Regulatory News

Strong Half Year performance, continuing into second half.

Equals, the e-banking and international payments group, announces its interim results for the six months ended 30 June 2019.

Highlights H1 Operational Summary Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Consolidated Statement of Cash Flows

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

Financial highlights:

• Group turnover(1) of £1.261 billion (H1 2018: £1.067 billion), an increase of 18.1%
• Group revenue of £14.6 million (H1 2018: £12.0 million), an increase of 21.4%
• Gross profit of £12.1 million (H1 2018: £9.7 million), an increase of 24.4%
• Adjusted EBITDA(2) of £4.7 million (H1 2018: £2.7 million), an increase of 78.0%
• Adjusted PBT(3) of £3.3 million (H1 2018: £2.6 million), an increase of 15.4%

Operational highlights:

• Rebranding of Group from FairFX to Equals to reflect diversified business and greater range of products
• Real-time Gross Settlement (RTGS) accounts opened at Bank of England
• Direct Membership of the UK Faster Payment Scheme
• Corporate expense platform up 41.0% to £106.6 million (2018: £75.6 million)
• Percentage of H1 Turnover from Corporate Customers rose to 68% from 52% in H1 2018
• Gained FCA Credit Broker Licence, allowing Group to offer loan products to customers via a broker model
• Continued focus on supply chain rationalisation and direct connectivity, driving better unit economics
• 123,392 new customers added to the business, bringing the total number of customers to 1,167,893

Post-Period End:

• Strong start to H2 with turnover up 18%* year on year
• Continued growth in Corporate Expense platform and International Payments
• Global banking partnership with Citi Commercial Bank providing improved payment speed and reduced cost
• Acquisition of international payments business HermexFX
• Completed successful share placing, raising gross proceeds of £14.3m to accelerate corporate offering and facilitate market consolidation through bolt-on acquisitions
• International Payments live in the USA with domestic settlement via partnership with MCB
• Five-year agreement with Mastercard to grow cards-based businesses on improved economic terms

*for H2 period to 23rd September 2019

Commenting on the results and outlook, Chief Executive Officer of Equals, Ian Strafford-Taylor, said:

"The business has delivered an excellent first half performance, continuing into the second half, both operationally and financially. Our strategic focus on rationalising supply chain through direct connectivity to payment schemes and other measures are proving successful, as demonstrated by our improving margins as we pay away less direct costs.

"The increasing diversity of our product range, adding non-FX products to our heritage revenue streams, has helped the Group achieve this against a less than benign macro-economic environment and weaker Sterling.

"With the steps we have achieved already and new revenue streams coming in during the rest of the year, the outlook for the Group's full financial year remains positive.

"Against this background, we remain confident that the full year results will be in line with expectations."

 

Contact:

Equals Group plc Ian Strafford-Taylor, CEO	+44 (0) 20 7778 9308
Cenkos Securities plc Max Hartley / Callum Davidson Nick Searle	+44 (0) 20 7397 8900
Canaccord Genuity Bobbie Hilliam / David Tyrrell Alex Aylen	+44 (0) 20 7523 8150
Yellow Jersey Charles Goodwin Joe Burgess Annabel Atkins	+44 (0) 7747 788 221 +44 (0) 7769 325 254

H1 Operational Summary

The excellent growth of the Equals Group in the first six months of 2019 was achieved in an operating environment dominated by the continuing lack of clarity over Brexit, which continues to impact consumer and business confidence. This performance emphasises the success of reducing the Group's reliance on FX revenues with 37% of turnover deriving from non-FX activities in H1 2019 compared with 32% in the same period last year and 14% in the same period in 2017. The success of the Group's strategy to increase its focus on the Corporate customer space was also shown as the turnover through the Corporate Expense platform grew by 41.0%. The overall percentage of Group turnover from corporate clients rose to 68% in the period compared to 52% in H1 2018.

In April 2019, the Group consolidated its London-based staff into the refurbished Group headquarters, greatly aiding internal efficiency demonstrated by more rapid product iteration and improved cross-selling.

