Equals Group anticipates recovery in 2021
(AIM:EQLS ) said it has seen ‘continued financial and operational progress’ accompanied by increasing client activity throughout the period from 1 July 2020 to 30 November 2020.
The B2B channel, comprising International Payments, its proprietary Spend platform, Faster Payments, and business IBAN products, continues to grow despite the effects of Covid-19.
In the five months to 30 November 2020, Equals said the B2B channel generated revenues of around £0.082m per day, 9% ahead of the £0.075m per day in the same period in 2019.
However, the legacy retail travel products have been significantly impacted by the pandemic.
Total revenue therefore averaged £0.114m a day, despite revenues from travel products averaging only £0.012m per day compared to £0.034m in 2019.
However, the company anticipates travel products will rebound partially in 2021 before fully recovering by 2022, and both revenue streams ‘will make a positive contribution to profitability.’
Importantly, both the acquisition of Effective FX on 15 October 2020, and the previous acquisitions in 2019, particularly of Casco, have performed well and widened the Group's SME footprint.
The Group said its payroll run rate will be less than £1.1m per month by January 2021, down from £1.5m in January 2020 and will be further reduced by 2H21.
Capitalised software is expected to be less than 50% of 2019 levels in 2020, c.40% in 2021 and one third in 2022.
Despite headcount reductions, progress has been made with the Group's product roadmap and this will lead to platform improvements before the year-end and new product launches in 2021. As a result, a further reduction in operating costs is anticipated in 2H21.
Beyond that, the Board expects Equals to maintain a blended gross profit ratio of 62% in 2021 but anticipates an improvement across the Group's card products on its new platform. Meanwhile, its Group contribution ratio is expected to remain between 55% and 60%.
Overall, Equals expects to report adjusted EBITDA for the twelve months to 31 December 2020 at a similar level that it reported in the interim results in September 2020.
Cash resources have been tightly managed, with cash of £7m as at 30 November 2020 and salary sacrifices in 4Q20. The group also has the ability to draw down a further £2m from the Government's CBILS scheme.
"The level of activity we are experiencing from our customers, particularly those in International Payments, but also now on the Spend platform provides us with increasing confidence for a recovery in 2021 and beyond,” said Ian Strafford Taylor, CEO of Equals.
Shares in Equals Group have increased by 30% since the beginning of November 2020 to open 14.18% lower this morning at 28.75p following the announcement.
Reasons to Follow Equals Gp
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.
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