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Earthport PLC (EPO)

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Tuesday 29 September, 2015

Earthport PLC

Final Results

RNS Number : 4742A
Earthport PLC
29 September 2015
 

 

29 September 2015

 

Earthport plc

("Earthport", the "Company" or the "Group")

 

Earthport (AIM: EPO.L), the global payments company, is pleased to announce its final results for the year ended 30 June 2015.

 

Financial Highlights

•  78% growth in revenue to £19.27 million (FY 2014: £10.82 million)

•  On a like-for-like basis revenue grew by over 55%

•  Transactional revenue was in excess of 84% of the total revenue

•  90% growth in adjusted gross profit to £15.66 million (FY 2014: £8.25 million)

•  Net cash used in operating activities decreased to £2.90 million (FY 2014: £4.36 million), despite significant new investments

•  Loss before taxation increased to £8.71 million (FY 2014: £6.33 million). This includes:

•  Administrative costs of £19.94 million (FY 2014: £14.37 million) which increased primarily due to full year costs of Baydonhill, warrant costs of £0.73 million (FY 2014: £0.32 million), share-based payment charge of £3.29 million (FY 2014: £1.75 million) and an adjustment of unrealised fair value gain amounting to £0.35 million (FY 2014: £2.27 million)

•  Cash and cash equivalents at 30 June 2015 of £30.20 million (30 June 2014: £9.46 million)

•  Achieved positive cash flow in multiple months during the second-half of the financial year

 

Strong Operational Progress

•  31 new clients signed during the year (FY 2014: 33)

•  22 clients went live during the year (FY 2014: 14)

•  Transacting new clients include some of the largest and most sophisticated financial institutions

•  Continued growth in business from existing clients, including Bank of America, with multiple new add-on projects underway

•  Success in the ecommerce and shared economy marketplaces, with some of the fastest growing companies contracted

•  Dollar value of payments grew by over 75%

 

Hank Uberoi, CEO of Earthport plc, commented: "Over the past year broad acceptance of the Earthport model has accelerated, enabling the Company to experience increased demand and recognition for its services across industry segments and geographic areas. Given the size of the opportunity, which is estimated to be several trillion dollars in payments value, we are investing at an accelerated pace in our people, geographic footprint and product development to maximise medium and long-term success. We will continue to focus on significant, demonstrable and recurring revenue, targeting financial institutions, money transfer organisations, high growth ecommerce and payment aggregators. Earthport is in the best position it has ever been in to take advantage of the significant opportunity in front of us."

 

 

 

 

 

For further information, please contact:

 

Earthport plc

Hank Uberoi, Chief Executive Officer

Simon Adamiyatt, Chief Financial Officer

 

020 7220 9700

Panmure Gordon (UK) Limited

Mark Taylor / Fred Walsh

 

020 7886 2500

Newgate Communications

Tim Thompson / Bob Huxford / Alex Shilov / Helena Bogle

020 7653 9850

 

 

About Earthport

 

Earthport plc is a financial services organisation providing cross-border payments services to banks, e-commerce providers, money transfer companies and payment administrators. Earthport is headquartered in London with a regional office in New York.

One of the FinTech50 2015 - judged to be the game-changers transforming the future of finance - Earthport is also winner of the Grant Thornton Quoted Company Awards 2015 Technology company of the year award and FStech/Retail Systems' B2B Payments Innovation of the Year (2014).

Earthport provides the industry with the largest open network for global bank payments. Worldwide, over 50 banks are connected into Earthport's network for the efficient clearing of low value payments. With one connection to Earthport's network, clients benefit from sophisticated validation and compliance services, efficiently serving their customers with more innovative payment products.

Earthport is listed on the Alternative Investment Market (AIM) on the London Stock Exchange. Earthport plc is authorised and regulated by the Financial Conduct Authority under the Payment Service Regulations 2009 for the provision of payment services. Find out more at www.earthport.com and on Twitter @Earthport, LinkedIn, Youtube, Slideshare and Google+.

 

 

Chairman's Statement

Progressing Ahead

As we move forward from our transformational period and look to the future, I am enthusiastic about the potential developments for Earthport that lie ahead.

I am very proud to be Chairman of Earthport and to be reporting another year of significant revenue growth and further enhancing our unique position in the international payments arena. In the year to June 2015, our gross revenue increased by 78% to £19.27 million and continues to improve our standing in the global payments landscape. In addition, the strength of our balance sheet, with cash reserves of over £30 million, gives us a platform on which to capitalise on the opportunities in our market.

