option charges (217) (195) (249) (444) EBITDA 766 (498) (1,546) (2,044) ------ ------ -------- --------
* Adjusted EBITDA and EBITDA
Adjusted EBITDA is defined as operating profit before: depreciation, amortisation, impairment charges, share option charges and items of an exceptional nature. EBITDA is defined as operating profit before depreciation and amortisation.
Revenue
Revenues have already been analysed and explained in the CEO report and it is not proposed to repeat the analysis here. It is however worth noting some split within international payments:
Table 2: International Payments - spot and forward transaction analysis
GBPmillions Spot Forward Total H1-2021 Transaction values 1,174 405 1,579 % mix 74% 26% Revenue 6.0 4.1 10.1 % mix 59% 41% H1-2020 Transaction values 766 297 1,063 % mix 72% 28% Revenue 5.7 2.6 8.3 % mix 69% 31% % change Transaction values 53% 36% 49% Revenue 4% 58% 20%
The rise in both the percentage of the total revenue from forward FX deals and the absolute rise in such revenue is attributable to a commercial drive for more B2B business and the high-quality of our dealing offer for SMEs.
Gross costs
Costs (including capital expenditure, exceptional items and before any furlough subsidies, but excluding marketing costs), were GBP10.8 million, 2% lower than H1-2020 (H1-2020: GBP11.0. million) and 14% lower than H2-2020 (H2-2020: GBP12.6 million).
Table 3: Gross costs
GBP000's H1-2021 H1-2020 H2-2020 FY-2020 Staff 7,943 8,366 9,159 17,525 Property 1,076 997 1,104 2,101 IT & telephone 1,022 759 959 1,718 Professional fees 712 743 949 1,692 Other costs 51 182 456 638 -------- -------- -------- -------- 10,804 11,047 12,627 23,674 -------- -------- -------- --------
Staff costs
Gross staff costs were GBP7.9 million in H1-2021 against GBP8.4 million in H1-2020, and GBP9.2 million in H2-2020. These costs were offset by:
- Capitalised software: GBP1.2 million (H1-2020: GBP2.2 million, H2-2020: GBP1.8 million)
- Exceptional costs: GBP0.6 million (H1-2020: 0.3 million, H2-2020: GBP1.0 million) - Acquisition costs: GBPnil (H1-2020: GBPnil, H2-2020: GBP0.1 million)
Costs in H1-2020 included salary cost savings after employees and directors agreed to temporary salary cuts at the height of the pandemic. The reduction in costs in H1-2021 is largely a result of controlled headcount reductions in 2020 continuing into 2021, as development staff cost spend decreased and more product was rolled-out.
Amounts capitalised have significantly reduced to GBP1.2 million representing 15% of gross staff costs, (H1-2020: 27%) as the Group investment strategy matures and moves to a focus on new and enhanced product design.
Headcount numbers have fallen from 314 as at 30 June 2020 to 258 as at 30 June 2021 and 248 at 31 August 2021. It is anticipated that these numbers will rise by around 5% within H2-2021.
Professional fees
Professional fees have remained broadly consistent on H1-2020 at GBP0.7 million (H1-2020: GBP0.7 million), and include considerable investment in regulatory compliance initiatives to provide additional control assurance to customers and the Group.
Property and office costs
The Group has property commitments in London for both offices and retail outlets. The Group has reduced its London office space in H1-2021 with a net gain of GBP16k on termination of lease contracts, and is reviewing its remaining commitments
Separately reported items
Separately reported items are large, non-recurring items identified by management.
Table 4: Separately reported items
GBP000's H1-2021 H1-2020 H2-2020 FY-2020 Senior management restructuring 616 - - - COVID-19 - 445 1,119 1,564 Wirecard - - 418 418 Cash based costs 616 445 1,537 1,982 -------- -------- -------- -------- Provisions and write-offs Wirecard card stocks written off - 530 122 652 616 975 1,659 2,634 -------- -------- -------- --------
The Group structure has been flattened and this led to a number of senior staff departing the business. The settlement costs, notice periods and associated legal expenses are reflected above. There were no other separately reported items in the period.
