Regulatory News

2023

Interim Results

07 September 2022

‘Significant revenue growth, record Adjusted EBITDA, return to statutory profit and strong balance sheet ’

Equals (AIM: EQLS), the fintech payments group focused on the SME marketplace, announces its interim results for the six months ended 30 June 2022 (the ‘period’ or ‘H1-2022’) and an update on trading for the period from 1 July 2022 to 5 September 2022 (‘Q3-2022’).

Download

These Results are available in PDF format.
To download please click here

To download the Results Presentation click here

H1-2022: Financial Summary

 H1-2022
£ millions
 
H1-2021
£ millions
Change
% ***
Underlying transaction values 4,169 2,434 +71%
 
Revenue 31.4 16.9 +86%
   
Gross profit 14.9 10.3 +44%
 
Contribution 14.1 9.9 +42%
 
Adjusted EBITDA* 4.9 1.6 +203%
 
Operating Profit /(Loss) 1.1 (2.2)
 
Profit / (loss) after Taxation and R&D credits
 
0.8 (1.2)
EPS (Basic, in pence) 0.38 (0.70)
 
Operational** cash in/(out) flows 4.7 0.8
 
Cash at bank 16.5 10.1 +63%

 

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.
** Operational cashflows are before earn-outs and R&D credits.
***Percentages are calculated based on underlying rather than rounded figures.

 

H1-2022: Financial Highlights

  • Record revenue performance with an 86% increase to £31.4 million (H1-2021: £16.9 million) with £6.3 million derived from the Solutions platform (H1-2021: £0.3 million)
  • 44% increase in Gross profit to £14.9 million (H1-2021: £10.3 million)
  • 203% increase in Adjusted EBITDA* to £4.9 million (H1-2021: £1.6 million) with £1.8 million contribution from Q1-2022 and £3.1 million in Q2-2022 (Q1-2021: £1.4 million; Q2-2021: £0.2 million)
  • Statutory profit achieved with statutory PBT at £0.9 million (H1-2021: loss of £2.2 million)
  • Basic EPS at 0.38 pence against a loss per share of 0.70 pence in H1-2021
  • Cash per share increased 62.5% to 9.1 pence (30 June 2021: 5.6 pence)

H1-2022: Operational and Product Highlights

  • Continued focus on sales and marketing to corporate (B2B/SME) customers driving growth
  • Hiring of highly experienced Chief Commercial Officer (‘CCO’) plus expansion of revenue generating headcount in sales and marketing teams
  • Direct integration into SEPA enabling rapid transactional capability in Euros
  • Equals Money cards live on new platform supporting physical and virtual cards with 21-currency capabilities
  • More investment into compliance via automation and hiring experienced staff
  • Progressed people agenda with 360 appraisals and staff retention measures in difficult labour market

Q3-2022 Trading (1 July 2022 to 5 September 2022) and Outlook

  • Strong performance continued with revenues of £13.3 million in the period, an increase of 55% over the same period in 2021
  • Year-to-date revenue of £44.7 million, which already exceeds full-year performance in 2021
  • Revenues per day of £289k, compared to £187k in the same period in 2021
  • Continued growth in Solutions revenues at £3.1 million compared to £1.1 million in same period in 2021
  • Positive distributable reserves allowing the Board to consider a future dividend policy
  • Cash generation allowed the CBILS loan of £1.8 million to be repaid in full in August 2022
  • Strong cash position permits further working capital to drive the card business, platform investments, and strategic acquisitions

Commenting on the Interim Results, Ian Strafford-Taylor, CEO of Equals Group plc, said:

“This is an outstanding set of results with record revenue and EBITDA cementing our extremely successful transition into cash generation and, ultimately, a return to the first statutory profit since 2018.

“It also reflects the three-year investment cycle into platform, connectivity and compliance which, alongside our operational pivot towards corporate customers, has enabled the business to go from strength to strength.  Our performance has of course been delivered by the hard work and dedication of every Equals team member who I am immensely proud of and, on behalf of the Board, would like to thank for their continued support and exceptional work ethic.

“Trading in Q3-2022 has continued to be robust, despite global economic uncertainty and inflationary pressures, with strong growth over the same period last year.  We continue to see an increase in fee-based revenues to complement our transactional and FX revenues, which is part of our overall strategy for diversifying and de-risking our earnings streams.  Based on these strong results and our current trading performance, we look to the future with increased confidence and remain in line with 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://webcasting.buchanan.uk.com/broadcast/62c3e636fb4bba516c453314.  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.

 

 

For more information, please contact:

Equals Group plc  
Ian Strafford-Taylor, CEO
Richard Cooper, CFO
Tel: +44 (0) 20 7778 9308
www.equalsplc.com
 
Canaccord Genuity (Nominated Adviser & Broker) 
Max Hartley / Georgina McCooke
 
Tel: +44 (0) 20 7523 8150
 
 
Buchanan (Financial Communications)  
Henry Harrison-Topham / Steph Whitmore / Toto Berger
[email protected]
Tel: +44 (0) 20 7466 5000
www.buchanan.uk.com

 

 

Chief Executive Officer’s Report

SUMMARY

The Group has delivered record-breaking revenue and Adjusted EBITDA performance in H1-2022, leading to a first reported statutory profit and positive EPS.  The quantum of underlying transactions through the Group’s platforms increased by 71%.  In addition, the value of ‘deposits’, meaning loads on cards and deposits through the banking platform, rose by 55%.

£ millions

Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022
Transaction value* 1,091 1,343 1,878 2,135 1,980 2,189
Deposit/Load value 292 430 495 509 515 607

*Q4-2021shown here excludes the £114 million from the one-off material trade announced on 28 October 2021.

Revenues rose by 86% in H1-2022 to £31.4 million (H1-2021: £16.9 million).  This growth was broad-based with all product lines performing well.  The Group continues to focus on corporate (B2B/SME) customers and saw very strong revenue growth in this sector in H1-2022.

Revenues from travel products, despite recovering strongly from the impact of Covid-19, represented a modest 10.4% of overall revenues in Q2-2022 and 8.9% for the whole of H1-2022.

Revenue from Solutions, the Group’s platform that targets larger corporates, led the way with strong growth and a healthy pipeline of new customers.  Additionally, the Group’s corporate expenses product, Equals Spend, reported strong growth along with Equals Connect, the Group’s white-label business.  Further detail on the revenue mix is included in the CFO’s Report.

Revenue* by quarter, in £ millions

 

 Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022
Solutions - 0.3 1.5 1.8 2.8 3.5
White-Label 0.8 1.6 2.2 3.2 3.3 3.8
Other 6.1 6.4 7.2 7.8 7.1 8.1
Total Non-Travel 6.9 8.3 10.9 12.8 13.2 15.4
Travel 1.2 0.6 0.9 0.9 1.0 1.8
 8.1 8.8 11.9 13.8 14.2 17.2
Material Trade - - - 1.5 - -
Total 8.18.811.915.314.217.2

 

Adjusted EBITDA (before share option charges) in H1-2022 increased to £4.9 million from £1.8 million, with £3.1 million being earned in Q2-2022.

The confidence in Equals’ performance and ability to generate cash led the Group to repay, in full, the outstanding balance (totalling £1.8 million) of the CBILS loan in August 2022.  With interest rates continuing to rise, this action is immediately accretive for EPS.

OPERATING REVIEW

Focus on growth

Given the product innovations Equals has achieved, the Group’s priority is to now overlay its platform developments with an enhanced Sales and Marketing approach to drive further growth.  The essential building blocks to achieve this are:

  • a single CRM system across the Group, so all customer interaction is captured in one place;
  • up-skilling the sales and marketing teams through training and selected hiring; and,
  • a data science and AI team focusing on sales and customer data to further assist the sales and marketing teams.

Equals’ CRM solution, HubSpot, was initiated in 2021 and in H1-2022 it has seen further refinement of how it is used.  Further work on extracting maximum value from HubSpot will continue throughout 2022 and beyond utilising dedicated internal ‘power users’ and providing training and facilitation.

The Group’s data science team is now fully staffed and has been concentrating on putting in place the data warehouse infrastructure needed to provide both repetitive and bespoke data reporting.  The benefits of this are now flowing through with strong measurement of key KPIs and more insights into customer acquisition and retention.

In keeping with the overall strategy of the Group, the focus for growth is on the B2B customer base.  B2B customer acquisition is heavily reliant on the outbound sales function augmented by and integrated with a coherent digital marketing strategy and content production.  This contrasts with B2C customer acquisition, where above-the-line (‘ATL’) marketing such as TV and billboard advertisements augmented by digital marketing is the driving force.  Hence our growth strategy is directed towards improving our sales capabilities with support from advanced data science and targeted marketing.

One sales challenge for Equals is managing the transition from being a product-led business to a platform-led business.  Previously, the Group has sold its products:  International Payments, Cards and Current Accounts, using largely separate sales teams and marketing strategies.  As Equals moves forward, it will be selling:

  • Equals Money to the SME customer base, and
  • Equals Solutions to the larger B2B customers.

The transition from product to platform differentiates Equals from traditional FX businesses, as the Group can compete not just on FX rates, but also on platform capabilities and service.

Equals strengthened its sales and marketing leadership by the appointment, announced on 17 May 2022, of Tom Kiddle as Chief Commercial Officer.  Tom, who started at the end of H1-2022, has a strong background in the B2B payments industry having previously held key positions at Travelex, Western Union and most recently at World First.  Since Tom’s arrival, and utilising Equals’ enhanced data capabilities, the Group has already refined many aspects of its go-to-market strategy and has more changes planned for the balance of 2022 whilst planning its targets and strategy for 2023.

Focus on product development

 Unified platform

H1-2022 focused on the further development of the Equals Money platform for B2B customers.

The platform incorporates the payments and cards products of the Group underpinned by an ‘own-name multi-currency IBAN’ allowing a business to run one account supporting multiple currencies and balances whilst being payment agnostic between bank transfer and cards.  This is the key strategic vision for the Group to simplify money movement for business customers.

The Equals platform is built to be ‘evergreen’ in utilisation of technology and has been assembled with scalability at its core, placing the Group in a strong position for the future.

Payment infrastructure, ‘Boxes’ operating system

The Equals platform can provide each B2B customer with an ‘own name multi-currency IBAN’, an account in their own name denoted by a unique IBAN (‘International Bank Account Number’) which supports multiple currencies.

This is a key differentiator from Banks who provide one account per currency, each with a unique IBAN.  As the account is in the name of the customer, a so-called ‘first party’ account, this allows more use-cases than payments into a ‘pooled account’ from a compliance perspective.  Furthermore, having one IBAN for all currencies enables a customer to provide one single account identifier to all its customers and suppliers, thereby simplifying both sales and procurement processes.

Providing own-name multi-currency accounts required a combination of third-party integrations to partner Banks and SWIFT overlaid with smart technology.  The in-house operating system used by Equals to support the platform is referred to as ‘Boxes’.  This proprietary technology allows Equals to offer a highly flexible platform supporting multiple accounts and sub-accounts bespoke to the customer.

The Boxes infrastructure was developed further in H1-2022 to provide key functionality including:

  • real-time running balances;
  • statements; and,
  • enhanced reporting for customers.

In addition, Equals directly integrated into the SEPA (Single European Payments Area) network, providing instant movement of Euros in and out of the Equals payment infrastructure.  Further enhancements will be rolled out in H2-2022 including enhanced bulk payments capabilities and the capability to offer IBAN and Boxes functionality via API, thereby allowing more sophisticated customers to directly integrate with the Equals platform and support white-label opportunities.

Card Products

B2B customers increasingly need the flexibility to pay suppliers via cards as well as traditional ‘wire-transfer’, particularly in the e-commerce space where providers such as Google and Amazon will only accept payments via a card.  The Equals Money platform was conceived recognising this need and therefore excellence in card issuance, processing and technology is core to the platform.

Development of the Group’s card infrastructure has continued in H1-2022 to replace legacy platforms with a single platform built to power the Equals card products for the medium term.

This platform provides the base from which a strong pipeline of customer-facing features will deployed in H2-2022 including the launch of the new Equals Money card which is multi-currency, can be both virtual and physical, can be prepaid or debit, are live in Apple Pay and have many more features and capabilities.

Focus on Compliance

The Group has a strong compliance culture and views its capabilities as a strategic asset and competitive advantage.  Efficient compliance is essential to optimisation of revenues as any delays to new business onboarding can lead to increased customer frustration and possibly abandonment.  Ensuring the process of becoming a customer is as efficient as possible whilst maintaining high standards of compliance requires the levels of investment made in H1-2022.  This investment is targeted at both automation where possible, of the compliance processes combined with adding skilled headcount to process the non-standard and exceptional items.

Compliance requires strong control at the onboarding stage augmented by ongoing monitoring and hence the Group’s systems investment is targeted at onboarding processes and transaction monitoring.

Equals hired a Head of Compliance in mid-2021, and since then, the Group has been consistently upgrading its staff and increasing the headcount as the business expands.  Equals has recruited a new, highly experienced MLRO (‘Money Laundering Reporting Officer’) joining the business in H2-2022, which will further bolster its relationships with the Group’s regulators and banks.  These hires supplemented an already an exceptionally skilled and commercially focused team.

Focus on Employees

The labour market in the UK continues to be challenging both for hiring talent and for staff retention.  The Group introduced various measures in 2021 to tackle these issues including share ownership and LTIP schemes and plans to repeat this process in 2022.  In addition, the Group paid a mid-year cost of living award and other bonuses to staff in July 2022 totalling £0.3 million, which is fully accrued in the Group’s interim financial statements.

Whilst the Group is growing rapidly, it retains a strong cost-control culture, and it balances efficiency gains it yields from its engineering investments with the priority to achieve strong growth.  The Group therefore expects overall staff numbers to continue to rise slowly with most increases coming in direct revenue generation roles or compliance.  Given the strong operational gearing of Equals, any increase in headcount and overall cost-base is expected to be at a much lower rate than growth in transactions and revenues.

Focus on ESG

Equals wholeheartedly embraces ESG initiatives and takes Equality, Diversity, and Inclusivity (‘EDI’) extremely seriously.  The Group’s EDI strategy, which covers not only employees but also customers, includes an internal EDI network populated with elected representatives and regular employee surveys.  This is a key objective for all Executive Committee members and forms part of their appraisal.

FUTURE PLANS AND OPPORTUNITIES

The key strategic vision for the Group continues to be the simplification of money movement for business customers.  Equals achieves this through its B2B platforms - Equals Money being targeted at the SME base and Equals Solutions at larger corporate opportunities.  The Group’s growth potential is extremely 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 will be enhanced further by the developments planned in the Group’s technical roadmap.

Equals will continue to look for external growth opportunities and can do so with a strong balance sheet and cash position.  The Group is examining overseas expansion beyond its current predominantly UK-centric customer base given the portability of its platforms and will also take a considered strategic approach to acquisitions.

Global Macro-Economic environment

The global economy faces serious challenges stemming from the conflict in Ukraine and rising inflation and interest rates in major economies.  To date, Equals has performed resiliently despite these conditions and continues to grow strongly as can be seen from today’s H1-2022 results and Q3-2022 trading update.  However, the Board continues to monitor the situation closely.

Q3-2022 trading and Outlook

Q3-2022 has continued the strong revenue generation seen in H1-2022 with revenue for the period from 1 July 2022 to 5 September 2022 being £13.3 million, representing a 55% increase on the same period in 2021.

Equals has a strong outlook resulting from the investments it has made to create a payments platform. Further investments made in compliance, onboarding and user experience means that the rich functionality of the platform is made easily accessible to current and potential customers.  Finally, advances made in sales, marketing and data mean that Equals now sells its products and platform more efficiently.  Accordingly, the Board looks forward to the future with increased confidence and the Group remains in line with expectations for the full year.

 

 

Ian Strafford-Taylor
Chief Executive Officer
7 September 2022

 

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 2022.

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

Table 1 - Income and Expenditure account

£000’sH1-2022 H1-2021 Change
Revenue 31,373 16,905 14,468
 
Gross profit 14,866 10,317 4,549
Marketing costs (790) (410) (380)
Contribution 14,076 9,907 4,169
 
Net staff costs (6,620) (6,104) (516)
Net property & office costs (430) (490) 60
Net IT & telephone costs (925) (817) (108)
Professional fees (560) (594) 34
Compliance costs (358) (251) (107)
Travel and other expenses (331) (52) (279)
Operating costs (9,224) (8,308) (916)
 
Adjusted EBITDA*4,8521,599 3,253
    
Separately reported items -(616) 616
Share option charges (290)(217) (73)
    
EBITDA4,562766 3796
    
Memo: Adjusted EBITDA after rent4,4971,0343,463

 

Group revenues rose by 86%, Gross profits by 44%, Contribution by 42%, whilst Operating costs increased by 11% leading to Adjusted EBITDA increasing by 203% and EBITDA by 495%.

Ongoing growth is witnessed by comparing revenues in H1-2022 at £31.4 million with £25.7 million in H2-2021 (excluding the one-off revenue of £1.5 million earned from the material trade reported in October 2021), thus a 22% half-on half increase.

To continue the theme of comparing the last two half years, I present below a bridge from the Adjusted EBITDA in H2-2021 to H1-2022, which shows a 13% increase on the like-for-like position:

Table 2 – Adjusted EBITDA bridge from H2-2021 to H1-2022

H2-2021 Adjusted EBITDA     5,174
    
Less: Gross profits from material trade  (812)
 Property rates rebate  (80)
Like-for-like H2-2021 Adjusted EBITDA 4,282
    
Add: 15% uplift in contribution H1-2022  1,868
    
Less: 15% increase in staff costs, reflecting higher planned headcount along with pay adjustments averaging 8%
 
  
(885)
 46% increase in professional and compliance costs, much of which is attributable to onboarding more clients
 
 (290)
 Increase in travel and exhibition costs
 
 (80)
 Increase in property utility costs and rates  (44)
H1-2022 Adjusted EBITDA 4,852
    
Uplift over like-for-like H2-2021   570
 
% uplift over like-for-like H2-2021
   
13%
    

 

Revenue

A split of revenues by both customer group and platform, clearly shows both the strong and growing emergence of Solutions and very significant migration away from the legacy travel products. 

Table 3, H1-2022

Revenue in £ millions Consumer and small business Corporates Large
enterprises
Sub-total White-label TOTAL
H1-2022
International payments 2.0 7.1 - 9.1 7.1 16.2
Cards 2.3 3.3 - 5.6 - 5.6
Banking 2.8 - - 2.8 - 2.8
Solutions - - 6.3 6.3 - 6.3
Travel cash 0.5 - - 0.5 - 0.5
Total, H1-2022 7.6 10.4 6.3 24.3 7.1 31.4
      
% Change*      
H1-22 vs H1-21 +29% +24% >2010% +67% +202% +86%

 

*based on underlying figures

Table 3a – H1-2021

 
Revenue in £ millions
Consumer and small business Corporates Large
enterprises
Sub-total White-label TOTAL
H1-2021
International payments 1.3 6.1 - 7.4 2.4 9.8
Cards 1.7 2.2 - 3.9 - 3.9
Banking 2.8 - - 2.8 - 2.8
Solutions - - 0.3 0.3 - 0.3
Travel cash 0.1 - - 0.1 - 0.1
Total, H1-2021 5.9 8.3 0.3 14.5 2.4 16.9

 

Taking a further look at International Payments, Table 4 below, shows the composition of transaction values and revenue across spot and forward contracts.

Table 4. White Label  Other

 

H1-2022 Spot Fwd Total  Spot Fwd Total
Transaction values 648.9 98.3 747.2  976.9 281.8 1,258.7
% mix 87% 13% 100%  78% 22% 100%
       
Revenue 5.7 1.4 7.1  6.7 2.3 9.0
% mix 81% 19% 100%  75% 25% 100%
       
H1-2021       
Transaction values 337.8 50.0 387.8  862.0 357.3 1219.3
% mix 87% 13% 100%  71% 29% 100%
       
Revenue 2.0 0.4 2.4  5.4 2.1 7.5
% mix 83% 17% 100%  72% 28% 100%

 

The move towards offering more forward contracts has evolved over time and reflecting on 2019 as the last “pre-covid” year, forward contracts only represented 10% of turnover.

Around 80% of the revenues were earned from three core currency parings (GBP:EUR; GBP:USD; and EUR:USD).

Solutions Revenues have been analysed below between transaction-based and fee-based.  This shows the evolution of the platform and its ability to secure long-term revenue streams.

Table 4a
In £ millions
Fee based revenue Transaction based revenue Total
revenues
H1-2022 1.7 4.6 6.3
H2-2021 0.9 2.4 3.3
H1-2021 0.1 0.2 0.3

 

Variable costs and gross profits

The elements of variable costs are shown in the table below, along with the gross profits and gross profit margins.

Table 5

 
 
In £ millions
Consumer and small business Corporates Large enterprises Sub-total White-label TOTAL
H1-2022
Transaction costs 1.3 2.7 - 4.0 0.1 4.1
Staff commissions 0.6 0.9 0.1 1.6 0.1 1.7
Affiliate costs 0.6 0.8 3.2 4.6 6.1 10.7
Total, H1-2022 2.5 4.4 3.3 10.2 6.3 16.5
Gross profit 5.2 5.9 2.9 14.0 0.8 14.9
Gross profit % 67% 58% 47% 58% 12% 47%

 

Table 5a

 
 
In £ millions
Consumer and small business Corporates Large enterprises Sub-total White-label TOTAL
H1-2021
Transaction costs 0.6 1.7 - 2.3 0.1 2.4
Staff commissions 0.5 0.6 - 1.1 0.1 1.2
Affiliate costs 0.4 0.6 0.2 1.2 1.8 3.0
Total, H1-2021 1.5 2.9 0.2 4.6 2.06.6
Gross profit 4.5 5.3 0.1 9.9 0.4 10.3
Gross profit % 75% 64% 37% 68% 18% 61%

 

H1-2022 witnessed Solutions and White-label contributing 43% of revenues (H1-2021: 16%) and 25% of Gross profits (H1-2021: 5%).

Marketing, branding and contribution

The Group has accelerated its marketing plans after pausing this during FY20 and FY21 when Covid posed greater uncertainties.  Cash costs include ad campaigns, pay-per-click and exhibition and similar events including those in the USA where the Group noticed considerable interest in particularly the Spend platform and the Group’s ability to sell this through its partnership with Metropolitan Commercial Bank.

Table 6 H1-2022 H1-2021
Marketing expenses (£ millions) 0.8 0.4
   
Contribution 14.1 9.9
Contribution margin 45% 59%

 

Staff costs

Staff costs, gross of capitalisation, were £8.8 million in H1-2022 against £7.3 million in H1-2021, and £7.7 million in H2-2021.  These costs were offset by:

- Capitalised software:   £2.0 million in total (H1-2021: £1.2 million, H2-2021: £1.8 million), with £0.6 million on contractors.

