TIDMCSFS
RNS Number : 0796M
Cornerstone FS PLC
12 September 2023
Certain information contained within this Announcement is deemed
by the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014 ("MAR") as applied in
the United Kingdom. Upon publication of this Announcement, this
information is now considered to be in the public domain .
12 September 2023
Cornerstone FS plc
("Cornerstone" or the "Company" or the "Group")
Interim Results
Significant revenue growth, maiden six-month period of
profitability and cash generation
On track for FY 2023 to be significantly ahead of
expectations
Cornerstone FS plc (AIM: CSFS), a foreign exchange and payments
solutions company offering multi-currency accounts to businesses
and individuals through its proprietary technology platform, is
pleased to announce its unaudited interim results for the six
months ended 30 June 2023.
Financial Highlights
-- Revenue increased by 90% to GBP3.6m (H1 2022: GBP1.9m)
through the continued expansion of the Group's payments
capabilities and offering, and on-going investment in the sales
function
-- Gross margin broadly stable at 61.0% (H1 2022: 61.7%)
-- Maiden half-year adjusted(1) EBITDA of GBP0.2m (H1 2022:
GBP0.5m loss) driven by both revenue growth and careful management
of the Group's cost base
-- Operating profit of GBP0.1m (H1 2022: GBP3.0m loss)
-- Profit before tax of GBP23k (H1 2022: GBP3.0m loss)
-- Cash generated from operations of GBP0.1m (H1 2022: cash used in operations of GBP0.1m)
-- Cash and cash equivalents increased to GBP816k at 30 June 2023 (31 December 2022: GBP682k)
Operational Highlights
-- Proportion of revenue accounted for by direct clients
increased to 91% (H1 2022: 74%) reflecting the strategic decision
to rationalise the majority of the historic white label
business
-- Active customers(2) increased to 874 (period to 30 June 2022: 697)
-- New counterparty partnerships established to broaden the
number of currencies and countries where the Group can transact -
the Group can now pay out to over 150 countries in 58
currencies
-- Completed preparation for the introduction of the Consumer Duty regulation in July 2023
Current trading and outlook
-- The strong trading momentum experienced in the first half of
the year has continued into the second half
-- With the continued advancements being made across the
business and a clear focus on Cornerstone's strategic growth
priorities, the Group now expects to report results for its full
year 2023 significantly ahead of market expectations, including
achieving its first full year of positive adjusted EBITDA
-- The Board is confident that the Group's funding position is
comfortable and sufficient to support its existing growth plans
James Hickman, CEO of Cornerstone, said:
"It has been an excellent six months for Cornerstone, delivering
substantial revenue growth and achieving our first half-year period
of profitability and operating cash generation. This has been
driven by our enhanced sales efforts and focus on more fully
commercialising our platform alongside important action to
carefully manage our cost base as we grow.
"We have also continued to execute on our strategy to augment
our capabilities by establishing further counterparty relationships
and partnerships, and we're particularly excited about the progress
we've made towards expanding our payment methods.
"With the strong trading momentum having continued into the
second half of the year, and with the benefits from our operational
improvements still coming through, we expect to report full year
results significantly ahead of market expectations, representing
substantial year-on-year growth as well as a maiden full year
adjusted EBITDA.
"When combined with a large and supportive market backdrop, as
global digital payment transaction values expand and the on-going
shift of payment transactions away from banks to specialist firms
continues, the Board has great confidence in the future of the
Group."
(1) Adjusted to exclude share-based compensation and transaction
costs of GBP0.2m and other operating income and profit on a
disposal of a subsidiary of GBP0.4m (H1 2022: GBP2.3m and
GBPnil)
(2) Calculated as customers who traded through Cornerstone in
the 12 months to 30 June 2023
Enquiries
Cornerstone FS plc +44 (0)203 971 4865
James Hickman, Chief Executive Officer
Judy Happe, Chief Financial Officer
SPARK Advisory Partners Limited (Nomad) +44 (0)203 368 3550
Mark Brady, Adam Dawes
Shore Capital (Broker) +44 (0)207 408 4090
Daniel Bush, Tom Knibbs (Corporate
Advisory)
Guy Wiehahn (Corporate Broking)
Gracechurch Group (Financial PR) +44 (0)204 582 3500
Harry Chathli, Claire Norbury
About Cornerstone FS plc
Cornerstone FS plc (AIM: CSFS) is a foreign exchange and
payments company offering multi-currency accounts and payment
solutions to businesses and individuals. Headquartered in the City
of London, Cornerstone combines a proprietary technology platform
with a high level of personalised service to support clients with
payments in over 150 countries in 58 currencies. With a track
record of over 12 years, Cornerstone has the expertise, experience
and expanding global partner network to be able to execute complex
cross-border payments. It is fully regulated by the Financial
Conduct Authority as an Electronic Money Institution.
www.cornerstonefs.com
Investor Presentation
James Hickman, CEO, and Judy Happe, CFO, will be presenting via
Investor Meet Company on 12 September 2023 at 11.00am BST.
