Cost cutting and focus on B2B helps Equals through first half

(Sharecast News) - Electronic banking and payments company Equals said on Thursday that it managed to achieve further growth in its first half, against the "challenging backdrop" of the Covid-19 pandemic, with total revenues of £13.7m, up slightly from £13.6m year-on-year.
The AIM-traded firm said that excluding its travel money division, revenues of £12.3m for the six months ended 30 June were up 23% on the first half of 2019.

It said its strategic focus on B2B revenue streams over its legacy travel money business had enabled it to trade well through the period, with B2B representing 66% of total revenue in the period, compared to 51% a year earlier.

Overall B2B revenues were 30% higher at £9m, while B2C revenues were 29% lower at £4.7m, primarily owing to the coronavirus pandemic.

International payments was Equals' strongest performing segment, supported by the acquisitions of Hermex and Casco in 2019, as well as strong organic growth.

Revenue of £8.2m was up 71%, of which £0.6m was attributable to organic growth.

Equals said international payments now represented 60% of its revenue, compared to 35% in the first half of 2019.

Banking revenues were flat overall, although B2B banking began to increase in the latest quarter, benefitting from the 2019 investment in its technology infrastructure.

Revenue from the corporate expenses platform - its B2B card product - fell by 40% to £1.4m, which reflected the "radically reduced" corporate activity from late-March amid the pandemic.

The board did note that revenues from the platform had started to recover in recent months.

B2C travel money revenue totalled £1.4 million, down 59% year-on-year, which reflected both Equals' strategic focus on B2B revenue streams, and the effects of the Covid-19 pandemic hitting volumes in historically strong seasonal months for travel.

Travel money continued to represent a smaller proportion of total revenues, now being 11% in the first half of 2020, compared to 26% a year earlier.

"Inevitably, there was a slowdown in the second quarter across all segments. but there has been resilience particularly in international payments," the Equals board said in its statement.

"Trading in June, and in the 14 working days to 20 July, was encouraging, with average revenues being £111,000 per day.

"Travel cash business via both bureaux and B2C retail cards has begun to pick up gradually and it is anticipated that corporate card revenues will continue to increase from current levels."

The board said it remained "optimistic" for revenue growth, particularly in international payments, in the current financial year and beyond.

Equals said that, after the "considerable investment" it had made in development over the last 24 months, as well as product and infrastructure improvements, it had already started the process of resizing the group.

The change in economic conditions driven by the Covid-19 pandemic, especially in the travel markets, had led it to conclude that a number of staff would now be at risk of redundancy.

It said the combined consequences of those actions would reduce the headcount from its high point of 341 in December by between 15% and 20%, net of a few new hires in revenue-generating roles.

The financial impact would be a one-off redundancy cost of about £0.5m, offset by a cash saving to the Group of around £2.5m per year.

"A further examination by the board of the group's real-estate expense, the second highest cost category, is continuing, and naturally all other costs are constantly under review," the directors added.

Looking ahead, Equals said its staff had transitioned to remote working "well", with the investment in improved technical infrastructure benefitting its operations.

It said its decision to strategically focus on both international payments and B2B markets had greatly helped it to trade robustly, not only against the headwinds of Covid-19, but also the uncertain pattern of Brexit transition trading and the disruption caused by the FCA's intervention in Wirecard's UK business in late June.

"Whilst the Covid-19 pandemic has naturally affected the group, revenues are returning to more normalised levels in most B2B business segments since the initial impact in late March.

"The board is pleased that overall trading continues to perform in line with management expectations.

"The bard believes that the group remains financially stable and well placed to grow and capitalise on opportunities that may arise alongside the wider global recovery."

Equals said it would provide a full update on trading, and reinstate financial guidance for the twelve months ending 31 December, at its interim results in September.

At 1124 BST, shares in Equals Group were up 5.11% at 30.74p.