Adjusted EBITDA
Adjusted EBITDA for the period was a profit of GBP1.6 million (H1-2020: GBP0.7 million), an increase of GBP0.9 million arising from the increase in gross profit for the period.
Table 5a: Reconciliation of adjusted EBITDA to loss before tax H1-2021
GBP000's Adjusted Separately Share Result EBITDA reported options before items tax Revenue 16,905 - - 16,905 Direct costs (6,685) - - (6,685) --------- ----------- --------- -------- Gross profits 10,220 - - 10,220 Marketing (392) - - (392) --------- ----------- --------- -------- Contribution 9,828 - - 9,828 Staff costs (6,105) (613) (217) (6,935) Property (490) - - (490) IT and Telephone (874) - - (874) Professional fees (709) (3) - (712) Travel and subsidence (50) - - (50) Other expenditure (1) - - (1) --------- ----------- --------- -------- 1,599 (616) (217) 766 --------- ----------- --------- -------- FX differences (52) Depreciation (733) Amortisation (2,135) Finance cost (93) -------- Loss before taxation (2,247) --------
Table 5b: Reconciliation of adjusted EBITDA to loss before tax H1-2020
GBP000's Adjusted Separately Share Result EBITDA reported options before items tax Revenue 13,772 - - 13,772 Direct costs (5,034) - - (5,034) --------- ----------- --------- -------- Gross profits 8,738 - - 8,738 Marketing (799) - - (799) --------- ----------- --------- -------- Contribution 7,939 - - 7,939 Staff costs (5,458) (343) (195) (5,996) Property (437) - - (437) IT and Telephone (549) - - (549) Professional fees (641) (102) - (743) Travel and subsidence (157) - - (157) Bad debt provisions - (530) - (530) Other expenditure (25) - - (25) --------- ----------- --------- -------- 672 (975) (195) (498) --------- ----------- --------- -------- FX differences (13) Depreciation (668) Amortisation (2,058) Finance cost (110) -------- Loss before taxation (3,347) --------
Impairment review
Given the improvement in results during H1-2021 and in the wider economic environment management are not envisaging any impairment under IAS 36 Impairment of assets for the full year based on the current balance sheet and cash generating units. A full review will be carried out for the full year.
Amortisation and depreciation
Amortisation and depreciation for the period remains relatively consistent at GBP2.1 million (H1-2020: GBP2.1 million) and GBP0.7 million (H1-2020: GBP0.7 million) respectively.
Operating result
The Group made a loss before taxation of GBP2.2 million for the period, compared to a loss of GBP9.0 million for the whole of 2020.
Taxation, incorporating R&D credits
The Group has recognised a net tax credit of GBP1.1 million (H1-2020: GBP0.2 million) of which GBP0.3 million (H1-2020: GBP0.7 million) relates to an R&D tax credit for the six months to 30 June 2021.
R&D project spend eligible for R&D tax relief decreased during the period, however this is not the only component behind the estimated R&D tax credit for the period, and, is not the only factor that will eventually drive the total claim for the year.
All valid R&D expenditure gives rise to tax advantages, either in the form of a tax credit receivable, or as an enhanced allowable expense deduction increasing the taxable loss for the year. Legislation places a cap on the amount a company can claim as a repayment and therefore, as the Group results improve, the amount it can claim in the form of a repayment decreases. The GBP0.3 million credit recognised is an estimation of the maximum amount the Group can claim in the form of a cash repayment, based on the results for the period.
B: Balance sheet
At 30 June 2021, the Group considers some of the key items on the balance sheet to be:
-- GBP10.1 million of cash at bank (30 June 2020: GBP 7.9 million) -- GBP2.0 million CBIL loan (30 June 2020: GBPnil)
-- GBP1.5 million of deferred consideration payable until October 2023 period, (30 June 2020: GBP0.7 million). The GBP1.5 million referred to above is net of discounting accounted for under IFRS 3.
-- GBP1.7 million of accrued R&D credits of which GBP1.4 million was received in August 2021
-- Within the working capital was GBP4.0 million of funds with regulated liquidity providers and card programs (outside of banks) (30 June 2020: GBP3.4 million).
