21 March 2017 Earthport plc ("Earthport", the "Company" or the "Group") Unaudited Interim Results

Transcription

1 21 March 2017 Earthport plc ("Earthport", the "Company" or the "Group") Unaudited Interim Results Earthport (AIM: EPO.L), the leading network for cross border payments, is pleased to announce its unaudited interim results for the six month period ended ember. Financial Highlights Revenues grew by 34.9% to 14.3 million (H1 FY : 10.6 million) o Transactional revenues comprised 95% of H1 FY 2017 total revenues Gross profit increased by 33.8% to 9.9 million (H1 FY : 7.4 million). Gross profit margin decreased by 0.6% to 69.2% (H1 FY : 69.8%) Adjusted Gross Margin 1 decreased by 3.1% to 70.4% (H1 FY : 73.5%), due to increases in network costs but is in line with management expectations and those achieved in the financial year ended 30 June Adjusted Gross Profit 1 increased by 29.5% to 10.1 million (H1 FY : 7.8million) Administrative expenses decreased by 7.8% to 13.0 million (H1 FY : 14.1 million) and represent 90.9% of revenues (H1 FY : 133.0%) Adjusted loss before taxation 2 decreased by 52.2 % to 3.2 million (H1 FY : 6.7 million) Loss before taxation decreased by 41.1% to 3.3 million (H1 FY : 5.6 million) Loss per share of 0.61 pence (H1 FY : 1.30 pence) Cash Balance at ember amounted to 11.4 million, compared to 14.4 million at 30 June 1. Excludes warrant charge of 0.23 million (H1 FY: 0.38 million) 2. Adjusted loss before taxation is stated before the unrealised fair value gain adjustment of 0.94 million (H1 FY : 1.3 million) and share based payment charge of 1.1 million (H1 FY : 0.3 million) Operational Highlights Transactions and payment volume grew significantly in the period with December setting a record month in the Company s history o Number of transactions reached 5 million, a growth of approximately 85% over the prior year period (H1 FY : 2.7 million) o Payment volume increased by 97% to $7.80 billion (H1 FY : $3.95 billion) The variation in growth rates of number of transactions and revenues principally reflects the geographical mix of transactions and the associated variability in transaction price per corridor o Revenue per transaction in the period was 2.70 (H1 FY : 3.26) Bank of America Merrill Lynch (BofAML) CashPro offering using the Earthport network went live in February 2017 as part of the broader strategic relationship with Bank of America Merrill Lynch In November, Earthport announced the approval from the Reserve Bank of India to operate cross-border payment services for banks in India o Axis Bank, India s third largest private sector bank is the first bank in the region to connect with Earthport

2 Hank Uberoi, CEO of Earthport plc, commented: "We accomplished a number of important developments in the six months under review, including expanding our strategic relationship with BofAML and gaining approval to provide outbound payment services for the extensive Indian market. The performance of the business in the past six months has been encouraging with a substantial increase in the number of transactions and payment volumes resulting in strong revenue growth. This positive momentum, coupled with our unique market positioning, gives us confidence in our continued growth and prospects." For further information, please contact: Earthport plc Hank Uberoi, Chief Executive Officer Simon Adamiyatt, Chief Financial Officer Newgate Bob Huxford / James Ash N+1 Singer (Nomad and Joint Broker) Mark Taylor / James White Shore Capital (Joint Broker) Bidhi Bhoma/ Toby Gibbs About Earthport: Earthport provides cross-border payment services to banks and businesses. Through a single relationship with Earthport, clients can seamlessly manage payments to almost any bank account in the world, reducing costs and complexity to meet their customers' evolving expectations of price, speed and transparency. Earthport offers clients access to global payment capability in 190+ countries and territories, with local ACH (Automated Clearing House) options in 60+ countries and an evolving suite of currencies and settlement options. Earthport continues to invest in the establishment of in-country bank partnerships across the world, bringing together its deep market and regulatory expertise in order to maintain compliant and commercially competitive services. The result - a global payments network accessed via a single relationship, delivering significant cost and operating efficiencies for banks and businesses servicing high volumes of lower value payments. Headquartered in London with regional offices in New York, Dubai, Miami and Singapore, Earthport is a public company, traded on the London Stock Exchange (AIM: EPO.L) with an institutional investor base including World Bank IFC, Oppenheimer, Blackrock, Henderson. Please visit for more information.