Amounts capitalised represent 19% of gross staff costs, consistent with FY21.  The Group investment strategy continues to accelerate and focus on new and enhanced product design as has been commented on in the CEO’s Report.

Headcount numbers have moved from 258 as at 30 June 2021 to 266 as at 30 June 2022, below the rate of increase in revenue for the period, and at 31 August 2022 they stood at 274.

The average number of engineering contractors per month in H1-2022 was 14 (H1-2021: 7).  As previously reported, Equals is accelerating product development as fast as resource access allows the Group to do in a tight labour market.

Professional fees and Compliance costs

Owing to an increasing cross-industry compliance burden, the Group has chosen to report compliance and similar costs separately from other professional fees.  Compliance costs, including onboarding systems, have risen due to a combination of greater business activity and the Group’s desire to fast-track business applications but not at the expense of quality.  Professional fees have risen in line with trends widely reported in the national press.

Property, insurance and office costs

Renegotiation of office leases has led to lower passing rents which benefit the Group’s cashflows but not the EBITDA as such rents are accounted for under IFRS-16.  Utilities, rates, and insurance charges have however risen by an aggregate of 19% over H2-2021, although there are 13% lower than in H1-2021.

Separately reported items

Separately Reported Items are large, non-recurring items identified by management.  There were no Separately Reported Items in the period.

Amortisation and depreciation

Amortisation and depreciation for the period were £2.9 million (H1-2021: £2.1 million) and £0.6 million (H1-2021: £0.7 million) respectively.

Operating result

The Group made a profit before taxation of £0.9 million for the period, compared to a loss of £2.2 million for the period H1-2021.

Taxation, incorporating R&D credits

The Group’s taxation charge includes both corporation tax, deferred tax, and R&D credits.  The Group has recognised a net tax charge of £37k (H1-2021: £1,075k net tax credit) of which £40k (H1-2021: £319k) relates to an estimated R&D tax credit repayment claim for the six months to 30 June 2022.

Result after taxation

The result after taxation was a profit of £848k against a loss in H1-2021 of £1,172k and a full year loss in 2021 of £2,262k.

Earnings per share

Both basic and diluted EPS went into the positive, with basic EPS rising to 0.38pence (H1-2021: negative, 0.70pence) and diluted EPS rising to 0.36pence (H1-2021: negative, 0.70pence).

B: Balance sheet

At 30 June 2022, the Group considers some of the key items on the balance sheet to be:

  • £16.5 million of cash at bank (30 June 2021: £10.1 million)
  • £1.8 million CBILS loan (repaid in full in August 2022)
  • £0.3 million deferred consideration payable but settled after the period end.

Table 7 - Balance sheet

As at
30 Jun 2022
As at
30 Jun 2021
As at
31 Dec 2021
 £’000s  £’000s £’000s
       
IFRS 16 assets, less IFRS 16 liabilities (976)   (364) (388)
Other non-current assets (other than deferred tax) 31,618   35,519 32,217
 30,642   35,155 31,829
       
Liquidity (per Table 9) 12,825   7,316 10,739
Trade debtors and accrued income 4,244   3,508 3,638
R&D rebates 438   1,687 398
Prepayments 1,411   1,076 998
Deposits and sundry debtors 190   396 329
Inventory of card stock 148   217 168
Accounts payable (2,315)   (2,051) (1,549)
Affiliate commissions (2,905)   (1,303) (1,945)
PAYE, staff commissions etc. (1,824)   (1,808) (1,884)
Other accruals and other creditors (1,412)   (1,151) (1,349)
 10,800   7,887 9,543
    
Earn-out balances due (Table 16)
Implied interest thereon
(304)
1
  (1,835)
350
(1,683)
63
 (303)   (1,485) (1,620)
Net corporation and deferred tax 1,148   208 888
Net value of forward contracts 511   (31) 511
 1,356   (1,308) (221)
       
NET SHAREHOLDER FUNDS 42,798   41,734 41,151
       
Retained earnings at 1 January (24,590)   (22,259) (22,259)
Earnings for the year 675   (1,251) (2,424)
Amount attributable to the exercise of share options -   - 93
Retained earnings at 31 December (23,915)   (23,510) (24,590)
       
Non-Controlling interest at 1 January 263   101 101
Earnings for year 173   79 162
Non-Controlling interest at 31 December 436   180 263
       
Share capital, share premium 55,212   54,836 55,011
Other reserves 11,065   10,228 10,467
 66,277   65,064 65,478
       
CAPITAL AND RESERVES 42,798  41,734 41,151

 

 Non-controlling Interest

The profit for H1-2022 includes £173k profit in respect of the Non-Controlling Interest of the Equals Connect business acquired in 2019 (H1-2021: £79k).

Off balance sheet items: client monies

As at 30 June 2022 the Group held client monies of £272.0 million in off balance sheet bank accounts (H1-2021: £170.4 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 H1-2022.

Earn-outs

The table below shows the financial position relating to acquisitions in and after FY19.

Table 8 – EARNOUTS

  Hermex Casco Effective Total
Acquisition date 09.08.2019 19.11.2019 15.10.2020
 £’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 H1-2021 - (741) (62) (803)
Paid during H2-2021 - - (306) (306)
Further change in consideration - 46 - 46
Gross Outstanding at 31.12.2021 - 601 1,082 1,683
Paid during H1 - 2022 - (601) (779) (1,380)
Gross Outstanding at 30.06.2022 - - 303 303
 
Paid during Q3-2022 - - (303) (303)
    
Maximum consideration 2,000 3,725 1,575 7,300
Total consideration 2,000 3,075 1,575 6,650
     

 

CASH FLOW

Table 9 - Cash flow

£000’s H1-2022 H1-2021
Adjusted EBITDA after rent 4,497  1,034
 - Cash incurred separately reported items -  (616)
 - Internally capitalised staff costs (2,051)  (1,191)
Internally capitalised IT costs (164)  (148)
 - Purchase of other intangibles (307)  (27)
 - Purchase of property, plant, equipment (122)  (40)
Add: Working capital movement 2,875  1,795
“Operational” cashflows 4,728 807
Cash for acquisitions/ earn-outs (1,380)  (803)
External funding   
  Repayment of CBILS loan (200)  -
  Cash raised from issue of equity 200  46
NET CASH FLOWS 3,348  50
Balance at start of period 13,104  10,032
Balance at end of period 16,452  10,082
    
Number of shares in issue 180,712,473  180,045,807
Cash per share (in pence) 9.1  5.6
   

 

Table 10 – LIQUIDITY

 H1-2022 H1-2021 FY-2021
£000’S £000’S £000’S
Cash at bank 16,452 10,083 13,104
Balances with liquidity providers 1,499 2,553 1,675
Pre-funded balances with card provider 884 1,435 1,615
Gross liquid resources 18,835 14,071 16,394
    
Customer balances not subject to safeguarding (4,210) (4,755) (3,655)
CBILS loan (1,800) (2,000) (2,000)
 (6,010) (6,755) (5,655)
    
Net position 12,825 7,316 10,739

 

 

Richard Cooper
Chief Financial Officer
7 September 2022

 

INTERIM CONSOLIDATED statement OF COMPREHENSIVE INCOME
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

Period end
30 June 2022
Unaudited
Period end
30 June 2021
Unaudited
 Year end 31
December
2021
Audited
 Note £000 £000  £000
       
       
Revenue on currency transactions  28,505  14,046  38,424
Banking revenue  2,868  2,859  5,667
Revenue 2 31,373  16,905  44,091
Direct costs 2 (16,507)  (6,589)  (19,855)
Gross profit  14,866  10,316  24,236
       
Administrative expenses 3 (10,314)  (9,602)  (18,715)
Depreciation  (632)  (733)  (1,398)
Amortisation charge  (2,858)  (2,135)  (5,812)
Impairment charge 4 -  -  (1,638)
Total operating expenses  (13,804)  (12,470)  (27,563)
    
Operating profit / (loss) 1,062  (2,154)  (3,327)
    
Finance costs 8 (177)  (93)  (490)
Profit / loss before tax  885  (2,247)  (3,817)
      
Tax (charge)/credit 5 (37)  1,075  1,555
Profit / loss after tax  848  (1,172)  (2,262)
Memo: Profit / loss is attributable to:       
Owners of Equals Group Plc  675  (1,251)  (2,424)
Non-controlling interest  173  79  162
      
Other comprehensive income:       
Exchange differences arising on translation of foreign operations  1  -  -
  849  (1,172)  (2,262)
Profit / loss per share       
Basic  0.38p  (0.70)p  (1.35)p
Diluted  0.36p  (0.70)p  (1.35)p

All income and expenses arise from continuing operations.

 

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

  As at
30 June 2022
Unaudited
As at
30 June 2021
Unaudited
 As at
31 December
2021
Audited
 Note £000 £000  £000
ASSETS       
Non-current assets       
Property, plant and equipment  1,193  1,439  1,257
Right of use assets 4,067  5,247  4,874
Intangible assets and goodwill  30,425  34,082  30,960
Deferred tax assets  1,287  230  949
  36,972  40,998  38,040
Current assets       
Inventories  148  217  168
Trade and other receivables  8,228  9,096  8,256
Current tax assets  439  1,687  397
Derivative financial assets  2,593  3,019  2,593
Cash and cash equivalents  16,452  10,082  13,104
  27,860  24,101  24,518
TOTAL ASSETS 64,832  65,099  62,558
       
EQUITY AND LIABILITIES       
Equity attributable to equity holders      
Share capital 6 1,807  1,787  1,793
Share premium 6 53,405  53,049  53,218
Share based payment reserve  2,455  1,619  1,858
Other reserves  8,610  8,609  8,609
Retained deficit  (23,915)  (23,510)  (24,590)
Equity attributable to owners of Equals Group Plc  42,362  41,554  40,888
Non-controlling interest  436  180  263
42,798  41,734  41,151
 
Non-current liabilities
     
Borrowings 7 1,600  1,800  1,600
Lease liabilities 4,224  5,164  4,484
Deferred tax liabilities  -  -  -
  5,824  6,964  6,084
 
Current liabilities
     
Borrowings 7 200  200  400
Trade and other payables  12,970  12,704  12,002
Current tax liabilities  139  -  61
Lease liabilities 819  447  778
Derivative financial liabilities  2,082  3,050  2,082
  16,210  16,401  15,323
TOTAL EQUITY AND LIABILITIES  64,832  65,099  62,558

 

 

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

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 2021 1,78653,0031,402(22,259)8,60942,54110142,642
         
(Loss) / income for the period- - - (1,251) - (1,251) 79 (1,172)
Other comprehensive income:         
Items that will not be reclassified subsequently to profit or loss:         
Exchange differences arising on translation of foreign operations - - - - - - - -
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
         
(Loss) / income for the period - - - (1,173) - (1,173) 83 (1,090)
Other comprehensive income:         
Items that will not be reclassified subsequently to profit or loss:         
Exchange differences arising on translation of foreign operations - - - - - - - -
Other items         
Share based payment charge - - 54 - - 54 - 54
Movement in deferred tax on share-based payment charge - - 278 - - 278 - 278
Share options exercised in year - - (93) 93 - - - -
New shares issued 6 169 - - - 175 - 175
At 31 December 2021 1,793 53,218 1,858 (24,590) 8,609 40,888 263 41,151
         
Income for the period and total comprehensive (loss) / income - - - 675 - 675 173 848
Other comprehensive income:         
Items that will not be reclassified subsequently to profit or loss:         
Exchange differences arising on translation of foreign operations - - - - 1 1 - 1
Other items         
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
         

 

Other reserves comprise:  
Merger reserve Arising on reverse acquisition from Group reorganisation.
Contingent consideration reserve
Foreign currency reserve
Arising on equity based contingent consideration on acquisition of subsidiaries.
Arising on translation of foreign operations

 

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

 Six month period ended
30 June 2022
Unaudited
 Six month period ended
30 June 2021
Unaudited
Six month period ended
31 December 2021
Audited
 £000  £000 £000
Operating Activities
Profit / loss for the period 885 (2,247)  (1,570)
Adjustments for:      
Depreciation 632  733  665
Amortisation 2,858  2,135  3,677
Impairment -  -  1,638
Share based payment charge 259  217  55
(Increase) / decrease in trade and other receivables (188)  (351)  3,965
Decrease /in net derivative financial assets / liabilities -  -  (4,898)
Increase / (decrease) in trade and other payables 1,561  2,210  426
Increase / decrease in derivative financial liabilities -  -  (968)
Decrease in inventories 20  (23)  49
Finance costs 177  93  397
Net cash inflow 6,204  2,767  3,436
      
Tax receipts -  -  1,367
     
Net cash inflow from operating activities 6,204  2,767  4,803
     
Cash flows from investing activities      
Acquisition of property, plant and equipment (122)  (40)  (38)
Acquisition of intangibles (2,323)  (1,367)  (2,193)
Deferred consideration on acquisition of subsidiary -  (803)  803
Acquisition of subsidiary, net of cash acquired -  -  -
Net cash used in investing activities (2,445)  (2,210)  (1,428)
      
Cash flows from financing activities      
Principal elements of lease payments (297)  (446)  (426)
Interest paid on finance lease (82)  (97)  (97)
Interest paid (33)  (10)  (4)
Repayment of borrowings (200)  -  -
Proceeds from issuance of ordinary shares 201  46  174
Net cash used in financing activities (411)  (507)  (353)
      
Net increase in cash and cash equivalents 3,348  50  3,022
Cash and cash equivalents at the beginning of the period 13,104  10,032  10,082
Cash and cash equivalents at end of the period 16,452  10,082 13,104

 

2022

Interim Results

07 September 2022

‘Significant revenue growth, record Adjusted EBITDA, return to statutory profit and strong balance sheet ’

Equals (AIM: EQLS), the fintech payments group focused on the SME marketplace, announces its interim results for the six months ended 30 June 2022 (the ‘period’ or ‘H1-2022’) and an update on trading for the period from 1 July 2022 to 5 September 2022 (‘Q3-2022’).

Download

These Results are available in PDF format.
To download please click here

To download the Results Presentation click here

H1-2022: Financial Summary

 H1-2022
£ millions
 
H1-2021
£ millions
Change
% ***
Underlying transaction values 4,169 2,434 +71%
 
Revenue 31.4 16.9 +86%
   
Gross profit 14.9 10.3 +44%
 
Contribution 14.1 9.9 +42%
 
Adjusted EBITDA* 4.9 1.6 +203%
 
Operating Profit /(Loss) 1.1 (2.2)
 
Profit / (loss) after Taxation and R&D credits
 
0.8 (1.2)
EPS (Basic, in pence) 0.38 (0.70)
 
Operational** cash in/(out) flows 4.7 0.8
 
Cash at bank 16.5 10.1 +63%

 

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.
** Operational cashflows are before earn-outs and R&D credits.
***Percentages are calculated based on underlying rather than rounded figures.

 

H1-2022: Financial Highlights

  • Record revenue performance with an 86% increase to £31.4 million (H1-2021: £16.9 million) with £6.3 million derived from the Solutions platform (H1-2021: £0.3 million)
  • 44% increase in Gross profit to £14.9 million (H1-2021: £10.3 million)
  • 203% increase in Adjusted EBITDA* to £4.9 million (H1-2021: £1.6 million) with £1.8 million contribution from Q1-2022 and £3.1 million in Q2-2022 (Q1-2021: £1.4 million; Q2-2021: £0.2 million)
  • Statutory profit achieved with statutory PBT at £0.9 million (H1-2021: loss of £2.2 million)
  • Basic EPS at 0.38 pence against a loss per share of 0.70 pence in H1-2021
  • Cash per share increased 62.5% to 9.1 pence (30 June 2021: 5.6 pence)

H1-2022: Operational and Product Highlights

  • Continued focus on sales and marketing to corporate (B2B/SME) customers driving growth
  • Hiring of highly experienced Chief Commercial Officer (‘CCO’) plus expansion of revenue generating headcount in sales and marketing teams
  • Direct integration into SEPA enabling rapid transactional capability in Euros
  • Equals Money cards live on new platform supporting physical and virtual cards with 21-currency capabilities
  • More investment into compliance via automation and hiring experienced staff
  • Progressed people agenda with 360 appraisals and staff retention measures in difficult labour market

Q3-2022 Trading (1 July 2022 to 5 September 2022) and Outlook

  • Strong performance continued with revenues of £13.3 million in the period, an increase of 55% over the same period in 2021
  • Year-to-date revenue of £44.7 million, which already exceeds full-year performance in 2021
  • Revenues per day of £289k, compared to £187k in the same period in 2021
  • Continued growth in Solutions revenues at £3.1 million compared to £1.1 million in same period in 2021
  • Positive distributable reserves allowing the Board to consider a future dividend policy
  • Cash generation allowed the CBILS loan of £1.8 million to be repaid in full in August 2022
  • Strong cash position permits further working capital to drive the card business, platform investments, and strategic acquisitions

Commenting on the Interim Results, Ian Strafford-Taylor, CEO of Equals Group plc, said:

“This is an outstanding set of results with record revenue and EBITDA cementing our extremely successful transition into cash generation and, ultimately, a return to the first statutory profit since 2018.

“It also reflects the three-year investment cycle into platform, connectivity and compliance which, alongside our operational pivot towards corporate customers, has enabled the business to go from strength to strength.  Our performance has of course been delivered by the hard work and dedication of every Equals team member who I am immensely proud of and, on behalf of the Board, would like to thank for their continued support and exceptional work ethic.

“Trading in Q3-2022 has continued to be robust, despite global economic uncertainty and inflationary pressures, with strong growth over the same period last year.  We continue to see an increase in fee-based revenues to complement our transactional and FX revenues, which is part of our overall strategy for diversifying and de-risking our earnings streams.  Based on these strong results and our current trading performance, we look to the future with increased confidence and remain in line with 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://webcasting.buchanan.uk.com/broadcast/62c3e636fb4bba516c453314.  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.

 

 

For more information, please contact:

Equals Group plc  
Ian Strafford-Taylor, CEO
Richard Cooper, CFO
Tel: +44 (0) 20 7778 9308
www.equalsplc.com
 
Canaccord Genuity (Nominated Adviser & Broker) 
Max Hartley / Georgina McCooke
 
Tel: +44 (0) 20 7523 8150
 
 
Buchanan (Financial Communications)  
Henry Harrison-Topham / Steph Whitmore / Toto Berger
[email protected]
Tel: +44 (0) 20 7466 5000
www.buchanan.uk.com

 

 

Chief Executive Officer’s Report

SUMMARY

The Group has delivered record-breaking revenue and Adjusted EBITDA performance in H1-2022, leading to a first reported statutory profit and positive EPS.  The quantum of underlying transactions through the Group’s platforms increased by 71%.  In addition, the value of ‘deposits’, meaning loads on cards and deposits through the banking platform, rose by 55%.

£ millions

Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022
Transaction value* 1,091 1,343 1,878 2,135 1,980 2,189
Deposit/Load value 292 430 495 509 515 607

*Q4-2021shown here excludes the £114 million from the one-off material trade announced on 28 October 2021.

Revenues rose by 86% in H1-2022 to £31.4 million (H1-2021: £16.9 million).  This growth was broad-based with all product lines performing well.  The Group continues to focus on corporate (B2B/SME) customers and saw very strong revenue growth in this sector in H1-2022.

Revenues from travel products, despite recovering strongly from the impact of Covid-19, represented a modest 10.4% of overall revenues in Q2-2022 and 8.9% for the whole of H1-2022.

Revenue from Solutions, the Group’s platform that targets larger corporates, led the way with strong growth and a healthy pipeline of new customers.  Additionally, the Group’s corporate expenses product, Equals Spend, reported strong growth along with Equals Connect, the Group’s white-label business.  Further detail on the revenue mix is included in the CFO’s Report.

Revenue* by quarter, in £ millions

 

 Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022
Solutions - 0.3 1.5 1.8 2.8 3.5
White-Label 0.8 1.6 2.2 3.2 3.3 3.8
Other 6.1 6.4 7.2 7.8 7.1 8.1
Total Non-Travel 6.9 8.3 10.9 12.8 13.2 15.4
Travel 1.2 0.6 0.9 0.9 1.0 1.8
 8.1 8.8 11.9 13.8 14.2 17.2
Material Trade - - - 1.5 - -
Total 8.18.811.915.314.217.2

 

Adjusted EBITDA (before share option charges) in H1-2022 increased to £4.9 million from £1.8 million, with £3.1 million being earned in Q2-2022.

The confidence in Equals’ performance and ability to generate cash led the Group to repay, in full, the outstanding balance (totalling £1.8 million) of the CBILS loan in August 2022.  With interest rates continuing to rise, this action is immediately accretive for EPS.

OPERATING REVIEW

Focus on growth

Given the product innovations Equals has achieved, the Group’s priority is to now overlay its platform developments with an enhanced Sales and Marketing approach to drive further growth.  The essential building blocks to achieve this are:

  • a single CRM system across the Group, so all customer interaction is captured in one place;
  • up-skilling the sales and marketing teams through training and selected hiring; and,
  • a data science and AI team focusing on sales and customer data to further assist the sales and marketing teams.

Equals’ CRM solution, HubSpot, was initiated in 2021 and in H1-2022 it has seen further refinement of how it is used.  Further work on extracting maximum value from HubSpot will continue throughout 2022 and beyond utilising dedicated internal ‘power users’ and providing training and facilitation.

The Group’s data science team is now fully staffed and has been concentrating on putting in place the data warehouse infrastructure needed to provide both repetitive and bespoke data reporting.  The benefits of this are now flowing through with strong measurement of key KPIs and more insights into customer acquisition and retention.

In keeping with the overall strategy of the Group, the focus for growth is on the B2B customer base.  B2B customer acquisition is heavily reliant on the outbound sales function augmented by and integrated with a coherent digital marketing strategy and content production.  This contrasts with B2C customer acquisition, where above-the-line (‘ATL’) marketing such as TV and billboard advertisements augmented by digital marketing is the driving force.  Hence our growth strategy is directed towards improving our sales capabilities with support from advanced data science and targeted marketing.

One sales challenge for Equals is managing the transition from being a product-led business to a platform-led business.  Previously, the Group has sold its products:  International Payments, Cards and Current Accounts, using largely separate sales teams and marketing strategies.  As Equals moves forward, it will be selling:

  • Equals Money to the SME customer base, and
  • Equals Solutions to the larger B2B customers.

The transition from product to platform differentiates Equals from traditional FX businesses, as the Group can compete not just on FX rates, but also on platform capabilities and service.

