E Q U A L S G R O U P P L C A N N U A L R E P O R T 2 0 2 3 www.equalsplc.com Annual Report 2023 EQUALS GROUP PLC THIRD FLOOR, THAMES HOUSE VINTNERS PLACE 68 UPPER THAMES STREET LONDON, EC4V 3BJ ENGLAND 5 Year Trading History Additional unaudited information (£ millions) Turnover Revenue Gross Profit Profit after tax Cash 2019 2,888 30.9 20.6 (5.4) 11.3 2020 3,493 29.0 18.3 (6.9) 10.0 2021 6,529 44.1 24.2 (2.3) 13.1 2022 9,216 69.7 33.7 3.6 15.0 2023 12,412 95.7 52.3 7.7 18.7 Equals Group PLC Contents COMPANY INFORMATION About Equals Group 1 2 3 4 5 Directors and Advisors Financial Glossary Financial Summary and Highlights FY-2023 History STRATEGIC REPORT 7 Chairman’s Statement 9 Chief Executive Officer’s Report 14 Chief Financial Officer’s Report 24 Statement on Section 172 of the Companies Act 2006 GOVERNANCE 27 Report on Corporate Governance 33 ESG Report 41 Report of the Audit Committee 44 Report of the Risk Committee 46 Directors’ Remuneration Report 54 Directors’ Report 57 Statement of Directors’ Responsibilities in Respect of the Annual Report and Financial Statements 58 Independent Auditors’ Report to the Members of Equals Group Plc FINANCIAL STATEMENTS 66 Consolidated Statement of Comprehensive Income 67 Consolidated and Company Statements of Financial Position 68 Consolidated and Company Statements of Changes in Equity 69 Consolidated Statement of Cash Flows 70 Company Statement of Cash Flows 71 Notes to the Consolidated Financial Statement IBC Trading History Subscribe to our investor alert service and receive all press releases, financial results and other key shareholder messages as soon as they become available. WWW.EQUALSPLC.COM Equals Group PLC About Equals Group Equals is a leading payments Group offering small and medium-sized enterprises (SMEs) a suite of payment products across FX transactions, prepaid card solutions, Faster Payments and accounts into which receipts can be credited and payments made. The Group enables its personal and business customers to make easy, low-cost payments both domestically and in a broad range of currencies, across a range of products, all via one integrated system. Equals provides money movement services to both business and personal customers through a growing number of interconnected channels: International Payments; Corporate Expenses platform; Current Accounts; and Travel Money (currency cards). The International Payments channel supports wire transfer foreign exchange transactions direct to bank accounts. For corporates, Equals has a market-leading business expenses solution based around its corporate platform and prepaid card, which yields significant cost savings via tighter control on expenses before they are incurred, coupled with eliminating inefficient processes. Equals also offers business and retail accounts with all the payments functionality offered by banks, namely faster payments, BACS, direct debits, international payments and a debit card. The retail currency card offers cost-effective and secure methods for travellers to spend abroad. Its core brands are: Equals Money An international, domestic and card payment platform comprising the “Spend” and “Pay” products for ‘just-in-time” expenditure needs of our customers who range from Hollywood studios to dynamic start-ups and fast growing businesses. Equals Money Solutions An enterprise scale-up of the Equals Money platform serving large corporates and financial institutions with complex payments needs. Equals Connect A white label platform serving smaller FX providers. FairFX A travel card and international payment product covering the needs of high-net-worth individuals, international holidaymakers, and their families. CardOneMoney UK focused product to meet the needs of small business and individuals for everyday account processes, allowing them to run their payments, direct debits, and cards via their account. Roqqett Open banking payment platform to provide payment services for merchants and consumers. Equals Group PLC (the “Company”) is a public limited liability company incorporated in England and Wales and domiciled in the UK whose shares are admitted to the Alternative Investment Market (AIM), a market operated by The London Stock Exchange. These consolidated financial statements comprise the Company and its subsidiaries (together referred to as the ‘Group’). These financial statements were approved by the Board after stock market trading hours on 15 April 2024. 11 Directors and Advisors Directors A R F HUGHES (Non-Executive Director and Chair) I A I STRAFFORD–TAYLOR (Chief Executive Officer) R Q M COOPER (Chief Financial Officer) S A HERBERT (Non-Executive Director) C J BONES (Non-Executive Director) Company Secretary ONE ADVISORY LIMITED 2 Advisors Registered Number 08922461 (England and Wales) Registered Office Third Floor, Thames House Vintners Place, 68 Upper Thames Street, London, EC4V 3BJ, England Principal Bankers Barclays Bank PLC 1 Church Hill Place, Canary Wharf, London, E13 5BH, England Independent Auditors PricewaterhouseCoopers LLP 1 Hardman Square, Manchester, M3 3EB, England Solicitors Browne Jacobson LLP 6 Bevis Marks, London, EC3A 7BA, England Ashurst LLP London Fruit & Wool Exchange, 1 Duval Square, London, W1 6PW, England Nominated Advisor and Broker Canaccord Genuity Limited 88 Wood Street, London, EC2V 7QR, England Financial Advisors Canaccord Genuity Limited 88 Wood Street, London, EC2V 7QR, England Lazard & Co Ltd 50 Stratton Street, London, W1J 8LL, England Investor Relations Buchannan Communications Limited 107 Cheapside, London, EC2V 6DN, England Registrar Link Group Unit 10, Central Square, 29 Wellington Street, Leeds, LS1 4DL, England Telephone 0871 664 0300 EQUALS GROUP PLC Financial Glossary GLOSSARY A definition of some of the abbreviations used in this document is outlined below: • AGM Annual General Meeting • AIM • AML Alternative Investment Market (a sub-market of the London Stock Exchange) Anti-Money Laundering • BACS Bankers' Automated Clearing System • B2B • B2C Business-To-Business (Transactions/Customers) Business-To-Consumer (Transactions/Customers) • CBILS Coronavirus Business Interruption Loan Scheme • CEO Chief Executive Officer • CFO Chief Financial Officer • CGU Cash Generating Unit • COO Chief Operating Officer • EBIT Earnings Before Interest and Taxes • EBITDA Earnings Before Interest, Taxes, Depreciation and Amortisation • ECL Expected Credit Loss • ED • EDI • EM Executive Director Equality, Diversity and Inclusivity Equals Money • EPS Earnings Per Share • ESG Environmental, Social and Governance • EU European Union • FCA Financial Conduct Authority • FX Foreign Exchange • GAAP Generally Accepted Accounting Principles • HMRC His Majesty’s Revenue & Customs • • • • • IAS IASB IBAN IFRS ISO • LTIP • M&A • NED International Accounting Standards International Accounting Standards Board International Bank Account Number International Financial Reporting Standards International Organisation for Standardisation Long Term Incentive Plan Mergers and Acquisitions Non-Executive Director • NOMAD Nominated Advisor • PUSA “Put up or Shut up” • QCA code Quoted Companies Alliance Corporate Governance Code • R&D Research and Development • S.A. • SIP • SME • STP Société Anonyme (a French business structure equivalent to a limited company in certain countries) Share Incentive Plan Small and Medium-Sized Enterprises Straight-Through Processing • SWIFT Society for Worldwide Interbank Financial Telecommunications • TAM • UX Target Addressable Market User Experience • WACC Weighted Average Cost of Capital 3 STRATEGIC REPORTANNUAL REPORT 2023 Financial Summary and Highlights FY-2023 FY-2023 Financial Summary Underlying transaction values - FX - Banking - Solutions Platform - Total Revenue % of revenue from B2B2 Adjusted EBITDA3 EBITDA Profit after taxation EPS: Basic Diluted Adjusted4 Basic Adjusted4 Diluted Other information: Capitalised staff costs Separately reported items (below Adjusted EBITDA) Cash per share (at balance sheet date) FY-2023 Financial Highlights • 35% increase (FY-2022: £9.2 billion) in transaction flow to £12.4 billion • • • • • • 37% increase in revenue to £95.7 million (FY-2022: £69.7 million) 70% increase in Adjusted EBITDA3 to £20.6 million (FY-2022: £12.1 million) Completion of three strategically enhancing acquisitions in the year at a cash cost of £6.0 million Payment in December of £0.9 million maiden interim dividend (0.5 pence per share) Robust Balance sheet with £18.7 million cash at bank at 31 December 2023 Final dividend proposed of 1.0 pence per share bringing the total dividends paid and proposed of 1.5 pence (FY-2022: Nil) Notes FY-2023 £ millions FY-2022 £ millions Change1 5,866 2,178 4,368 12,412 95.7 82% 20.6 17.1 7.7 5,470 1,741 2,005 9,216 69.7 76% 12.1 11.0 3.6 + 7% + 25% + 118% + 35% + 37% + 70% + 56% + 118% 4.22p 1.80p + 134% + 131% + 127% + 124% 4.00p 7.16p 6.79p 5.7 2.1 10.2p 1.73p 3.15p 3.03p 4.2 0.2 8.3p H1 FY-2024 Trading update • • • Revenue in H1-2024 up to 12 April 2024 reached £31.9 million, up from £24.5 million in the same period in 2023, an increase of 30% The revenue from Solutions in the same period was £13.2 million, up 74% on the same period in 2023 of £7.6 million Revenues per working day up to 12 April 2024 were £443k, an increase of 27% over £350k per day in Q1-2023 and 5% higher than £422k per day achieved in Q4-2023 • Cash balances of £21.6 million as at 12 April 2024 1 Based on underlying, not rounded, figures. 2 Transactions with business customers are reported as ‘B2B’ and transactions with retail customers are reported as ‘B2C’. 3 Adjusted EBITDA is defined as: earnings before; depreciation, amortisation, impairment charges, share option charges, foreign exchange differences and separately reported items. Separately reported items are of a material nature, non-recurring items. 4 The measure of profit for this ratio has been adjusted to form Adjusted EPS. The add-back adjustments consist of share option charges, amortisation of acquired intangibles, exceptional items, acquisition costs and tax impacts on these items thereon. 4 4 STRATEGIC REPORTEQUALS GROUP PLC EQUALS GROUP PLC History December 2023 Obtained ISO/IEC 27001 Certification April 2023 Acquisition of Hamer and Hamer Ltd November 2019 Acquisition of Casco Financial Services Ltd July 2023 Acquisition of Oonex S.A. January 2023 Acquisition of Roqqett Ltd August / September 2019 Capital raise and share placing for acquisitions, raising £14.5m net of expenses for expansion July 2019 Banking partnership with Citi Commercial Bank February 2019 Becomes part of Bank of England’s Faster Payments Scheme February 2018 Acquisition of City Forex January 2017 e-Money licence obtained via acquisition of Q-Money 2013 Customer milestone, over 500,000 registered customers 2010 Launch of international payments platform September 2019 New five-year agreement with Mastercard August 2019 Acquisition of Hermex FX June 2019 The Group rebrands to become Equals Group 2018 Partnership with US bank Metropolitan Commercial Bank August 2017 Acquisition of CardOneBanking 2014 IPO on AIM 2012 Launch of expense platform 2007 Foundation of travel cash business 5 5 STRATEGIC REPORTANNUAL REPORT 2023 Strategic report 6 Chairman’s Statement I am pleased to report another record year for your Company with a 35% growth in the value of transactions, 37% growth in revenue, 70% growth in adjusted EBITDA, and 127% growth in Adjusted Basic EPS. The growth in services to businesses is the source of this, with higher interest rates also contributing to EBITDA growth. The benefits of our investment in our platform and the closer links we’ve established with international payments platforms are evident in our results. Developments in the Group’s ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) The Group takes its ESG responsibilities very seriously and has platform included the ability to offer customers direct links robust controls and governance throughout all its subsidiaries with major international payment schemes, principally, the including formal board meetings not less frequently than once Bank of England’s “Faster Payments” and the EU’s “SEPA” a quarter. We work closely with suppliers, banking partners and for the fastest possible payments. Equals offers customers regulators and always aim to provide a high-quality service to fast and simple access to their payments combined with the our customers. Our ESG report details our performance in this benefit of a tailored and competitive payment service. area, along with our high Trustpilot scores. The Group continues to seek to grow organically and through acquisition, where accretive and supportive of our strategy. To this end, the Group acquired an open-banking platform, Roqqett Limited, on 6 January 2023, an SME focused international payments business (Hamer & Hamer) in April 2023, and Oonex S.A., a Belgian incorporated and regulated business on 4 July 2023, accelerating our expansion into Europe. CAPITAL RESTRUCTURE AND DIVIDEND PEOPLE The Group has a diverse workforce with over 30 nationalities represented across its four locations and remains highly conscious of its role as a responsible employer. The Group has made significant additions to its sales, marketing and onboarding teams in the year. The longer-term incentive plans originally put in place in Q4-2021 were echoed in Q4-2022 and again in Q4-2023 should provide significant incentives both to employees and senior staff below the Board level. These plans link rewards with financial success and cannot pay-out The Company completed its plan to restructure its capital base until five years from grant, although accelerate upon a change to create distributable reserves. This led to the declaration of a maiden interim dividend of 1/2p per share in November 2023, of control. The number of UK employees increased from 285 at the end of 2022 to 397 at the end of 2023. In addition, we paid in December 2023. At the AGM in May 2024, the Directors have 22 staff in Brussels and Amsterdam from the acquisition will propose a final dividend of 1p per share. of Oonex S.A. STRATEGIC REVIEW Perhaps because of the general uncertain economic conditions, this substantial growth in revenue and EBITDA, and the future potential did not seem to the Board to be to be fully reflected in the share price of the Company. The Board therefore initiated a regular strategic review as announced on 1st November 2023. At the time of writing, we have received two approaches to acquire the Company, it is too early to conclude what the outcome of these approaches may be. The PUSU (“Put Up or Shut Up”) extension under the Takeover code expires on 17 April. Shareholders should review the news flow from the Company, which is reported on our website, Equalsplc.com The Board and I would like to thank all our people for their commitment and hard work. Credit for these strong results goes to them. The Board was unchanged in 2023. It benefits from a range of experience ranging from finance, banking, risk assessment, regulatory, people management, digital services and, above all commercial success. 7 STRATEGIC REPORTANNUAL REPORT 2023 CHAIRMAN’S STATEMENT CONTINUED ECONOMIC ENVIRONMENT The Group is not immune to the uncertain and volatile economic conditions, but the broadness of our product set, the robustness of our platforms and the skills of our staff give us confidence in our ability to continue to grow and increase the financial returns to shareholders and service to more customers. ALAN HUGHES Chairman 15 April 2024 8 STRATEGIC REPORTEQUALS GROUP PLC Chief Executive Officer’s Report The vision for the Group continues to be the simplification In addition to investments in creating the platform, the Group of global money movement for business customers. Equals has continued its strategy of focusing on distribution to the achieves this through its B2B platforms, Equals Money being B2B customer segment and augmented our capabilities in targeted at SME customers and Equals Solutions which targets Sales and Marketing. larger corporate opportunities. The Group’s growth potential is particularly strong given that the core building blocks of The combination of product advancements and improved its platforms, namely own-name multi-currency IBANs and distribution capabilities produced strong financial performance bank-grade connectivity and clearance, are highly complex in 2023 and this strategy and delivery has continued into 2024. and time consuming to replicate. This ‘first mover’ advantage was achieved by the investments made in previous years and will be continuously enhanced by the developments planned in the Group’s technical roadmap combined with further investments into direct connectivity to payment networks. GROWTH COMBINED WITH OPERATIONAL GEARING Processed transaction volumes grew 35% to £12.4 billion (FY-2022: £9.2 billion), with increases across all payment channels, and reflects the scalability of the platform that has Against this vision, the Board’s objective for FY-2023 was to been built, and the operational processes that support it. leverage the investments made into product, engineering, and connectivity to deliver a unified platform offering to its B2B In keeping with the prior year, revenues grew faster than customers that could deliver further growth to the Group as transaction volumes, posting a 37% increase to £95.7 million a whole. Equals achieved these objectives with the roll-out of the Equals Money platform to the SME customer base and Equals Solutions platform to larger corporates. In addition, during FY-2023 the Group added the capability for customers to consume our services via API integrations which considerably increased our ‘Total Addressable Market’ (‘TAM’). Accordingly, Equals can now distribute its services directly to customers via its brands, integrate via API, or white-label its platform so Equals customers can sell directly to their own customers (‘B2B2X’). (FY-2022: £69.7 million), which demonstrates the success of focusing on higher-margin business lines. The Group’s focus on distribution to B2B customers is reflected in the breakdown of revenues of which 82% were derived from B2B customers, up from 76% in FY-2022. Similarly, our success in attracting larger corporate customers, especially via the Equals Solutions platform, is reflected in 33% of revenues being derived from this category, compared to 23% in FY-2022. Analysing growth trends further, in keeping with FY-2022, the core products within Equals Money all grew and were The advances the Group made in its offering, combined with augmented by a very strong uptake of Equals Solutions. improved Sales and Marketing capabilities, meant the Group This translated to International Payments (including White significantly surpassed our expectations in the year, delivering the following strong headline financial performance: • • • Transactions executed on the Group’s platforms increased by 35% to £12.4 billion (FY-2022: £9.2 billion) Revenue increased by 37% to £95.7 million (FY-2022: £69.7 million) Adjusted EBITDA increased by 70% to £20.6 million (FY- 2022: £12.1 million) Labelled FX services) growing 14% to £39.4 million (FY-2022: £34.4 million). This compares favourably to the results of many peers as macro-economic headwinds dampened demand, particularly from B2C customers. Card-based revenues grew 22% to £15.2 million (FY-2022: £12.5 million) despite the film production vertical being affected by strikes in Hollywood. Equals Solutions revenues grew by 99% to £31.0 million (FY-2022: £15.6 million) which reflects the strong demand for the platform and the success of our sales and marketing A detailed financial analysis is presented in the Report of the Chief Financial Officer, which follows this statement. SUMMARY OF FY-2023 PERFORMANCE efforts in this market. The increase in transaction volumes and revenues resulted in even stronger profit growth, with Adjusted EBITDA up 70% to £20.6 million (FY-2022: £12.1 million) which clearly The financial results demonstrate the success of our strategy demonstrated continued operational gearing. of investment into creating a robust, scalable platform comprising international and domestic payments, card The Group’s operations remain strongly cash generative which payments and current-account services underpinned by gives Equals the flexibility to perform opportunistic M&A exceptional technology and direct connections to multiple activity as illustrated by the acquisition of Oonex S.A., which payment networks. was completed on 4 July 2023. Oonex, now renamed Equals Money Europe (‘EMEU’), is a payment institution based in 9 STRATEGIC REPORTANNUAL REPORT 2023 CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED Brussels and regulated by the National Bank of Belgium. The and all applications pass through rigorous quality assurance acquisition of Oonex, together with its regulatory licences and and live testing before wider roll-out. In addition to customer- banking relationships, allows Equals to bring its payments, facing developments, our technical roadmaps include many cards, and multi-currency account products to a new suite workstreams that improve internal efficiency and control, not of customers across Europe, thereby further increasing the just outward facing product rollouts. Concurrently, the Group Group’s TAM. GROWTH WITH CONTROL The Group remains committed to growing revenues and profits as rapidly as possible by increasing the volumes of transactions processed via its platform whilst concurrently minimising risk and retaining operational control. Accordingly, investment into finance, operations, compliance, and risk functions remains a key focus as Equals continues to grow. The nature of the payments industry means that all companies that operate within it will incur some operational risk, especially in terms of so-called ‘daylight exposure’ in the times between transactions being agreed and being settled. The Group seeks to minimise and mitigate these risks wherever possible. Therefore, all foreign exchange transactions with customers are automatically matched with a liquidity provider and funds are never released until inbound funds have been received. Additionally, although the Group does offer forward contracts to its customers, its deposit and mark-to-market policies ensure that Equals runs an immaterial risk in this area. Regulators and banks across the globe are increasingly focused on anti-money laundering (‘AML’) and compliance standards. Equals welcomes the higher levels of supervision and auditing in this area as we view our compliance controls and governance to be a competitive advantage. Equals instils a Group-wide compliance culture facilitated by regular, compulsory, training for all employees. The Group has continued its investment in this area with increased headcount and expertise being added across onboarding, enhanced due-diligence, transaction monitoring, risk, compliance and regulatory teams. In addition, the Group has invested in compliance technology by deploying improved internal tooling combined with outsourced platforms to automate tasks where possible. Furthermore, given our growth in transaction volumes, in FY-2022 the Group invested into a machine- learning transaction monitoring system, called Featurespace, which we successfully rolled out in FY-2023. The philosophy of ‘growth with control’ is also prevalent in our product and engineering functions. All customer-facing product developments are built with the involvement of all areas of the business to ensure Equals creates end-to-end applications that support internal operational efficiency as well as superior customer user experience (‘UX’). Equally, the Group listens to our customers when we design and build new products 10 will utilise external tooling and software where appropriate, for instance in CRM, transaction monitoring & KYC checks, so we can concentrate our resources on developing software that enhances our products and competitive advantage. The Group has also implemented strong governance over all aspects of our Engineering and IT processes. A monthly Security Council, with membership including Board members and all key departments, is required to sign off all changes including new products, product changes, new software usage and vendor approval. The Security Council also conducts a review of any security incidents at each meeting and authorises any changes required. The robustness of our governance allowed the Group to announce, on 4 December 2023, that it had been awarded ISO/IEC 27001 status, the leading international standard focused on Information Security Management. This independent accreditation testifies to the strength of the technology platform that has been built as well as the processes and controls that we operate. The engineering, product and design teams continued to produce significant improvements in our products and functionality in FY-2023 at a very high cadence. Highlights included: • • • • • • • Payments Sending Service (PSS) – this capability allows automation of our ‘payments out’ rails, utilising SWIFT, and thereby direct integrations to our major Banking partners Completion of Equals Money core functionality – Equals Money now has the complete range of functionality required to sunset legacy platforms and enable all our products to operate on one unified technology stack Equals Money API – full functionality of Equals Money now available to customers over API, including a technical team dedicated to customer onboarding and full sandbox FairFX re-platformed – FairFX B2C cards now operate as a pure “white label” of Equals money, utilising the API suite described above White-Label of Equals Money – Similar to FairFX, The Equals Money API suite was utilised to enable the first commercial white-label of Equals Money Equals Money Europe – integration work completed on time to bring EMEU into operational status with local IBAN capability by the end of 2023; and Roqqett integration – the GBP open-banking capabilities of Roqqett were enhanced and made more robust before integration into the FairFX checkout journey. STRATEGIC REPORTEQUALS GROUP PLC CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED The developments above all fit within the Group’s strategy Overall, investment in People has resulted in the Group of increasing its total addressable markets by product having a low level of staff turnover amongst key employees. and functionality innovation combined with widening the Implementation of a Company-wide share incentive plan geographic markets the Group can access. (‘SIP’) combined with a long-term incentive plan (‘LTIP’) for SUSTAINED INVESTMENT IN PEOPLE The success of the Group is attributable to its excellent employees who consistently demonstrate all of the core values of Equals, namely: • Make it happen – own the outcome individually • • • Succeed together – communicate and encourage each other to deliver Be the customer – constantly seek to improve customer experience Go beyond – push ourselves to excel, individually and collectively. management, continue to be strong retention tools in what continues to be a difficult labour market in terms of attracting talent. Average headcount increased to 341 in FY-2023, up from 268 in FY-2022. The growth in headcount reflects the Group putting in place the resources needed for our next phase of growth in 2024 and beyond, given the greater TAM and distribution channels we can now access. The additional recruitment has been in either direct revenue production areas or in revenue enablement areas. Revenue production teams include sales, marketing, sales operations and dealing. Revenue enablement encompasses onboarding, compliance, API integration as well as broader The Group has a bi-annual appraisal process, which also operations capacity. drives salary reviews and incentive plans. The Group is proud to have a diverse workforce and it strives to train and promote In addition, headcount increased by the expansion via from within as well as seek fresh talent from elsewhere. acquisition into Europe via EMEU, completed in July 2023, Equals continues to invest in its employees and consistently looks to implement measures to enhance the work We expect headcount to remain broadly stable at current levels environment for employees. The Group utilises benchmarking in 2024. Accordingly, although revenue per head increased to to ensure it provides a strong benefits programme and it £281k from £260k in the prior year, we would expect a further continues to support a hybrid working policy. The health and increase in 2024 given the investments we have made and the wellbeing of employees is taken very seriously, and the Group increased Target Addressable Market. which will contribute to revenues more strongly in 2024. has implemented many programmes to support this. 11 STRATEGIC REPORTANNUAL REPORT 2023 CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED EQUALS POSITION IN THE PAYMENTS SPACE In contrast to the incumbent banks, fintech competitors tend to Global payments is a multi-trillion dollar market that remains a complex and constantly evolving space. Whilst technology has seen radical changes in many industries, payments had not evolved at the same pace until relatively recently with legacy payment mechanisms of cash, cheques, account-to-account transfers and more latterly cards dominating the landscape. Furthermore, the settlement rails that supported these payment methodologies were frequently decades old. The problems that this created were even more acute when making international, or cross-border, payments as settlement rails in one country frequently did not interface with those in another. The 21st century has seen more investment into payments and more disruptive technology being applied which has changed the long-standing status quo and introduced new participants into the space, known as ‘fintech’ businesses. The advent of focus on one silo of what Equals provides as an overall platform (e.g. current accounts, cards, or international payments) and are often B2C focused. In addition, they typically operate ‘self- serve’ platforms. This is in contrast to Equals as it provides leading technology allied with human assistance in supporting customers to navigate the complexities of payments via dedicated account management teams. The Group therefore differentiates itself by harnessing the best of these two competitor groups, namely the trust, security and heritage of the incumbent banks combined with the technological innovation of the fintech community. Accordingly, Equals will continue to invest in its platform, connectivity, and payment rails to remain one step ahead and its success to date in doing so is reflected in the Group’s FY-2023 results. crypto currencies, and concurrently blockchain, has further M&A OPPORTUNITIES accelerated the rate of change such that payments in general is now evolving at a rapid pace. This is the backdrop to the Group’s sustained investment over several years to carve out a specific niche for Equals, focused on the B2B customer space. The Group has developed a unique proposition that provides its customers with both account-to-account transfers and card payments in one multi- The Group continues to assess M&A opportunities in three main areas, which are not mutually exclusive. Firstly, to acquire profitable businesses that can easily be added to the platform and provide scale. Secondly, to acquire value-added functionality complementary to our offering. Lastly, to expand our portfolio of regulatory licences and access to overseas markets. FY-2023 saw Equals execute deals in all three categories and we continue to be alert for further opportunities. currency platform built on infrastructure giving bank-grade connectivity and security on superior customer interfaces. Equals customers can consume this platform directly via the ESG secure login, on a white-label basis, or via an API technical Equals wholeheartedly embraces ESG initiatives and takes interface. The flexibility the Group can support and the Equality, Diversity, and Inclusivity (‘EDI’) extremely seriously. channels by which this can be consumed by customers is a Our EDI strategy, which covers not only employees but also key differentiator. Within Equals B2B focus, the Group targets customers, includes an internal EDI network populated with two major segments, SMEs, via Equals Money, and larger elected representatives and regular employee surveys. This corporates, via Equals Solutions. Both offer a single platform is a key objective for all Executive Committee members and comprising own-name, multi-currency IBAN current accounts, forms part of their appraisals. account-to-account transfers, and card products for both domestic and international transactions. H1-2024 TRADING COMPETITION AND DIFFERENTIATION FY-2024 has started strongly with revenue in H1-2024 up to 12 April 2024 reaching £31.9 million, up from £24.5 million in The Group’s competitors fall into two major categories, the the same period in FY-2023, an increase of 30%. The revenue incumbent banks and the fintech ‘disruptors’. Despite the from Solutions in the same period was £13.2 million, up 74% recent growth of fintech companies, the majority of payment on the same period in 2023 of £7.6 million. Revenues per volumes still flow through the incumbent banks, in some working day up to 12 April 2024 were £443k, an increase of 27% over £350k per day in the same period in H1-2023 and 5% higher than £422k per day achieved in Q4-2023. part due to customer inertia and the difficulty of switching providers. For Equals, the key is to target the customer base of the incumbent banks whilst concurrently making it easy for those customers to consume the products and services of the Group. These twin challenges have been the driving factors behind the Group’s product development and also its efforts to make onboarding of new customers as rapid and seamless as possible for the customer. 