3 Overview In H1 FY 2017, we delivered strong revenue growth and continue to make consistent progress on our strategy, by further deepening our relationships with customers, extending our market reach, and developing our technology, unique product offerings, compliance processes and people capabilities. We are continuing to capitalise on our strong market position as the leading cross-border payment solutions provider. Our strategy is focused on helping our customers to prosper, by using our payments expertise and insight to increase their sales, and reduce their costs and risk. It is designed to ensure the continued success of our business in a competitive and rapidly changing market, in order to deliver sustainable value to our customers, colleagues and shareholders. During the period Earthport successfully extended its global network across different geographies and industries and is developing a strong pipeline of opportunities. We expect that realising the full potential of our business model and strategy will drive robust, visible and recurring organic revenue growth over the medium and long term. Financial Review During the period the number of transactions increased by approximately 85% to 5 million (H1 FY : 2.7 million) and payment volumes grew by 97% to $7.80 billion (H1 FY : $3.95 billion). Transactional and payment volumes were the highest in the Company s history in December and have continued to increase during the first two months of H2 FY Revenues grew by 35% to 14.3 million (H1 FY : 10.6 million) with 95% of H1 FY 2017 revenues being transactional revenues. The increase is predominantly from existing customers, as the service becomes more robust, as well as the continued expansion of our global network and a significant growth of ecommerce payments. The variation in growth rates of number of transactions and revenues principally reflects the geographical mix of transactions and the associated variability in transaction price per corridor. During the period, the Company saw a significant contribution from the European corridor which has a lower price per transaction. It is important to note that the company s gross margin has remained consistent at approximately 70%. The Adjusted Gross Margin decreased by 3.1% to 70.4% (H1 FY : 73.5%) due to increases in network costs, but is in-line with the management expectations and those achieved in the financial year ended 30 June. Gross Profit for the period increased by 34% to 9.9 million (H1 FY : 7.4 million). Administrative expenses decreased by 7.8% to 13.0 million (H1 FY : 14.1 million), mainly resulting from operational efficiency and the restructuring of certain parts of the business completed in the prior financial year. Adjusted Loss before Taxation, excluding share based payment charges of 1.1 million (H1 FY : 0.3 million) and unrealised fair gain value of 0.94 million (H1 FY : 1.3 million) decreased by 52.2% to 3.2 million (H1 FY : 6.7 million).the unrealised fair value adjustment of 0.9 million arises on the translation of unsettled transactions at ember and this gain would only crystallise in the event that any parties to the transactions defaulted. The reported loss before taxation decreased by 41.1% to 3.3 million (H1 FY : 5.6 million). Loss per share decreased by 53.1% to 0.61 pence (H1 FY : 1.30 pence).

4 Net cash used in operating activities decreased by 59.2% to 2.0 million (H1 FY : 4.9 million), reflecting the Board s focus on cash used in operations versus revenue growth. The Cash Balance at ember amounted to 11.4 million, compared to 14.4 million at 30 June (H1 FY : 24.1 million). Recovery activities related to the 5m loss continue, involving law enforcement and insurance companies. There can be no certainty about the likelihood, amount or timing of any recovery in connection with this loss. Operational and Network Review Earthport continues to hold the premier position as one of the most versatile and trusted cross-border payments provider among banks, ecommerce companies, Money Transfer Organisations, and payments aggregators. The Company launched client relationships with a number of new banks and business enterprises across the world in H1 FY17. In November, the Reserve Bank of India ("RBI") granted Earthport approval for operating outbound cross border payment services for banks in India. The subsequent agreement with Axis Bank, one of India s most prominent systemic financial institutions, was the first organisation in the region to entrust Earthport with their cross-border payments business. Bank of America Merrill Lynch launched its CashPro service, which utilises the Earthport network, in February This service will add new countries and currencies to the bank's online and file-based banking portal, CashPro, further expanding the bank's international ACH payment capabilities. BofAML clients can now access cross currency payments in more than 60 countries and nearly 25 currencies. This expanded access represents a significant development of the strategic relationship between Earthport and BofAML that was first announced in The Company continues to execute upon its growth strategy to: o o o o Expand geographically including India and other Emerging Markets Improve internal processes and enhance technology infrastructure Augment our network resilience by establishing relationships with additional partner banks Enhance our service offerings with the development of new products such as an Enhanced FX Offering, Faster Payments, Global Receivables, Alias Payments, Global Treasury Netting, and further expanding the Distributed Ledger offering Earthport continues to grow its network, providing its clients with additional routes and destinations. The Company executes payments across 181 countries and destinations in 51 currencies. Board and Management changes During the period, Sajeev Viswanathan stepped down from the board on 3 rd November as an Executive Director to pursue other opportunities and Dr Caroline A. Brown joined Earthport s Board on 17 January 2017 as an Independent Non-Executive Director. Dr Brown is an experienced finance executive and board member of listed companies. She currently chairs the audit committee of Luceco plc, an industrial technology business, which was admitted to trading on the Main Market of the London Stock Exchange in October. Dr Brown is a qualified accountant and has also worked in corporate finance at Merrill Lynch, UBS and HSBC.

