Cornerstone FS plc (AIM: CSFS), the cloud-based provider of international payment, currency risk management and electronic account services to SMEs, is pleased to announce its unaudited interim results for the six months ended 30 June 2022.
· Total revenue increased by 127% to £1.9m (H1 2021: £837k)
o Growth driven by direct sales, which increased to £1.4m (H1 2021: £231k)
· Gross margin improved substantially to 61.7% (H1 2021: 38.1%)
· Acquired Capital Currencies Limited (“Capital Currencies”) and, post period, Pangea FX Limited (“Pangea FX”), two well-established FX businesses
· Commenced trading through an additional payment partner and liquidity provider, Banking Circle, strengthening and enhancing the Group’s offer
· Post period, raised a combined total of £1.1m through a placing and issue of a convertible loan note
Gareth Edwards, Chairman of Cornerstone, said:
“The first half of 2022 represents a period of significant growth – both in terms of revenue as well as the expansion of the operations with the acquisition of Capital Currencies. Our business has been strengthened further post period with the addition of the Pangea FX team, who will help drive our sales function both in the UK and Dubai. With the arrival of James Hickman, our new CEO, on 12 September 2022, we can expect an added impetus to the growth in direct sales and, in due course, the addition of further revenue streams.
“The strong trading momentum that was experienced in the first half of the year has been sustained through the second half, reflecting underlying growth as well as the initial contribution from Pangea FX. Accordingly, we continue to expect to achieve significant revenue growth for full year 2022 and I look forward to reporting on our progress.”
|Cornerstone FS plc||+44 (0)203 971 4865|
|James Hickman, Chief Executive OfficerJudy Happe, Chief Financial Officer|
|SPARK Advisory Partners Limited (Nomad)||+44 (0)203 368 3550|
|Mark Brady, Adam Dawes|
|SP Angel Corporate Finance LLP (Broker)||+44 (0)203 470 0470|
|Jeff Keating, Harry Davies-Ball|
|Gracechurch Group (Financial PR)||+44 (0)204 582 3500|
|Harry Chathli, Claire Norbury|
About Cornerstone FS plc
Cornerstone FS plc is a payments focused fintech business that makes managing currency simple for SMEs. It provides international payment, currency risk management and electronic account services using a proprietary cloud-based multi-currency payments platform. These services are delivered directly and via white label partners on a SaaS basis to UK-based SMEs that engage in international trade. Cornerstone also serves some high-net worth individual clients.
Headquartered in the City of London with offices in Tunbridge Wells and Dubai, Cornerstone is admitted to trading on AIM under the trading symbol ‘CSFS’. For more information, please visit www.cornerstonefs.com.
The six months to 30 June 2022 was another strong period for the Group, with revenue more than doubling to £1.9m (H1 2021: £837k) and continued strategic execution.
In particular, the Group reached a significant milestone with the acquisition of Capital Currencies, a well-established broker that is authorised and regulated by the FCA as an authorised payment institution permitted to provide payment services. The integration of Capital Currencies’ clients onto Cornerstone’s technology has progressed well, with approximately 250 transitioned across to the Cornerstone platform during the period and the migration completed subsequently. Since the acquisition, the business has performed well and is positioned to grow its contribution to the Group now that integration is complete.
Cornerstone has expanded further, in the second half, with the acquisition of Pangea FX, a specialist FX and treasury consultancy, which is expected to assist in the Group’s growth particularly through the addition of two senior sales executives. The Pangea FX executives will be divided between the Group’s headquarters in London and the Group’s office in Dubai, where the Group is seeing strong demand for its services.
The Group delivered significant growth in revenue to £1.9m (H1 2021: £837k). In line with the Group’s stated strategy, this reflects an increase in revenue generated by clients that the Group serves directly. The proportion of total revenue that was accounted for by direct clients increased to 74% compared with 28% for the same period last year, being £1.4m (H1 2021: £231k). A key contributor to this growth was the new Asia team that was brought on board in the second half of 2021.
Revenue generated through the Group’s introducer network (which is primarily white label partners, who use Cornerstone’s technology, but also introducer brokers) accounted for 26% of total revenue (H1 2021: 72%) and was £501k (H1 2021: £606k). On a reported basis this represents a reduction due to some revenue that the Group previously generated through the introducer network now being serviced directly. However, on an underlying basis, there was an increase in revenue generated through the Group’s introducer network in H1 2022 compared with H1 2021.
By client type, there was an increase in revenue generated by both corporate accounts and HNWIs. This includes particularly strong growth in revenue from HNWIs, which was primarily due to the addition of the Asia team. As a result, the proportion of total revenue accounted for by HNWIs increased to 45% (H1 2021: 16%) with corporate accounts contributing 55% (H1 2021: 84%). However, for the majority of the HNWI revenue (and nearly exclusively for the Asia team’s HNWI revenue), whilst the underlying transaction is with an individual, the relationship is via a corporate that provides services to the HNWI.