12 STRATEGIC REPORTEQUALS GROUP PLC CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED Strong B2B revenue growth continues with all product The outlook for the business, as a result of our sustained lines progressing well. Equals Solutions, which contributed and continuing investments combined with our excellent £31.0 million of revenues in FY-2023, is expected to continue people, remains strong. In addition, the Group’s addressable to grow strongly as the Group adds new functionality to its market is now significantly greater with our expansion into payments platform during the year and widens its TAM. Europe and increased distribution channels. Equals has In keeping with the strategy pursued in FY-2023, our product domestic payments, card payments and current account and development roadmap for the rest of FY-2024 reflects services underpinned by exceptional technology and direct our continued investment into our platform capabilities. Key connections to multiple payment networks. created a payments platform comprising international and deliverables are: - • Automated bulk payments capability, including over API integration, • Full straight-through-processing (STP), • Further enhancement of Equals Money Europe capabilities, • In-house integration with SWIFT, • Improve complete onboarding UX and processes to improve speed, • Support white-label scale up, • Sunset remaining legacy platforms and minimise technical debt. IAN STRAFFORD-TAYLOR Chief Executive Officer 15 April 2024 13 STRATEGIC REPORTANNUAL REPORT 2023 Chief Financial Officer’s Report The FY-2023 results have been impacted by a number of significant events: (a) The Company’s decision to restructure its reserves thus leading to an interim dividend of 0.5 pence per share paid on 7 December 2023 and the recommendation of a final dividend of 1 pence per share, giving a total dividend paid and proposed of 1.5 pence for 2023. (b) The launch of a Strategic Review, announced on 1 November 2023, aimed at evaluating whether greater value could be obtained through a sale of the Company in light of the lacklustre performance of the UK equities market as a whole. (c) The disposal of the travel cash business and the completion of three acquisitions: (i) Roqqett Ltd (open banking platform); (ii) Hamer and Hamer Ltd; and (iii) Oonex S.A. (renamed Equals Money Europe S.A.). More details on these events are reported below. In summary, the FY-2023 results have been positively impacted by the success of the Equals Solutions product: Group Revenue was up 37%; Gross Profits up 55%, Adjusted EBITDA up 70%, and Adjusted EPS up 127%. I present my review and financial analysis for the year ended 31 December 2023. TABLE 1 – INCOME AND EXPENSE ACCOUNT Revenue (tables 3, 4) Gross Profits (table 5) Less: Marketing Contribution Staff costs Property and office cost IT and telephone costs Professional Fees Compliance costs Travel and other expenses Adjusted EBITDA Less: Share option expense Less: Acquisition costs (table 6) Less: Exceptional items EBITDA IFRS 16 Depreciation (table 7) Other depreciation (table 7) Amortisation of acquired intangibles (table 8) Other amortisation (table 8) Contingent consideration credit / (cost) Gain on Disposal of Cash CGU EBIT Lease interest Foreign exchange differences Contingent consideration finance charges PROFIT BEFORE TAXATION Corporate and deferred taxation PROFIT FOR THE YEAR 14 FY-2023 £ millions 95.7 52.3 (2.6) 49.8 (20.3) (1.2) (3.2) (2.2) (1.5) (0.7) 20.6 (1.4) (1.4) (0.7) 17.1 FY-2022 £ millions 69.7 33.7 (1.9) 31.8 (14.4) (0.9) (2.0) (1.2) (0.7) (0.5) 12.1 (0.9) (0.2) - 11.0 (0.7) (0.5) (1.7) (5.4) 0.5 (7.8) 0.4 9.7 (0.2) (0.3) (0.1) (0.6) 9.1 (1.4) 7.7 (0.8) (0.4) (1.3) (4.4) (0.3) (7.2) – 3.8 (0.2) (0.1) (0.1) (0.4) 3.4 0.2 3.6 STRATEGIC REPORTEQUALS GROUP PLC CHIEF FINANCIAL OFFICER’S REPORT CONTINUED When the changes are presented as a bridge, the standout facts are the increase in revenue leading to increased contribution (gross profits less marketing costs), offset by higher labour costs, both through planned increases in staff resources and responding to labour market pressures. Other cost increases were also a mix of inflation pressures, but also decisions taken to upskill and upscale resources for a rapidly growing business. TABLE 2 – ADJUSTED EBITDA BRIDGE FROM FY-2022 TO FY-2023 (in £’000s) FY-2022 Adjusted EBITDA Add: 56% uplift in contribution FY-2023 Less: 41% increase in staff costs, reflecting a higher planned headcount, particularly in compliance due to regulatory pressures. 60% increase in IT and communications, taking into account increased web hosting charges and development tools in line with transaction growth. 96% increase in professional and compliance costs, much of which is attributable to increased professional and compliance including regulatory fees in line with geographical expansion. 24% increase in property through geographical expansion. Increase in other costs including travel and entertaining costs incurred through ambassadorial initiatives and industry awareness events. FY-2023 Adjusted EBITDA Uplift over FY-2022 % uplift over FY-2022 12,120 17,964 (5,898) (1,206) (1,836) (228) (279) 20,637 8,514 70% Revenue All product lines and all verticals saw significant increases in revenue in the year. The Group has concentrated on the corporate sector and has seen strong growth in International Payments, White-Label and Solutions business and modest growth in consumer and small businesses. H1-2023 saw an increase of £13.6 million in revenue over H1-2022, and £6.7 million over H2-2022. The growth continued in the second half, with H2-2023 adding a further £12.4 million in revenue against the same period in H2-2022 and £5.7 million over H1-2023. Overall revenue in FY-2023 was 37% ahead of FY-2022. The table below shows the revenue by both CGU and customer types. The Europe revenue segment is the acquisition of the European entity Equals Money Europe in H2–2023, which represents £1.7 million of the Group’s total revenue of £95.7 million for FY-2023. TABLE 3 – REVENUE BY CUSTOMER TYPE Consumer and small business Large (“B2C”) Corporates enterprises Sub-total 3.8 5.0 8.3 – 0.1 – 17.2 16.6 18.9 10.2 – – – 0.9 30.0 22.4 – – – 31.0 – 0.8 31.8 15.7 22.7 15.2 8.3 31.0 0.1 1.7 79.0 54.7 White- label 16.7 – – – – – 16.7 15.0 TOTAL FY-2023 TOTAL FY-2022 % change 39.4 15.2 8.3 31.0 0.1 1.7 95.7 69.7 34.4 12.5 6.1 15.7 1.0 – 69.7 14% 22% 36% 97% – 86% – 37% +3% +34% >103% +45% +11% +37% +37% Revenue in £ millions International Payments Cards Banking Solutions Travel cash Europe Total, FY-2023 Total, FY-2022 % Change* FY-2023 to FY-2022 * based on underlying figures Further analysis we disclose below, revenue per half-year period. 15 STRATEGIC REPORTANNUAL REPORT 2023 CHIEF FINANCIAL OFFICER’S REPORT CONTINUED TABLE 4 – REVENUE BY HALF-YEAR Revenue in £ millions H1-2022 H2-2022 FY-2022 % of total H1-2023 H2-2023 FY-2023 % of total White- Label Other International Payments Cards (Retail and Corporate) Solutions 6.2 9.5 15.7 22% 13.6 17.4 31.0 32% 7.2 7.8 15.0 22% 8.9 7.8 16.7 17% 9.1 10.3 19.4 28% 11.0 11.7 22.7 24% 5.6 6.9 12.5 18% 7.4 7.8 15.2 16% Banking Bureau Europe 2.8 3.3 6.1 9% 4.0 4.3 8.3 9% 0.5 0.5 1.0 1% 0.1 – 0.1 0% – – – – – 1.7 1.7 2% Revenue per day in £’000s 255.1 301.4 278.7 362.9 397.6 380.5 Total 31.4 38.3 69.7 100% 45.0 50.7 95.7 100% 2023 vs 2022 99% 11% 16% 22% 37% – 86% 37% 36.4% Gross profits Gross profits have improved both monetarily and in percentage terms. The aggregate gross profits have steadily increased through tight management of pay-aways and the changing mix of business. Gross profit percentage has increased from 47% in H1-2022 to 49% in H2-2022, to 52% in H1-2023 and to 57% in H2-2023. This ratio is expected to remain at this level. White-label GP percentages have increased materially as the division becomes less reliant on some underlying B2C trading. The key components of cost of sales have not changed, being a mix of affiliate (or introducer) commissions, transaction costs, and sales-related staff commissions (which include employers National Insurance Contributions) to the trading and sales teams. TABLE 5 – GROSS PROFIT MARGIN BY HALF-YEAR White- Label Other International Payments Cards (Retail and Corporate) 12% 14% 13% 19% 21% 20% 59% 56% 57% 59% 60% 60% 61% 65% 63% 64% 65% 64% Solutions 46% 50% 48% 54% 60% 57% Banking Bureau Europe 76% 78% 77% 84% 84% 84% 48% 42% 45% 31% 87% 36% – – – – 56% 56% Total 47% 49% 48% 52% 57% 55% H1-2022 H2-2022 FY-2022 H1-2023 H2-2023 FY-2023 Marketing, branding and contribution The Group has actively managed its marketing expenditure more closely having carried out a thorough review and a constant assessment of ‘Return on Spend’. Expenditure has been incurred on digital marketing, marketing and hospitality events and exhibitions. Marketing, as a percentage of Revenue has remained static at around 2.7%. 16 STRATEGIC REPORTEQUALS GROUP PLC CHIEF FINANCIAL OFFICER’S REPORT CONTINUED Staff costs Staff costs (gross of capitalisation and exceptional items) were £25.9 million in FY-2023 against £18.6 million in FY-2022. This increase was attributable to: • Organic headcount increases (headcount numbers have moved from 285 as at 31 December 2022 to 367 as at 31 December 2023 and 400 at 31 March 2024). Recruitment costs were £969k in 2023 against £557k in 2022. 2023 saw the recruitment of 90 new employees in the UK. • Acquisitions added a further 30 to the Group’s headcount offset by five leavers following the sale of the FX bureau in March 2023. • Wage pressures, where the aggregate increases were around 7.2%. Gross staff costs have been offset by £5.7 million of capitalised internal software (FY-2022: £4.2 million), which included £2.4 million on contractors (FY-2022: £1.4 million). The amounts capitalised represent 27% of gross staff costs, increased from 22% in 2022 largely due to inflation impacting contractor costs. The composition of headcount is approximately: Commercial, 20%; Operations (including compliance), 38%; Engineering, 16%; Product and Design, 5%; Europe (all functions), 6%; Finance and HR, 8%; Other, 7%.. Professional fees and Compliance costs Owing to an increasing cross-industry compliance burden, the Group has chosen to report compliance and similar costs separate to other professional fees. Such costs, including onboarding systems, have risen due to a combination of greater business activity and the Group’s desire to fast-track business applications proactive with regulation. Professional fees have risen in line with trends widely reported in the national press, most notably the provision for the cost of the audit noting increased acquisition activity and implementation of enhanced systems. Exceptional items There were two significant corporate projects undertaken in FY-2023 which led to exceptional costs of £0.7 million being incurred: the restructuring of reserves to enable the payment of dividends, and the decision to launch a strategic review in order to explore ways of enhancing shareholder value. The former, which required Court consent, was successfully concluded in Q4-2023 leading to the payment of 0.5 pence per share dividend. The latter is a process which is continuing at the time of this announcement. Capital Reduction and Maiden Interim Dividend Payment With Court approval, on 1 November 2023, the Group carried out a Capital Reduction moving £25 million to Distributable Reserves from the Share Premium account. Following the reduction, the Group declared and issued a maiden interim dividend of 0.5 pence per share to the shareholders of Equals Group PLC and the Trust. The total number of shares eligible for the dividend was 185,731,589 with a total cash payment of £928k paid on 7 December 2023. Acquisitions and disposals In FY-2023, the Group incurred costs of £1.5 million (of which £1.4 million was taken to the income statement) in relation to the completion of the three acquisitions and one disposal. • • • Roqqett Limited, an FCA-regulated open-banking platform provider, was acquired on 6 January 2023. It has two key licenses: an AISP (Account Information Service Provider) and a PISP (Payment Initiation Service Provider). Hamer and Hamer Limited, acquisition completed following FCA approval on 20 April 2023 of the entire ordinary share capital historically focused on the provision of international payments. Oonex S.A., a Belgian company, an authorised payment institution regulated by the National Bank of Belgium, was acquired on 4 July 2023. The acquisition enables the provision of Equals products into the European Economic Area (EEA). Oonex was subsequently renamed Equals Money Europe S.A. Its board now comprises Ian Strafford-Taylor (CEO), Stephen Paul (Deputy CFO), James Simcox (Chief Product Officer and MD of Europe) and Matthijs Boon (COO), along with two independent directors as required under Belgian regulations. • The FX bureau business, with a predominantly B2C customer base, was sold on 14 March 2023 for an initial £250k with a further £100k subject to certain conditions being met. 17 STRATEGIC REPORTANNUAL REPORT 2023 CHIEF FINANCIAL OFFICER’S REPORT CONTINUED TABLE 6 – ACQUISITIONS Acquisition date Cash paid at acquisition Cash paid at acquisition for acquired liabilities Cash paid post-acquisition Total cash paid for acquisitions Shares issued at acquisition Shares issued post-acquisition Total shares issued paid for acquisitions Total cash paid and shares issued for acquisitions Fair Value on shares issued Performance assessed consideration thereon Capitalised incidental expenses Acquired liabilities payable in cash Deferred consideration payable in cash** Deferred consideration payable in shares Total consideration transferred Fair Value thereon Deferred tax thereon Total acquired Goodwill Other intangible assets: Open Banking Technology Customer Relationships Total intangibles acquired Acquisition costs charged to P&L Roqqett 06.01.2023 £’000s 169 – 215 384 – 500 500 884 – 35 131 – 500 – 1,550 664 – 2,214 Hamer & Hamer* 20.04.2023 £’000s 1,500 – – 1,500 – – – 1,500 – – – – 768 – 2,268 (30) 369 Oonex S.A. 04.07.2023 £’000s – 2,461 120 2,581 3,190 – 3,190 5,771 694 50 – 1,524 – 810 8,849 1,779 609 2,607 11,237 Total £’000s 1,669 2,461 335 4,465 3,190 500 3,690 8,155 694 85 131 1,524 1,268 810 12,667 2,413 978 16,058 – 1,129 8,801 9,930 2,214 – 2,214 212 – 1,478 2,607 149 – 2,436 11,237 1,016 2,214 3,914 16,058 1,377 * earn outs are payable on the 1st, 2nd and 3rd anniversaries of the acquisition if targets are met. The maximum earn out is £1.7 million over the three-year period. ** the final earnout for Casco acquired on 19 November 2019 of £509k is included in deferred consideration on the balance sheet date. This final earnout and the £500k due for Roqqett was paid by 31 March 2024. The remaining balance, which relates to Hamer & Hamer, has a gross value of £1.7 million and a fair value of £0.8 million is payable over three years from May 2024. The transactions contributed to the Group’s results as shown below: Date acquired/disposed Revenue Gross Profits Adjusted EBITDA FY-2023 Roqqett 06.01.2023 £’000s – – (495) FY-2023 Hamer & Hamer 20.04.2023 £’000s 839 736 466 FY-2023 Oonex S.A. 04.07.2023 £’000s 1,747 975 (368) FY-2023 Total £’000s 2,586 1,711 (397) Depreciation Tangible fixed assets are depreciated over the anticipated useful life with a maximum of 60 months (other than leasehold improvements which is a maximum of 120 months). 18 STRATEGIC REPORTEQUALS GROUP PLC CHIEF FINANCIAL OFFICER’S REPORT CONTINUED TABLE 7 – DEPRECIATION IFRS 16 depreciation Other depreciation FY-2023 £’000s 692 536 1,228 Based upon the expenditure incurred to 31 December 2023, the depreciation charges for those assets in FY-2024 will be: IFRS 16 depreciation Other depreciation FY-2022 £’000s 822 389 1,211 £’000s 662 450 1,112 Amortisation Intangible assets acquired on acquisition are amortised over their estimated useful lives, with a maximum of 60 months for brands and a maximum of 108 months for customer relationships. The charge to amortisation for the year can be analysed as follows: TABLE 8 – COMPONENTS OF AMORTISATION CHARGES FY-2023 £’000s FY-2022 £’000s Amortisation charge arising from the capitalisation of internally developed software in the following years: 2018 and earlier 2019 2020 2021 2022 2023 Amortisation charge for other intangibles Amortisation of acquired intangibles Total amortisation charge Based upon expenditure to 31 December 2023, the amortisation charges for FY-2024 are expected to be: Internally developed software Other intangible assets Acquired intangibles 545 1,661 893 599 791 506 4,995 381 5,376 1,672 7,048 917 1,661 893 576 388 – 4,435 291 4,726 1,282 6,008 £’000 4,857 202 1,718 6,777 Operating result The Group made a profit before taxation of £9.1 million for the year, compared to £3.4 million for FY-2022. Taxation, incorporating R&D credits The Group has recognised a net tax charge of £1.4 million (FY-2022: net tax credit £135k). At the balance sheet date, the Group estimates it has usable tax losses of £12.4 million. 19 STRATEGIC REPORTANNUAL REPORT 2023 CHIEF FINANCIAL OFFICER’S REPORT CONTINUED TABLE 9 – BALANCE SHEET This table shows a compressed “balance sheet” for the Group. Internally generated software – cost Internally generated software – accumulated amortisation Other non-current assets (other than deferred tax) IFRS 16 assets, less IFRS 16 liabilities Liquidity (per Table 11) Trade debtors and accrued income Prepayments Deposits and sundry debtors Working Capital Advances to Roqqett Deferred Consideration Receivable from the sale of FX bureau Inventory of card stock Accounts payable Affiliate commissions PAYE and pension Staff commissions and accrued bonuses Acquired liabilities for Oonex S.A. outstanding at 31 December Other accruals and other creditors Cash earn-out balances not paid* Cash earn-out balances paid by 31.12.2023 Cash earn-out balances paid between 31.12.2023 and 15.04.2024: Casco Roqqett (per Table 6) Cash earn-out balances payable after 15 April 2024 attributable to Hamer & Hamer: – Gross amount which could be payable over 3 years – Fair value accounting adjustment (1,700) 932 Net corporation and deferred tax Net value of forward contracts** NET SHAREHOLDER FUNDS 31.12.2023 £’000s 31.12.2022 £’000s 32,207 (18,407) 13,800 32,949 (599) 46,150 17,803 6,503 1,789 196 – 100 372 (2,831) (3,135) (1,023) (2,391) (1,519) (3,700) 12,164 – – (509) (500) (768) 849 358 (570) 26,001 (13,411) 12,590 18,558 (830) 30,318 14,320 4,244 1,345 189 830 – 292 (2,069) (2,563) (816) (1,690) – (1,937) 12,145 (424) (1,092) (509) – – 1,639 827 441 57,744 42,904 At 31 December 2023, the Company has distributable reserves of £23,079k. This is equivalent to £0.12 per share. * The 2022 cash earn-out balances not paid where performance assessed and subsequently credited back to the P&L in 2023 ** The gross value of the forwards book at 31st December 2023 was £315.3 million (31st December 2022: £253.3 million) 20 STRATEGIC REPORTEQUALS GROUP PLC CHIEF FINANCIAL OFFICER’S REPORT CONTINUED Share capital The number of shares in issue at 1 January 2023 was 180,712,473. This increased in the year through the exercise of 352,758 share options and 1,051,176 shares at nominal value were issued pursuant to the 2021 SIP. In addition, 3,938,294 shares were issued in pursuance to the acquisition of Oonex S.A. and 573,197 shares in pursuance to the acquisition of Roqqett. Thus, at the balance sheet date, there were 186,627,898 shares in issue. A further 1,000,000 shares were issued on 4 January 2024 pursuant to the acquisition of Oonex S.A. The SIP held 1,719,296 shares at 31 December 2023. Share options At 1 January 2023, the Company had 16,141,058 options outstanding. 352,758 of these were exercised in 2023, 536,512 were cancelled and 165,760 were lapsed. On 6 November 2023, the Company announced Discretionary Share Incentive Plans for over 2,600,000 shares and 459,448 shares under the Company SIP. Thus, at the date of signing of these financial statements, there were 16,390,301 options, representing 8.74% of the issued share capital as at 15 April 2024. At 15 April 2024, there were 16,390,301 share options yet to be exercised of which 7,222,800 had fully vested. Earnings per share Earnings per share are reported/calculated in accordance with IAS 33. For non-diluted, the result after tax is divided by the average number of shares in issue in the year. The average number of shares was 183,624,192 (FY-2022: 180,304,802). The calculation of diluted EPS is based on the result after tax divided by the number of actual shares in issue (above) plus the number of options where the fair value exceeds the weighted average share price in the year. The fair value of options is measured using Black-Scholes and Monte-Carlo. It should be noted that in accordance with Accounting Standards, this calculation is based on fair value, not the difference between the market price at the end of the year or the weighted average price and the exercise price. The weighted average price was 99 pence (FY-2022: 84 pence), the number of options exceeding the fair value was 9,820,535 (FY-2022: 7,278,986). The basic and diluted EPS are shown below: Earnings per share (in pence) Adjusted earnings and adjusted EPS P&L attributable to owners of Equals Group Plc Add back: - Share option charges - Amortisation of acquired intangibles - Exceptional items - Acquisition costs - Tax impacts thereon* Adjusted earnings Basic Basic FY-2023 FY-2022 Diluted FY-2023 Diluted FY-2022 4.22 1.80 4.00 1.73 FY-2023 £’000s 7,746 FY-2022 £’000s 3,236 1,447 1,672 714 1,377 183 970 1,282 – 164 31 13,139 5,683 *Tax impacts thereon are associated to items not added back to the tax computations relating to Exceptional items and Acquisition costs. 21 STRATEGIC REPORTANNUAL REPORT 2023 CHIEF FINANCIAL OFFICER’S REPORT CONTINUED The resulting earnings per share are shown below: Adjusted earnings per share (in pence) 7.16 3.15 6.79 3.03 Basic Basic FY-2023 FY-2022 Diluted FY-2023 Diluted FY-2022 CASH STATEMENT Exclusive of acquisitions and dividends, operational cash of £13.2 million (2022: £7.2 million) was generated during the year, a cash conversion rate of 64% over Adjusted EBITDA, compared to 60% for FY-2022. FY-2023 £’000s 20,637 232 – (929) (1,377) (714) FY-2022 £’000s 12,120 – 400 (969) (164) – (5,653) (4,191) (553) (412) (478) (1,027) 9,726 97 (928) 280 (1,092) (4,465) – – 3,618 15,044 18,662 (408) (445) (271) 1,147 7,219 193 – – (2,614) – (830) (2,028) 1,940 13,104 15,044 10.2 pence 8.3 pence The movement in the cash position is shown in the table below: TABLE 10 – CASHFLOW Adjusted EBITDA R&D tax credits received via Roqqett acquisition R&D tax credits received in cash Lease payments (principal and interest) Acquisition costs expensed through the income statement Exceptional items Internally developed software capitalised for R&D: - Staff - IT Costs Purchase of other intangible assets less disposals (Non-R&D) Purchase of other non-current assets Movement in working capital “Operational cash inflows” Funds from exercise of share options Interim dividend payment Net cash proceeds in Disposal of CGU Earn-outs of acquisitions made in prior periods Cash paid for acquisitions made in period (table 6) Working capital loan made ahead of acquisition of Roqqett Limited External funding repaid (CBILS) NET CASHFLOWS Balance at 1st January Balance at 31st December Cash per share 22 STRATEGIC REPORTEQUALS GROUP PLC CHIEF FINANCIAL OFFICER’S REPORT CONTINUED TABLE 11 – LIQUIDITY Cash at bank Balances with liquidity providers Pre-funded balances with card provider Gross liquid resources Customer balances not subject to safeguarding Net position FY-2023 £’000s 18,662 2,758 1,912 23,332 FY-2022 £’000s 15,044 1,950 1,491 18,485 (5,529) (5,529) (4,165) (4,165) 17,803 14,320 Under the Group’s current licensing regimes, the regulatory capital requirement is £3 million. The Group’s principal banking and liquidity providers include Barclays, NatWest, Citibank, Crown Agents Bank, Blackrock, Valitor, Sucden and Velocity along with funds held at the Bank of England. RICHARD COOPER Chief Financial Officer 15 April 2024 23 STRATEGIC REPORTANNUAL REPORT 2023 Statement on Section 172 of the Companies Acts 2006 COMPLIANCE WITH COMPANIES ACT 2006, SECTION 172 STATEMENT Under Section 172 of the Companies Act 2006, a director of a company must act in the way they consider, in good faith, would be most likely to promote the success of the company* for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to: (a) the likely consequences of any decision in the long term, (b) the interests of the company’s employees, (c) the need to foster the company’s business relationships with suppliers, customers and others, (d) the impact of the company’s operations on the community and the environment, (e) the desirability of the company maintaining a reputation for high standards of business conduct, and (f) the need to act fairly as between members of the company. *The Directors consider that references to company extend to both the Company and the Group The Group’s stakeholders include, but are not limited to, its employees; suppliers; customers; regulators; and investors. The Board endeavours to achieve and maintain a reputation for high standards of conduct amongst its stakeholders which it regards as crucial in its ability to successfully achieve its corporate objectives. During the development of the Group’s strategies and decision making processes, the Board will consider its stakeholders and their interests. The differing interests of stakeholders require the Board to assess and manage the impact of its policies in a fair and balanced manner to the benefit of its stakeholders as a whole. The Board considers below these different stakeholder groups, their material issues and how the Group engages with them. Relevant board engagement with key stakeholders is detailed in the corporate governance report. EMPLOYEES The employees are one of the greatest assets to the Group. Their interests, which include training and development; a safe environment to work; diversity and inclusion; fair pay and benefits; reward and recognition are a high priority. On a day-to-day basis, Directors engage directly with employees promoting an open, non-hierarchical culture, in which employees have an active contribution to the Group’s success. Regular management training, internship programmes, personal development and performance reviews all contribute to the development of staff. SUPPLIERS Supplier interests include fair trading, payment terms and working towards building a successful relationship. The Group will regularly review its supplier payments and performance alongside its monitoring of its performance. All suppliers, particularly low value suppliers, are paid promptly for their invoices once validated by the approved personnel in the Group. The Group has processes in place in order to combat modern slavery in the business and its supply chains, and details of these can be found in the published Modern Slavery Statement at https://www.equalsPLC.com/content/investors/corporate-governance CUSTOMERS Customers are interested in successful product availability, fair pricing and adherence to regulations. The Group wants to achieve the highest level of customer service and will regularly review feedback and reviews it receives from its customers. The Group operates under an open and transparent pricing model with its customers. REGULATORS AND COMPLIANCE The Group holds licences with the Financial Conduct Authority and HMRC and must adhere to the regulatory requirements of these licences. The Group ensures that staff have sufficient knowledge and regular training if necessary to ensure that these regulations are met. All staff receive ongoing Anti-Bribery and Anti-Money Laundering training as the nature of the business may result in a higher risk of money laundering. Procedures and communications are in place to ensure that staff are able to comply with Anti-Money Laundering should there ever be a case. 24 STRATEGIC REPORTEQUALS GROUP PLC STATEMENT ON SECTION 172 OF THE COMPANIES ACTS 2006 CONTINUED INVESTORS Investors expect to be informed of the financial performance and developments of the Group. This is done by holding regular trading updates; planned investor programmes; publication of the annual and interim reports and press releases. All shareholders are invited to attend the Annual General Meeting where they are able to raise questions to the Board. The Executive Directors will attend meetings with investors and analysts. The Strategic Report on pages 6 to 25 was approved and authorised for issue by the Board after stock market trading hours on 15 April 2024, and was signed on its behalf by: IAN STRAFFORD-TAYLOR Chief Executive Officer 25 STRATEGIC REPORTANNUAL REPORT 2023 Governance 26 Report on Corporate Governance for the year ended 31 December 2023 OVERVIEW As Chairman of the Board of Directors of Equals Group PLC (“Equals”, “we”, “the Company”, “the Board”, or “the Group” as the context requires), it is my responsibility to ensure that The Group’s Investor Relations website (equalsplc.com) contains all documents required by AIM rule 26, notably: • The Articles and Memorandum of Association Equals has sound governance and an effective Board. This • Admission document responsibility includes leading the Board and overseeing the Group’s corporate governance. Good and timely information flows between Executives and Non-Executives • Financial statements and annual reports • Governance statements with interactions that are both supportive and challenging are • Details of directors and advisors. essential to this. The goals the Group pursues are to create value for shareholders and customers, to monitor and improve our environmental and societal impacts and to adhere to good corporate governance. BOARD OF DIRECTORS The Board is responsible for the overall management of the Group including the formulation and approval of the Group’s long-term objectives and strategy, the approval of budgets, the oversight of the Group’s operations, the maintenance of sound internal control and risk management systems and the GOVERNANCE CODE AND COMPLIANCE implementation of Group strategy, policies, and plans. Whilst Equals adopted the 2018 Quoted Companies Alliance Corporate Governance Code (“QCA Code”) in line with the London Stock Exchange’s AIM Rules. The QCA code was re-issued on 13 November 2023 and Equals will be following the principles therein for 2024. The three themes of the 2023 code are: • Deliver growth the Board may delegate specific responsibilities, there is a formal schedule of matters specifically reserved for decision by the Board; such reserved matters include, amongst other things, approval of significant capital expenditure, material business contracts and major corporate transactions. The Board meets formally on a regular basis to review performance. DIRECTORS The Equals Board is presently made up of five Directors. The • Maintain a dynamic management framework experience and skills of each director is set out below. • Build trust. This Statement, in conjunction with the Chairman’s Corporate Governance Statement published on our website, follows the The Board is confident that the current mix of skills and competencies amongst the Board aligns well with the Company’s strategic priorities over the medium- to long-term ten-point structure of the 2018 QCA Code and describes how but this position will continue to be kept under review. we have applied the Code. The Group will provide updates not less than annually. ALAN HUGHES The Board considers that the Group complies with the 2018 QCA Code so far as it is practicable having regard to the size, nature and current stage of development of the Group. The Board recognises that even where the Group may not fully comply with a principle or general provisions of the Code, it uses the Code as a benchmark in assessing its corporate governance standards. Where the Group does not fully comply, it gives reasons for this. and Equals environmentally responsible culture illustrated through its customer-driven, pursues socially a internal values and policies and its supplier and shareholder engagements. Equals believes that application of the 2023 QCA Code supports the Group’s medium to long-term success whilst simultaneously managing risks and providing an underlying framework of commitment and transparent communications with stakeholders. Chairman and Independent Non-Executive Director Date of appointment: 1 March 2020 Committees: Nominations (Chair), Remuneration, Risk Alan has 35 years of experience with HSBC, becoming General Manager on the UK Executive board. He was also CEO of FirstDirect Bank where he introduced its digital services, and, introduced significant product innovation. He has had several non-executive roles, currently he is Chair of Unity Trust Bank PLC and Chair of Mitsubishi HC Capital UK PLC. He has taught banking and lectured at Warwick and Oxford Universities on service and innovation. He was Pro-Chancellor and deputy Chair of Council at Loughborough University. He has an MBA from Henley, is a Fellow of the Chartered Institute of Bankers, a Fellow of the Royal Society for Arts, Manufactures and Commerces and holds an Honorary Doctorate from Loughborough University. 27 ANNUAL REPORT 2023GOVERNANCE REPORT ON CORPORATE GOVERNANCE CONTINUED IAN STRAFFORD-TAYLOR Chief Executive Officer Date of appointment: 4 March 2014 Committees: Nominations PROFESSOR CHRISTOPHER BONES Independent Non-Executive Director Date of appointment: 9 April 2021 Committees: Remuneration (Chair); Audit, Risk, Nominations A Founder and a Director of the Group since 2007. Ian has Chris has held senior executive positions at major companies held a number of senior banking roles, including Business including Diageo and Cadbury. He was also Principal/ Unit Controller and Head of International Securities Lending Executive Dean of the Henley Business School from 2004- at Morgan Stanley, where he worked from 1985 to 1992. 2010. Chris co-founded Good Growth Ltd (‘Good Growth’), Following this, Ian moved to UBS where he worked for 13 years a successful e-commerce consulting business whose clients as Managing Director and Global Head of Securities Borrowing include Diageo, Kraft Heinz, WH Smith, Pets at Home, ITV, & Lending, Fixed Income Repo and Prime Brokerage. Ian is a Boohoo, Channel 4, and others. Chartered Accountant, qualifying with Arthur Andersen in 1985. RICHARD COOPER Chief Financial Officer Date of appointment: 1 October 2020 Committees: Audit, Risk, Remuneration, Nominations Richard has extensive public market and growth company experience. He was the CFO of GVC Holdings PLC (now Entain PLC), one of the world’s largest sports betting and gaming groups, from December 2008 to February 2017. Whilst at GVC, along with responsibility for financial reporting, Richard played a key role in the implementation of the company’s He is chair of the Remuneration Committee for Equals Group PLC. He has held a variety of non-executive appointments in the private, public and third sectors. His other current roles are that of Chair of the Chartered Institute of Legal Executives and as a Commissioner for Judicial Appointments where he sits as a lay member of the Board of the Judicial Appointments Commission for England and Wales. Chris was awarded an honorary doctorate from Aberdeen University, from which he holds his undergraduate degree. BOARD INDEPENDENCE AND TIME COMMITMENT acquisition strategy during that period, together with its The Board has reviewed the independence of the Chairman and move from AIM to the premium segment of the London Stock each of the Non-Executive Directors (“NEDs”) and considers Exchange’s Main Market. Richard, a Chartered Accountant, them to be independent in character and judgement, with no is also a non-executive director of two other companies on relationships or circumstances that are likely to affect, or could AIM: Non-Executive Chairman of Engage XR Holdings PLC, appear to affect, their judgement. None of the Non-Executive a technology-focused education company, and Chair of the directors holds or did hold any share options in the Company. Audit Committee of Insig AI PLC, a machine learning business focused on ESG for the fund management industry. The Non-Executive Directors are each expected to dedicate approximately 18 days per annum towards their duties and otherwise such time as required. BOARD EFFECTIVENESS All Directors are expected to keep their skill-set up-to-date, and the Company provides a number of opportunities for Board members to access development opportunities. The Company Secretary provides periodic briefings to the Board throughout the year on developments in corporate governance and regulatory matters, and new Directors are provided with a tailored induction. Non-Executive Directors are encouraged to be involved in specific workshops or meetings, in line with their individual areas of expertise. The Board shall review annually the appropriateness and opportunity for continuing professional development, whether formal or informal. SIAN HERBERT Independent Non-Executive Director Date of appointment: 1 October 2020 Committees: Audit (Chair); Risk Nominations (Chair); Remuneration, Sian has had an extensive City career spanning 35 years within audit, financial crime, risk and regulation, focusing on the financial services and technology sectors. She gained 25 years’ experience at PricewaterhouseCoopers LLP (“PwC”), including fifteen years as a partner within the forensic services group, becoming an established expert in financial services, e-money, and payment services, advising on financial crime, risk, regulatory change and the impact of technology. As well as being a member of the ICAEW, Sian is also a Member of the Hong Kong Society of Accountants. She is a member of the Board of Mitsubishi HC Capital UK PLC as the Audit and Risk Committee Chairs. 