Cornerstone FS plc (LON:CSFS), a Forex and payments solutions company offering multi-currency accounts to businesses and individuals through its proprietary technology platform, today announced its unaudited interim results for the six months ended 30 June 2023.

Revenue for the six months to 30 June 2023 increased by 90% to £3.6 million compared with £1.9 million for the first half of the previous year.

This growth reflects the strategic and operational changes that were implemented during the second half of 2022 and which continued into the current period focusing on driving direct sales and fully commercialising the platform. The Group also benefited from full six-month contributions from Capital Currencies and Pangea FX, which were acquired in H1 2022 and H2 2022, respectively.

Gross margin for the first half of 2023 was 61.0% (H1 2022: 61.7%). Whilst the proportion of revenue derived from white label partners has declined to 9% (from 26% in H1 2022), the gross margin benefit of this was offset by a change in commission arrangements with Robert O’Brien, the General Manager APAC and Middle East, which were previously agreed at enhanced levels in 2023 compared with the prior year.

Mr. O’Brien agreed to vary and extend certain elements of his compensation package, decreasing his commission share on certain established revenue streams and increasing his share of the profitability of the Dubai office. This was immediately beneficial for the Group and, as a result of this change, the Group generated stronger gross margin in the second quarter of 2023 compared with the first quarter.

As a result of gross margin remaining at a broadly consistent level, combined with the significant growth in revenue, gross profit increased by 88% to £2.2m (H1 2022: £1.2m).

Operating expenses were reduced to £2.2m in H1 2023 compared with £4.1m for the first half of the previous year. This primarily reflects a reduction of £2.1m in share-based (non-cash) compensation to £173k (H1 2022: £2.2m) following the Company reaching an agreement in H2 2022 with Mr. O’Brien and the Asia team to vary the terms of their incentivisation agreement pursuant to which they received £nil share-based compensation during the period (H1 2022: £2.1m).

The Group also recognised a £0.2m profit during the period from the disposal of its subsidiary, Avila House Ltd, with the share purchase agreement having been entered in December 2022 and completed during the period under review. Together with the reduced share-based compensation, this more than offset the increase in other administrative expenses to £2.0m (H1 2022: £1.7m) and amortisation of intangible assets to £0.3m (H1 2022: £0.2m).

The Group generated other operating income of £0.2m (H1 2022: £nil) based on interest on client cash balances (see note 3 to the financial statements).

As a result of the increased gross profit and other operating income and reduced operating expenses, the Group generated a profit from operations of £0.1m compared with a loss from operations of £3.0m for the first half of 2022.

Net finance costs were £115k (H1 2022: £49k), which was primarily related to interest on loan notes due to Mr. O’Brien (principal balance of £2.0m) and in respect of the Pangea FX acquisition (principal balance of £0.2m), both of which have a fixed coupon rate of 6% p.a.

As a result, the Group generated a maiden profit before tax of £23k in the six-month period compared with a loss before tax of £3.0m for the first half of 2022. Earnings per share on a basic and diluted basis were 0.06 pence (H1 2022: loss of 13.05 pence per share), which was achieved despite an increase in the weighted average number of ordinary shares in issue to 55,791,324 (H1 2022: 23,143,117).

On an adjusted basis (to exclude share-based compensation and transaction costs, as well as the other operating income and profit from the disposal of Avila House), the Group generated a first half-year period of positive EBITDA of £0.2m, compared with an adjusted EBITDA loss of £0.6m for H1 2022.

The strong trading momentum that was experienced in the first half of the year has continued into the second half.

The solid growth being generated reflects the advancements being made across the business as the Group realises the benefits of the enhancements made to its operations and offering towards the end of 2022 and to date in 2023. With the continued strengthening of its sales team, and a clear focus on Cornerstone’s strategic growth priorities, the Group expects this revenue trend to be sustained throughout the year.

As a result, and with the continued careful management of the cost base, the Group now expects to report results for its full year 2023 significantly ahead of market expectations, including achieving its first full year of positive adjusted EBITDA.