Within the Banking division, the Group gained Real-Time Gross Settlement (RTGS) Accounts at the Bank of England. Through this the Group became a Direct Member of the UK Faster Payment Scheme, allowing the Group to offer immediate, same day UK domestic payments. These two achievements were the culmination of a year-long initiative and demonstrate the Group's strategy of direct connection to payment schemes rather than going via third parties. The benefit of this strategy is four-fold: yielding vastly near instantaneous movement of money for customers, quicker resolution of payment issues, reduced point-of-failure in the supply chain and significant cost reductions for the Group.

Also within Banking, in June 2019 the Group was granted permission by the FCA to offer Credit products to customers on a Broker-basis, thus enabling a wide range of loan products to be offered to both its business and retail customers. The Group will be acting as a broker with the loans provided by FCA authorised third party lenders, so there will be no credit risk to the Group and the loans will not appear on the Group's balance sheet.

In the currency card division, we continued to rationalise the supply chain, resulting in improved financial terms with existing partners combined with moving business to more favourable relationships where possible. In addition, in keeping with our strategy of direct connectivity to payment schemes, the process of issuing our cards directly under licence with Mastercard, rather than using third-parties, was accelerated and will yield significant future benefits. The Group yesterday announced that it had entered into a new five year agreement with Mastercard, whereby they will provide assistance to grow Equals' various card-based businesses through improved economic terms and also assist in the process of Equals becoming an issuer of all its cards.

In June 2019, the Group announced the rebranding of the Group to Equals to reflect the evolution of the product offering and strategic direction. Following the name change, the Group will move towards a monolithic brand architecture with a suite of product brands underneath with a consistent identity. The Group has moved beyond its heritage foreign exchange business into integrated money management solutions for consumers and business. The unification of the brand away from the inhouse and acquired brands will simplify the marketing messaging, optimise customer acquisition, retention and engagement whilst facilitating improved cross-selling between the family of products.  

Financial Review

The Group has enjoyed a strong first half of trading with excellent top line growth, translating into increased revenue and EBITDA in line with expectations. Against this background, strong margins have been maintained and rationalisation of the supply chain is delivering results.  

Turnover for the first half was up 18.1% year on year to £1.261.5 billion (2018: £1.067.4 billion), in line with management's expectations with strong performances from corporate expenses, international payments and banking.

Group revenue increased by 21.4% to £14.6m (2018: £12.0m) with the revenue margin (revenue over turnover)  slightly improved in the period to 1.16% (2018: 1.13%) A major part of the revenue growth is due to currency cards which grew by 48.9% to £6.1 million (2018: £4.1 million) due to increased volumes and improved terms with the supply chain. International Payments also performed strongly with a 22% increase in revenue to £4.8 million (£3.9 million), demonstrating the Group's ability to grow the International Payments book both organically and through acquisition.

Gross profit was £12.1 million (2018: £9.7 million), an increase of 24.4% on prior year and ahead of revenue growth. This was due to the cost focus on the supply chain.

The Group's operating expenses increased by 33.0% to £9.9 million (2018: £7.4 million) on the same period last year. Adjusting for non-recurring costs such as the marketing re-brand, the adjusted costs are 21.9% ahead at £9.1 million (2018 £7.4 million). The increased operating costs include the full year effect of the City Forex acquisition and an increased depreciation and amortisation charge of £1.7 million (2018: £0.4 million). The increase in the depreciation and amortisation charge is primarily to the implementation of the new accounting treatment for leases (IFRS16) which requires property leases to be capitalised and amortised over the period of the lease and the amortisation of the internally generated intangible fixed assets. The Group has also invested further in people in areas such as cross sales, data analytics, product and design, which is expected to have a positive effect on revenue in future periods.

As illustrated in the table below, the Company achieved adjusted EBITDA of £4.7 million (2018: £2.7 million) for the period, an increase of 78%. This is a result of strong top line organic growth increasingly converting to profitability by maintaining product margins and a stable cost base. The Group has proved it can assimilate acquired companies efficiently and extract revenue and cost synergies.

The adjusted PBT in the first half of £3.3 million (H1 2018: £2.6 million), up 27% in the period, demonstrates the Group's success in executing its strategy of top line growth whilst maintaining revenue margins and controlling costs. 