It was appropriate to deliver our last Annual Report with the theme "Transformational Year" as we continued to position the Company for the future. This year we have focused on "Earthport Ahead" to describe how we have built on our core business to create real competitive advantage which Hank Uberoi, will detail more expansively in his Chief Executive's Statement.

Looking back, we are all well aware that the financial crisis in 2008 changed the whole face of banking, with increased financial pressures on the world's largest financial institutions, and with increased scrutiny through the establishment of new regulators and their increased powers. That, coupled with the fierce financial penalties that have been levied recently against a number of top-tier banks, has continued this period of retrenchment. Not unnaturally, these banks have re-evaluated their risk profiles and the resultant lack of risk appetite has been keenly felt in the world of cross-border payments. The impact has been that there has been a significant reduction in the already reducing number of global correspondents.

During the last financial year, our brand recognition has risen appreciably. This visibility led to numerous invitations to deliver presentations at international forums and conferences, sharing the platform with international leaders and regulators who view Earthport as an important participant in the future of the payments ecosystem.

The relationships with our Tier 1 Banking partners are crucially important to us, not only for the direct value we can secure from their own payments businesses, but also to enable us to increase Earthport's profile. In order to maintain these partners, we have to demonstrate the "best of breed" compliance and governance that we have developed over the recent years. These relationships have taken a significant time to come to fruition as, rightfully, these banks have had to ensure the complete integrity of our practices and processes.

Earthport is increasingly recognised as a positive disruptive force in the market. The result has been to open the doors to other industry sectors who rely on international payments but find the traditional settlement methods expensive, cumbersome and inflexible. The payments landscape is changing with e-wallets, mobile apps, blockchain technologies and virtual currencies demanding a re-think in how payment providers interact. Earthport is rapidly becoming a 'trusted third party', which makes our business model attractive to cross-border trade.

As we move forward, the opportunities from the new wave companies and non-traditional payment providers are increasing, in response we are increasing our investment to ensure that we broaden our geographical presence and strengthen our relationships with our network partners.

Our belief is that we should structure our company for the long-term and ensure the resilience of our infrastructure, networks and products continue to give us the competitive advantage in a world that is rapidly evolving. We believe the size of our addressable market is growing and will continue to grow over the foreseeable future.

Finally, I would like to pay tribute to Hank Uberoi, his executive team and the entire Earthport staff for another year of total commitment and success. The Board and I look forward to working with them in the coming years ahead.

Philip Hickman

Chairman

 

 

Chief Executive's Statement

Leading Ahead

Earthport continues to confirm our position as the leading cross-border payments network that safely and effectively delivers payment services across the globe in a unique and highly competitive manner.

Over the past 12 months, Earthport has cemented its position as an innovative and unique solution for cross-border payments, signified by the signing some of the largest and most sophisticated brands globally, significant engagement with central bank regulators, governments and industry influencers and expansion into the world's largest growth markets where we see the potential for our model to flourish over the years to come.

The continued investment we are making to secure our position in this highly specialised, highly regulated field, supported by our focused vision on the areas within which we operate, is clearly now beginning to pay dividends.

From this juncture, my conviction of the potential for Earthport to play a role at the centre of fundamental structural change for payments within the financial services industry has never been stronger.

•  The opportunity identified remains the largest in the payments arena globally, and the need for a faster, cheaper, more transparent and compliant solution is great

•  The solution we have is unique and barriers to adoption and scale are vast and complex

•  As we gain in momentum and recognition of our model increases, we must continue to do so through close consultation and collaboration with industry and regulators globally

•  The pace of change and investment within the industry is great and Earthport has now developed the organisational leadership, capability and physical footprint to ensure that the organisation remains defensible and remains resilient and nimble in the face of potential competition

•  Our focus on the enhancement of our core product capability continues to strengthen our value proposition, enabling our clients and partners to access new and innovative payment methods through a single relationship with Earthport

 

Client Acquisition and Performance

In line with increased acceptance of the model, Earthport has seen a significant step change in new business activity with 22 clients going live and new clients being signed, including top global banks Standard Chartered, BBVA and Santander and 6 of the top 10 money transfer organisations globally.

Earthport continues to focus on diversifying its client base. As testimony, Stripe, one of the fastest growing payments providers in the world recently signed an agreement with Earthport, further augmenting our position as a provider to the ecommerce segment.