28 EQUALS GROUP PLCGOVERNANCE REPORT ON CORPORATE GOVERNANCE CONTINUED The Companies believes that an effective board is one which The Group’s values are: delivers financial value for its shareholders along with other values and integrity for other stakeholders – customers, suppliers, communities, and colleagues. In 2023, the Board took forward the outcomes of the formal annual Board evaluation • Make it happen; • Succeed together; • Be the customer; and process undertaken in 2022, with a view to ensuring continued • Go beyond improvements in all aspects of the Board’s operations. The areas covered in the evaluation were: Board relationships, Board Skills & Governance, Board Processes Committees of the Board, and Priorities for Change. The Chairman also meets at least once annually with each of the Non-Executive Directors to discuss each Director’s contributions to Board meetings. The Board intends to continue its approach toward periodic board evaluation in 2024 and beyond. These values promote the healthy corporate ethos of effective communication and encourage an ‘ideas culture’. The Group believes such values are important in creating a strong and consistent internal culture, as well as being essential to driving the overall success as a business. Staff are actively encouraged to provide feedback on many areas surrounding the business activities and initiative, and fortnightly Group-wide meetings are held to promote an open and honest dialogue across the Group. CULTURE The Board recognises the importance it has in setting the tone, culture and behaviour of the Group and promotes an open and respectful dialogue with employees, suppliers and other stakeholders. The importance of sound ethical values and behaviours is crucial to the ability to successfully achieve the corporate objectives, and the Board places great importance on this aspect of corporate life, seeking to ensure that this flows across the Group. SHAREHOLDER ENGAGEMENT The Group is committed to maintaining a healthy dialogue between the Board and all its shareholders to enable shareholders to come to informed decisions about the Company. The Chairman is generally available to shareholders, and the AGM presents shareholders with an additional opportunity to communicate with the Board. The AGM is attended by the Board and is open to all the Group’s shareholders. 29 ANNUAL REPORT 2023GOVERNANCE REPORT ON CORPORATE GOVERNANCE CONTINUED At the Annual General Meeting held on 16 May 2023, the proposed resolutions received the following proportion of votes: Ordinary resolutions: Adoption of 2022 Annual Report and Consolidated Financial Statements Re-appointment of PriceWaterhouseCoopers LLP as auditor to the Company Authority to allot shares Special resolution: Disapplication of pre-emption rights *a vote withheld is not a vote “in law” and is not counted in the calculation of the votes cast. In favour Opposed Withheld* 99.99 99.97 99.99 95.61 0.01 0.03 0.01 4.39 0.00% 0.00% 0.00% 0.00% The Board has established four committees to which it has formally delegated duties and responsibilities. The four committees are: • Audit • Risk • Remuneration • Nominations The attendance record of each relevant director at board level and committee meetings during 2023 is as follows (quorum was achieved for all meetings). Below committee attendance records represent those of committee members only, with other directors attending by invitation but not specifically included: Number of meetings in the year Alan Hughes Ian Strafford-Taylor Richard Cooper Christopher Bones Sian Herbert Board 91 9/9 9/9 9/9 9/9 9/9 Audit Committee Remuneration Committee Nomination Committee Risk Committee 2 – – – 2/2 2/2 5 5/5 – – 5/5 4/5 0 – – – – – 5 5/5 – – 4/5 5/5 [1] Four additional Board or Board Committee meetings were held throughout the reporting period. Canaccord Genuity Limited (“CGL”) are appointed as Nominated Advisor, a position required under the rules of AIM support the Company to comply with the rules of AIM and the Market Abuse Regulations. Browne Jacobson, solicitors, have served the Group for a number of years, and have dialogue as and when required with the Chairman, Chief Executive Officer and other executives of the Group. One Advisory Limited (“ONE”) was appointed as Company Secretary to the Company on 1 August 2021. ONE are responsible for ensuring that Board procedures are followed and supporting the Company to comply with applicable rules, regulations and obligations governing its operation, as well as helping the Chairman maintain excellent standards of corporate governance. AUDIT COMMITTEE The Audit Committee is responsible for monitoring the integrity of the Group’s financial statements, reviewing significant financial reporting issues, reviewing the effectiveness of the Group’s internal control and risk management systems, ensuring that processes are put in place to manage risk inherent in the business, and overseeing the relationship with the external auditor (including advising on their appointment, agreeing the scope of the audit and reviewing the audit findings). The Audit Committee is chaired by Sian Herbert and includes Non-Executive Director Chris Bones. The Audit Committee meets at least two times a year, including at appropriate times in the reporting and audit cycle to consider audit matters and otherwise to focus on risk matters. The Audit Committee also meets regularly with the Group’s external auditor. The report of the Audit Committee is included on pages 41 to 43. 30 EQUALS GROUP PLCGOVERNANCE REPORT ON CORPORATE GOVERNANCE CONTINUED RISK COMMITTEE The Risk Committee is responsible for maintaining the Group’s risk register and evaluating the risks included in it. The Risk Committee comprises all Non-Executive Directors and is chaired by Sian Herbert and meets not less than four times a year. The Chief Operations Officer, not a board member, is responsible for day-to-day risk management and compliance and is the prime contact for regulatory bodies that have supervisory roles for the Group. Each regulated subsidiary company also has a risk committee which meets quarterly. The report of the Risk Committee is included on pages 44 to 45. REMUNERATION COMMITTEE The Remuneration Committee is responsible for determining and agreeing with the Board the framework for the remuneration of the Chairman, the Executive Directors, and other designated senior executives and, within the terms of the agreed framework, determining the total individual The CFO assumes overall responsibility for the financial integrity of the Company. Internal forecasts and budgets are prepared prior to the year end for the following financial year and performance is measured with the actual results produced within the financial reports. Further, the CFO diligently prepares a comprehensive financial paper for each board meeting providing stakeholders with a detailed insight into the financial performance and outlook. The Group also maintains a formal document known as the Financial Position and Prospects Procedures (FPPP), which serves as a comprehensive memorandum outlining controls across trading, operations, and finance for the entire group and its subsidiaries. This document facilitates the Directors’ ability to stay informed regularly on key aspects such as the Company’s financial position, including assets, liabilities, profits and losses, as well as projected profitability, cash flows, funding needs based on realistic assumptions and internal and external factors likely to impact the business materially. It undergoes regular review and updates throughout the year to remuneration packages of such persons including, where ensure relevance and accuracy. appropriate, bonuses, incentive payments and share options or other share awards. The remuneration of Non- Executive Directors is a matter for the Board. No Director is involved in any decision as to his or her own remuneration. The Remuneration Committee currently comprises two Non- Executive Directors and is chaired by Christopher Bones. The Committee meets at least twice a year. To support the ongoing growth and expansion of the company across global territories, the Company demonstrated a commitment to bolstering its financial governance framework. The appointment of two senior non-board members from Equals to the board of Oonex underscores the organisation’s dedication to ensuring seamless integration and adherence to regulatory standards across all subsidiaries. These executives have played a pivotal role in leading the recruitment of the finance team, thereby facilitating a smooth transition and alignment with the organisation’s overarching governance The Remuneration Committee report is included on pages 46 objectives. to 53. NOMINATION COMMITTEE The Nomination Committee is responsible for developing and maintaining an effective and rigorous procedure for making recommendations on the appointments and re-appointments to the Board. The Nomination Committee currently comprises the Non-Executive Directors and the Chief Executive and is chaired by Alan Hughes. INTERNAL CONTROLS AND FINANCIAL REPORTING Further, concerted efforts have been made to fortify the internal control environment. This includes proactive measures such as the daily review of unmatched items, margin analysis on forwards, and routine monitoring of revenue and cash reporting. These daily assessments ensure prompt identification of discrepancies or irregularities, allowing for timely corrective actions to be taken. A proactive approach was adopted to enhance the financial ledger system by transitioning to a more robust Enterprise Resource Planning (ERP) system, better suited for the growth The Company aims to ensure robust internal control and risk management systems, particularly concerning the financial of the Company. This strategic move provides the Group with a robust foundation to effectively manage financial reporting reporting process. The financial reporting process is governed capabilities aligned with the company’s growth trajectory. The by a comprehensive system designed to ensure accuracy, upgraded system offers scalability, enhanced internal reporting transparency, and compliance with regulatory standards as functionalities, and improved operational efficiencies. prescribed by the International Accounting Standards Board (IASB) and the Financial Conduct Authority (FCA). 31 ANNUAL REPORT 2023GOVERNANCE REPORT ON CORPORATE GOVERNANCE CONTINUED SHARE DEALING CODE The Company has a share dealing code for Directors and applicable employees of the Group for the purpose of ensuring compliance by such persons with the provisions of the AIM Rules relating to dealings in the Company’s securities (including, in particular, dealing, during close periods in accordance with Rule 21 of the AIM Rules). The Directors consider that this share dealing code is appropriate for a company whose shares are admitted to trading on AIM. The Company takes proper steps to ensure compliance by the Directors and applicable employees of the Group with the terms of the share dealing code and the relevant provisions of the AIM Rules (including Rule 21). The Corporate Governance Report was approved and authorised for issue by the Board after stock market trading hours on 15 April 2024, and was signed on its behalf by: ALAN HUGHES Chairman 32 EQUALS GROUP PLCGOVERNANCE ESG Report for the year ended 31 December 2023 This report provides stakeholders with a guide to the way in which Equals deals with the three core tenets of ESG, namely: Environmental Social Governance This Annual Report has already dealt with governance in detail in its report on Corporate Governance on pages 26 to 32, moreover, there are some other aspects which are reported in the Governance section below. 1. CORPORATE CULTURE Underpinning everything the Group does – and seeks to do – is its culture and values. The core elements of this are articulated below: • Make it happen: We will own the outcome and execute flawlessly against our plans. We need to deliver our part and influence others to deliver theirs. • Succeed together: We must pull in the same direction and bring out the best in each other. We need to communicate effectively and adapt together. • Be the customer: We should always be asking ourselves if what we’re doing is making our customers’ lives easier and helping them get more for their money. • Go beyond: We need to care for ourselves and each other and push ourselves to excel. Every day is a new chance to grow and develop ourselves as well as those around us. 33 ANNUAL REPORT 2023GOVERNANCE ESG REPORT CONTINUED 2. ESG – THE ENVIRONMENTAL DIMENSION An Employee Carbon Emissions Survey was conducted in The Group had two UK offices; London and Chester. Since the acquisition of Oonex S.A. (now renamed Equals Money Europe S.A), the group has a physical presence in Brussels and Amsterdam. 2021 to calculate the average carbon footprint of employees whilst at work. The Group uses an external provider (C-Free) to verify the carbon emissions. The London office in Vintners Place building is managed in accordance with the landlord, CBRE’s, sustainability policy which champions recycling and low-emission practices. Vintners Place has an extensive and secure bicycle store and employees are encouraged to commute this way if they can do so safely. The Chester office has a number of initiatives aimed at reducing negative environmental impacts. In 2021 energy provider was changed to guarantee that 100% of energy comes from renewable sources – and this also represented a cost-saving for the business. An environmental waste service that separates all our recycling and burns waste to feed energy back into the grid is used. The Group has a Cycle to Work scheme in place to help those employees who which to participate in it. Our modest offices in Brussels and Amsterdam are shared facilities run by well-known flexible office providers. A number of employees are provided with a Company car. All such vehicles must either by fully electric or hybrid, and, at Chester, there are electric charging points for these vehicles. A paper-free initiative was started in 2020, identifying where the use of paper can be eliminated. The quantity of copier paper ordered continues to be modest. The ongoing partnership with Wales Recycles has enabled the Group to donate unused or retired devices to be wiped or refurbished and then given to local schools and underprivileged members of the community. A similar scheme has been launched for the London office. This has allowed the Group to offset the individual carbon footprints for the entire workforce. Whilst pleased with this outcome, the next step is to assess where energy use and carbon emissions across the business can be reduced. Responsible procurement The environmental impact of the Group’s supply chain is another important consideration. Since 2021 a new due diligence procedure was introduced to incorporates ESG criteria; questions address suppliers’ own sustainability programmes, whether they screen environmental and social impacts, and how they engage with and determine the interests of their key stakeholders. There is an internal committee with oversight of supplier due diligence. With the exception of staff, the next most significant area of expenditure remains third party IT and communication supplies, followed by costs incurred by other service industries such as law, accounting, and compliance advisory firms. As part of the Group’s upcoming assessment into reduction strategies, the practices of suppliers are reviewed. Giving back to the community In considering societal impact, the Group wishes to give employees the opportunity to get involved and support is provided to employees in their endeavours, making a number of charitable donations and allowing the workforce to select charities that will receive the Company’s donations. The Group for many years has also run a work-experience programme and internships focusing on schools local to the office locations, this is alongside the apprenticeship scheme. 34 EQUALS GROUP PLCGOVERNANCE ESG REPORT CONTINUED Part of the forward-looking strategy is to formalise the Corporate Social Responsibility (CSR) programme, to enable employees to volunteer within working hours and offer their time and expertise for the benefit of local voluntary and community groups. IMPACT ON THE GROUP Total employee carbon footprint offset Number of devices donated CHESTER OFFICE Energy use - Total energy use (KwH) Paper use 2023 1,574 tonnes 2022 1,000 tonnes 10 -* 2021 346 tonnes 15 62,408** 41,062** 42,875 - Number of sheets of headed paper ordered - Number of sheets of copier paper ordered - 11,000 30,000 6,500 40,000 7,000 LONDON Paper use - Number of sheets of paper ordered 11,825 37,500 25,000 * No devices were donated in 2022 as a result of replacing old desktops with new laptops for certain employees. ** Direct measurement basis used. Vintners Place not included as a result of limitations of any allocation methodology, due to shared office space. 3. ESG – THE SOCIAL DIMENSION Engaging with our stakeholders helps the continued success of our business; stakeholders provide different perspectives and expertise that can drive innovation and support our strategic direction and financial performance. We engage regularly with our stakeholders, through both direct communications and our reporting, which we ensure accurately reflect the performance of the business. We also appreciate that each stakeholder group has different interests and concerns, and we therefore tailor our method of engagement with each appropriately. 3.1 Employees We are passionate on making Equals a rewarding place to work and to foster attraction and retention of employees by developing our recruitment practices, offering more opportunities for growth and progression, and sharpening our focus on equality, diversity and inclusion (EDI) to ensure we are accessing the broadest pools of talent. In doing so this has resulted in a motivated workforce that feels more connected than ever to the business and its success. The recent initiatives introduced by the Group include: • • • All-employee Share Incentive Plans; grants were announced in 2021, 2022 and 2023 giving eligible employees up to 10,000 shares in the Company to vest over a four year period, Key-employee LTIP programme which identified around 61 key staff below board level and that granted 6,055,000 share options over two years The Group has a referral program which allows employees (below the level of executive) to financially benefit from direct employee introductions and hence avoid paying recruitment fees externally, • Visa sponsorship • Mental health support • Healthcare and life assurance schemes. Employee communication The Group has a strong ethos of employee communication with “All Hands” being held every two weeks; Monthly Own The Outcome (OTO) awards; annual OTO Awards ceremony and strategy presentation from the CEO; use of our internal communications platform; and Base Camp days celebrating achievements and outlining strategy. To take advantage of Zoom, many departments themselves hold weekly “all-in” sessions to discuss progress, initiatives and problems. EDI Ensuring that equality, diversity and inclusion considerations are embedded within all facets of our business is a key priority. In 2021 we developed a new EDI strategy, and we introduced pronouns on our internal communications platform, to allow our employees to indicate their preferred pronouns. We conducted a review of our recruitment practices and now include an EDI statement in all job advertisements for the Group. This also supports our ambition to access diverse pools of talented candidates and demonstrate that we are an employer that can support the employees in different circumstances with flexible working practices. Contractors The Group regularly uses contractors in the UK and overseas to assist chiefly with engineering projects. These people are regarded as part of the Equals family and are offered the same working conditions and communication systems as regular • Flexible working employees. 35 ANNUAL REPORT 2023GOVERNANCE ESG REPORT CONTINUED The table below provides as summary of the number of staff within the Group based on the average for the financial year: EMPLOYEES Employees by employment type - Number of full-time employees - Number of part-time employees - Number of temporary employees Diversity and inclusion - Number of women at Board level - Number of women in workforce - Percentage of women in workforce (%) - Number of people from ethnic minorities at Board level - Number of people from ethnic minorities in workforce Employees paid a national living wage (%) 2023 2022 2021 325 15 1 1 132 39% 0 255 13 0 1 97 36% 0 242 12 9 1 85 32% 0 43 (declared, not compulsory to complete) 32 (declared, not compulsory to complete) 15 (declared, not compulsory to complete) 100% 100% 100% 3.2 Customers The Group prides itself on providing a high level of customer service. We don’t get it right all the time, but we aim to! At the heart of this is our initial and ongoing engagement with our customers to enable us to understand their requirements and maintain clear and transparent communication with them. To this end, we have adopted the following approach: • Created one centralised customer identity management system (Hubspot) • Robust customer complaints process • Logging dissatisfactions to drive improvements • • • Implemented Vulnerability Champions in front line teams and established a vulnerability working party which is a group set up to look at the subject of “Customer Vulnerability” at Equals and work on ways to improve how we help and support customers. Created a Vulnerability Forum within slack for quick escalations to key people who can provide advice on how we can assist our customers. Implementation of pinned notes on Access Point to make it easier for customer service teams to identify customers who may need additional support. In order to be accessible and responsive to our customers, we maintain three key channels for receiving queries: • • A policy of Treating Customer Fairly, and conduct ongoing training Responding to customer feedback and implementing quick fixes • phone calls, • email • live chat. • Three channels for customer services • Two weeks of training for new starters in customers services and ongoing training for all customer services staff • System for flagging suspicious activity We have a target in place to ensure that customers wait no more than 30 seconds before their call is answered and email queries are responded to within the working day; we utilise live chat to enable even faster responses from the team. In addition, we have an obligation to identify and protect To ensure our Customer Services Team are best placed vulnerable customers. To this end we have: • Increased awareness for customer vulnerability across the entire Group • Rewritten the Vulnerability Policy • Put together customer vulnerability training tailored to assist front line teams and delivered this as face-to-face workshops with customer-facing senior managers and their teams. to provide the support required, we provide two weeks of training for all new employees, followed by ongoing training including support when they begin receiving customer phone calls. Additionally, all customer services employees receive Anti-Money Laundering (AML) and cybersecurity training, and since 2022 we have also completed vulnerable customer training. The integration of our online training platform, Meta Compliance, will support this programme, increasing accessibility to the training modules and enabling us to monitor rates of completion and send reminders to employees when necessary. 36 EQUALS GROUP PLCGOVERNANCE ESG REPORT CONTINUED In addition to our three key communication channels, we also Authority’s (FCA) Principles, encapsulates the best practice we receive customer feedback through our Trust Pilot and app expect of our employees at all levels of the business, and this review pages, and we reach out to all customers who express is reinforced through our TCF training. dissatisfaction to see if we can improve their experience. We are very proud that both FairFX and Equals Connect are rated as ‘Excellent’ on Trustpilot. Messages to our social media pages – X (formerly Twitter) and Facebook – are filtered into our ticketing system, so that the team can stay on top of all feedback provided. Since 2021 we introduced a new policy on the processing of Faster Payments to strengthen security, including updating the personal identifying information we ask for from customers and addressing the value at which payments must be checked before they are processed. The process of updating all our existing policies and procedures is ongoing, as we want to We have a robust complaints process in place. Following ensure all are in line with Group expectations. receipt of a complaint, our key objective is to resolve the issue within three business days and send a summary resolution to the customer. In the event of an issue not being resolved within that period, the Complaints Resolution Officer is brought in to both investigate and to advise the customer on the timescale for resolution, to ensure the customer remains informed. We are very proud that our Team continue to close 100% of all complaints and that, in 2023, over 99% of complaints across the Group were closed out within 35 business days. If we identify a complaint that we feel has not been dealt with effectively, we conduct a root cause analysis, and the Complaints Resolution Officer will feedback to the team and provide guidance on where the process could have been improved. Concurrently, we log dissatisfactions. Whilst these are not complaints, tracking all feedback from customers can drive improvements across the business, as we can identify if an issue (albeit a very small issue) is repeatedly arising and then implement a change to improve our service. Our dedicated AIM channel provides another medium through which both employees and customers can feedback with suggestions. These are reviewed regularly, with an assessment of the resources available to make immediate changes and discussion with the Product Team as to what can be achieved. Quality Assurance Results, Complaints and Dissatisfaction Information pack are distributed to department heads monthly by the Operational Assurance Team. Conduct and reputation risk indicators, including Quality Assurance results, complaints, Trustpilot reviews, and vulnerability, are fed back on a quarterly basis to the Subsidiary Board meetings, and information is also provided to the Group Risk Committee. An important innovation to our processes has been the creation Details of our fees are available on our websites and included in our FAQs. In addition to providing annual AML training, there are controls in place in the system to recognise and flag unusual activity, including customers who are potentially being scammed. A member of the team will raise anything suspicious with the Anti-Fraud Manager, who will then consider further action as necessary. Consumer Duty Following the FCA’s implementation of the Consumer Duty we have worked to ensure we are implementing this within the group by completing a number of tasks including gap analysis’ for each subsidiary and its products to establish which products were in scope and what work would need to completed to become compliant with The Duty, competitor analysis’, fair value assessments and an ongoing project plan to identify any poor outcomes and look at areas where improvements or changes needed to be made throughout the business to ensure we are providing good outcomes to our customers and that we are meeting expectations across the four outcomes. During this time, we have also completed the following: • Developed a Consumer Duty Policy for the group as well as ensured Consumer Duty has been considered in all relevant existing and future group policies. • Developed and delivered Consumer Duty Meta Compliance training that went out to the group and white-label partners outlining the keys points of the Duty as well as the scope and our responsibilities under the Duty. • Implemented Consumer Duty Champions as well as creating a Consumer Duty Coordinator role within the group of one central customer identity in our Customer Relationship to manage the groups implementation plan and complete Management (CRM) system. By centralising this customer information, we aim to improve customers’ internal data lifecycle. Safeguarding our customers To ensure the continued protection of our customers we maintain transparent, fair practices and update processes to make sure they are fit for purpose. Our Treating Customer Fairly (TCF) Policy, developed in line with the Financial Conduct outcomes testing on various areas of the business. • • Developed an Outcomes Testing process and schedule to assess both good and poor outcomes. Started the first outcomes testing project focusing on vulnerability, where we are identifying both good and poor outcomes. 37 ANNUAL REPORT 2023GOVERNANCE ESG REPORT CONTINUED Feedback from customers CUSTOMERS Trust Pilot scores - Equals Money PLC - Card One Money - Equals Connect Limited Training - Number of hours of customer services training available Calls - Calls answered within 30 second target (%) Percentage of complaints closed (%) Equals Money PLC Equals Money UK Limited Equals Money International Limited Equals Connect Limited Percentage complaints closed in less than 35 business days (%) Equals Money PLC Equals Money UK Limited Equals Money International Limited Equals Connect Limited 2023 4.8 4.6 4.9 2022 4.4 4.4 4.7 2021 4.6 4.6 4.9 25+ hours 25+ hours 25+ hours 85% 2023 100% 100% 100% 100% 99% 100% 100% 100% 80% 2022 100% 100% 100% 100% 95% 91% 93% 80% 80% 2021 100% 100% 100% no complaints 87% 85% 92% no complaints 3.3 Suppliers The key issues for us with suppliers are: regulator – the National Bank of Belgium – having regulatory oversight of that subsidiary. • Their integrity • The reliability • Their governance and business ethics Many of our suppliers have been with us for a number of years and hence we have built up a good understanding of them and their values. For all new significant suppliers, we ask them to complete a due-diligence questionnaire and annually review the supplier. The Group has a Supplier Diligence committee, independent of procurement, and this has the responsibility to ensure diligence is conducted for all new suppliers and to conduct a rolling review of existing suppliers. These fall mainly into three categories: • Affiliates • IT suppliers • Professional services firms – the majority of whom have codes of conduct from their own governing bodies 3.4 Regulators Equals endeavours to have an open dialogue with every one of its regulators. During the year, the acquisition of Oonex S.A. (now renamed Equals Money Europe S.A.) led to an additional We constantly seek to demonstrate our high standards of governance and business ethics, this may range from telephone and email communication, the prompt and professional responses to queries they may have, and the timely submission of all scheduled returns (examples: corporation tax, VAT, P60’s compliance returns). The Company must follow the rules of AIM and is in regular dialogue with the nominated advisor (NOMAD), Canaccord Genuity. Subsidiaries of the Group have licences from a variety of regulators and these are updated on our investor relations website, the link to which section is: https://www.equalsplc. com/content/company/our-permissions. 3.5 Banks and Liquidity Providers Equals has banking relationships with a number of banks and liquidity providers. We are in regular – often daily – contact with these and at all times adhere to the rules and customs imposed on us by these banks. The principal banking/liquidity partners we have include: Barclays, Citibank, NatWest, Crown Agents Bank, Blackrock, Valitor, Sucden, Velocity along with funds held at the Bank of England. 38 EQUALS GROUP PLCGOVERNANCE ESG REPORT CONTINUED 3.6 Shareholders and the Analyst Community Shares in Equals Group PLC are publicly traded on London’s AIM. Under AIM rules we are obliged to have a NOMinated procedures and have focussed upon increasing security awareness among our colleagues. ADvisor (“NOMAD) and broker with whom we work closely on Central to cybersecurity for the business is having robust all AIM and MAR (Market Abuse Regulations) matters. oversight and effective governance. The importance of IT and data security is driven from the very top of the business, The broker is the prime interface with our shareholders. with CEO recognition and direct involvement in cybersecurity In 2023, in addition to the Annual and Interim results, Equals released four trading updates. At the final and interim results, the Executive directors present the results – and a trading update - to investors and handle regular analyst calls. Our investor presentations and audio-casts are included in our Investor Relations website, the link to which is here: https:// www.equalsplc.com/content/investors/results-and-reports The Company receives regular requests from Institutional shareholders on ESG matters and responds to these requests in a timely manner. 4. ESG – THE GOVERNANCE DIMENSION To execute our strategy flawlessly we maintain strong governance practices. These practices are streamlined and harmonised across the Group. Our full Report on Corporate Governance is on pages 26 to 32. 