Questions can be submitted pre-event via the Investor Meet
Company platform up until 9.00am BST the day before the meeting or
at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add
to meet Cornerstone via:
https://www.investormeetcompany.com/cornerstone-fs-plc/register-investor
Operational Review
The six months to 30 June 2023 was a very strong period for the
Group, with revenue increasing by 90% to GBP3.6m (H1 2022: GBP1.9m)
and the Group achieving its maiden half-year profit and positive
adjusted EBITDA. Importantly, the Group also delivered its first
interim cash inflow from operating activities. This reflects the
strategic and operational changes that were implemented during the
second half of 2022 and which continued into the current period.
The Group's focus has been on driving direct sales and fully
commercialising the platform, while maintaining tight control over
costs. Key elements of this have been growing the sales team and
enhancing and expanding the Group's offering, particularly through
increasing the number of counterparties to broaden the number of
currencies and countries where it can transact, with the objective
of increasing the number of active customers, through customer
acquisition and retention, and value of payment transactions
managed by the Group.
Performance
The Group delivered significant growth in revenue to GBP3.6m (H1
2022: GBP1.9m), reflective of a substantial increase in revenue
generated by clients that the Group serves directly. The proportion
of total revenue that was accounted for by direct clients was 91%,
being GBP3.3m (H1 2022: GBP1.4m), compared with 74% in H1 2022.
Revenue generated through the Group's white label partners
accounted for total revenue of GBP319k (H1 2022: GBP501k). This is
in line with the Group's strategic decision to manage down almost
all its historic white label business - only maintaining a small
number of accounts that meet appropriate profitability thresholds.
This commenced towards the end of 2022, but primarily took place in
the first half of the current year.
Active customers, calculated as customers who traded during the
12 months ending 30 June 2023, increased to 874 compared with 697
for the 12 months to 30 June 2022, as the Group has continued its
strategy of investing in its sales team and payment
capabilities.
By client type, there was an increase in revenue generated by
both private clients (primarily high net worth individuals) and
corporate accounts. Particularly strong growth was seen from
private clients, with the proportion of total revenue accounted for
by private clients increasing to 62% (H1 2022: 45%) with corporate
accounts contributing 38% (H1 2022: 55%). However, for the majority
of private client revenue, whilst the underlying transaction is
with an individual, the relationship is via a corporate that
provides services to the individual.
During the first half of 2023, transactions were conducted
between 43 different currency pairs (H1 2022: 43), with 88% of
transactions being between various combinations of Sterling, Euros
and US Dollars (H1 2022: 86%).
Enhancing our offer
A key strategic focus is the enhancement of the Group's offer,
primarily through growing its counterparty and partner network to
expand its product capabilities. At the same time, internal
technology development continues, to enhance the Group's platform
as well as its service provision.
Expanding our product
A core element of the Group's strategy is to establish a global
payments network that will enable Cornerstone customers to be able
to pay in from, and pay out to, any jurisdiction and via any
payment method. While it is still relatively early days, important
steps have been taken in implementing this strategy.
New counterparty partnerships have been established, which
enables the Group to broaden the number of currencies and countries
where it can transact, as well as expanding the business sectors
that it can serve. The Group can now pay out to over 150 countries
in 58 currencies.
To further support the expansion of its offer, the Group has
established a new offering, Cornerstone Solutions, that will focus
on providing solutions to clients that are harder to service, due
to, for example, the sector in which they operate. This will allow
the Group to leverage some of its competitive strengths - such as
the high level of experienced, personalised service - and open
access to a further cohort of potential clients.
The Group has also made significant progress towards expanding
its payment method offering and is at an advanced stage with a
potential partner. The Group expects to be able to launch its first
initiative in this respect during the first quarter of next
year.
To be able to support customers with more of their business
needs, the Group has also formed strategic partnerships with
specialised and alternative lenders to offer a range of funding
solutions. In particular, the Group launched a lending platform in
partnership with Swoop Finance ("Swoop"), which enables the Group
to seamlessly refer customers to a lending partner that it has
pre-vetted to ensure that they can meet the customers'
requirements. This service increases the Group's value to its
customers while also providing commission on referrals. It also
enhances the Group's competitive offer to potential customers who
want to utilise Cornerstone's FX services (rather than those of
their traditional bank), but who are hesitant to move away from
their traditional bank as they require their lending
facilities.