In addition to new business development, we continue to expand our engagement with existing clients such as Bank of America Merrill Lynch, providing the foundation for embedded financial performance in the coming years.

This multi-faceted approach to commercial expansion continues to drive year-on-year revenue growth for Earthport with the attainment of positive cash flow in multiple months during 2015, indicative of the strength of our commercial proposition.

Our revenues are derived mostly from transaction fees (approximately 84%) and professional services. As we expand, fees from transactions will continue to be the focus of our efforts to achieve the required benefits from scale as our model reaches its full potential.

 

Investing for Growth

The achievement of positive cash flow in multiple months this fiscal year represented a pivotal point in our evolution, whilst at the same time we continue to engage with the sheer size of the opportunity. We strongly believe that now is the time to accelerate the pace of our investment in critical areas of the Company, such as infrastructure, geographic expansion, human capital and leadership, enabling us to fully capitalise on the growth opportunities being presented.

To that end, Earthport's recent acquisitions have enabled the Company to nimbly assume the core capabilities and capacity to scale and effectively achieve differentiation in the market. The acquisition of Baydonhill in late 2013 has now been successfully integrated into the Group, enabling significantly enhanced Foreign Exchange and Treasury Service capability. Furthermore, the purchase agreements Earthport made in 2014 for a minority stake in ASPOne, a provider of IT Development for financial services companies based in Istanbul, Turkey, continues to bear fruit as a means for us to bolster our operating platform and further enhance customer experience.

By far the most important investment made this year has been in our executive and senior leadership talent with the appointments of Daniel Marovitz as President of Europe, Mia Shernoff, Group Head of Marketing and most recently, Simon Adamiyatt, the Company Chief Financial Officer, all seasoned and highly accomplished professionals. Additional focus has been on acquiring new sales and client management leadership in strategically critical locations (Germany, Singapore and Dubai) and for high growth sectors (US Banking, ecommerce).

 

Network and Geographic Expansion

Over the last year, continued efforts to expand our international payments network, in line with client requirements, has resulted in the successful establishment of new network partnerships in several critical markets, including Pakistan, Jamaica and Barbados. As we strive to ensure business continuity and exceptional client experience across the network, focus has also remained on the development of resiliency across live countries.

In support of this, the establishment of a physical presence in several regions including Miami to support Latin America and most recently, Singapore to support the broader Asia Pacific, has enabled us to strengthen relationships with bank partners from within these regions and quickly respond to opportunities to optimise our service and expand our partnerships.

These developments, supported by our existing operations in London, New York and Dubai and key alliances with organisations such as the International Finance Corporation (IFC), continue to provide Earthport with the strong global coverage and connections required to properly support expansion and maintenance of the network over the years to come.

 

Strong Compliance Expertise    

In a segment marked by ever-increasing regulatory complexity, Earthport has invested significantly in the compliance expertise required to enable banks to meet the measures being implemented to oversee international transfers. The very nature of traditional open-loop (correspondent banking or wire) payment systems makes it extremely difficult for any institution to understand and easily disclose to the end-user when a payment will arrive, what the 'in-flight' charges are and how much the beneficiary will receive. Earthport's capabilities enable our clients to address these needs.

Earthport's compliance capability is embedded in every client interaction and processed transaction. We apply a risk-based approach to the execution of compliance controls designed to ensure that the legislative and regulatory environment requirements are met. A comprehensive and detailed approach is utilised to further strengthen our counter-party's own control regimes. We adopt a transparent partnership approach on an ongoing basis, including third party reviews, and audits as well as maintaining perpetual due diligence to monitor a client's business activities. Transaction screening further augments the compliance processes. These effective controls manage our risk and ensure the safe growth of Earthport's business.

Enhanced Client Service

Delivering an unparalleled client experience is paramount to Earthport's continued success and a focus on operational excellence to achieve this is at the forefront of priorities. As such, Earthport continues to expand service availability and transaction throughput to ensure the highest level of efficiency, accuracy and availability of our service.

There are three core components that comprise our service operations:

•  Client integrations - Earthport continues to enhance systems to enable simplified integration options for clients and bank partners to connect to Earthport's network

•  Platform efficiency - As our volumes grow, continued focus is placed on developing the capacity to scale operations. These improvements enable Earthport to deliver better throughput results and timelines for payment delivery to meet clients' Service Level Agreements

•  Professional service engagements - Given the size of our client's organisations and the complex nature of their operations, most new business engagements begin with a consultative assessment and discovery phase to guide a successful implementation. We continue to grow the calibre of our resources and processes that enable us to expertly assume new client volumes

 

Strong, Industry-Leading Presence

Earthport remains highly visible among industry leaders and policy makers by partaking in steering committees, presentations at industry conferences and by hosting events and webinars alongside some of the world's largest banks and technology innovators.