Equals strengthened its sales and marketing leadership by the appointment, announced on 17 May 2022, of Tom Kiddle as Chief Commercial Officer.  Tom, who started at the end of H1-2022, has a strong background in the B2B payments industry having previously held key positions at Travelex, Western Union and most recently at World First.  Since Tom’s arrival, and utilising Equals’ enhanced data capabilities, the Group has already refined many aspects of its go-to-market strategy and has more changes planned for the balance of 2022 whilst planning its targets and strategy for 2023.

Focus on product development

 Unified platform

H1-2022 focused on the further development of the Equals Money platform for B2B customers.

The platform incorporates the payments and cards products of the Group underpinned by an ‘own-name multi-currency IBAN’ allowing a business to run one account supporting multiple currencies and balances whilst being payment agnostic between bank transfer and cards.  This is the key strategic vision for the Group to simplify money movement for business customers.

The Equals platform is built to be ‘evergreen’ in utilisation of technology and has been assembled with scalability at its core, placing the Group in a strong position for the future.

Payment infrastructure, ‘Boxes’ operating system

The Equals platform can provide each B2B customer with an ‘own name multi-currency IBAN’, an account in their own name denoted by a unique IBAN (‘International Bank Account Number’) which supports multiple currencies.

This is a key differentiator from Banks who provide one account per currency, each with a unique IBAN.  As the account is in the name of the customer, a so-called ‘first party’ account, this allows more use-cases than payments into a ‘pooled account’ from a compliance perspective.  Furthermore, having one IBAN for all currencies enables a customer to provide one single account identifier to all its customers and suppliers, thereby simplifying both sales and procurement processes.

Providing own-name multi-currency accounts required a combination of third-party integrations to partner Banks and SWIFT overlaid with smart technology.  The in-house operating system used by Equals to support the platform is referred to as ‘Boxes’.  This proprietary technology allows Equals to offer a highly flexible platform supporting multiple accounts and sub-accounts bespoke to the customer.

The Boxes infrastructure was developed further in H1-2022 to provide key functionality including:

  • real-time running balances;
  • statements; and,
  • enhanced reporting for customers.

In addition, Equals directly integrated into the SEPA (Single European Payments Area) network, providing instant movement of Euros in and out of the Equals payment infrastructure.  Further enhancements will be rolled out in H2-2022 including enhanced bulk payments capabilities and the capability to offer IBAN and Boxes functionality via API, thereby allowing more sophisticated customers to directly integrate with the Equals platform and support white-label opportunities.

Card Products

B2B customers increasingly need the flexibility to pay suppliers via cards as well as traditional ‘wire-transfer’, particularly in the e-commerce space where providers such as Google and Amazon will only accept payments via a card.  The Equals Money platform was conceived recognising this need and therefore excellence in card issuance, processing and technology is core to the platform.

Development of the Group’s card infrastructure has continued in H1-2022 to replace legacy platforms with a single platform built to power the Equals card products for the medium term.

This platform provides the base from which a strong pipeline of customer-facing features will deployed in H2-2022 including the launch of the new Equals Money card which is multi-currency, can be both virtual and physical, can be prepaid or debit, are live in Apple Pay and have many more features and capabilities.

Focus on Compliance

The Group has a strong compliance culture and views its capabilities as a strategic asset and competitive advantage.  Efficient compliance is essential to optimisation of revenues as any delays to new business onboarding can lead to increased customer frustration and possibly abandonment.  Ensuring the process of becoming a customer is as efficient as possible whilst maintaining high standards of compliance requires the levels of investment made in H1-2022.  This investment is targeted at both automation where possible, of the compliance processes combined with adding skilled headcount to process the non-standard and exceptional items.

Compliance requires strong control at the onboarding stage augmented by ongoing monitoring and hence the Group’s systems investment is targeted at onboarding processes and transaction monitoring.

Equals hired a Head of Compliance in mid-2021, and since then, the Group has been consistently upgrading its staff and increasing the headcount as the business expands.  Equals has recruited a new, highly experienced MLRO (‘Money Laundering Reporting Officer’) joining the business in H2-2022, which will further bolster its relationships with the Group’s regulators and banks.  These hires supplemented an already an exceptionally skilled and commercially focused team.

Focus on Employees

The labour market in the UK continues to be challenging both for hiring talent and for staff retention.  The Group introduced various measures in 2021 to tackle these issues including share ownership and LTIP schemes and plans to repeat this process in 2022.  In addition, the Group paid a mid-year cost of living award and other bonuses to staff in July 2022 totalling £0.3 million, which is fully accrued in the Group’s interim financial statements.

Whilst the Group is growing rapidly, it retains a strong cost-control culture, and it balances efficiency gains it yields from its engineering investments with the priority to achieve strong growth.  The Group therefore expects overall staff numbers to continue to rise slowly with most increases coming in direct revenue generation roles or compliance.  Given the strong operational gearing of Equals, any increase in headcount and overall cost-base is expected to be at a much lower rate than growth in transactions and revenues.

Focus on ESG

Equals wholeheartedly embraces ESG initiatives and takes Equality, Diversity, and Inclusivity (‘EDI’) extremely seriously.  The Group’s EDI strategy, which covers not only employees but also customers, includes an internal EDI network populated with elected representatives and regular employee surveys.  This is a key objective for all Executive Committee members and forms part of their appraisal.

FUTURE PLANS AND OPPORTUNITIES

The key strategic vision for the Group continues to be the simplification of money movement for business customers.  Equals achieves this through its B2B platforms - Equals Money being targeted at the SME base and Equals Solutions at larger corporate opportunities.  The Group’s growth potential is extremely 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 will be enhanced further by the developments planned in the Group’s technical roadmap.

Equals will continue to look for external growth opportunities and can do so with a strong balance sheet and cash position.  The Group is examining overseas expansion beyond its current predominantly UK-centric customer base given the portability of its platforms and will also take a considered strategic approach to acquisitions.

Global Macro-Economic environment

The global economy faces serious challenges stemming from the conflict in Ukraine and rising inflation and interest rates in major economies.  To date, Equals has performed resiliently despite these conditions and continues to grow strongly as can be seen from today’s H1-2022 results and Q3-2022 trading update.  However, the Board continues to monitor the situation closely.

Q3-2022 trading and Outlook

Q3-2022 has continued the strong revenue generation seen in H1-2022 with revenue for the period from 1 July 2022 to 5 September 2022 being £13.3 million, representing a 55% increase on the same period in 2021.

Equals has a strong outlook resulting from the investments it has made to create a payments platform. Further investments made in compliance, onboarding and user experience means that the rich functionality of the platform is made easily accessible to current and potential customers.  Finally, advances made in sales, marketing and data mean that Equals now sells its products and platform more efficiently.  Accordingly, the Board looks forward to the future with increased confidence and the Group remains in line with expectations for the full year.

 

 

Ian Strafford-Taylor
Chief Executive Officer
7 September 2022

 

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 2022.

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

Table 1 - Income and Expenditure account

£000’sH1-2022 H1-2021 Change
Revenue 31,373 16,905 14,468
 
Gross profit 14,866 10,317 4,549
Marketing costs (790) (410) (380)
Contribution 14,076 9,907 4,169
 
Net staff costs (6,620) (6,104) (516)
Net property & office costs (430) (490) 60
Net IT & telephone costs (925) (817) (108)
Professional fees (560) (594) 34
Compliance costs (358) (251) (107)
Travel and other expenses (331) (52) (279)
Operating costs (9,224) (8,308) (916)
 
Adjusted EBITDA*4,8521,599 3,253
    
Separately reported items -(616) 616
Share option charges (290)(217) (73)
    
EBITDA4,562766 3796
    
Memo: Adjusted EBITDA after rent4,4971,0343,463

 

Group revenues rose by 86%, Gross profits by 44%, Contribution by 42%, whilst Operating costs increased by 11% leading to Adjusted EBITDA increasing by 203% and EBITDA by 495%.

Ongoing growth is witnessed by comparing revenues in H1-2022 at £31.4 million with £25.7 million in H2-2021 (excluding the one-off revenue of £1.5 million earned from the material trade reported in October 2021), thus a 22% half-on half increase.

To continue the theme of comparing the last two half years, I present below a bridge from the Adjusted EBITDA in H2-2021 to H1-2022, which shows a 13% increase on the like-for-like position:

Table 2 – Adjusted EBITDA bridge from H2-2021 to H1-2022

H2-2021 Adjusted EBITDA     5,174
    
Less: Gross profits from material trade  (812)
 Property rates rebate  (80)
Like-for-like H2-2021 Adjusted EBITDA 4,282
    
Add: 15% uplift in contribution H1-2022  1,868
    
Less: 15% increase in staff costs, reflecting higher planned headcount along with pay adjustments averaging 8%
 
  
(885)
 46% increase in professional and compliance costs, much of which is attributable to onboarding more clients
 
 (290)
 Increase in travel and exhibition costs
 
 (80)
 Increase in property utility costs and rates  (44)
H1-2022 Adjusted EBITDA 4,852
    
Uplift over like-for-like H2-2021   570
 
% uplift over like-for-like H2-2021
   
13%
    

 

Revenue

A split of revenues by both customer group and platform, clearly shows both the strong and growing emergence of Solutions and very significant migration away from the legacy travel products. 

Table 3, H1-2022

Revenue in £ millions Consumer and small business Corporates Large
enterprises
Sub-total White-label TOTAL
H1-2022
International payments 2.0 7.1 - 9.1 7.1 16.2
Cards 2.3 3.3 - 5.6 - 5.6
Banking 2.8 - - 2.8 - 2.8
Solutions - - 6.3 6.3 - 6.3
Travel cash 0.5 - - 0.5 - 0.5
Total, H1-2022 7.6 10.4 6.3 24.3 7.1 31.4
      
% Change*      
H1-22 vs H1-21 +29% +24% >2010% +67% +202% +86%

 

*based on underlying figures

Table 3a – H1-2021

 
Revenue in £ millions
Consumer and small business Corporates Large
enterprises
Sub-total White-label TOTAL
H1-2021
International payments 1.3 6.1 - 7.4 2.4 9.8
Cards 1.7 2.2 - 3.9 - 3.9
Banking 2.8 - - 2.8 - 2.8
Solutions - - 0.3 0.3 - 0.3
Travel cash 0.1 - - 0.1 - 0.1
Total, H1-2021 5.9 8.3 0.3 14.5 2.4 16.9

 

Taking a further look at International Payments, Table 4 below, shows the composition of transaction values and revenue across spot and forward contracts.

Table 4. White Label  Other

 

H1-2022 Spot Fwd Total  Spot Fwd Total
Transaction values 648.9 98.3 747.2  976.9 281.8 1,258.7
% mix 87% 13% 100%  78% 22% 100%
       
Revenue 5.7 1.4 7.1  6.7 2.3 9.0
% mix 81% 19% 100%  75% 25% 100%
       
H1-2021       
Transaction values 337.8 50.0 387.8  862.0 357.3 1219.3
% mix 87% 13% 100%  71% 29% 100%
       
Revenue 2.0 0.4 2.4  5.4 2.1 7.5
% mix 83% 17% 100%  72% 28% 100%

 

The move towards offering more forward contracts has evolved over time and reflecting on 2019 as the last “pre-covid” year, forward contracts only represented 10% of turnover.

Around 80% of the revenues were earned from three core currency parings (GBP:EUR; GBP:USD; and EUR:USD).

Solutions Revenues have been analysed below between transaction-based and fee-based.  This shows the evolution of the platform and its ability to secure long-term revenue streams.

Table 4a
In £ millions
Fee based revenue Transaction based revenue Total
revenues
H1-2022 1.7 4.6 6.3
H2-2021 0.9 2.4 3.3
H1-2021 0.1 0.2 0.3

 

Variable costs and gross profits

The elements of variable costs are shown in the table below, along with the gross profits and gross profit margins.

Table 5

 
 
In £ millions
Consumer and small business Corporates Large enterprises Sub-total White-label TOTAL
H1-2022
Transaction costs 1.3 2.7 - 4.0 0.1 4.1
Staff commissions 0.6 0.9 0.1 1.6 0.1 1.7
Affiliate costs 0.6 0.8 3.2 4.6 6.1 10.7
Total, H1-2022 2.5 4.4 3.3 10.2 6.3 16.5
Gross profit 5.2 5.9 2.9 14.0 0.8 14.9
Gross profit % 67% 58% 47% 58% 12% 47%

 

Table 5a

 
 
In £ millions
Consumer and small business Corporates Large enterprises Sub-total White-label TOTAL
H1-2021
Transaction costs 0.6 1.7 - 2.3 0.1 2.4
Staff commissions 0.5 0.6 - 1.1 0.1 1.2
Affiliate costs 0.4 0.6 0.2 1.2 1.8 3.0
Total, H1-2021 1.5 2.9 0.2 4.6 2.06.6
Gross profit 4.5 5.3 0.1 9.9 0.4 10.3
Gross profit % 75% 64% 37% 68% 18% 61%

 

H1-2022 witnessed Solutions and White-label contributing 43% of revenues (H1-2021: 16%) and 25% of Gross profits (H1-2021: 5%).

Marketing, branding and contribution

The Group has accelerated its marketing plans after pausing this during FY20 and FY21 when Covid posed greater uncertainties.  Cash costs include ad campaigns, pay-per-click and exhibition and similar events including those in the USA where the Group noticed considerable interest in particularly the Spend platform and the Group’s ability to sell this through its partnership with Metropolitan Commercial Bank.

Table 6 H1-2022 H1-2021
Marketing expenses (£ millions) 0.8 0.4
   
Contribution 14.1 9.9
Contribution margin 45% 59%

 

Staff costs

Staff costs, gross of capitalisation, were £8.8 million in H1-2022 against £7.3 million in H1-2021, and £7.7 million in H2-2021.  These costs were offset by:

- Capitalised software:   £2.0 million in total (H1-2021: £1.2 million, H2-2021: £1.8 million), with £0.6 million on contractors.

Amounts capitalised represent 19% of gross staff costs, consistent with FY21.  The Group investment strategy continues to accelerate and focus on new and enhanced product design as has been commented on in the CEO’s Report.

Headcount numbers have moved from 258 as at 30 June 2021 to 266 as at 30 June 2022, below the rate of increase in revenue for the period, and at 31 August 2022 they stood at 274.

The average number of engineering contractors per month in H1-2022 was 14 (H1-2021: 7).  As previously reported, Equals is accelerating product development as fast as resource access allows the Group to do in a tight labour market.

Professional fees and Compliance costs

Owing to an increasing cross-industry compliance burden, the Group has chosen to report compliance and similar costs separately from other professional fees.  Compliance costs, including onboarding systems, have risen due to a combination of greater business activity and the Group’s desire to fast-track business applications but not at the expense of quality.  Professional fees have risen in line with trends widely reported in the national press.

Property, insurance and office costs

Renegotiation of office leases has led to lower passing rents which benefit the Group’s cashflows but not the EBITDA as such rents are accounted for under IFRS-16.  Utilities, rates, and insurance charges have however risen by an aggregate of 19% over H2-2021, although there are 13% lower than in H1-2021.

Separately reported items

Separately Reported Items are large, non-recurring items identified by management.  There were no Separately Reported Items in the period.

Amortisation and depreciation

Amortisation and depreciation for the period were £2.9 million (H1-2021: £2.1 million) and £0.6 million (H1-2021: £0.7 million) respectively.

Operating result

The Group made a profit before taxation of £0.9 million for the period, compared to a loss of £2.2 million for the period H1-2021.

Taxation, incorporating R&D credits

The Group’s taxation charge includes both corporation tax, deferred tax, and R&D credits.  The Group has recognised a net tax charge of £37k (H1-2021: £1,075k net tax credit) of which £40k (H1-2021: £319k) relates to an estimated R&D tax credit repayment claim for the six months to 30 June 2022.

Result after taxation

The result after taxation was a profit of £848k against a loss in H1-2021 of £1,172k and a full year loss in 2021 of £2,262k.

Earnings per share

Both basic and diluted EPS went into the positive, with basic EPS rising to 0.38pence (H1-2021: negative, 0.70pence) and diluted EPS rising to 0.36pence (H1-2021: negative, 0.70pence).

B: Balance sheet

At 30 June 2022, the Group considers some of the key items on the balance sheet to be:

  • £16.5 million of cash at bank (30 June 2021: £10.1 million)
  • £1.8 million CBILS loan (repaid in full in August 2022)
  • £0.3 million deferred consideration payable but settled after the period end.

Table 7 - Balance sheet

As at
30 Jun 2022
As at
30 Jun 2021
As at
31 Dec 2021
 £’000s  £’000s £’000s
       
IFRS 16 assets, less IFRS 16 liabilities (976)   (364) (388)
Other non-current assets (other than deferred tax) 31,618   35,519 32,217
 30,642   35,155 31,829
       
Liquidity (per Table 9) 12,825   7,316 10,739
Trade debtors and accrued income 4,244   3,508 3,638
R&D rebates 438   1,687 398
Prepayments 1,411   1,076 998
Deposits and sundry debtors 190   396 329
Inventory of card stock 148   217 168
Accounts payable (2,315)   (2,051) (1,549)
Affiliate commissions (2,905)   (1,303) (1,945)
PAYE, staff commissions etc. (1,824)   (1,808) (1,884)
Other accruals and other creditors (1,412)   (1,151) (1,349)
 10,800   7,887 9,543
    
Earn-out balances due (Table 16)
Implied interest thereon
(304)
1
  (1,835)
350
(1,683)
63
 (303)   (1,485) (1,620)
Net corporation and deferred tax 1,148   208 888
Net value of forward contracts 511   (31) 511
 1,356   (1,308) (221)
       
NET SHAREHOLDER FUNDS 42,798   41,734 41,151
       
Retained earnings at 1 January (24,590)   (22,259) (22,259)
Earnings for the year 675   (1,251) (2,424)
Amount attributable to the exercise of share options -   - 93
Retained earnings at 31 December (23,915)   (23,510) (24,590)
       
Non-Controlling interest at 1 January 263   101 101
Earnings for year 173   79 162
Non-Controlling interest at 31 December 436   180 263
       
Share capital, share premium 55,212   54,836 55,011
Other reserves 11,065   10,228 10,467
 66,277   65,064 65,478
       
CAPITAL AND RESERVES 42,798  41,734 41,151

 

 Non-controlling Interest

The profit for H1-2022 includes £173k profit in respect of the Non-Controlling Interest of the Equals Connect business acquired in 2019 (H1-2021: £79k).

Off balance sheet items: client monies

As at 30 June 2022 the Group held client monies of £272.0 million in off balance sheet bank accounts (H1-2021: £170.4 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 H1-2022.

Earn-outs

The table below shows the financial position relating to acquisitions in and after FY19.

Table 8 – EARNOUTS

  Hermex Casco Effective Total
Acquisition date 09.08.2019 19.11.2019 15.10.2020
 £’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 H1-2021 - (741) (62) (803)
Paid during H2-2021 - - (306) (306)
Further change in consideration - 46 - 46
Gross Outstanding at 31.12.2021 - 601 1,082 1,683
Paid during H1 - 2022 - (601) (779) (1,380)
Gross Outstanding at 30.06.2022 - - 303 303
 
Paid during Q3-2022 - - (303) (303)
    
Maximum consideration 2,000 3,725 1,575 7,300
Total consideration 2,000 3,075 1,575 6,650
     

 

CASH FLOW

Table 9 - Cash flow

£000’s H1-2022 H1-2021
Adjusted EBITDA after rent 4,497  1,034
 - Cash incurred separately reported items -  (616)
 - Internally capitalised staff costs (2,051)  (1,191)
Internally capitalised IT costs (164)  (148)
 - Purchase of other intangibles (307)  (27)
 - Purchase of property, plant, equipment (122)  (40)
Add: Working capital movement 2,875  1,795
“Operational” cashflows 4,728 807
Cash for acquisitions/ earn-outs (1,380)  (803)
External funding   
  Repayment of CBILS loan (200)  -
  Cash raised from issue of equity 200  46
NET CASH FLOWS 3,348  50
Balance at start of period 13,104  10,032
Balance at end of period 16,452  10,082
    
Number of shares in issue 180,712,473  180,045,807
Cash per share (in pence) 9.1  5.6
   

 

Table 10 – LIQUIDITY

 H1-2022 H1-2021 FY-2021
£000’S £000’S £000’S
Cash at bank 16,452 10,083 13,104
Balances with liquidity providers 1,499 2,553 1,675
Pre-funded balances with card provider 884 1,435 1,615
Gross liquid resources 18,835 14,071 16,394
    
Customer balances not subject to safeguarding (4,210) (4,755) (3,655)
CBILS loan (1,800) (2,000) (2,000)
 (6,010) (6,755) (5,655)
    
Net position 12,825 7,316 10,739

 

 

Richard Cooper
Chief Financial Officer
7 September 2022

 

INTERIM CONSOLIDATED statement OF COMPREHENSIVE INCOME
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

Period end
30 June 2022
Unaudited
Period end
30 June 2021
Unaudited
 Year end 31
December
2021
Audited
 Note £000 £000  £000
       
       
Revenue on currency transactions  28,505  14,046  38,424
Banking revenue  2,868  2,859  5,667
Revenue 2 31,373  16,905  44,091
Direct costs 2 (16,507)  (6,589)  (19,855)
Gross profit  14,866  10,316  24,236
       
Administrative expenses 3 (10,314)  (9,602)  (18,715)
Depreciation  (632)  (733)  (1,398)
Amortisation charge  (2,858)  (2,135)  (5,812)
Impairment charge 4 -  -  (1,638)
Total operating expenses  (13,804)  (12,470)  (27,563)
    
Operating profit / (loss) 1,062  (2,154)  (3,327)
    
Finance costs 8 (177)  (93)  (490)
Profit / loss before tax  885  (2,247)  (3,817)
      
Tax (charge)/credit 5 (37)  1,075  1,555
Profit / loss after tax  848  (1,172)  (2,262)
Memo: Profit / loss is attributable to:       
Owners of Equals Group Plc  675  (1,251)  (2,424)
Non-controlling interest  173  79  162
      
Other comprehensive income:       
Exchange differences arising on translation of foreign operations  1  -  -
  849  (1,172)  (2,262)
Profit / loss per share       
Basic  0.38p  (0.70)p  (1.35)p
Diluted  0.36p  (0.70)p  (1.35)p

All income and expenses arise from continuing operations.