Improving our service
Cornerstone is committed to continuously improving the service
that it provides to its customers. During the period, this included
making enhancements to the user interface and user experience of
the Group's platform. The Group is also continuing development work
to increase the automation in transactional processes to increase
the speed of payments as well as working on enhancements to the
onboarding process.
Actions such as these, which stem from one of the Group's core
values of always putting customers first, meant that the Group was
well prepared for the introduction of the Financial Conduct
Authority's Consumer Duty regulation in July 2023. During the
period, the Group undertook a review of its operations to ensure
that it was fully compliant with the new regulation, which sets
higher and clearer standards for consumer protection across
financial services.
Financial Review
Revenue for the six months to 30 June 2023 increased by 90% to
GBP3.6m compared with GBP1.9m for the first half of the previous
year. This growth reflects the strategic and operational changes
that were implemented during the second half of 2022 and which
continued into the current period focusing on driving direct sales
and fully commercialising the platform. The Group also benefited
from full six-month contributions from Capital Currencies and
Pangea FX, which were acquired in H1 2022 and H2 2022,
respectively.
Gross margin for the first half of 2023 was 61.0% (H1 2022:
61.7%). Whilst the proportion of revenue derived from white label
partners has declined to 9% (from 26% in H1 2022), the gross margin
benefit of this was offset by a change in commission arrangements
with Robert O'Brien, the General Manager APAC and Middle East,
which were previously agreed at enhanced levels in 2023 compared
with the prior year. As announced on 8 March 2023, Mr. O'Brien
agreed to vary and extend certain elements of his compensation
package, decreasing his commission share on certain established
revenue streams and increasing his share of the profitability of
the Dubai office. This was immediately beneficial for the Group
and, as a result of this change, the Group generated stronger gross
margin in the second quarter of 2023 compared with the first
quarter.
As a result of gross margin remaining at a broadly consistent
level, combined with the significant growth in revenue, gross
profit increased by 88% to GBP2.2m (H1 2022: GBP1.2m).
Operating expenses were reduced to GBP2.2m in H1 2023 compared
with GBP4.1m for the first half of the previous year. This
primarily reflects a reduction of GBP2.1m in share-based (non-cash)
compensation to GBP173k (H1 2022: GBP2.2m) following the Company
reaching an agreement in H2 2022 with Mr. O'Brien and the Asia team
to vary the terms of their incentivisation agreement pursuant to
which they received GBPnil share-based compensation during the
period (H1 2022: GBP2.1m). The Group also recognised a GBP0.2m
profit during the period from the disposal of its subsidiary, Avila
House Ltd. ("Avila House"), with the share purchase agreement
having been entered in December 2022 and completed during the
period under review. Together with the reduced share-based
compensation, this more than offset the increase in other
administrative expenses to GBP2.0m (H1 2022: GBP1.7m) and
amortisation of intangible assets to GBP0.3m (H1 2022: GBP0.2m).
The Group has maintained tight control over operating costs and the
increase in other administrative expenses primarily relates to
additional sales team hires and the impact of the acquisitions of
Capital Currencies and Pangea FX. Amortisation was higher due to
the acquired customer lists from the 2022 acquisitions, combined
with the cumulative impact of internally developed software
additions that have been capitalised since 2020 with an
amortisation period of three years.
The Group generated other operating income of GBP0.2m (H1 2022:
GBPnil) based on interest on client cash balances (see note 3 to
the financial statements).
As a result of the increased gross profit and other operating
income and reduced operating expenses, the Group generated a profit
from operations of GBP0.1m compared with a loss from operations of
GBP3.0m for the first half of 2022.
Net finance costs were GBP115k (H1 2022: GBP49k), which was
primarily related to interest on loan notes due to Mr. O'Brien
(principal balance of GBP2.0m) and in respect of the Pangea FX
acquisition (principal balance of GBP0.2m), both of which have a
fixed coupon rate of 6% p.a.
As a result, the Group generated a maiden profit before tax of
GBP23k in the six-month period compared with a loss before tax of
GBP3.0m for the first half of 2022. Earnings per share on a basic
and diluted basis were 0.06 pence (H1 2022: loss of 13.05 pence per
share), which was achieved despite an increase in the weighted
average number of ordinary shares in issue to 55,791,324 (H1 2022:
23,143,117).
On an adjusted basis (to exclude share-based compensation and
transaction costs, as well as the other operating income and profit
from the disposal of Avila House), the Group generated a first
half-year period of positive EBITDA of GBP0.2m, compared with an
adjusted EBITDA loss of GBP0.6m for H1 2022.
The Group was cash flow positive for the first six months of
2023. Cash generated by operating activities was GBP0.1m (H1 2022:
GBP0.1m used in operating activities) based on the improved trading
performance. Cash generated by investing activities was GBP85k (H1
2022: GBP0.8m used in investing activities) as the proceeds from
the disposal of Avila House offset the acquisition of intangible
assets, property, plant and equipment principally associated with
the continued investment in developing the Group's proprietary
platform. Cash from operating and investing activities more than
offset cash used in financing activities, which consisted of GBP66k
in interest and similar charges (H1 2022: GBPnil).