Adjusted EBITDA/PBT Calculation	2019 H1 £	2018 H1 £	2018 FY £
Statutory Net Profit	1,464,079	2,083,559	2,617,666
Amortisation of acquisition intangibles	414,956	310,100	794,959
Other amortisation charges	702,469	14,928	523,690
Depreciation costs	614,663	71,082	200,123
Right of use asset - Interest charge	148,247	-	-
Tax expense / (credit)	525,838	(58,919)	(538,343)
EBITDA	3,870,252	2,420,750	3,598,095
Acquisition-related costs	22,966	227,752	297,484
Marketing rebrand costs	725,558	-	590,034
Development costs	-	-	1,404,962
Restructuring costs	-	-	1,048,119
Recruitment costs	-	-	499,617
Other	116,540	13,627	74,039
Adjusted EBITDA	4,735,316	2,662,129	7,512,350
Depreciation costs	(614,663)	(71,082)	(200,123)
Other amortisation charges	(702,469)	(14,928)	(523,690)
Right of use asset interest charge	(148,247)	-	-
Adjusted PBT	3,269,938	2,576,118	6,788,537
Tax expense / (credit)	525,838	(58,919)	(538,343)
Adjusted PAT	2,744,100	2,635,038	7,326,880

The tax expense in the period is due to an increase in the deferred tax liability driven by the increase in the intangible assets. The deferred tax expense is purely an accounting entry with no cash impact and the deferred tax liability will unwind in future years as the asset is amortised. The Group reported tax losses brought forward at the end of 2018 of £9.3 million and so does not expect to pay any tax in the near term.

The Adjusted PAT was only slightly ahead at £2.7 million (2018: £2.6 million) on the previous period due to the higher depreciation and amortisation charges and the tax charge in the period.

The Company's balance sheet remains healthy with net assets of £41.9 million (H1 2018: £37.1 million), whilst cash and cash equivalents (excluding client money) totalled £4.8 million (H1 2018: £10.7 million).

The adjusted statutory EPS was slightly down at 1.72p (2018: 1.79p) due to the higher depreciation and amortisation and tax charges in 2019 compared to the prior period and the increased average number of shares in issue - 159.6 million (2018: 147.6 million).

Current Trading and Outlook

In the second half of the year, Equals continues to build on the significant growth achieved, with total turnover for the 2 and a half-month period to 23rd September 2019 of £722 million, up 18% on the same period last year. Growth continues to be strongest in International Payments and Corporate Expenses product lines, up 19% and 30% respectively in the post period.

The Group has entered into a global relationship with Citi Commercial Bank, allowing it to leverage Citi's extensive global footprint to enhance its current product offering and bring even more efficiencies to current processes. Citi has local settlement and clearance capabilities for payments in over 90 countries, which together will improve the customer experience through faster settlement and deliver improved economics for Equals in terms of reduced transaction costs. The partnership will also significantly increase the number of currencies Equals is able to offer clients, with more than 135 being available on Citi's WorldLink platform.

Following the attainment of the credit broker licence, an online revolving credit facility is currently in live beta testing. The credit offering is in partnership with iwoca and will allow SME's to apply and receive a decision in minutes and immediately receive funds. Business customers will be able to choose to receive funds directly into their account or onto prepaid card, either virtual or physical, which will be issued by the Group under its Mastercard membership. With the benefit of the Group's membership of Faster Payments, funds could be spent directly and immediately; for instance, in cases where stock needs to be purchased or an urgent invoice be settled.

In early August 2019, the Group acquired the international payments business of Hermex International Limited ("Hermex FX") for total consideration of £2 million cash. HermexFX offers international payment services to a predominantly corporate client base through a personalised service offering. The Acquisition will complement the Group's strategy to develop its fast-growing corporate segment, providing additional corporate clients and cross-selling opportunities for the expanding range of products through their existing sales channels. The Group continues to monitor attractive acquisition opportunities and intends to make further acquisitions in line with its stated growth strategy.

In the second half of August 2019, the Group announced that it has raised £14.3m in equity which will used to accelerate the corporate offering, facilitate market consolidation through bolt-on acquisitions and provide growth working.

Accordingly, the Board of Equals continues to be confident of meeting market expectations for the full year.

