TIDMEQLS
RNS Number : 7570U
Equals Group PLC
08 April 2021
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS DEFINED IN
ARTICLE 7 OF THE MARKET ABUSE REGULATION NO. 596/2014 ("MAR")
For immediate release 8 April 2021
Equals Group plc
('Equals' or the 'Group')
Final Results
'Strong operational and financial progress as B2B focus gains
further momentum'
Equals (AIM:EQLS) , the technology-led international payments
group focused on the SME marketplace, announces its final results
for the year ended 31 December 2020 (the 'period' or 'FY-2020') and
an update on the Group's trading in FY-2021.
FY-2020 Financial Summary
GBPmillions FY-2020 FY-2019 Change
(restated) W
Underlying transaction
values 3,493 2,888 +605
- B2B* 2,843 2,156 +687
- B2C* 650 731 -81
Revenue 29.0 30.9 -1.9
- B2B* 20.3 18.5 +1.8
- B2C* 8.7 12.4 -3.7
Gross profit 18.3 20.6 -2.3
Capitalised internal
software (4.4) (8.3) +3.9
Separately reported
items (2.6) (3.4) +0.8
Adjusted EBITDA** 1.2 5.6 -4.4
R&D Credits 1.4 3.5 -2.1
Loss after taxation (6.9) (5.4) -1.5
FY-2020 Group Highlights
* Successful refocus on business customers with B2B
transactions up by 32%
* International Payments: revenue increased by 46%; and
its B2B segment revenue increased by 51%
* Total B2B revenues represented 70% (FY-2019: 56%)
* Non travel-money revenues increased by 18% to GBP26.6
million (FY-2019: GBP22.9 million)
* Over 18,000 active unique B2B customers
* Total underlying expenditure reduced by 18% from
GBP30.6 million to GBP25.0 million
* Cash break-even achieved in Q4-2020
* Further bolt-on acquisition of Effective FX in
October 2020
* Adjusted EBITDA of GBP1.2 million, ahead of market
expectations and achieved against Covid-19 and
Wirecard headwinds
* The 50% reduction in staff costs capitalised combined
with Covid-19/Wirecard headwinds and single-year R&D
tax relief led to loss after tax widening from GBP5.4
million to GBP6.9 million
Q1-2021 Group Highlights
* Launch of Equals Money 'an account you can bank on'
* Revenue in Q1-2021 totalled GBP8.0 million, an annual
run-rate equivalent of GBP120k per employee.
* Current free cash position GBP9.0 million -
equivalent to 5 pence per share
* Costs remain under tight control and headcount stable
at 250
* Q1-2021 performance exceeded management expectations
Commenting on the Final Results, Ian Strafford-Taylor, CEO of
Equals Group plc, said:
"Despite a number of external headwinds, t he operational and
financial progress made this year as we focused our business
towards B2B is something I am incredibly proud of, and highlights
the quality of the Equals Group.
"As the UK payments sector becomes increasingly crowded with
specialist operators, our unique proposition spanning banking
services, international payments and card-based solutions is
proving to be a major differentiator for our customers, driving
loyalty and new customer acquisition. This, coupled with the
benefits of our accelerated planned restructuring and right-sizing
of operations, places us in a really strong position as we move
past the challenges of 2020 and continue to focus on driving
further B2B-led growth."
Analyst meeting
A conference call for analysts hosted by Ian Strafford-Taylor
(CEO) and Richard Cooper (CFO) will be held at 09.30am today, 8
April 2021. A copy of the Final Results presentation is available
at the Group's website: http://www.equalsplc.com .
For retail investors, a n audio webcast of the conference call
with analysts will be available after 12pm today:
https://webcasting.buchanan.uk.com/broadcast/60546425d2ba3d1fb050bfdc
Notes
*Transactions with business customers are reported as 'B2B' and
transactions with retail customers reported as 'B2C'
**Adjusted EBITDA is defined as: earnings before depreciation,
amortisation, impairment charges, share option charges, and
separately reported items. Separately reported items are large,
non-recurring items
W 2019 restatement - R&D credits now shown within taxation,
as opposed to an offset within operating expenses.
- Ends -
For more information, please contact:
Equals Group plc
Ian Strafford-Taylor, CEO Tel: +44 (0) 20 7778
Richard Cooper, CFO 9308
www.equalsplc.com
Canaccord Genuity (Nominated Advisor
/ Broker)
Emma Gabriel / Bobbie Hilliam / Georgina Tel: +44 (0) 20 7523
McCooke 8150
Alex Aylen (Sales)
Buchanan (Financial Communications)
Henry Harrison-Topham / Steph Watson Tel: +44 (0) 20 7466
/ Toto Berger 5000
equals@buchanan.uk.com www.buchanan.uk.com
Notes to Editors:
Equals Group is a technology-led international payments group
augmented by highly personalised service for the payment needs of
SME's whether these be FX, card payments or via Faster Payments.
Founded in 2007, the Group listed on AIM in 2014 and currently
employs around 250 staff across sites in London and Chester. For
more information, please visit www.equalsplc.com .
Chief Executive Officer's Report
Our original objectives for 2020
The main objective of the Group for 2020 was to continue to grow
rapidly with an increasing focus on its B2B customers and products.
This growth would be achieved by harnessing the power of the
payments infrastructure and connectivity put in place in 2019, and
to be further augmented during 2020, to drive increased volumes
through international payments, the Equals Spend card platform and
the banking services platform.
Covid-19
The World Health Organisation declared Covid-19 a global
pandemic on 11 March 2020. The immediate impacts of this were a
contraction in B2B trading in line with reduced economic activity
and a virtual closure of the Group's B2C travel money products. Due
to the first lockdown being imposed, the Group immediately
implemented its business continuity plan and seamlessly moved staff
to work from home. The success of moving a complex payments
business with strict security protocols and regulatory and
compliance regulation to a remote working status proved the value
of the investments in digital-services infrastructure made by the
Group in 2019. Concurrently, the Board accelerated a planned
restructuring and re-sizing of Equals, which yielded a
significantly reduced cost base and headcount, whilst positioning
the business ideally for further B2B-led growth by relentless focus
on the Group's product roadmap, marketing strategies and
cross-selling. The Group availed itself of the government's
furlough scheme and drew-down GBP2.0 million under the CBILs
initiative.
Wirecard
As reported in the Group's interim results and widely reported
in the press, the demise of Wirecard AG and its subsidiaries
('Wirecard') (the largest prepaid card issuer in the UK), affected
Equals as the Group issued cards using Wirecard for all its B2C and
some of its B2B programmes. The net result was that the Group had
to accelerate its development of a new multi-currency card
platform, supporting both website and app, and to migrate its
entire B2C customer base by the end of October 2020. This work and
migration necessitated significant diversion of resources, mainly
management and staff time, as well as the write-off of previously
incurred costs of inventory and similar. It was a remarkable
achievement by the Group's staff, and demonstrated the robustness
of Equals' underlying platform, that a full migration of over
150,000 cards was achieved by end of October at which point the
Group had, in just four months, moved to a superior platform with a
better product and enhanced economics.
Marketplace and competitive landscape
The payments market overall is significant, comprising as it
does, all the various payment mechanisms and customer bases. The
Group is somewhat unique in that it spans UK banking services and
payments, international payments and card-based payments solutions.
Most competitors specialise in one of these segments but not all.
In addition, the well-funded FinTech 'unicorns' are still focused
on the B2C space with the over-riding KPIs of customer numbers,
whereas Equals is firmly focused on the B2B customer space.
Despite the growth of FinTech, it remains the case that most of
the customer payments activity still flows through the incumbent
banks and it is winning business from these institutions that is
the sales focus for the Group. To achieve this, Equals has
assembled 'bank-grade' payments connectivity overlaid with vastly
superior user experience than many incumbents. In addition, the
Group's products are set up so that they do not require B2B
customers to change their banking provider, they simply just have
to use the Group for the individual services that they require.
Nevertheless, the role of London as a FinTech centre means that
staff cost inflation is high and accordingly the Group is in the
process of moving roles where possible to its Chester facility and
tapping into the great talent pool in the North-West of
England.
Within International Payments, the Group has identified the SME
segment of the B2B sector as the optimal target audience for its
products and services. The Group's 'target customer is an SME
between 50-500 employees with domestic UK and overseas payment
needs. Engineering, product and design resources are focused on
providing solutions to this customer segment, however, the Group's
products equally serve smaller and larger B2B customers.