As a result, as of 30 June 2023, the Group had increased cash
and cash equivalents of GBP816k (31 December 2022: GBP682k).
As announced on 8 March 2023, the Group agreed to further vary
the incentivisation arrangement with Mr. O'Brien as well as the
settlement arrangement with Craig Strong, Director of Capital
Currencies. The repayment date of Mr. O'Brien's loan note has been
extended to 31 July 2026 and the payment dates of Mr. Strong's
earn-out consideration have both been extended by a year.
The Group's emerging adjusted EBITDA, and profit generation,
together with its current cash balances give the Board confidence
in the strength of the Company's balance sheet and is comfortable
that the Group has sufficient resources to support its existing
growth plans.
Outlook
The strong trading momentum that was experienced in the first
half of the year has continued into the second half.
The strong growth being generated reflects the advancements
being made across the business as the Group realises the benefits
of the enhancements made to its operations and offering towards the
end of 2022 and to date in 2023. With the continued strengthening
of its sales team, and a clear focus on Cornerstone's strategic
growth priorities, the Group expects this revenue trend to be
sustained throughout the year.
As a result, and with the continued careful management of the
cost base, the Group now expects to report results for its full
year 2023 significantly ahead of market expectations, including
achieving its first full year of positive adjusted EBITDA.
Cornerstone FS plc
Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months 6 months 12
to 30 June to 30 June months
2023 2022 to 31 Dec
2022
Notes GBP GBP GBP
Revenue 3,601,842 1,896,073 4,821,996
Cost of sales (1,405,919) (727,081) (1,885,503)
------------ ------------ ------------
Gross profit 2,195,923 1,168,992 2,936,493
Share-based compensation 5 (172,679) (2,243,258) (4,284,039)
Further adjustments to adjusted
EBITDA (see below) (63,306) (183,509) (500,529)
Other administrative expenses (2,005,647) (1,718,910) (3,805,812)
------------ ------------ ------------
Total administrative expenses (2,241,632) (4,145,677) (8,590,380)
Other operating income 1 183,506 - 30,647
Adjusted EBITDA / (EBITDA
loss) 190,275 (549,918) (869,319)
Stated after the add-back
of:
- other operating income (183,506) - (30,647)
- share-based compensation 5 172,679 2,243,258 4,284,039
- transaction costs 4,500 12,600 99,365
- (profit) on disposal of
subsidiary 7 (207,480) - -
- amortisation of intangible
assets 6 256,707 166,046 386,542
- depreciation of property,
plant and equipment 9,579 4,863 14,622
Profit / (loss) from operations 2 137,797 (2,976,685) (5,623,240)
Finance and other income 3 - 10 18
Finance costs 3 (114,550) (49,280) (163,975)
------------ ------------ ------------
Profit / (loss) before
tax 23,247 (3,025,955) (5,787,197)
Income tax 11,699 6,699 175,365
------------ ------------ ------------
Profit / (loss) for the
financial period 34,946 (3,019,256) (5,611,832)
Total comprehensive profit
/ (loss) for the period 34,946 (3,019,256) (5,611,832)
============ ============ ============
Profit / (loss) per share
from continuing operations:
Basic & diluted (pence) 4 0.06 (13.05) (17.26)
Cornerstone FS plc
Consolidated Statement of Financial Position
Unaudited Unaudited Audited
as at 30 as at 30 as at
June 2023 June 2022 31 Dec
2022
Notes GBP GBP GBP
ASSETS
Non-current assets
Intangible assets and
goodwill 6 2,180,104 2,106,268 2,315,637
Tangible assets 30,923 34,256 39,677
2,211,027 2,140,524 2,355,314
------------- ------------- -------------
Current assets
Trade and other receivables 8 1,503,464 415,216 1,339,110
Cash and cash equivalents 816,176 283,075 682,346
2,319,640 698,291 2,021,456
------------- ------------- -------------
TOTAL ASSETS 4,530,667 2,838,815 4,376,770
============= ============= =============
Equity
Share capital 5 574,171 236,837 480,362
Share premium 6,191,748 3,906,533 5,496,829
Share-based payment reserve 620,006 4,635,968 1,489,765
Merger relief reserve 5,557,645 5,557,645 5,557,645
Contingent consideration
reserve 999,859 891,784 950,920
Reverse acquisition reserve (3,140,631) (3,140,631) (3,140,631)
Retained earnings (10,406,693) (10,847,482) (10,924,791)
-------------
TOTAL EQUITY 396,105 1,240,654 (89,901)
------------- ------------- -------------
Non-current liabilities
Loan notes 10 2,172,578 - 2,172,578
Deferred tax liability 88,117 57,608 99,816
------------- ------------- -------------
2,260,695 57,608 2,272,394
------------- ------------- -------------
Current liabilities
Trade and other payables 9 1,873,867 1,524,477 1,969,277
Loan notes 10 - - 225,000
Deferred tax liability - 16,076 -
------------- ------------- -------------
1,873,867 1,540,553 2,194,277
------------- ------------- -------------
TOTAL EQUITY AND LIABILITIES 4,530,667 2,838,815 4,376,770
============= ============= =============