 

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

  As at
30 June 2022
Unaudited
As at
30 June 2021
Unaudited
 As at
31 December
2021
Audited
 Note £000 £000  £000
ASSETS       
Non-current assets       
Property, plant and equipment  1,193  1,439  1,257
Right of use assets 4,067  5,247  4,874
Intangible assets and goodwill  30,425  34,082  30,960
Deferred tax assets  1,287  230  949
  36,972  40,998  38,040
Current assets       
Inventories  148  217  168
Trade and other receivables  8,228  9,096  8,256
Current tax assets  439  1,687  397
Derivative financial assets  2,593  3,019  2,593
Cash and cash equivalents  16,452  10,082  13,104
  27,860  24,101  24,518
TOTAL ASSETS 64,832  65,099  62,558
       
EQUITY AND LIABILITIES       
Equity attributable to equity holders      
Share capital 6 1,807  1,787  1,793
Share premium 6 53,405  53,049  53,218
Share based payment reserve  2,455  1,619  1,858
Other reserves  8,610  8,609  8,609
Retained deficit  (23,915)  (23,510)  (24,590)
Equity attributable to owners of Equals Group Plc  42,362  41,554  40,888
Non-controlling interest  436  180  263
42,798  41,734  41,151
 
Non-current liabilities
     
Borrowings 7 1,600  1,800  1,600
Lease liabilities 4,224  5,164  4,484
Deferred tax liabilities  -  -  -
  5,824  6,964  6,084
 
Current liabilities
     
Borrowings 7 200  200  400
Trade and other payables  12,970  12,704  12,002
Current tax liabilities  139  -  61
Lease liabilities 819  447  778
Derivative financial liabilities  2,082  3,050  2,082
  16,210  16,401  15,323
TOTAL EQUITY AND LIABILITIES  64,832  65,099  62,558

 

 

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

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 2021 1,78653,0031,402(22,259)8,60942,54110142,642
         
(Loss) / income for the period- - - (1,251) - (1,251) 79 (1,172)
Other comprehensive income:         
Items that will not be reclassified subsequently to profit or loss:         
Exchange differences arising on translation of foreign operations - - - - - - - -
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
         
(Loss) / income for the period - - - (1,173) - (1,173) 83 (1,090)
Other comprehensive income:         
Items that will not be reclassified subsequently to profit or loss:         
Exchange differences arising on translation of foreign operations - - - - - - - -
Other items         
Share based payment charge - - 54 - - 54 - 54
Movement in deferred tax on share-based payment charge - - 278 - - 278 - 278
Share options exercised in year - - (93) 93 - - - -
New shares issued 6 169 - - - 175 - 175
At 31 December 2021 1,793 53,218 1,858 (24,590) 8,609 40,888 263 41,151
         
Income for the period and total comprehensive (loss) / income - - - 675 - 675 173 848
Other comprehensive income:         
Items that will not be reclassified subsequently to profit or loss:         
Exchange differences arising on translation of foreign operations - - - - 1 1 - 1
Other items         
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
         

 

Other reserves comprise:  
Merger reserve Arising on reverse acquisition from Group reorganisation.
Contingent consideration reserve
Foreign currency reserve
Arising on equity based contingent consideration on acquisition of subsidiaries.
Arising on translation of foreign operations

 

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

 Six month period ended
30 June 2022
Unaudited
 Six month period ended
30 June 2021
Unaudited
Six month period ended
31 December 2021
Audited
 £000  £000 £000
Operating Activities
Profit / loss for the period 885 (2,247)  (1,570)
Adjustments for:      
Depreciation 632  733  665
Amortisation 2,858  2,135  3,677
Impairment -  -  1,638
Share based payment charge 259  217  55
(Increase) / decrease in trade and other receivables (188)  (351)  3,965
Decrease /in net derivative financial assets / liabilities -  -  (4,898)
Increase / (decrease) in trade and other payables 1,561  2,210  426
Increase / decrease in derivative financial liabilities -  -  (968)
Decrease in inventories 20  (23)  49
Finance costs 177  93  397
Net cash inflow 6,204  2,767  3,436
      
Tax receipts -  -  1,367
     
Net cash inflow from operating activities 6,204  2,767  4,803
     
Cash flows from investing activities      
Acquisition of property, plant and equipment (122)  (40)  (38)
Acquisition of intangibles (2,323)  (1,367)  (2,193)
Deferred consideration on acquisition of subsidiary -  (803)  803
Acquisition of subsidiary, net of cash acquired -  -  -
Net cash used in investing activities (2,445)  (2,210)  (1,428)
      
Cash flows from financing activities      
Principal elements of lease payments (297)  (446)  (426)
Interest paid on finance lease (82)  (97)  (97)
Interest paid (33)  (10)  (4)
Repayment of borrowings (200)  -  -
Proceeds from issuance of ordinary shares 201  46  174
Net cash used in financing activities (411)  (507)  (353)
      
Net increase in cash and cash equivalents 3,348  50  3,022
Cash and cash equivalents at the beginning of the period 13,104  10,032  10,082
Cash and cash equivalents at end of the period 16,452  10,082 13,104

 

2021

Interim Results

07 September 2022

‘Significant revenue growth, record Adjusted EBITDA, return to statutory profit and strong balance sheet ’

Equals (AIM: EQLS), the fintech payments group focused on the SME marketplace, announces its interim results for the six months ended 30 June 2022 (the ‘period’ or ‘H1-2022’) and an update on trading for the period from 1 July 2022 to 5 September 2022 (‘Q3-2022’).

Download

These Results are available in PDF format.
To download please click here

To download the Results Presentation click here

H1-2022: Financial Summary

 H1-2022
£ millions
 
H1-2021
£ millions
Change
% ***
Underlying transaction values 4,169 2,434 +71%
 
Revenue 31.4 16.9 +86%
   
Gross profit 14.9 10.3 +44%
 
Contribution 14.1 9.9 +42%
 
Adjusted EBITDA* 4.9 1.6 +203%
 
Operating Profit /(Loss) 1.1 (2.2)
 
Profit / (loss) after Taxation and R&D credits
 
0.8 (1.2)
EPS (Basic, in pence) 0.38 (0.70)
 
Operational** cash in/(out) flows 4.7 0.8
 
Cash at bank 16.5 10.1 +63%

 

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.
** Operational cashflows are before earn-outs and R&D credits.
***Percentages are calculated based on underlying rather than rounded figures.

 

H1-2022: Financial Highlights

  • Record revenue performance with an 86% increase to £31.4 million (H1-2021: £16.9 million) with £6.3 million derived from the Solutions platform (H1-2021: £0.3 million)
  • 44% increase in Gross profit to £14.9 million (H1-2021: £10.3 million)
  • 203% increase in Adjusted EBITDA* to £4.9 million (H1-2021: £1.6 million) with £1.8 million contribution from Q1-2022 and £3.1 million in Q2-2022 (Q1-2021: £1.4 million; Q2-2021: £0.2 million)
  • Statutory profit achieved with statutory PBT at £0.9 million (H1-2021: loss of £2.2 million)
  • Basic EPS at 0.38 pence against a loss per share of 0.70 pence in H1-2021
  • Cash per share increased 62.5% to 9.1 pence (30 June 2021: 5.6 pence)

H1-2022: Operational and Product Highlights

  • Continued focus on sales and marketing to corporate (B2B/SME) customers driving growth
  • Hiring of highly experienced Chief Commercial Officer (‘CCO’) plus expansion of revenue generating headcount in sales and marketing teams
  • Direct integration into SEPA enabling rapid transactional capability in Euros
  • Equals Money cards live on new platform supporting physical and virtual cards with 21-currency capabilities
  • More investment into compliance via automation and hiring experienced staff
  • Progressed people agenda with 360 appraisals and staff retention measures in difficult labour market

Q3-2022 Trading (1 July 2022 to 5 September 2022) and Outlook

  • Strong performance continued with revenues of £13.3 million in the period, an increase of 55% over the same period in 2021
  • Year-to-date revenue of £44.7 million, which already exceeds full-year performance in 2021
  • Revenues per day of £289k, compared to £187k in the same period in 2021
  • Continued growth in Solutions revenues at £3.1 million compared to £1.1 million in same period in 2021
  • Positive distributable reserves allowing the Board to consider a future dividend policy
  • Cash generation allowed the CBILS loan of £1.8 million to be repaid in full in August 2022
  • Strong cash position permits further working capital to drive the card business, platform investments, and strategic acquisitions

Commenting on the Interim Results, Ian Strafford-Taylor, CEO of Equals Group plc, said:

“This is an outstanding set of results with record revenue and EBITDA cementing our extremely successful transition into cash generation and, ultimately, a return to the first statutory profit since 2018.

“It also reflects the three-year investment cycle into platform, connectivity and compliance which, alongside our operational pivot towards corporate customers, has enabled the business to go from strength to strength.  Our performance has of course been delivered by the hard work and dedication of every Equals team member who I am immensely proud of and, on behalf of the Board, would like to thank for their continued support and exceptional work ethic.

“Trading in Q3-2022 has continued to be robust, despite global economic uncertainty and inflationary pressures, with strong growth over the same period last year.  We continue to see an increase in fee-based revenues to complement our transactional and FX revenues, which is part of our overall strategy for diversifying and de-risking our earnings streams.  Based on these strong results and our current trading performance, we look to the future with increased confidence and remain in line with 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://webcasting.buchanan.uk.com/broadcast/62c3e636fb4bba516c453314.  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.

 

 

For more information, please contact:

Equals Group plc  
Ian Strafford-Taylor, CEO
Richard Cooper, CFO
Tel: +44 (0) 20 7778 9308
www.equalsplc.com
 
Canaccord Genuity (Nominated Adviser & Broker) 
Max Hartley / Georgina McCooke
 
Tel: +44 (0) 20 7523 8150
 
 
Buchanan (Financial Communications)  
Henry Harrison-Topham / Steph Whitmore / Toto Berger
[email protected]
Tel: +44 (0) 20 7466 5000
www.buchanan.uk.com

 

 

Chief Executive Officer’s Report

SUMMARY

The Group has delivered record-breaking revenue and Adjusted EBITDA performance in H1-2022, leading to a first reported statutory profit and positive EPS.  The quantum of underlying transactions through the Group’s platforms increased by 71%.  In addition, the value of ‘deposits’, meaning loads on cards and deposits through the banking platform, rose by 55%.

£ millions

Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022
Transaction value* 1,091 1,343 1,878 2,135 1,980 2,189
Deposit/Load value 292 430 495 509 515 607

*Q4-2021shown here excludes the £114 million from the one-off material trade announced on 28 October 2021.

Revenues rose by 86% in H1-2022 to £31.4 million (H1-2021: £16.9 million).  This growth was broad-based with all product lines performing well.  The Group continues to focus on corporate (B2B/SME) customers and saw very strong revenue growth in this sector in H1-2022.

Revenues from travel products, despite recovering strongly from the impact of Covid-19, represented a modest 10.4% of overall revenues in Q2-2022 and 8.9% for the whole of H1-2022.

Revenue from Solutions, the Group’s platform that targets larger corporates, led the way with strong growth and a healthy pipeline of new customers.  Additionally, the Group’s corporate expenses product, Equals Spend, reported strong growth along with Equals Connect, the Group’s white-label business.  Further detail on the revenue mix is included in the CFO’s Report.

Revenue* by quarter, in £ millions

 

 Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022
Solutions - 0.3 1.5 1.8 2.8 3.5
White-Label 0.8 1.6 2.2 3.2 3.3 3.8
Other 6.1 6.4 7.2 7.8 7.1 8.1
Total Non-Travel 6.9 8.3 10.9 12.8 13.2 15.4
Travel 1.2 0.6 0.9 0.9 1.0 1.8
 8.1 8.8 11.9 13.8 14.2 17.2
Material Trade - - - 1.5 - -
Total 8.18.811.915.314.217.2

 

Adjusted EBITDA (before share option charges) in H1-2022 increased to £4.9 million from £1.8 million, with £3.1 million being earned in Q2-2022.

The confidence in Equals’ performance and ability to generate cash led the Group to repay, in full, the outstanding balance (totalling £1.8 million) of the CBILS loan in August 2022.  With interest rates continuing to rise, this action is immediately accretive for EPS.

OPERATING REVIEW

Focus on growth

Given the product innovations Equals has achieved, the Group’s priority is to now overlay its platform developments with an enhanced Sales and Marketing approach to drive further growth.  The essential building blocks to achieve this are:

  • a single CRM system across the Group, so all customer interaction is captured in one place;
  • up-skilling the sales and marketing teams through training and selected hiring; and,
  • a data science and AI team focusing on sales and customer data to further assist the sales and marketing teams.

Equals’ CRM solution, HubSpot, was initiated in 2021 and in H1-2022 it has seen further refinement of how it is used.  Further work on extracting maximum value from HubSpot will continue throughout 2022 and beyond utilising dedicated internal ‘power users’ and providing training and facilitation.

The Group’s data science team is now fully staffed and has been concentrating on putting in place the data warehouse infrastructure needed to provide both repetitive and bespoke data reporting.  The benefits of this are now flowing through with strong measurement of key KPIs and more insights into customer acquisition and retention.

In keeping with the overall strategy of the Group, the focus for growth is on the B2B customer base.  B2B customer acquisition is heavily reliant on the outbound sales function augmented by and integrated with a coherent digital marketing strategy and content production.  This contrasts with B2C customer acquisition, where above-the-line (‘ATL’) marketing such as TV and billboard advertisements augmented by digital marketing is the driving force.  Hence our growth strategy is directed towards improving our sales capabilities with support from advanced data science and targeted marketing.

One sales challenge for Equals is managing the transition from being a product-led business to a platform-led business.  Previously, the Group has sold its products:  International Payments, Cards and Current Accounts, using largely separate sales teams and marketing strategies.  As Equals moves forward, it will be selling:

  • Equals Money to the SME customer base, and
  • Equals Solutions to the larger B2B customers.

The transition from product to platform differentiates Equals from traditional FX businesses, as the Group can compete not just on FX rates, but also on platform capabilities and service.

Equals strengthened its sales and marketing leadership by the appointment, announced on 17 May 2022, of Tom Kiddle as Chief Commercial Officer.  Tom, who started at the end of H1-2022, has a strong background in the B2B payments industry having previously held key positions at Travelex, Western Union and most recently at World First.  Since Tom’s arrival, and utilising Equals’ enhanced data capabilities, the Group has already refined many aspects of its go-to-market strategy and has more changes planned for the balance of 2022 whilst planning its targets and strategy for 2023.

Focus on product development

 Unified platform

H1-2022 focused on the further development of the Equals Money platform for B2B customers.

The platform incorporates the payments and cards products of the Group underpinned by an ‘own-name multi-currency IBAN’ allowing a business to run one account supporting multiple currencies and balances whilst being payment agnostic between bank transfer and cards.  This is the key strategic vision for the Group to simplify money movement for business customers.

The Equals platform is built to be ‘evergreen’ in utilisation of technology and has been assembled with scalability at its core, placing the Group in a strong position for the future.

Payment infrastructure, ‘Boxes’ operating system

The Equals platform can provide each B2B customer with an ‘own name multi-currency IBAN’, an account in their own name denoted by a unique IBAN (‘International Bank Account Number’) which supports multiple currencies.

This is a key differentiator from Banks who provide one account per currency, each with a unique IBAN.  As the account is in the name of the customer, a so-called ‘first party’ account, this allows more use-cases than payments into a ‘pooled account’ from a compliance perspective.  Furthermore, having one IBAN for all currencies enables a customer to provide one single account identifier to all its customers and suppliers, thereby simplifying both sales and procurement processes.

Providing own-name multi-currency accounts required a combination of third-party integrations to partner Banks and SWIFT overlaid with smart technology.  The in-house operating system used by Equals to support the platform is referred to as ‘Boxes’.  This proprietary technology allows Equals to offer a highly flexible platform supporting multiple accounts and sub-accounts bespoke to the customer.

The Boxes infrastructure was developed further in H1-2022 to provide key functionality including:

  • real-time running balances;
  • statements; and,
  • enhanced reporting for customers.

In addition, Equals directly integrated into the SEPA (Single European Payments Area) network, providing instant movement of Euros in and out of the Equals payment infrastructure.  Further enhancements will be rolled out in H2-2022 including enhanced bulk payments capabilities and the capability to offer IBAN and Boxes functionality via API, thereby allowing more sophisticated customers to directly integrate with the Equals platform and support white-label opportunities.

Card Products

B2B customers increasingly need the flexibility to pay suppliers via cards as well as traditional ‘wire-transfer’, particularly in the e-commerce space where providers such as Google and Amazon will only accept payments via a card.  The Equals Money platform was conceived recognising this need and therefore excellence in card issuance, processing and technology is core to the platform.

Development of the Group’s card infrastructure has continued in H1-2022 to replace legacy platforms with a single platform built to power the Equals card products for the medium term.

This platform provides the base from which a strong pipeline of customer-facing features will deployed in H2-2022 including the launch of the new Equals Money card which is multi-currency, can be both virtual and physical, can be prepaid or debit, are live in Apple Pay and have many more features and capabilities.

Focus on Compliance

The Group has a strong compliance culture and views its capabilities as a strategic asset and competitive advantage.  Efficient compliance is essential to optimisation of revenues as any delays to new business onboarding can lead to increased customer frustration and possibly abandonment.  Ensuring the process of becoming a customer is as efficient as possible whilst maintaining high standards of compliance requires the levels of investment made in H1-2022.  This investment is targeted at both automation where possible, of the compliance processes combined with adding skilled headcount to process the non-standard and exceptional items.

Compliance requires strong control at the onboarding stage augmented by ongoing monitoring and hence the Group’s systems investment is targeted at onboarding processes and transaction monitoring.

Equals hired a Head of Compliance in mid-2021, and since then, the Group has been consistently upgrading its staff and increasing the headcount as the business expands.  Equals has recruited a new, highly experienced MLRO (‘Money Laundering Reporting Officer’) joining the business in H2-2022, which will further bolster its relationships with the Group’s regulators and banks.  These hires supplemented an already an exceptionally skilled and commercially focused team.

Focus on Employees

The labour market in the UK continues to be challenging both for hiring talent and for staff retention.  The Group introduced various measures in 2021 to tackle these issues including share ownership and LTIP schemes and plans to repeat this process in 2022.  In addition, the Group paid a mid-year cost of living award and other bonuses to staff in July 2022 totalling £0.3 million, which is fully accrued in the Group’s interim financial statements.

Whilst the Group is growing rapidly, it retains a strong cost-control culture, and it balances efficiency gains it yields from its engineering investments with the priority to achieve strong growth.  The Group therefore expects overall staff numbers to continue to rise slowly with most increases coming in direct revenue generation roles or compliance.  Given the strong operational gearing of Equals, any increase in headcount and overall cost-base is expected to be at a much lower rate than growth in transactions and revenues.

Focus on ESG

Equals wholeheartedly embraces ESG initiatives and takes Equality, Diversity, and Inclusivity (‘EDI’) extremely seriously.  The Group’s EDI strategy, which covers not only employees but also customers, includes an internal EDI network populated with elected representatives and regular employee surveys.  This is a key objective for all Executive Committee members and forms part of their appraisal.

FUTURE PLANS AND OPPORTUNITIES

The key strategic vision for the Group continues to be the simplification of money movement for business customers.  Equals achieves this through its B2B platforms - Equals Money being targeted at the SME base and Equals Solutions at larger corporate opportunities.  The Group’s growth potential is extremely 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 will be enhanced further by the developments planned in the Group’s technical roadmap.

Equals will continue to look for external growth opportunities and can do so with a strong balance sheet and cash position.  The Group is examining overseas expansion beyond its current predominantly UK-centric customer base given the portability of its platforms and will also take a considered strategic approach to acquisitions.

Global Macro-Economic environment

The global economy faces serious challenges stemming from the conflict in Ukraine and rising inflation and interest rates in major economies.  To date, Equals has performed resiliently despite these conditions and continues to grow strongly as can be seen from today’s H1-2022 results and Q3-2022 trading update.  However, the Board continues to monitor the situation closely.

Q3-2022 trading and Outlook

Q3-2022 has continued the strong revenue generation seen in H1-2022 with revenue for the period from 1 July 2022 to 5 September 2022 being £13.3 million, representing a 55% increase on the same period in 2021.

Equals has a strong outlook resulting from the investments it has made to create a payments platform. Further investments made in compliance, onboarding and user experience means that the rich functionality of the platform is made easily accessible to current and potential customers.  Finally, advances made in sales, marketing and data mean that Equals now sells its products and platform more efficiently.  Accordingly, the Board looks forward to the future with increased confidence and the Group remains in line with expectations for the full year.

 

 

Ian Strafford-Taylor
Chief Executive Officer
7 September 2022

 

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 2022.

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

Table 1 - Income and Expenditure account

£000’sH1-2022 H1-2021 Change
Revenue 31,373 16,905 14,468
 
Gross profit 14,866 10,317 4,549
Marketing costs (790) (410) (380)
Contribution 14,076 9,907 4,169
 
Net staff costs (6,620) (6,104) (516)
Net property & office costs (430) (490) 60
Net IT & telephone costs (925) (817) (108)
Professional fees (560) (594) 34
Compliance costs (358) (251) (107)
Travel and other expenses (331) (52) (279)
Operating costs (9,224) (8,308) (916)
 
Adjusted EBITDA*4,8521,599 3,253
    
Separately reported items -(616) 616
Share option charges (290)(217) (73)
    
EBITDA4,562766 3796
    
Memo: Adjusted EBITDA after rent4,4971,0343,463

 

Group revenues rose by 86%, Gross profits by 44%, Contribution by 42%, whilst Operating costs increased by 11% leading to Adjusted EBITDA increasing by 203% and EBITDA by 495%.

Ongoing growth is witnessed by comparing revenues in H1-2022 at £31.4 million with £25.7 million in H2-2021 (excluding the one-off revenue of £1.5 million earned from the material trade reported in October 2021), thus a 22% half-on half increase.

To continue the theme of comparing the last two half years, I present below a bridge from the Adjusted EBITDA in H2-2021 to H1-2022, which shows a 13% increase on the like-for-like position:

Table 2 – Adjusted EBITDA bridge from H2-2021 to H1-2022

H2-2021 Adjusted EBITDA     5,174
    
Less: Gross profits from material trade  (812)
 Property rates rebate  (80)
Like-for-like H2-2021 Adjusted EBITDA 4,282
    
Add: 15% uplift in contribution H1-2022  1,868
    
Less: 15% increase in staff costs, reflecting higher planned headcount along with pay adjustments averaging 8%
 
  
(885)
 46% increase in professional and compliance costs, much of which is attributable to onboarding more clients
 
 (290)
 Increase in travel and exhibition costs
 
 (80)
 Increase in property utility costs and rates  (44)
H1-2022 Adjusted EBITDA 4,852
    
Uplift over like-for-like H2-2021   570
 
% uplift over like-for-like H2-2021
   
13%
    

 

Revenue

A split of revenues by both customer group and platform, clearly shows both the strong and growing emergence of Solutions and very significant migration away from the legacy travel products. 