Other achievements and product launches
-- B2B Payments agreement with HomeSend (a joint-venture between
MasterCard and eServeGlobal), via an API, utilising the Group's
outstanding FX capabilities in conjunction with its directly
connected and settling status with the Faster Payments network;
-- Implementation of core payment partnership with Citi,
supplementing existing arrangements with Barclays and RBS and
providing additional functionality and improved 'in-country'
settlement capabilities paving the way to
straight-through-processing (STP);
-- Refined Equals Go-To-Market strategy under the Equals
umbrella to be Equals Money for B2B customers and FairFX for B2C
customers;
-- Launch of an all-new customer-facing international payments
product: 'Equals Pay'. This is a functionality-rich self-service
platform that will help customer acquisition whilst increasing
capacity and efficiency;
-- Rebuild and rebrand of the B2C FairFX website and app to
support a new multi-currency card offering;
-- Acquisition of Effective FX, a predominantly B2B focused
international payments business with over 200 corporate clients and
strong B2B sales culture;
-- Implementation of:
o a new CRM system to improve both new customer acquisition and
maximisation of revenue opportunities from existing client
base;
o a new customer services platform across the Group improving
efficiency and productivity of the customer services team. The
platform is fully integrated with both the new CRM and telephony
solutions providing further opportunities for cross-selling and
customer retention;
o a new compliance system to lower onboarding friction particularly for B2B customers
-- Further investment into finance, compliance and regulatory
capabilities. The regulatory burden in the payments industry is
constantly increasing and the Group sees its capability as a
competitive advantage.
Financial performance
Underlying transaction values
The pivot towards B2B resulted in not only a 21% increase in
overall transaction values to GBP3.5 billion, but also a 24% growth
in H2-2020 over H1-2020. These overall increases however mask a
significantly better performance in International Payments (up 52%
compared with FY-2019 and up 25% in H2-2020 compared with H1-2020).
Inevitably, the Corporate Spend platform and retail facing products
saw decreased volumes with the opportunities for travel severely
curtailed by Covid-19. Details of the transaction values are shown
in Table 1 below:
Table 1*
GBPmillions International Corporate Cash & retail Banking TOTAL
Payments Expenses cards services
B2B
H2-2020 1,126 123 7 378 1,633
H1-2020 818 93 12 286 1,209
-------------- ---------- -------------- ---------- ------
FY-2020 1,944 216 19 664 2,843
-------------- ---------- -------------- ---------- ------
FY-2019 1,214 271 68 604 2,157
-------------- ---------- -------------- ---------- ------
Y-on-Y % change 60% (20%) (72%) 10% 32%
B2C
H2-2020 191 - 29 80 299
H1-2020 237 - 36 78 351
-------------- ---------- -------------- ---------- ------
FY-2020 428 - 64 158 650
-------------- ---------- -------------- ---------- ------
FY-2019 348 - 217 166 731
-------------- ---------- -------------- ---------- ------
Y-on-Y % change 23% (70%) (5%) (11%)
TOTALS
H2-2020 1,317 123 35 457 1,933
H1-2020 1,055 93 48 364 1,560
-------------- ---------- -------------- ---------- ------
FY-2020 2,372 216 83 821 3,493
-------------- ---------- -------------- ---------- ------
FY-2019 1,562 271 285 770 2,888
-------------- ---------- -------------- ---------- ------
Y-on-Y % change 52% (20%) (71%) 7% 21%
*A detailed review of the underlying data has led to some minor
re-profiling of H1-2020 and prior year disclosures. Totals may not
sum due to rounding. Percentages are calculated on the underlying
figures before rounding.
Revenue and revenue margins
Total revenue for the year was just shy of GBP29.0 million
compared to the pre-Covid-19 environment revenue in FY-2019 of
GBP31.0 million. Very encouragingly, revenue in H2-2020 rose by 10%
over H1-2020 to GBP15.2 million.
Table 2 below splits out the revenue by component and by
half-year. The retail cash and card products have been combined in
this analysis to show the impact of Covid-19 across these retail
products.
Table 2*
GBP000's International Corporate Cash Rebates Banking TOTAL
Payments Expenses & retail and other services
cards income
B2B
H2-2020 7,373 1,765 136 488 1,284 11,047
H1-2020 6,242 1,310 230 177 1,282 9,241
-------------- ---------- ---------- ----------- ---------- -------
FY-2020 13,605 3,075 366 665 2,566 20,277
-------------- ---------- ---------- ----------- ---------- -------
FY-2019 9,000 3,976 1,249 1,607 2,712 18,545
-------------- ---------- ---------- ----------- ---------- -------
Y-on-Y % change 51% (23%) (71%) (59%) (5%) 9%
B2C
H2-2020 1,757 - 774 287 1,322 4,141
H1-2020 1,991 - 1,229 89 1,222 4,531
-------------- ---------- ---------- ----------- ---------- -------
FY-2020 3,759 - 2,003 376 2,544 8,683
-------------- ---------- ---------- ----------- ---------- -------
FY-2019 2,929 - 6,840 10 2,621 12,400
-------------- ---------- ---------- ----------- ---------- -------
Y-on-Y % change (28%) - (71%) 3662% (3%) (30%)
TOTALS
H2-2020 9,130 1,765 911 776 2,606 15,188
H1-2020 8,233 1,310 1,459 266 2,504 13,772
-------------- ---------- ---------- ----------- ---------- -------
FY-2020 17,363 3,075 2,369 1,042 5,110 28,960
-------------- ---------- ---------- ----------- ---------- -------
Business mix
% 60% 11% 8% 4% 18%
H2-20 v H1-20 11% 35% (38%) 192% 4% 10%
FY-2019 11,929 3,976 8,089 1,617 5,333 30,945
Business mix
% 39% 13% 26% 5% 17%
Y-on-Y change
% 46% (23%) (71%) (36%) (4%) (6%)
*A detailed review of the underlying data has led to some minor
re-profiling of H1-2020 and prior year disclosures. Totals may not
sum due to rounding. Percentages are calculated on the underlying
figures before rounding.
Revenue margins in International Payments were slightly softer
at 73bp (FY-2019: 76bp), and in Banking at 31bp (FY-2019:
35bp).
Close to 10% of trades were in forward FX (FY-2019: 18%) at
close to 100bp per trade.
Cash break-even
The resizing and restructuring of the business, which began in
2019, was greatly accelerated by the outbreak of Covid-19. It was
the stated aim of the Board to get the Group's cost run-rate low
enough to achieve cash break-even within Q4-2020, even with the
effects of the pandemic on revenues. The Group achieved this whilst
continuing to invest in its product suite together with its sale
and marketing capabilities, and the Board is proud to achieve this
performance against the backdrop of the cash-burning Fintech
competitor community.
Board composition
After many years combined service, John Pearson, Robert Head and
Ajay Chowdhury stepped down from the Board this year and I thank
them for their wise counsel and diligence. Alan Hughes joined the
Board as a Non-Executive Director in March 2020 and became
Non-Executive Chairman on the date of the Group's AGM at the end of
June. Sian Herbert joined the Board as a Non-Executive Director and
Head of the Audit and Risk Committees in October 2020. Under all
governance guidelines, both are considered to be independent
Non-Executive Directors.
Product update
Unified platform
The clear focus for the Group in 2021 and beyond, is to continue
to grow its B2B payments capabilities through the further
development of the 'Equals Money' proposition whilst ramping up the
Group's sales and marketing in this sector. Equals Money is the
unified platform that incorporates the payments, cards and current
account solutions that the Group can offer and ties directly into
the strategic vision for the Group to simplify money movement.
The work undertaken in 2019 and 2020 forms a key component of
this proposition. Assembly of bank-grade security and connectivity,
including the integration into the Faster Payments network and the
implementation of the Citibank partnership to provide 'local'
settlement in over 40 countries, form the underlying scalable and
secure platform for clearing payments efficiently. This backbone is
overlaid by 'better than banks' technology to provide customers
with the products and platforms they need to make payments, both by
account-to-account transfer and by cards, in easily accessible (via
enhanced onboarding system) and simple to use applications.
Investments made in 2020 into the Group's customer services
platform, telephony and the new CRM system mean that Equals can not
only onboard the customer but also service them to the highest
levels with human interaction.
With this impressive capability now assembled, the twin
priorities in 2021 are to further refine the platform whilst
increasing the Group's sales and marketing efforts to win more
customers and grow revenues.
Own-name IBANs
A key component of further enhancing the platform is the ability
to give customers 'own-name' multi-currency IBAN numbers. This
functionality enables the Group to give a customer one account into
which all their international payment transactions can flow in and
out seamlessly and rapidly. Even more importantly, the account
being in the customer's own name makes dealing with suppliers and
customers much simpler and utilising the Group for this aspect of
their business does not require them to change their main banking
provider. Own-name IBANs was delivered on the scheduled date in the
Group's development roadmap for 2021.