Cornerstone FS plc
Consolidated Statement of Changes in Equity
Share Share Share-based Merger Contingent Reverse Retained Total
capital premium payment relief consideration acquisition earnings
reserve reserve reserve reserve
GBP GBP GBP GBP GBP GBP GBP GBP
At 1 January
2022 202,776 3,074,355 2,392,710 5,557,645 - (3,140,631) (7,828,230) 258,625
-------- ---------- ------------ ---------- -------------- ------------ ------------- ------------
Issue of
shares 34,061 868,538 - - - - - 902,599
Cost of
raising
equity - (36,360) - - - - - (36,360)
Deferred
equity-based
consideration - - - - 891,784 - - 891,784
Share-based
payments - - 2,243,258 - - - (2,243,258) -
Other
comprehensive
loss - - - - - - (775,994) (775,994)
At 30 June
2022 236,837 3,906,533 4,635,968 5,557,645 891,784 (3,140,631) (10,847,482) 1,240,654
-------- ---------- ------------ ---------- -------------- ------------ ------------- ------------
Share-based
payments 176,362 1,036,696 - - - - - 1,213,058
Cost of
raising
equity - (50,950) - - - - - (50,950)
Deferred
equity-based
consideration - - - - 59,136 - - 59,136
Share-based
payments - - 2,040,781 - - - - 2,040,781
Settlement
of
equity-based
incentives 67,163 604,550 (5,186,984) - - - 2,515,271 (2,000,000)
Other
comprehensive
loss - - - - - - (2,592,580) (2,592,580)
At 31 December
2022 480,362 5,496,829 1,489,765 5,557,645 950,920 (3,140,631) (10,924,791) (89,901)
======== ========== ============ ========== ============== ============ ============= ============
Issue of
shares 35,299 194,143 - - - - - 229,442
Deferred
equity-based
consideration - - - - 48,939 - - 48,939
Share-based
payments - - 172,679 - - - - 172,679
Settlement
of
equity-based
incentives 58,510 500,776 (1,042,438) - - - 483,152 -
Other
comprehensive
income - - - - - - 34,946 34,946
At 30 June
2023 574,171 6,191,748 620,006 5,557,645 999,859 (3,140,631) (10,406,693) 396,105
======== ========== ============ ========== ============== ============ ============= ============
Cornerstone FS plc
Consolidated Cash Flow Statement
Unaudited Unaudited Audited
six months six months 12 months
to 30 June to 30 June to 31 Dec
2023 2022 2022
GBP GBP GBP
Profit / (loss) before tax 23,247 (3,025,955) (5,787,197)
------------ ------------ ------------
Adjustments to reconcile profit
before tax to cash generated
from operating activities:
Finance income - (10) (18)
Finance costs 114,550 49,280 163,975
Share-based compensation 172,679 2,243,258 4,284,039
Other equity settled share-based
payments - 32,595 32,595
Profit on disposal of subsidiary (207,480) - -
Depreciation and amortisation 266,286 170,909 401,164
(Increase) / decrease in trade
and other receivables (164,354) 78,028 (845,866)
(Decrease) / increase in trade
and other payables (90,969) 312,676 757,250
------------ ------------ ------------
Cash generated / (used) in
operations 113,959 (139,219) (994,058)
Income tax received - - 158,188
Cash generated / (used) in
operating activities 113,959 (139,219) (835,870)
------------ ------------ ------------
Investing activities
Acquisition of property, plant
and equipment (824) (2,994) (17,198)
Acquisition of intangible assets (213,694) (228,484) (422,713)
Proceeds from disposal of subsidiary 300,000 - -
Acquisition of subsidiary, net
of cash acquired - (527,984) (552,128)
------------ ------------ ------------
Cash generated / (used) in investing
activities 85,482 (759,462) (992,039)
------------ ------------ ------------
Financing activities
Shares issued (net of costs) - 833,644 1,992,694
Loans received - - 225,000
Interest and similar income - 10 18
Interest and similar charges (65,611) - (55,559)
------------ ------------ ------------
Cash (used in) / generated
from financing activities (65,611) 833,654 2,162,153
------------ ------------ ------------
Increase / (decrease) in cash
and cash equivalents 133,830 (65,027) 334,244
------------ ------------ ------------
Cash and cash equivalents at beginning
of period 682,346 348,102 348,102
------------ ------------ ------------
Cash and cash equivalents at
end of period 816,176 283,075 682,346
============ ============ ============
Cornerstone FS plc
Notes to the financial statements
1. General information and basis of preparation
Cornerstone FS plc is a public limited company, incorporated and
domiciled in England. T he Company was admitted to trading on AIM,
London Stock Exchange's market for small and medium size growth
companies, on 6 April 2021 . The registered office of the Company
is The Old Rectory, Addington, Buckingham, England, MK18 2JR, and
its principal business address is 75 King William Street, London,
EC4N 7BE. Cornerstone FS plc is a foreign exchange and payments
company offering multi-currency accounts to businesses and
individuals using a proprietary cloud-based multi-currency payments
platform. These services are primarily delivered directly on a SaaS
basis to UK-based SMEs and high-net worth individuals (private
clients).