5 Michael R. Steinharter also joined Earthport on 3 November in the new position of Chief Commercial Officer. Mike brings a great range of experience to Earthport, building, managing and growing successful sales organisations at some of the largest and most respected technology service companies. Among his many roles, Mike spent over 20 years selling to the financial services sector at IBM with significant management responsibility in New York, London, and Sydney. Mike has also served as president of Reuters America and built a significant financial services practice at Computer Sciences Corporation (CSC). Outlook Earthport s performance in H1 FY 2017 reflects its continued progress as the leading cross-border payments company and the Company will continue to invest in its operational platform to ensure platform scalability and resilience as well as expanding its geographical presence and product capabilities. The number of transactions processed and payments volumes have continued to increase month on month in January and February 2017 and the Board expects these core operational metrics to continue to improve in the second half of the fiscal year. Given current business and operational trajectory, the Board remains confident that FY 2017 revenues and year end cash balance will be broadly in-line with market projections. In addition, the Board is focused on balancing its objective of becoming cash flow breakeven whilst addressing the significant demand emerging due to our strong market position. While cash usage is continuing to decrease, we will not achieve cash flow breakeven in Q4 FY 2017, as previously communicated in order to capitalise on these opportunities.

6 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the six months ended ember 6 months 6 months 12 months ended ended ended Jun Continuing operations: Notes Revenue 14,335 10,612 22,772 Cost of sales (4,250) (2,809) (6,849) Adjusted gross profit 10,085 7,803 15,923 Cost of sales warrant charge (229) (379) (578) Gross profit 9,856 7,424 15,345 Administrative expenses (13,017) (14,105) (25,780) Adjusted operating loss (3,161) (6,681) (10,435) Share-based payment charge (1,058) (287) (620) Unrealised fair value gain ,333 8,224 Exceptional item EarthportFX (Baydonhill) loss - - (5,000) Exceptional item impairment of available for sale investment - - (250) Operating loss (3,280) (5,635) (8,081) Finance income Decrease in contingent consideration liability due to amendment as per the CVR deed Loss before taxation (3,277) (5,622) (7,219) Income tax credit/(expense) 393 (469) (996) Loss for the period and total comprehensive income attributable to owners of the parent (2,884) (6,091) (8,215) Loss per share attributable to the owners of the parent basic and diluted 4 (0.61p) (1.30p) (1.74p) There were no items of other comprehensive income for the year.