Linked cards
Other product deployments in the first quarter of 2021 included
the delivery of 'Linked Cards' on the Group's FairFX B2C card
platform. This capability allows users to set up additional users
on their account that can either share in the balance on the
primary card or alternatively only receive funds via a
push-transaction from the primary card. This functionality will
enable the FairFX B2C cards to widen their use-case from only
travel money applications to also provide pocket-money solutions
for children of existing cardholders
Dealer platform
In addition, further enhancements to the Group's Equals Pay
International Payments platform were delivered concurrently with
the deployment of a new internal dealer platform, called
'Exchange', which integrates directly with the new CRM system.
Major product developments for the rest of 2021 include:
- further enhancements to the payment processing engine to
enable complete straight-through-processing ('STP'), both inbound
and outbound;
- improvements to the Pay platform, specifically around forward contracts and bulk payments functionality;
- additional card capabilities for both B2B and B2C including
real-time payment authorisations by Equals, virtual cards, Apple
Pay and Google Pay;
- implementation of Group-wide omni-product transaction
monitoring and risk systems, utilising machine-learning
capabilities; and,
- the integration of Equals Money products into accountancy
software provider offerings.
Sales and marketing
In conjunction with the developments listed above, the Group
will be accelerating its sales and marketing efforts, particularly
in the B2B space. A root-and-branch review of the Group's sales
effort was completed in March 2021 and the recommendations from
that will be implemented during the remainder of the year. In
keeping with Equals Money being the combination of the Group's
Payments, Cards and Banking products, the new sales force will be
selling the combined product suite. This will involve a combination
of re-training, recruitment, and incentive plans to drive
cross-selling and the investment in the new CRM system is vital to
the success of this effort.
As Equals has seen in recent years, hastened even further by the
collapse of Wirecard in June 2020, the compliance and regulatory
oversight of payment institutions is increasing significantly. The
Group has always been at the forefront of compliance practice and
views this increased focus as a competitive opportunity, as many
smaller companies will not be able to meet the standards required.
Accordingly, the Board continues to look for accretive acquisitions
where the compliance overhead for the company can be removed and
bring their business onto Equals' superior platform and thereby
free them to concentrate on growing their revenues.
Overall, whilst the Covid-19 pandemic is by no means over,
especially its ongoing effects on international travel, the Group
is seeing consistent turnover increases in International Payments
and the Corporate Spend platform. The Board envisages further
growth across the Equals Money product suite as enhanced product
capabilities combine with the Group's sales and marketing
initiatives. In addition, incremental enhancements to the Group's
operational systems and payments connections will yield further
capacity for scale and efficiencies.
Current trading and future prospects
From this time last year, the Group has cut its headcount by
around 25% and reduced its monthly costs by around GBP400,000.
Revenue during the continuing Covid-19 lockdown of Q1-2021 was
GBP8.0 million against the pre-Covid Q1-2020 revenue of GBP8.1
million On an annualised run-rate basis, revenue per head is now
GBP120k pa (Q1-2020: GBP90k), a productivity increase of a third.
The well-controlled liquidity position has resulted in a free-cash
balance of GBP9.0 million at 31 March 2021.
Capital Markets Day
On 6 May 2021, Equals will host its first ever Capital Markets
Day. This is an opportunity for the Group to showcase its people,
current products and capabilities and the sales and development
roadmaps. This will enable investors to gain a deeper understanding
of the business and an insight into the future strategic direction
of the Group. Further details are included in a separate
announcement.
Employees
Finally, a review of FY-2020 and the prospects of the Group
would not be complete without a word about our employees. We have
always had an employee base that was dedicated, hardworking and
loyal but the pandemic really emphasised the strength of our
people. They have shown both diligence and fortitude through the
year, accepting salary sacrifices during lockdown whilst seeing
many of their colleagues either on furlough or leaving the Group
permanently as we downsized. We have emerged from the challenges of
2020 with a fantastic, cohesive and motivated group of people who
are collectively driving the business forward. I am tremendously
grateful to all of them, individually and collectively, for
everything they did in the year and are continuing to deliver in
2021.
Ian Strafford-Taylor
Chief Executive Officer
7 April 2021
Chief Financial Officer's Report
PART A. INTRODUCTION
To aid readers of these financial statements, the Group has
chosen to present the primary statements in an alternative format
and explain the major movements to the prior year along with issues
of accounting impact and judgement.
As a result of the strategic pivot from B2C towards B2B, this
review starts with a 'dashboard' look at the business performance
and then takes readers through a granular examination of the income
stream and cost dynamics. This is shown below in Table 3, which is
net of Separately Reported Items (see note G).
Table 3
Payments Cards Banking Rebates Total
services and similar
B2B METRICS
Number of active accounts 4.4k 8.9k 4.9k
x Transactions per day 0.2k 1.3k 2.1k
x Average transaction size GBP32k GBP0.6k
x Average margin (in bps) 70 160 40
= Revenues per day GBP54k GBP12k GBP10k GBP76k
x days in period
--------- -------- ----------- ------------- -----------
= Revenue GBP13.6m GBP3.1m GBP2.6m GBP1.0m GBP20.3m
--------- -------- ----------- -------------
+
Add: B2C REVENUE GBP8.7m
TOTAL REVENUE GBP29.0m
x Contribution margin 59.0%
= CONTRIBUTION GBP17.1m
Less: Gross costs (excluding (GBP23.6m)
separately identified items)
% booked through income
statement 67%
-----------
à (GBP15.9m)
ADJUSTED EBITDA GBP1.2m
-----------
*A detailed review of the underlying data has led to some minor
re-profiling of H1-2020 and prior year disclosures. Totals may not
sum due to rounding. Percentages are calculated on the underlying
figures before rounding.
The Group reacted quickly to the Covid-19 pandemic, the effect
of which had a dramatic impact on revenues. The Group immediately
accelerated its re-sizing programme which involved reducing costs
in all areas of the business, without jeopardising its product
roll-out programme.
Adjusted EBITDA fell by GBP4.4 million from GBP5.6 million to
GBP1.2 million. The three principal reasons for this reduction
were:
-- Reduction in revenue, translating into a reduction in contribution of GBP1.8 million
-- GBP3.8 million reduction in the amount of staff costs capitalised, offset by:
-- a reduction in staff and other costs of GBP1.2 million,
resulting in a net increase in costs taken to the P&L of GBP2.6
million
PART B. INCOME AND EXPITURE ACCOUNT
Table 4 - Income and Expenditure account and its notes
Note H1-2020 H2-2020 FY-2020 FY-2019
In GBP000's
Revenue A 13,772 15,188 28,960 30,945
Less: Variable costs (5,034) (5,636) (10,670) (10,378)
-------- -------- --------- ---------
Gross profit B 8,738 9,552 18,290 20,567
-------- -------- --------- ---------
Ratio 63.4% 62.9% 63.2% 66.5%
Marketing (799) (407) (1,206) (2,037)
Contribution B 7,939 9,145 17,084 18,530
-------- -------- --------- ---------
Ratio 57.6% 60.2% 59.0% 59.9%
Staff costs C (5,458) (6,103) (11,561) (9,801)
IT & telephone D (549) (750) (1,299) (878)
Professional fees E (641) (788) (1,429) (959)
Property and office costs F (437) (556) (993) (803)
Travel (157) (76) (233) (451)
Bad debt provisions - (357) (357) -
Other costs (25) (23) (48) (62)
Net other costs (7,267) (8,653) (15,920) (12,954)
-------- -------- --------- ---------
*Adjusted EBITDA L 672 492 1,164 5,576
-------- -------- --------- ---------
Separately reported items: G
Covid-19 related costs (445) (1,119) (1,564) -
Wirecard related costs
(non-cash) (530) (540) (1,070) -
Management exceptional
items - - - (3,423)
------ -------- -------- --------
(975) (1,659) (2,634) (3,423)
------ -------- -------- --------
Acquisition costs H - (130) (130) (478)
Share option charges (195) (249) (444) (123)
EBITDA L (498) (1,546) (2,044) 1,552
====== ======== ======== ========
(*) Adjusted EBITDA is defined as earnings before: interest,
depreciation, amortisation, impairment charges, foreign exchange
differences, share option charges, and separately reported
items.
A detailed review of the underlying data has led to some minor
re-profiling of H1-2020 and prior year disclosures. Totals may not
sum due to rounding. Percentages are calculated on the underlying
figures before rounding.
Note A: Revenue
Covid-19 had a more significant impact on the revenues from
retail-facing products, resulting in total revenue being softer at
GBP29.0 million (FY-2019: GBP31.0 million).
The most significant changes were:
- B2B revenues surged to 70% of the total (Fy-2019: 56%)
- International Payments revenue increased by 46% and within
that B2B revenues increased by 51%
- Revenue from Equals Connect, the Group's white-label platform
grew rapidly with GBP0.9 million earned in H1-2020 and GBP1.5
million earned in H2-2020.
