EQUALS Beats Market Forecasts for FY20
(EQLS ) has released its trading update for year ended 31 December 2020 following the Group's recent trading update on 1 December 2020 outlining its strong 2H20 trading.
Financial Highlights
Since October, the strong performance has continued with revenue for FY20 now expected to be around £1.0m ahead of market expectations at £29.0m, reflecting a strong performance in the Group's B2B products in December 2020.
During 2020, the Group significantly reduced its cost base, significantly reducing headcount across the Group below 260 employees (over 25% down from its peak), resulting in Adjusted EBITDA of around £1.0m, which is comfortably ahead of consensus market FY20 expectations of approximately £0.55m
From a cashflow perspective, the Company is expected to be cash break-even for the year with an improved year end cash position of £8.0 million (excluding the £2.0 million drawdown from the Government's CBILS scheme), which is also comfortably ahead of market expectations.
Operating Highlights
Whilst the Group's original focus was Travel Money, the global effects of Covid-19 have meant the Company underwent a strategic shift during the period towards both international Payments and Banking Services.
Importantly, the Group is increasingly being seen as the payment partner of choice for SMEs allowing them to utilise a variety of payment options to boost their international trade.
Ian Strafford Taylor, CEO of Equals, said: "With the considerable headwinds posed in FY-2020 by Brexit and the ongoing Covid-19 pandemic, for us to deliver revenues only 6% lower than the prior year and materially ahead of expectations, is I believe an excellent achievement of which I am extremely proud. The hard work and motivation of our dedicated team of staff, from engineers delivering product, customer facing staff upselling and cross-selling, middle-office staff providing superior customer service, and back-office staff tightly controlling risks, has meant that we have ended the year well and in robust shape, leaving us well positioned for the post Brexit future."
Shares in EQLS have had double digit increases over the past three months, increasing from 24p in October to 27p yesterday. Todays Market Beat has advanced the shares a further 21% to 32.75p in early trading following confirmation the Group is increasingly being seen as the payment partner of choice for SMEs by allowing them to utilise a variety of payment options to boost their international trade.
Reasons to Follow Equals
EQUALS is an international payment services provider to the retail and corporate segments of the UK market, which combined is estimated to be worth £60bn a year.
The cloud-based peer-to-peer payments platform is widely regarded in the industry as ‘best-in-class’ enabling personal and business customers to make low-cost multi-currency payments across a range of FX products, all via one integrated system.
The FairFX platform facilitates payments either directly to Bank Accounts or at 30 million merchants and over 1 million ATM’s in a broad range of countries globally via Mobile apps, the Internet, SMS, wire transfer and Mastercard/VISA debit cards.
Successful Acquisition Strategy
In recent weeks, Equals said it is ‘increasingly being approached by other international payments businesses’ and highlighted that it will continue to selectively acquire companies.
Last month, Equals acquired certain assets from the international payments business of Effective FX (EFX) for a consideration of £1.6m, to be satisfied from existing cash resources.
The ‘earnings enhancing acquisition’ primarily comprises the purchase of EFX's client book of more than 200 corporate clients, from a wide range of industries, which generated adjusted EBITDA of approximately £0.5 million for the 12-month period to 31 August 2020.
Equals said the acquisition showed the continuing growth of the Group in B2B international payments via its three routes to market: ‘firstly, directly to its own customers; secondly, via its Equals connect B2B2B strategy; and thirdly, via the acquisition of compatible businesses.’
CEO, Ian Strafford-Taylor, said the acquisition highlighted Equals’ key strengths in the B2B international payments arena; its openness to M&A opportunities, its versatility in acquiring volumes and revenues, and the strength of its payment’s infrastructure and technology.
Compelling Buy-Side Valuation
Recent research from PMH Capital has confirmed Equals is expected to grow at approximately 16% in FY21e, which is above the average growth rate of 12% for the Fintech and e-payments segment of the Technology sector.
Based on these assumptions, the current valuation for the company appears extremely compelling on a forward FY21e EV/Sales multiple of approximately 1.2x versus 6.9x for its peers.
[Source: PMH Capital]
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