 

EQUALS GROUP PLC (FORMERLY KNOWN AS FAIRFX GROUP PLC)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		Unaudited 6 Months Ended 30-Jun-19	Unaudited 6 Months Ended 30-Jun-18	Audited Year Ended 31-Dec-18
	Notes	£	£	£
Gross value of currency transactions sold		902,837,168	805,293,495	1,783,710,215
Gross value of currency transactions purchased		(890,779,786)	(796,327,938)	(1,763,246,570)
Revenue on currency transactions		12,057,382	8,965,557	20,463,645
Banking revenue		2,538,317	3,057,739	5,628,747
Revenue	4	14,595,699	12,023,296	26,092,392
Direct costs		(2,534,403)	(2,328,410)	(5,605,961)
Gross profit		12,061,296	9,694,886	20,486,431
Administrative expenses		(9,900,166)	(7,442,495)	(18,109,624)
Acquisition expenses		(22,966)	(227,752)	(297,484)
Operating profit		2,138,164	2,024,639	2,079,323
Lease finance costs		(148,247)	-	-
Profit before tax		1,989,917	2,024,639	2,079,323
Tax credit / (expense)	5	(525,838)	58,919	538,343
Profit and total comprehensive income for the period / year		1,464,079	2,083,558	2,617,666
Earnings per share
Basic	6	0.92p	1.41p	1.68p
Diluted	6	0.89p	1.38p	1.64p

All income and expenses arise from continuing operations. There are no differences between the profit for the year and total comprehensive income for the year, hence no Statement of Other Comprehensive Income is presented.

The below notes to the financial statements form an integral part of these financial statements.

*Refer to note 1

The below notes to the financial statements form an integral part of these financial statements.

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Unaudited as at	Unaudited as at	Audited as at
	30-Jun-19	30-Jun-18	31-Dec-18
		(Restated*)
	£	£	£
ASSETS
Non-current assets
Property, plant and equipment	1,705,336	603,246	941,826
Right of use assets	6,619,677	-	-
Intangible assets and goodwill	30,817,014	24,622,318	27,107,873
Deferred tax asset	2,679,747	511,912	2,035,728
	41,821,774	25,737,476	30,085,427
Current assets
Inventories	285,569	239,763	286,713
Trade and other receivables	11,638,788	4,252,944	7,150,750
Deferred tax asset	-	-	859,914
Derivative financial assets	2,600,695	279,522	1,181,892
Cash and cash equivalents	4,848,870	10,734,011	7,860,368
	19,373,922	15,506,240	17,339,637
TOTAL ASSETS	61,195,696	41,243,716	47,425,064
EQUITY AND LIABILITIES
Equity attributable to Equity holders
Share capital	1,643,176	1,553,682	1,553,682
Share premium	38,239,668	35,858,770	35,858,770
Share based payment reserve	1,757,519	1,168,832	1,748,105
Merger reserve	8,395,521	8,395,521	8,395,521
Contingent consideration reserve	207,100	543,172	543,172
Retained deficit	(8,368,798)	(10,366,986)	(9,832,880)
	41,874,186	37,152,991	38,266,370
Non-Current liabilities
Deferred tax liability	2,221,037	261,206	1,543,894
Lease liability	6,673,019	-	-
	8,894,056	261,206	1,543,894
Current liabilities
Trade and other payables	7,617,240	3,588,979	6,679,131
Deferred tax liability	-	117,838	356,713
Derivative financial liabilities	2,601,035	122,702	578,956
Lease liability	209,180	-	-
	10,427,455	3,829,519	7,614,800
TOTAL EQUITY AND LIABILITIES	61,195,696	41,243,716	47,425,064

*Refer to note 1

The below notes to the financial statements form an integral part of these financial statements.

