Equals Group (AIM:EQLS)  1H20 results for the period ended 30 June demonstrated the resilience of its business, which has pivoted to a Business-to-Business (“B2B”) focused model.

The B2B e-banking group, formerly known as FairFX, reported a 1% revenue increase to £13.8m (1H19: £13.6m) with international payments contributing 60% totalling £8.2m (1H19: £4.8m).

The group said the effects of the pandemic were felt in both the card businesses and the cash business, dropping by 52% to £3.0m (1H19: £6.2m), which was a better outcome than expected.

Gross margin was also particularly resilient during the period at 63% (1H19: 69%) despite the shift in sales mix as B2B revenue rose by 32% to £9.0 million (1H19: £6.9 million), which more than offset the impact of Covid-19 on the Cards and Cash businesses. 

Despite the challenging conditions and historically low interest rates, revenue from Banking Services fell by only 1% against the same period last year.

Operating costs were managed carefully during the period with the combination of marketing expenditure and gross operational expenditure 26% lower than 2H19 and 7% lower than 1H19. The Group continued with its restructuring, taking its headcount down from a high of 337 employees to 280.  

Adjusted EBITDA (before R&D tax credits) was therefore £672k against a pre-Covid-19 result in H1-2019 of £1.9 million.  The principal movements were attributable to a lower level of capitalisation of internally developed software.

The Group’s cash position as of 30 June was £7.7m with £7.8m as of 18 September. An expected R&D tax credit of £2.3 million more than offsets the Group’s PAYE liability of £1.8 million, leaving the group well-funded for further growth.

Post-period, the company said its international payments business remains resilient to-date in Q3 2020 at £3.8m (£0.068m per day) compared to Q2 2020: £3.5m (£0.058m per day).

Commenting on the half-year results, Ian Strafford-Taylor, CEO of Equals Group said:

“We believe it is testament to the quality of the business and the resilience of our B2B focused model that we are reporting both an increase in revenue and decrease in underlying expenditure against the headwinds posed by a combination of Covid-19 and the changes forced upon the business as a result of the demise of Wirecard.”

Outlook
The group highlighted ‘significant progress’ in its shift from its B2C travel money business to B2B revenue streams, specifically SMEs, which it said remains a priority since it represents 66% of the $230bn revenue opportunity of the global international payments market.

Further cost reductions are planned before the end of FY-2020, as more engineering deployments are completed in the next few months and the Wirecard migration is completed. 

Whilst theses outstanding redundancy/leaver costs are expected to be incurred in 4Q20, it expects to become cash break-even in 4Q20, before moving into positive territory in 1Q21.

"Our revenues continue to grow against this unprecedented backdrop and we have not yet completed our exercise of cost savings which will benefit the second half of the year.  

With a stable cash position, we remain positive about our future prospects and although we are conscious of the potential for further disruption as a result of Covid-19, and indeed Brexit, we remain confident about the outlook for the Group,” added Strafford-Taylor.

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