The consolidated financial information contained within these
financial statements is unaudited and does not constitute statutory
accounts within the meaning of Section 434 of the Companies Act
2006. While the financial figures included in this interim report
have been prepared in accordance with IFRS applicable to interim
periods, this interim report does not contain sufficient
information to constitute an interim financial report as defined in
IAS 34. Financial information for the year ended 31 December 2022
has been extracted from the audited financial statements for that
year. With the exception of an additional accounting policy for
other operating income included below, the accounting policies
applied by the Group in this consolidated interim financial report
are the same as those applied by the Group in its consolidated
financial statements as at and for the year ended 31 December
2022.
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiary undertakings. Entities
are accounted for as subsidiary undertakings when the Group is
exposed to or has rights to variable returns through its
involvement with the entity and it has the ability to affect those
returns through its power over the entity.
Details of subsidiary undertakings and % shareholding:
Cornerstone Payment Solutions Ltd - 100% owned by the Company
Cornerstone Middle East FZCO - 100% owned by the Company
Capital Currencies Limited - 100% owned by the Company
Pangea FX Limited - 100% owned by the Company
On 26 April 2023, the Group completed the sale of Avila House
Ltd (formerly 100% owned by Cornerstone Payment Solutions Ltd). The
results of Avila House were consolidated up to the date of
disposal.
Other operating income
Other operating income represents interest generated from client
cash balances. The recent changes to the interest rate environment
has meant that these accounts can be interest bearing, whilst
maintaining the safeguarding requirements. Under the terms of the
Group's Electronic Money Licence, the Group is not able to pass any
of the interest earned back to the clients.
Whilst the increased interest stream is a positive boost for the
Group and a natural by-product of its increasingly diversified
product offering, the Group is mindful that aspects of its dynamics
are driven by macroeconomics beyond its control. The Group has
therefore chosen to recognise interest income on client balances as
'other operating income', not revenue on the face of the
Consolidated Statement of Comprehensive Income. For the same
reason, interest income has been excluded from the presentation of
adjusted EBITDA.
Interest earned on Cornerstone's own cash is recognised within
finance and other income in the Consolidated Statement of
Comprehensive Income.
Going concern
During the period ended 30 June 2023, the Group made a profit of
GBP34,946; its maiden period of profitability. As at 30 June 2023,
the Group's Statement of Financial Position showed cash and cash
equivalents of GBP816,176 . The trading position of the Group has
strengthened during 2023 with continued revenue growth coupled with
a strong focus on cost control. As a result, the Group expects to
begin generating a recurring cash inflow before financing
activities during the second half of 2023.
The Board continues to closely monitor the Group's performance
and considers a range of risks that could affect the future
performance and position of the Group. The Board considers the
Group has a reasonable expectation that it has adequate resources
to continue to operate for the foreseeable future and therefore the
financial statements are prepared on a going concern basis.