In July, Earthport participated at a forum of Central Bankers from around the world at the invitation of the Bank for International Settlements in Basel. Increasingly, policy makers view Earthport's model as a means to foster greater transparency and efficiency within established payment institutions. These opportunities continue to provide exposure for our thought leadership and represent acknowledgment of our solution.

 

Financial Review

Total revenue for the year ended 30 June 2015 increased 78% to £19.27 million (FY 2014: £10.82 million). On a like-for-like basis, revenue grew by over 55%. The increase in underlying revenues has been driven primarily by payment transactions as existing clients increase activity and as new customers go live, as well as minimum revenue contracts and consulting engagements that generate professional services fees.

Earthport achieved positive cash flow in multiple months during the second-half of 2015 fiscal year, before accelerating the pace of investments driven by the sheer size of opportunities ahead. Adjusted gross margin increased to 81% (FY 2014: 76%).

Adjusted operating loss, before share-based payment charges of £3.29 million (FY 2014: £1.75 million) and unrealised fair value adjustment of £0.35 million arising on the year end translation of unsettled transactions (FY 2014: £2.27 million), decreased by approximately 22% to £5.01 million (FY 2014: £6.44 million). The operating loss was £7.96 million (FY 2014: £6.35 million). A charge of £0.73 million has been recognised for warrants granted to Bank of America Merrill Lynch (FY 2014: £0.32 million). The Group loss before taxation increased to £8.71 million (FY 2014: £6.33 million), including £0.80 million in relation to unwinding of discount on deferred consideration. Overall, loss after taxation increased to £8.69 million (FY 2014: £6.70 million).

Cash and cash equivalents at 30 June 2015 were £30.20 million (at 30 June 2014: £9.46 million).

Like-for-like net cash used in operating activities decreased to £2.90 million (FY 2014: £4.36 million). The continued decrease in net cash used in operating activities demonstrates that a turning point in cash used versus revenue growth has been reached.

 

Shares Placing

On 18 September 2014, Earthport announced the successful placement of 65,136,464 new ordinary shares at 40.85 pence per share with both new and existing institutional investors. The gross proceeds of £26.6 million ($43.43 million) have and will continue to enable accelerated geographic expansion in Asia and other geographies, investment in significant product opportunities, such as the recently announced distributed ledger solution, a first of its kind, and the ability to invest behind the growth and momentum achieved in North America and Europe.

Oppenheimer Funds Inc. of New York was the cornerstone investor in the round and held 8.62% (currently 10.20%) of the enlarged issued share capital of the Company at year end. The strengthened balance sheet adds significant comfort for clients and regulators around the world with the Group's model and positioning. There are several revenue opportunities, such as US licencing and increased forward FX lines that will benefit from our stronger balance sheet, although not all will involve an actual increase in the use of cash.

 

Key Performance Indicators

Earthport specialises in the large segment of low value cross-border payment disbursements. It is our vision to provide banks, money transfer organisations and other payment service providers with an improved way of servicing these payments through a single relationship, enabling them to serve their commercial and retail customer payments in a faster, cheaper and more transparent way.

The indicators of our success involve four characteristics under which we operate:

1. The incumbent process is antiquated, costly and prone to risk: the existing model is not fit for purpose and complexity increases as it proliferates at the expense of efficiency and regulatory compliance.

2. The market opportunity is significant: global trade and remittance flows exceed $21 trillion today with expectation of future growth.

3. The segment remains largely underserved: to date, the majority of attention, funding and new solutions have focused on the collections or retail side of payments, with acquirers, card networks and consumer applications thriving.

4. Our competitors are our clients: incumbents who are providing cross border disbursements and remittances are typically our clients focused on addressing a defined segment of the market.

Furthermore, Earthport's proposition is based on partnership and is disruptive without being in competition with existing players in the segment. Our focus is on creating solutions for incumbents to remove the inefficiencies in their model, enabling them to focus on new product innovation and retention of the customer relationship.

To measure our success, the directors consider that the appropriate key performance indicators for the business are:

•  Gross revenue

•  Gross margin

•  Number of bank partnerships across the network

•  Straight Through Processing (STP) ratio

 

Employees

Earthport places considerable value in a diverse population of employees and their engagement as enablers of our performance. To that end, within the bounds of commercial confidentiality as a matter of interest, information is shared with all levels of staff about matters that affect the progress of the Group.