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share Capital	Share Premium	Share Based Payment	Retained Deficit	Merger Reserve	Contingent consideration reserve	Total Equity Attributable to Shareholders
	£	£	£	£	£	£	£
Balance as at 1 January 2018	1,553,682	35,858,770	1,144,832	(12,450,546)	8,395,521	543,172	35,045,431
Profit for the period	-	-	-	2,083,559	-	-	2,083,559
Share based payment charge	-	-	24,001	-	-	-	24,001
Balance as at 30 June 2018	1,553,682	35,858,770	1,168,832	(10,366,986)	8,395,521	543,172	37,152,991
Balance as at 1 January 2018	1,553,682	35,858,770	1,144,832	(12,450,546)	8,395,521	543,172	35,045,431
Profit for the period	-	-	-	2,617,666	-	-	2,617,666
Share based payment charge	-	-	603,273	-	-	-	603,273
Balance as at 31 December 2018	1,553,682	35,858,770	1,748,105	(9,832,880)	8,395,521	543,172	38,266,370
Profit for the year	-	-	-	1,464,080	-	-	1,464,080
Shares issued in the period	89,494	2,380,898	-	-	-	(336,072)	2,134,320
Share based payment charge	-	-	9,414	-	-	-	9,414
Balance as at 30 June 2019	1,643,176	38,239,668	1,757,519	(8,368,798)	8,395,521	207,100	41,874,186

The following describes the nature and purpose of each reserve within owners' equity:

Share capital	Amount subscribed for shares at nominal value.
Share premium	Amount subscribed for shares in excess of nominal value less directly attributable costs.
Share based payment	Fair value of share options granted to both directors and employees.
Retained deficit	Cumulative profit and losses are attributable to equity shareholders.
Merger reserve	Arising on reverse acquisition from Group reorganisation.
Contingent consideration reserve	Arising on equity based contingent consideration on acquisition of subsidiaries

Under the principles of reverse acquisition accounting, the Group is presented as if Equals Group PLC had always owned the FairFX (UK) Limited Group. The comparative and current period consolidated reserves of the Group are adjusted to reflect the statutory share capital and merger reserve of Equals Group PLC as if it had always existed.

The below notes to the financial statements form an integral part of these financial statements.

 

CONSOLIDATED STATEMENT OF CASH FLOWS

	Unaudited 6 months ended 30-Jun-19	Unaudited 6 months ended (Restated*) 30-Jun-18	Audited as at Year ended 31-Dec-18
	£	£	£
Profit for the period / year	1,464,079	2,083,559	2,617,666
Cash flow from operating activities
Adjustments for:
Depreciation	614,663	71,082	200,123
Amortisation	1,117,425	325,028	1,318,649
Interest paid on lease liabilities	(148,247)	-	-
Share based payment charge	9,414	24,000	53,765
Increase in deferred tax asset on share-based payment	-	-	549,508
Decrease / (increase) in trade and other receivables	(4,488,038)	1,146,760	(1,551,213)
Decrease / (increase) in derivative financial assets	(1,418,803)	24,253	(878,117)
Decrease / (increase) in deferred tax asset	215,896	-	(2,383,730)
Decrease / (increase) in inventories	1,144	(40,016)	(86,966)
Increase in trade and other payables	938,110	942,164	1,899,118
Increase / (decrease) in deferred tax liabilities	320,430	(58,919)	878,369
Increase / (decrease) in derivative financial liabilities	2,022,079	(22,503)	433,751
Net cash generated from operating activities	648,152	4,495,410	3,050,923
Cash flows from investing activities
Acquisition of property, plant and equipment	(946,826)	(203,205)	(670,827)
Acquisition of intangibles	(4,826,565)	-	(5,758,957)
Acquisition of subsidiary, net of cash acquired	-	(6,963,834)	(6,563,834)
Investment in subsidiary undertaking	-	(4,397,423)	-
Deferred contingent consideration on acquisition of subsidiary	(336,072)	-	-
Net cash used in investing activities	(6,109,463)	(11,564,462)	(12,993,618)
Cash flows from financing activities
Proceeds from issuance of ordinary shares	2,470,392	-	-
Principal elements of lease payments	(20,578)	-	-
Net cash from financing activities	2,449,814	-	-
Net increase / (decrease) in cash and cash equivalents	(3,011,497)	(7,069,052)	(9,942,695)
Cash and cash equivalents at the beginning of the period / year	7,860,368	17,803,063	17,803,063
Cash and cash equivalents at the end of the period / year	4,848,871	10,734,011	7,860,368

*Refer to note 1