Table 6: Balance sheet
As at As at As at GBP000's 30 Jun 2021 31 Dec 2020 30 Jun 2020 Restated(1) Restated (1) Gross Cash resources 10,082 10,032 7,908 Balances with liquidity providers 2,553 2,776 1,955 Gross liquidity position 12,635 12,808 9,863 Customer balances not subject to safeguarding (Note 2) (4,755) (4,059) (1,908) Net liquidity position (Note 3) 7,880 8,749 7,955 ----------- ----------- ------------ Other current assets and liabilities* Card stock and other inventories 217 194 199 Accrued income (Note 3) 447 419 1,914 Trade debtors, including profits on forward contracts 3,090 2,443 811 Balances pre-funded at card providers 1,435 2,078 1,431 Other debtors 495 168 1,336 Prepayments 1,076 860 1,079 Accrued R&D credit (Note 4) 1,687 1,367 3,064 ----------- ----------- ------------ 8,447 7,529 9,834 ----------- ----------- ------------ Retention and deferred consideration (1,485) (1,662) (703) Accrued affiliate commissions (1,303) (343) (271) Accrued expenses (2,422) (1,928) (1,499) Trade and other creditors (2,107) (2,510) (1,143) PAYE and VAT (Note 5) (629) (766) (2,017) Other creditors (1) - (1) (7,947) (7,209) (5,634) ----------- ----------- ------------ Borrowings (2,000) (2,000) - Cash resources, less other current assets and liabilities 6,380 7,069 12,155 Fixed Assets (other than "right to use") 35,519 36,496 35,700 Net lease liabilities (Right to use assets less lease liabilities) (364) (346) (292) Net derivative financial assets (31) (30) 324 Net deferred tax 230 (547) (1,758) Shareholders' funds 41,734 42,642 46,129 ----------- ----------- ------------
* Other current assets and liabilities excluding net derivative financial assets and current net lease liabilities
1) Certain balance sheet lines have been restated to show separately balances with card providers and to better reflect where there is both a legal right and an intention to settle net.
2) Customer balances not defined as client monies subject to regulated safeguarding requirements, which are held off balance sheet . These balances represent the margins called by the Group from customers for forward FX trading. The Group is subject to margin positions imposed on it by liquidity providers, including banks that act in that capacity. Where customer margins are lower than margins requested by liquidity providers, this infers that the Group has taken a risk-assessment of the client's credit worthiness and not called the customer for margin but has been called itself. Where margins imposed by liquidity providers is lower than margins called from customers, this infers that Group's customers have off-setting currency positions in the eyes of the liquidity providers.
3) The net liquidity position is the internal measure of available resource, but subject to certain balances being held for regulatory capital reasons. At 30 June 2021 these balances were GBP352k (30 June 2020: GBP352k).
4) Accrued income at 30 June 2020 included GBP1.0 million due from Wirecard. Following its demise, the Group became a direct issuer of its own cards rather than relying solely on third party issuers, with a corresponding decrease in accrued income due from such third parties.
5) Accrued R&D credit includes GBP1.4 million accrued in respect of 2020 and prior years. This was received in August 2021.
6) To manage the Group's working capital through the early stages of the Covid-19 pandemic, the Group availed itself of a postponement of PAYE liabilities to HMRC, pending the receipt from HMRC of the R&D tax credit. At 30 June 2021 the outstanding balance of historic PAYE was insignificant.
Internally capitalised software
The Group continues its investment in product development and has capitalised a further GBP1.3 million, including GBP1.2 million staff costs.
Other balance sheet items
The Group has accrued a further GBP0.3 million for R&D credits. GBP1.4 million in relation to previous periods was outstanding as at 30 June 2021 but was received in August 2021.
Non-Controlling Interest
The loss for the period includes GBP90k profit in respect of the Non-Controlling Interest of the Equals Connect business acquired in 2019.
Off balance sheet items: client monies
Client monies held by the Group, but not included on the balance sheet, represent monies held on behalf of clients, and where the risks and rewards of ownership are not transferred to the Group, and the Group does not have control over how those monies are used. Such accounts are subject to stringent regulatory controls.
As at 30 June the Group held client monies of GBP170.4 million in off balance sheet bank accounts (H1-2020: GBP96.1 million). The increase year-on-year arises from the acquisition of new clients, and a further general increase consistent with the uptake in B2B revenue in H1-2021.