Strategic Pillars

Consistent with Earthport's strategic intent to be the largest global bank payment network, Earthport remains focused on the development of the five key pillars of our model.

1. Platform

State-of-the-art platform, offering scale to manage millions of cross-border payment transactions complemented by versatile interface structures and formats ensuring Straight Through Processing (STP) rates of 99.5% plus.

2. Network

A network of 60+ countries with a target of over a 100 countries where Earthport will deliver payments through an interface via the local clearing system.

3. Domain expertise

Domain expertise across all markets in the Earthport Network, providing automated access to one of the largest validation databases for payment formats, and an up-to-date knowledge base on payment systems across the world.

4. Compliance

A robust and fully integrated compliance process which ensures enhanced protection and risk mitigation to meet existing and evolving regulatory requirements.

5. Treasury services and evolving products

Efficient Treasury Services offering liquidity management structures to optimise the journey of a payment in a wide range of currencies required by our clients, combined with new product innovations to capture evolving technologies such as, the distributed ledger/blockchain technology.

Proof points have now been achieved across each of these pillars, establishing Earthport's foundation for expansion of its regional footprint and growing client base whilst enriching product suite and platform capability to cover emerging areas such as mobile payments, card/POS payments, collections, payment tracking and most recently, our distributed ledger offering.

 

Outlook

Earthport enters the current financial year in an excellent position, with established relationships with some of the largest financial institutions in the world and a strong balance sheet. The current pipeline of opportunities is substantial within our core banking client market as well as in adjacent areas of the international payments ecosystem.

Earthport's product positioning, extensive market opportunity, acceptance with our existing clients and prospects, provides us with the confidence to increase our investment with a focus on accelerated growth over the coming years.

We are entering a truly exciting phase in the evolution of the Company.

Hank Uberoi

Chief Executive Officer

 

 

 

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2015

 

 

 

Notes

2015
£'000

2014
£'000

Continuing operations:

 

 

 

Revenue

3

19,267

10,820

Cost of sales - before warrant charge

 

(3,612)

(2,570)

Adjusted gross profit

 

15,655

8,250

Cost of sales - warrant charge

 

(728)

(317)

Gross profit

 

14,927

7,933

Administrative expenses

5

(19,941)

(14,370)

Adjusted operating loss

 

(5,014)

(6,437)

Share-based payment charge

 

(3,289)

(1,745)

Exceptional items - acquisition costs

12

-

(439)

Unrealised fair value adjustment

 

345

2,274

Operating loss

 

(7,958)

(6,347)

Finance income

 

52

18

Unwinding of discount on deferred consideration

 

(803)

-

Loss before taxation

 

(8,709)

(6,329)

Income tax income/(expense)

6

18

(371)

Loss for the year and total comprehensive income attributable to owners of the Parent

 

(8,691)

(6,700)

 

 

 

 

Loss per share - basic and fully diluted

7

(1.91p)

(1.76p)

 

 

There were no items of other comprehensive income for the year.

 

 

 

Consolidated Statement of Financial Position

As at 30 June 2015

 

 

 

Notes

2015
£'000

2014
£'000

Assets

 

 

 

Non-current assets

 

 

 

Goodwill

 

2,709

2,709

Intangible assets

 

6,406

6,394

Investment

 

250

225

Deferred tax asset

10

327

541

Property, plant and equipment

 

709

294

 

 

10,401

10,163

Current assets

 

 

 

Trade and other receivables

8

8,329

7,468

Derivative financial assets

 

976

197

Cash and cash equivalents

 

30,195

9,461

 

 

39,500

17,126

Total assets

 

49,901

27,289

 

 

 

 

Liabilities

 

 

 

Current liabilities

 

 

 

Trade and other payables

9

(5,711)

(7,223)

Derivative financial liabilities

 

(2,766)

(1,239)

Loan

 

-

(344)

 

 

(8,477)

(8,806)

Non-current liabilities

 

 

 

Contingent consideration

 

(3,292)

(2,489)

Deferred tax liability

10

(737)

(867)

 

 

(4,029)

(3,356)

Total liabilities

 

(12,506)

(12,162)

Net assets

 

37,395

15,127

 

 

 

 

Equity

 

 

 

Share capital

 

70,695

64,016

Share premium

 

78,272

58,213

Interest in own shares

 