- Revenues from non travel-money products increased by 18% to
GBP26.6 million (FY-2019: GBP22.9million).
- Whilst revenue from the Corporate expense platform contracted
by 23% from FY-2019, growth resumed in H2-2020 by 35%.
- Retail cards and travel cash, the B2C exposed travel products
inevitably contracted compared to FY-2019 and H2-2020 was lower
than H1-2020.
- FY-2019 revenue benefited from rebates of GBP1.6 million
including some one-offs. FY-2020 rebate revenues were GBP1.0
million.
Note B: Gross profits and contribution
There is an interaction between direct costs (which includes
variable revenue-share arrangements) and marketing expenditure. The
Group's marketing department review the effectiveness of CPA
arrangements (shown within direct costs) and marketing costs and
move expenditure to the more efficient cost silo. Marketing costs,
net of separately reported items, are shown below:
Table 5: Marketing costs
GBP000's H1-2020 H2-2020 FY-2020 FY-2019
Gross costs 799 407 1,206 4,090
Less: Separately reported
items - - - (2,053)
--------------------------- -------- -------- -------- --------
Net costs 799 407 1,206 2,037
--------------------------- -------- -------- -------- --------
Contribution margin was virtually unchanged at 59% (FY-2019:
60%).
Excluding Equals Connect, the Group's white label platform, the
underlying margin on International Payments was 70% in FY-2020
(FY-2019: 68%).
The white-label business (Equals Connect) acquired in November
2019 contributed GBP0.6 million of contribution in FY-2020
(FY-2019: GBP0.05 million), with a contribution margin of 26%.
Contribution, and contribution margins are shown below:
Table 6: Contribution
GBP000's International Banking Cards and FY-2020 FY-2019
Payments cash
Revenue 17,363 5,110 6,487 28,960 30,945
-------------- -------- ---------- --------- ---------
Variable costs (6,469) (1,356) (2,845) (10,670) (10,378)
Marketing - (607) (599) (1,206) (2,037)
(6,469) (1,963) (3,444) (11,876) (12,415)
-------------- -------- ---------- --------- ---------
Contribution FY-2020 10,894 3,147 3,043 17,084 18,530
-------------- -------- ---------- --------- ---------
% 63% 62% 47% 59% 60%
Contribution FY-2019 8,391 3,356 6,783 18,530 -
-------------- -------- ---------- --------- ---------
% 70% 63% 50% 60% -
Note C: Staff costs
Staff and Directors took a 20% salary reduction for three months
in H1-2020, and 10% for two months in H2-2020. The total financial
value of the sacrifices made by staff was around GBP1.0 million,
and, equated to a 7% cut in staff salaries in the year. The
underlying monthly run-rate of payroll costs reduced from GBP1.4
million in January 2020 to GBP1.2 million in December 2020. It has
subsequently fallen further to just above GBP0.9 million although
it is expected to rise marginally above that level in 2021.
Table 7: Staff costs
GBP000's H1-2020 H2-2020 FY-2020 FY-2019
Gross costs 8,366 9,159 17,525 18,497
less Furlough credit (324) (222) (546) -
-------- -------- -------- --------
8,042 8,937 16,979 18,497
Less: Capitalised internal
software (2,241) (1,761) (4,002) (7,801)
Less: Acquisition costs - (83) (83) (160)
Less: Separately identified
items - Covid-19 (343) (990) (1,333) -
Less: Separately identified
items - other - - - (735)
Net staff costs 5,458 6,103 11,561 9,801
-------- -------- -------- --------
Staff numbers reduced from 331 in January 2020 to 272 in
December 2020 and 257 in January 2021. A redundancy and exit
programme was launched early in 2020 and resulted in GBP1.3 million
of associated costs. The Group availed itself of the Government's
furlough scheme with up to 72 employees being placed on furlough
during the lockdown.
Part of the reduction in headcount was associated with the
completion of a number of projects. The demise of Wirecard and the
subsequent card migration diverted resources away from capital
projects.
Note D: IT and telephone
In the last three months of 2019, a number of decisions were
taken to invest more in the security network, system resilience,
and other IT tools and subscriptions required for the execution of
the product roadmap. The full cost of this, together with increased
hosting costs came through in 2020 leading to an increase in costs.
These investments allowed the Group's employees to seamlessly work
from home during the pandemic in a secure and compliant
environment.
Table 8
H1-2020 H2-2020 FY-2020 FY-2019
Gross costs 759 959 1,718 1,180
Less: capitalised (210) (209) (419) (302)
-------- -------- -------- --------
Net IT & telephone 549 750 1,299 878
-------- -------- -------- --------
Note E: Professional fees
There are two streams of professional fees which were material,
but not treated as separately reported items:
a. Additional regulatory, but routine external audit* costs of a
subsidiary, GBP125k
b. marketing consulting fees, GBP200k
As reported in the interims, the Group expects compliance costs
to remain high for the foreseeable future.
One consequence of the Covid-19 pandemic was that the FY-2019
audit suffered delays as remote working was not entirely conducive
to the verification process and there was a significant cost
over-run of GBP160k but this shown as a separately reported
item.
*S166 FSMA 2000
Table 9
H1-2020 H2-2020 FY-2020 FY-2019
Gross costs 743 949 1,692 1,601
Less: acquisition costs - (48) (48) (318)
Less: Separately identified
items (102) (114) (216) (324)
-------- -------- -------- --------
Net professional fees 641 788 1,429 959
-------- -------- -------- --------
Note F: Property and office costs
The Group has property commitments in Chester for offices, and
in London for both offices and retail outlets. Two retail outlets
have been shuttered and exited.
Table 10
H1-2020 H2-2020 FY-2020 FY-2019
Gross costs 997 1,007 2,102 2,310
Less: Separately identified
items - - - (151)
Less: Capitalised internal
software (45) - (45) (204)
Less: IFRS16 adjustment (515) (548) (1,063) (1,152)
--------------------------------- -------- -------- -------- --------
Net property and office related
costs 437 459 993 803
--------------------------------- -------- -------- -------- --------
Note G: Separately reported items
With the demise of Wirecard AG and its UK operating subsidiary,
the Group has made provisions of GBP652k against card-stock and
prepaid issuance costs (normally amortised over three years).
The Group's action plan to downsize with the onset of Covid-19
resulted in costs of GBP1.6 million split largely between staffing
costs of GBP1.3 million, and additional professional fees, mainly
audit over-run costs. The Group's recognition of the costs
associated with these two events was tracked on an
individual-by-individual basis to ensure charges were correctly
recorded as either operational or Covid-19 related.
Table11
In GBP000's H1-2020 H2-2020 FY-2020 FY-2019
Cash-based costs - Covid
Staff costs 343 979 1,322 -
Professional fees 102 102 204 -
Other costs - 38 38
-------- -------- -------- --------
Total, Covid-19 445 1,119 1,564 -
-------- -------- -------- --------
-
Cash-based costs - Wirecard
Staff costs - 11 11 -
Professional fees - 12 12 -
Transaction charges - 395 395 -
-------- -------- -------- --------
Total, Wirecard - 418 418 -
-------- -------- -------- --------
Total Cash-based costs 445 1,537 1,982 -
Provisions and write-offs
- Wirecard
Card stocks written off 530 122 652 -
Rebranding - - - 2,724
Corporate reorganisation - - - 579
Litigation and similar - - - 120
-------- -------- -------- --------
- - - 3,423
-------- -------- -------- --------
Total, separately reported
items 975 1,659 2,634 3,423
-------- -------- -------- --------
Split between:
Covid-19 costs 445 1,119 1,564 -
Wirecard 530 540 1,070 -
Other - - - 3,423
-------- -------- -------- --------
975 1,659 2,634 3.423
-------- -------- -------- --------
Note H: Acquisition costs
In October 2020, the Group acquired the trade and assets of
Effective FX for GBP125k as an up-front payment and further
performance related earn-outs over three years. Acquisition costs
of GBP130k were incurred and charged to the P&L account.
Note J: Impairment review
Despite the Covid-19 pandemic, no further impairment was judged
in any of the Cash Generating Units.
Note K: Depreciation and amortisation
Depreciation for the period was GBP0.45 million for tangible
fixed assets (FY-2019: GBP0.4 million) and GBP0.9 million for
'right-to-use' assets (FY-2019: GBP0.9 million). Amortisation of
acquired intangibles was GBP1.2 million for the year (FY-2019:
GBP0.9 million). Amortisation of other assets, principally
capitalised software was GBP3.1 million (FY-2019: GBP1.8
million).