C. Cash flow
Table 7 Cash flow
GBP000's H1-2021 H1-2020 H2-2020 FY-2020 Adjusted EBITDA (table 1) 1,599 672 492 1,164 Add: R&D tax receipts relating to qualifying expenditure in prior periods - 2,539 2,539 Less: - IFRS 16 excess of cash cost over accounting cost (586) (514) (549) (1,063) - Acquisition costs - - (130) (130) - Cash incurred separately reported items (616) (445) (1,537) (1,982) - Internally capitalised software (1,340) (2,496) (1,969) (4,465) - Purchase of other intangibles (27) (50) (15) (65) - Purchase of property, plant, equipment (40) (119) (41) (160) (Less) / add: Working capital movement* 1,817 103 1,651 1,754 Net cashflow before acquisitions, earn-outs and external fundings 807 (2,849) 441 (2,408) Cash for acquisitions/ earn-outs (803) (508) (317) (825) External funding CBIL loan from UK Government - - 2,000 2,000 Cash raised from issue of equity 46 - - - NET CASH FLOWS 50 (3,357) 2,124 (1,233) Balance at start of period 10,032 11,265 7,908 11,265 Balance at end of period 10,082 7,908 10,032 10,032 ======= ======= ======= =======
Richard Cooper
Chief Financial Officer
14 September 2021
INTERIM CONSOLIDATED statement OF COMPREHENSIVE INCOME
FOR THE six month periodED 30 june 2021
Year end Period end Period end 31 30 June 30 June December 2021 2020 2020 Unaudited Unaudited Audited Note GBP000 GBP000 GBP000 Gross value of currency transactions sold*(1) 1,738,215 1,196,192 2,671,245 Gross value of banking deposit transactions 570,343 363,546 821,426 ----------- ----------- ---------- Revenue on currency transactions 14,046 11,268 23,850 Banking revenue 2,859 2,504 5,110 ----------- ----------- ---------- Revenue 2 16,905 13,772 28,960 Direct costs 2 (6,685) (5,033) (10,671) ----------- ----------- ---------- Gross profit 10,220 8,739 18,289 Administrative expenses 3 (10,239) (9,917) (22,467) Amortisation charge (2,135) (2,058) (4,347) Credit impairment charge 4 - - (261) Acquisition expenses - - (130) ----------- ----------- ---------- Total operating expenses (12,374) (11,975) (26,944) Operating loss (2,154) (3,236) (8,655) Finance costs 8 (93) (110) (391) ----------- ----------- ---------- Loss before tax (2,247) (3,346) (9,046) Tax credit 5 1,075 177 2,109 ----------- ----------- ---------- Loss after tax (1,172) (3,169) (6,937) =========== =========== ========== Memo: Loss is attributable to: ----------- ----------- ---------- Owners of Equals Group Plc (1,251) (3,086) (6,919) Non-controlling interest 79 (83) (18) ----------- ----------- ---------- Other comprehensive income: Exchange differences arising on translation of foreign operations - - 6 (1,172) (3,169) (6,931) =========== =========== ========== Loss per share Basic (70)p (1.73)p (3.87)p Diluted (70)p (1.69)p (3.87)p =========== =========== ==========
*(1) Gross value of currency transactions sold and banking deposit transactions are a non-GAAP measure and represent the gross value of currency transactions sold to customers and banking deposits made by customers.
All income and expenses arise from continuing operations.