7 CONSOLIDATED STATEMENT OF FINANCIAL POSITION at ember as at as at as at Jun Notes Non-current assets Goodwill 2,709 2,709 2,709 Intangible assets 5,917 6,312 6,249 Investment Property, plant and equipment ,110 9,898 9,555 Current assets Trade and other receivables 5 12,892 4,102 11,290 Derivative financial assets 5,051 2,197 6,253 Cash and cash equivalents 11,375 24,154 14,429 29,318 30,453 31,972 Total assets 38,428 40,351 41,527 Current liabilities Trade and other payables 6 (4,077) (3,326) (5,676) Derivative financial liabilities (1,796) (750) (1,368) Earn-out consideration (135) - (2,295) (6,008) (4,076) (9,339) Non-current liabilities Earn-out consideration - (3,292) - Deferred tax liability (1,283) (879) (1,676) (1,283) (4,171) (1,676) Total liabilities (7,291) (8,247) (11,015) NET ASSETS 31,137 32,104 30,512 Equity Capital and reserves Ordinary shares 7 71,834 70,738 70,738 Share premium 8 79,120 78,331 78,064 Interest in own shares 9 (883) (1,220) (953) Merger reserve 9,200 9,200 9,200 Share-based payment reserve 13,085 12,647 12,164 Warrant reserve 1,852 1,424 1,623 Retained earnings (143,071) (139,016) (140,324) EQUITY ATTRIBUTABLE TO 31,137 32,104 30,512 OWNERS OF THE PARENT

8 CONSOLIDATED STATEMENT OF CASH FLOWS for the six months ended ember Restated 6 months 6 months 12 months ended ended ended Jun Notes Net cash used in operating activities 10 (2,031) (4,946) (12,388) Investing activities Purchase of property, plant and equipment (99) (129) (392) Capitalised intangible fixed assets (924) (1,077) (2,265) Purchase of trade investment - (23) - Part payment of contingent consideration - - (855) Net cash used in investing activities (1,023) (1,229) (3,512) Financing activities Proceeds on exercise of options Net cash from financing activities Net decrease in cash and (3,054) (6,041) (15,766) cash equivalents Cash and cash equivalents at the beginning of the period 14,429 30,195 30,195 Cash and cash equivalents at the end of the period 11,375 24,154 14,429

9 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended ember 2015 (Unaudited) Attributable to the owners of the Parent Interest Share-based Share Share In own Merger Payment Warrant Retained Capital Premium Shares Reserve Reserve Reserve Earnings Total Balance at 1 July ,695 78,272 (1,252) 9,200 12,557 1,045 (133,122) 37,395 Loss for the period, being total comprehensive income for the period (6,091) (6,091) Transactions with owners Share-based payments - employee share options - employee share options charge (197) warrants (5,894) (5,291) Total transactions with owners of the Parent, recognised directly in equity Balance at 31 December ,738 78,331 (1,220) 9,200 12,647 1,424 (139,016) 32,104

10 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended ember (Unaudited) Attributable to the owners of the Parent Interest Share-based Share Share In own Merger Payment Warrant Retained Capital Premium Shares Reserve Reserve Reserve Earnings Total Balance at 1 July 70,738 78,064 (953) 9,200 12,164 1,623 (140,324) 30,512 Loss for the period, being total comprehensive income for the period (2,884) (2,884) Transactions with owners Share-based payments - employee share - (70) 70 - (137) options - employee share options , ,058 charge - warrants Issue of ordinary shares 1,080 1, ,160 - CVR holders Issue of ordinary shares in lieu of fee Total transactions with owners of the Parent, recognised directly in equity 1,096 1, (2,747) 625 Balance at ember 71,834 79,120 (883) 9,200 13,085 1,852 (143,071) 31,137

11 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Year ended 30 June (Audited) Interest Share-based Share Share In own Merger Payment Warrant Retained Capital Premium Shares Reserve Reserve Reserve Earnings Total Balance at 1 July ,695 78,272 (1,252) 9,200 12,557 1,045 (133,122) 37,395 Loss for the year, being total comprehensive Income for the year (8,215) (8,215) Transactions with owners Share-based payments - employee share options - employee share options charge 43 (208) (1,013) - 1, warrants (208) (393) 578 (7,202) (6,883) Total transactions with owners of the Parent, recognised directly in equity Balance at 30 June 70,738 78,064 (953) 9,200 12,164 1,623 (140,324) 30,512

