Electronic banking and international payments firm Equals Group (EQLS:AIM) delivered a strong first-half performance, despite a less-than-benign economic backdrop, with the promise of more to come in the second half of the year.
Revenues for the six months to 30 June grew by 21% to £14.6m, while gross profits grew by 24% to £12.1m as margins expanded, and adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) rose by 78% to £4.7m.
The second half has started strongly, and the addition of a credit-broking licence together with a global banking tie-up with Citi means the firm is fully confident that full year earnings will meet expectations.
Following today’s update, and the announcement that Richard Cooper, former chief financial officer of GVC Holdings (GVC), is joining as finance director next month, the shares have dropped 9% to a three-month low of 90.5p which seems at odds with the positive news-flow.
EVOLUTION NOT REVOLUTION
Without any fanfare, Equals - formerly known as FairFX - has evolved over the last couple of years from a foreign-exchange business into a fully-fledged corporate banking and payments group turning over billions of pounds a year.
Since gaining an electronic banking or ‘e-money’ licence in early 2017 the firm has continued to invest in its banking platform. In February this year it became only the fourth non-Banking firm to be granted a settlement account with the Bank of England, enabling it to participate directly in the Faster Payments Scheme, one of the fastest-growing UK payment-processing systems.
CHALLENGING THE BANKS
Being part of the Faster Payments Scheme means that customers can move money almost instantaneously, there are fewer points of contact in the system (therefore fewer potential points of failure), and payment issues can be resolved faster. For Equals it also means a significant cost saving on its own operations.
Combining this real-time payment service with its expense management platform has made Equals an even more attractive partner for small and medium UK businesses looking to optimise their working capital and boost cash flows.
The addition of a credit broking licence from the Financial Conduct Authority (FCA) in June means that business and retail customers now have access to a wide range of short-term loan products with no credit risk to the group, unlike traditional banks.
The subsequent global agreement with Citi Commercial Bank, which has over 90 settlement and clearance facilities around the world and over 130 currencies on its platform, means that Equals customers get access to a truly global marketplace with reduced transaction costs.