4.1 IT and data security As a financial services business, IT and data security is critical; we endeavour to continually improve our cybersecurity matters. The Security Council, Architecture Council and Technical Risk Committee oversee, among other matters, the security design and risk associated with our systems and are all accountable to the Group Board. There are strong lines of communication between the Executive Team and the Security and Architecture Councils, with regularly scheduled meetings and dedicated channels on the internal communications platform allowing a continual flow of information. There is ever-present Executive and senior management participation at the Technical Risk Committee, which facilitates appropriate communications upwards within the business when required. To support the secure operation of our IT systems, there are a comprehensive series of security policies and procedures in place1, and employees are updated on any material changes to the policies. At the Small Cap Awards 2023, Equals won “Technology Company of the Year” and excellent testament to the strength of our technology function. Security Council Architecture Council Technical Risk Committee Chair: Chief Product Officer Chair: Head of Architecture Chair: Head of Infrastructure Purpose: Purpose: Purpose: • Evaluate security threats to the • To review architectural sign off • To maintain a technical risk register group, requests • To feed risks up to the Group Risk • sign off new technical decisions or • To discuss new architectural Committee system changes, changes • sign off new third party integrations, • To review practices and standards • ensure compliance with relevant • To create architectural control for regulations, auditing purposes • To risk assess and discuss the outcome for changes to the status quo • maintain certifications as required (such as PCI), • organise and evaluate penetration testing, • maintain DR & BCP plans, • write appropriate group policy on security 1 Policies and procedures for IT and data security: Cloud Storage Usage Policy; Computer Usage Policy; Data Classification Policy; Data Protection Impact Assessment Procedure; Data Protection Policy; Data Retention Policy; Instant Messaging Policy; Password Policy; Business Continuity & Disaster Recovery Procedure. 39 ANNUAL REPORT 2023GOVERNANCE ESG REPORT CONTINUED Cybersecurity encompasses oversight of all manner of push out reminders via email and our internal communications security matters including ensuring Payment Card Industry platform. We will be introducing security awareness training (PCI) compliance, annual targeted penetration testing, and as part of our onboarding process for new employees. Meta monthly vulnerability scanning. We conduct an annual audit Compliance will also enable the setting of KPIs to measure of our existing technology suppliers to ensure that they are ongoing performance, as well as monthly mini-training still meeting the required standards. Whenever we engage sessions on different IT and data privacy topics. a new supplier, we run data protection checks, and if the supplier is providing a core service, we conduct an in-depth assessment and the organisation is incorporated into our 4.3 Privacy of customer data We handle sensitive customer information, thus our data Business Continuity & Disaster Recovery Procedure, for which privacy practices are of paramount importance, and we the Security Council has signed off. approach all data security scenarios from the perspective that no employee is necessarily secure. We have two-factor 4.2 Continuous improvement IT and data security practices are constantly improved, as we react to developments and implement adjustments to authentication for all systems that contain customer data. Where an employee must use a personal device for work, we require the use of remote sessions to ensure that information existing systems and procedures to facilitate efficiencies. In cannot be exported. Customers are also kept informed of the past year, we undertook a number of such actions. The the information we will ask from them, to mitigate the risk appointment and retention of a Cybersecurity Manager since of external parties accessing their data whilst posing as an 2021, solidifies the seriousness with which we approach IT employee of Equals. and data security, and highlights our drive to make security a way of life rather than an add-on to the working day. 4.4 Risk management We increased the capabilities within the risk management side Since 2021, we commenced the process to achieve ISO of the business. Fundamental to this has been the onboarding 27001 certification. The Chief Technology Officer (CTO) is the of our new Group Head of Risk and Compliance, who has Executive Sponsor of the initiative, and it is being driven by the restructured the risk and compliance framework to ensure that Cybersecurity Manager. The Group became accredited in 2023. it underpins business operations and supports our financial To ensure that concerns flagged are dealt with effectively subsidiary undertaking. There is a Change Council, comprising and efficiently, employees that raise an issue are now invited of senior members of staff, which receives suggested changes to attend the Security Council meetings which means that and advise on the potential governance, operational, and the issue is articulated to the Council first-hand. We will customer impacts before further investment is approved. objectives. There is a Risk Committee for each operating also simplify the issue identification and information sharing process to enable ease of use and understanding. 4.5 Governance and business ethics We continue to strengthen our internal governance and ensure As internal employee actions pose the greatest risk to IT and data security, the overarching objective is to raise awareness we are conducting business correctly even when we are not being scrutinised. We have created a conduct policy, rolled-out for cybersecurity across the Group. We have begun targeted in 2022 alongside a wider conduct framework. Using our new phishing campaigns on our own staff to improve awareness online training platform, “Meta Compliance+, we are also able and reduce the risk of employees clicking through on to deliver compliance and ethics training easily. suspicious emails. All employees must complete annual security awareness, knowledge sharing has greatly improved. As a result of our general cyber and data security, GDPR and AML training. continued harmonisation efforts, we are now better placed as With the integration of our new online training platform, Meta a business for innovation and improvement of the customer Compliance, we can monitor levels of training completion, and experience. We have established better feedback loops and our internal OUR GOVERNANCE Number of data breaches Employees completed Meta Compliance Security Awareness training (%) Employees completed Meta Compliance* Anti-Money Laundering training (%) Employees completed Meta Compliance* GDPR training (%) 40 2023 - 97.2% 99.0% 98.9% 2022 - 98.3% 97.2% 95.3% 2021 - 95.6% 98.1% 74.6% EQUALS GROUP PLCGOVERNANCE Report of the Audit Committee for the year ended 31 December 2023 This report covers the following areas: The head of Audit Committee is a member if the Board and it 1. Membership of the Audit Committee (“the Committee”) is the full board that approved the strategic review. The Audit Committee has oversight on any acquisition proposed by any 2. Responsibilities of the Committee of the executive directors. 3. Activities of the Committee during the year 4. Governance 5. External Auditor and independence thereof 6. Risk Management and Internal Control 7. Conflicts of interest 8. Significant issues 9. Events after 31 December 2023 The Committee is appointed by the Board; in their primary duties are listed beneath the subheadings below, along with a brief description of sub-tasks: 2.1 Financial reporting a. consider the areas of financial reporting risk and what is done to optimise these risks and ensure that these are communicated to the external auditor; b. review significant financial reporting judgements and the application of accounting policies, including compliance 1. MEMBERSHIP OF THE AUDIT COMMITTEE with the accounting standards; The Audit Committee is chaired by Sian Herbert and includes Non-Executive Director Christopher Bones. Other meeting attendees during the year included members of the external audit team, Chairman and Non-Executive Director Alan Hughes, Ian Strafford-Taylor, CEO; Richard Cooper, CFO; and other members of the finance team. c. oversee the integrity of the financial statements and their compliance with UK company law and accounting regulations; d. ensure the Annual Report and financial statements are fair, balanced and understandable, and recommend their approval to the Board; e. monitor the integrity of announcements containing financial 2. RESPONSIBILITIES OF THE AUDIT COMMITTEE information. The Audit Committee (“the Committee”) has responsibility for Equals Group PLC and all subsidiaries in the Group. In the period since the last report, the Committee continued to focus on the effectiveness of the controls across the Group within the ambit of the finance department and other departments, including but not limited to Risk, Compliance, Operations and Human Resources. 2.2 Internal controls a. monitor adequacy and effectiveness of the internal financial controls and processes, and ensure any material shortcomings are rectified at the earliest opportunity; b. where appropriate, ensure compliance with UK Corporate Governance Code, Quoted Company’s Alliance Code, Information Commissioner’s Office, HMRC and the Financial Conduct Authority’s relevant regulatory framework. The integrity of reporting and risk monitoring is a key area that the Committee will continue to focus on over the coming year. Monitoring of the operational performance of the Group is 2.3 Risk management a. review and provide oversight of the processes by which an area of ongoing review. The focus is on several key areas risks are identified, evaluated, managed and optimised by including a continued focus on data governance, regulatory the Risk Committee. compliance and operational resilience. The Audit Committee appointed various third parties to give independent opinions on chosen topics that are regarded as potentially higher risk (for example, cyber security, money laundering and safeguarding). The Group has well-resourced compliance and risk operations but given its size does not consider it necessary to have an internal audit function, using external parties when considered appropriate. Non-statutory audits of subsidiaries for the purpose of FCA safeguarding obligations are conducted by a separate audit firm, Azets. 2.4 External audit a. manage the relationship with the Group’s external auditor; b. monitor and review the independence and performance of the external auditor and formally evaluate their effectiveness; c. review the policy on non-audit services carried out by the external auditor, taking account of relevant ethical guidance; d. review, consider and approve the external auditor’s fee, the scope of the audit and the terms of their engagement; e. make recommendations to the Board for the appointment or reappointment of the external auditor. 41 ANNUAL REPORT 2023GOVERNANCE REPORT OF THE AUDIT COMMITTEE CONTINUED 3. COMMITTEE ACTIVITIES DURING THE YEAR Such abilities ensure that the Committee functions with The principal activities which the Committee undertook within the year were as follows: the 2023 3.1 Financial statements and business reports • Interim Consolidated Financial Reviewed statements, the 2023 Annual Report and Consolidated Financial Statements, and recommended that both be approved by the Board; • Reviewed the projected cash flow forecasts and sensitivity analyses as prepared by the Chief Financial Officer; as a result, the Committee concluded the business should be considered a going concern, and the financial statements should be prepared as such. 3.2 External audit • Debated and agreed the external audit strategy; • • • • Noted the adjusted and non-adjusted differences and debated the highlights memo previously circulated to Committee members; Acknowledged that the prepared financial statements represented a true and fair view of the Group’s affairs, were in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006 and AIM Regulations. Their enquiries covered regular management and KPI reporting, analytical review and sign off on key control accounts; Reviewed any control issues raised by the external auditors in their management letter and monitored progress thereon; Reviewed and approved the Letter of Representation sent by the Company to the external auditors. 3.3 Other Oversees the compliance with laws and regulations including competence and credibility. The Committee receives regular updates on changes to financial accounting standards and reporting requirements, regulatory and governance changes and developments around risk management, fraud prevention and detection, and cyber security. In its advisory capacity, the Committee confirmed to the Board, that, based on its review of the Annual Report and financial statements and internal controls that support the disclosures, the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable, and provide the necessary information for shareholders to assess the Group’s position and performance, its business model and strategy. 5. EXTERNAL AUDITOR AND INDEPENDENCE PricewaterhouseCoopers LLP was appointed as an external auditor following an audit tender process in 2019. As a matter of course, PwC is not awarded any non-audit work; please refer to note 5 of the financial statements for more details regarding the breakdown of payments to the Group auditor. The Committee agrees the budget for the audit with the auditor and receives a summary of all audit fees payable to the external auditor. A summary of fees paid to the external auditor is set out in note 5 to the financial statements. The external auditor confirmed its independence as auditor of the Group through written confirmation to the Group. External audit effectiveness The effectiveness of the external audit process is assessed by the Committee, which meets regularly throughout the year with the audit partner and senior audit managers. The Committee believes that sufficient and appropriate money laundering including working with the Compliance information is obtained to form an overall judgement of the department and external counsel to verify the Group’s position effectiveness of the external audit process. The external audit on any contentious matters. 4. GOVERNANCE The Committee meets at least three times per year and routinely meets with the external auditor without the Executive Directors present. It is chaired by Sian Herbert, an independent Non-Executive Director, who is a Chartered Accountant with recent and relevant financial experience. The Chair has meetings with the external auditors to ensure effectiveness process findings from last year’s review were also incorporated into the audit processes this year. One matter that the Committee keeps under review is the mix of substantive and control testing by the auditors. The most cost- effective audit currently remains a “substantive audit.” 6. RISK MANAGEMENT AND INTERNAL CONTROL Further details of risk management and internal controls are set out under note 20.2 of the consolidated financial statements. The Committee is dedicated to the thorough monitoring of the issues are being considered on a timely basis. The Chief Financial effectiveness of its internal controls and risk management; Officer and other members of the finance team work closely they maintain a good understanding of business performance, with the Committee Chair to facilitate open communication key areas of judgement and decision-making processes within and regular information flow. The Committee members bring a the Group. wealth of professional and practical knowledge and experience which is relevant to the Group’s industry. 42 EQUALS GROUP PLCGOVERNANCE REPORT OF THE AUDIT COMMITTEE CONTINUED 7. CONFLICTS OF INTEREST 9. EVENTS AFTER 31 DECEMBER 2023 An annual review is undertaken, facilitated by the Company The Audit Committee has continued the above activities in Secretary, to identify any conflicts of interest that may impact 2023, focusing on: upon Board members’ independence. All identified conflicts are recorded on a register that is adopted by the Board. Conflicted Directors are not able to attend meetings where the conflicted matter is discussed, and decisions are made. It has been determined that none of the Directors had or have an interest in any material contract relating to the business of the Company or any of its subsidiary undertakings. 8. SIGNIFICANT ISSUES • The 2023 Annual Report and Consolidated Financial Statements, and the Committee has recommended that both be approved by the Board; • A review of the Cash Flow forecast as overseen by the Chief Financial Officer. judgements (refer to Significant note 3.25, “judgements and estimates”) are identified by the issues and accounting Committee, the finance team, or through the external audit process and are reviewed by the Audit Committee. SIAN HERBERT Chair of the Audit Committee 15 April 2024 43 ANNUAL REPORT 2023GOVERNANCE Report of the Risk Committee for the year ended 31 December 2023 PURPOSE AND COMPOSITION The CEO continues to hold the prime responsibility for the identification, assessment, management and monitoring of risks to the Group, but to assist and to bring external expertise a board-level Risk Committee was formed on 1st January 2021. The Committee consists of the full board of directors plus the Chief Operational Officer (‘COO”), and, the Money Laundering Reporting Officer who are not members of the Board. The COO has day-to-day responsibility for risk and compliance. Other employees of the Group, including the Director of Trading, the Head of Risk and Compliance may join meetings by invitation. Formal papers are prepared for each meeting. These include a review of the individual Risk Committees of each regulated subsidiary company whose meetings are held every quarter. A risk register is maintained which scorecards those risks identified and the appropriate policies and procedures to mitigate those risks. A risk appetite statement has been developed and approved. Below is a summary of the risks which the Committee believe are highly rated and the controls put in place to mitigate them. Risk Position risk Description of Risk Control / Mitigation A forward foreign exchange contract is partially completed exposing the Company to volatile exchange rate movements. The trading system does not allow trades to be completed without a matching entry with a liquidity provider. More than 95% of trades are booked via an API. Client default on an out of the money forward position Volatile currency markets make a client’s margined position significantly out of the money. The trading team have data feeds which constantly monitor the positions. All trades over £3 million require senior manager approval and all trades over £10 million require the approval of the CEO. The operations team provide “out of the money” reports at least once a day and independently advise both the trading team and the Executive directors of any margin calls to be made. Data integrity and security • Losses from a cyber-attack or • Appointed a Chief Information Officer with responsibility for other associated malicious events data security and data governance • Loss of revenue • Reputational risk • Setup a Security Council with Group wide participants to monitor all aspects of security in the Group • Regular penetration testing, training and awareness, system access controls and encryption, physical security • Introduced new comprehensive training modules through Meta Compliance covering Cyber/ Security Risk and Data Protection. Business Continuity/ Disaster Recovery Business disruption and potential business failure. • Detailed Business Continuity Plan and Disaster Recovery Plan tailored to each entity Fraud Financial loss, reputational risk, potential to lose customers and reduce growth, supplier chain risk. • Regular testing of the above plan • Increased adoption of cloud-based services (AWS) • Senior management awareness • Staff training • Fraud reporting to Risk Committee • Automated transaction monitoring • Appropriate people in fraud roles to oversee and manage risk 44 EQUALS GROUP PLCGOVERNANCE REPORT OF THE RISK COMMITTEE CONTINUED Risk Description of Risk Control / Mitigation Banking arrangements and relationships • Loss in one or more banking partners could result in disruption and eventual business failure • Loss of Agency Banking services • From February 2019, the Group became a direct member of Faster Payments and have banking arrangements with the Bank of England which mitigates the risk of losing agency banking services The Group faces significant competition A reduction to competitive advantage resulting in slower business growth and ultimately financial loss. • Group partnered with Citi Commercial Bank in July 2019 and entered 5-year agreement with Mastercard in September 2019 • In April 2021 the group launched the connected BIC (SWIFT) that allows the group to open own named IBANs for the benefit of collecting and allocating funds efficiently. • Engineering development to maintain research & development and innovation • New products • Improved customer experience to enhance usability of products - IT development to maintain research & development and innovation • Maintain relationship and traffic from key price comparison sites • Quality of people in business • Maintain the Group’s reputation • Investment in marketing and product development • Increased investment in IT development • Increased sales development • Review of costs to ensure cost efficiency • Development of the Solutions line creating significant revenue opportunities. Key person absence The CEO or other key persons become ill, or incapacitated. The Group does not have silo management, and there are overlaps in skills between Executives. Failure of key suppliers impacts performance Loss of productivity, potential to lose customers and reduce growth. Carry out regular review of supplier performance and seek alternatives where necessary. Macro environment Loss of revenue, operational resilience. Monitor key performance indicators, increased controls on expenditure and large single expenditure commitments. IT platform re-build Out of date technology which results in development delays. Re-platform tech stacks in more modern computer language and move away from on-premises solution to cloud. Liquidity Unable to meet liabilities as they fall due. • Weekly reporting of prior week cash movements • Regular cashflow forecasts run with sensitivities • Longer term budgets and forecasts Regulatory compliance • Emerging regulations and • Review and update Group policies and procedures. adherence to existing regulations • Non-compliance: fines; sanctions; prison and reputational risk • Review of new statutes and financial regulation. • Annual regulatory audits by expert third parties. • Annual staff training. Governance • Lack of Board oversight leading to failure to fulfil legal and regulatory responsibilities • Regular Board and Committee meetings SIAN HERBERT Chair of the Risk Committee 15 April 2024 45 ANNUAL REPORT 2023GOVERNANCE Directors’ Remuneration Report for the year ended 31 December 2023 This report for the year ended 31 December 2023 complies 3. REMUNERATION POLICY with the requirements of the Companies Act 2006, the Group’s adopted Corporate Governance Code - the Quoted Companies Alliance Code - and applicable AIM Rules. This report covers the following areas; 1. Membership of the Remuneration Committee 3.1 Overall Policy The Group’s overall policy remains one underpinned by the need to attract and retain the key skills and capabilities throughout the organisation that will deliver our strategy, particularly in strategic leadership, commercial, product and engineering capabilities alongside the financial and compliance expertise to meet both our operational and 2. Responsibilities of the Remuneration Committee regulatory requirements. 3. Remuneration Policy 4. Remuneration for 2023 5. Remuneration for 2024 6. Long-term incentives 7. Professional fees incurred by the Committee 1. MEMBERSHIP OF THE REMUNERATION COMMITTEE Core to this is the belief that better than average performance should result in higher than average rewards and that these should incentivise a longer-term perspective to reflect that of our shareholders; as such for Executive Directors and other senior executives there are long-term incentives as well as annual ones, alongside a competitive salary. The core reward principle is that the potential for total remuneration should, for all roles, be at median to upper levels for companies of a similar size, complexity and growth Membership of the Remuneration Committee (“Committee”) aspirations with better than average performance achieving comprises: • • • Christopher Bones, Independent Non-Executive Director, Committee Chair since 1 May 2021 Alan Hughes, Independent Non-Executive Director, on committee since 1 October 2020 Sian Herbert, Independent Non-Executive Director, on committee since 1 October 2020 Executive Directors are invited to contribute, and the CEO may be invited to attend. No attendee or member is present for discussion of their own remuneration or for matters that may have a bearing on their remuneration. 2. RESPONSIBILITIES OF THE REMUNERATION COMMITTEE The Committee is responsible for: • • Setting remuneration policy and remuneration for the Executive Directors of the Company and remuneration policy and governance of awards under that policy for senior executives and employees earning over £100,000pa Oversight of remuneration policy for the whole Group and its adherence to Group values and the principles established in the policy laid out below As part of the overall review of Board effectiveness the performance of this and other committees is considered and reviewed. No material changes have been made to its ways of working or terms of reference over the period of this report save that Ms Shona Kerfoot, People Director, attends meetings to provide staff support. 46 upper median levels. To reinforce this, the Committee established some key principles to ensure that shareholders are confident that performance-based rewards: • incentivise growth in revenue, and earnings per share and, • encourage behaviours that support our ESG principles and company values; these are: o o o Ensure a competitive balance in the remuneration mix between salary and pay ‘at risk’, with this element being related to performance over both the short and longer-term; Ensure that short-term cash incentives are linked to stretching performance measures; and Align more remuneration at every the shareholder financial interest through share-based remuneration. level to The Committee procured specialist advice through the appointment of remuneration advisers H2glenfern Ltd to ensure that decisions made going forward on Executive and Non-Executive Director remuneration are properly informed with robust data. H2glenfern is a member of the UK Remuneration Consultants Group (RCG) and has confirmed that it complies with the RCG Code. H2glenfern has no other relationship with the Company and the Committee is satisfied that the advice it receives is independent and objective. The Committee instructed H2glenfern to carry out benchmarking for executive and non-executive remuneration during Q4 2022, and the Committee keeps a regular eye on the remuneration of executives in listed comparable businesses. EQUALS GROUP PLCGOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED This part of the report sets out the remuneration policy with regard to the Executive Directors (“EDs”). The policy on each element of remuneration and how it operates is detailed in the table: Elements of Remuneration Application of policy Maximum opportunity Performance metric Element Base salary Link to remuneration policy To attract and retain individuals of the experience and calibre required to achieve our strategic goals and in whom shareholders can have confidence. EDs salaries are reviewed annually on 1 April. Using an externally recommended ‘peer group’ of similar listed companies in our sector and others with common core capabilities and product offering we establish a range that reflects our policy position. Annual Bonus To incentivise performance and to align the interests of EDs and shareholders over the short to medium terms. The scale of the bonus is set through the peer group benchmarking exercise to ensure a competitive annual reward. The parameters, performance criteria, weightings and targets are ordinarily set at the start of each financial year. Payments are made in cash following completion of the annual audit and subject to the Committee’s assessment of performance against targets and other matters it deems relevant. Awards are subject to malus and clawback provisions. The benchmarking provides a range for both roles from the median to Upper Quartile and we will reflect the business performance outcome in agreeing any salary increase. The CEO has a maximum bonus opportunity of 140% of salary; the CFO has a maximum of 120%. The salaries used are those as at the end of the financial year. Salary reviews are conducted vs. business performance including ESG aspects Performance measures may include financial, non- financial, personal and strategic objectives. Performance criteria and weightings may be changed from year to year. At present, the performance targets are based on Revenue and Adjusted EBITDA which is considered by the committee to be the Group’s key financial performance metric. 47 ANNUAL REPORT 2023GOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED Element Long Term Incentive Plan Link to remuneration policy To incentivise performance and to align the interests of EDs and shareholders over the long term. Application of policy Maximum opportunity Performance metric Performance measures are CAGR in revenue over the vesting period and the annual achievement of an internally set EPS target ahead of market expectations for each of the three years of the vesting period. The award reflects practices in the median to upper quartile of our peer group. The plan sets a normal maximum of 100% of the base rate of salary and lays down that the committee may exceptionally grant up to 200% of the base rate of salary at the time of the award. EDs are eligible to receive awards under the Long-Term Incentive Plan at the discretion of the Committee. Awards are granted as conditional awards which vest after three years subject to the meeting of objective performance conditions specified at award. Awards are subject to malus and clawback provisions. An additional holding period of two years post vesting is applied to awards made to the EDs. All employee shareholding plan Pensions Benefits Non-Executive Remuneration To encourage all employees to make a long-term investment in the Company’s shares in a tax efficient way. To offer all employees the opportunity to invest in their retirement and to treat all employees equally in respect of their long-term retirement planning. To attract and retain individuals of the experience and calibre required to achieve our strategic goals and in whom shareholders can have confidence. To provide fees appropriate to time commitments and responsibilities of each role. The EDs and enrolled in the plan as it covers all employees. Complies with the HMRC regulations for Share Incentive Plans. None The EDs are eligible for the Group Workplace Pension Plan. None None None None EDs are entitled to a car or car allowance, along with family healthcare scheme (BUPA), and life assurance cover. None Non-executive Directors are paid a base fee through the payroll. Fees are reviewed periodically. In addition, reasonable business expenses maybe reimbursed. The Group Board is guided by the general increase for the broader employee population and takes into account relevant market movements. 48 EQUALS GROUP PLCGOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED 3.2 Malus and clawback Both Annual Bonus and Long-Term Incentive Plan awards are subject to malus and clawback provisions. Reasons for malus and clawback being applied would include material misstatement in audited results, discovery of errors or inaccuracies in the assessment of any performance 3.6 Non-executive Directors’ letters of appointment The Non-executive Directors do not have service contracts but instead have letters of appointment dated as follows: Alan Hughes Sian Herbert 1 July 2020 1 October 2020 condition, fraud or gross misconduct, events or behaviour Christopher Bones 9 April 2021 which lead to the censure of the Group by a regulatory authority or have a significant detrimental impact on the reputation of the Group. 3.3 Remuneration of employees below the Group Board Employees below the Group Board receive base salary, benefits, annual bonus, and senior executives are invited to participate in the Long-Term Incentive plan. Pay and conditions throughout the Group are taken into consideration when setting remuneration policy. The Committee does not consult other employees when setting executive remuneration. 3.4 Shareholder consultation The Committee’s policy is to consult with major shareholders All of which contain a three-month notice period. 3.7 Consideration of new Executive Directors or senior executives When recruiting or promoting any senior executive, we seek to apply consistent policies on fixed and variable remuneration components in line with the remuneration policy set out above. This helps to ensure that any new Executive Directors or senior executive is on the same remuneration footing as existing Executive Directors or senior executives respectively, while still taking into account the skill and experience of the individual, the market rate for a candidate of that experience and the importance of securing the relevant individual. in respect of significant decisions on executive remuneration. 4. ANNUAL REMUNERATION REPORT FOR 2023 The Chair of the Remuneration Committee is available for contact with investors concerning the Company’s approach to remuneration. 