Note L: Reconciliation between Adjusted EBITDA and loss before
taxation
Table 12
GBP000's Adjusted Separately Acquisition Share Result
EBITDA reported costs options before
items tax
Note G Note H
Revenue 28,960 - - - 28,960
Direct costs (10,671) - - - (10,671)
--------- ----------- ------------ --------- ---------
Gross profits 18,289 - - - 18,289
Marketing (1,206) - - - (1,206)
--------- ----------- ------------ --------- ---------
Contribution 17,083 - - 17,083
Staff costs (11,561) (1,333) (82) (444) (13,420)
Property (993) - - - (993)
IT and Telephone (1,299) - - - (1,299)
Professional fees (1,428) (216) (48) - (1,692)
Travel and subsidence (233) - - - (233)
Other expenditure (405) (1,085) - - (1,490)
--------- ----------- ------------ --------- ---------
1,164 (2,634) (130) (444) (2,044)
--------- ----------- ------------ --------- ---------
FX differences (199)
Depreciation (1,427)
Contingent consideration (637)
Amortisation (4,347)
Interest (392)
---------
Loss before taxation (9,046)
---------
Note M: Tax
An accrual has been made for GBP1,367k of R&D credits.
GBP2,535k of R&D accruals at 31 December 2019 were received in
2020. With GBP1,367k of R&D tax accruals for 2020, the 'net'
cost of the staff costs capitalised drops from GBP4,002k to
GBP2,635k or 66 pence in the pound.
Table 13
GBP'000 FY-2020 FY-2019
GBP GBP
R&D tax credits 1,371 3,514
Deferred tax credit/(charge) 738 (927)
-------- --------
Total tax credit 2,109 2,587
-------- --------
The Group has GBP16.9 million of tax losses available to be
offset against future taxable profits.
Note N: Loss / Earnings per share in pence
2020 2020 2019 2019
Basic Diluted Basic Diluted
Loss per share (3.87) (3.87) (3.20) (3.12)
Adjusted loss per share* (2.33) (2.33) (0.86) (0.84)
*adjusted EPS is before separately reported items and
acquisition costs .
PART C CASH STATEMENT
The table below aggregates the movements across Bank and
Liquidity providers:
Table 14
GBP000's FY-2020 FY-2020 FY-2019 FY-2019 Movement
Adjusted EBITDA (table
4) 1,164 5,576 (4,412)
Less: IFRS 16 Leases
impact (1,063) (1,152)
Less: acquisition
costs (130) (478)
Less: separately reported
items cash based (1,982) (3,423)
(3,175) (5,053) 1,878
Less: Internally capitalised
software (4,465) (8,307)
Less: Purchase of
other intangibles (65) (806)
Less: Purchase of
property, plant, equipment (160) (1,452)
-------- --------
(4,690) (10,565) 5,875
Cashflows before working
capital, acquisitions
and external funding (6,701) (10,042) 3,341
(Less) / add: Working
capital movement* (1,485) 402 (1,887)
(8,186) (9,640) 1,454
Cash for acquisitions/
earn-outs (825) (3,325) 2,500
External funding
R&D credits received
during the year 2,539 1,068
Cash raised from
equity issues - 15,749
Cash raised from
share options - 130
Draw-down of CBILs 2,000 -
-------- --------
4,539 16,947 (12,408)
NET CASH FLOWS (4,472) 3,982 (8,454)
Balance at 1 January 13,299 9,317 3,982
Balance at 31 December 8,827 13,299 (4,472)
-------- --------- ---------
Comprising:
Cash at bank 9,658 10,451
Cash in hand in bureaux 22 462
Regulatory deposits 352 352
-------- --------
10,032 11,265 (1,233)
Add: Balances with
liquidity providers 5,695 3,717
Less: Customer deposit
margins and similar** (4,900) (1,683)
-------- --------
795 2,034 (1,239)
Less: CBILs (2,000) - (2,000)
8,827 13,299 (4,472)
------------ ------------ ------------
Shares in issue 178,602,918 178,602,918 -
Amount per share 4.9 pence 7.4 pence (2.5 pence)
------------ ------------ ------------
*balances which fall outside the FCA safeguarding regime and
hence are "on" balance sheet.
**includes movements in balances with liquidity providers and
customer deposit margins
PART D BALANCE SHEET
The Group was able to avail itself of the Government's Covid-19
support package through the draw-down of GBP2 million through the
Coronavirus Business Interruption Loan Scheme ("CBILs"). The loan
carries no interest for the first 12 months and can be repaid at
any time during this period. This loan provides a working capital
buffer against any customer debt failure or to expand - principally
by being able to offer more forward FX business at competitive
rates.
Table 15
At 31.12.2020 At 31.12.2019
In GBP000's On Off On Off
Balance Balance Balance Balance
sheet sheet sheet sheet Movement
(memo (memo
only) only)
Gross Cash resources 15,727 96,110 14,982 52,441
Less: Customer balances* (4,900) (96,110) (1,683) (52,441)
Less: CBILs loan (2,000) - - -
-------------- --------- --------- --------- -----------
Cash per cashflow (table
14) 8,827 - 13,299 - (4,472)
-------------- --------- --------- --------- -----------
Other current assets
and liabilities
Card stock and other
inventories 194 - 264 -
Accrued income 419 - 1,726 -
Trade debtors 2,443 - 1,450 -
Other debtors 168 - 360 -
Prepayments 860 - 1,466 -
Accrued R&D credit 1,367 - 2,535 -
-------------- --------- -----------
5,451 - 7,801 - (2,350)
-------------- --------- -----------
Retention and deferred
consideration (1,662) - (1,110) -
Accrued expenses (2,271) - (1,786) -
Trade creditors (2,510) - (2,495) -
PAYE and VAT (766) - (624) -
Other creditors - (155) -
(7,209) - (6,170) - (1,039)
-------------- --------- -----------
Cash resources, less
other current assets
and liabilities 7,069 - 14,930 - (7,861)
Fixed Assets (other
than "right to use") 36,496 - 35,297 - 1,199
IFRS16 (Right to use
assets less lease liabilities) (346) - (294) - (52)
Derivative financial
assets (net) (30) - 372 - (402)
Deferred tax, (net) (547) - (788) - 241
Shareholders' funds 42,642 - 49,517 - (6,875)
-------------- --------- -----------
*on-balance sheet balances are not required to be
safeguarded.
Internally capitalised software
The Group continues its investment in product development and
has capitalised a further GBP4.5 million (FY-2019: 8.3 million) of
which GBP4.0 million (FY-2019: GBP7.8 million) was staff costs.
Off balance-sheet funds
The rapid expansion of the B2B side of the business has led to
an 83% increase in funds either safeguarded or segregated by
regulated subsidiaries of the Group.
Other balance sheet items
The Group has accrued GBP1.25 million for R&D credits
(FY-2019: GBP2.5 million). During FY-2020, the Group received the
GBP2.5 million of R&D credits accrued in FY-2019.
Non-Controlling Interest
Of the GBP6.9 million loss for the period, GBP18k relates to the
Non-Controlling Interest of the Equals Connect business acquired in
FY-2019.
Richard Cooper
Chief Financial Officer
7 April 2021
CONSOLIDATED statement OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2020
FY-2020 FY-2019
Note GBP GBP
Gross value of currency transactions
sold*(1) 3.4 2,671,244,658 2,117,459,669
Gross value of banking deposit transactions 821,426,227 769,446,473
-------------- ------------------
Revenue on currency transactions 23,849,449 25,611,521
Banking revenue 5,110,180 5,333,203
-------------- ------------------
Revenue 4 28,959,629 30,944,724
Direct costs (10,670,263) (10,378,265)
-------------- ------------------
Gross profit 18,289,366 20,566,459
Administrative expenses 5 (22,466,835) (20,123,517)
Amortisation charge 10 (4,346,682) (2,830,587)
Impairment charge 10 - (4,858,898)
Acquisition expenses 5j (130,433) (478,476)
-------------- ------------------
Total operating expenses (26,943,950) (28,291,478)
Operating loss (8,654,584) (7,725,019)
Finance costs (391,813) (233,564)
-------------- ------------------
Loss before tax (9,046,397) (7,958,583)
Tax credit 6 2,109,055 2,586,885
-------------- ------------------
Loss after tax (6,937,342) (5,371,698)
============== ==================
Attributable to:
Owners of Equals Group PLC (6,919,650) (5,342,074)
Non-controlling interest (17,692) (29,624)
Other comprehensive income:
Exchange differences arising on translation 6,246 -
of foreign operations
-------------- ------------------
Total comprehensive loss for the year (6,931,096) (5,371,698)
============== ==================
Loss per share
Basic 7 (3.87) (3.20)
Diluted 7 (3.87) (3.12)
============== ==================
*(1) Gross value of currency transactions sold and banking
deposit transactions are a non-GAAP measure and represent the gross
value of currency transactions sold to customers and banking
deposits made by customers. See Note 3.4 for more guidance.