(1,252)

(1,456)

Merger reserve

 

9,200

9,200

Share-based payment reserve

 

12,557

9,632

Warrant reserve

 

1,045

317

Retained earnings

 

(133,122)

(124,795)

Equity attributable to owners of the Parent

 

37,395

15,127

 

 

 

Consolidated Statement of Cashflows

For the year ended 30 June 2015

 

 

 

Notes

2015
£'000

2014
£'000

Net cash used in operating activities

11

(2,903)

(4,356)

 

 

 

 

Investing activities

 

 

 

Purchase of property, plant and equipment

 

(757)

(244)

Capitalised intangible fixed assets

 

(1,916)

(1,110)

Trade investment

 

(25)

(225)

Subsidiary acquired net of cash received

 

-

(1,841)

Net cash used in investing activities

 

(2,698)

(3,420)

 

 

 

 

Financing activities

 

 

 

Proceeds on issuance of ordinary shares (net of costs paid)

 

26,567

1,531

Proceeds on exercise of warrants

 

-

1,934

Proceeds on exercise of options through Joint Share Ownership Plan

 

112

483

Repayment of loan

 

(344)

(130)

Net cash from financing activities

 

26,335

3,818

Net (decrease)/increase in cash and cash equivalents

 

20,734

(3,958)

Cash and cash equivalents at the beginning of the year

 

9,461

13,419

Cash and cash equivalents at the end of the year

 

30,195

9,461

 

 

 

 

Consolidated Statement of Changes in Equity

For the year ended 30 June 2015

 

 

 

Attributable to owners of the parent

 

Share
capital
£'000

Share
premium
£'000

Interest
in own
shares
£'000

Merger
reserve
£'000

Share-based payment reserve
£'000

Warrant reserve
£'000

Retained earnings
£'000

Total
£'000

Balance at 30 June 2013

61,587

57,020

(1,910)

9,200

8,980

914

(120,102)

15,689

Loss for the year, being total comprehensive
income for the year

-

-

-

-

-

-

(6,700)

(6,700)

Transactions with owners

 

 

 

 

 

 

 

 

- exercise of share options

610

950

454

-

(1,093)

-

1,093

2,014

- employee share options charge

-

-

-

-

1,745

-

-

1,745

- warrants

1,759

175

-

-

-

(597)

914

2,251

Issue of ordinary shares

60

68

-

-

-

-

-

128

Total transactions with owners of the parent,
recognised directly in equity

2,429

1,193

454

-

652

(597)

(4,693)

(562)

Balance at 30 June 2014

64,016

58,213

(1,456)

9,200

9,632

317

(124,795)

15,127

Loss for the year, being total comprehensive
income for the year

-

-

-

-

-

-

(8,691)

(8,691)

Transactions with owners

 

 

 

 

 

 

 

 

- exercise of share options

101

63

204

-

(364)

-

364

368

- employee share options charge

-

-

-

-

3,289

-

-

3,289

- warrants

-

-

-

-

-

728

-

728

Issue of ordinary shares

6,578

20,295

-

-

-

-

-

26,873

Cost of share issues

-

(299)

-

-

-

-

-

(299)

Total transactions with owners of the parent,
recognised directly in equity

6,679

20,059

204

-

2,925

728

(8,327)

22,268

Balance at 30 June 2015

70,695

78,272

(1,252)

9,200

12,557

1,045

(133,122)

37,395

 

 

Merger Reserve

The merger reserve represents the premium attributable to shares issued in consolidation of the costs of acquisition of subsidiaries in prior years.

 

Share-based Payment Reserve

The share-based payment reserve represents the cumulative charge to date in respect of unexercised share options at the balance sheet date.

 

Warrant Reserve

The warrant reserve represents the cumulative charge to date in respect of unexercised share warrants at the balance sheet date.

 

Retained Earnings

The retained earnings represent the cumulative profit and loss net of distribution to owners.

 

 

 

Notes to the Financial Statements

For the year ended 30 June 2015

 

1. General Information

 

Earthport plc is a public limited company incorporated and domiciled in England and Wales under the Companies Act 2006. The address of its principle place of business and registered office is 21 New Street, London EC2M 4TP.

 

The preliminary financial information does not constitute full accounts within the meaning of section 434 of the Companies Act 2006 but is derived from accounts for the years ended 30 June 2015 and 30 June 2014, both of which are audited. The preliminary announcement is prepared on the same basis as set out in the statutory accounts for the year ended 30 June 2015. While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), this announcement does not in itself contain sufficient information to comply with IFRSs.