Revenue continued to be generated from the provision of foreign exchange and payments services in the form of spot and forward trades, accounting for 93% and 7% of revenue respectively (H1 2021: 83% and 17%), which reflects a more normal distribution compared with the first half of the previous year.
During the first half of 2022, transactions were conducted between 43 different currency pairs (H1 2021: 33), with 86% of transactions being between various combinations of Sterling, Euros and US Dollars (H1 2021: 90%).
The Group continued to enhance its offer during the period by commencing trading through an additional payment partner and liquidity provider, Banking Circle, which sits alongside Currency Cloud and Velocity. All trades placed with the Group by clients are replicated in a back-to-back contract with a third-party liquidity provider, which provides pricing, execution and settlement services. By partnering with Banking Circle, not only does this provide more resilience by having multiple suppliers, but it expands the Group’s business offering in several respects. Firstly, it enables the Group to provide clients with European IBANs (with some customers wanting a European IBAN rather than a UK IBAN). It also enables Cornerstone to service a broader range of countries and industries thanks to the range of services and partnerships that Banking Circle has in place.
Revenue for the six months to 30 June 2022 increased by 127% to £1.9m, compared with £837k for the first half of the previous year, and by 27% sequentially (H2 2021: £1.5m). This reflects strong underlying growth, driven by the revenue generated by clients that the Group serves directly, as well as the contribution from Capital Currencies, which was acquired during the period.
As a result of the increased contribution to revenue from clients that the Group serves directly, gross margin improved substantially to 61.7% in the first half of 2022 (H1 2021 38.1%). The improvement in gross margin combined with the increased revenue enabled the Group to achieve significant growth in gross profit to £1.2m (H1 2021: £319k).
Total administrative expenses for the first half of 2022 were £4.1m compared with £1.5m for the first half of the prior year. This primarily reflects an increase of:
· £2.0m in share-based compensation to £2.2m (H1 2021: £234k), which predominantly relates to share-based incentivisation for the Asia team and the General Manager APAC and Middle East; and
· £626k in other administrative expenses to £1.9m (H1 2021: £1.3m).
Post period, the Company reached an agreement with Robert O’Brien, the General Manager APAC and Middle East, and the Asia team to vary the terms of their incentivisation agreement, as a result of performance being ahead of expectations. On joining Cornerstone, Mr. O’Brien and his team were entitled to receive share-based incentivisation based on a multiple of revenue generation and contribution to profit over the two years following their appointment. The variation capped the settlement at a total value of £3.15m and extended the term of full settlement by a further year (see note 11 to the financial statements).
The £626k increase in other administrative expenses included a £112k increase in depreciation and amortisation costs, reflecting the continued investment in the Group’s proprietary technology platform and also amortisation of the value attributed to the customer base acquired through the acquisition of Capital Currencies. The costs related to public company requirements increased by approximately £131k owing to the Company becoming public part way through the comparative period (6 April 2021). The Group also recognised £128k in administrative expenses in relation to Capital Currencies. The remaining administrative expense increase of approximately £255k largely reflects additional hires made during 2021 (including the addition of Mr. O’Brien and the Asia team), as well as small increases in banking partner fees due to the Group’s enhanced product offering, and rental costs owing to rent discounts realised during the COVID-19 restrictions in 2021.
The Group recognised a loss before tax of £3.0m for the first half of 2022 compared with £1.2m for the prior period, which primarily reflects the greater administrative expenses. Loss per ordinary share on a basic and diluted basis was 13.05 pence (H1 2021: 6.49 pence), due to the increased loss.
The Group’s underlying loss from operations (excluding share-based compensation charges and transaction costs) was £721k, an improvement of £41k compared to the prior period (H1 2021: £762k).
As at 30 June 2022, the Group had cash and cash equivalents of £283k (31 December 2021: £348k; 30 June 2021: £951k). This followed the raising of gross proceeds of £870k via the placing of, and subscription for, new ordinary shares, which was partly used to fund the initial £586k cash consideration for the acquisition of Capital Currencies. Post period, the Group raised a total of approximately £1.1m through the placing of new ordinary shares (£860k) and the issue of a convertible loan note (£225k). The loan note was issued to one investor who also took shares up to the maximum amount allowed before obtaining FCA approval (9.9% of the Company’s issued share capital). Application for FCA approval has been made and the loan note converts automatically into shares on approval being received.
The strong trading momentum that was experienced in the first half of the year has continued into the second half, reflecting underlying growth as well as the initial contribution from the Pangea FX acquisition. With the investment in the expansion of its sales team, the Group expects this trend to be sustained throughout the year. In addition, revenue for 2022 will benefit from the contribution from Capital Currencies, which was acquired during the year. As a result, the Board continues to expect to achieve substantial revenue growth for full year 2022.
Looking further ahead, with the strength of the Group’s platform combined with an enhanced and expanded team, the Board continues to believe that Cornerstone is well-placed to take advantage of the meaningful opportunities to build a significant business offering technology-enabled international payment services. Accordingly, the Board remains confident in Cornerstone’s prospects and looks forward to reporting on its progress.