3.5 Executive Directors’ service contracts and payments for loss of office The Executive Directors have rolling service contracts, Ian Strafford Taylor’s commencing 1st August 2014 (continuous service from 1st August 2006), Richard Cooper’s commencing 14th October 2019, but a fixed period of 12 months’ notice of termination for Ian Strafford Taylor and of six months’ notice of termination for Richard Cooper. Our approach to remuneration in each of the circumstances in which an Executive Director may leave is determined by the Remuneration Committee in accordance with the rules of any applicable scheme. The date for the annual review of salary for the Executive directors is 1st April each year. The annual salary of Ian Strafford-Taylor from 1st April 2023 was £400,000, up from £350,000. The Annual Salary of Richard Cooper from 1st April 2023 was £300,000, up from £285,000. Bonus payments as reported below were linked directly to the performance against revenue growth and achievement against goals set for Adjusted EBITDA – both of which were significantly ahead of internal goals and external expectations. The fees to Non-Executive Directors were reviewed in the year and the following changes were implemented: Alan Hughes (Chair) Sian Herbert Chris Bones £100,000, up from £80,000 with effect from 1st April 2023 £70,000, up from £65,000 with effect from 1st April 2023 £65,000, up from £55,000 with effect from 1st April 2023 49 ANNUAL REPORT 2023GOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED 4.1 Table of total remuneration for 2023 and 2022 In £ Ian Strafford-Taylor Richard Cooper 2022 Comparative Non-Executive Directors* Alan Hughes Sian Herbert Christopher Bones 2022 Comparative Total, 2023 Total, 2022 Gross salary and fees 385,115 322,603 707,718 622,500 Benefits Table 4.2 32,979 11,484 44,463 63,131 Bonuses* Table 4.3 498,339 343,742 842,081 723,225 93,000 68,481 61,577 223,058 200,000 930,776 822,500 – – – – – 44,463 63,131 – – – – – 842,081 723,225 Total 916,433 677,829 1,594,262 1,408,856 93,000 68,481 61,577 223,058 200,000 1,817,320 1,608,856 2022 809,799 599,057 1,408,856 80,000 65,000 55,000 200,000 * Numbers above are represented on an accrual basis. The most significant difference to on a cash basis is in relation to bonuses. See note 5b for further details of cash basis. 4.2 Table of benefits for 2023 and 2022 In £ Executive Directors Ian Strafford-Taylor Richard Cooper 2022 Comparative 4.3 Table of bonuses for 2023 and 2022 In £ Executive Directors Ian Strafford-Taylor Richard Cooper 2022 Comparative Pension Healthcare Car allowance Total 2022 3,522 3,522 7,044 7,044 7,962 7,962 15,924 12,558 21,495 – 21,495 43,529 32,979 11,484 44,463 63,131 36,757 26,374 63,131 Performance related Covid reimbursement Total 2022 498,339 343,742 842,081 693,600 – – – 29,625 498,339 343,742 842,081 723,225 435,542 287,683 723,225 Bonuses, as a percentage of adjusted EBITDA before bonuses equated to 3.9% (2022: 5.5%). 4.4 Dividends received by Directors in 2023 Equals Group PLC declared a maiden interim dividend on ½ pence per share on 9 November 2023. The shareholdings of the Directors and their entitlement and thus payment of the dividend to the Directors is shown below Alan Hughes Sian Herbert Chris Bones Ian Strafford-Taylor Richard Cooper Total 46,000 – 46,000 77,800 – 77,800 4,500 – 4,500 2,200,250 7,976 2,208,226 1,183,334 7,976 1,191,310 3,511,884 15,952 3,527,836 £230.00 £389.00 £22.50 £11,041.13 £5,956.55 £17,639.18 Shareholding in own name Interest in the Trust Total holding Dividend in £ and pence 50 EQUALS GROUP PLCGOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED 5. 2024 REMUNERATION As indicated above there has been a review of the base salaries for the Executive Directors for 2024 vs a peer group of comparator companies the results of which are shown below: CEO Salary of £400,000 raised to £420,000 from 1 April 2024 CFO Salary of £300,000 raised to £315,000 from 1 April 2024 For the 2024 financial year, both the CEO and CFO have the opportunity to earn up to 140% and 120% of their salaries respectively. The bonus criteria are associated with achievement of targets set for revenue growth and Adjusted EBITDA as in 2023. Payments in excess of 100% for the CEO and 80% for the CFO are linked to levels of performance significantly ahead of market expectations. None of this bonus entitlement will be payable before the publication of the audited financial statements for 2024. The 2024 financial statements will however accrue whatever award the Remuneration Committee decide on. 6. LONG TERM INCENTIVES The Group launched new share-based incentive plans in 2021 and has made additional grants in 2022 and 2023. These plans were announced to the stock market on 18 October 2021, 14 December 2022 and 6 November 2023. All employees All employees with a length of service of 12 months or more are able to participate in the Share Incentive Plan. This plan has a vesting period of three years, in line with HMRC guidelines. Key Staff This plan supports the retention of key talent and only vests should the recipient be in employment a full three years after the award. Recipients are all subject to a further two-year holding period. Grants made in 2021 were subject to no performance conditions whereas grants made in 2022 and 2023 are subject to performance conditions. Executive Directors The grants are performance related and only vest should the recipient be in employment a full three years after the award. Recipients are all subject to a further two-year holding. The nature of this award reduces dilution for shareholders and provides the Committee with the opportunity to model the potential cash award on vesting based on publicly available market forecasts and to aim for these to be no more than 100% of total remuneration should forecasts be exceeded by a significant amount although the Committee has discretion in this area. The Remuneration Committee resolved to extend the option exercise period of certain options granted at IPO in 2014 to ensure alignment with the standard ten-year option period. Such change was announced to the Stock Exchange on 31 October 2022. Summary of grants made in 2023, 2022 and 2021 Date of award 2023 Number of share awards 06.11.2023 2023 Number of recipients Date shares issued into trust 08.12.2023 2022 Number of options/ share awards 14.12.2022 25.01.2023 2022 Number of recipients 2021 Number of options/ share awards 18.10.2021 20.04.2022 2021 Number of recipients Executive directors’ performance-based plan Key-staff retention plan* Share incentive plan* TOTAL *Notes: 850,000 1,750,000 459,448 3,059,448 2 56 227 1,012,500 2,170,000 747,488 3,929,988 2 44 188 1,250,000 2,415,000 704,000 4,369,000 2 36 176 51 ANNUAL REPORT 2023GOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED Share incentive plan 176 awards of 4,000 shares were made in 2021, of which 33 awards have lapsed up to 31 December 2023 resulting in 143 remaining. 188 awards of 3,976 shares were made in 2022, of which 15 awards have lapsed up to 31 December 2023, resulting in 173 remaining. 227 awards of 2,024 shares were made in 2023, none of which lapsed up to 31 December 2023. The total number of shares in trust are 1,719,296 across 227 recipients. Both Ian Strafford-Taylor and Richard Cooper have 10,000 each in the Trust. Key Staff incentive plan 38 awards totalling 3,665,000 were made in 2021, 3 were exercised and sold to good leavers and 3 lapsed resulting in 32, (being retained at 31 December 2023 with 2,185,000 to key Employees, 750,000 for Ian Strafford-Taylor and 500,000 for Richard Cooper, a total of 3,435,000 46 awards totalling 3,182,500 were made in 2022, 2 lapsed and 44 remain with 2,120,000 to Key Employees, 637,500 for Ian Strafford-Taylor and 375,000 for Richard Cooper, a total of 3,132,500. 58 awards totalling 2,600,000 were made in 2023, with 1,750,000 to Key Employees, 550,000 to Ian Strafford-Taylor and 300,000 to Richard Cooper. At 31 December 2023 there were 6,055,000 awards across 61 recipients excluding Ian Strafford-Taylor with 1,937,500 and Richard Cooper with 1,175,000. Director award date SHARE OPTIONS Ian Strafford-Taylor 28/07/2014 28/07/2014 28/07/2014 28/09/2016 28/09/2016 28/09/2016 01/09/2020 01/09/2020 01/09/2020 SHARE INCENTIVE PLAN (“SIP”) Ian Strafford-Taylor 18/10/2021 14/12/2022 06/11/2023 Richard Cooper 18/10/2021 14/12/2022 06/11/2023 LONG TERM INCENTIVE PLAN (“LTIP”) Ian Strafford-Taylor 18/10/2021 14/12/2022 06/11/2023 52 Option Price (£) Number Granted Date of Grant Earliest Exercise date Latest Exercise date 0.22 0.36 0.36 0.30 0.30 0.30 0.29 0.29 0.29 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 192,950 1,789,300 1,535,750 250,000 250,000 250,000 666,667 666,667 666,666 6,268,000 4,000 3,976 2,024 10,000 4,000 3,976 2,024 10,000 750,000 637,500 550,000 1,937,500 28/07/2014 28/07/2014 28/07/2014 28/09/2016 28/09/2016 28/09/2016 01/09/2020 01/09/2020 01/09/2020 05/08/2016 05/08/2016 05/08/2016 28/09/2017 28/09/2018 28/09/2019 30/04/2021 30/04/2022 30/04/2023 28/07/2024 28/07/2024 28/07/2024 27/09/2026 27/09/2026 27/09/2026 01/09/2030 01/09/2030 01/09/2030 07/01/2022 20/01/2023 04/12/2023 07/01/2025 20/01/2026 04/12/2026 07/01/2032 20/01/2033 04/12/2033 07/01/2022 20/01/2023 04/12/2023 07/01/2025 20/01/2026 04/12/2026 07/01/2032 20/01/2033 04/12/2033 18/10/2021 14/12/2022 06/11/2023 18/10/2024 14/12/2025 06/11/2026 18/10/2031 14/12/2032 06/11/2033 EQUALS GROUP PLCGOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED Director award date Richard Cooper 18/10/2021 14/12/2022 06/11/2023 Totals Ian Strafford-Taylor Richard Cooper Option Price (£) Number Granted Date of Grant Earliest Exercise date Latest Exercise date 18/10/2021 14/12/2022 06/11/2023 18/10/2024 14/12/2025 06/11/2026 18/10/2031 14/12/2032 06/11/2033 0.01 0.01 0.01 500,000 375,000 300,000 1,175,000 3,112,500 8,215,500 1,185,000 9,400,500 As well as the principles above, the vesting criteria for the 2021, 2022 and 2023 awards include a minimum share-price threshold above the price on the date of grant; the eventual amount awarded from the grant made will be driven by revenue growth, growth in active B2B customers and performance against EPS targets. In addition, the final award will be assessed against progress against a range of ESG matters including the effectiveness of our compliance operations. Options vested by 15 April 2024 Of the total of 8,215,500 share incentives for Ian Strafford-Taylor 6,268,000 had vested by 15 April 2024, through the approval of these financial statements leaving, 1,947,500 unvested at that date. Of the total of 1,185,000 share incentives for Richard Cooper none had vested by 15 April 2024. Richard Cooper exercised and retained 333,334 options during 2023. At the date of this report, the equity awards made to Ian Strafford-Taylor and Richard Cooper were equal to 4.40% and 0.63% of the fully diluted share capital. Option numbers used for EPS The calculation of diluted EPS and diluted adjusted EPS ignores any dilution if the result attributable to owners of Equals Group PLC is a statutory loss. The number to be used for 2023 is 193,444,728 (2022: 187,583,788). 7. PROFESSIONAL FEES INCURRED BY THE REMUNERATION COMMITTEE During 2023 the cost (including irrecoverable VAT) of advice taken by the Remuneration Committee in the year amounted to £nil (2022: £23,250). This advice relates to share incentive awards, share-based remuneration and remuneration comparative report. In addition, the manager of the shares platform, “Global Shares” invoiced the Company for a total of £18,000 for the administration of their platform and administration of the SIP and LTIP in 2023 (2022: £18,000). PROFESSOR CHRISTOPHER BONES Chair of the Remuneration Committee 15 April 2024 53 ANNUAL REPORT 2023GOVERNANCE Directors’ Report for the year ended 31 December 2023 Equals Group PLC is a company limited by shares and incorporated in England and Wales. The registered office address is Third Floor, Thames House, Vintners Place, 68 Upper Thames Street, London, EC4V 3BJ. The Directors present their annual report and audited consolidated financial statements for the year ended 31 December 2023. FINANCIAL REPORTING The consolidated financial statements of Equals Group PLC for the year ended 31 December 2023 are set out on pages 66 to 104. These have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. PRINCIPAL ACTIVITIES The principal activities of the Group during the year were to provide payment processing and banking-style services and to both private customers and corporations through prepaid currency cards, travel cash, international money transfers and current accounts. Its trading subsidiaries have various degrees of regulation as shown below: Company number Company name (and date of name change) Previous name 05539698 Equals Money PLC (13.09.2022) 06268340 Equals Money UK Limited (26.09.2022) 07131446 Equals Connect Limited 09558664 Equals Money International Limited (03.05.2022) 12330839 Roqqett Limited 09347930 Hamer & Hamer Limited 7477374 Equals Pay LLC 0849.185.510 Equals Money Europe S.A. (04.07.2023) Oonex S.A. FCA permissions Authorised Payment institution under Payment Service Regulations, 2009 Authorised Payment institution under Payment Service Regulations, 2009 Authorised Payment institution under Payment Service Regulations, 2009 Authorised E-Money institution under the Electronic Money Regulations 2011 Authorised Payment institution under Payment Service Regulations, 2009 Authorised Payment institution under Payment Services Regulations, 2009 None Authorised under the National Bank of Belgium to deliver financial and payment services to businesses and individuals in the EU The principal activity of the Company is as an investment holding company for the Equals Group of companies. KEY PERFORMANCE INDICATORS The Strategic Report set out on pages 6 to 25 provides key performance indicators and an assessment of the Group’s financial performance throughout the year. RELATIONSHIP WITH EMPLOYEES The Group operates transparently with its employees and holds fortnightly Group wide “All Hands” with the purpose of keeping employees up to date with Group business and its developments. These also offer staff the opportunity to present their viewpoints and are in addition to regular departmental updates. The Board believes this helps create a common awareness and goals across the Group to help it achieve its strategies. Equals is an equal opportunity employer. It does not discriminate on the basis of disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, sexual orientation, religion or belief, sex or age. It ensures that this is upheld in regard to hiring, continuing employment and training, career development and promotion. Further details of the Group’s relationship with its employees can be found in the Section 172 statement on pages 24 to 25 and in the ESG report on pages 33 to 40. 54 EQUALS GROUP PLCGOVERNANCE DIRECTORS’ REPORT CONTINUED RELATIONSHIPS WITH SUPPLIERS, CUSTOMERS AND OTHERS The Group recognises that strong relationships with customers and fair dealings with its suppliers are key to its success as a business. Further details of how this is applied in practice can be found in the Section 172 statement in the Strategic Report on pages 24 to 25. DIVIDENDS A maiden interim dividend of 0.5p per share was declared on 9th November 2023 and paid on 7th December 2023. The Directors recommend a final dividend of 1p per share for the year ended 31 December 2023. DIRECTORS The following Directors have held office during the financial year and up to the date of approval of these financial statements: I A I Strafford–Taylor R Q M Cooper A R F Hughes S A Herbert C J Bones DIRECTORS’ INTERESTS The Directors who held office at 31 December 2023 held the following shares in the Company as at that date: Ordinary 1p shares Ordinary 1p shares held in trust Shareholding % I A I Strafford-Taylor R Q M Cooper S A Herbert A R F Hughes C J Bones 1.18% 0.63% 0.04% 0.02% 0.002% 2023 2,200,250 1,183,334 77,800 46,000 4,500 2023 10,000 10,000 – – – The Directors who held office at 31 December 2023 held the following unexercised share options in the Company as at that date: Option price (£) Number Granted Date Granted 192,950 28/07/2014 1,789,300 28/07/2014 I A I Strafford-Taylor 0.22 0.36 0.36 0.30 0.29 – – – – – – R Q M Cooper Option price (£) Number Granted Date Granted – – – – – – 500,000 18/10/2021 4,000 07/01/2022 375,000 14/12/2022 3,976 20/01/2023* 300,000 06/11/2023 2,024 04/12/2023 *Per IFRS 2, service period for the 2022 SIP commences before the grant date and thus the share are disclosed in the year which participants are made aware of the grant conditions which in this case was the announcement date on 14th December 2022. INDEMNITY INSURANCE The Company maintains a directors and officers liability insurance policy in respect of any legal costs that may be incurred against the Directors in dealing with any legal claims or investigations. The policy was in place throughout the year and up to the date of approval of the financial statements. CAPITAL STRUCTURE Details of the Group’s authorised and issued share capital, together with details of the movement therein, are set out in note 16 to the financial statements. This includes the rights and obligations attaching to shares. There are no restrictions on the transfer of the Company’s shares. Details of major shareholders (that hold greater than 3.0%) as at 31/12/2023 are set out below: Name Pembar Limited Threadneedle Asset Management Schroders Funds JP Morgan Asset Management Chelverton Asset Management ENVIRONMENT No. of Ordinary Shares held Percentage of issued capital 22,291,833 11.94% 22,228,127 22,203,859 11.91% 11.90% 13,140,154 7.04% 6,500,000 3.48% Carbon dioxide emission data has been collected for 2023 and disclosed within the ESG report. This along with further information on environmental matters can be found in the ESG 1,535,750 28/07/2014 report on pages 33 to 40. 750,000 28/09/2016 2,000,000 01/09/2020 750,000 18/10/2021 4,000 07/01/2022 637,500 14/12/2022 3,976 20/01/2023* 550,000 06/11/2023 2,024 04/12/2023 RESEARCH AND DEVELOPMENT The Group has continued its investment in research and development throughout the year. A review of the work undertaken can be found in the Chief Executive Officer’s Report on pages 9 to 13. 55 ANNUAL REPORT 2023GOVERNANCE DIRECTORS’ REPORT CONTINUED RISK AND RISK MANAGEMENT The Group is exposed to various financial and operational risks. Further details of these, including processes put in place to mitigate these risks, are disclosed in the Risk Committee Report on pages 44 to 45 and note 20 of the financial statements. truncating of product development expenditure. The Group is satisfied with the adequacy of its cash position. Further details of post balance sheet trading and position can be found in the Chairman’s Statement on pages 7 to 8. The Directors’ Report was approved by the Board after stock market trading hours on 15 April 2024 and signed on its behalf by: IAN STRAFFORD-TAYLOR Chief Executive Officer 15 April 2024 INDEPENDENT AUDITORS Under section 489(4) of the Companies Act 2006, PricewaterhouseCoopers LLP will be deemed to have been reappointed as auditor. In accordance with section 489(4) of the Companies Act 2006 a resolution for their reappointment will be proposed at the forthcoming Annual General Meeting. DISCLOSURE OF INFORMATION TO AUDITOR The Directors who held office at the date of approval of this Directors’ report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditors are unaware; and each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. POST BALANCE SHEET EVENTS On 13 March 2024, a share issue agreement was signed to convert the 29 February 2024 Roqqett Loan due to Equals Group PLC debt of £1,128k to Equity. In the parent company Equals Group PLC accounts, investment in subsidiary will increase by £1,128k and intercompany loan receivable from Roqqett will be reduced to £nil. In the subsidiary Roqqett Limited accounts, intercompany loan payable to Equals Group PLC will reduce to £nil and share capital and share premium will increase by £1,128k. These entries will be eliminated at the Group level. FUTURE DEVELOPMENT The Group’s business activities, together with the factors likely to affect its future development and position, are set out in the Strategic Report on pages 6 to 25. GOING CONCERN Based on the Group’s budgets and financial projections, the Directors are satisfied that the business is a going concern and therefore the financial statements have been prepared on a going concern basis. This assessment is based on whether there is sufficient liquidity and financing to support the business, the post balance sheet trading of the Group, the regulatory environment, and the effectiveness of risk management policies. Management has sensitised its base case, assumed certain business lines might be discontinued and examined the 56 EQUALS GROUP PLCGOVERNANCE Statement of Directors’ Responsibilities in Respect of the Annual Report and the Financial Statements for the year ended 31 December 2023 Statement of directors’ responsibilities in respect of the financial statements The directors are responsible for preparing the Equals Group PLC annual report for the year ended 31 December 2023 and the financial statements in accordance with applicable law and regulation. Company law requires the directors to prepare financial statements for each financial year. Under that law, the directors have prepared the group and the parent company financial statements in accordance with UK-adopted international accounting standards. Under company law, directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of the profit or loss of the group for that period. In preparing the financial statements, the directors are required to: • • • • select suitable accounting policies and then apply them consistently; state whether applicable UK-adopted international accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; make judgements and accounting estimates that are reasonable and prudent; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and parent company will continue in business. The directors are responsible for safeguarding the assets of the group and parent company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are also responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and parent company and enable them to ensure that the financial statements comply with the Companies Act 2006. The directors are responsible for the maintenance and integrity of the parent company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Directors’ confirmations The directors consider that the Equals Group PLC annual report for the year ended 31 December 2023 and financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the group’s and parent company’s position and performance, business model and strategy. IAN STRAFFORD-TAYLOR Chief Executive Officer 15 April 2024 57 ANNUAL REPORT 2023GOVERNANCE Independent Auditors’ Report to the Members of Equals Group PLC REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS OPINION BASIS FOR OPINION In our opinion, Equals Group PLC’s group financial statements We conducted our audit in accordance with International and company financial statements (the “financial statements”): Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. • • • give a true and fair view of the state of the group’s and of the company’s affairs as at 31 December 2023 and of the group’s profit and the group’s and company’s cash flows for the year then ended; have been properly prepared in accordance with UK- adopted international accounting standards as applied in accordance with the provisions of the Companies Act 2006; and have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements, included within the Annual Report, which comprise: consolidated and company statements of financial position as at 31 December 2023; the consolidated statement of comprehensive income, the consolidated and company statements of cash flows, and the consolidated and company statements of changes in equity for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies. OUR AUDIT APPROACH Overview • • • Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. The Group comprises multiple subsidiary entities in the UK. Most of the Group’s accounting systems are centralised in the corporate head office located in London. Our overall audit approach considered each subsidiary entity’s contribution to the Group’s financial reporting balances. • Capitalisation of IT development costs (group) • The measurement and recognition of the goodwill and intangible assets arising from the acquisition of Equals Money Europe, previously known as Oonex S.A. (group) • Overall group materiality: £957,116 (2022: £696,822) based on 1% of total revenue. • Overall company materiality: £804,710 (2022: £654,103) based on 1% of total assets. • Performance materiality: £717,837 (2022: £522,616) (group) and £603,533 (2022: £490,577) (company). The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. 58 EQUALS GROUP PLCGOVERNANCE INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF EQUALS GROUP PLC CONTINUED Key audit matters Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit. The measurement and recognition of the goodwill and intangible assets arising from the acquisition of Equals Money Europe, previously known as Oonex S.A. is a new key audit matter this year. Carrying value of goodwill, which was a key audit matter last year, is no longer included because of the lower impact of changes to judgemental assumptions on the conclusion of the impairment assessment as a result of an increased surplus supported by the increased profitability of the group since 2021. Otherwise, the key audit matters below are consistent with last year. Key audit matter How our audit addressed the key audit matter Capitalisation of IT development costs (group) We performed the following substantive audit procedures over The Group capitalises, as intangible assets, certain expenditure on the development of systems and infrastructure designed to support its business strategy. Determining whether expenditure qualifies for capitalisation requires judgement and the total expenditure capitalised in the financial year ending 31 December 2023 amounts to £6.5m (£5.2m during the financial years ending 31 December 2022). The carrying value of software assets was £16.9m at the end of the period (£14.8m at 31 December 2022).When capitalising costs, management determines whether it is probable that expected future economic benefits are attributable to the asset, the cost or value can be reliably measured, and the nature of expenditure qualifies for capitalisation under the accounting standards. Additionally, the determination of costs, particularly salaries and other personnel related costs, that meet the criteria in IAS 38 Intangible Assets to be capitalised is subjective. The Group’s estimates included determining the extent of time spent by employees performing IT and non-IT roles in developmental activities and whether all costs were directly attributable to the relevant projects. The Group’s disclosures are provided in Note 10 ‘Intangible assets and goodwill and the related accounting policies applied are detailed in Note 3.12. Management’s judgements in the application of the accounting policy is disclosed in Note 3.25A(i). the capitalised IT development costs: • • • • • We evaluated the design of key controls around the capitalisation of internally generated intangible assets. For a sample of projects to which costs have been capitalised, we obtained and evaluated management’s assessment of the nature, feasibility and probably economic benefit expected from the intangible asset. We obtained a breakdown of the capitalised IT development costs and evaluated whether the nature of expenses meet the criteria in IAS 38 Intangible Assets to be capitalised. For a sample of IT development cost capitalised, we obtained supporting documentation to corroborate the value and the nature of the expenditure and assessed whether it met the criteria for capitalisation. We recalculated the amounts capitalised and tested the reliability of data used within the calculation. Based on the procedures performed and evidence obtained. With respect to the IT development costs capitalised during the current financial period we found it to be reasonable and materially compliant with the requirements of IAS 38 Intangible Assets. 59 ANNUAL REPORT 2023GOVERNANCE INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF EQUALS GROUP PLC CONTINUED Key audit matter How our audit addressed the key audit matter The measurement and recognition of the goodwill and intangible assets arising from the acquisition of Equals Money Europe, previously known as Oonex S.A. (group) We performed the following substantive audit procedures over managements’ recognition and measurement of the acquisition of EMEU in its consolidated financial statements: We verified, based on the purchase agreements and the agreements under the criteria defined in IFRS 10, the assessment made by the Management Board regarding the control over the shares taken over and the consolidation in the consolidated financial statements, We independently recalculated the fair value of the initial and deferred consideration on acquisition date settled through the issuance of Equals Group PLC shares as determined in the purchase agreements, We assessed the methodical approach in identifying the assets acquired and liabilities assumed at the acquisition date, We challenged, and agreed to supporting evidence where available, the liabilities assumed at acquisition, We evaluated the key assumptions in the forecasts, and evidence provided to corroborate them with a focus on revenue growth and costs, independent experts We engaged the reasonability of the methods applied and judgements taken in performing the purchase price allocation and determining the identifiable assets, to evaluate We tested the mathematical accuracy of the calculations used to determine the goodwill and identifiable intangible asset balances at acquisition, and • • • • • We examined the disclosures on the acquisition made in the notes in accordance with the requirements of IFRS 3. Based on the procedures performed and evidence obtained, we determined that the accounting and measurement methods applied are IFRSs. We consider management’s conclusions and the significant underlying assumptions to be reasonable. in accordance with On 4 July 2023, the Group completed its acquisition of Equals Money Europe (‘EMEU’), previously known as Oonex S.A., a Belgium company. The fair value of consideration on the date of acquisition amounted to £8.9m. The business combination is accounted for according to IFRS 3. • • The assets, liabilities and contingent liabilities acquired were stated at their fair values which were determined in the purchase price allocation performed. This results in preliminary net liabilities measured at fair value in the amount of £0.5m and • goodwill in the amount of £8.8m. The purchase price allocation performed is dependent on various assumptions which require management judgement and give rise to estimation uncertainty. These assumptions, which are subject to estimation uncertainty, are derived from a combination of management’s judgement, experts engaged by management and market data. Changes in these assumptions may have a material impact on the fair value of the identifiable intangible assets and goodwill balances recognised at acquisition. The significant assumptions that we focused our audit on were those with greater levels of management judgement and for which variations had the most significant impact on the recoverable amount. Specifically, these included the discount rate, forecasted revenue and costs. Due to the matter described, we considered the business combination and in particular the purchase price allocation as a key audit matter in our audit. The Group’s disclosures are provided in Note 12 ‘Acquisitions and disposals’ and the related accounting policies applied are detailed in Note 3.12. Management’s judgements in the application of the accounting policy is disclosed in Note 3.25B(iv). 60 EQUALS GROUP PLCGOVERNANCE INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF EQUALS GROUP PLC CONTINUED How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in which they operate. We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate. Within the Group’s main consolidation and financial reporting system, the consolidated financial statements are a consolidation of subsidiary entities. In establishing the overall approach to the Group audit, we scoped our work using the balances included in the consolidation. We determined the type of work that needed to be performed over the subsidiary entities by us, as the Group engagement team. As a result of our scoping, we determined that an audit of the complete financial information of Equals Money PLC, Fair Payments Limited, Equals Money UK Limited and Equals Connect Limited was necessary, owing to their financial significance. All audit work over these subsidiary entities was performed by the Group engagement team. We then considered the significance of other reporting units in relation to primary statement account balances. In doing this we also considered the presence of any significant audit risks and other qualitative factors. For the remainder, the risk of material misstatement was mitigated through Group audit procedures including subsidiary level analytical review procedures. Certain Group-level account balances, including goodwill, were audited by the Group engagement team. The impact of climate risk on our audit As part of our audit we made enquiries of management to understand the extent of the potential impact of climate risk on the group’s and company’s financial statements, and we remained alert when performing our audit procedures for any indicators of the impact of climate risk. Our procedures did not identify any material impact as a result of climate risk on the group’s and company’s financial statements. Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Overall materiality £957,116 (2022: £696,822). £804,710 (2022: £654,103). How we determined it 1% of total revenue 1% of total assets Financial statements – Group Financial statements – Company Rationale for benchmark The Group is very focused on expansion The entity’s assets predominantly consist applied through acquisition and organic growth. of investments in their subsidiaries and are Revenue has been determined to be a key benchmark for financial statement users to measure of financial performance for the Group measure the entity’s scale and how they operate and therefore has been used to determine their business. Total assets has been determined materiality. to be a key measure and has been used to determine materiality. For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality allocated across components was £5,591 to £957,116. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2022: 75%) of overall materiality, amounting to £717,837 (2022: £522,616) for the group financial statements and £603,533 (2022: £490,577) for the company financial statements. In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate. 61 ANNUAL REPORT 2023GOVERNANCE INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF EQUALS GROUP PLC CONTINUED We agreed with those charged with governance that we would report to them misstatements identified during our audit above 47,856 (group audit) (2022: 34,841) and 40,236 (company audit) (2022: 32,705) as well as misstatements below those amounts REPORTING ON OTHER INFORMATION The other information comprises all of the information in the Annual Report other than the financial statements and our that, in our view, warranted reporting for qualitative reasons. auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. With respect to the Strategic report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included. Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below. Strategic report and Directors’ Report In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’ Report for the year ended 31 December 2023 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic report and Directors’ Report. CONCLUSIONS RELATING TO GOING CONCERN Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue to adopt the going concern basis of accounting included: • • • • We assessed and challenged key assumptions used by directors in their determination of going concern of the Group and Company; We used our knowledge of the Group, its industry and the general economic environment in which it operates to identify the inherent risks in its business model and analysed how those risks might affect the Group’s and Company’s financial resources or ability to continue operations over the going concern period. This included the ongoing strategic review and impact of that review, as discussed in the strategic report; We considered whether these risks could plausibly affect the liquidity or profitability in the going concern period by comparing severe, but plausible downside scenarios that could arise from these risks individually and collectively against the level of available financial resources indicated by the Group and Company’s financial forecasts We considered whether the going concern disclosure in note 3.1 to the financial statements gives a full and accurate description of the Directors’ assessment of going concern, including the identified risks, dependencies, and related sensitivities. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group’s and the company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s and the company’s ability to continue as a going concern. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. 62 EQUALS GROUP PLCGOVERNANCE INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF EQUALS GROUP PLC CONTINUED RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT Responsibilities of the directors for the financial statements As explained more fully in the Statement of directors’ responsibilities in respect of the annual report and financial statements, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the company or to cease operations, or have no realistic alternative but to do so. Auditors’ responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. considered those laws and regulations that have a direct impact on the financial statements such as the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to misstate revenue or reduce costs through incorrect capitalisation, creation of fictitious transactions to hide losses or to improve financial performance, and management bias in accounting estimates. Audit procedures performed by the engagement team included: • • • • Obtaining confirmations from third parties to confirm the existence of a sample of transactions and balances; and Identifying and testing journal entries meeting specific fraud criteria, including those posted with certain descriptions, posted and approved by the same individual, backdated journals or posted by infrequent and unexpected users. Review of correspondence with and reports to the regulators, including the FCA; Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to capitalisation of costs to internally generated intangible assets and the measurement and recognition of the goodwill and intangible assets arising from the acquisitions (see related key audit matters above); There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. Irregularities, including fraud, are instances of non-compliance Our audit testing might include testing complete populations with laws and regulations. We design procedures in line of certain transactions and balances, possibly using data with our responsibilities, outlined above, to detect material auditing techniques. However, it typically involves selecting a misstatements in respect of irregularities, including fraud. limited number of items for testing, rather than testing complete The extent to which our procedures are capable of detecting populations. We will often seek to target particular items for irregularities, including fraud, is detailed below. testing based on their size or risk characteristics. In other cases, Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations related to the Financial Conduct Authority’s (‘FCA’) regulations, Alternative Investments Market (‘AIM’) Listing Rules, Anti-Money Laundering legislation and UK tax legislation, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www. frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report. 63 ANNUAL REPORT 2023GOVERNANCE INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF EQUALS GROUP PLC CONTINUED Use of this report This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. OTHER REQUIRED REPORTING COMPANIES ACT 2006 EXCEPTION REPORTING Under the Companies Act 2006 we are required to report to you if, in our opinion: • • • • we have not obtained all the information and explanations we require for our audit; or adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or certain disclosures of directors’ remuneration specified by law are not made; or the company financial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. DANIEL BRYDON (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Manchester 15 April 2024 64 EQUALS GROUP PLCGOVERNANCE Financial statements 65 Consolidated Statement of Comprehensive Income for the year ended 31 December 2023 Revenue on currency transactions Banking revenue Europe revenue Revenue Transaction and commission costs Gross profit Administrative expenses Depreciation charge Amortisation charge Acquisition expenses*1 Total operating expenses Note 4 5 8/9 10 2023 £’000 85,614 8,350 1,747 95,711 (43,385) 52,326 (33,739) (1,228) (7,048) (1,377) (43,392) 2022 £’000 63,541 6,141 – 69,682 (36,027) 33,655 (22,576) (1,211) (6,008) (164) (29,959) Adjusted EBITDA*2 20,637 12,120 Operating profit Gain on the sale of the Cash CGU Finance costs Profit before tax Tax (charge) / credit Profit after tax Attributable to: Owners of Equals Group PLC Non-controlling interest Other comprehensive income: Exchange differences arising on translation of foreign operations Total comprehensive income for the year Earnings per share Basic Diluted 6 7 7 8,934 380 (166) 9,148 (1,402) 7,746 7,746 – 6 7,752 4.22p 4.00p 3,696 – (280) 3,416 135 3,551 3,237 314 – 3,551 1.80p 1.73p *1 Acquisition costs represents and includes costs pursuant to acquisitions. *2 Adjusted EBITDA is not a ‘Generally Accepted Accounting Principles’ (GAAP) measure and represents operating loss before share option charges, depreciation, amortisation and separately reported items (exceptional items). All income and expenses arise from continuing operations. The notes on pages 71 to 104 form an integral part of these financial statements. 66 FINANCIAL STATEMENTSEQUALS GROUP PLC Consolidated and Company Statements of Financial Position as at 31 December 2023 Group 2023 £’000 Note ASSETS Non-current assets Property, plant and equipment Right of use assets Intangible assets and goodwill Deferred tax assets Investments Current assets Inventories Trade and other receivables Derivative financial assets Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES Equity attributable to equity holders Share capital Share premium Share-based payment reserve Other reserves Retained earnings / (accumulated losses) Company loss in the year Non-current liabilities Lease liabilities Current liabilities Trade and other payables Current tax liabilities Lease liabilities Derivative financial liabilities TOTAL EQUITY AND LIABILITIES 8 9 10 6 11 13 14 19 15 16 17 9 18 6 9 19 1,120 2,881 45,629 956 – 50,586 372 13,431 4,760 18,662 37,225 87,811 1,866 28,498 5,564 13,556 8,260 – 57,744 2,730 2,730 22,079 106 750 4,402 27,337 87,811 2022 £’000 1,139 3,367 30,008 1,831 – 36,345 292 10,274 5,616 15,044 31,226 67,571 1,807 53,405 3,231 8,609 (24,148) – 42,904 3,417 3,417 15,489 192 780 4,789 21,250 67,571 Company 2023 £’000 – – – 814 77,750 78,564 – 1,398 – 509 1,907 80,471 1,866 28,498 3,483 8,128 24,574 (1,719) 64,830 – – 15,641 – – – 15,641 80,471 2022 £’000 – – – 1,368 62,902 64,270 – 1,159 – – 1,159 65,429 1,807 53,405 2,397 3,187 1,038 (1,127) 60,707 – – 4,722 – – – 4,722 65,429 The notes on pages 71 to 104 form an integral part of these financial statements. The financial statements on pages 66 to 70 were approved by the Board of Directors after stock market trading hours on 15 April 2024 and were signed on its behalf by: Richard Cooper Director, Chief Financial Officer Company Registration number: 08922461 67 FINANCIAL STATEMENTSANNUAL REPORT 2023 Consolidated and Company Statements of Changes in Equity for the year ended 31 December 2023 Group At 1 January 2022 Profit for the year Acquisition of the remaining NCI (Note 12) Share-based payment charge (note 21) Share options exercised in year Shares issued in year Movement in deferred tax on share-based payment reserve At 31 December 2022 Profit for the year Other comprehensive income: Exchange differences arising on translation of foreign operations Other items: Share-based payment charge (note 21) Share options exercised in year Shares issued in year Shares issued in relation to Roqqett acquisition Dividends paid in year Share premium reduction scheme Share issued in relation to Oonex acquisition Shares yet to be issued in relation to Oonex acquisition Oonex deferred shares – non-payable Transfer of Q-Money contingent liability Movement in deferred tax on share-based payment reserve At 31 December 2023 Company At 1 January 2022 Loss for the year Share-based payment charge (note 21) Share options exercised in year Shares issued in year At 31 December 2022 Loss for the year Share-based payment charge (note 21) Share options exercised in year Shares issued in year Shares issued in relation to Roggett acquisition Dividends paid in year Share premium reduction scheme Acquisition of Oonex fair value increase Acquisition of Oonex deferred consideration Oonex deferred consideration – non-payable Transfer of Q-Money contingent liability At 31 December 2023 Share capital £’000 1,793 – – – – 14 – 1,807 – – – 3 50 6 – – – – – – Share premium £’000 53,218 – – – – 187 Share-based payment £’000 1,858 – – 924 (107) – Retained earnings / (accumulated losses) £’000 (24,590) 3,237 (2,902) – 107 – – 53,405 – 556 3,231 – – (24,148) 7,746 – – – – – 93 – – (25,000) – – – – 1,419 (333) – – – – – – – – – 333 – – (928) 25,000 – – 50 207 – 8,260 Other reserves (note 17) £’000 8,609 – – – – – – 8,609 – 6 – – 494 – – 3,844 860 (50) (207) Total attributable to owners of Equals Group PLC £’000 40,888 3,237 (2,902) 924 – 201 Non- controlling interest £’000 263 314 (577) – – – 556 42,904 7,746 6 1,419 3 143 500 (928) – 3,844 860 – – – – – – – – – – – – – – – – – – – 1,866 – 28,498 1,247 5,564 – 13,556 1,247 57,744 Share premium £’000 53,218 – – – 187 53,405 – – – 93 – – (25,000) – – – – 28,498 Share-based payment £’000 1,580 – 924 (107) – 2,397 – 1,419 (333) – – – – – – – – 3,483 Retained earnings/ (accumulated losses) £’000 931 (1,127) – 107 – (89) (1,718) – 333 – – (928) 25,000 – – 50 207 22,855 Other reserves (note 17) £’000 3,187 – – – – 3,187 – – – – 494 – – 3,844 860 (50) (207) 8,128 Share capital £’000 1,793 – – – 14 1,807 – – 3 50 6 – – – – – – 1,866 Total equity £’000 41,151 3,551 (3,479) 924 – 201 556 42,904 7,746 6 1,419 3 143 500 (928) – 3,844 860 – – 1,247 57,744 Total equity £’000 60,709 (1,127) 924 – 201 60,707 (1,718) 1,419 3 143 500 (928) – 3,844 860 – – 64,830 The following describes the nature and purpose of each reserve within owners’ equity: Share capital Share premium Share-based payment reserve Amount subscribed for shares at nominal value. Amount subscribed for shares in excess of nominal value less directly attributable costs. Proportion of the fair value of share options granted relating to services rendered up to the balance sheet date Retained earnings/(accumulated losses) Cumulative profit and losses attributable to equity shareholders. Other reserves comprise: Merger reserve Contingent consideration reserve Foreign currency reserve Arising on reverse acquisition from Group reorganisation. Arising on equity based contingent consideration on acquisition of subsidiaries. Arising on translation of foreign operations The notes on pages 71 to 104 form an integral part of these financial statements. 68 FINANCIAL STATEMENTSEQUALS GROUP PLC Consolidated Statement of Cash Flows for the year ended 31 December 2023 Group Profit before tax Cash flows from operating activities Adjustments for: Depreciation Amortisation Share-based payment charge Increase in trade and other receivables*1 (Decrease) / increase in trade and other payables*2 Decrease / (increase) in derivative financial assets (Decrease) / increase in derivative financial liabilities Increase in inventories Finance Costs Net cash inflow Tax receipts Tax paid Net cash inflow from operating activities Cash flows from investing activities Property, plant and equipment additions Intangibles additions Net cash used in investing activities Cash flows from financing activities Repayment of borrowings Principal elements of lease payments Interest paid on finance lease Interest paid Acquisition of the remaining non-controlling interest Dividends paid Proceeds from issuance of ordinary shares Net cash outflow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at end of the year Note 5 10 5 19 19 13 8 10 9 9 15 2023 £’000 9,148 1,228 7,048 1,419 (6,416) (386) 856 (387) (80) 167 3,449 12,597 232 (345) 12,484 (479) (6,618) (7,097) – (786) (155) – – (928) 100 (1,769) 3,618 15,044 18,662 2022 £’000 3,416 1,211 6,008 924 (9,920) 9,707 (3,023) 2,707 (124) 280 7,770 11,186 400 (61) 11,525 (271) (5,056) (5,327) (2,000) (837) (169) (47) (1,405) – 200 (4,258) 1,940 13,104 15,044 *1 The movement in the deferred and current tax assets and the right-of-use asset balances (excluding the depreciation charge) is included within the movement in trade and other receivables. *2 The movement in the deferred and current tax liabilities and the lease liability balances is included within the movement in trade and other payables. The notes on pages 71 to 104 form an integral part of these financial statements. 69 FINANCIAL STATEMENTSANNUAL REPORT 2023 Company Statement of Cash Flows for the year ended 31 December 2023 Company Loss before tax Cash flows from operating activities Adjustments for: Decrease / (Increase) in trade and other receivables*1 Increase in trade and other payables*2 Finance costs Net cash inflow from operating activities Cash flows from investing activities Acquisition of subsidiary, net of cash acquired Net cash used in investing activities Cash flows from financing activities Interest paid Acquisition of the remaining non-controlling interest Dividends paid Proceeds from issuance of ordinary shares Net cash outflow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at end of the year 2023 £’000 (1,166) 1,867 3,604 8 4,313 (2,976) (2,976) – – (928) 100 (828) 509 – 509 2022 £’000 (1,332) (1,024) 3,086 3 733 – – (3) (930) 200 (733) – – – *1 The movement in the deferred and current tax assets and the right-of-use asset balances (excluding the depreciation charge) is included within the movement in trade and other receivables. *2 The movement in the deferred and current tax liabilities and the lease liability balances is included within the movement in trade and other payables. The notes on pages 71 to 104 form an integral part of these financial statements. 70 FINANCIAL STATEMENTSEQUALS GROUP PLC Notes to the Consolidated Financial Statements for the year ended 31 December 2023 1 GENERAL INFORMATION The Company is a public company limited by shares and incorporated in England and Wales and domiciled in the UK and whose shares are admitted to trading on AIM, a market operated by The London Stock Exchange. These consolidated its financial statements comprise subsidiaries (together referred to as the ‘Group’). The Group is a financial technology (“fintech”) provider, primarily providing payment services. the Company and The Company and Group’s consolidated financial statements for the year ended 31 December 2023 were authorised for issue after stock market trading hours on 15 April 2024 and the Company and Group’s statement of financial position signed by Richard Cooper (CFO) on behalf of the Board. 2 NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS TO PUBLISHED STANDARDS New and revised accounting standards and interpretations adopted, none of which had any material impact to the Company and Group: • • • IFRS 17 Insurance Contracts (effective date of 1 January 2023) Classification of Liabilities as Current or Non-current (Amendments to IAS 1) (effective date of 1 January 2023) Definition of Accounting Estimates (Amendments to IAS 8) (effective date of 1 January 2023) New standards, amendments and interpretations issued but not yet effective or early adopted, none of which is expected to have a material impact on the Company and Group: • • • • Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) (effective date of 1 January 2024) Non-current Liabilities with Covenants (Amendments to IAS 1) (effective date of 1 January 2024) Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7) (effective date of 1 January 2024) Lack of Exchangeability (Amendments to IAS 21) (effective date of 1 January 2025) 3 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of the Group and Company financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements have been prepared on a historical cost basis with the exception of derivative financial instruments and share option charges which are measured at fair value through profit or loss. 3.1 Basis of preparation These financial statements are prepared in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006 and AIM Regulations. The financial statements are presented in Sterling, the Company and Group’s presentational currency. IFRS requires management to make certain accounting estimates and to exercise judgement in the process of applying the Company and Group’s accounting policies. These estimates are based on the Directors best knowledge and past experience and are explained further in note 3.26. Going concern Details of the Group’s business activities, results, cash flows and resources, together with the risks it faces and other factors likely to affect its future development, performance and position are set out in the strategic report. Certain Group companies are regulated by the Financial Conduct Authority and perform annual capital adequacy assessments. The Group acquired a Belgian company on 4 July 2023 and its activities are regulated by the National Bank of Belgium. Consideration was given to whether there is sufficient liquidity and financing to support the business, the post balance sheet trading of the Group, the regulatory environment and the effectiveness of risk management policies. Management has sensitised its base case, assumed certain business lines might be discontinued and examined the truncating of product development expenditure. The Board also considered the impact of the potential sale of the company on it’s going concern status, as outlined in the strategic report, and concluded there was no impact as at the balance sheet date. The Board, therefore, has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and therefore the financial statements are prepared on a going concern basis. 3.2 Basis of consolidation The consolidated financial statements comprise the financial statements of all Group subsidiaries as at 31 December each year using consistent accounting policies. Business combinations The Group financial statements for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. that meets Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration the definition of a financial instrument is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise, other contingent consideration is re-measured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. 71 FINANCIAL STATEMENTSANNUAL REPORT 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 3 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. A non-controlling interest is recognised, representing the interests of minority shareholders in subsidiaries not wholly owned by the Group. Transactions eliminated on consolidation Intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions are eliminated. On publishing the Company financial statements here, together with the Group financial statements, the Company is taking advantage of exemption in section 408 of the Companies Act 2006 not to present the individual income statement and related notes of the Company which form part of these approved financial statements. 3.3 Foreign currency in In preparing these financial statements, transactions currencies other than the Company and Group’s presentational currency (“foreign currencies”) are recorded at the rates of exchange prevailing on the dates of the transaction. At each statement of financial position date, monetary items in foreign currencies are translated into the presentational currency at the exchange rate prevailing at statement of financial position date. Exchange differences arising on the settlements of monetary items and on the retranslation of monetary items are included in the consolidated statement of comprehensive income for the year. 3.4 Gross value of currency transactions sold and the gross value of banking transactions The gross value of currency transactions sold represent the gross value of currency transactions undertaken with customers by the Group, where the net is reported as revenue. The gross value of banking transactions represents client money deposits by customers. These values are a non-GAAP measure and therefore disclosed as additional information in the consolidated statement of comprehensive income. 3.5 Revenue recognition The Group applies IFRS 15 Revenue from Contracts with Customers for the recognition of revenue. IFRS 15 established a comprehensive framework for determining whether, how much and when revenue is recognised. It affects the timing and recognition of revenue items, but not generally the overall amount recognised. 72 The performance obligations of all revenue streams are satisfied on the transaction date or by the provision of the service for the period described in the contract. Revenue is not recognised where there is evidence to suggest that customers do not have the ability or intention to pay. The Group does not have any contracts with customers where the performance obligations have not been fully satisfied. How the Group recognises revenue for its significant revenue streams is described below. Currency Cards – Retail and Corporate A contract is identified when it is approved by relevant parties and when the card is issued to the customer. Performance obligations and transaction prices are set out in the contract. Revenue from provision of card services is recognised over the period in which they are provided. ATM transaction and out-of-currency variable fees are constrained to the amount not expected to be reversed. Variable revenue is recognised at the point at which it is unlikely to be reversed, typically the transaction date. International Payments and Travel Cash This service relates to the facility to buy and sell currency. A contract is identified when a payment is approved by the Group and the customer. Performance obligations and transaction prices are set out in the contract. Revenue is recognised on the transaction date for both spot and forward transactions. Banking This service relates to the provision of bank account services. A contract is identified when a customer enters an agreement with the Group for a CardOne Banking account. Performance obligations and transaction prices are set out in the contract. Monthly account fees are recognised during the month the account is provided. ATM transaction and out-of-currency variable fees are recognised up to the amount not expected to be reversed. Variable revenue is recognised at the point at which it is unlikely to be reversed, typically the transaction date. Solutions A bespoke enterprise platform aimed at large enterprises. Revenue derived is recognised both on transaction date for payment transactions and on an accrual basis for periodic fees agreed and set out in the contract. Europe The service line for the European market comprising of both European “Solutions” and “Acquiring”. Acquiring is aimed to facilitate corporates to accept card payments from their customers. Revenue is recognised at the point of each card transaction processed and on an accrual basis for periodic fees agreed and set out in the contract. 3.6 Pension costs The Group operates a defined contribution pension scheme and outsources the administration of the pension scheme to a third party. The Group contributes to the pension scheme FINANCIAL STATEMENTSEQUALS GROUP PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 3 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) in line with Auto-enrolment obligations as defined in the Pensions Act 2008 and passes on the employer and employee contributions to the pension scheme administrator on a monthly basis. The employer contributions are recognised as they occur through the payroll. 3.7 Share-based payments Employees (including Directors) of the Group may receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions). In situations where equity instruments are issued and some or all of the services received by the entity as consideration cannot be specifically identified, they are measured as the difference between fair value of the share-based payment and the fair value of any identifiable services received at the grant date, and therefore not at historical cost. The cost of equity-settled transactions with employees, is measured by reference to the fair value at the date on which they are granted. The fair value is determined using an appropriate pricing model, further details of which are given in note 21. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“the vesting date”). The cumulative expense recognised for equity settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance and/or service conditions are satisfied. Where the terms of an equity-settled award are modified, the minimum expense recognised is the expense as if the terms had not been modified. An additional expense is recognised for any modification, which increases the total fair value of the share- based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification. Where an equity settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. its individual financial statements, an increase in the cost of investment in its subsidiaries equivalent to the equity settled share-based payment charge recognised. 3.8 Research and development Research costs are expensed as incurred. Expenditure on IT software and development is recognised as an intangible asset only if the expenditure can be measured reliably, when the intangible asset is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Subsequent to initial recognition, development expenditure is measured at cost less accumulated amortisation and any accumulated impairment losses. 3.9 Treatment of research and development tax credits Research and development tax credits are treated as taxation credits as defined under IAS12 Income Taxes with a credit recorded in the year to which the claim relates. 3.10 Taxation The tax expense comprises current tax, deferred tax and R&D tax credits. 3.11 Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: • • • temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; temporary differences related to investments in subsidiaries to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and taxable recognition of goodwill. temporary differences arising on the initial The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. The dilutive effect of outstanding options is reflected as additional share dilution on the computation of earnings per share. Where the Company grants options over its own shares to the employees of its subsidiaries it recognises, in A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are 73 FINANCIAL STATEMENTSANNUAL REPORT 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 3 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. 3.12 Intangible assets and goodwill (i) Recognition and measurement Goodwill arising on business combinations is measured at cost less accumulated impairment losses. is capitalised but only Development expenditure if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Otherwise, it is recognised in profit or loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost less accumulated amortisation and any accumulated impairment losses. Separately acquired trademarks and licences are shown at historical cost less accumulated impairment losses. Other intangible assets, including customer relationships, patents and trademarks acquired in a business combination are recognised at fair value at the acquisition date. They have a finite useful life and are subsequently carried at cost less accumulated amortisation and impairment losses. (ii) Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred. less their estimated residual values using (iii) Amortisation Amortisation is calculated to write off the cost of intangible assets the straight-line method over their estimated useful lives and is generally recognised in profit or loss. Goodwill is not amortised. The estimated useful lives for current and comparative periods are as follows: Customer relationships Brands Trademarks, licences, patented and non-patented technology 5-11 years 5 years 3-10 years Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. 3.13 Property, plant and equipment All property, plant and equipment is stated at cost of acquisition or production cost less accumulated depreciation and impairment losses. Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss. 74 Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives, using the straight-line method, on the following basis: Plant and equipment Fixtures and fittings Leasehold improvements 3-5 years 3-5 years 10 years 3.14 Investments in subsidiaries Investments in subsidiary undertakings are stated at cost less impairment in value. 3.15 Inventories Inventories comprise of stock of plastic payment cards not yet distributed to customers. Inventories are valued at the lower of cost and net realisable value. Cost is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs in bringing them to their existing location and condition. There are no currency amounts loaded on the stock of cards. 3.16 Trade and other receivables Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Group holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. Details about the Group’s impairment policies and the calculation of the loss allowance are provided in note 3.23. 3.17 Derivative financial assets and liabilities Derivative financial assets and liabilities are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Changes in the fair value of derivatives are included in the income statement. The Group’s derivative financial assets and liabilities at fair value through profit or loss comprise solely of forward foreign exchange contracts, which are dealt on a matched principal basis. 3.18 Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. 3.19 Cash and cash equivalents These include cash in hand and deposits held at call with banks. Any cash held on behalf of customers is segregated from operational cash and safeguarded in accordance with our regulatory obligations. The risks and rewards to the Group that arise from the holding of customer money are principally vested with the customers. As a result, the Group does not account for safeguarded customer cash in the Group’s financial statements. FINANCIAL STATEMENTSEQUALS GROUP PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 3 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.20 Trade and other payables These are initially recognised at fair value and then carried at amortised cost using the effective interest method. The Group does not account for safeguarded customer cash and the associated customer liability in the Group’s financial statements, as the risks and rewards that arise are principally vested with the customers. 3.21 Provisions excluding those under IFRS 9 (see note 3.23) A provision is recognised in the statement of financial position when the Company and Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessment of the time value of money and, where appropriate, the risks specific to the liability. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the consolidated statement of financial position date. 3.22 Leases At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16. Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the Group is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component. The Group recognises a Right of Use asset and a corresponding liability at the date at which the leased asset is available for use. Lease liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the fixed payments (including in-substance fixed payments), less any lease incentives receivable. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lessee’s incremental borrowing rate, being the rate that the individual lessee would have to pay to borrow the funds necessary to lease payments are discounted using the obtain an asset of similar value to the Right of Use asset in a similar economic environment with similar terms, security and conditions. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right of Use assets are measured at cost comprising the following: • the amount of the initial measurement of lease liability; • any lease payments made at or before the commencement date less any lease incentives received; • any initial direct costs. Right of Use assets are depreciated using the straight-line basis over the lease term at a rate between 10-25%. The Group applies the following practical expedients permitted by the standard: • • excluding short term leases (less than 12 months) and low-value items (less than £3,775); exercising extension options where the contract contains a provision. There are no variable payment terms in current leases. 3.23 Impairment A. Non-derivative financial assets IFRS 9 offers two approaches for measuring and recognising the loss allowance: General and Simplified. The general approach should be applied for all financial assets subject to impairment, except for trade receivables or contract assets (IFRS 15) without significant financing component, for these assets simplified approach should be applied. The Group’s financial instruments measured at amortised cost falling within the scope of the standard are (i) trade and other receivables and (ii) cash and cash equivalents. While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial. Trade and other receivables The Group applies the IFRS 9 Simplified approach, by recognising a loss allowance based on a lifetime expected credit loss (“ECL”) at each reporting date. B. Non-financial assets At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows 75 FINANCIAL STATEMENTSANNUAL REPORT 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 3 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs of disposal (“FVLCOD”). Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. FVLCOD is the price that would be received to sell an asset or CGU in an orderly transaction between market participants at the measurement date, less any incremental costs directly attributable to the disposal of an asset or CGU, excluding finance costs and income tax expense. The Group’s CGU’s for impairment testing are defined in note 10. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro-rata basis. An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 3.24 Director’s remuneration From 2020, the Group have adopted accrual accounting for the recognition of annual bonuses to Executive Directors, with bonuses being accrued in the year to which they relate, provided in management’s opinion it seems more certain than not that any award dependent on the fulfilment of performance criteria will, in fact, be met. Previously bonuses were recognised in the year they were awarded. See note 5b for further details. requires management 3.25 Judgements and estimates the Group’s consolidated financial The preparation of statements to make estimates, judgements and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively. A. Judgements The judgements made in applying the Group’s accounting policies that have the most significant effect on the amounts recognised in the financial statements were as follows: (i) Technology development intangibles Development costs are capitalised based on management’s judgements technologically and economically feasible, the asset is expected to generate future net cash inflows and a successful outcome is probable in accordance with IAS 38 Intangible Assets. Management the project that is 76 judgement is required to determine the useful economic lives of these assets and uses market and technological knowledge in determining these, and to determine if development costs can be capitalised. Development costs cover employee gross wages, employers NI, employers pension contributions, IT based expenditure relating to contractor costs and development projects. (ii) IFRS 16 Leases – lease term and extension options In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). All extension options in office leases have been included in the lease liability. (iii) IFRS 16 Leases – incremental borrowing rate To determine the incremental borrowing rate, the Group uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group which do not have recent third-party financing, and makes adjustments specific to the lease; inflation, country risk premium, financing spread level of indebtedness and asset specific risk. B. Assumptions and estimation uncertainties The assumptions and estimation uncertainties at the end of the financial year that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities in the next financial year were as follows: (i) Impairment of goodwill and intangibles The Group assesses goodwill annually for impairment. The assumptions and estimates used in the impairment test for goodwill including the sensitivity testing are disclosed in note 10. (ii) Valuation of share options The Group fair values share options on date of grant using the Black-Scholes and Monte-Carlo models. Further details on the use of fair value can be found in note 3.26 Measurement of fair values and note 21 Share options. (iii) Valuation of derivative instruments The Group enters into foreign exchange forward positions with clients which it matches against foreign exchange forward positions with various financial institutions, earning a margin in the process. Open positions are fair valued at the balance sheet date using Hedgebook forward rates for all major currencies. (iv) Measurement uncertainty related to business combinations • Recognition and measurement of intangible assets & goodwill on acquisition date is detailed in accounting policy 3.12. In determining the value of the identifiable intangible assets at acquisition, judgement is required which give rise to estimation uncertainty. The identifiable intangible assets are measured with reference to the forecasted cash flows. The forecasted cash flows are derived from a market acquirer perspective taking into consideration the impact FINANCIAL STATEMENTSEQUALS GROUP PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 3 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) of expected revenue growth and customer attrition over the forecast period. The discount rate representing the subsidiary’s weighted average cost are used to discount the forecasted cash flows to it’s present value. The impact of a 1% increase/decrease in the discount rate used will result in the value of the intangible assets identified decreasing/ increasing by £348k. • including deferred Measurement of consideration, consideration - total compensation for acquisitions may include an element of deferred consideration payable, subject to the fulfilment of certain conditions post-acquisition. Where this is the case, management use historical information and management forecasts to estimate a liability, using the discounted cash-flow methodology, to derive a fair value of the deferred consideration payable. This estimate is revised at each reporting date to reflect latest current and expected outcomes. 4 REVENUE AND SEGMENTAL ANALYSIS 3.26 Measurement of fair values When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: • • Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities. Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices). • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). Segment results are reported to the Board of Directors (being the chief operating decision maker) to assess both performance and support strategic decisions. The Board reviews financial information on revenue for the following segments: Currency Cards (both personal and corporate), International Payments, Solutions, Travel Cash, Banking and Central (which includes overheads and corporate costs). Revenue is primarily derived from UK based customers. IFRS 15 requires the presentation of disaggregated revenue from contracts with customers into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The Group has assessed that the disaggregation of revenue by operating segments is appropriate in meeting this disclosure requirement as this is the information regularly reviewed by the Board, to evaluate the financial performance of the Group. Group Year ended 31 December 2023 Segment revenue Transaction and commission costs Gross profit Administrative expenses Depreciation charge Amortisation charge Acquisition expenses Finance costs Gain on the sale of the cash CGU Profit / (loss) before tax Current assets Non-current assets Total liabilities Total assets International payments £’000 Solutions £’000 Currency Cards £’000 Banking £’000 Travel Cash £’000 Europe £’000 Central £’000 Total £’000 39,270 30,971 15,231 8,350 142 1,747 (22,452) 16,818 (13,280) 17,691 (5,436) 9,795 (1,353) 6,997 (92) 50 (772) 975 – – – – – – – – – – – – 16,818 17,691 – 21,048 – 21,048 – 1,956 – 1,956 – – – – – – 9,795 – 5,164 – 5,164 – – – – – – 6,997 5,045 10,341 (1,828) 13,558 – – – – – – 50 – – – – – – – – – – 975 1,400 11,171 (1,014) 11,557 – – – 95,711 (43,385) 52,326 (33,739) (33,739) (1,228) (7,048) (1,377) (166) (1,228) (7,048) (1,377) (166) 380 380 (43,178) 30,780 906 (27,225) 4,461 9,148 37,225 50,586 (30,067) 57,744 77 FINANCIAL STATEMENTSANNUAL REPORT 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 4 REVENUE AND SEGMENTAL ANALYSIS (CONTINUED) International Payments £’000 Solutions £’000 Currency Cards £’000 Banking £’000 Travel Cash £’000 Central £’000 Total £’000 Group Year ended 31 December 2022 Segment revenue Transaction and commission costs Gross profit Administrative expenses Depreciation charge Amortisation charge Acquisition expenses Finance costs Profit / (loss) before tax Current assets Non-current assets Total liabilities Total assets 5 OPERATING PROFIT 34,357 (21,362) 12,995 15,636 (8,089) 7,547 12,539 (4,618) 7,921 6,141 (1,405) 4,736 1,009 (553) 456 – – – – – 12,995 – 17,975 – 17,975 – – – – – 7,547 – – – – – – – – – 7,921 – 5,341 – 5,341 – – – – – 4,736 2,343 4,372 (2,287) 4,428 Operating profit is stated after charging the following operating expenses: Staff costs (net of expenditure capitalised) IT and telephone cost (net of expenditure capitalised) Other professional fees Compliance costs Marketing costs Property and office costs (net of expenditure capitalised) Travel and subsistence Other share option related costs Other Sub-total, cash-based expenses Contingent consideration Share option charge Foreign exchange loss Sub-total, non cash-based costs Total administrative expenses Depreciation of right of use assets Depreciation of property, plant and equipment Amortisation charge Acquisition costs Total operating expenses Note 5a 5c 5d 5f 5g 9 8 78 – – – (22,576) (1,211) (6,008) (164) (280) (30,239) 28,883 8,529 (22,380) 15,032 69,682 (36,027) 33,655 (22,576) (1,211) (6,008) (164) (280) 3,416 31,226 36,345 (24,667) 42,904 2022 £’000 14,406 2,012 1,201 683 1,858 932 440 46 3 21,581 – 924 71 995 22,576 822 389 6,008 164 29,959 – – – – – 456 – 128 – 128 2023 £’000 20,270 3,306 2,874 1,508 2,565 1,160 633 28 89 32,433 (459) 1,419 346 1,306 33,739 692 536 7,048 1,377 43,392 FINANCIAL STATEMENTSEQUALS GROUP PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 5 OPERATING PROFIT (CONTINUED) 5A STAFF COSTS Number of employees The number of employees (including Directors) was: Administrative staff – monthly average for the year Number of staff at the balance sheet date Average wage per employee Gross salary All employees are employed by the subsidiaries of Equals Group PLC. Employee costs Cost of staff on payrolls Cost of contractors and consultants Gross costs Less: categorised in transaction and commission costs Less: reported within internally generated software intangibles Wages and salaries Social security costs Pension costs Less: categorised in transaction and commission costs Contractors Recruiting Training Benefits and similar 2023 Headcount 341 397 2023 £’000 46 2022 Headcount 268 285 2022 £’000 55 2023 £’000 28,248 2,398 30,646 (4,141) 26,505 (5,653) 20,852 2023 £’000 19,849 2,168 739 22,756 (4,141) 18,615 755 969 145 368 2022 £’000 20,990 1,471 22,461 (3,864) 18,597 (4,191) 14,406 2022 £’000 14,812 1,769 597 17,178 (3,864) 13,314 211 557 105 219 Total staff costs included in administrative and acquisition expenses* 20,852 14,406 * Staff costs charged in acquisition expenses is £582k (2022: £36k) 79 FINANCIAL STATEMENTSANNUAL REPORT 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 5 OPERATING PROFIT (CONTINUED) 5B DIRECTORS’ REMUNERATION Company All bonuses and conditional bonuses, whether the conditions have been made or not, have, from 2023 onwards, been accrued. CEO bonus In relation to the 2022 financial year, a bonus of £330k was paid during 2023. The CEO is entitled to a bonus of £560k in relation to 2023 should all performance conditions be met. At the date of signing these financial statements, not all of the conditions have been met and £498k is immediately payable in April 2024. The full amount of the bonus together with associated national insurance contributions has been accrued. CFO bonus In relation to the 2022 financial year, a bonus of £273.6k was paid during 2023. The CFO is entitled to a bonus of £360k in relation to 2023 should all performance conditions be met. At the date of signing these financial statements, not all of the conditions have been met and £344k is immediately payable in April 2024. The full amount of the bonus together with associated national insurance contributions has been accrued. Gross Salary £’000 Bonus paid in 2023 £’000 Employer Pension £’000 Total Remuneration Paid £’000 Benefits £’000 385 323 708 93 68 62 931 420 274 694 – – – 694 4 4 8 – – – 8 29 7 36 – – – 36 838 608 1,446 93 68 62 1,669 Gross Salary £’000 Bonus £’000 Employer Pension £’000 Total Remuneration Paid £’000 Benefits £’000 350 304 654 82 65 55 856 330 160 490 – – – 490 4 64 68 – – – 68 33 23 56 – – – 56 717 551 1,268 82 65 55 1,470 Year ended 31 December 2023 Paid during the year Ian Strafford-Taylor Richard Cooper Sub-total - executives Non-Executive Directors A R F Hughes S Herbert C Bones Total remuneration paid Year ended 31 December 2022 Paid during the year Ian Strafford-Taylor Richard Cooper Sub-total - executives Non-Executive Directors A R F Hughes S Herbert C Bones Total remuneration paid 80 FINANCIAL STATEMENTSEQUALS GROUP PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 5 OPERATING PROFIT (CONTINUED) The above tables have been prepared on a cash paid basis for 2023, whereas the remuneration committee report will be shown on an accrual basis to detail out the bonuses accrued as at 31 December 2023. Highest Paid Director Gross Salary 2023 £’000 385 2022 £’000 350 Group The total amount paid during 2023 to Executive Directors, when including Executive Directors of all the subsidiaries in the consolidated Group, was £4,065k (2022: £3,466k). This included pension payments of £43k (2022: £105k). Details of CEO and CFO bonuses accrued during the year but not paid are given in the Company disclosures above. Information about Directors’ share options is given in note 21. 5C IT AND TELEPHONE IT and telephone costs Capitalised costs Total IT and telephone costs included in administrative expenses 5D PROFESSIONAL FEES Professional and Court fees incurred on the capital restructuring of the Company Professional and advisory fees incurred on the strategic review Statutory audit fees – fees payable for the Statutory audit of the Group Other professional fees Total professional fees included in administrative expenses Professional fees incurred on acquisitions Less: amounts included in non-current assets Total professional fees included in acquisition expenses 5E AUDIT FEES 2023 £’000 3,859 (553) 3,306 2023 £’000 58 656 493 1,667 2,874 795 (131) 664 2022 £’000 2,420 (408) 2,012 2022 £’000 – – 420 781 1,201 128 – 128 Included in professional fees above are amounts charged by the Group’s auditors are shown inclusive of VAT are as follows: Statutory audit fees Fees payable for the statutory audit of the Group Total audit fees included in professional fees 2023 £’000 493 493 There were no non-audit fees during the current and preceding year. Audit fees are borne by Equals Group PLC. 2022 £’000 420 420 81 FINANCIAL STATEMENTSANNUAL REPORT 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 5 OPERATING PROFIT (CONTINUED) 5F PROPERTY AND OFFICE COSTS Property costs, including rent, rates, service charges and utilities IFRS 16 property lease payments and finance costs (note 9) Total property costs included in administrative and acquisition expenses Property costs charged in acquisition expenses is £14k (2022: £nil) 5G CONTINGENT CONSIDERATION 2023 £’000 1,872 (697) 1,175 2022 £’000 1,695 (763) 932 Contingent consideration represents the fair value of additional consideration estimated in respect of the acquisitions of Equals Connect Limited NCI in September 2022, Roqqett Limited in January 2023 and Oonex SA (renamed to Equals Money Europe SA) in July 2023. This decrease in consideration payable is the result of revenues underperforming compared to forecasts at the time of acquisition and receivables at the time of acquisition not being recovered. 6 TAXATION The Group’s taxation charge or credit is the composite of: 1. Corporation tax charge arising on profits in the financial year. 2. R&D tax credits received or receivable on development expenditure (which is debited to the Balance Sheet). 3. Deferred taxation arising on temporary and permanent timing differences and losses carried forward, to the extent that the Company believes these to be recoverable from future taxable profits. At 31 December 2023, the Group had tax losses available to be offset against future taxable profits of £12,384k (2022: £17,632k). The losses can be carried forward indefinitely and have no expiry date. In addition to corporation tax, the Group paid the following taxation costs during the year: a. Employers National Insurance contributions - £2,683k (2022: £2,145k) b. Irrecoverable VAT - £2,658k (2022: £1,584k) Group Corporation tax charge* Current tax charge Origination and reversal of temporary differences Recognition of previously unrecognised deductible temporary differences – current year Deferred tax – prior year adjustment Deferred tax charge / (credit) Total tax charge / (credit) 2023 £’000 259 259 534 844 (235) 1,143 1,402 2022 £’000 192 192 (203) (124) – (327) (135) * Corporation tax charge is paid under quarterly instalments, £153k has been paid up to 31 December 2023 with the remainder £106k payable in January 2024 and April 2024. 82 FINANCIAL STATEMENTSEQUALS GROUP PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 6 TAXATION (CONTINUED) Factors affecting tax charge / (credit) for the year The charge / (credit) for the year can be reconciled to the profit per the consolidated statement of comprehensive income as follows: Profit before taxation: Continuing operations Taxation at the UK corporation rate tax of 23.5% (2022: 19.0%) Net permanent differences between tax and accounting Net impact of R&D tax credit claim Remeasure of deferred tax asset on carry forward losses – current year Remeasure of deferred tax asset on carry forward losses – prior year Effect of change in tax rates Utilisation of tax losses Total tax charge / (credit) for the year Movement in deferred tax balances 2023 £’000 9,148 2,150 190 (897) 844 (235) 194 (844) 1,402 2022 £’000 3,416 649 78 (655) (124) – – (83) (135) Net balance at 1 January £’000 Acquired in business combinations £’000 Recognised to equity £’000 Recognised to profit or loss £’000 Net balance at 31 December £’000 Deferred tax asset £’000 Deferred tax liability £’000 (3,683) (979) – – (196) (4,857) 4 (235) – – (4,857) (235) 1,247 – 260 (1,211) 2,951 3,097 2,951 3,096 – – – – – (979) 1,247 (1,143) 956 6,047 (5,092) (239) 1,445 4,308 1,831 Net balance at 1 January £’000 Acquired in business combinations £’000 Recognised to equity £’000 Recognised to profit or loss £’000 Net balance at 31 December £’000 Deferred tax asset £’000 Deferred tax liability £’000 (3,546) (196) 673 4,018 949 – – – – – – – 556 – 556 (137) (3,683) (43) (239) 216 290 327 1,445 4,308 1,831 – – 1,445 4,308 (3,683) (239) – – 5,753 (3,922) Group 2023 Intangibles Property plant and equipment Equity settled share-based payments Unutilised tax losses Deferred tax assets/ (liabilities) Group 2022 Intangibles Property plant and equipment Equity settled share-based payments Unutilised tax losses Deferred tax assets/ (liabilities) The standard rate of corporation tax applicable to the Group for the year ended 31 December 2023 was 23.5%. The rate in the year ending 31 December 2024 will be 25%. Deferred tax assets and liabilities have been recognised at the substantively enacted rate. The Group estimates it has £12,384k of UK tax losses to be carried forward at 31 December 2023 and €3,000k of Belgian tax losses to be carried forward at 31 December 2023. 83 FINANCIAL STATEMENTSANNUAL REPORT 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 6 TAXATION (CONTINUED) Assumptions and estimation uncertainties The Group has recorded a £3,096k (2022: £4,308k) deferred tax asset in relation to brought forward and carried forward tax losses and has a further £nil (2022: £nil) deferred tax asset unrecognised. Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is considered more likely than not. The Group has concluded that the deferred assets will be recoverable using estimated future taxable income based on a based on approved board budget for 2024 and 5-year forecast horizon. The Group has recorded a £2,951k (2022: £1,445k) deferred tax asset in relation to share option awards outstanding at the year-end. Deferred tax assets are recognised for share options when the share options have intrinsic value that could be deductible for tax purposes, this is classed as share options in-the-money at the year-end. 7 EARNINGS PER SHARE Basic earnings per share The calculation of basic earnings per share has been based on the profit attributable to ordinary shareholders and weighted average number of ordinary shares outstanding. The profit after tax attributable to ordinary shareholders of the Group is £7,746k (2022: £3,236k) and the weighted average number of shares for the period was 183,624,192 (2022: 180,304,802). Diluted earnings per share The calculation of diluted earnings per share has been based on the profit attributable to ordinary shareholders and weighted average number of ordinary shares outstanding, after adjustment for the effects of all dilutive potential ordinary shares. The weighted average number of dilutive shares is 193,444,728 (2022: 187,583,788). Earnings per share Basic 2023 4.22p Diluted 2023 4.00p Basic 2022 1.80p Diluted 2022 1.73p Adjusted earnings and adjusted EPS We have observed that the analyst community prepares EPS calculations on a number of different bases. To try and harmonise these we have prepared below a basis which hopefully offers consistency: P&L YTD Attributable to owners of Equals Group PLC Add back: – Share option charges – Amortisation of acquired intangibles. – Exceptional items – Acquisition costs – Tax impacts thereon* Adjusted earnings FY-2023 £’000s 7,746 1,447 1,672 714 1,377 183 13,139 FY-2022 £’000s 3,236 970 1,282 – 164 31 5,683 * Tax impacts thereon are associated to items not added back to the tax computations relating to Exceptional items and Acquisition costs. The resulting earnings per share are shown below: Adjusted earnings per share (in pence) Basic FY-2023 7.16 Basic FY-2022 3.15 Diluted FY-2023 6.79 Diluted FY-2022 3.03 84 FINANCIAL STATEMENTSEQUALS GROUP PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 8 PROPERTY, PLANT AND EQUIPMENT Plant and machinery £’000 Fixtures and fittings £’000 Leasehold improvements £’000 Group Cost At 1 January 2023 Acquisitions through business combinations Disposals Dissolved company disposal Additions At 31 December 2023 Accumulated Depreciation At 1 January 2023 Acquisitions through business combinations Disposals Dissolved company disposal Charge for the year At 31 December 2023 Net book value At 31 December 2023 Group Cost At 1 January 2022 Additions At 31 December 2022 Accumulated Depreciation At 1 January 2022 Charge for the year At 31 December 2022 Net book value At 31 December 2022 Total £’000 3,427 48 (768) (17) 478 3,168 2,288 9 (768) (17) 536 2,048 1,351 12 (536) – 4 831 615 3 (536) – 233 315 1,590 36 (232) (17) 446 1,823 1,313 6 (232) (17) 210 1,280 543 486 – – – 28 514 360 – – – 93 453 61 516 1,120 Plant and machinery £’000 Fixtures and fittings £’000 Leasehold improvements £’000 1,363 227 1,590 1,133 180 1,313 277 464 22 486 270 90 360 126 1,329 22 1,351 496 119 615 736 Total £’000 3,156 271 3,427 1,899 389 2,288 1,139 85 FINANCIAL STATEMENTSANNUAL REPORT 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 9 LEASES Group Right of use assets At 1 January 2022 Additions to right of use assets Modifications to leases Depreciation charge for the year At 31 December 2022 Additions to right of use assets Modifications to leases Depreciation charge for the year At 31 December 2023 Lease liabilities At 1 January 2022 Additions to lease liabilities Lease finance expenses Modification to leases* Credit notes Payments At 31 December 2022 Additions to lease liabilities Lease finance expenses Modification to leases* Payments At 31 December 2023 Current lease liabilities Non-current lease liabilities Vehicles £’000 267 157 (61) (170) 193 343 (53) (173) 310 Vehicles £’000 257 157 10 (51) – (191) 182 316 18 (50) (172) 294 112 182 294 Property £’000 4,607 4 (784) (653) 3,174 – (84) (519) 2,571 Property £’000 5,005 – 159 (808) 473 (814) 4,015 – 137 (198) (768) 3,186 638 2,548 3,186 Total £’000 4,874 161 (845) (823) 3,367 343 (137) (692) 2,881 Total £’000 5,262 157 169 (859) 473 (1,005) 4,197 316 155 (248) (940) 3,480 750 2,730 3,480 * Modifications to lease assets and lease liabilities relate to a negotiated early termination of a Bureau property lease, early termination of a vehicle and modifications to a current lease for the main London office property lease. 2023 £’000 599 2022 £’000 830 Net lease liability 86 FINANCIAL STATEMENTSEQUALS GROUP PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 9 LEASES (CONTINUED) (i) Amounts recognised in the consolidated statement of comprehensive income Group Depreciation charge for right of use assets Lease finance expenses Modification of lease terms – net impact Expense relating to short-term and low value items leases 173 17 3 – 193 Vehicles 2023 £’000 Property 2023 £’000 Total 2023 £’000 692 155 519 138 (114) (111) 66 609 66 802 Vehicles 2022 £’000 Property 2022 £’000 170 10 10 – 190 653 159 (24) 67 855 Total 2022 £’000 823 169 (14) 67 1,045 Included within expenses relating to low value assets, which are below the de-minimis level, are amounts relating to IT equipment (printer and photocopiers etc) and property costs (fridges, microwaves etc). The total cash outflow for leases in 2023 was £940k (2022: £1,005k) including for principal and interest. 10 INTANGIBLE ASSETS AND GOODWILL Trademarks, licences, patented and non-patented technology Customer relationships £’000 £’000 30,584 1,403 5,481 2,214 39,682 17,118 7 6,156 – 23,281 4,652 – – 3,914 8,566 2,956 – 887 – 3,843 Goodwill £’000 13,468 – – 9,930 23,397 – – – – – Brands £’000 455 – – – 455 450 – 5 – 455 Under construction £’000 1,374 (1,403) 1,137 – 1,108 – – – – – Total £’000 50,532 – 6,618 16,058 73,208 20,524 7 7,048 – 27,579 23,397 16,401 4,723 – 1,108 45,629 Group Cost At 1 January 2023 Reclassifications Additions Acquisitions through business combinations* At 31 December 2023 Amortisation At 1 January 2023 Acquired through business combinations Charge for the year Disposals At 31 December 2023 Net book value At 31 December 2023 87 FINANCIAL STATEMENTSANNUAL REPORT 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 10 INTANGIBLE ASSETS AND GOODWILL (CONTINUED) *Acquisitions through business combinations Oonex S.A. Hamer and Hamer Ltd Roqqett Ltd At 31 December 2023 Trademarks, licences, patented and non-patented technology £’000 – – 2,214 2,214 Goodwill £’000 8,801 1,129 – 9,930 Customer relationships £’000 2,436 1,478 – 3,914 Trademarks, licences, patented and non-patented technology Customer relationships £’000 £’000 26,253 214 4,321 (205) 30,583 11,935 5,196 (13) 17,118 4,652 – – – 4,652 2,216 741 – 2,957 Goodwill £’000 13,468 – – – 13,468 – – – – Brands £’000 455 – – – 455 378 71 – 449 Under construction £’000 661 (214) 927 – 1,374 – – – – Group Cost At 1 January 2022 Reclassifications Additions Disposals At 31 December 2022 Amortisation At 1 January 2022 Charge for the year Disposals At 31 December 2022 Net book value At 31 December 2022 Total £’000 11,237 2,607 2,214 16,058 Total £’000 45,489 – 5,248 (205) 50,532 14,529 6,008 (13) 20,524 13,468 13,465 1,695 6 1,374 30,008 Included within additions to ‘assets under construction’ and ‘trademarks, licenses, patented and non-patented technology’ is £6,206k (2022: £4,599k) for internally generated software. The intangibles under construction balance consists of costs incurred on software development projects that were not completed before the end of the reporting period. IAS 36 Impairment of Assets requires that intangible assets that are not available for use are required to be tested for impairment at least on an annual basis. The balance at reporting date relates to additions made during the reporting period, which are tested annually for impairment during the 2023 calendar year. Goodwill Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business combination. Impairment testing of goodwill that was recognised in a business combination is required by IAS 36 to be performed on an annual basis or whenever indicators of impairment exist. Where goodwill has been allocated to a cash-generating unit (“CGU”) that CGU is tested for impairment to determine whether the carrying amount of the CGU may not be recoverable. The Group has carried out the impairment review of goodwill recognised in the following CGUs as required by IAS 36: • Banking • International Payments (including businesses of Hermex, Eiger, Equals Connect (previously Casco), the International Payments business of CFX and Effective) • Solutions • Europe (Equals Money Europe S.A.) 88 FINANCIAL STATEMENTSEQUALS GROUP PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 10 INTANGIBLE ASSETS AND GOODWILL (CONTINUED) This represents the lowest level at which goodwill is monitored for internal management purposes. Management estimates discount rates using pre-tax rate that reflects the current market assessment of the time value of money and the specific risks associated with the asset for which the future cash flow estimates have not been adjusted. The rate used to discount the forecast cash flows are based upon the CGU’s weighted average cost of capital (WACC). The WACC for the CGUs were: Banking; 15.18% (2022: 16.15%), International Payments; 14.28% (2022: 14.30%), Solutions; 15.18% (2022: 0%) and Europe; 15.18% (2022: 0%) The Group prepared cash flow forecasts derived from the most recent detailed financial budgets approved by management for the next five years. For the purpose of the value in use calculation the management forecasts were extrapolated into perpetuity using a growth rate of 3% (2022: 3%), representing the expected long-run rate of inflation in the UK. The forecasts assume growth rates in acquisitions which in turn drive the forecast collections and cost figures. The Group has conducted a sensitivity analysis on the impairment test of the CGU’s carrying value. The table below summarises the changes required and the key assumptions which would result in the recoverable value of each of the CGUs being equal to the respective carrying amounts: Group Decrease in revenue Banking International Payments Solutions Europe Group Increase in discount rate (WACC) Banking International Payments Solutions Europe 2023 13.02% 18.76% 33.75% 23.97% 2023 23.97% 50.40% 6904.82% 21.73% 2022 9.40% 10.84% – – 2022 6.45% 22.61% – – Based on the sensitivity analyses, the Group has determined that for Banking, International Payments, Solutions and Europe there are no reasonable possible changes to the key assumptions which would result in the carrying value of the CGU exceeding its recoverable value at 31 December 2023. 11 INVESTMENTS Company – shares in subsidiary undertakings Cost At 1 January Additions through share-based payments* Additions through subsidiary acquisitions At 31 December Net Book Value At 31 December 2023 £’000 62,902 1,419 13,429 77,750 2022 £’000 61,978 924 – 62,902 77,750 62,902 * Additions through share-based payments are an expense recognised in Equals Money PLC, as the parent Company Equals Group PLC has no payroll and therefore all employees are employed via subsidiaries. In the opinion of the Directors the aggregate value of the Company’s investment in subsidiary undertakings is not less than the amount included in the statement of financial position. 89 FINANCIAL STATEMENTSANNUAL REPORT 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 11 INVESTMENTS (CONTINUED) Subsidiary undertakings The Company holds the share capital (both directly and indirectly) of the following companies: Subsidiary Undertaking Equals Money PLC Equals Money UK Limited Equals Money International Limited Equals Connect Limited*1 Roqqett Limited Hamer and Hamer Limited*1 Equals Money Europe S.A. Equals Pay LLC Fair Foreign Exchange Ireland Limited*1 City Forex Limited*2 FairFX Limited*2 Spectrum Payment Services Limited*2 Fair Payments Limited*2 Oonex Limited*2 Company number 05539698 06268340 09558664 07131446 12330839 09347930 0849.185.510 7477374 IE537487 13518424 14344612 14344429 14811356 14476167 *1 Share capital held indirectly. Country of registration or incorporation England and Wales England and Wales England and Wales England and Wales England and Wales England and Wales Belgium United States of America Ireland England and Wales England and Wales England and Wales England and Wales England and Wales Class Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Shares held % Status 100 Trading 100 Trading 100 Trading 100 Trading 100 Trading 100 Trading 100 Trading 100 Trading 100 Dormant 100 Dormant 100 Dormant 100 Dormant 100 Dormant 100 Dormant *2 The UK dormant Companies are exempt from the requirement to prepare and file individual accounts by virtue of Companies Act 2006 section 394A and section 448A. Hamer and Hamer is no longer licenced by the FCA to trade, and the company is in the process of being wound-up. The registered office address of subsidiary undertakings is Third Floor, Thames House, Vintners Place, 68 Upper Thames Street, London, EC4V 3BJ. They have a reporting date of 31st December. 12 ACQUISITIONS AND DISPOSALS A. Acquisition of Oonex S.A. (renamed Equals Money Europe S.A.) On 4th July 2023, Equals Group PLC acquired the entire ordinary share capital of Oonex S.A. (Oonex), an authorised payment institution regulated by the National Bank of Belgium (NBB) to enable the provision of Equals products into the European Economic Area (EEA). Acquiring Oonex allows the Group to bring its payments, cards and multi-currency account products to a new suite of customers across Europe. Oonex’s ability to issue local IBANs within the Eurozone will expand the addressable market for the Group’s platform and products. The fair value of consideration on the date of acquisition transferred was calculated as follows: Initial share consideration – Fair valued* Share Consideration – Fair valued Completion Liabilities – Cash Contingent Share consideration – Fair valued* Contingent Assumed Liabilities – Cash Total consideration transferred 3,939,294 new ordinary shares of 1p each in Equals Group PLC at an issue price of 81p per share Fair Value consideration thereon *Fair valued – initial share consideration 90 £’000 3,757 3,757 2,461 987 1,644 8,849 £’000 3,190 567 3,757 FINANCIAL STATEMENTSEQUALS GROUP PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 12 ACQUISITIONS AND DISPOSALS (CONTINUED) 1,061,706 new ordinary shares of 1p each in Equals Group PLC at an issue price of 81p per share Fair Value consideration thereon *Fair valued - further contingent consideration £’000 860 127 987 The initial consideration for the acquisition was £3,191k satisfied by the issue of 3,939,294 new ordinary shares of 1p each in Equals Group PLC at an issue price of £0.81 per share (‘Issue Price’). Completion liabilities of £2,461k were settled on acquisition. Further contingent consideration of up to £987k is subject to conditions due to be paid in the next six months and will be satisfied by the issue of 1,061,706 new ordinary shares of 1p each in Equals Group PLC at an issue price of 81p per share. Additional contingent consideration of assumed liabilities of £1,644k are expected to be settled over the next 12 months. For the period post-acquisition to 31 December 2023, Oonex SA contributed revenue of £1,747k and net loss of £774k to the Group’s results. If the acquisition occurred on the 1 January 2023 revenue of £3,144k and loss before tax of £2,667k would have been contributed to the Group’s results. The recognised amounts of assets acquired, and liabilities assumed at the date of acquisition were as follows: Property, plant and equipment Intangibles – customer relationships Cash Net working capital Debt Deferred tax liabilities Total identifiable net liabilities acquired £’000 103 2,436 204 (2,168) (14) 561 (609) (48) Based on the valuation of the intangibles and enacted UK corporation tax rates a deferred tax liability of £609k was recognised as a result of the identified intangible asset. Goodwill comprises the value to shortcut Equals EU API Licencing journey and to allow Equals to launch the full Equals Money product for direct sales into almost every EEA state without further presence and open up significant new Solutions product corridors. The Oonex transaction and other comparable transactions in the market typically have high Goodwill representing the speed and security of access to the market. Management advised it could have taken Equals at least eighteen months and significant resource and costs to independently acquire an EU API Licence. Goodwill arising from the acquisition has been recognised as follows: Consideration transferred Fair value of identifiable net liabilities Goodwill B. Acquisition of Hamer and Hamer Limited £’000 8,849 (48) 8,801 On 20th April 2023, Equals Money PLC, a fully owned subsidiary of the Group, acquired the entire ordinary share capital of Hamer and Hamer Limited, an authorised payment institution regulated by the FCA, established in 2014 and has historically focused on the provision of international payments. The initial consideration payable was £1,500k payable in cash with a potential additional consideration of £768k depending on future performance. For the period post-acquisition to 31 December 2023, Hamer and Hamer Limited contributed revenue of £839k and net profit of £466k to the Group’s results. If the acquisition occurred on the 1 January 2023 revenue of £1,285k and profit before tax of £371k would have been contributed to the Group’s results. The contingent consideration will be payable in cash and is subject to a number of performance conditions. 