 

The statutory accounts for the year ended 30 June 2015 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. Statutory accounts for the year ended 30 June 2014 have been filed with the Registrar of Companies. The auditor's report for the year ended 30 June 2015 was unqualified and did not contain any statement under section 498(2) or (3) of the Companies Act 2006.

 

 

2. Going Concern

The Directors believe that the Group has demonstrated further progress in achieving its objective of positioning itself as an infrastructure supplier to the global payments industry. The Group raised £26.6 million during the year through issuance of equity and exercise of options. The Directors have prepared a cash flow forecast covering a period extending beyond 12 months from the date of these financial statements after taking account of anticipated overhead costs and revenue, the Directors are confident that sufficient funds are in place to support the going concern status of the Group. Therefore, the Directors consider that it is appropriate to prepare the Group's financial statements on a going concern basis, which assumes that the Group is to continue in operational existence for the foreseeable future.

 

3. Segment Information

Revenue, loss and net assets/liabilities are attributable to two business segments operating from the Group's headquarters in London, United Kingdom. This is consistent with the information reviewed by the chief operating decision maker.

 

As the Group is still evolving, segmenting beyond revenue is under review and will be reported in future accounts. Revenue categories and segmental analysis by location of customers is as follows:

 

 

2015
£'000

2014
£'000

Transactional*

16,266

9,616

Professional services**

3,001

1,205

 

19,267

10,820

UK

12,275

7,220

Europe

1,106

557

North America

4,642

2,295

Rest of the world

1,244

748

 

19,267

10,820

 

 

*   Revenues related to payment transactions

** Revenues typically related to providing consulting/development services in relation to acquiring payment transactions

 

 

4. Loss Before Taxation

 

 

2015
£'000

2014
£'000

Loss before taxation is stated after charging:

 

 

Amortisation of intangible assets

1,904   

1,247   

Depreciation of property, plant and equipment

342   

162   

Development costs

151   

137   

Operating leases:

 

 

- property

359   

322   

Fees payable to the company's Auditor:

 

 

For the statutory audit of the:

 

 

- parent and consolidated financial statements

43   

40   

- subsidiary financial statements

30   

30   

- additional fees in respect of the prior year audit

30   

-   

Fees payable to associates of the company's Auditor:

 

 

- for tax compliance

7   

10   

- for other services

12   

2   

- corporate finance

-   

55   

 

 

 

5. Administrative Expenses

 

 

2015
£'000

2014
£'000

Staff and contractor costs

10,913

7,985

Travel and entertainment costs

1,091

721

Professional services costs

1,281

779

Sales and marketing costs

514

259

IT operational costs

1,469

998

Other operational costs

432

596

Other overheads

1,995

1,623

Depreciation of property, plant and equipment

342

162

Amortisation of intangible assets

1,904

1,247

 

19,941

14,370

 

 

Cost of sales includes bank transaction charges and sales commission.

 

6. Income Tax Expense

 

 

2015
£'000

2014
£'000

Current tax charge/(credit)

4

-

Deferred tax charge/(credit)

84

371

R&D tax (credit) received

(106)

-

 

(18)

371

Factors affecting the tax charge for the year:

 

 

Loss before taxation

(8,709)

(6,329)

Loss before tax multiplied by effective standard rate of corporation tax in the UK of 21% (FY 2014: 25.5%)

(1,829)

(1,424)

Tax effect of:

 

 

Expenses not deductible for tax purposes

5

5

Temporary differences not recognised for deferred tax purposes

14

14

Share-based payment charge not recognised for deferred tax purposes

397

393

Losses not recognised for deferred tax purposes

1,395

1,383

Tax charge for the year

(18)

371

 

 

No deferred tax asset has been recognised in relation to trading loss carried forward of £92 million (FY 2014: £83 million) due to the uncertainty over the timing of it's recovery.

 

 

 

7. Loss Per Share

The 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 year.

 

 

2015
£'000

2014
£'000

Loss attributable to equity shareholders of the company

(8,691)

(6,700)

 

 

 

2015
Number

2014
Number

Weighted average number of ordinary shares in issue (thousands)

461,444

388,817

Less: own shares held (thousands)

(7,113)

(8,319)

 

454,331

380,498

 

 

 

2015

2014

Basic and fully diluted loss per share (pence)

(1.91p)

(1.76p)

 

 

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 IAS 33, Earnings Per Share.

 

8. Trade and Other Receivables

 

 

 

Group

 

 

 

2015
£'000

2014
£'000

Trade receivables

 

 

6,464

6,427

Other receivables

 

 

1,098

472

 

 

 

 

 

Prepayments

 

 

767

569

 

 

 

8,329

7,468

 

Trade receivables amounted to £6,464,000 (2014: £6,427,000), net of a provision of £100,000 (FY 2014: £129,000) for impairment. There were no provisions, movement on the Group provisions for impairment were as follows:

 

 

2015
£'000

2014
£'000

At 1 July

129

-

Provision for impairment

-

161

Receivables written off during the year

(29)

(32)

At 30 June

100

129

 

 

The average credit period taken on sales of services is 30 days (2014: 27 days). No interest is charged on overdue balances. The Directors consider that the carrying amount of trade receivables approximates their fair value.

 

 

 

9. Trade and Other Payables

 

 

 

Group

 

 

 

2015
£'000

2014
£'000

Trade payables

 

 

3,662

5,200

Other payables

 

 

4

2

Amount due to subsidiary undertakings

 

 

-

-

Other taxation and social security

 

 

356

292

Accruals

 

 

1,689

1,729

 

 

 

5,711

7,223

 

 

Trade payables and accruals principally comprise amounts outstanding in respect of operating costs. The average credit period taken for trade purchases is 33 days (FY 2014: 35 days). The Directors consider that the carrying amounts for trade and other payables and accruals approximate their fair value.

 

10. Deferred Tax

 

Deferred tax asset

2015
£'000

2014
£'000

1 July

541

-

Acquisition of subsidiary

-

1,032

Deferred tax charge released to income statement

(214)

(491)

30 June

327

541

 

 

Deferred tax liability

2015
£'000

2014
£'000

1 July

(867)

-  

Acquisition of subsidiary

-

(987)  

Deferred tax credit released to income statement

130

120  

30 June

(737)

(867)  

Deferred tax liabilities (net)

(410)

(326)  

 

 

The gross movement on the deferred tax is as follows:

 

 

2015
£'000

2014
£'000

1 July

(326)

-

Acquisition of subsidiary

-

45

Accelerated capital allowances

92

-

Tax losses relieved during the year

(661)

(491)

Deferred tax credit released to the income statement

130

120

Tax credit on net derivative financial liabilities

355

-

30 June

(410)

(326)

 

 

The potential deferred tax asset arising on the cumulative losses carried forward is £ 18.4 million (FY 2014: £16.6 million) has not been recognised owning to uncertainty as to its recoverability.

 

 

 

 

11. Reconciliation of Loss Before Tax to Net Cash Used in Operating Activities

 

Group

2015
£'000

2014
£'000

Loss before tax

(8,709)

(6,329)

Amortisation of intangible assets

1,904

1,247

Depreciation of property, plant and equipment

342

162

Share-based payment and warrants charge

4,017

2,062

Shares issued in lieu of fee

263

128

R&D tax credit received

106

-

Finance income

(52)

(18)

Current year tax charge

4

-

Unwinding of discount on deferred consideration

803

-

Operating cash outflow before movements in working capital

(1,330)

(2,748)

Increase in receivables

(1,640)

(2,296)

Increase in payables

15

670

Cash used by operations

(2,955)

(4,374)

Interest received

52

18

Net cash used in operating activities

(2,903)

(4,356)

 

 

12. Exceptional Items

Acquisition costs amounting to £nil (FY 2014: £0.44 million) are related to the legal and professional services received by the Group in order to facilitate the acquisition of Baydonhill.

 

In accordance with IAS 39, Group fair valued its client's contracts and all currency bank accounts as at spot rate. The revaluation of debtors, creditors and currency segregated accounts gave rise to a foreign exchange gain of £1.1 million (FY 2014: £3.4 million). All client contracts are covered with bank contracts and as a result, the revaluation of the bank contracts generated a net derivative loss of £0.75 million (FY 2014: £1.1 million). These gains and losses would only crystallise in the unlikely event that any party of the transaction would default.

 

 

2015
£'000

2014
£'000

Unrealised fair value adjustment

 

 

Foreign exchange gain

1,093

3,437

Fair value (loss) on derivatives

(748)

(1,163)

Total

345

2,274

 

 

13. Annual Report and Accounts

 

Copies of the Annual Report will be available as of 5 October 2015 on the Group's website, www.earthport.com and from the Group's registered office.

 

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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