Regulatory News

Equals Group PLC, the e-banking and international payments group, is pleased to announce a further acquisition aligned to its publicly stated expansion strategy.  The Group has today acquired the entire issued ordinary share capital of Casco Financial Services Limited ("Casco"), a UK based payment services provider (the "Acquistion"). The initial consideration for the Acquisition is £1.725 million with a potential additional consideration of £2.0 million, depending on future performance.

Casco overview

Casco, which is regulated by the FCA as an Authorised Payment Institution (API), was established in 2010 and has historically focused on the provision of international payments, primarily for corporate clients.

Casco launched an additional product in 2017 - the provision of infrastructure services to the international payments sector. Through this Infrastructure Services platform, Casco offers a white-label product enabling other FX and payments companies to scale their businesses by utilising its technology, banking, liquidity and compliance capabilities.

For the last 12 calendar months to 31 October 2019, Casco generated unaudited revenue of £3.3 million, EBITDA of £0.3 million and profit before tax of £0.2 million. Post-acquisition, Equals expects to extract cost synergies of £0.4 million per annum. As at 31 October 2019, Casco had net assets of approximately £0.3 million.

The Acquisition will result in: -

1. A straightforward transfer of Casco's client base of over 1,000 corporate customers to the International Payments Division of Equals. Adding these clients and transaction volumes onto the Equals platform will provide further revenues and economies of scale for the Group, as well as substantial cross selling opportunities.
2. Casco's Infrastructure Services Business, which represents a new product and revenue stream for the Group, being rebranded as "Equals Connect" operated under a separate subsidiary (the "Subsidiary")

Strategic rationale

The Acquisition is in accordance with three of the Group's stated strategies: to consolidate smaller, attractive market participants, expand its product range and leverage its investment into deeper payments connectivity.

As part of the payments connectivity strategy, since 2017 Equals has been focusing on supply-chain rationalisation. This has meant building out its platform to integrate deeper into payment networks and provide "connectivity" which, in turn, vastly improves customer experience (CX) and retention as well as yielding improved economics for the Group. The most recent example of this is Equals' direct connection to Faster Payments and Bank of England settlement accounts.

Equals Connect will combine this investment in deep connectivity with the Casco platform to accelerate the Group into the B2B service provider industry.

The Board believes there is a substantial addressable market within this subsector of payment services and sees significant opportunities for well-positioned companies to capture market share.

The Board also notes that Banco Santander recently paid £350 million for a 50.1% stake in direct competitor Ebury Partners UK Limited, illustrating the growing value of this subsector.

Transaction details

The initial acquisition price of £1.725 million is being satisfied using a combination of cash and shares.

The cash element of £1.406 million has been funded from the Group's existing cash resources, which were augmented in September 2019 following completion of its £14.3 million fundraising (before expenses).

The balance of £318,750 will be satisfied by the issue of 377,666 new ordinary shares of 1p each in the Company at an issue price of 84.4 pence (based on a five day average) ("Consideration Shares"). The Consideration Shares are subject to a two-year lock-in period followed by an orderly market provision.

Two additional cash payments may be made over the next 2 years, conditional upon the payments services business achieving certain net revenue targets. Based on run-rate revenue and growth patterns, these payments would be expected to be approximately £0.25 million per annum (and are capped at a maximum of £1 million per annum).

The Company has applied for the Consideration Shares to be admitted to trading on AIM ("Admission"). It is expected that Admission will take place at 8.00 a.m. on 22 November 2019. Following Admission, the Company will have 178,552,918 ordinary shares of 1p each in issue admitted to trading on AIM. This figure, 178,522,918, may be used by Shareholders as the denominator for the calculation by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules.

Concurrently with the Acquisition, Craig Granger, Kane Granger and Jack Bryant, the current senior management team of Casco, have joined the Equals Group as employees. These individuals will retain an aggregate 48.19% economic interest in the Subsidiary entitling them to 48.19% of any dividends paid by the Subsidiary to the Group and/or 48.19% of any sale proceeds of the Subsidiary should it be sold. Various protections have been put in place in respect of that economic interest.

Ian Strafford-Taylor, Chief Executive Officer, commented: "We have been planning to enter the Service Provision sector for some time in order to leverage the Group's resources in a parallel market, where all of the same attributes are required as our core international payments division. This transaction enables us to enter with a proven provider and penetrate this growing market at pace. In addition, we are also acquiring an excellent international payments team and over 1,000 clients, most of which corporate clients, who will benefit from our existing proprietary technology and excellent operations teams. I very much look forward to working with Craig, Kane, Jack and the rest of the incoming team on further expanding our services."

Craig Granger, Managing Director, Equals Connect, commented:"After building Casco for nearly 10 years I am delighted that our team and clients are now joining the Equals Group. With a shared culture and attitude, and with Equals' significant resources behind us, I am confident that our Service Provider offering will flourish at an even faster rate."

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About Equals

Equals is a leading challenger brand in banking and payments that disintermediates the incumbent banks with a superior user experience and low-cost operating model. Our business enables personal and business customers to make easy, low-cost payments both domestically and in a broad range of currencies and across a range of products all via one integrated system. The Equals platform facilitates payments either direct to Bank Accounts or at 35 million merchants and over 1 million ATM's in a broad range of countries globally via Mobile apps, the Internet, SMS, wire transfer and MasterCard/VISA debit cards.

Equals provides money movement services to both personal and business customers through four channels: Currency Cards, Physical Currency, International Payments and Bank Accounts. The Currency Card and Physical Currency offerings facilitate multiple overseas payments at points of sale and ATM's whereas the International Payments channel supports wire transfer foreign exchange transactions direct to Bank Accounts. For Corporates, Equals has a market-leading business-expenses solution based around its corporate platform and prepaid card. This service can yield significant savings on a Corporate's expenses and procurement both domestically and overseas, through better controls and improved transparency. The platform also streamlines the downstream administrative processes and integrates into accounting software, thus saving costs. Equals offers retail and business bank accounts with all the functionality you would expect from a bank, namely faster payments, BACs, direct debits, international payments and a debit card.