91 FINANCIAL STATEMENTSANNUAL REPORT 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 12 ACQUISITIONS AND DISPOSALS (CONTINUED) The acquisition date fair value of consideration transferred was calculated as follows: Cash Consideration Contingent consideration Total consideration transferred The recognised amounts of assets acquired, and liabilities assumed at the date of acquisition were as follows: Property, plant and equipment Intangibles – customer relationships Cash Trade and other receivables Trade and other payables Deferred tax liabilities Total identifiable net assets acquired £’000 1,500 1,500 768 2,268 £’000 35 1,478 293 102 (400) 1,508 (369) 1,139 Based on the valuation of the intangibles and enacted UK corporation tax rates a deferred tax liability of £369k was recognised as a result of the identified intangible asset. Goodwill comprises the value of expected synergies arising from the acquisition and additional value attributed by the acquirer in relation to the future expected cash flows, which is not separately recognised. None of the goodwill recognised is expected to be deductible for income tax purposes. Goodwill arising from the acquisition has been recognised as follows: Consideration transferred Fair value of identifiable net assets Goodwill C. Acquisition of Roqqett Limited £’000 2,268 (1,139) 1,129 On 6th January 2023, Equals Group PLC acquired the entire ordinary share capital of Roqqett Limited, an open-banking platform regulated by the FCA, established in 2019 and has historically focused on open-banking software. The acquisition will provide Equals Group with two key licenses it currently does not hold; Roqqett is authorised by the FCA as both an AISP (Account Information Service Provider) and PISP (Payment Initiation Service Provider). This creates the ability to provide customers with an alternative route to acquire payments from their customers, i.e. open banking services. The initial consideration payable was £1,000k less gross liabilities of £831k and therefore £169k payable in cash. There was further potential additional consideration of £1,250k depending on future performance and platform delivery. This has been settled in full by 31 March 2024. For the period post-acquisition to 31 December 2023, Roqqett Limited contributed revenue of £nil and net loss of £366k to the Group’s results. If the acquisition occurred on the 1 January 2023 revenue of £nil and loss before tax of £375k would have been contributed to the Group’s results. The contingent consideration of £1,250k is made up of three deferred payments. One of up to £250k satisfied in cash on receipt of R&D tax credits from 2022 claim and two of £500k, one in cash and the other satisfied by the issue of ordinary shares in Equals Group PLC at an issue price of 87.23p (five-day volume-weighted average price as of Friday 25 November 2022). 92 FINANCIAL STATEMENTSEQUALS GROUP PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 12 ACQUISITIONS AND DISPOSALS (CONTINUED) The deferred consideration has been satisfied as follows: 1. £215k was satisfied in cash on receipt of the 2022 R&D tax credit on 26th May 2023. 2. Deferred share consideration of £500k was settled via 573,197 new shares being issued at 87.23p on 8th December 2023. 3. Remaining £500k cash deferred consideration was paid on 7th March 2024. The acquisition date fair value of consideration transferred was calculated as follows: Cash Contingent consideration Total consideration transferred Incidental consideration expenses Total transferred The recognised amounts of assets acquired, and liabilities assumed at the date of acquisition were as follows: Cash Trade and other receivables Trade and other payables Total identifiable net liabilities acquired Intangible software arising from the acquisition has been recognised as follows: Total transferred Fair value of identifiable liabilities Intangibles £’000 169 1,250 1,419 131 1,550 £’000 152 238 (1,054) (664) £’000 1,550 664 2,214 Intangibles comprises of the Open Banking Platform Technology only. A ‘concentration test’ was applied under IFRS 3 – Business Combinations where substantially all the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets). D. Disposal of Travel Cash CGU On 14th March 2023, Equals Group PLC disposed the Travel Cash CGU from the Group to Currency Exchange Corporation Ltd, having a predominantly B2C customer base and aligning with the objective towards being a B2B focussed payments platform. The disposed CGU comprised of one physical travel branch operated by the Group in the City of London. The Travel Cash CGU was disposed for an initial £250k with a further £100k subject to certain conditions being met to Currency Exchange Corporation Ltd. The conditions attached to the further £100k is expected to be considered in 2026. The carrying value of the assets disposed of were £128k shown in note 4 and consisted of right of use and intangible assets. For the current year up to the disposal date, the Travel Cash CGU contributed revenue of £142,170 and net profit before tax of £50,000 to the Group’s results. Gain on the disposal of the Travel Cash CGU has been recognised as follows: Net IFRS 16 lease liabilities of the CGU Proceeds from the disposal consideration Less: associated legal and supplier termination costs Gain on disposal £ 114,933 350,000 (85,210) 379,723 93 FINANCIAL STATEMENTSANNUAL REPORT 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 12 ACQUISITIONS AND DISPOSALS (CONTINUED) E. Acquisition of Equals Connect NCI On 30 September 2022, Equals through its subsidiary Equals Money PLC acquired the remaining 48% minority interest in Equals Connect Limited, a UK-based payment service provider, which is regulated by the FCA as an Authorised Payment Institution (API) for a maximum consideration of £3,430k. The initial consideration is £1,405k, which £475k of this being payable to cover the share of distributable reserves attributable to the minority shareholders. An additional £1,395k consideration is payable at certain dates, with a further £630k additional consideration dependant on certain targets and milestones being exceeded. As the Group had majority control at the start of the year of this subsidiary and the change in the parent’s ownership does not result in the parent losing control of the subsidiary, the total consideration has been treated as equity transactions and recognised against retained earnings as per IFRS 10. Contingent consideration – as at 1 January 2023 Tranche 5 FV adjustment Tranche 5 payment – 21 August 2023 Tranche 6 payment – 3 October 2023 Year-end FV adjustment future tranches Contingent consideration remaining – as at 31 December 2023 13 INVENTORIES Group Finished goods £’000 2,025 (155) (162) (930) (270) 508 2022 £’000 292 2023 £’000 372 The Group’s inventories comprise of cards. Included within transaction and commission costs is a charge relating to stock of £280k (2022: £207k) incurred in the ordinary course of business. 14 TRADE AND OTHER RECEIVABLES Current assets Trade receivables Amounts due from Group undertakings Other receivables Prepayments Accrued income Group 2023 £’000 5,642 – 4,842 1,789 1,158 13,431 2022 £’000 3,434 – 4,684* 1,344 812 10,274 Company 2023 £’000 – 1,272 – 126 – 1,398 2022 £’000 – 192 830* 137 – 1,159 * During the year ended 2022, the Group entered into a loan agreement with Roqqett Limited for a principal amount of £830K. The loan was unsecured and did not bear interest. The terms of the loan required that the principal be converted towards the payment to acquire Roqqett Limited upon regulatory approval from the Financial Conduct Authority (FCA) which was received on 6th January 2023. See note 12 for information on the acquisition of Roqqett Limited. Information about the Group’s exposure to market risk, credit risk and impairment losses for trade and other receivables is included in note 20. Amounts owed by group undertaking are unsecured, non-interest bearing and repayable on demand. Group – movement in expected credit loss (“ECL”) Cost Allowance for ECLs at 1 January Released during the period Allowance for ECLs at 31 December The ECL allowance for the Company is £nil (2022: £nil) 94 2023 £’000 27 30 57 2022 £’000 95 (68) 27 FINANCIAL STATEMENTSEQUALS GROUP PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 15 CASH AND CASH EQUIVALENTS Group Cash at bank 16 SHARE CAPITAL Group and Company Authorised, issued and fully paid-up capital B/fwd Exercised in year Issued in the year - SIP Issued in year – Oonex acquisition Issued in year – Roqqett acquisition C/fwd - 186,627,898 (2022: 180,712,473) ordinary shares of £0.01 each Weighted average number of shares 2023 £’000 18,662 2023 £’000 1,807 3 10 40 6 1,866 2023 No. 180,712,473 352,758 1,051,176 3,938,294 573,197 186,627,898 183,624,192 Deferred shares of 1,000,000 relating to the Oonex acquisition were issued on 4th January 2024. 17 OTHER RESERVES Group At 31 December 2021 and 2022 Shares issued in relation to Roqqett acquisition Acquisition of Oonex fair value increase Acquisition of Oonex deferred consideration Oonex deferred consideration – non-payable Exchange differences arising on translation of foreign operations Transfer of Q-Money contingent liability At 31 December 2023 Company At 31 December 2021 and 2022 Shares issued in relation to Roqqett acquisition Acquisition of Oonex fair value increase Acquisition of Oonex deferred consideration Oonex deferred consideration – non-payable Transfer of Q-Money contingent liability At 31 December 2023 Merger reserve £’000 Contingent consideration reserve £’000 Foreign currency reserve £’000 6 – – – – 6 – 12 8,396 494 3,844 860 (50) – – 13,544 207 - – – – – (207) – Merger reserve £’000 Contingent consideration reserve £’000 2,980 494 3,844 860 (50) – 8,128 207 - – – – (207) – 2022 £’000 15,044 2022 £’000 1,793 7 7 – – 1,807 Total £’000 8,609 494 3,844 860 (50) 6 (207) 13,556 Total £’000 3,187 494 3,844 860 (50) (207) 8,128 95 FINANCIAL STATEMENTSANNUAL REPORT 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 18 TRADE AND OTHER PAYABLES Current liabilities Trade payables Amounts owing to Group undertakings Taxation and social security Other creditors Accruals and deferred income Group 2023 £’000 4,847 – 1,389 1,658 14,291 22,185 2022 £’000 4,767 – 911 390 9,421 15,489 Company 2023 £’000 558 12,244 – 1,519 1,320 15,641 2022 £’000 70 3,980 – – 672 4,722 Amounts owed to group undertakings are unsecured, non-interest bearing and repayable on demand. 19 DERIVATIVE FINANCIAL ASSETS AND FINANCIAL LIABILITIES 19.1 Derivative financial assets Financial assets at fair value through profit or loss Group Foreign exchange forward contracts Total financial instruments at fair value 19.2 Derivative financial liabilities Financial liabilities at fair value through profit or loss Group Foreign exchange forward contracts Total financial instruments at fair value 20 FINANCIAL INSTRUMENTS Fair Value 2023 £’000 4,760 4,760 Fair Value 2023 £’000 4,402 4,402 Notional Principal 2023 £’000 315,294 315,294 Notional Principal 2023 £’000 311,154 311,154 Fair Value 2022 £’000 5,616 5,616 Fair Value 2022 £’000 4,789 4,789 Notional Principal 2022 £’000 253,300 253,300 Notional Principal 2022 £’000 147,360 147,360 The Group’s financial instruments comprise cash, foreign exchange forward contracts and various items arising directly from its operations. The main purpose of these financial instruments is to provide working capital for the Group. In common with other businesses, the Group is exposed to the risk that arises from its use of financial instruments. The Group does not deal in any financial instrument contracts for its own benefit. This note describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information is found throughout these consolidated financial statements. 20.1 Principal financial instruments The principal financial instruments of the Group, from which financial instrument risk arises, are as follows: Group Financial instruments held at amortised cost Cash and cash equivalents Trade and other receivables Trade and other payables Lease liabilities 96 2023 £’000 18,662 11,642 (15,268) (3,480) 2022 £’000 15,044 8,930 (10,582) (4,197) FINANCIAL STATEMENTSEQUALS GROUP PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 20 FINANCIAL INSTRUMENTS (CONTINUED) Financial instruments held at fair value through profit or loss Derivative financial assets – Forward foreign exchange contracts Derivative financial liabilities – Forward foreign exchange contracts Trade and other payables generally have a maturity of less than one month. 2023 £’000 4,760 (4,402) 2022 £’000 5,616 (4,789) Forward foreign exchange contracts fall into Level 2 of the fair value hierarchy as set out in note 3.26 since Level 2 comprises those financial instruments which can be valued using inputs other than quoted prices that are observable for the asset or liability either directly (i.e., prices) or indirectly (i.e., derived from prices). In 2023, the unrealised gain or loss recognised in the income statement on the fair value of financial instruments was a gain of £260k (2022: £30k loss). This was reported in administration costs in the statement of comprehensive income. 20.2 Financial risk management objectives and policies Credit risk As required under IFRS 9, the Group analysed its trade debtors and split them into portfolios: bank and other financial institutions, financial service providers and corporate customers. The Group has significant short-term receivables and security collateral arrangements with banks and other financial institutions which are generally considered to be a low credit risk due to the financial strength of the counterparty. The ageing of financial assets at the statement of financial position date is as follows: 2023 Group Trade and other receivables – gross Allowance for Expected Credit Loss (ECL) Trade and other receivables – net Derivative financial assets 2022 Group Trade and other receivables – gross Allowance for ECL Trade and other receivables – net Derivative financial assets On demand £’000 10,127 57 10,184 330 On demand £’000 8,903 27 8,930 556 Between 1 and 3 months £’000 252 – 252 1,852 Between 1 and 3 months £’000 – – – 2,268 Between 3 and 12 months £’000 1,206 – 1,206 2,177 Between 3 and 12 months £’000 – – – 2,711 Over 1 year £’000 – – – 401 Over 1 year £’000 – – – 81 Total £’000 11,585 57 11,642 4,760 Total £’000 8,903 27 8,930 5,616 Liquidity risk Management of liquidity risk is achieved by monitoring budgets and forecasts and actual cash flows and available cash balances. The daily settlement flows in respect of financial asset and liability, spot and swap contracts require adequate liquidity which is provided through intra-day settlement facilities. Further details of the risk management objectives and policies are disclosed in the principal risks and uncertainties section of the Strategic Report. The table below analyses the Group’s gross undiscounted financial liabilities by their contractual maturity date. 2023 Group Trade and other payables Derivative financial liabilities Lease liabilities On demand and within 1 month £’000 15,268 389 63 Between 1 and 3 months £’000 – 1,637 125 Between 3 and 12 months £’000 – 2,019 563 Over 1 year £’000 – 357 2,729 Total £’000 15,268 4,402 3,480 97 FINANCIAL STATEMENTSANNUAL REPORT 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 20 FINANCIAL INSTRUMENTS (CONTINUED) 2022 Group Trade and other payables Derivative financial liabilities Lease liabilities On demand and within 1 month £’000 10,582 453 65 Between 1 and 3 months £’000 – 2,276 130 Between 3 and 12 months £’000 – 1,936 585 Over 1 year £’000 – 124 3,417 Total £’000 10,582 4,789 4,197 Market risk Market risk arises from the Group’s use of foreign currency. This is detailed below. Interest rate risk The Group is subject to interest rate risk as its bank balances and borrowings are subject to interest at a floating rate. Foreign currency risk Foreign currency risk arises from having assets and liabilities in currencies other than sterling. The Group’s balance sheet includes foreign currency balances placed with card issuers and foreign currency settlement partners. The sterling equivalent of foreign currency balances with card providers at year end was £154k (2022: £160k), which is primarily made up of USD and EUR. The Group’s foreign currency (FX) collateral with FX settlement partners is immaterial as collateral is primarily settled in sterling. The Group does not hold any material foreign currency cash at bank on its balance sheet. Financial instruments and fair value risk The following table shows the carrying amount of financial assets and financial liabilities. It does not include a fair value adjustment as the carrying amount is a reasonable approximation of fair value. 31 December 2023 Financial assets Cash and cash equivalents Trade and other receivables Derivative financial assets Financial liabilities Trade and other payables Lease liabilities Derivative financial liabilities 31 December 2022 Financial assets Cash and cash equivalents Trade and other receivables Derivative financial assets Financial liabilities Trade and other payables Lease liabilities Derivative financial liabilities Measured at amortised cost £’000 Measured at fair value £’000 18,662 11,642 – 30,304 15,268 3,480 – 18,748 – – 4,760 4,760 – – 4,402 4,402 Measured at amortised cost £’000 Measured at fair value £’000 15,044 8,930 – 23,974 10,582 4,197 – 14,779 – – 5,616 5,616 – – 4,789 4,789 Total £’000 18,662 11,642 4,760 35,064 15,268 3,480 4,402 23,150 Total £’000 15,044 8,930 5,616 29,590 10,582 4,197 4,789 19,568 All financial instruments measured at fair value are classified as level 2 financial instruments in the fair value hierarchy. 98 FINANCIAL STATEMENTSEQUALS GROUP PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 20 FINANCIAL INSTRUMENTS (CONTINUED) Capital management policy and procedures The Group’s capital management objectives are: • to ensure that the Group and Company will be able to continue as a going concern; and • to maximise the income and capital return to the Company’s shareholders. The Company is subject to the following externally imposed capital requirements: • as a public limited company, the Company is required to have a minimum issued share capital of £50k. Equals Money PLC and Equals Connect Limited, wholly owned subsidiaries, are each subject to the following capital requirement under the Payment Service Regulations 2009. • either 10% of fixed overheads for the preceding year or the initial capital requirement of €25k, whichever is the higher. Equals Money UK Limited, a wholly owned subsidiary, is subject to the following capital requirement under the Payment Service Regulations 2009. • either 10% of fixed overheads for the preceding year or the initial capital requirement of €323k, whichever is the higher. Equals Money International Limited (formerly Fair Payments Limited), a wholly owned subsidiary, is subject to the following capital requirement under the Electronic Money Regulations 2011: The Company is subject to the following externally imposed capital requirements: • capital at least equal to 2% of the average outstanding electronic money of the institution or €350k, whichever is the higher. The Group has complied with these requirements. 21 SHARE OPTIONS The Group issues equity-settled share-based payments to certain Directors and employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value of options granted has been calculated with reference to the Black-Scholes option pricing model except for the new LTIP scheme offered to the Executive Directors in 2021 and all 2022 and 2023 LTIP awards which have been calculated under the Monte Carlo pricing model as detailed below due to various performance conditions. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions. During the year ended 31 December 2023, there were a number of share-based payment transactions within the Group. Date Granted 22/07/2014 22/07/2014 22/07/2014 28/09/2016 28/09/2016 28/09/2016 28/09/2019 28/09/2019 28/09/2019 01/09/2020 01/09/2023 01/09/2020 01/09/2020 01/09/2020 01/09/2020 01/09/2020 01/09/2020 Cancelled/replaced At 1 January 2023 Number 200,000 447,750 3,725,050 283,333 283,333 283,333 166,667 166,667 166,667 250,000 250,000 250,000 416,667 416,667 416,667 166,667 166,667 Exercise price (£) 0.07 0.22 0.36 0.30 0.30 0.30 1.01 1.01 1.01 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 Cancelled Number – – – – – – (166,667) (166,667) (166,667) – – – – – – – – Granted Number – – – – – – – – – – – – – – – – – Exercised Number – – – – – – – – – – – – – – – (166,667) (166,667) At 31 December 2023 Number 200,000 447,750 3,725,050 283,333 283,333 283,333 – – – 250,000 250,000 250,000 416,667 416,667 416,667 – – Lapsed Number – – – – – – – – – – – – – – – – – 99 FINANCIAL STATEMENTSANNUAL REPORT 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 21 SHARE OPTIONS (CONTINUED) Exercise price (£) – – – – At 1 January 2023 Number 2,244,424 1,250,000 3,182,500 – 14,733,058 Cancelled/replaced Cancelled Number – – – – (500,000) Granted Number – – – 2,600,000 2,600,000 Exercised Number (19,424) – – – (352,757) At 31 December 2023 Number 2,185,000 1,250,000 3,132,500 2,600,000 16,390,301 Lapsed Number (40,000) – (50,000) – (90,000) – – – 624,000 784,000 – 1,408,000 – (36,512) – (36,512) – – 459,448 459,448 (16,000) (19,880) – (35,880) (36,000) (39,760) – (75,760) 572,000 687,848 459,448 1,719,296 16,141,058 (536,512) 3,059,448 (388,637) (165,760) 18,109,597 Date Granted 18/10/2021 18/10/2021 14/12/2022 06/11/2023 Number of share options Number of SIP awards issued but accounted for as a share option award 07/01/2022* 20/01/2023* 04/12/2023* Total number of SIPs Total number of options * These grants are per IFRS 2, service period commences before the grant date and thus the shares are disclosed in the year which participants are made aware of the grant conditions and thus the expense is accrued at the date participants become aware of the grant condition. Which in the case of the 2023 SIP was 6 November 2022. In 2023 executives have been granted performance-based share options shown in the table below. Ian Strafford-Taylor - options - SIPs Richard Cooper - options - SIPs Total - Executive Directors* Employees Ian Strafford-Taylor Richard Cooper Executive Directors* Employees At 1 January 2023 Number 7,655,500 8,000 7,663,500 1,208,334 8,000 1,216,334 8,879,834 7,261,225 16,141,059 At 1 January 2022 Number 7,022,000 1,504,000 8,526,000 4,581,800 13,107,800 Cancelled Number Granted Number Exercised Number Lapsed Number At 31 December 2023 Number – (24) (24) 550,000 2,024 552,024 – (24) (24) (48) (536,464) (536,512) 300,000 2,024 302,024 854,048 2,205,400 3,059,448 - – – (333,334) – (333,334) (333,334) (55,304) (388,638) Cancelled Number – – – (16,000) (16,000) Granted Number 641,500 379,000 1,020,500 2,946,000 3,966,500 Exercised Number – (666,666) (666,666) – (666,666) - – – 8,205,500 10,000 8,215,500 – – – – (165,760) (165,760) 1,175,000 10,000 1,185,000 9,400,500 8,709,097 18,109,597 At 31 December 2022 Number 7,663,500 1,216,334 8,879,834 7,261,224 16,141,058 Lapsed Number – – – (250,576) (250,576) * See Remuneration Committee report on pages 46 to 53 for a list of current Directors’ share options. 100 FINANCIAL STATEMENTSEQUALS GROUP PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 21 SHARE OPTIONS (CONTINUED) The above share options issued in Equals Group PLC have been granted to both Directors and employees of the Group. At 31 December 2023, there were unexercised share options amounting to 8.78% (2022: 8.15%) of the Company’s total issued shares. Of the above options 9,401k (2022: 8,880k) have been granted to Directors of the Company (see Remuneration Committee report pages 46 to 53, with an additional 3,198k (2022: 2,421k) having been granted to individuals who are, or have been during the year, Directors of wholly owned subsidiaries within the Group. In November 2023, Equals Group PLC awarded new shares under their discretionary share incentive plan. A total of 459,448 share options were awarded under the plan to various employees, which had a vesting period of three years from the grant date. The shares will be awarded as ‘free shares’. The estimated future grant date fair value for the basis of the FY2023 charge was £1.15, as in accordance with IFRS 2. The actual grant date was 4th December 2023. Weighted average exercise price of options The number and weighted average exercise prices of share options are as follows: Outstanding at the beginning of the year Granted during the year Cancelled during the year Lapsed during the year Exercised during the year Outstanding at the end of the year Exercisable at the end of the year Weighted average exercise price 2023 0.1822 Number of options 2023 16,141,058 Weighted average exercise price 2022 0.2397 Number of options 2022 13,107,800 – 3,059,448 0.0020 3,966,500 0.9422 (0.0100) (0.2487) 0.1272 0.3188 (536,512) (165,760) (388,637) 18,109,597 7,222,801 – (0.0100) (0.2900) 0.1822 0.3706 (16,000) (250,576) (666,666) 16,141,058 7,056,134 The weighted average share price for the year was £0.99 (2022: £0.84). The fair values of share options in the relevant schemes are calculated using a Black-Scholes model. The fair value of a share award is based on the share price at the date of the grant. Details of the inputs made into that model are disclosed in the table below. Weighted average share price (£) Weighted average exercise price (£) Weighted average expected volatility Weighted average option life in years Weighted average risk-free rate Weighted average expected dividends Weighted average fair value of the options granted (£) At 1 January 2023 0.51 0.25 35.4% 5.9 0.90% None 0.32 Granted during year 1.16 0.01 d 44.0% b 3.0 a 4.31% c None 1.15 c The fair values of share options in the relevant schemes are calculated using a Monte Carlo model. The fair value of a share award is based on the share price at the date of the grant. Details of the inputs made into that model are disclosed in the table below. Weighted average share price (£) Weighted average exercise price (£) Weighted average expected volatility Weighted average option life in years Weighted average risk-free rate Weighted average expected dividends Weighted average air value of the options granted (£) At 1 January 2023 0.83 – 58.7% 3.0 2.57% None 0.57 Granted during year 1.11 Nil d 45.1% b 3.0 a 4.43% c None – d 101 FINANCIAL STATEMENTSANNUAL REPORT 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 21 SHARE OPTIONS (CONTINUED) a. Option life is an estimate of the average time expected between the issue of the options and exercise. This is calculated on each individual tranche of options issued and varies between 3 and 10 years. b. Expected volatility has been determined on the company share price for the same time frame as the average option life for that tranche, this varies between 35% and 59%. c. Risk Free rate is based on the UK gilt rate for a time period equal to the Option Life at the date of grant of the option. This varies between 0.9% and 4.4%. d. A summary of the exercise price and fair value of the options granted is summarised below. If the fair value of the option was deemed to be nil it is marked accordingly. 22/07/2014 22/07/2014 22/07/2014 28/09/2016 26/09/2019 01/09/2020 18/10/2021 18/10/2021 07/01/2022 14/12/2022 20/01/2023 06/11/2023 04/12/2023 Exercise price (£) 0.07 0.22 0.36 0.30 1.01 0.29 0.01 – – – – – – Fair Value (£) 0.28 0.20 0.12 0.13 0.39 0.16 0.62 0.34 0.68 0.66 0.87 0.89 1.15 For the options outstanding at 31 December 2023, the weighted average fair values and the weighted average remaining contractual lives (being the time period from 31 December 2023 until the lapse date of each option) are set out below: Historic Share Schemes Pre 2021 2021 Long-term Incentive Plan - SLT 2021 Long-Term Incentive Plan - Exec 2021 Share Incentive Plan 2022 Long-Term Incentive Plan - SLT 2022 Long-term Incentive Plan - Exec 2022 Share Incentive Plan 2023 Long-Term Incentive Plan – SLT 2023 Long-Term Incentive Plan – Exec 2023 Share Incentive Plan Weighted average fair value of options outstanding (£) 0.14 0.62 0.34 0.68 0.66 0.66 0.88 0.89 0.89 1.15 Weighted average remaining contractual life (years) 2.52 7.80 7.80 8.02 8.96 8.96 9.06 9.84 9.84 9.93 The charge expensed to the statement of comprehensive income is £1,419k (2022: £924k). During the year the Group recognised a £1,507k increase (2022: £779k increase) in deferred tax assets in relation to unexercised share options. Of this amount, £260k was recognised in the current year’s tax credit (2022: £216k tax credit) and £1,247k (2022: £562k) was taken to equity. 22 FINANCIAL COMMITMENTS The Group has no significant financial commitments not on the balance sheet for 2023 and 2022 year-end. 102 FINANCIAL STATEMENTSEQUALS GROUP PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 23 RELATED PARTY TRANSACTIONS The related parties of the Group and related companies under IFRS are the Group’s key management personnel. Key Management Personnel Key management personnel are those responsible for controlling and directing the activities of the Group and comprise the Executive Directors, the Non-Executive Directors and members of the Executive. Key management personnel compensation paid during the year is as follows: Salaries, fees and other short-term employee benefits Post-employment benefits 2023 £’000 4,978 50 5,028 Key management personnel share-based payment expense for all existing and new share schemes: Share-based payment expense Company Intercompany transactions and balances with the rest of the Group: 31 December 2022 Balance sheet Equals Money PLC Equals Money International Limited Equals Money UK Limited Roqqett Limited* Equals Money Europe Due from 2023 £’000 – 192 – 1,079 – 1,271 Due to 2023 £’000 (11,531) – (500) – (214) (12,245) 2023 £’000 737 Due from 2022 £’000 – 192 – – – 192 The intercompany balances within the Group are unsecured, non-interest bearing and repayable on demand. * £830k due from Roqqett in 2022, this is shown in other debtors due to acquisition being approved on 6th January 2023. Year ended 31 December 2023 Ian Strafford-Taylor Richard Cooper Year ended 31 December 2022 Ian Strafford-Taylor Richard Cooper Number of transactions 3 2 5 Number of transactions 7 5 12 Value of Transactions £ 50,339 70,000 120,339 Value of Transactions £ 55,160 598.457 653,617 2022 £’000 4,064 108 4,172 2022 £’000 612 Due to 2022 £’000 (3,980) – – – – (3,980) Revenue Generated £ 38 7 45 Revenue Generated £ 36 439 475 The Group engaged in trading transactions for payment services with directors of Company. The transactions were conducted on commercial terms consistent with those that the Group offers to its employees and therefore is considered to be at arm’s length. 103 FINANCIAL STATEMENTSANNUAL REPORT 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 CONTINUED 24 ULTIMATE CONTROLLING PARTY The Directors consider Equals Group PLC to be the ultimate controlling party of the Group. 25 POST BALANCE SHEET EVENTS On 13 March 2024, a share issue agreement was signed to convert the 29 February 2024 Roqqett Loan due to Equals Group PLC debt of £1,128k to Equity. In the parent company Equals Group PLC accounts, investment in subsidiary will increase by £1,128k and intercompany loan receivable from Roqqett will be reduced to £nil. In the accounts for Roqqett Limited, the intercompany loan payable to Equals Group PLC will reduce to £nil and share capital and share premium will increase by £1,128k. These entries will be eliminated at the Group level. 104 FINANCIAL STATEMENTSEQUALS GROUP PLC 5 Year Trading History Additional unaudited information (£ millions) Turnover Revenue Gross Profit Profit after tax Cash 2019 2,888 30.9 20.6 (5.4) 11.3 2020 3,493 29.0 18.3 (6.9) 10.0 2021 6,529 44.1 24.2 (2.3) 13.1 2022 9,216 69.7 33.7 3.6 15.0 2023 12,412 95.7 52.3 7.7 18.7 Equals Group PLC Contents COMPANY INFORMATION About Equals Group 1 2 3 4 5 Directors and Advisors Financial Glossary Financial Summary and Highlights FY-2023 History STRATEGIC REPORT 7 Chairman’s Statement 9 Chief Executive Officer’s Report 14 Chief Financial Officer’s Report 24 Statement on Section 172 of the Companies Act 2006 GOVERNANCE 27 Report on Corporate Governance 33 ESG Report 41 Report of the Audit Committee 44 Report of the Risk Committee 46 Directors’ Remuneration Report 54 Directors’ Report 57 Statement of Directors’ Responsibilities in Respect of the Annual Report and Financial Statements 58 Independent Auditors’ Report to the Members of Equals Group Plc FINANCIAL STATEMENTS 66 Consolidated Statement of Comprehensive Income 67 Consolidated and Company Statements of Financial Position 68 Consolidated and Company Statements of Changes in Equity 69 Consolidated Statement of Cash Flows 70 Company Statement of Cash Flows 71 Notes to the Consolidated Financial Statement IBC Trading History Subscribe to our investor alert service and receive all press releases, financial results and other key shareholder messages as soon as they become available. WWW.EQUALSPLC.COM E Q U A L S G R O U P P L C A N N U A L R E P O R T 2 0 2 3 www.equalsplc.com Annual Report 2023 EQUALS GROUP PLC THIRD FLOOR, THAMES HOUSE VINTNERS PLACE 68 UPPER THAMES STREET LONDON, EC4V 3BJ ENGLAND