Table 3, H1-2022

Revenue in £ millions Consumer and small business Corporates Large
enterprises
Sub-total White-label TOTAL
H1-2022
International payments 2.0 7.1 - 9.1 7.1 16.2
Cards 2.3 3.3 - 5.6 - 5.6
Banking 2.8 - - 2.8 - 2.8
Solutions - - 6.3 6.3 - 6.3
Travel cash 0.5 - - 0.5 - 0.5
Total, H1-2022 7.6 10.4 6.3 24.3 7.1 31.4
      
% Change*      
H1-22 vs H1-21 +29% +24% >2010% +67% +202% +86%

 

*based on underlying figures

Table 3a – H1-2021

 
Revenue in £ millions
Consumer and small business Corporates Large
enterprises
Sub-total White-label TOTAL
H1-2021
International payments 1.3 6.1 - 7.4 2.4 9.8
Cards 1.7 2.2 - 3.9 - 3.9
Banking 2.8 - - 2.8 - 2.8
Solutions - - 0.3 0.3 - 0.3
Travel cash 0.1 - - 0.1 - 0.1
Total, H1-2021 5.9 8.3 0.3 14.5 2.4 16.9

 

Taking a further look at International Payments, Table 4 below, shows the composition of transaction values and revenue across spot and forward contracts.

Table 4. White Label  Other

 

H1-2022 Spot Fwd Total  Spot Fwd Total
Transaction values 648.9 98.3 747.2  976.9 281.8 1,258.7
% mix 87% 13% 100%  78% 22% 100%
       
Revenue 5.7 1.4 7.1  6.7 2.3 9.0
% mix 81% 19% 100%  75% 25% 100%
       
H1-2021       
Transaction values 337.8 50.0 387.8  862.0 357.3 1219.3
% mix 87% 13% 100%  71% 29% 100%
       
Revenue 2.0 0.4 2.4  5.4 2.1 7.5
% mix 83% 17% 100%  72% 28% 100%

 

The move towards offering more forward contracts has evolved over time and reflecting on 2019 as the last “pre-covid” year, forward contracts only represented 10% of turnover.

Around 80% of the revenues were earned from three core currency parings (GBP:EUR; GBP:USD; and EUR:USD).

Solutions Revenues have been analysed below between transaction-based and fee-based.  This shows the evolution of the platform and its ability to secure long-term revenue streams.

Table 4a
In £ millions
Fee based revenue Transaction based revenue Total
revenues
H1-2022 1.7 4.6 6.3
H2-2021 0.9 2.4 3.3
H1-2021 0.1 0.2 0.3

 

Variable costs and gross profits

The elements of variable costs are shown in the table below, along with the gross profits and gross profit margins.

Table 5

 
 
In £ millions
Consumer and small business Corporates Large enterprises Sub-total White-label TOTAL
H1-2022
Transaction costs 1.3 2.7 - 4.0 0.1 4.1
Staff commissions 0.6 0.9 0.1 1.6 0.1 1.7
Affiliate costs 0.6 0.8 3.2 4.6 6.1 10.7
Total, H1-2022 2.5 4.4 3.3 10.2 6.3 16.5
Gross profit 5.2 5.9 2.9 14.0 0.8 14.9
Gross profit % 67% 58% 47% 58% 12% 47%

 

Table 5a

 
 
In £ millions
Consumer and small business Corporates Large enterprises Sub-total White-label TOTAL
H1-2021
Transaction costs 0.6 1.7 - 2.3 0.1 2.4
Staff commissions 0.5 0.6 - 1.1 0.1 1.2
Affiliate costs 0.4 0.6 0.2 1.2 1.8 3.0
Total, H1-2021 1.5 2.9 0.2 4.6 2.06.6
Gross profit 4.5 5.3 0.1 9.9 0.4 10.3
Gross profit % 75% 64% 37% 68% 18% 61%

 

H1-2022 witnessed Solutions and White-label contributing 43% of revenues (H1-2021: 16%) and 25% of Gross profits (H1-2021: 5%).

Marketing, branding and contribution

The Group has accelerated its marketing plans after pausing this during FY20 and FY21 when Covid posed greater uncertainties.  Cash costs include ad campaigns, pay-per-click and exhibition and similar events including those in the USA where the Group noticed considerable interest in particularly the Spend platform and the Group’s ability to sell this through its partnership with Metropolitan Commercial Bank.

Table 6 H1-2022 H1-2021
Marketing expenses (£ millions) 0.8 0.4
   
Contribution 14.1 9.9
Contribution margin 45% 59%

 

Staff costs

Staff costs, gross of capitalisation, were £8.8 million in H1-2022 against £7.3 million in H1-2021, and £7.7 million in H2-2021.  These costs were offset by:

- Capitalised software:   £2.0 million in total (H1-2021: £1.2 million, H2-2021: £1.8 million), with £0.6 million on contractors.

Amounts capitalised represent 19% of gross staff costs, consistent with FY21.  The Group investment strategy continues to accelerate and focus on new and enhanced product design as has been commented on in the CEO’s Report.

Headcount numbers have moved from 258 as at 30 June 2021 to 266 as at 30 June 2022, below the rate of increase in revenue for the period, and at 31 August 2022 they stood at 274.

The average number of engineering contractors per month in H1-2022 was 14 (H1-2021: 7).  As previously reported, Equals is accelerating product development as fast as resource access allows the Group to do in a tight labour market.

Professional fees and Compliance costs

Owing to an increasing cross-industry compliance burden, the Group has chosen to report compliance and similar costs separately from other professional fees.  Compliance costs, including onboarding systems, have risen due to a combination of greater business activity and the Group’s desire to fast-track business applications but not at the expense of quality.  Professional fees have risen in line with trends widely reported in the national press.

Property, insurance and office costs

Renegotiation of office leases has led to lower passing rents which benefit the Group’s cashflows but not the EBITDA as such rents are accounted for under IFRS-16.  Utilities, rates, and insurance charges have however risen by an aggregate of 19% over H2-2021, although there are 13% lower than in H1-2021.

Separately reported items

Separately Reported Items are large, non-recurring items identified by management.  There were no Separately Reported Items in the period.

Amortisation and depreciation

Amortisation and depreciation for the period were £2.9 million (H1-2021: £2.1 million) and £0.6 million (H1-2021: £0.7 million) respectively.

Operating result

The Group made a profit before taxation of £0.9 million for the period, compared to a loss of £2.2 million for the period H1-2021.

Taxation, incorporating R&D credits

The Group’s taxation charge includes both corporation tax, deferred tax, and R&D credits.  The Group has recognised a net tax charge of £37k (H1-2021: £1,075k net tax credit) of which £40k (H1-2021: £319k) relates to an estimated R&D tax credit repayment claim for the six months to 30 June 2022.

Result after taxation

The result after taxation was a profit of £848k against a loss in H1-2021 of £1,172k and a full year loss in 2021 of £2,262k.

Earnings per share

Both basic and diluted EPS went into the positive, with basic EPS rising to 0.38pence (H1-2021: negative, 0.70pence) and diluted EPS rising to 0.36pence (H1-2021: negative, 0.70pence).

B: Balance sheet

At 30 June 2022, the Group considers some of the key items on the balance sheet to be:

  • £16.5 million of cash at bank (30 June 2021: £10.1 million)
  • £1.8 million CBILS loan (repaid in full in August 2022)
  • £0.3 million deferred consideration payable but settled after the period end.

Table 7 - Balance sheet

As at
30 Jun 2022
As at
30 Jun 2021
As at
31 Dec 2021
 £’000s  £’000s £’000s
       
IFRS 16 assets, less IFRS 16 liabilities (976)   (364) (388)
Other non-current assets (other than deferred tax) 31,618   35,519 32,217
 30,642   35,155 31,829
       
Liquidity (per Table 9) 12,825   7,316 10,739
Trade debtors and accrued income 4,244   3,508 3,638
R&D rebates 438   1,687 398
Prepayments 1,411   1,076 998
Deposits and sundry debtors 190   396 329
Inventory of card stock 148   217 168
Accounts payable (2,315)   (2,051) (1,549)
Affiliate commissions (2,905)   (1,303) (1,945)
PAYE, staff commissions etc. (1,824)   (1,808) (1,884)
Other accruals and other creditors (1,412)   (1,151) (1,349)
 10,800   7,887 9,543
    
Earn-out balances due (Table 16)
Implied interest thereon
(304)
1
  (1,835)
350
(1,683)
63
 (303)   (1,485) (1,620)
Net corporation and deferred tax 1,148   208 888
Net value of forward contracts 511   (31) 511
 1,356   (1,308) (221)
       
NET SHAREHOLDER FUNDS 42,798   41,734 41,151
       
Retained earnings at 1 January (24,590)   (22,259) (22,259)
Earnings for the year 675   (1,251) (2,424)
Amount attributable to the exercise of share options -   - 93
Retained earnings at 31 December (23,915)   (23,510) (24,590)
       
Non-Controlling interest at 1 January 263   101 101
Earnings for year 173   79 162
Non-Controlling interest at 31 December 436   180 263
       
Share capital, share premium 55,212   54,836 55,011
Other reserves 11,065   10,228 10,467
 66,277   65,064 65,478
       
CAPITAL AND RESERVES 42,798  41,734 41,151

 

 Non-controlling Interest

The profit for H1-2022 includes £173k profit in respect of the Non-Controlling Interest of the Equals Connect business acquired in 2019 (H1-2021: £79k).

Off balance sheet items: client monies

As at 30 June 2022 the Group held client monies of £272.0 million in off balance sheet bank accounts (H1-2021: £170.4 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 H1-2022.

Earn-outs

The table below shows the financial position relating to acquisitions in and after FY19.

Table 8 – EARNOUTS

  Hermex Casco Effective Total
Acquisition date 09.08.2019 19.11.2019 15.10.2020
 £’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 H1-2021 - (741) (62) (803)
Paid during H2-2021 - - (306) (306)
Further change in consideration - 46 - 46
Gross Outstanding at 31.12.2021 - 601 1,082 1,683
Paid during H1 - 2022 - (601) (779) (1,380)
Gross Outstanding at 30.06.2022 - - 303 303
 
Paid during Q3-2022 - - (303) (303)
    
Maximum consideration 2,000 3,725 1,575 7,300
Total consideration 2,000 3,075 1,575 6,650
     

 

CASH FLOW

Table 9 - Cash flow

£000’s H1-2022 H1-2021
Adjusted EBITDA after rent 4,497  1,034
 - Cash incurred separately reported items -  (616)
 - Internally capitalised staff costs (2,051)  (1,191)
Internally capitalised IT costs (164)  (148)
 - Purchase of other intangibles (307)  (27)
 - Purchase of property, plant, equipment (122)  (40)
Add: Working capital movement 2,875  1,795
“Operational” cashflows 4,728 807
Cash for acquisitions/ earn-outs (1,380)  (803)
External funding   
  Repayment of CBILS loan (200)  -
  Cash raised from issue of equity 200  46
NET CASH FLOWS 3,348  50
Balance at start of period 13,104  10,032
Balance at end of period 16,452  10,082
    
Number of shares in issue 180,712,473  180,045,807
Cash per share (in pence) 9.1  5.6
   

 

Table 10 – LIQUIDITY

 H1-2022 H1-2021 FY-2021
£000’S £000’S £000’S
Cash at bank 16,452 10,083 13,104
Balances with liquidity providers 1,499 2,553 1,675
Pre-funded balances with card provider 884 1,435 1,615
Gross liquid resources 18,835 14,071 16,394
    
Customer balances not subject to safeguarding (4,210) (4,755) (3,655)
CBILS loan (1,800) (2,000) (2,000)
 (6,010) (6,755) (5,655)
    
Net position 12,825 7,316 10,739

 

 

Richard Cooper
Chief Financial Officer
7 September 2022

 

INTERIM CONSOLIDATED statement OF COMPREHENSIVE INCOME
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

Period end
30 June 2022
Unaudited
Period end
30 June 2021
Unaudited
 Year end 31
December
2021
Audited
 Note £000 £000  £000
       
       
Revenue on currency transactions  28,505  14,046  38,424
Banking revenue  2,868  2,859  5,667
Revenue 2 31,373  16,905  44,091
Direct costs 2 (16,507)  (6,589)  (19,855)
Gross profit  14,866  10,316  24,236
       
Administrative expenses 3 (10,314)  (9,602)  (18,715)
Depreciation  (632)  (733)  (1,398)
Amortisation charge  (2,858)  (2,135)  (5,812)
Impairment charge 4 -  -  (1,638)
Total operating expenses  (13,804)  (12,470)  (27,563)
    
Operating profit / (loss) 1,062  (2,154)  (3,327)
    
Finance costs 8 (177)  (93)  (490)
Profit / loss before tax  885  (2,247)  (3,817)
      
Tax (charge)/credit 5 (37)  1,075  1,555
Profit / loss after tax  848  (1,172)  (2,262)
Memo: Profit / loss is attributable to:       
Owners of Equals Group Plc  675  (1,251)  (2,424)
Non-controlling interest  173  79  162
      
Other comprehensive income:       
Exchange differences arising on translation of foreign operations  1  -  -
  849  (1,172)  (2,262)
Profit / loss per share       
Basic  0.38p  (0.70)p  (1.35)p
Diluted  0.36p  (0.70)p  (1.35)p

All income and expenses arise from continuing operations.

 

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

  As at
30 June 2022
Unaudited
As at
30 June 2021
Unaudited
 As at
31 December
2021
Audited
 Note £000 £000  £000
ASSETS       
Non-current assets       
Property, plant and equipment  1,193  1,439  1,257
Right of use assets 4,067  5,247  4,874
Intangible assets and goodwill  30,425  34,082  30,960
Deferred tax assets  1,287  230  949
  36,972  40,998  38,040
Current assets       
Inventories  148  217  168
Trade and other receivables  8,228  9,096  8,256
Current tax assets  439  1,687  397
Derivative financial assets  2,593  3,019  2,593
Cash and cash equivalents  16,452  10,082  13,104
  27,860  24,101  24,518
TOTAL ASSETS 64,832  65,099  62,558
       
EQUITY AND LIABILITIES       
Equity attributable to equity holders      
Share capital 6 1,807  1,787  1,793
Share premium 6 53,405  53,049  53,218
Share based payment reserve  2,455  1,619  1,858
Other reserves  8,610  8,609  8,609
Retained deficit  (23,915)  (23,510)  (24,590)
Equity attributable to owners of Equals Group Plc  42,362  41,554  40,888
Non-controlling interest  436  180  263
42,798  41,734  41,151
 
Non-current liabilities
     
Borrowings 7 1,600  1,800  1,600
Lease liabilities 4,224  5,164  4,484
Deferred tax liabilities  -  -  -
  5,824  6,964  6,084
 
Current liabilities
     
Borrowings 7 200  200  400
Trade and other payables  12,970  12,704  12,002
Current tax liabilities  139  -  61
Lease liabilities 819  447  778
Derivative financial liabilities  2,082  3,050  2,082
  16,210  16,401  15,323
TOTAL EQUITY AND LIABILITIES  64,832  65,099  62,558

 

 

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

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 2021 1,78653,0031,402(22,259)8,60942,54110142,642
         
(Loss) / income for the period- - - (1,251) - (1,251) 79 (1,172)
Other comprehensive income:         
Items that will not be reclassified subsequently to profit or loss:         
Exchange differences arising on translation of foreign operations - - - - - - - -
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
         
(Loss) / income for the period - - - (1,173) - (1,173) 83 (1,090)
Other comprehensive income:         
Items that will not be reclassified subsequently to profit or loss:         
Exchange differences arising on translation of foreign operations - - - - - - - -
Other items         
Share based payment charge - - 54 - - 54 - 54
Movement in deferred tax on share-based payment charge - - 278 - - 278 - 278
Share options exercised in year - - (93) 93 - - - -
New shares issued 6 169 - - - 175 - 175
At 31 December 2021 1,793 53,218 1,858 (24,590) 8,609 40,888 263 41,151
         
Income for the period and total comprehensive (loss) / income - - - 675 - 675 173 848
Other comprehensive income:         
Items that will not be reclassified subsequently to profit or loss:         
Exchange differences arising on translation of foreign operations - - - - 1 1 - 1
Other items         
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
         

 

Other reserves comprise:  
Merger reserve Arising on reverse acquisition from Group reorganisation.
Contingent consideration reserve
Foreign currency reserve
Arising on equity based contingent consideration on acquisition of subsidiaries.
Arising on translation of foreign operations

 

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

 Six month period ended
30 June 2022
Unaudited
 Six month period ended
30 June 2021
Unaudited
Six month period ended
31 December 2021
Audited
 £000  £000 £000
Operating Activities
Profit / loss for the period 885 (2,247)  (1,570)
Adjustments for:      
Depreciation 632  733  665
Amortisation 2,858  2,135  3,677
Impairment -  -  1,638
Share based payment charge 259  217  55
(Increase) / decrease in trade and other receivables (188)  (351)  3,965
Decrease /in net derivative financial assets / liabilities -  -  (4,898)
Increase / (decrease) in trade and other payables 1,561  2,210  426
Increase / decrease in derivative financial liabilities -  -  (968)
Decrease in inventories 20  (23)  49
Finance costs 177  93  397
Net cash inflow 6,204  2,767  3,436
      
Tax receipts -  -  1,367
     
Net cash inflow from operating activities 6,204  2,767  4,803
     
Cash flows from investing activities      
Acquisition of property, plant and equipment (122)  (40)  (38)
Acquisition of intangibles (2,323)  (1,367)  (2,193)
Deferred consideration on acquisition of subsidiary -  (803)  803
Acquisition of subsidiary, net of cash acquired -  -  -
Net cash used in investing activities (2,445)  (2,210)  (1,428)
      
Cash flows from financing activities      
Principal elements of lease payments (297)  (446)  (426)
Interest paid on finance lease (82)  (97)  (97)
Interest paid (33)  (10)  (4)
Repayment of borrowings (200)  -  -
Proceeds from issuance of ordinary shares 201  46  174
Net cash used in financing activities (411)  (507)  (353)
      
Net increase in cash and cash equivalents 3,348  50  3,022
Cash and cash equivalents at the beginning of the period 13,104  10,032  10,082
Cash and cash equivalents at end of the period 16,452  10,082 13,104

 

2020

Interim Results

07 September 2022

‘Significant revenue growth, record Adjusted EBITDA, return to statutory profit and strong balance sheet ’

Equals (AIM: EQLS), the fintech payments group focused on the SME marketplace, announces its interim results for the six months ended 30 June 2022 (the ‘period’ or ‘H1-2022’) and an update on trading for the period from 1 July 2022 to 5 September 2022 (‘Q3-2022’).

Download

These Results are available in PDF format.
To download please click here

To download the Results Presentation click here

H1-2022: Financial Summary

 H1-2022
£ millions
 
H1-2021
£ millions
Change
% ***
Underlying transaction values 4,169 2,434 +71%
 
Revenue 31.4 16.9 +86%
   
Gross profit 14.9 10.3 +44%
 
Contribution 14.1 9.9 +42%
 
Adjusted EBITDA* 4.9 1.6 +203%
 
Operating Profit /(Loss) 1.1 (2.2)
 
Profit / (loss) after Taxation and R&D credits
 
0.8 (1.2)
EPS (Basic, in pence) 0.38 (0.70)
 
Operational** cash in/(out) flows 4.7 0.8
 
Cash at bank 16.5 10.1 +63%

 

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.
** Operational cashflows are before earn-outs and R&D credits.
***Percentages are calculated based on underlying rather than rounded figures.

 

H1-2022: Financial Highlights

  • Record revenue performance with an 86% increase to £31.4 million (H1-2021: £16.9 million) with £6.3 million derived from the Solutions platform (H1-2021: £0.3 million)
  • 44% increase in Gross profit to £14.9 million (H1-2021: £10.3 million)
  • 203% increase in Adjusted EBITDA* to £4.9 million (H1-2021: £1.6 million) with £1.8 million contribution from Q1-2022 and £3.1 million in Q2-2022 (Q1-2021: £1.4 million; Q2-2021: £0.2 million)
  • Statutory profit achieved with statutory PBT at £0.9 million (H1-2021: loss of £2.2 million)
  • Basic EPS at 0.38 pence against a loss per share of 0.70 pence in H1-2021
  • Cash per share increased 62.5% to 9.1 pence (30 June 2021: 5.6 pence)

H1-2022: Operational and Product Highlights

  • Continued focus on sales and marketing to corporate (B2B/SME) customers driving growth
  • Hiring of highly experienced Chief Commercial Officer (‘CCO’) plus expansion of revenue generating headcount in sales and marketing teams
  • Direct integration into SEPA enabling rapid transactional capability in Euros
  • Equals Money cards live on new platform supporting physical and virtual cards with 21-currency capabilities
  • More investment into compliance via automation and hiring experienced staff
  • Progressed people agenda with 360 appraisals and staff retention measures in difficult labour market

Q3-2022 Trading (1 July 2022 to 5 September 2022) and Outlook

  • Strong performance continued with revenues of £13.3 million in the period, an increase of 55% over the same period in 2021
  • Year-to-date revenue of £44.7 million, which already exceeds full-year performance in 2021
  • Revenues per day of £289k, compared to £187k in the same period in 2021
  • Continued growth in Solutions revenues at £3.1 million compared to £1.1 million in same period in 2021
  • Positive distributable reserves allowing the Board to consider a future dividend policy
  • Cash generation allowed the CBILS loan of £1.8 million to be repaid in full in August 2022
  • Strong cash position permits further working capital to drive the card business, platform investments, and strategic acquisitions

Commenting on the Interim Results, Ian Strafford-Taylor, CEO of Equals Group plc, said:

“This is an outstanding set of results with record revenue and EBITDA cementing our extremely successful transition into cash generation and, ultimately, a return to the first statutory profit since 2018.

“It also reflects the three-year investment cycle into platform, connectivity and compliance which, alongside our operational pivot towards corporate customers, has enabled the business to go from strength to strength.  Our performance has of course been delivered by the hard work and dedication of every Equals team member who I am immensely proud of and, on behalf of the Board, would like to thank for their continued support and exceptional work ethic.

“Trading in Q3-2022 has continued to be robust, despite global economic uncertainty and inflationary pressures, with strong growth over the same period last year.  We continue to see an increase in fee-based revenues to complement our transactional and FX revenues, which is part of our overall strategy for diversifying and de-risking our earnings streams.  Based on these strong results and our current trading performance, we look to the future with increased confidence and remain in line with 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://webcasting.buchanan.uk.com/broadcast/62c3e636fb4bba516c453314.  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.

 

 

For more information, please contact:

Equals Group plc  
Ian Strafford-Taylor, CEO
Richard Cooper, CFO
Tel: +44 (0) 20 7778 9308
www.equalsplc.com
 
Canaccord Genuity (Nominated Adviser & Broker) 
Max Hartley / Georgina McCooke
 
Tel: +44 (0) 20 7523 8150
 
 
Buchanan (Financial Communications)  
Henry Harrison-Topham / Steph Whitmore / Toto Berger
[email protected]
Tel: +44 (0) 20 7466 5000
www.buchanan.uk.com

 

 

Chief Executive Officer’s Report

SUMMARY

The Group has delivered record-breaking revenue and Adjusted EBITDA performance in H1-2022, leading to a first reported statutory profit and positive EPS.  The quantum of underlying transactions through the Group’s platforms increased by 71%.  In addition, the value of ‘deposits’, meaning loads on cards and deposits through the banking platform, rose by 55%.

£ millions

Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022
Transaction value* 1,091 1,343 1,878 2,135 1,980 2,189
Deposit/Load value 292 430 495 509 515 607

*Q4-2021shown here excludes the £114 million from the one-off material trade announced on 28 October 2021.

Revenues rose by 86% in H1-2022 to £31.4 million (H1-2021: £16.9 million).  This growth was broad-based with all product lines performing well.  The Group continues to focus on corporate (B2B/SME) customers and saw very strong revenue growth in this sector in H1-2022.

Revenues from travel products, despite recovering strongly from the impact of Covid-19, represented a modest 10.4% of overall revenues in Q2-2022 and 8.9% for the whole of H1-2022.

Revenue from Solutions, the Group’s platform that targets larger corporates, led the way with strong growth and a healthy pipeline of new customers.  Additionally, the Group’s corporate expenses product, Equals Spend, reported strong growth along with Equals Connect, the Group’s white-label business.  Further detail on the revenue mix is included in the CFO’s Report.

Revenue* by quarter, in £ millions

 

 Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022
Solutions - 0.3 1.5 1.8 2.8 3.5
White-Label 0.8 1.6 2.2 3.2 3.3 3.8
Other 6.1 6.4 7.2 7.8 7.1 8.1
Total Non-Travel 6.9 8.3 10.9 12.8 13.2 15.4
Travel 1.2 0.6 0.9 0.9 1.0 1.8
 8.1 8.8 11.9 13.8 14.2 17.2
Material Trade - - - 1.5 - -
Total 8.18.811.915.314.217.2

 

Adjusted EBITDA (before share option charges) in H1-2022 increased to £4.9 million from £1.8 million, with £3.1 million being earned in Q2-2022.

The confidence in Equals’ performance and ability to generate cash led the Group to repay, in full, the outstanding balance (totalling £1.8 million) of the CBILS loan in August 2022.  With interest rates continuing to rise, this action is immediately accretive for EPS.

OPERATING REVIEW

Focus on growth

Given the product innovations Equals has achieved, the Group’s priority is to now overlay its platform developments with an enhanced Sales and Marketing approach to drive further growth.  The essential building blocks to achieve this are:

  • a single CRM system across the Group, so all customer interaction is captured in one place;
  • up-skilling the sales and marketing teams through training and selected hiring; and,
  • a data science and AI team focusing on sales and customer data to further assist the sales and marketing teams.

Equals’ CRM solution, HubSpot, was initiated in 2021 and in H1-2022 it has seen further refinement of how it is used.  Further work on extracting maximum value from HubSpot will continue throughout 2022 and beyond utilising dedicated internal ‘power users’ and providing training and facilitation.

The Group’s data science team is now fully staffed and has been concentrating on putting in place the data warehouse infrastructure needed to provide both repetitive and bespoke data reporting.  The benefits of this are now flowing through with strong measurement of key KPIs and more insights into customer acquisition and retention.

In keeping with the overall strategy of the Group, the focus for growth is on the B2B customer base.  B2B customer acquisition is heavily reliant on the outbound sales function augmented by and integrated with a coherent digital marketing strategy and content production.  This contrasts with B2C customer acquisition, where above-the-line (‘ATL’) marketing such as TV and billboard advertisements augmented by digital marketing is the driving force.  Hence our growth strategy is directed towards improving our sales capabilities with support from advanced data science and targeted marketing.

One sales challenge for Equals is managing the transition from being a product-led business to a platform-led business.  Previously, the Group has sold its products:  International Payments, Cards and Current Accounts, using largely separate sales teams and marketing strategies.  As Equals moves forward, it will be selling:

  • Equals Money to the SME customer base, and
  • Equals Solutions to the larger B2B customers.

The transition from product to platform differentiates Equals from traditional FX businesses, as the Group can compete not just on FX rates, but also on platform capabilities and service.

Equals strengthened its sales and marketing leadership by the appointment, announced on 17 May 2022, of Tom Kiddle as Chief Commercial Officer.  Tom, who started at the end of H1-2022, has a strong background in the B2B payments industry having previously held key positions at Travelex, Western Union and most recently at World First.  Since Tom’s arrival, and utilising Equals’ enhanced data capabilities, the Group has already refined many aspects of its go-to-market strategy and has more changes planned for the balance of 2022 whilst planning its targets and strategy for 2023.

Focus on product development

 Unified platform

H1-2022 focused on the further development of the Equals Money platform for B2B customers.

The platform incorporates the payments and cards products of the Group underpinned by an ‘own-name multi-currency IBAN’ allowing a business to run one account supporting multiple currencies and balances whilst being payment agnostic between bank transfer and cards.  This is the key strategic vision for the Group to simplify money movement for business customers.

The Equals platform is built to be ‘evergreen’ in utilisation of technology and has been assembled with scalability at its core, placing the Group in a strong position for the future.

Payment infrastructure, ‘Boxes’ operating system

The Equals platform can provide each B2B customer with an ‘own name multi-currency IBAN’, an account in their own name denoted by a unique IBAN (‘International Bank Account Number’) which supports multiple currencies.

This is a key differentiator from Banks who provide one account per currency, each with a unique IBAN.  As the account is in the name of the customer, a so-called ‘first party’ account, this allows more use-cases than payments into a ‘pooled account’ from a compliance perspective.  Furthermore, having one IBAN for all currencies enables a customer to provide one single account identifier to all its customers and suppliers, thereby simplifying both sales and procurement processes.

Providing own-name multi-currency accounts required a combination of third-party integrations to partner Banks and SWIFT overlaid with smart technology.  The in-house operating system used by Equals to support the platform is referred to as ‘Boxes’.  This proprietary technology allows Equals to offer a highly flexible platform supporting multiple accounts and sub-accounts bespoke to the customer.

The Boxes infrastructure was developed further in H1-2022 to provide key functionality including:

  • real-time running balances;
  • statements; and,
  • enhanced reporting for customers.

In addition, Equals directly integrated into the SEPA (Single European Payments Area) network, providing instant movement of Euros in and out of the Equals payment infrastructure.  Further enhancements will be rolled out in H2-2022 including enhanced bulk payments capabilities and the capability to offer IBAN and Boxes functionality via API, thereby allowing more sophisticated customers to directly integrate with the Equals platform and support white-label opportunities.

Card Products

B2B customers increasingly need the flexibility to pay suppliers via cards as well as traditional ‘wire-transfer’, particularly in the e-commerce space where providers such as Google and Amazon will only accept payments via a card.  The Equals Money platform was conceived recognising this need and therefore excellence in card issuance, processing and technology is core to the platform.

Development of the Group’s card infrastructure has continued in H1-2022 to replace legacy platforms with a single platform built to power the Equals card products for the medium term.

This platform provides the base from which a strong pipeline of customer-facing features will deployed in H2-2022 including the launch of the new Equals Money card which is multi-currency, can be both virtual and physical, can be prepaid or debit, are live in Apple Pay and have many more features and capabilities.

Focus on Compliance

The Group has a strong compliance culture and views its capabilities as a strategic asset and competitive advantage.  Efficient compliance is essential to optimisation of revenues as any delays to new business onboarding can lead to increased customer frustration and possibly abandonment.  Ensuring the process of becoming a customer is as efficient as possible whilst maintaining high standards of compliance requires the levels of investment made in H1-2022.  This investment is targeted at both automation where possible, of the compliance processes combined with adding skilled headcount to process the non-standard and exceptional items.

Compliance requires strong control at the onboarding stage augmented by ongoing monitoring and hence the Group’s systems investment is targeted at onboarding processes and transaction monitoring.

Equals hired a Head of Compliance in mid-2021, and since then, the Group has been consistently upgrading its staff and increasing the headcount as the business expands.  Equals has recruited a new, highly experienced MLRO (‘Money Laundering Reporting Officer’) joining the business in H2-2022, which will further bolster its relationships with the Group’s regulators and banks.  These hires supplemented an already an exceptionally skilled and commercially focused team.

Focus on Employees

The labour market in the UK continues to be challenging both for hiring talent and for staff retention.  The Group introduced various measures in 2021 to tackle these issues including share ownership and LTIP schemes and plans to repeat this process in 2022.  In addition, the Group paid a mid-year cost of living award and other bonuses to staff in July 2022 totalling £0.3 million, which is fully accrued in the Group’s interim financial statements.

Whilst the Group is growing rapidly, it retains a strong cost-control culture, and it balances efficiency gains it yields from its engineering investments with the priority to achieve strong growth.  The Group therefore expects overall staff numbers to continue to rise slowly with most increases coming in direct revenue generation roles or compliance.  Given the strong operational gearing of Equals, any increase in headcount and overall cost-base is expected to be at a much lower rate than growth in transactions and revenues.

Focus on ESG

Equals wholeheartedly embraces ESG initiatives and takes Equality, Diversity, and Inclusivity (‘EDI’) extremely seriously.  The Group’s EDI strategy, which covers not only employees but also customers, includes an internal EDI network populated with elected representatives and regular employee surveys.  This is a key objective for all Executive Committee members and forms part of their appraisal.

FUTURE PLANS AND OPPORTUNITIES

The key strategic vision for the Group continues to be the simplification of money movement for business customers.  Equals achieves this through its B2B platforms - Equals Money being targeted at the SME base and Equals Solutions at larger corporate opportunities.  The Group’s growth potential is extremely 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 will be enhanced further by the developments planned in the Group’s technical roadmap.

Equals will continue to look for external growth opportunities and can do so with a strong balance sheet and cash position.  The Group is examining overseas expansion beyond its current predominantly UK-centric customer base given the portability of its platforms and will also take a considered strategic approach to acquisitions.

Global Macro-Economic environment

The global economy faces serious challenges stemming from the conflict in Ukraine and rising inflation and interest rates in major economies.  To date, Equals has performed resiliently despite these conditions and continues to grow strongly as can be seen from today’s H1-2022 results and Q3-2022 trading update.  However, the Board continues to monitor the situation closely.

Q3-2022 trading and Outlook

Q3-2022 has continued the strong revenue generation seen in H1-2022 with revenue for the period from 1 July 2022 to 5 September 2022 being £13.3 million, representing a 55% increase on the same period in 2021.

Equals has a strong outlook resulting from the investments it has made to create a payments platform. Further investments made in compliance, onboarding and user experience means that the rich functionality of the platform is made easily accessible to current and potential customers.  Finally, advances made in sales, marketing and data mean that Equals now sells its products and platform more efficiently.  Accordingly, the Board looks forward to the future with increased confidence and the Group remains in line with expectations for the full year.

 

 

Ian Strafford-Taylor
Chief Executive Officer
7 September 2022

 

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 2022.

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

Table 1 - Income and Expenditure account

£000’sH1-2022 H1-2021 Change
Revenue 31,373 16,905 14,468
 
Gross profit 14,866 10,317 4,549
Marketing costs (790) (410) (380)
Contribution 14,076 9,907 4,169
 
Net staff costs (6,620) (6,104) (516)
Net property & office costs (430) (490) 60
Net IT & telephone costs (925) (817) (108)
Professional fees (560) (594) 34
Compliance costs (358) (251) (107)
Travel and other expenses (331) (52) (279)
Operating costs (9,224) (8,308) (916)
 
Adjusted EBITDA*4,8521,599 3,253
    
Separately reported items -(616) 616
Share option charges (290)(217) (73)
    
EBITDA4,562766 3796
    
Memo: Adjusted EBITDA after rent4,4971,0343,463

 

Group revenues rose by 86%, Gross profits by 44%, Contribution by 42%, whilst Operating costs increased by 11% leading to Adjusted EBITDA increasing by 203% and EBITDA by 495%.

Ongoing growth is witnessed by comparing revenues in H1-2022 at £31.4 million with £25.7 million in H2-2021 (excluding the one-off revenue of £1.5 million earned from the material trade reported in October 2021), thus a 22% half-on half increase.

To continue the theme of comparing the last two half years, I present below a bridge from the Adjusted EBITDA in H2-2021 to H1-2022, which shows a 13% increase on the like-for-like position:

Table 2 – Adjusted EBITDA bridge from H2-2021 to H1-2022

H2-2021 Adjusted EBITDA     5,174
    
Less: Gross profits from material trade  (812)
 Property rates rebate  (80)
Like-for-like H2-2021 Adjusted EBITDA 4,282
    
Add: 15% uplift in contribution H1-2022  1,868
    
Less: 15% increase in staff costs, reflecting higher planned headcount along with pay adjustments averaging 8%
 
  
(885)
 46% increase in professional and compliance costs, much of which is attributable to onboarding more clients
 
 (290)
 Increase in travel and exhibition costs
 
 (80)
 Increase in property utility costs and rates  (44)
H1-2022 Adjusted EBITDA 4,852
    
Uplift over like-for-like H2-2021   570
 
% uplift over like-for-like H2-2021
   
13%
    

 

Revenue

A split of revenues by both customer group and platform, clearly shows both the strong and growing emergence of Solutions and very significant migration away from the legacy travel products. 

Table 3, H1-2022

Revenue in £ millions Consumer and small business Corporates Large
enterprises
Sub-total White-label TOTAL
H1-2022
International payments 2.0 7.1 - 9.1 7.1 16.2
Cards 2.3 3.3 - 5.6 - 5.6
Banking 2.8 - - 2.8 - 2.8
Solutions - - 6.3 6.3 - 6.3
Travel cash 0.5 - - 0.5 - 0.5
Total, H1-2022 7.6 10.4 6.3 24.3 7.1 31.4
      
% Change*      
H1-22 vs H1-21 +29% +24% >2010% +67% +202% +86%

 

*based on underlying figures

Table 3a – H1-2021

 
Revenue in £ millions
Consumer and small business Corporates Large
enterprises
Sub-total White-label TOTAL
H1-2021
International payments 1.3 6.1 - 7.4 2.4 9.8
Cards 1.7 2.2 - 3.9 - 3.9
Banking 2.8 - - 2.8 - 2.8
Solutions - - 0.3 0.3 - 0.3
Travel cash 0.1 - - 0.1 - 0.1
Total, H1-2021 5.9 8.3 0.3 14.5 2.4 16.9

 

Taking a further look at International Payments, Table 4 below, shows the composition of transaction values and revenue across spot and forward contracts.

Table 4. White Label  Other

 

H1-2022 Spot Fwd Total  Spot Fwd Total
Transaction values 648.9 98.3 747.2  976.9 281.8 1,258.7
% mix 87% 13% 100%  78% 22% 100%
       
Revenue 5.7 1.4 7.1  6.7 2.3 9.0
% mix 81% 19% 100%  75% 25% 100%
       
H1-2021       
Transaction values 337.8 50.0 387.8  862.0 357.3 1219.3
% mix 87% 13% 100%  71% 29% 100%
       
Revenue 2.0 0.4 2.4  5.4 2.1 7.5
% mix 83% 17% 100%  72% 28% 100%

 

The move towards offering more forward contracts has evolved over time and reflecting on 2019 as the last “pre-covid” year, forward contracts only represented 10% of turnover.

Around 80% of the revenues were earned from three core currency parings (GBP:EUR; GBP:USD; and EUR:USD).

Solutions Revenues have been analysed below between transaction-based and fee-based.  This shows the evolution of the platform and its ability to secure long-term revenue streams.

Table 4a
In £ millions
Fee based revenue Transaction based revenue Total
revenues
H1-2022 1.7 4.6 6.3
H2-2021 0.9 2.4 3.3
H1-2021 0.1 0.2 0.3

 

Variable costs and gross profits

The elements of variable costs are shown in the table below, along with the gross profits and gross profit margins.

Table 5

 
 
In £ millions
Consumer and small business Corporates Large enterprises Sub-total White-label TOTAL
H1-2022
Transaction costs 1.3 2.7 - 4.0 0.1 4.1
Staff commissions 0.6 0.9 0.1 1.6 0.1 1.7
Affiliate costs 0.6 0.8 3.2 4.6 6.1 10.7
Total, H1-2022 2.5 4.4 3.3 10.2 6.3 16.5
Gross profit 5.2 5.9 2.9 14.0 0.8 14.9
Gross profit % 67% 58% 47% 58% 12% 47%

 

Table 5a

 
 
In £ millions
Consumer and small business Corporates Large enterprises Sub-total White-label TOTAL
H1-2021
Transaction costs 0.6 1.7 - 2.3 0.1 2.4
Staff commissions 0.5 0.6 - 1.1 0.1 1.2
Affiliate costs 0.4 0.6 0.2 1.2 1.8 3.0
Total, H1-2021 1.5 2.9 0.2 4.6 2.06.6
Gross profit 4.5 5.3 0.1 9.9 0.4 10.3
Gross profit % 75% 64% 37% 68% 18% 61%

 

H1-2022 witnessed Solutions and White-label contributing 43% of revenues (H1-2021: 16%) and 25% of Gross profits (H1-2021: 5%).

Marketing, branding and contribution

The Group has accelerated its marketing plans after pausing this during FY20 and FY21 when Covid posed greater uncertainties.  Cash costs include ad campaigns, pay-per-click and exhibition and similar events including those in the USA where the Group noticed considerable interest in particularly the Spend platform and the Group’s ability to sell this through its partnership with Metropolitan Commercial Bank.

Table 6 H1-2022 H1-2021
Marketing expenses (£ millions) 0.8 0.4
   
Contribution 14.1 9.9
Contribution margin 45% 59%

 

Staff costs

Staff costs, gross of capitalisation, were £8.8 million in H1-2022 against £7.3 million in H1-2021, and £7.7 million in H2-2021.  These costs were offset by:

- Capitalised software:   £2.0 million in total (H1-2021: £1.2 million, H2-2021: £1.8 million), with £0.6 million on contractors.

Amounts capitalised represent 19% of gross staff costs, consistent with FY21.  The Group investment strategy continues to accelerate and focus on new and enhanced product design as has been commented on in the CEO’s Report.

Headcount numbers have moved from 258 as at 30 June 2021 to 266 as at 30 June 2022, below the rate of increase in revenue for the period, and at 31 August 2022 they stood at 274.

The average number of engineering contractors per month in H1-2022 was 14 (H1-2021: 7).  As previously reported, Equals is accelerating product development as fast as resource access allows the Group to do in a tight labour market.

Professional fees and Compliance costs

Owing to an increasing cross-industry compliance burden, the Group has chosen to report compliance and similar costs separately from other professional fees.  Compliance costs, including onboarding systems, have risen due to a combination of greater business activity and the Group’s desire to fast-track business applications but not at the expense of quality.  Professional fees have risen in line with trends widely reported in the national press.

Property, insurance and office costs

Renegotiation of office leases has led to lower passing rents which benefit the Group’s cashflows but not the EBITDA as such rents are accounted for under IFRS-16.  Utilities, rates, and insurance charges have however risen by an aggregate of 19% over H2-2021, although there are 13% lower than in H1-2021.

Separately reported items

Separately Reported Items are large, non-recurring items identified by management.  There were no Separately Reported Items in the period.

Amortisation and depreciation

Amortisation and depreciation for the period were £2.9 million (H1-2021: £2.1 million) and £0.6 million (H1-2021: £0.7 million) respectively.

Operating result

The Group made a profit before taxation of £0.9 million for the period, compared to a loss of £2.2 million for the period H1-2021.

Taxation, incorporating R&D credits

The Group’s taxation charge includes both corporation tax, deferred tax, and R&D credits.  The Group has recognised a net tax charge of £37k (H1-2021: £1,075k net tax credit) of which £40k (H1-2021: £319k) relates to an estimated R&D tax credit repayment claim for the six months to 30 June 2022.

Result after taxation

The result after taxation was a profit of £848k against a loss in H1-2021 of £1,172k and a full year loss in 2021 of £2,262k.

Earnings per share

Both basic and diluted EPS went into the positive, with basic EPS rising to 0.38pence (H1-2021: negative, 0.70pence) and diluted EPS rising to 0.36pence (H1-2021: negative, 0.70pence).

B: Balance sheet

At 30 June 2022, the Group considers some of the key items on the balance sheet to be:

  • £16.5 million of cash at bank (30 June 2021: £10.1 million)
  • £1.8 million CBILS loan (repaid in full in August 2022)
  • £0.3 million deferred consideration payable but settled after the period end.

Table 7 - Balance sheet

As at
30 Jun 2022
As at
30 Jun 2021
As at
31 Dec 2021
 £’000s  £’000s £’000s
       
IFRS 16 assets, less IFRS 16 liabilities (976)   (364) (388)
Other non-current assets (other than deferred tax) 31,618   35,519 32,217
 30,642   35,155 31,829
       
Liquidity (per Table 9) 12,825   7,316 10,739
Trade debtors and accrued income 4,244   3,508 3,638
R&D rebates 438   1,687 398
Prepayments 1,411   1,076 998
Deposits and sundry debtors 190   396 329
Inventory of card stock 148   217 168
Accounts payable (2,315)   (2,051) (1,549)
Affiliate commissions (2,905)   (1,303) (1,945)
PAYE, staff commissions etc. (1,824)   (1,808) (1,884)
Other accruals and other creditors (1,412)   (1,151) (1,349)
 10,800   7,887 9,543
    
Earn-out balances due (Table 16)
Implied interest thereon
(304)
1
  (1,835)
350
(1,683)
63
 (303)   (1,485) (1,620)
Net corporation and deferred tax 1,148   208 888
Net value of forward contracts 511   (31) 511
 1,356   (1,308) (221)
       
NET SHAREHOLDER FUNDS 42,798   41,734 41,151
       
Retained earnings at 1 January (24,590)   (22,259) (22,259)
Earnings for the year 675   (1,251) (2,424)
Amount attributable to the exercise of share options -   - 93
Retained earnings at 31 December (23,915)   (23,510) (24,590)
       
Non-Controlling interest at 1 January 263   101 101
Earnings for year 173   79 162
Non-Controlling interest at 31 December 436   180 263
       
Share capital, share premium 55,212   54,836 55,011
Other reserves 11,065   10,228 10,467
 66,277   65,064 65,478
       
CAPITAL AND RESERVES 42,798  41,734 41,151

 

 Non-controlling Interest

The profit for H1-2022 includes £173k profit in respect of the Non-Controlling Interest of the Equals Connect business acquired in 2019 (H1-2021: £79k).

