GCIEquals sees 30% revenue boost and record profit in H1, doubles interim dividend
I have owned () shares for >4 years and continue to be impressed by this B2B foreign exchange and international payments platform.
What's more, when the strategic review was first announced last November, I would have bet that the business might have been disrupted at least a little by the auction process. However, this couldn't have been further from the truth. Rather, the company has gone from strength to strength.
This morning, posted outstanding H1'24 numbers with LFL sales and adjusted EBITDA jumping 29.6% and 60.8% respectively to £60.0m (£45m H1'23) and £12.7m, driven by more clients spending ever greater amounts, higher interest income (£9.9m vs £4.2m), new product launches, expansion into Europe (£2.3m, +32% LFL) and continued strong growth from Solutions (£24.8m vs £13.6m).
What's more, a favourable mix has also helped push gross margins higher to 57.4% (52.4% H1'23) and cash up to £28.3m as of 6th Sept'24 vs £18.7m Dec'23, enabling a 1p interim dividend to be declared, and underlining the Board's confidence in the future.
So how's trading since June 30th?
Well, incredibly, even better as YTD'24 revenues have now reached £86.9m, up 38% (£63m LY) with Q3'TD sales/working day coming in at £549k vs £383k (43%).
Plus, looking further ahead, it wouldn't be too surprising to see Equals achieve turnover of £155m (consensus £147m) in 2025 and £34m (est £32m) of adjusted EBITDA. This would put the stock, at 114p, on fully diluted FY'25 EV/sales and EV/EBITDA multiples of less than 1.4x and 6.3x. Or in my view - far too cheap for such a fast growing, well-run and high-quality asset.
In terms of the strategic review, the next 'Put Up or Shut Up' deadline is 5pm 2nd Oct. Here the potential bidding consortium of private equity house JC Flowers (owner of 'Castle Trust Bank'), TowerBrook Capital and Railsr, are progressing a 'fully equity financed' offer, with negotiations, financing and due diligence all at an advanced stage.
No take-out price was detailed today. Albeit on 10th July, an indicative, non-binding proposal of 135p/share (£276m fully diluted) in cash was mentioned. So unless something unexpected crops up, I suspect a firm offer might be submitted to the Board sometime over the next 2-3 weeks.
The strategic logic (re cost/sales synergies) of combining Equals' best-in-class forex/banking platform with both Railsr and Castle Trust Bank makes perfect sense.
CEO Ian Strafford-Taylor commenting: "The Global macroeconomic environment continues to be challenging. [However] against this backdrop, Equals continues to grow strongly because it has a product and capability suite that is hard to replicate."
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