12 NOTES TO THE UNAUDITED INTERIM RESULTS for the six months ended ember 1. GENERAL INFORMATION Earthport plc is a public limited company listed on the AIM Market of London Stock Exchange, incorporated and domiciled in the England and Wales under the Companies Act The address of its principal place of business and registered office is 140 Aldersgate Street, London EC1A 4HY. 2. GOING CONCERN The interim financial information has been prepared on the assumption that the Group is a going concern. When assessing the foreseeable future the directors have looked at a period of twelve months from the date of approval of the interim financial information. The directors believe that the Group has demonstrated further progress in achieving its objective of positioning the Group as an infrastructure supplier to the global payments industry, and with net cash used in the operating activities having decreased significantly to 2.0 million in the six month period to 31 December compared with 4.9 million for the six month period to ember 2015 as well as revenue growth of 35%, the directors consider that it is appropriate to prepare the Group s interim financial information on a going concern basis, which assumes that the Company is to continue in operational existence for the foreseeable future. 3. ACCOUNTING POLICIES Basis of preparation The interim financial information is prepared using accounting policies consistent with International Financial Reporting Standards ( IFRS ) as adopted by the European Union. The financial statements have been prepared under the historical cost convention and the principal accounting policies are set out in the 30 June financial statements.

13 NOTES TO THE UNAUDITED INTERIM RESULTS for the six months ended ember 4. LOSS PER SHARE Loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period. 6 months 6 months 12 months ended Ended ended Jun Loss attributable to owners of the parent (2,884) (6,091) (8,215) Number Number Number Weighted average number of ordinary shares 478, , ,674 in issue (thousands) Less: own shares held (thousands) (4,958) (6,926) (5,369) 473, , ,305 Basic and fully diluted loss per share (pence) (0.61p) (1.30p) (1.74p) The loss attributable to Ordinary shareholders and weighted average number of ordinary shares for the purposes of calculating the diluted loss per share are identical to those used for basic loss per ordinary share. This is because the exercise of share options and other benefits would have the effect of reducing loss per share and is therefore not dilutive under the terms of IAS33 Earnings per share.

14 NOTES TO THE UNAUDITED INTERIM RESULTS for the six months ended ember 5. TRADE AND OTHER RECEIVABLES as at as at as at Jun Trade receivables 9,443 2,610 8,349 Other receivables 2, ,246 Prepayments ,892 4,206 11,290 Less: Provision for impairment - (104) - Trade and other receivables 12,892 4,102 11,290 Trade receivables are comprised of two components; amounts receivable from clients in the normal course of business ( 2.9 million), as well as amounts related to forward foreign exchange contract payments executed with clients with the notional ( 6.5 million) amount. These forward foreign exchange contracts are fair valued in accordance with IAS 39 Financial Instruments: IAS 39 outlines the requirements for the recognition and measurement of financial assets, financial liabilities, and some contracts to buy or sell non-financial items. Financial instruments are initially recognised when an entity becomes a party to the contractual provisions of the instrument, and are classified into various categories depending upon the type of instrument, which then determines the subsequent measurement of the instrument. 6. TRADE AND OTHER PAYABLES as at as at as at Jun Trade payables 1, ,117 Other payables Other taxation and social security Accruals and deferred income 2,495 2,365 2,913 4,077 3,326 5,676 Trade payables and accruals principally comprise amounts outstanding in respect of operating costs. The average credit period taken for trade purchases is 35 days (H1 FY : 33 days). The directors consider that the carrying amounts for trade and other payables approximate their fair value.

15 NOTES TO THE UNAUDITED INTERIM RESULTS for the six months ended ember 7. SHARE CAPITAL Authorised The Articles of Association were amended on 24 March The Company has no authorised share capital limit. Issued 6 months 6 months 12 months ended ended ended Jun At start of period 47,679 47,636 47,636 Shares issued in the period 1, Shares issues in lieu of consultancy fees At end of period 48,775 47,679 47,679 Deferred shares 23,059 23,059 23,059 Total 71,834 70,738 70,738 During the period on 15 November : 10,797,671 (H1 FY : 432,488) ordinary shares of 10p were issued to the holders of Contingent Value Rights from the 2013 acquisition of Baydonhill plc (On 1 July, the name was changed to EarthportFX Limited), and 155,836 (H1 FY : Nil) ordinary shares of 10p were issued in lieu of consultancy fees. Deferred shares carry no rights to receive any dividend nor other distribution. The holders of the deferred shares have no rights to receive notice, nor attend, speak or vote at any general meeting of the Company. On a return of capital on liquidation or otherwise, the holders of the deferred shares are entitled to receive the nominal amount paid up on the deferred shares after the repayment of 10,000,000 per ordinary share.