Off balance sheet items: client monies

As at 30 June 2022 the Group held client monies of £272.0 million in off balance sheet bank accounts (H1-2021: £170.4 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 H1-2022.

Earn-outs

The table below shows the financial position relating to acquisitions in and after FY19.

Table 8 – EARNOUTS

  Hermex Casco Effective Total
Acquisition date 09.08.2019 19.11.2019 15.10.2020
 £’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 H1-2021 - (741) (62) (803)
Paid during H2-2021 - - (306) (306)
Further change in consideration - 46 - 46
Gross Outstanding at 31.12.2021 - 601 1,082 1,683
Paid during H1 - 2022 - (601) (779) (1,380)
Gross Outstanding at 30.06.2022 - - 303 303
 
Paid during Q3-2022 - - (303) (303)
    
Maximum consideration 2,000 3,725 1,575 7,300
Total consideration 2,000 3,075 1,575 6,650
     

 

CASH FLOW

Table 9 - Cash flow

£000’s H1-2022 H1-2021
Adjusted EBITDA after rent 4,497  1,034
 - Cash incurred separately reported items -  (616)
 - Internally capitalised staff costs (2,051)  (1,191)
Internally capitalised IT costs (164)  (148)
 - Purchase of other intangibles (307)  (27)
 - Purchase of property, plant, equipment (122)  (40)
Add: Working capital movement 2,875  1,795
“Operational” cashflows 4,728 807
Cash for acquisitions/ earn-outs (1,380)  (803)
External funding   
  Repayment of CBILS loan (200)  -
  Cash raised from issue of equity 200  46
NET CASH FLOWS 3,348  50
Balance at start of period 13,104  10,032
Balance at end of period 16,452  10,082
    
Number of shares in issue 180,712,473  180,045,807
Cash per share (in pence) 9.1  5.6
   

 

Table 10 – LIQUIDITY

 H1-2022 H1-2021 FY-2021
£000’S £000’S £000’S
Cash at bank 16,452 10,083 13,104
Balances with liquidity providers 1,499 2,553 1,675
Pre-funded balances with card provider 884 1,435 1,615
Gross liquid resources 18,835 14,071 16,394
    
Customer balances not subject to safeguarding (4,210) (4,755) (3,655)
CBILS loan (1,800) (2,000) (2,000)
 (6,010) (6,755) (5,655)
    
Net position 12,825 7,316 10,739

 

 

Richard Cooper
Chief Financial Officer
7 September 2022

 

INTERIM CONSOLIDATED statement OF COMPREHENSIVE INCOME
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

Period end
30 June 2022
Unaudited
Period end
30 June 2021
Unaudited
 Year end 31
December
2021
Audited
 Note £000 £000  £000
       
       
Revenue on currency transactions  28,505  14,046  38,424
Banking revenue  2,868  2,859  5,667
Revenue 2 31,373  16,905  44,091
Direct costs 2 (16,507)  (6,589)  (19,855)
Gross profit  14,866  10,316  24,236
       
Administrative expenses 3 (10,314)  (9,602)  (18,715)
Depreciation  (632)  (733)  (1,398)
Amortisation charge  (2,858)  (2,135)  (5,812)
Impairment charge 4 -  -  (1,638)
Total operating expenses  (13,804)  (12,470)  (27,563)
    
Operating profit / (loss) 1,062  (2,154)  (3,327)
    
Finance costs 8 (177)  (93)  (490)
Profit / loss before tax  885  (2,247)  (3,817)
      
Tax (charge)/credit 5 (37)  1,075  1,555
Profit / loss after tax  848  (1,172)  (2,262)
Memo: Profit / loss is attributable to:       
Owners of Equals Group Plc  675  (1,251)  (2,424)
Non-controlling interest  173  79  162
      
Other comprehensive income:       
Exchange differences arising on translation of foreign operations  1  -  -
  849  (1,172)  (2,262)
Profit / loss per share       
Basic  0.38p  (0.70)p  (1.35)p
Diluted  0.36p  (0.70)p  (1.35)p

All income and expenses arise from continuing operations.

 

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

  As at
30 June 2022
Unaudited
As at
30 June 2021
Unaudited
 As at
31 December
2021
Audited
 Note £000 £000  £000
ASSETS       
Non-current assets       
Property, plant and equipment  1,193  1,439  1,257
Right of use assets 4,067  5,247  4,874
Intangible assets and goodwill  30,425  34,082  30,960
Deferred tax assets  1,287  230  949
  36,972  40,998  38,040
Current assets       
Inventories  148  217  168
Trade and other receivables  8,228  9,096  8,256
Current tax assets  439  1,687  397
Derivative financial assets  2,593  3,019  2,593
Cash and cash equivalents  16,452  10,082  13,104
  27,860  24,101  24,518
TOTAL ASSETS 64,832  65,099  62,558
       
EQUITY AND LIABILITIES       
Equity attributable to equity holders      
Share capital 6 1,807  1,787  1,793
Share premium 6 53,405  53,049  53,218
Share based payment reserve  2,455  1,619  1,858
Other reserves  8,610  8,609  8,609
Retained deficit  (23,915)  (23,510)  (24,590)
Equity attributable to owners of Equals Group Plc  42,362  41,554  40,888
Non-controlling interest  436  180  263
42,798  41,734  41,151
 
Non-current liabilities
     
Borrowings 7 1,600  1,800  1,600
Lease liabilities 4,224  5,164  4,484
Deferred tax liabilities  -  -  -
  5,824  6,964  6,084
 
Current liabilities
     
Borrowings 7 200  200  400
Trade and other payables  12,970  12,704  12,002
Current tax liabilities  139  -  61
Lease liabilities 819  447  778
Derivative financial liabilities  2,082  3,050  2,082
  16,210  16,401  15,323
TOTAL EQUITY AND LIABILITIES  64,832  65,099  62,558

 

 

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

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 2021 1,78653,0031,402(22,259)8,60942,54110142,642
         
(Loss) / income for the period- - - (1,251) - (1,251) 79 (1,172)
Other comprehensive income:         
Items that will not be reclassified subsequently to profit or loss:         
Exchange differences arising on translation of foreign operations - - - - - - - -
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
         
(Loss) / income for the period - - - (1,173) - (1,173) 83 (1,090)
Other comprehensive income:         
Items that will not be reclassified subsequently to profit or loss:         
Exchange differences arising on translation of foreign operations - - - - - - - -
Other items         
Share based payment charge - - 54 - - 54 - 54
Movement in deferred tax on share-based payment charge - - 278 - - 278 - 278
Share options exercised in year - - (93) 93 - - - -
New shares issued 6 169 - - - 175 - 175
At 31 December 2021 1,793 53,218 1,858 (24,590) 8,609 40,888 263 41,151
         
Income for the period and total comprehensive (loss) / income - - - 675 - 675 173 848
Other comprehensive income:         
Items that will not be reclassified subsequently to profit or loss:         
Exchange differences arising on translation of foreign operations - - - - 1 1 - 1
Other items         
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
         

 

Other reserves comprise:  
Merger reserve Arising on reverse acquisition from Group reorganisation.
Contingent consideration reserve
Foreign currency reserve
Arising on equity based contingent consideration on acquisition of subsidiaries.
Arising on translation of foreign operations

 

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

 Six month period ended
30 June 2022
Unaudited
 Six month period ended
30 June 2021
Unaudited
Six month period ended
31 December 2021
Audited
 £000  £000 £000
Operating Activities
Profit / loss for the period 885 (2,247)  (1,570)
Adjustments for:      
Depreciation 632  733  665
Amortisation 2,858  2,135  3,677
Impairment -  -  1,638
Share based payment charge 259  217  55
(Increase) / decrease in trade and other receivables (188)  (351)  3,965
Decrease /in net derivative financial assets / liabilities -  -  (4,898)
Increase / (decrease) in trade and other payables 1,561  2,210  426
Increase / decrease in derivative financial liabilities -  -  (968)
Decrease in inventories 20  (23)  49
Finance costs 177  93  397
Net cash inflow 6,204  2,767  3,436
      
Tax receipts -  -  1,367
     
Net cash inflow from operating activities 6,204  2,767  4,803
     
Cash flows from investing activities      
Acquisition of property, plant and equipment (122)  (40)  (38)
Acquisition of intangibles (2,323)  (1,367)  (2,193)
Deferred consideration on acquisition of subsidiary -  (803)  803
Acquisition of subsidiary, net of cash acquired -  -  -
Net cash used in investing activities (2,445)  (2,210)  (1,428)
      
Cash flows from financing activities      
Principal elements of lease payments (297)  (446)  (426)
Interest paid on finance lease (82)  (97)  (97)
Interest paid (33)  (10)  (4)
Repayment of borrowings (200)  -  -
Proceeds from issuance of ordinary shares 201  46  174
Net cash used in financing activities (411)  (507)  (353)
      
Net increase in cash and cash equivalents 3,348  50  3,022
Cash and cash equivalents at the beginning of the period 13,104  10,032  10,082
Cash and cash equivalents at end of the period 16,452  10,082 13,104

 

2019

Interim Results

07 September 2022

‘Significant revenue growth, record Adjusted EBITDA, return to statutory profit and strong balance sheet ’

Equals (AIM: EQLS), the fintech payments group focused on the SME marketplace, announces its interim results for the six months ended 30 June 2022 (the ‘period’ or ‘H1-2022’) and an update on trading for the period from 1 July 2022 to 5 September 2022 (‘Q3-2022’).

Download

These Results are available in PDF format.
To download please click here

To download the Results Presentation click here

H1-2022: Financial Summary

 H1-2022
£ millions
 
H1-2021
£ millions
Change
% ***
Underlying transaction values 4,169 2,434 +71%
 
Revenue 31.4 16.9 +86%
   
Gross profit 14.9 10.3 +44%
 
Contribution 14.1 9.9 +42%
 
Adjusted EBITDA* 4.9 1.6 +203%
 
Operating Profit /(Loss) 1.1 (2.2)
 
Profit / (loss) after Taxation and R&D credits
 
0.8 (1.2)
EPS (Basic, in pence) 0.38 (0.70)
 
Operational** cash in/(out) flows 4.7 0.8
 
Cash at bank 16.5 10.1 +63%

 

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.
** Operational cashflows are before earn-outs and R&D credits.
***Percentages are calculated based on underlying rather than rounded figures.

 

H1-2022: Financial Highlights

  • Record revenue performance with an 86% increase to £31.4 million (H1-2021: £16.9 million) with £6.3 million derived from the Solutions platform (H1-2021: £0.3 million)
  • 44% increase in Gross profit to £14.9 million (H1-2021: £10.3 million)
  • 203% increase in Adjusted EBITDA* to £4.9 million (H1-2021: £1.6 million) with £1.8 million contribution from Q1-2022 and £3.1 million in Q2-2022 (Q1-2021: £1.4 million; Q2-2021: £0.2 million)
  • Statutory profit achieved with statutory PBT at £0.9 million (H1-2021: loss of £2.2 million)
  • Basic EPS at 0.38 pence against a loss per share of 0.70 pence in H1-2021
  • Cash per share increased 62.5% to 9.1 pence (30 June 2021: 5.6 pence)

H1-2022: Operational and Product Highlights

  • Continued focus on sales and marketing to corporate (B2B/SME) customers driving growth
  • Hiring of highly experienced Chief Commercial Officer (‘CCO’) plus expansion of revenue generating headcount in sales and marketing teams
  • Direct integration into SEPA enabling rapid transactional capability in Euros
  • Equals Money cards live on new platform supporting physical and virtual cards with 21-currency capabilities
  • More investment into compliance via automation and hiring experienced staff
  • Progressed people agenda with 360 appraisals and staff retention measures in difficult labour market

Q3-2022 Trading (1 July 2022 to 5 September 2022) and Outlook

  • Strong performance continued with revenues of £13.3 million in the period, an increase of 55% over the same period in 2021
  • Year-to-date revenue of £44.7 million, which already exceeds full-year performance in 2021
  • Revenues per day of £289k, compared to £187k in the same period in 2021
  • Continued growth in Solutions revenues at £3.1 million compared to £1.1 million in same period in 2021
  • Positive distributable reserves allowing the Board to consider a future dividend policy
  • Cash generation allowed the CBILS loan of £1.8 million to be repaid in full in August 2022
  • Strong cash position permits further working capital to drive the card business, platform investments, and strategic acquisitions

Commenting on the Interim Results, Ian Strafford-Taylor, CEO of Equals Group plc, said:

“This is an outstanding set of results with record revenue and EBITDA cementing our extremely successful transition into cash generation and, ultimately, a return to the first statutory profit since 2018.

“It also reflects the three-year investment cycle into platform, connectivity and compliance which, alongside our operational pivot towards corporate customers, has enabled the business to go from strength to strength.  Our performance has of course been delivered by the hard work and dedication of every Equals team member who I am immensely proud of and, on behalf of the Board, would like to thank for their continued support and exceptional work ethic.

“Trading in Q3-2022 has continued to be robust, despite global economic uncertainty and inflationary pressures, with strong growth over the same period last year.  We continue to see an increase in fee-based revenues to complement our transactional and FX revenues, which is part of our overall strategy for diversifying and de-risking our earnings streams.  Based on these strong results and our current trading performance, we look to the future with increased confidence and remain in line with 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://webcasting.buchanan.uk.com/broadcast/62c3e636fb4bba516c453314.  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.

 

 

For more information, please contact:

Equals Group plc  
Ian Strafford-Taylor, CEO
Richard Cooper, CFO
Tel: +44 (0) 20 7778 9308
www.equalsplc.com
 
Canaccord Genuity (Nominated Adviser & Broker) 
Max Hartley / Georgina McCooke
 
Tel: +44 (0) 20 7523 8150
 
 
Buchanan (Financial Communications)  
Henry Harrison-Topham / Steph Whitmore / Toto Berger
[email protected]
Tel: +44 (0) 20 7466 5000
www.buchanan.uk.com

 

 

Chief Executive Officer’s Report

SUMMARY

The Group has delivered record-breaking revenue and Adjusted EBITDA performance in H1-2022, leading to a first reported statutory profit and positive EPS.  The quantum of underlying transactions through the Group’s platforms increased by 71%.  In addition, the value of ‘deposits’, meaning loads on cards and deposits through the banking platform, rose by 55%.

£ millions

Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022
Transaction value* 1,091 1,343 1,878 2,135 1,980 2,189
Deposit/Load value 292 430 495 509 515 607

*Q4-2021shown here excludes the £114 million from the one-off material trade announced on 28 October 2021.

Revenues rose by 86% in H1-2022 to £31.4 million (H1-2021: £16.9 million).  This growth was broad-based with all product lines performing well.  The Group continues to focus on corporate (B2B/SME) customers and saw very strong revenue growth in this sector in H1-2022.

Revenues from travel products, despite recovering strongly from the impact of Covid-19, represented a modest 10.4% of overall revenues in Q2-2022 and 8.9% for the whole of H1-2022.

Revenue from Solutions, the Group’s platform that targets larger corporates, led the way with strong growth and a healthy pipeline of new customers.  Additionally, the Group’s corporate expenses product, Equals Spend, reported strong growth along with Equals Connect, the Group’s white-label business.  Further detail on the revenue mix is included in the CFO’s Report.

Revenue* by quarter, in £ millions

 

 Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022
Solutions - 0.3 1.5 1.8 2.8 3.5
White-Label 0.8 1.6 2.2 3.2 3.3 3.8
Other 6.1 6.4 7.2 7.8 7.1 8.1
Total Non-Travel 6.9 8.3 10.9 12.8 13.2 15.4
Travel 1.2 0.6 0.9 0.9 1.0 1.8
 8.1 8.8 11.9 13.8 14.2 17.2
Material Trade - - - 1.5 - -
Total 8.18.811.915.314.217.2

 

Adjusted EBITDA (before share option charges) in H1-2022 increased to £4.9 million from £1.8 million, with £3.1 million being earned in Q2-2022.

The confidence in Equals’ performance and ability to generate cash led the Group to repay, in full, the outstanding balance (totalling £1.8 million) of the CBILS loan in August 2022.  With interest rates continuing to rise, this action is immediately accretive for EPS.

OPERATING REVIEW

Focus on growth

Given the product innovations Equals has achieved, the Group’s priority is to now overlay its platform developments with an enhanced Sales and Marketing approach to drive further growth.  The essential building blocks to achieve this are:

  • a single CRM system across the Group, so all customer interaction is captured in one place;
  • up-skilling the sales and marketing teams through training and selected hiring; and,
  • a data science and AI team focusing on sales and customer data to further assist the sales and marketing teams.

Equals’ CRM solution, HubSpot, was initiated in 2021 and in H1-2022 it has seen further refinement of how it is used.  Further work on extracting maximum value from HubSpot will continue throughout 2022 and beyond utilising dedicated internal ‘power users’ and providing training and facilitation.

The Group’s data science team is now fully staffed and has been concentrating on putting in place the data warehouse infrastructure needed to provide both repetitive and bespoke data reporting.  The benefits of this are now flowing through with strong measurement of key KPIs and more insights into customer acquisition and retention.

In keeping with the overall strategy of the Group, the focus for growth is on the B2B customer base.  B2B customer acquisition is heavily reliant on the outbound sales function augmented by and integrated with a coherent digital marketing strategy and content production.  This contrasts with B2C customer acquisition, where above-the-line (‘ATL’) marketing such as TV and billboard advertisements augmented by digital marketing is the driving force.  Hence our growth strategy is directed towards improving our sales capabilities with support from advanced data science and targeted marketing.

One sales challenge for Equals is managing the transition from being a product-led business to a platform-led business.  Previously, the Group has sold its products:  International Payments, Cards and Current Accounts, using largely separate sales teams and marketing strategies.  As Equals moves forward, it will be selling:

  • Equals Money to the SME customer base, and
  • Equals Solutions to the larger B2B customers.

The transition from product to platform differentiates Equals from traditional FX businesses, as the Group can compete not just on FX rates, but also on platform capabilities and service.

Equals strengthened its sales and marketing leadership by the appointment, announced on 17 May 2022, of Tom Kiddle as Chief Commercial Officer.  Tom, who started at the end of H1-2022, has a strong background in the B2B payments industry having previously held key positions at Travelex, Western Union and most recently at World First.  Since Tom’s arrival, and utilising Equals’ enhanced data capabilities, the Group has already refined many aspects of its go-to-market strategy and has more changes planned for the balance of 2022 whilst planning its targets and strategy for 2023.

Focus on product development

 Unified platform

H1-2022 focused on the further development of the Equals Money platform for B2B customers.

The platform incorporates the payments and cards products of the Group underpinned by an ‘own-name multi-currency IBAN’ allowing a business to run one account supporting multiple currencies and balances whilst being payment agnostic between bank transfer and cards.  This is the key strategic vision for the Group to simplify money movement for business customers.

The Equals platform is built to be ‘evergreen’ in utilisation of technology and has been assembled with scalability at its core, placing the Group in a strong position for the future.

Payment infrastructure, ‘Boxes’ operating system

The Equals platform can provide each B2B customer with an ‘own name multi-currency IBAN’, an account in their own name denoted by a unique IBAN (‘International Bank Account Number’) which supports multiple currencies.

This is a key differentiator from Banks who provide one account per currency, each with a unique IBAN.  As the account is in the name of the customer, a so-called ‘first party’ account, this allows more use-cases than payments into a ‘pooled account’ from a compliance perspective.  Furthermore, having one IBAN for all currencies enables a customer to provide one single account identifier to all its customers and suppliers, thereby simplifying both sales and procurement processes.

Providing own-name multi-currency accounts required a combination of third-party integrations to partner Banks and SWIFT overlaid with smart technology.  The in-house operating system used by Equals to support the platform is referred to as ‘Boxes’.  This proprietary technology allows Equals to offer a highly flexible platform supporting multiple accounts and sub-accounts bespoke to the customer.

The Boxes infrastructure was developed further in H1-2022 to provide key functionality including:

  • real-time running balances;
  • statements; and,
  • enhanced reporting for customers.

In addition, Equals directly integrated into the SEPA (Single European Payments Area) network, providing instant movement of Euros in and out of the Equals payment infrastructure.  Further enhancements will be rolled out in H2-2022 including enhanced bulk payments capabilities and the capability to offer IBAN and Boxes functionality via API, thereby allowing more sophisticated customers to directly integrate with the Equals platform and support white-label opportunities.

Card Products

B2B customers increasingly need the flexibility to pay suppliers via cards as well as traditional ‘wire-transfer’, particularly in the e-commerce space where providers such as Google and Amazon will only accept payments via a card.  The Equals Money platform was conceived recognising this need and therefore excellence in card issuance, processing and technology is core to the platform.

Development of the Group’s card infrastructure has continued in H1-2022 to replace legacy platforms with a single platform built to power the Equals card products for the medium term.

This platform provides the base from which a strong pipeline of customer-facing features will deployed in H2-2022 including the launch of the new Equals Money card which is multi-currency, can be both virtual and physical, can be prepaid or debit, are live in Apple Pay and have many more features and capabilities.

Focus on Compliance

The Group has a strong compliance culture and views its capabilities as a strategic asset and competitive advantage.  Efficient compliance is essential to optimisation of revenues as any delays to new business onboarding can lead to increased customer frustration and possibly abandonment.  Ensuring the process of becoming a customer is as efficient as possible whilst maintaining high standards of compliance requires the levels of investment made in H1-2022.  This investment is targeted at both automation where possible, of the compliance processes combined with adding skilled headcount to process the non-standard and exceptional items.

Compliance requires strong control at the onboarding stage augmented by ongoing monitoring and hence the Group’s systems investment is targeted at onboarding processes and transaction monitoring.

Equals hired a Head of Compliance in mid-2021, and since then, the Group has been consistently upgrading its staff and increasing the headcount as the business expands.  Equals has recruited a new, highly experienced MLRO (‘Money Laundering Reporting Officer’) joining the business in H2-2022, which will further bolster its relationships with the Group’s regulators and banks.  These hires supplemented an already an exceptionally skilled and commercially focused team.

Focus on Employees

The labour market in the UK continues to be challenging both for hiring talent and for staff retention.  The Group introduced various measures in 2021 to tackle these issues including share ownership and LTIP schemes and plans to repeat this process in 2022.  In addition, the Group paid a mid-year cost of living award and other bonuses to staff in July 2022 totalling £0.3 million, which is fully accrued in the Group’s interim financial statements.