2. Profit / (loss) from operations
Unaudited Unaudited Audited
six months six months 12 months
to 30 June to 30 June to 31 Dec
2023 2022 2022
GBP GBP GBP
Profit / (loss) from operations
is stated after charging:
Share-based compensation 172,679 2,243,258 4,284,039
Transaction costs 4,500 12,600 99,365
Expensed software development
costs 33,189 53,473 86,941
Depreciation of property, plant
and equipment 9,579 4,863 14,622
Amortisation of intangible assets 256,707 166,046 386,541
Short-term (2018 IAS 17 operating)
lease rentals 137,236 93,363 252,308
============ ============ ===========
3. Interest and similar items
Unaudited Unaudited Audited
six months six months 12 months
to 30 June to 30 June to 31 Dec
2023 2022 2022
GBP GBP GBP
Total finance and other income
Bank interest receivable - 10 18
============== ============ ===========
Total finance costs
Unwinding of discount 48,939 49,280 108,416
Loan note interest 65,129 - 53,500
Other interest payable and charges 482 - 2,059
-------- ------- --------
114,550 49,280 163,975
======== ======= ========
In the audited financial statements for the year ended 31
December 2022, interest on client cash balances of GBP37,929 was
included within finance and other income and interest charges
related to client balances of GBP7,282 were included within finance
costs. As a result of the appreciation in interest rates, combined
with the continued growth of the Group's client balances following
its authorisation as an Electronic Money Institution in August 2021
and commensurate with its growth in revenue, interest on client
cash balances has materially grown since the year ended 31 December
2022. As a result, interest on client cash balances for the six
months ended 30 June 2023 of GBP183,506 has been classified as
other operating income. For consistency purposes, and to aid
comparison, the comparatives related to client balances for the
year ended 31 December 2022 have also been reclassified from
finance income and finance costs to other operating income. No
interest income or interest charges on client balances were
recognised in the six-month period ended 30 June 2022.
4. Earnings per share
The earnings per share of 0.06 pence is based upon the profit of
GBP34,946 (six months to June 2022: loss of GBP3,019,256; year
ended 31 December 2022: loss of GBP5,611,832) and the weighted
average number of ordinary shares in issue for the period of
55,791,324 (30 June 2022: 23,143,117; 31 December 2022:
32,506,335).
The prevailing share price of the Company's shares during the
period means that the effect of any outstanding warrants and
options would be considered anti-dilutive (due to their strike
price exceeding the average share price in the period), and is
ignored for the purposes of the loss per share calculation.
5. Share capital
Allotted, called up and fully paid Ordinary shares Share capital
No. GBP
Ordinary shares of GBP0.01 each as at 1
January 2022 20,277,582 202,776
Issue of new shares of GBP0.01 each 3,406,034 34,061
Ordinary shares of GBP0.01 each at 30
June 2022 23,683,616 236,837
Issues of new shares of GBP0.01 each 24,352,583 243,525
Ordinary shares of GBP0.01 each at 31
December 2022 48,036,199 480,362
Issues of new shares of GBP0.01 each 9,380,902 93,809
Ordinary shares of GBP0.01 each at 30
June 2023 57,417,101 574,171
The following changes in share capital have taken place in six
months ended 30 June 2023:
- On 13 January 2023, 806,182 ordinary shares were issued at a
price of GBP0.06501 settling the share-based remuneration for
former non-executive board members and company secretary in respect
of the year ended 31 December 2021
- On 3 February 2023, 5,113,182 ordinary shares were issued at a
price of GBP0.100 being the final equity settlement with Robert
O'Brien related to his share-based incentivisation agreement and
following receipt of approval from the Financial Conduct Authority
("FCA") for Mr. O'Brien to take his shareholding in the Company
above 10%
- On 3 February 2023, 3,461,538 ordinary shares were issued at a
price of GBP0.065 upon conversion of a loan note held by Mark
Horrocks and following receipt of approval from the FCA for Mr.
Horrocks to take his shareholding in the Company above 10%
Options
On 13 January 2023, the Company granted 3,049,180 options under
its equity-settled share-based remuneration schemes for employees
with a weighted average exercise price of GBP0.13 and a vesting
period between 1 and 3 years.
The Black-Scholes model was used for calculating the cost of
options. The model inputs for the options issued were:
Share price at grant date - GBP0.08
Risk-free rate - 2.7%
Expected Volatility - 129.5%
Contractual life - 5 years
During the period 248,360 options were forfeited (H1 2022:
200,000) at a weighted average exercise price of GBP0.20 per share.
Additionally, 63,114 warrants with an exercise price of GBP0.61
expired during the period (H1 2022: nil).
Share-based compensation charge
The Group's share-based compensation charge for the period ended
30 June 2023 of GBP172,679 (H1 2022: GBP2,243,258) consists of
GBP49,115 (H1 2022: GBP67,978) in respect of warrants (including
the impact of warrant expirations), GBP123,564 (H1 2022: credit of
GBP13,395) in respect of share options granted under the Company's
share option scheme (including the impact of option forfeitures)
and GBPnil in respect of the share-based incentivisation agreement
with Robert O'Brien & his team (H1 2022: GBP2,138,378) and
equity-settled share-based payments related to the non-executive
Board member's service agreements (H1 2022: GBP50,297).