All income and expenses arise from continuing operations.
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
Group Company
FY-2020 FY-2019 FY-2020 FY-2019
GBP GBP GBP GBP
ASSETS
Non-current assets
Property, plant and equipment 1,645,635 1,972,818 - -
Right of use assets 6,061,346 6,948,876 - -
Intangible assets and
goodwill 34,849,927 33,324,137 - -
Deferred tax assets 3,192,585 2,438,859 743,613 238,369
Investments - - 61,706,671 38,892,060
------------- ------------- ----------- ------------
45,749,493 44,684,690 62,450,284 39,130,429
------------- ------------- ----------- ------------
Current assets
Inventories 194,091 263,971 - -
Trade and other receivables 10,953,438 11,347,749 274,222 20,138,017
Derivative financial assets 3,019,247 4,560,780 - -
Cash and cash equivalents 10,032,178 11,265,266 - -
------------- ------------- ----------- ------------
24,198,954 27,437,766 274,222 20,138,017
------------- ------------- ----------- ------------
TOTAL ASSETS 69,948,447 72,122,456 62,724,506 59,268,446
============= ============= =========== ============
EQUITY AND LIABILITIES
Equity attributable to
equity holders
Share capital 1,786,029 1,786,029 1,786,029 1,786,029
Share premium 53,003,077 53,003,077 53,003,077 53,003,077
Share-based payment reserve 1,401,886 1,345,234 1,401,886 957,757
Other reserves 8,608,867 8,602,621 3,186,538 3,186,538
Retained (deficit)/earnings (22,258,531) (15,338,881) 1,530,421 (1,624,991)
------------- ------------- ----------- ------------
Equity attributable to
owners of Equals Group
PLC 42,541,328 49,398,080 60,907,951 57,308,410
Non-controlling interest 101,134 118,826 - -
------------- ------------- ----------- ------------
42,642,462 49,516,906 60,907,951 57,308,410
------------- ------------- ----------- ------------
Non-current liabilities
Borrowings 2,000,000 - - -
Lease liabilities 5,509,382 6,431,578 - -
Deferred tax liabilities 3,739,960 3,226,586 - -
------------- ------------- ----------- ------------
11,249,342 9,658,164 - -
------------- ------------- ----------- ------------
Current liabilities
Trade and other payables 12,109,220 7,947,364 1,816,555 1,960,036
Lease liabilities 897,266 811,628 - -
Derivative financial liabilities 3,050,157 4,188,394 - -
------------- ------------- ----------- ------------
16,056,643 12,947,386 1,816,555 1,960,036
------------- ------------- ----------- ------------
TOTAL EQUITY AND LIABILITIES 69,948,447 72,122,456 62,724,506 59,268,446
============= ============= =========== ============
CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2020
Group Called Share Share- Accumulated Other Total Non-controlling Total
up share premium based losses reserves attributable interest equity
capital payment (note to owners of
17) Equals Group
PLC
GBP GBP GBP GBP GBP GBP GBP GBP
Attributable to the owners of Equals Group PLC
--------------------------------------------------------- ------------
At 1 January
2019 1,553,682 35,858,770 1,748,105 (9,832,880) 8,938,693 38,266,370 - 38,266,370
Acquisition of
subsidiary
with
non-controlling
interest - - - - - - 148,450 148,450
Loss for the
year
and total
comprehensive
expense - - - (5,342,074) - (5,342,074) (29,624) (5,371,698)
Share-based
payment
charge (note
22) - - 122,609 - - 122,609 - 122,609
Movement in
deferred
tax on
share-based
payment reserve - - (525,480) - - (525,480) - (525,480)
Shares issued
in
year 232,347 17,144,307 - (163,927) (336,072) 16,876,655 - 16,876,655
--------- ---------- --------- ------------ --------- ------------ ---------------- -----------
At 31 December
2019 1,786,029 53,003,077 1,345,234 (15,338,881) 8,602,621 49,398,080 118,826 49,516,906
Loss for the
year
and total
comprehensive
income - - - (6,919,650) - (6,919,650) (17,692) (6,937,342)
Other
comprehensive
income:
Items that will
not
be reclassified
subsequently
to profit or
loss:
Exchange
differences
arising on
translation
of foreign
operations - - - - 6,246 6,246 - 6,246
Other items:
Share-based
payment
charge (note
22) - - 444,129 - - 444,129 - 444,129
Movement in
deferred
tax on
share-based
payment reserve - - (387,477) - - (387,477) - (387,477)
At 31 December
2020 1,786,029 53,003,077 1,401,886 (22,258,531) 8,608,867 42,541,328 101,134 42,642,462
========= ========== ========= ============ ========= ============ ================ ===========
CONSOLIDATEd and company STATEMENT OF changes in equitY
FOR THE YEARED 31 DECEMBER 2020
Company Called Share Share- Retained Other Total Non-controlling Total
up share premium based earnings reserves attributable interest equity
capital payment / (note to owners of
accumulated 17) Equals Group
losses PLC
GBP GBP GBP GBP GBP GBP GBP GBP
At 1 January
2019 1,553,682 35,858,770 835,148 240,954 3,522,610 42,011,164 - 42,011,164
Loss for the
year
and total
comprehensive
expense - - - (1,702,018) - (1,702,018) - (1,702,018)
Shares issued
in
the year 232,347 17,144,307 - (163,927) (336,072) 16,876,655 - 16,876,655
Share-based
payment
charge (note
22) - - 122,609 - - 122,609 - 122,609
--------- ---------- --------- ----------- --------- ------------ --------------- -----------
At 31 December
2019 1,786,029 53,003,077 957,757 (1,624,991) 3,186,538 57,308,410 - 57,308,410
Profit for the
year
and total
comprehensive
income - - - 3,155,412 - 3,155,412 - 3,155,412
Share-based
payment
charge (note
22) - - 444,129 - - 444,129 - 444,129
------------
At 31 December
2020 1,786,029 53,003,077 1,401,886 1,530,421 3,186,538 60,907,951 - 60,907,951
========= ========== ========= =========== ========= ============ =============== ===========
CONSOLIDATED STATEMENT OF CASH FLOWS
F or the Year ended 31 december 2020
Group
FY-2020 FY-2019
GBP GBP
Operating loss for the year (8,654,584) (7,725,019)
Cash flows from operating activities
Adjustments for:
Depreciation 1,427,368 1,347,872
Amortisation 4,346,682 2,830,587
Impairment - 4,858,898
Share-based payment charge 444,129 122,609
Decrease / (Increase) in trade and
other receivables (401,045) (1,859,253)
Decrease / (Increase) in derivative
financial assets 1,541,533 (3,378,888)
(Decrease) / Increase in trade and
other payables 3,051,193 2,943,227
(Decrease) / Increase in derivative
financial liabilities (1,510,626) 3,609,438
Decrease in inventories 69,880 22,742
------------ -------------
Net cash inflow 314,530 2,772,213
Tax receipts 2,538,873 -
Net cash inflow from operating activities 2,853,403 2,772,213
Cash flows from investing activities
Acquisition of property, plant and
equipment (159,834) (1,460,870)
Acquisition of intangibles (4,530,470) (11,679,597)
Acquisition of subsidiary, net of
cash acquired (255,433) (2,226,153)
Net cash used in investing activities (4,945,737) (15,366,620)
Cash flows from financing activities
New borrowings 2,000,000 -
Principal elements of lease payments (891,167) (643,786)
Interest paid on finance lease (222,193) (233,564)
Interest paid (27,394) -
Proceeds from issuance of ordinary
shares - 17,748,353
Costs directly attributable to share
issuance - (871,698)
Net cash inflow from financing activities 859,246 15,999,305
Net (decrease)/increase in cash and
cash equivalents (1,233,088) 3,404,898
Cash and cash equivalents at the beginning
of the year 11,265,266 7,860,368
------------ -------------
Cash and cash equivalents at end of
the year 10,032,178 11,265,266
============ =============
NOTES TO THE CONSOLIDATED FINANCIAL statementS
For the year ended 31 December 2020
Company
FY-2020 FY-2019
GBP GBP
Profit / (loss) before tax 2,650,167 (1,940,387)
Cash flows from operating activities
Adjustments for:
Increase in trade and other
receivables (2,506,686) (15,230,313)
(Decrease) / increase in trade and
other payables (143,481) 294,045
Net cash outflow from operating
activities - (16,876,655)
Cash flows from financing activities
Proceeds from issuance of shares - 17,748,353
Costs directly attributable to share
issuance - (871,698)
Net cash inflow from financing
activities - 16,876,655
Net increase in cash and cash - -
equivalents
Cash and cash equivalents at the - -
beginning
of the year
-------------- -----------------
Cash and cash equivalents at end of - -
the year
============== =================
At 31 December the Company held no bank accounts.
NOTES TO THE CONSOLIDATED FINANCIAL statementS
For the year ended 31 December 2020
1 General information
The Company is a public company limited by shares and
incorporated in England and Wales and domiciled in the UK and whose
shares are quoted on AIM, a market operated by The London Stock
Exchange. These consolidated financial statements comprise the
Company and its subsidiaries (together referred to as the 'Group').
The Group is a financial technology (fintech) provider, primarily
providing foreign currency and banking services. In addition, the
Group has a Bureau de Change retail network in the City of
London.
The Company and Group's consolidated financial statements for
the year ended 31 December 2020 were authorised for issue on 8
April 2021 and the Company and Group's statement of financial
position signed by Richard Cooper on behalf of the Board.
2 New standards, amendments and interpretations to published standards
New and revised accounting standards and interpretations
adopted, none of which had any material impact to the Group:
* Amendments to References to Conceptual Framework in
IFRS Standards
* Definition of Material (Amendments to IAS 1 and IAS
8)
* Definition of a Business (Amendments to IFRS 3)
* COVID-19-Related Rent Concessions - Amendment to IFRS
16
New standards, amendments and interpretations issued but not yet
effective, none of which is expected to have a material impact on
the Group:
-- Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) (effective 1 January
2021)
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments
to IAS 37) (effective 1 January 2022)
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) (effective 1 January 2022)
-- IFRS 17 Insurance Contracts has been issued by the IASB (effective date of 1 January 2023)
-- Classification of Liabilities as Current or Non-current
(Amendments to IAS 1) (effective date of 1 January 2023)
3 Basis of preparation and significant accounting policies
The principal accounting policies applied in the preparation of
the Group and Company financial statements are set out below. These
policies have been consistently applied to all the years presented,
unless otherwise stated. The financial statements have been
prepared on a historical cost basis with the exception of
derivative financial instruments which are measured at fair value
through profit or loss.
3.1 Basis of preparation
These financial statements are prepared in accordance with
International Accounting Standards in conformity with the
requirements of the Companies Act 2006 and AIM Regulations. The
financial statements are presented in sterling, the Company and
Group's presentational currency.
IFRS requires management to make certain accounting estimates
and to exercise judgement in the process of applying the Company
and Group's accounting policies. These estimates are based on the
Directors best knowledge and past experience and are explained
further in note 3.25.
Going concern
Details of the Group's business activities, results, cash flows
and resources, together with the risks it faces and other factors
likely to affect its future development, performance and position
are set out in the strategic report. Certain Group companies are
regulated by the Financial Conduct Authority and perform annual
capital adequacy assessments. Consideration was given to whether
there is sufficient liquidity and financing to support the
business, the post balance sheet trading of the Group, the
regulatory environment and the effectiveness of risk management
policies. Management has sensitised its base case, assumed certain
business lines might be discontinued and examined the truncating of
product development expenditure. The Board therefore has a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future and
therefore the financial statements are prepared on a going concern
basis.
3.2 Basis of consolidation
The consolidated financial statements comprise the financial
statements of all Group subsidiaries as at 31 December each year
using consistent accounting policies.
Business combinations
The Group financial statements for business combinations using
the acquisition method when control is transferred to the Group.
The consideration transferred in the acquisition is generally
measured at fair value, as are the identifiable net assets
acquired. Any goodwill that arises is tested annually for
impairment. Any gain on a bargain purchase is recognised in profit
or loss immediately. Transaction costs are expensed as incurred,
except if related to the issue of debt or equity securities. The
consideration transferred does not include amounts related to the
settlement of pre-existing relationships. Such amounts are
generally recognised in profit or loss.
Any contingent consideration is measured at fair value at the
date of acquisition. If an obligation to pay contingent
consideration that meets the definition of a financial instrument
is classified as equity, then it is not re-measured and settlement
is accounted for within equity. Otherwise, other contingent
consideration is re-measured at fair value at each reporting date
and subsequent changes in the fair value of the contingent
consideration are recognised in profit or loss.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
In assessing control, the Group takes into consideration potential
voting rights. The acquisition date is the date on which control is
transferred to the acquirer. The financial statements of
subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control
ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, non-controlling interest
and any unrealised income and expenses arising from intra-group
transactions, are eliminated.
On publishing the Company financial statements here, together
with the Group financial statements, the Company is taking
advantage of exemption in section 408 of the Companies Act 2006 not
to present the individual income statement and related notes of the
Company which form part of these approved financial statements.
3.3 Gross value of currency transactions sold and the gross value of banking transactions
The gross value of currency transactions sold represent the
gross value of currency transactions undertaken with customers by
the Group, where the net is reported as revenue. The gross value of
banking transactions represents client money deposits by customers.
These values are a non-GAAP measure and therefore disclosed as
additional information in the consolidated statement of
comprehensive income.
3.4 Revenue recognition
The Group applies IFRS 15 Revenue from Contracts with Customers
for the recognition of revenue. IFRS 15 established a comprehensive
framework for determining whether, how much and when revenue is
recognised. It affects the timing and recognition of revenue items,
but not generally the overall amount recognised.
The performance obligations of all revenue streams are satisfied
on the transaction date. Revenue is not recognised where there is
evidence to suggest that customers do not have the ability or
intention to pay. The Group does not have any contracts with
customers where the performance obligations have not been fully
satisfied.
How the Group recognises revenue for its significant revenue
streams is described below.
Currency Cards
A contract is identified when it is approved by relevant parties
and when the card is issued to the customer. Performance
obligations and transaction prices are set out in the contract.
Revenue from provision of card services is recognised over period
in which they are provided.
ATM transaction and out-of-currency variable fees are
constrained to the amount not expected to be reversed. Variable
revenue is recognised at the point at which it is unlikely to be
reversed, typically the transaction date.
International Payments and Travel Cash
This service relates to the facility to buy and sell currency. A
contract is identified when a payment is approved by the Group and
the customer. Performance obligations and transaction prices are
set out in the contract. Revenue is recognised at a point in time
using the relevant exchange rate.
Banking
This service relates to the provision of bank account services.
A contract is identified when a customer enters an agreement with
the Group for a Cardone Banking account. Performance obligations
and transaction prices are set out in the contract.
Monthly account fees are recognised during the month the account
is provided. ATM transaction and out-of-currency variable fees are
recognised up to the amount not expected to be reversed. Variable
revenue is recognised at the point at which it is unlikely to be
reversed, typically the transaction date.
3.5 Accounting for government grants
The Group recognises government grants once it has satisfied
itself that it is compliant with the relevant conditions and the
grant will be received. Grant income is recognised in profit or
loss on a systematic basis and in line with the recognition of the
expenses that the grants are intended to compensate, and is offset
against related expenditure.
The cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending on
the date on which the relevant employees become fully entitled to
the award ('the vesting date'). The cumulative expense recognised
for equity settled transactions at each reporting date until the
vesting date reflects the extent to which the vesting period has
expired and the Group's best estimate of the number of equity
instruments that will ultimately vest. The profit or loss charge or
credit for a period represents the movement in cumulative expense
recognised as at the beginning and end of that period.
3.6 Research and development
Research costs are expensed as incurred. Expenditure on IT
software and development is recognised as an intangible asset only
if the expenditure can be measured reliably, when the intangible
asset is technically and commercially feasible, future economic
benefits are probable, and the Group intends to and has sufficient
resources to complete development and to use or sell the asset.
Subsequent to initial recognition, development expenditure is
measured at cost less accumulated amortisation and any accumulated
impairment losses.
3.7 Treatment of research and development tax credits
Research and development tax credits are treated as taxation
credits as defined under IAS12 Income Taxes with a credit recorded
in the year to which the claim relates.
3.8 Taxation
The tax expense comprises current and deferred tax and R&D
tax credits.
3.9 Cash and cash equivalents
These include cash in hand and deposits held at call with banks.
Any cash held on behalf of customers is segregated from operational
cash and safeguarded in accordance with our regulatory obligations.
The risks and rewards to the Group that arise from the holding of
customer money are principally vested with the customers. As a
result, the Group does not account for customer cash in the Group's
financial statements.
4 Revenue and segmental analysis
Segment results are reported to the Board of Directors (being
the chief operating decision maker) to assess both performance and
support strategic decisions. The Board reviews financial
information on revenue for the following segments: Currency Cards,
International Payments, Travel Cash, Banking and Central (which
includes overheads and corporate costs). Revenue is primarily
derived from UK based customers.
IFRS 15 requires the presentation of disaggregated revenue from
contracts with customers into categories that depict how the
nature, amount, timing and uncertainty of revenue and cash flows
are affected by economic factors. The Group has assessed that the
disaggregation of revenue by operating segments is appropriate in
meeting this disclosure requirement as this is the information
regularly reviewed by the Board, to evaluate the financial
performance of the Group.
Group Currency International Travel Banking Central Total
Cards Payments Cash
2020
GBP GBP GBP GBP GBP GBP
Segment revenue 5,856,180 17,241,091 630,156 5,110,180 122,022 28,959,629
Direct costs (2,946,536) (6,176,228) (274,064) (1,356,074) 82,639 (10,670,263)
------------ ------------ ---------- ------------ ---------------- ----------------
Gross profit 2,909,644 11,064,863 356,092 3,754,106 204,661 18,289,366
Administrative
expenses - - - - (22,466,835) (22,466,835)
Amortisation
charge - - - - (4,346,682) (4,346,682)
Impairment - - - - - -
charge
Acquisition
expenses - - - - (130,433) (130,433)
Finance costs - - - - (391,813) (391,813)
Profit /
(loss) before
tax 2,909,644 11,064,863 356,092 3,754,106 (27,131,102) (9,046,397)
============ ============ ========== ============ ================ ================
Total assets - - - 4,398,909 65,549,538 69,948,447
Total
liabilities - - - (1,754,754) (25,551,231) (27,305,985)
------------ ------------ ---------- ------------ ---------------- ----------------
Total net
assets - - - 2,644,155 39,998,307 42,642,462
============ ============ ========== ============ ================ ================
Group Currency International Travel Banking Central Total
Cards Payments Cash
2019
GBP GBP GBP GBP GBP GBP
Segment revenue 11,293,815 11,928,662 2,389,044 5,333,203 - 30,944,724
Direct costs (4,391,599) (3,537,900) (1,043,047) (1,405,719) - (10,378,265)
------------ ------------ ------------ ------------ ------------- -------------
Gross profit 6,902,216 8,390,762 1,345,997 3,927,484 - 20,566,459
Administrative
expenses - - - - (20,123,517) (20,123,517)
Amortisation
charge - - - - (2,830,587) (2,830,587)
Impairment
charge - - (4,858,898) - (4,858,898)
Acquisition
expenses - - - (478,476) (478,476)
Finance costs - - - - (233,564) (233,564)
------------ ------------ ------------ ------------ ------------- -------------
Profit /
(loss) before
tax 6,902,216 8,390,762 1,345,997 (931,414) (23,666,144) (7,958,583)
============ ============ ============ ============ ============= =============
Total assets - - - 5,077,618 67,044,838 72,122,456
Total liabilities - - - (1,926,658) (20,678,892) (22,605,550)
------------ ------------ ------------ ------------ ------------- -------------
Total net
assets - - - 3,150,960 46,365,946 49,516,906
============ ============ ============ ============ ============= =============
5 Operating loss
Operating Loss is stated after FY-2020 FY-2019
charging / (crediting) the following
operating expenses: -
Note GBP GBP
Staff costs (net of expenditure
capitalised) 5a 12,894,185 10,695,174
IT and telephone cost (net of
expenditure capitalised) 5c 1,298,634 877,597
Other professional fees 5d 1,269,755 963,966
- Audit fees 5e 375,000 319,200
Marketing costs 1,205,738 4,089,772
Property and office costs (net
of expenditure capitalised) 5f 992,748 1,015,832
Travel and subsistence 233,231 452,041
Other 401,479 9,744
------------ ------------
Sub-total, cash-based expenses 18,670,770 18,423,326
------------ ------------
Write-off of card stocks 5g 574,953 -
Bad debt expense 5g 513,355 -
Depreciation of right of use
assets 9 940,350 917,993
Depreciation of property, plant
and equipment 8 487,018 429,879
Contingent consideration 5h 637,383 -
Share option charge 444,129 122,609
Foreign exchange loss 198,877 229,710
------------ ------------
Sub-total, non cash-based costs 3,796,065 1,700,191
------------ ------------
Total administrative expenses 22,466,835 20,123,517
============ ============
Amortisation charge 4,346,682 2,830,587
Impairment charge - 4,858,898
Acquisition costs - staff costs 5j 82,841 160,401
Acquisition costs - professional
fees 5j 47,592 318,075
------------ ------------
Total operating expenses 26,943,950 28,291,478
============ ============
6 Taxation
The Group's taxation charge or credit is the composite of:
1. Corporation tax credit arising on losses in the financial
year
2. R&D tax credits received or receivable on development
expenditure (which is debited to the Balance Sheet)
3. Deferred taxation arising on temporary and permanent timing
differences and losses carried forward, to the extent that the
Company believes these to be recoverable from future profits.
At 31 December 2020, the Group had tax losses available to be
offset against future profits of GBP16,879,616 (2019:
GBP11,273,645). The losses can be carried forward indefinitely and
have no expiry date.
Additional to corporate taxation, the Group paid the following
taxation costs during the year:
a. Employers National Insurance contributions - GBP1,751,511
b. irrecoverable VAT - GBP1,052,716
Group FY-2020 FY-2019
GBP GBP
R&D credit - current year (1,346,747) (3,478,997)
R&D credit - prior year (24,476) -
Changes in tax estimates related
to prior years - (25,000)
Changes in tax estimates in
pre-acquisition accounts of
businesses acquired during
the year - (10,487)
------------ ------------
Current tax credit (1,371,223) (3,514,484)
------------ ------------
Origination and reversal of
temporary differences (564,158) 868,016
Recognition of previously
unrecognised deductible temporary
differences (173,674) 59,583
------------ ------------
Deferred tax (credit) / charge (737,832) 927,599
------------ ------------
Total tax credit (2,109,055) (2,586,885)
============ ============
7. Loss / Earnings per share
The calculation of basic profit or loss per share has been based
on the profit or loss attributable to ordinary shareholders and
weighted average number of ordinary shares outstanding. The loss
after tax attributable to ordinary shareholders of the Group is
GBP6,919,650 (FY-2019, Loss GBP5,342,074, and the weighted average
number of shares for the period was 178,602,918 (FY-2019:
167,096,081).
Diluted earnings per share
The calculation of diluted earnings per share has been based on
the profit or loss attributable to ordinary shareholders and
weighted average number of ordinary shares outstanding, after
adjustment for the effects of all dilutive potential ordinary
shares. The weighted average number of dilutive shares is
178,602,918 (FY-2019: 171,327,405).
2020 basic 2020 diluted 2019 Basic 2019 Diluted
(3.87) (3.87) (3.20) (3.12)
----------- ------------- ----------- -------------
8 Acquisition
On 14 October 2020, Equals acquired business information and
intellectual property rights from Effective FX Limited
('Effective'), a London-based international payments business
servicing both corporate and private clients for a maximum
consideration of GBP1,575,000. This payment is contingent on future
net revenue targets over a period of three years from the
acquisition date and is payable in quarterly instalments, in cash.
Based on current and forecast performance it has been assumed that
the contingent consideration will be paid in full, each
quarter.
The Group determined that the activities and assets acquired
represent a business as defined under IFRS 3 Business Combinations
and has accounted for the transaction accordingly. The acquisition
was made in accordance with the Group's strategy to consolidate
smaller, attractive market participant and has been immediately
earnings enhancing. In addition, the acquisition fits with one of
the Group's stated core strategies of extracting value from
increasing economies of scale.
The acquisition of Effective contributed GBP124,949 of revenue
and GBP87,562 of profit before tax to the Group since its
acquisition.
The acquisition date fair value of consideration transferred was
calculated as follows:
GBP
Contingent consideration - undiscounted maximum payments
in cash, payable in quarterly instalments over three
years 1,575,000
==========
Contingent consideration discounted - fair value 1,232,000
==========
The recognised amounts of assets acquired and liabilities
recognised at the date of acquisition were as follows:
GBP
Intangibles - customer relationships 586,002
Deferred tax liabilities (110,000)
Total identifiable new assets acquired 476,002
===========
Based on the valuation of the intangibles and enacted UK
corporation tax rates a deferred tax liability of GBP110,000 was
recognised as a result of the identified intangible asset.
Goodwill arising from the acquisition has been recognised as
follows:
GBP
Consideration transferred 1,232,000
Fair value of identifiable new
assets (476,000)
-----------
Goodwill 756,000
===========
Goodwill comprises the value of expected synergies arising from
the acquisition and additional value attributed by the acquirer in
relation to the future expected cash flows, which is not separately
recognised. None of the goodwill recognised is expected to be
deductible for income tax purposes.
- ENDS -
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FR EAALXEANFEAA
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April 08, 2021 02:00 ET (06:00 GMT)
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