16 NOTES TO THE UNAUDITED INTERIM RESULTS for the six months ended ember 8. SHARE PREMIUM 6 months 6 months 12 months ended ended ended June At start of period 78,064 78,272 78,272 New issue 1, Exercise of share options Transfer to interest in own shares (70) - (299) Share issue in lieu of consultancy fees At end of period 79,120 78,331 78, INTEREST IN OWN SHARES 6 months 6 months 12 months ended ended ended June At start of period (953) (1,252) (1,252) Exercise of share options At end of period (883) (1,220) (953)

17 NOTES TO THE UNAUDITED INTERIM RESULTS for the six months ended ember 10. RECONCILIATION OF LOSS BEFORE TAX TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES Restated 6 months 6 months 12 months ended ended ended Jun Loss before tax (3,277) (5,622) (7,219) Amortisation of intangible assets 1,256 1,171 2,422 Depreciation of property, plant and equipment Share-based payment charge and warrant 1, ,198 charge Shares issued in lieu of consultancy fees R & D Tax Credit Received Finance income (3) (13) (20) Contingent consideration - - (842) Impairment of available for sale investment Operating cash out flow before movements in (463) (3,564) (3,437) working capital (Increase)/Decrease in receivables (400) 3,006 (7,538) Decrease in payables (1,171) (4,401) (1,433) Cash used by operations (2,034) (4,959) (12,408) Interest received Net cash used in operating activities (2,031) (4,946) (12,388)

18 NOTES TO THE UNAUDITED INTERIM RESULTS for the six months ended ember 11. UNREALISED FAIR VALUE ADJUSTMENT In accordance with IAS 39, the Group fair valued all currency bank accounts (excluding client bank accounts) and forward foreign exchange contracts. The fair value revaluation of such receivables, payables and currency accounts gave rise to an unrealised gain of 2.6 million (H1 FY : loss of 1.9 million). All forward foreign exchange contracts executed with clients are hedged with bank forward foreign exchange contracts and as a result, the fair value revaluation generated a net derivative unrealised loss of 1.6 million (H1 FY : gain of 3.2 million). Treasury hedge client forward transactions through mirror hedge bank trades on the amount, however the maturity date of these hedge trades can sometimes differ from date of the original client trade. This is industry practice to ensure the business manages the open drawdown schedule nature associated with these client forward transactions in combination with remaining within prescribed credit line limits provided by the bank liquidity providers. On settlement/maturity of the contract there is no P&L effect, however while the contracts are open and the hedge has a different maturity date, there is a mark to market which leads to an unrealised fair value gain or loss. These gains and losses would only crystallise in the event that any parties to the transaction default. 6 months 6 months 12 months ended ended ended 30 June Foreign exchange gain/(loss) 2,569 (1,904) 1,549 Fair value (loss)/gain on derivatives (1,630) 3,237 6,675 Total 939 1,333 8,224

19 NOTES TO THE UNAUDITED INTERIM RESULTS for the six months ended ember 12. PUBLICATION OF NON-STATUTORY FINANCIAL STATEMENTS The results for the six months ended ember and ember 2015 are unaudited and have not been reviewed by the auditor. The results for the year ended 30 June included in this announcement do not constitute statutory financial statements as defined in section 434 of the Companies Act 2006, but have been derived from the full audited financial statements for the year ended 30 June. Statutory accounts for the year ended 30 June, on which the auditors gave an audit report which was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006, have been filed with the Registrar of Companies. The interim financial information has been prepared on the basis of the same accounting policies as published in the audited financial statements for the year ended 30 June and the accounting policies to be adopted in the financial statements for the year ended 30 June The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards and International Financial Reporting Interpretations Committee ( IFRIC ) pronouncements as adopted by the European Union. Comparative figures for the year ended 30 June have been extracted from the statutory financial statements for that period. 13. The interim results for the six months ended ember are available on the Company s website: