Equals Group hails FY20 progress as it gains momentum
(EQLS ) said it has made financial and operational progress in the year ended 31 December 2020 after refocusing the business towards its B2B customers and products.
In its FY20 results, the technology-led international payments company said its successful refocus on business customers had resulted in B2B transactions being driven up by 32%.
During the period, international payments revenue increased by 46% while B2B revenue increased by 51% with B2B revenues representing 70% of all revenues (FY-2019: 56%).
Over the period, the company noted that it had 18,000 active unique B2B customers.
The company stated that its pivot towards B2B resulted in not only a 21% increase in overall transaction values to £3.5 billion, but also a 24% growth in 2H20 over 1H20.
Total revenue for the year was just shy of £29m compared to pre-pandemic revenue in FY19 of £31m. ‘Very encouragingly, revenue in 2H20 rose by 10% over 1H20 to £15.2m,’ it said.
The Group broke-even in cash within 4Q20 and reduced its total expenditure by 18% down from £30.6m in FY19 to £25.0m in FY20. Despite underlying profits coming in at £1.2m compared to £5.6 in FY19, this figure came in ahead of market expectations and was achieved in spite of headwinds posed by both Wirecard as well as the COVID-19 pandemic.
As previously reported, the demise of Wirecard AG and its subsidiaries affected Equals as the Group issued cards using Wirecard for all its B2C and some of its B2B programmes.
As a result, Equals accelerated its development of a new multi-currency card platform for both website and app and migrated its entire B2C customer base by the end of October 2020.
The company described its efforts as “a remarkable achievement” by its staff. It said it had “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.”
Post-period, the company has hailed its launch of Equals Money, a unified platform that incorporates the payments, cards and current account solutions that the Company can offer which ‘ties directly into the strategic vision for the Group to simplify money movement.’
From this time last year, the Group has cut its headcount by around 25% and reduced its monthly costs by around £0.4m. Meanwhile, revenue during 1Q21 came in above £8m against revenue of £8.1m in 1Q20, which included £0.9m of retail card and bureau revenue.
Overall, the group’s trading performance in 1Q21 has exceeded management expectations and to date, Equals’ current free cash position stands at £9 million at 5 pence per share.
Looking ahead, the group said its focus for 2021, and beyond, is for the group to continue to grow its B2B payments capabilities through the further development of the ‘Equals Money’ proposition whilst ramping up Equals’ sales and marketing in this sector.
“As the UK payments sector becomes increasingly crowded with specialist operators, our unique proposition spanning banking services and payments, International Payments and card-based payments solutions is proving to be a major differentiator for our customers, driving loyalty and new customer acquisition,” said CEO, Ian Strafford-Taylor.
He added, “This, coupled with the benefits of our accelerated planned restructuring and right-sizingof 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.”
In recent weekly, and alongside the recent deployment of EqualsPay and a new internal FX dealing system (Exchange), Equals Money said last month that it had also launched a simple “pocket money” type FairFX B2C ‘Linked Card” that allows ‘friends and family’ new wallet options and the ability to teach their children/colleagues how to spend and manage money.
Looking ahead, Equals said it will continue to deploy new functionality across Equals ‘as the year unfolds.’ The stock has gained nearly 40% in value since the beginning of the year.
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.
In a trading statement released in January 2021, Equals said it had significantly reduced its cost base leading to both cash break-even and an increased cash position of £8 million.
This comes in ‘comfortably ahead of market expectations’, it noted, with current market expectations for adjusted EBITDA averaging £0.55m with net cash averaging £6.75m FY20.
The figures stated in this previous announcement are unaudited and the Company told investors that it expects to report its audited financial statements in early April 2021.
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.
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