Equals sees strong revenue growth, strategic review nears conclusion
The pieces in the
Indeed today the company released an eye-popping trading update. Saying H1'24 revenues had soared 33% to £59.96m (vs £45.0m LY) - with an exit Q2’24 run-rate of £32.6m (+40% YoY), equivalent to £527k per working day.
A staggering performance thanks to stand-out numbers from Solutions & International Payments - which I suspect is best-in-class despite the relative calmness across the broader market.
In fact, just think what Equals might achieve when the economy improves, volatility picks ups and disruption from the Strategic Review is over?
Elsewhere, last year’s acquisition of Equals Money Europe (formerly Oonex SA) is gaining traction too (re Q2’24 run-rate of €1.6m vs €0.8m LY) and has recently been onboarded by a Tier 1 UK bank.
Plus, in terms of the balance sheet, net cash impressively ended June 2024 at £20.5m (or 10p/diluted share) vs £18.7m in Dec’23 – after paying £1.9m in dividends, £1.8m of deferred consideration relating to past M&A, and £0.5m in external SR costs. Leaving the group with ample firepower for possible further synergistic deals in the months ahead.
So how does this stack up vs analyst estimates?
Well to me, Equals’ 33% top-line growth appears to be ahead of consensus FY'24 sales expectations of £119.1m (+25%). Meaning once the constraints of the SR are over, there’s probably more than a decent chance of upgrades sometime in H2’24. That said, my conservative fair value for the stock remains at a prudent 170p/share, until new guidance is available (re Interims 9th Sept).
Lastly, I’m often quizzed by both retail and professional investors about why the strategic review is taking so long (now 8 months). Well, not surprisingly, there have been plenty of conspiracy theories from the Bears.
However, for me, sometimes the truth stares you squarely in the face. That being, the business is performing far better than almost everyone anticipated when the original takeover discussions started. Thus increasing the group’s intrinsic value as the fundamental investment case has kept getting better & better.
Who knows how the SR will end – albeit the next PUSU deadline for the TowerBrook Capital Partners L.P. & Railsr consortium closes at 5 pm Wednesday 10th July.
In my opinion, this simply comes down to whether Equals' Board & institutional shareholders can agree on a fair and acceptable price with the buyer.
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