INTERIM CONSOLIDATED statement OF FINANCIAL POSITION
FOR THE six month periodED 30 june 2021
As at As at As at 30 June 31 December 30 June 2021 2020 2020 Unaudited Restated* Restated* Note GBP000 GBP000 GBP000 ASSETS Non-current assets Property, plant and equipment 1,439 1,887 1,646 Right of use assets 5,247 6,487 6,061 Intangible assets and goodwill 34,082 33,813 34,850 Deferred tax assets 4,057 2,095 3,193 44,825 44,282 45,750 -------------- ----------- ------------- Current assets Inventories 217 199 194 Trade and other receivables 10,783 11,699 10,112 Derivative financial assets 3,019 2,476 3,019 Cash and cash equivalents 10,082 7,909 10,032
-------------- ----------- ------------- 24,101 22,283 23,357 -------------- ----------- ------------- TOTAL ASSETS 68,926 66,565 69,107 ============== =========== ============= EQUITY AND LIABILITIES Equity attributable to equity holders Share capital 6 1,787 1,786 1,786 Share premium 6 53,049 53,003 53,003 Share based payment reserve 1,619 1,126 1,402 Other reserves 8,609 8,603 8,609 Retained deficit (23,510) (18,425) (22,259) -------------- ----------- ------------- Equity attributable to owners of Equals Group Plc 41,554 46,093 42,541 Non-controlling interest 180 36 101 -------------- ----------- ------------- 41,734 46,129 42,642 -------------- ----------- ------------- Non-current liabilities Borrowings 7 2,000 - 2,000 Lease liabilities 5,164 6,120 5,509 Deferred tax liabilities 3,827 3,854 3,740 -------------- ----------- ------------- 10,991 9,974 11,249 -------------- ----------- ------------- Current liabilities Trade and other payables 12,704 7,652 11,269 Lease liabilities 447 659 897 Derivative financial liabilities 3,050 2,151 3,050 -------------- ----------- ------------- 16,201 10,462 15,216 -------------- ----------- ------------- TOTAL EQUITY AND LIABILITIES 68,926 66,565 69,107 ============== =========== =============
* Certain balance sheet lines have been restated to better reflect where there is both a legal right and an intention to settle net .
INTERIM CONSOLIDATEd STATEMENT OF changes in equity
For the SIX MONTH period ended 30 june 2021
Group Total attributable Share to owners Share Share based Retained Other of Equals Non-controlling capital premium payment deficit reserves Group Plc interest Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 At 1 January 2020 1,786 53,003 1,345 (15,339) 8,603 49,398 119 49,517 (Loss) for the period and total comprehensive loss - - - (3,086) - (3,086) (83) (3,169) Other items Share based payment charge - - 195 - - 195 - 195 Movement in deferred tax on share-based payment charge - - (414) - - (414) - (414) -------- -------- -------- -------- --------- ------------------ --------------- ------- At 30 June 2020 1,786 53,003 1,126 (18,425) 8,603 46,093 36 46,129 (Loss) / income for the period - - - (3,834) - (3,834) 65 (3,769) Other comprehensive income: Items that will not be reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations - - - - 6 6 - 6 Other items Share based payment charge - - 249 - - 249 - 249 Movement in deferred tax on share-based payment charge - - 27 - - 27 - 27 At 31 December 2020 1,786 53,003 1,402 (22,259) 8,609 42,541 101 42,642 (Loss) / income for the period and total comprehensive (loss) / income - - - (1,251) - (1,251) 79 (1,172) Other items Share based payment charge - - 217 - - 217 - 217 Movement in deferred - - - - - - - - tax on share-based payment charge New shares issued 1 46 - - - 47 - 47 -------- -------- -------- -------- --------- ------------------ --------------- ------- At 30 June 2021 1,787 53,049 1,619 (23,510) 8,609 41,554 180 41,734 ======== ======== ======== ======== ========= ================== =============== ======= Other reserves comprise: Merger reserve Arising on reverse acquisition from Group reorganisation. Contingent consideration Arising on equity based contingent consideration reserve on acquisition of subsidiaries. Foreign currency reserve Arising on translation of foreign operations
INTERIM Consolidated statement of cash flows
FOR THE SIX MONTH PERIODED 30 JUNE 2021
