International payments platform Cornerstone FS (CSFS) is knocking the ball out the park.
Indeed in a better than expected year-end trading update, the company said that 2023 revenues had doubled year-on-year to £9.6m (vs. £4.8m in FY22). Additionally, CSFS reported an adjusted EBITDA of "no less than £1.4m" (vs. -£0.9m FY22) and £1.4m (-£0.8m) in positive FCF - alongside closing December with cash resources of £2.3m (est +£0.1m net post £2.2m of loan notes) vs. £0.8m in June.
What's more, the figures were no less impressive when viewed sequentially (see charts below), with H2 sales, gross margins and EBITDA climbing to £6.0m, est 64% and £1.2m (20% margin) respectively, compared to £3.6m, 61% and £0.2m (5%) in H1.
So what’s been driving this industry leading growth?
Well, since taking the helm in Sept'22, the CEO James Hickman has transformed CSFS from being a purely 'white labelled' forex execution system into a rapidly expanding international payments group that serves SMEs and HNW individuals directly with tailored 'white glove' services.
This strategic shift has not only attracted more clients (906 vs 803 in FY22) and generated higher average transaction values, but also improved client cross-selling and engagement after the successful upskilling and broadening of both the sales team and range of currency pairs offered.
Similarly, fixed costs and commissions have been tightly controlled, which augmented by improved mix and economies of scale, has helped turbo-charge EBITDA drop through rates (est to be 30%+).
Nonetheless, this is just the start. In fact, by combining overseas expansion, continued UK market share gains, new product launches, and M&A, the board’s longer term focus is to ultimately build a £100m+ turnover business - a realistic prospect, which only the bravest of investors would bet against given CSFS' momentum.
That said, there’s still a lot of wood to chop. And therefore house broker Shore Capital Markets has conservatively held its 2024 estimates - pencilling in adjusted EBITDA and EPS of £1.8m (+29%) and 1.5p respectively on revenues 18% higher at £11.3m - forecasts which I suspect will be upgraded as the year progresses - along with the 50p/share price target.
CEO James Hickman commenting: "It has been an excellent year for Cornerstone FS as we made substantial strategic progress culminating in a set of strong financial results which significantly exceeded the Board’s expectations this time last year. With a highly scalable platform, along with careful management of our cost base, we are also benefitting from the operating leverage within our business and 2023 has seen us report our maiden full year adjusted EBITDA. We look forward to updating the market on our success as we progress through 2024."
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