Whilst the Group is growing rapidly, it retains a strong cost-control culture, and it balances efficiency gains it yields from its engineering investments with the priority to achieve strong growth.  The Group therefore expects overall staff numbers to continue to rise slowly with most increases coming in direct revenue generation roles or compliance.  Given the strong operational gearing of Equals, any increase in headcount and overall cost-base is expected to be at a much lower rate than growth in transactions and revenues.

Focus on ESG

Equals wholeheartedly embraces ESG initiatives and takes Equality, Diversity, and Inclusivity (‘EDI’) extremely seriously.  The Group’s EDI strategy, which covers not only employees but also customers, includes an internal EDI network populated with elected representatives and regular employee surveys.  This is a key objective for all Executive Committee members and forms part of their appraisal.

FUTURE PLANS AND OPPORTUNITIES

The key strategic vision for the Group continues to be the simplification of money movement for business customers.  Equals achieves this through its B2B platforms - Equals Money being targeted at the SME base and Equals Solutions at larger corporate opportunities.  The Group’s growth potential is extremely 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 will be enhanced further by the developments planned in the Group’s technical roadmap.

Equals will continue to look for external growth opportunities and can do so with a strong balance sheet and cash position.  The Group is examining overseas expansion beyond its current predominantly UK-centric customer base given the portability of its platforms and will also take a considered strategic approach to acquisitions.

Global Macro-Economic environment

The global economy faces serious challenges stemming from the conflict in Ukraine and rising inflation and interest rates in major economies.  To date, Equals has performed resiliently despite these conditions and continues to grow strongly as can be seen from today’s H1-2022 results and Q3-2022 trading update.  However, the Board continues to monitor the situation closely.

Q3-2022 trading and Outlook

Q3-2022 has continued the strong revenue generation seen in H1-2022 with revenue for the period from 1 July 2022 to 5 September 2022 being £13.3 million, representing a 55% increase on the same period in 2021.

Equals has a strong outlook resulting from the investments it has made to create a payments platform. Further investments made in compliance, onboarding and user experience means that the rich functionality of the platform is made easily accessible to current and potential customers.  Finally, advances made in sales, marketing and data mean that Equals now sells its products and platform more efficiently.  Accordingly, the Board looks forward to the future with increased confidence and the Group remains in line with expectations for the full year.

 

 

Ian Strafford-Taylor
Chief Executive Officer
7 September 2022

 

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 2022.

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

Table 1 - Income and Expenditure account

£000’sH1-2022 H1-2021 Change
Revenue 31,373 16,905 14,468
 
Gross profit 14,866 10,317 4,549
Marketing costs (790) (410) (380)
Contribution 14,076 9,907 4,169
 
Net staff costs (6,620) (6,104) (516)
Net property & office costs (430) (490) 60
Net IT & telephone costs (925) (817) (108)
Professional fees (560) (594) 34
Compliance costs (358) (251) (107)
Travel and other expenses (331) (52) (279)
Operating costs (9,224) (8,308) (916)
 
Adjusted EBITDA*4,8521,599 3,253
    
Separately reported items -(616) 616
Share option charges (290)(217) (73)
    
EBITDA4,562766 3796
    
Memo: Adjusted EBITDA after rent4,4971,0343,463

 

Group revenues rose by 86%, Gross profits by 44%, Contribution by 42%, whilst Operating costs increased by 11% leading to Adjusted EBITDA increasing by 203% and EBITDA by 495%.

Ongoing growth is witnessed by comparing revenues in H1-2022 at £31.4 million with £25.7 million in H2-2021 (excluding the one-off revenue of £1.5 million earned from the material trade reported in October 2021), thus a 22% half-on half increase.

To continue the theme of comparing the last two half years, I present below a bridge from the Adjusted EBITDA in H2-2021 to H1-2022, which shows a 13% increase on the like-for-like position:

Table 2 – Adjusted EBITDA bridge from H2-2021 to H1-2022

H2-2021 Adjusted EBITDA     5,174
    
Less: Gross profits from material trade  (812)
 Property rates rebate  (80)
Like-for-like H2-2021 Adjusted EBITDA 4,282
    
Add: 15% uplift in contribution H1-2022  1,868
    
Less: 15% increase in staff costs, reflecting higher planned headcount along with pay adjustments averaging 8%
 
  
(885)
 46% increase in professional and compliance costs, much of which is attributable to onboarding more clients
 
 (290)
 Increase in travel and exhibition costs
 
 (80)
 Increase in property utility costs and rates  (44)
H1-2022 Adjusted EBITDA 4,852
    
Uplift over like-for-like H2-2021   570
 
% uplift over like-for-like H2-2021
   
13%
    

 

Revenue

A split of revenues by both customer group and platform, clearly shows both the strong and growing emergence of Solutions and very significant migration away from the legacy travel products. 

Table 3, H1-2022

Revenue in £ millions Consumer and small business Corporates Large
enterprises
Sub-total White-label TOTAL
H1-2022
International payments 2.0 7.1 - 9.1 7.1 16.2
Cards 2.3 3.3 - 5.6 - 5.6
Banking 2.8 - - 2.8 - 2.8
Solutions - - 6.3 6.3 - 6.3
Travel cash 0.5 - - 0.5 - 0.5
Total, H1-2022 7.6 10.4 6.3 24.3 7.1 31.4
      
% Change*      
H1-22 vs H1-21 +29% +24% >2010% +67% +202% +86%

 

*based on underlying figures

Table 3a – H1-2021

 
Revenue in £ millions
Consumer and small business Corporates Large
enterprises
Sub-total White-label TOTAL
H1-2021
International payments 1.3 6.1 - 7.4 2.4 9.8
Cards 1.7 2.2 - 3.9 - 3.9
Banking 2.8 - - 2.8 - 2.8
Solutions - - 0.3 0.3 - 0.3
Travel cash 0.1 - - 0.1 - 0.1
Total, H1-2021 5.9 8.3 0.3 14.5 2.4 16.9

 

Taking a further look at International Payments, Table 4 below, shows the composition of transaction values and revenue across spot and forward contracts.

Table 4. White Label  Other

 

H1-2022 Spot Fwd Total  Spot Fwd Total
Transaction values 648.9 98.3 747.2  976.9 281.8 1,258.7
% mix 87% 13% 100%  78% 22% 100%
       
Revenue 5.7 1.4 7.1  6.7 2.3 9.0
% mix 81% 19% 100%  75% 25% 100%
       
H1-2021       
Transaction values 337.8 50.0 387.8  862.0 357.3 1219.3
% mix 87% 13% 100%  71% 29% 100%
       
Revenue 2.0 0.4 2.4  5.4 2.1 7.5
% mix 83% 17% 100%  72% 28% 100%

 

The move towards offering more forward contracts has evolved over time and reflecting on 2019 as the last “pre-covid” year, forward contracts only represented 10% of turnover.

Around 80% of the revenues were earned from three core currency parings (GBP:EUR; GBP:USD; and EUR:USD).

Solutions Revenues have been analysed below between transaction-based and fee-based.  This shows the evolution of the platform and its ability to secure long-term revenue streams.

Table 4a
In £ millions
Fee based revenue Transaction based revenue Total
revenues
H1-2022 1.7 4.6 6.3
H2-2021 0.9 2.4 3.3
H1-2021 0.1 0.2 0.3

 

Variable costs and gross profits

The elements of variable costs are shown in the table below, along with the gross profits and gross profit margins.

Table 5

 
 
In £ millions
Consumer and small business Corporates Large enterprises Sub-total White-label TOTAL
H1-2022
Transaction costs 1.3 2.7 - 4.0 0.1 4.1
Staff commissions 0.6 0.9 0.1 1.6 0.1 1.7
Affiliate costs 0.6 0.8 3.2 4.6 6.1 10.7
Total, H1-2022 2.5 4.4 3.3 10.2 6.3 16.5
Gross profit 5.2 5.9 2.9 14.0 0.8 14.9
Gross profit % 67% 58% 47% 58% 12% 47%

 

Table 5a

 
 
In £ millions
Consumer and small business Corporates Large enterprises Sub-total White-label TOTAL
H1-2021
Transaction costs 0.6 1.7 - 2.3 0.1 2.4
Staff commissions 0.5 0.6 - 1.1 0.1 1.2
Affiliate costs 0.4 0.6 0.2 1.2 1.8 3.0
Total, H1-2021 1.5 2.9 0.2 4.6 2.06.6
Gross profit 4.5 5.3 0.1 9.9 0.4 10.3
Gross profit % 75% 64% 37% 68% 18% 61%

 

H1-2022 witnessed Solutions and White-label contributing 43% of revenues (H1-2021: 16%) and 25% of Gross profits (H1-2021: 5%).

Marketing, branding and contribution

The Group has accelerated its marketing plans after pausing this during FY20 and FY21 when Covid posed greater uncertainties.  Cash costs include ad campaigns, pay-per-click and exhibition and similar events including those in the USA where the Group noticed considerable interest in particularly the Spend platform and the Group’s ability to sell this through its partnership with Metropolitan Commercial Bank.

Table 6 H1-2022 H1-2021
Marketing expenses (£ millions) 0.8 0.4
   
Contribution 14.1 9.9
Contribution margin 45% 59%

 

Staff costs

Staff costs, gross of capitalisation, were £8.8 million in H1-2022 against £7.3 million in H1-2021, and £7.7 million in H2-2021.  These costs were offset by:

- Capitalised software:   £2.0 million in total (H1-2021: £1.2 million, H2-2021: £1.8 million), with £0.6 million on contractors.

Amounts capitalised represent 19% of gross staff costs, consistent with FY21.  The Group investment strategy continues to accelerate and focus on new and enhanced product design as has been commented on in the CEO’s Report.

Headcount numbers have moved from 258 as at 30 June 2021 to 266 as at 30 June 2022, below the rate of increase in revenue for the period, and at 31 August 2022 they stood at 274.

The average number of engineering contractors per month in H1-2022 was 14 (H1-2021: 7).  As previously reported, Equals is accelerating product development as fast as resource access allows the Group to do in a tight labour market.

Professional fees and Compliance costs

Owing to an increasing cross-industry compliance burden, the Group has chosen to report compliance and similar costs separately from other professional fees.  Compliance costs, including onboarding systems, have risen due to a combination of greater business activity and the Group’s desire to fast-track business applications but not at the expense of quality.  Professional fees have risen in line with trends widely reported in the national press.

Property, insurance and office costs

Renegotiation of office leases has led to lower passing rents which benefit the Group’s cashflows but not the EBITDA as such rents are accounted for under IFRS-16.  Utilities, rates, and insurance charges have however risen by an aggregate of 19% over H2-2021, although there are 13% lower than in H1-2021.

Separately reported items

Separately Reported Items are large, non-recurring items identified by management.  There were no Separately Reported Items in the period.

Amortisation and depreciation

Amortisation and depreciation for the period were £2.9 million (H1-2021: £2.1 million) and £0.6 million (H1-2021: £0.7 million) respectively.

Operating result

The Group made a profit before taxation of £0.9 million for the period, compared to a loss of £2.2 million for the period H1-2021.

Taxation, incorporating R&D credits

The Group’s taxation charge includes both corporation tax, deferred tax, and R&D credits.  The Group has recognised a net tax charge of £37k (H1-2021: £1,075k net tax credit) of which £40k (H1-2021: £319k) relates to an estimated R&D tax credit repayment claim for the six months to 30 June 2022.

Result after taxation

The result after taxation was a profit of £848k against a loss in H1-2021 of £1,172k and a full year loss in 2021 of £2,262k.

Earnings per share

Both basic and diluted EPS went into the positive, with basic EPS rising to 0.38pence (H1-2021: negative, 0.70pence) and diluted EPS rising to 0.36pence (H1-2021: negative, 0.70pence).

B: Balance sheet

At 30 June 2022, the Group considers some of the key items on the balance sheet to be:

  • £16.5 million of cash at bank (30 June 2021: £10.1 million)
  • £1.8 million CBILS loan (repaid in full in August 2022)
  • £0.3 million deferred consideration payable but settled after the period end.

Table 7 - Balance sheet

As at
30 Jun 2022
As at
30 Jun 2021
As at
31 Dec 2021
 £’000s  £’000s £’000s
       
IFRS 16 assets, less IFRS 16 liabilities (976)   (364) (388)
Other non-current assets (other than deferred tax) 31,618   35,519 32,217
 30,642   35,155 31,829
       
Liquidity (per Table 9) 12,825   7,316 10,739
Trade debtors and accrued income 4,244   3,508 3,638
R&D rebates 438   1,687 398
Prepayments 1,411   1,076 998
Deposits and sundry debtors 190   396 329
Inventory of card stock 148   217 168
Accounts payable (2,315)   (2,051) (1,549)
Affiliate commissions (2,905)   (1,303) (1,945)
PAYE, staff commissions etc. (1,824)   (1,808) (1,884)
Other accruals and other creditors (1,412)   (1,151) (1,349)
 10,800   7,887 9,543
    
Earn-out balances due (Table 16)
Implied interest thereon
(304)
1
  (1,835)
350
(1,683)
63
 (303)   (1,485) (1,620)
Net corporation and deferred tax 1,148   208 888
Net value of forward contracts 511   (31) 511
 1,356   (1,308) (221)
       
NET SHAREHOLDER FUNDS 42,798   41,734 41,151
       
Retained earnings at 1 January (24,590)   (22,259) (22,259)
Earnings for the year 675   (1,251) (2,424)
Amount attributable to the exercise of share options -   - 93
Retained earnings at 31 December (23,915)   (23,510) (24,590)
       
Non-Controlling interest at 1 January 263   101 101
Earnings for year 173   79 162
Non-Controlling interest at 31 December 436   180 263
       
Share capital, share premium 55,212   54,836 55,011
Other reserves 11,065   10,228 10,467
 66,277   65,064 65,478
       
CAPITAL AND RESERVES 42,798  41,734 41,151

 

 Non-controlling Interest

The profit for H1-2022 includes £173k profit in respect of the Non-Controlling Interest of the Equals Connect business acquired in 2019 (H1-2021: £79k).

Off balance sheet items: client monies

As at 30 June 2022 the Group held client monies of £272.0 million in off balance sheet bank accounts (H1-2021: £170.4 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 H1-2022.

Earn-outs

The table below shows the financial position relating to acquisitions in and after FY19.

Table 8 – EARNOUTS

  Hermex Casco Effective Total
Acquisition date 09.08.2019 19.11.2019 15.10.2020
 £’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 H1-2021 - (741) (62) (803)
Paid during H2-2021 - - (306) (306)
Further change in consideration - 46 - 46
Gross Outstanding at 31.12.2021 - 601 1,082 1,683
Paid during H1 - 2022 - (601) (779) (1,380)
Gross Outstanding at 30.06.2022 - - 303 303
 
Paid during Q3-2022 - - (303) (303)
    
Maximum consideration 2,000 3,725 1,575 7,300
Total consideration 2,000 3,075 1,575 6,650
     

 

CASH FLOW

Table 9 - Cash flow

£000’s H1-2022 H1-2021
Adjusted EBITDA after rent 4,497  1,034
 - Cash incurred separately reported items -  (616)
 - Internally capitalised staff costs (2,051)  (1,191)
Internally capitalised IT costs (164)  (148)
 - Purchase of other intangibles (307)  (27)
 - Purchase of property, plant, equipment (122)  (40)
Add: Working capital movement 2,875  1,795
“Operational” cashflows 4,728 807
Cash for acquisitions/ earn-outs (1,380)  (803)
External funding   
  Repayment of CBILS loan (200)  -
  Cash raised from issue of equity 200  46
NET CASH FLOWS 3,348  50
Balance at start of period 13,104  10,032
Balance at end of period 16,452  10,082
    
Number of shares in issue 180,712,473  180,045,807
Cash per share (in pence) 9.1  5.6
   

 

Table 10 – LIQUIDITY

 H1-2022 H1-2021 FY-2021
£000’S £000’S £000’S
Cash at bank 16,452 10,083 13,104
Balances with liquidity providers 1,499 2,553 1,675
Pre-funded balances with card provider 884 1,435 1,615
Gross liquid resources 18,835 14,071 16,394
    
Customer balances not subject to safeguarding (4,210) (4,755) (3,655)
CBILS loan (1,800) (2,000) (2,000)
 (6,010) (6,755) (5,655)
    
Net position 12,825 7,316 10,739

 

 

Richard Cooper
Chief Financial Officer
7 September 2022

 

INTERIM CONSOLIDATED statement OF COMPREHENSIVE INCOME
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

Period end
30 June 2022
Unaudited
Period end
30 June 2021
Unaudited
 Year end 31
December
2021
Audited
 Note £000 £000  £000
       
       
Revenue on currency transactions  28,505  14,046  38,424
Banking revenue  2,868  2,859  5,667
Revenue 2 31,373  16,905  44,091
Direct costs 2 (16,507)  (6,589)  (19,855)
Gross profit  14,866  10,316  24,236
       
Administrative expenses 3 (10,314)  (9,602)  (18,715)
Depreciation  (632)  (733)  (1,398)
Amortisation charge  (2,858)  (2,135)  (5,812)
Impairment charge 4 -  -  (1,638)
Total operating expenses  (13,804)  (12,470)  (27,563)
    
Operating profit / (loss) 1,062  (2,154)  (3,327)
    
Finance costs 8 (177)  (93)  (490)
Profit / loss before tax  885  (2,247)  (3,817)
      
Tax (charge)/credit 5 (37)  1,075  1,555
Profit / loss after tax  848  (1,172)  (2,262)
Memo: Profit / loss is attributable to:       
Owners of Equals Group Plc  675  (1,251)  (2,424)
Non-controlling interest  173  79  162
      
Other comprehensive income:       
Exchange differences arising on translation of foreign operations  1  -  -
  849  (1,172)  (2,262)
Profit / loss per share       
Basic  0.38p  (0.70)p  (1.35)p
Diluted  0.36p  (0.70)p  (1.35)p

All income and expenses arise from continuing operations.

 

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

  As at
30 June 2022
Unaudited
As at
30 June 2021
Unaudited
 As at
31 December
2021
Audited
 Note £000 £000  £000
ASSETS       
Non-current assets       
Property, plant and equipment  1,193  1,439  1,257
Right of use assets 4,067  5,247  4,874
Intangible assets and goodwill  30,425  34,082  30,960
Deferred tax assets  1,287  230  949
  36,972  40,998  38,040
Current assets       
Inventories  148  217  168
Trade and other receivables  8,228  9,096  8,256
Current tax assets  439  1,687  397
Derivative financial assets  2,593  3,019  2,593
Cash and cash equivalents  16,452  10,082  13,104
  27,860  24,101  24,518
TOTAL ASSETS 64,832  65,099  62,558
       
EQUITY AND LIABILITIES       
Equity attributable to equity holders      
Share capital 6 1,807  1,787  1,793
Share premium 6 53,405  53,049  53,218
Share based payment reserve  2,455  1,619  1,858
Other reserves  8,610  8,609  8,609
Retained deficit  (23,915)  (23,510)  (24,590)
Equity attributable to owners of Equals Group Plc  42,362  41,554  40,888
Non-controlling interest  436  180  263
42,798  41,734  41,151
 
Non-current liabilities
     
Borrowings 7 1,600  1,800  1,600
Lease liabilities 4,224  5,164  4,484
Deferred tax liabilities  -  -  -
  5,824  6,964  6,084
 
Current liabilities
     
Borrowings 7 200  200  400
Trade and other payables  12,970  12,704  12,002
Current tax liabilities  139  -  61
Lease liabilities 819  447  778
Derivative financial liabilities  2,082  3,050  2,082
  16,210  16,401  15,323
TOTAL EQUITY AND LIABILITIES  64,832  65,099  62,558

 

 

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

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 2021 1,78653,0031,402(22,259)8,60942,54110142,642
         
(Loss) / income for the period- - - (1,251) - (1,251) 79 (1,172)
Other comprehensive income:         
Items that will not be reclassified subsequently to profit or loss:         
Exchange differences arising on translation of foreign operations - - - - - - - -
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
         
(Loss) / income for the period - - - (1,173) - (1,173) 83 (1,090)
Other comprehensive income:         
Items that will not be reclassified subsequently to profit or loss:         
Exchange differences arising on translation of foreign operations - - - - - - - -
Other items         
Share based payment charge - - 54 - - 54 - 54
Movement in deferred tax on share-based payment charge - - 278 - - 278 - 278
Share options exercised in year - - (93) 93 - - - -
New shares issued 6 169 - - - 175 - 175
At 31 December 2021 1,793 53,218 1,858 (24,590) 8,609 40,888 263 41,151
         
Income for the period and total comprehensive (loss) / income - - - 675 - 675 173 848
Other comprehensive income:         
Items that will not be reclassified subsequently to profit or loss:         
Exchange differences arising on translation of foreign operations - - - - 1 1 - 1
Other items         
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
         

 

Other reserves comprise:  
Merger reserve Arising on reverse acquisition from Group reorganisation.
Contingent consideration reserve
Foreign currency reserve
Arising on equity based contingent consideration on acquisition of subsidiaries.
Arising on translation of foreign operations

 

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022

 Six month period ended
30 June 2022
Unaudited
 Six month period ended
30 June 2021
Unaudited
Six month period ended
31 December 2021
Audited
 £000  £000 £000
Operating Activities
Profit / loss for the period 885 (2,247)  (1,570)
Adjustments for:      
Depreciation 632  733  665
Amortisation 2,858  2,135  3,677
Impairment -  -  1,638
Share based payment charge 259  217  55
(Increase) / decrease in trade and other receivables (188)  (351)  3,965
Decrease /in net derivative financial assets / liabilities -  -  (4,898)
Increase / (decrease) in trade and other payables 1,561  2,210  426
Increase / decrease in derivative financial liabilities -  -  (968)
Decrease in inventories 20  (23)  49
Finance costs 177  93  397
Net cash inflow 6,204  2,767  3,436
      
Tax receipts -  -  1,367
     
Net cash inflow from operating activities 6,204  2,767  4,803
     
Cash flows from investing activities      
Acquisition of property, plant and equipment (122)  (40)  (38)
Acquisition of intangibles (2,323)  (1,367)  (2,193)
Deferred consideration on acquisition of subsidiary -  (803)  803
Acquisition of subsidiary, net of cash acquired -  -  -
Net cash used in investing activities (2,445)  (2,210)  (1,428)
      
Cash flows from financing activities      
Principal elements of lease payments (297)  (446)  (426)
Interest paid on finance lease (82)  (97)  (97)
Interest paid (33)  (10)  (4)
Repayment of borrowings (200)  -  -
Proceeds from issuance of ordinary shares 201  46  174
Net cash used in financing activities (411)  (507)  (353)
      
Net increase in cash and cash equivalents 3,348  50  3,022
Cash and cash equivalents at the beginning of the period 13,104  10,032  10,082
Cash and cash equivalents at end of the period 16,452  10,082 13,104