Six month Six month Six month period ended period ended period ended 30 June 30 June 31 December 2021 2020 2020 Unaudited Unaudited Audited GBP000 GBP000 GBP000 Operating Activities Loss for the period (2,154) (3,236) (5,419) Adjustments for: Depreciation 733 668 759 Amortisation 2,135 2,058 2,289 Impairment - - 261 Share based payment charge 217 195 249 Decrease / (increase) in trade and other receivables (351) 382 (203) Decrease / (increase) in net derivative financial assets / liabilities - 2,085 (543) Increase / (decrease) in trade and other payables 2,210 (296) 2,506 (Decrease) / increase in derivative financial liabilities - (2,037) 526 (Increase) / decrease in inventories (23) 65 5 -------------- -------------- -------------- Net cash inflow / (outflow) 2,767 (116) 430 Tax receipts - - 2,539 -------------- -------------- -------------- Net cash inflow / (outflow) from operating activities 2,767 (116) 2,969 Cash flows from investing activities Acquisition of property, plant and equipment (40) (120) (40) Acquisition of intangibles (1,367) (2,546) (1,984) Deferred consideration on acquisition (803) - - of subsidiary Acquisition of subsidiary, net of cash acquired - - (256) Net cash used in investing activities (2,210) (2,666) (2,280) Cash flows from financing activities Borrowings - - 2,000 Principal elements of lease payments (446) (464) (427) Interest paid on finance lease (97) (110) (112) Interest paid (10) - (27) Proceeds from issuance of ordinary 46 - - shares Net cash (used in) / from financing activities (507) (574) 1,434 - Net increase / (decrease) in
cash and cash equivalents 50 (3,356) 2,123 Cash and cash equivalents at the beginning of the period 10,032 11,265 7,909 -------------- -------------- -------------- Cash and cash equivalents at end of the period 10,082 7,909 10,032 ============== ============== ==============
CONSOLIDATED NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIODED 30 JUNE 2021
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 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 year ended 31 December 2020. 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 2020 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 2020 have been reviewed in preparing these Interim consolidated financial statements, and in particular surrounding the current Covid-19 situation, 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, including the on-going risks to the business arising from the Covid-19 pandemic. 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
The segmental results were as follows:
Unaudited International Currency Travel Banking Central Total Payments Cards Cash 6 months ended 30 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 June 2021 Segment revenue 10,124 3,853 69 2,859 - 16,905 Direct costs (5,837) (27) (21) (800) - (6,685) -------------- --------- ------- -------- --------- --------- Gross profit 4,287 3,826 48 2,059 - 10,220 Administrative expenses (10,239) (10,239) Amortisation (2,135) (2,135) Finance costs (93) (93) -------------- --------- ------- -------- --------- --------- Profit / (loss) before tax 4,287 3,826 48 2,059 (12,467) (2,247) ============== ========= ======= ======== ========= ========= Total assets 4,976 63,950 68,926 Total liabilities (1,996) (25,196) (27,192) -------------- --------- ------- -------- --------- --------- Total net assets - - - 2,980 38,754 41,734 ============== ========= ======= ======== ========= ========= Unaudited International Currency Travel Banking Central Total Payments Cards Cash 6 months ended 30 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 June 2020 Segment revenue 8,233 2,642 393 2,504 - 13,772 Direct costs (2,899) (1,341) (151) (643) - (5,034) -------------- --------- ------- -------- --------- --------- Gross profit 5,334 1,301 242 1,861 - 8,738 Administrative expenses - - - - (9,916) (9,916) Amortisation - - - - (2,058) (2,058) Finance costs - - - - (110) (110) -------------- --------- ------- -------- --------- --------- Profit / (loss) before tax 5,334 1,301 242 1,861 (12,084) (3,346) ============== ========= ======= ======== ========= ========= Total assets - - - 5,714 60,851 66,565 Total liabilities - - - (2,087) (18,350) (20,437) -------------- --------- ------- -------- --------- --------- Total net assets - - - 3,627 42,501 46,128 ============== ========= ======= ======== ========= ========= Audited International Currency Travel Banking Central Total Payments Cards Cash 6 months ended 31 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 December 2020* Segment revenue 9,009 3,336 237 2,606 - 15,188 Direct costs (3,277) (1,523) (123) (713) - (5,636) -------------- --------- ------- -------- --------- --------- Gross profit 5,732 1,813 114 1,893 - 9,552 Administrative expenses - - - - (13,526) (13,526) Amortisation - - - - (2,289) (2,289) Impairment charge - - - - 845 845 Finance costs - - - - (282) (282) -------------- --------- ------- -------- --------- --------- Profit / (loss) before tax 5,732 1,813 114 1,893 (15,252) (5,700) ============== ========= ======= ======== ========= ========= Total assets - - - 4,399 64,708 69,107 Total liabilities - - - (1,755) (24,710) (26,465) -------------- --------- ------- -------- --------- --------- Total net assets - - - 2,644 39,998 42,642 ============== ========= ======= ======== ========= =========
*A review of the underlying data has led to some minor re-profiling of H1-2020 and H2-2020 disclosures.
3. Loss before tax
Loss before tax is stated after charging the following operating costs:
6 months 12 months ended 6 months ended ended 30 31 December 30 June 2021 June 2020 2020 Unaudited Unaudited Audited GBP000 GBP000 GBP000 Marketing costs 392 799 1,206 Staff costs 6,718 5,799 12,894 Property and office costs 490 500 993 Audit fees 188 192 375 Other professional fees 524 552 1,270 IT and telephone cost 874 552 1,299 Travel and similar 50 157 233 Foreign exchange loss 52 (38) 199 Share option charge 217 195 444 Write-off of card stocks - - 575 Contingent consideration - - 637
Bad debt provisions - 530 513 Depreciation of right of use assets 486 465 940 Depreciation of property, plant and equipment 247 203 487 Other costs 1 11 402 --------------- ----------- ---------------- Administrative costs 10,239 9,917 22,467 =============== =========== ================
Staff costs include GBP0.6 million costs relating to a number of senior staff departing the business. This includes settlement costs, notice period costs and associated legal expenses.
4. Credit impairment charge
Credit impairment charge represents the movement for the period in expected credit loss under IFRS 9 Financial Instruments.
5. Taxation 6 months 6 months 12 months ended ended 30 ended 31 December 30 June 2021 June 2020 2020 Unaudited Unaudited Audited GBP000 GBP000 GBP000 Current year R&D credit (319) (734) (1,347) Change in R&D credit estimates relating to prior years - - (24) Current year corporation tax 20 - - charge -------------- ----------- ------------------- Current tax credit (299) (734) (1,371) -------------- ----------- ------------------- Origination and reversal of temporary differences (762) 458 (564) Recognition of previously unrecognised deductible temporary differences (14) 99 (174) -------------- ----------- ------------------- Deferred tax expense (776) 557 (738) -------------- ----------- ------------------- Total tax credit (1,075) (177) (2,109) ============== =========== =================== 6. Share capital 6 months 6 months 6 months 12 months ended 30 ended 30 ended 30 ended 31 December June 2021 June 2021 June 2020 2020 Unaudited Unaudited Unaudited Audited No GBP000 GBP000 GBP000 Authorised, issued and fully paid-up ordinary shares of GBP0.01 each As at start of period 178,602,918 1,786 1,786 1,786 Issued during the period 138,889 1 - - As at end of period 178,741,807 1,787 1,786 1,786 ----------- ---------- ---------- ------------------
Equals Group Plc issued 138,889 1p ordinary shares on 20 April 2021 for total consideration of GBP46,875, of which GBP45,486 was allocated to the Share Premium reserve, in order to satisfy the exercise of share options by a former Director of the Group.
7. Borrowings 2021 2020 GBP000 GBP000 Loan debenture 2,000 2,000 ======= =======
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 GBP2,000,000 loan agreement with the Royal Bank of Scotland (RBS).
Under the terms of the loan, there is an initial twelve month capital repayment holiday and the UK Government will pay the first 12 months of interest due. This is being recognised as a government grant, with interest grant income received being offset against the loan interest due. At the current Bank Base rate, the estimated grant income receivable by the Group for the period 1 July 2021 to 31 December 2021 representing six months repayment holiday will be GBP26k. The estimated interest payment for the year ended 31 December 2022 is GBP48k. The loan is for a six year period, maturing on December 2026, at the Bank Base rate + 2.53% and may be repaid early at any point without penalty.
The loan agreement required that by 31 March 2021, Equals Group plc issued a guarantee to FairFX plc as security on the loan and that FairFX plc provides a debenture to the RBS for the value of the loan. Both of these requirements have been met.
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. Post balance sheet events
On 23 July 2021, Equals Group Plc issued 550,000 1p ordinary shares for total consideration of GBP153,875, of which GBP148,375 was allocated to the share premium reserve, in order to satisfy the exercise of share options by former Director of the Group and a former senior employee.
- ENDS -
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