6. Intangible assets
Internally
developed Software Customer Regulatory
software costs relationships Goodwill licenses Total
GBP GBP GBP GBP GBP GBP
COST
As at 1 January
2023 1,070,198 15,611 615,756 1,086,262 92,520 2,880,347
Additions 213,694 - - - - 213,694
Disposal (note 8) - - - - (92,520) (92,520)
---------- ---------- --------------- --------- ---------- ---------
At 30 June 2023 1,283,892 15,611 615,756 1,086,262 - 3,001,521
AMORTISATION
As at 1 January
2023 458,691 15,611 90,408 - - 564,710
Charge for the
period 195,132 - 61,575 - - 256,707
---------------
As at 30 June 2023 653,823 15,611 151,983 - - 821,417
NET BOOK VALUE
At 30 June 2023 630,069 - 463,773 1,086,262 - 2,180,104
========== ========== =============== ========= ========== =========
At 30 June 2022 582,621 - 387,808 1,043,319 92,520 2,106,268
========== ========== =============== ========= ========== =========
At 31 December 2022 611,507 - 525,348 1,086,262 92,520 2,315,637
========== ========== =============== ========= ========== =========
7. Disposal of Avila House Ltd
On 26 April 2023, the Group completed the sale of Avila House
Ltd ("Avila House") to Aspire Commerce Ltd and received GBP300,000
in cash consideration following the receipt of regulatory approval
for the transaction from the FCA . Immediately prior to the
disposal, the net assets of Avila House were GBPnil (31 December
2022: net liabilities of GBP1,331), but upon its acquisition by the
Group in October 2020, the Group had previously recognised an
intangible asset of GBP92,520 related to the small e-money
institution license held by Avila House. The profit on disposal
recognised by the Group upon the sale of Avila House was therefore
GBP207,480.
8. Trade and other receivables
Unaudited Unaudited Audited
as at 30 as at 30 as at 31
June 2023 June 2022 Dec 2022
GBP GBP GBP
Trade receivables 347,655 94,182 221,669
Prepayments and accrued income 152,238 71,670 131,010
Derivative financial assets
at fair value 674,424 200,653 635,473
Other receivables 52,523 32,525 53,062
Taxes and social security 276,624 16,186 297,896
Total trade and other receivables 1,503,464 415,216 1,339,110
=========== =========== ==========
9. Trade and other payables
Unaudited Unaudited Audited
as at 30 as at 30 as at 31
June 2023 June 2022 Dec 2022
GBP GBP GBP
Trade payables 216,298 505,565 362,035
Derivative financial liabilities
at fair value 767,557 171,724 563,676
Other taxes and social security 391,513 237,651 515,750
Other payables and accruals 498,499 609,537 527,816
Total trade and other payables 1,873,867 1,524,477 1,969,277
=========== =========== ==========
10. Loan Notes
Unaudited Unaudited Audited
as at 30 as at 30 as at 31
June 2023 June 2022 Dec 2022
GBP GBP GBP
CURRENT
Convertible loan notes - - 225,000
============= =========== ==========
NON-CURRENT
Loan notes 2,172,578 - 2,172,578
========== ==========
As described in note 5, on 3 February 2023 the current
convertible loan note of GBP225,000, issued pursuant to the
Company's fundraising on 5 August 2022 , was converted to 3,461,538
ordinary shares at a price of GBP0.065 for Mr. Horrocks to take his
shareholding in the Company above 10%.
The non-current non-convertible loan notes comprise GBP2,000,000
issued to Robert O'Brien (repayable on 31 July 2026) and GBP172,578
of deferred consideration in relation to the acquisition of Pangea
FX Limited (repayable on 31 August 2024). Both loan notes have a 6%
coupon rate payable quarterly in arrears. The Pangea FX Limited
loan note is payable contingent upon achieving future revenue
targets over a period of two years from the acquisition date. Based
on current and forecast performance it has been assumed that the
loan notes will be paid in full.
11. Related party transactions
During the period ended 30 June 2023, the Group generated
revenue of GBP1,503,740 under a referral agreement with Atlantic
Partners Asia ("APA"), a significant shareholder in the Company (H1
2022: GBP625,499). As at 30 June 2023, APA owed the Group
GBP338,155 (30 June 2022: GBP82,978).
During the period ended 30 June 2023, the Group incurred charges
of GBP60,000 (H1 2022: GBPnil) under a computer services agreement
with JF Technology (UK) Ltd of whom Stephen Flynn (a former
Director of the Company and a significant shareholder) is a
director and a majority shareholder.
As at 30 June 2023, an amount of GBP8,750 remained due to the
Group from Terry Everson, a former director of Cornerstone Payment
Solutions Ltd (30 June 2022: GBP8,750).
The transactions with Robert O'Brien and Mark Horrocks are
disclosed in notes 5 and 10.
12. Events after the reporting date
None
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END
IR SFSFAFEDSELU
(END) Dow Jones Newswires
September 12, 2023 02:00 ET (06:00 GMT)
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