Equals Group revenues rise despite depressed travel market

(Sharecast News) - Technology-led payments group Equals updated the market on its first half of trading on Thursday, reporting revenues of £16.7m, a 21% year-on-year increase despite the continued absence of meaningful travel-related activity.
The AIM-traded firm said revenues in the six month period ended 30 June also rose 11% over the second half of 2020.

Travel-related activity represented less than 5% of revenue in the second quarter, compared to 31% in the third quarter of 2019, which the board said showed the differential between pre-Covid-19 levels, and thus the potential for increased travel money revenues as pandemic restrictions were relaxed.

The board said the "engine of growth" continued to be the company's business-to-business (B2B) initiatives, encompassed in the 'Equals Money' product suite for corporate customers.

Within B2B, it said growth was broad-based, with international payments seeing strong demand for its 'own-name multi-currency IBAN' offering and white-label platform, and the corporate expenses platform achieving record results.

The second quarter was a record three months for the Group, driven by record levels of international payment transactions, record activity on the 'Spend' platform, and buoyant revenues from banking-style products.

The company said it had continued to drive down headcount and reshape its cost base throughout the year thus far.

Headcount remained around 250, but with a "significantly lower" cost footprint, with that now being around £0.9m of base pay per month, compared to £0.96m in June 2020 and £1.2m in January 2020.

Equals said it was continuing to invest its increased revenues in additional product development and marketing to drive further growth.

In addition, it had further strengthened its internal control environment, and provisioned for a greater frequency of external audit requirements in the highly regulated space which it occupied.

For those reasons, the board said that while it was "delighted" with revenue growth, it was not currently anticipating any meaningful change in its clean EBITDA, which the market had forecast in either 2021 or 2022 at present.

However, the firm said it would provide more guidance at the publication of its interims in early September.

The group became operationally cash break-even in the fourth quarter of 2020, and had remained so since.

Equals incurred £0.8m of legacy earn-outs, and had incurred further exceptional redundancy costs as it continued to change the staffing composition.

The company said it was also filing a claim for £1.3m of research and development credits for 2020, and as at 30 June it had £9.2m of cash at bank.

Increased trading activity could mean additional collateral may have to be posted, the board said, and thus about £1.2m was currently used for card pre-funding, regulatory deposits and funding margins with liquidity providers.

Equals said it expected the composition of that funding requirement to change, which should allow about £0.5m to become more freely available over the rest of 2021.

"The hard work undertaken on both product development and cost restructuring over the last 12 months has really paid off, as can be seen from these excellent revenues for the first half," said chief executive officer Ian Strafford Taylor.

"Given the growth trajectory, we remain highly confident about the revenue prospects for the second half of the year."

At 1600 BST, shares in Equals Group were down 7.2% at 43.15p.