RS2 Software plc - Full-Year Results

On 29 April 2021, RS2 Software plc published its Annual Report & Financial Statements for the year ended 31 December 2020.

Performance Overview

During 2020, RS2 increased its revenues by 21.3% to €26.8 million which is also 6.7% higher than the previously anticipated figure of €25.1 million as forecasted in the Preference Share Prospectus. The growth emanated from both ‘Licensing Solutions’ (+7% to €14.5 million) and ‘Processing Solutions’ (+20.7% to €10.3 million) whilst in 2020, RS2 also generated €2 million in revenue from its new ‘Merchant Solutions’ segment following the acquisition of Kalicom Zahlungssysteme GmbH in January 2020 which has more than 4,000 terminals and over 2,000 merchants. Moreover, the growth in business was spread across all of the Group’s principal markets – namely Europe (+0.5% to €15.3 million), North America (+83.7% to €8.87 million) and Asia-Pacific (+104.4% to €1.63 million).

In view of the international expansion and growth in business, total operating expenses surged by 26.6% to €30.3 million compared to €24.1 million in 2019. The increase in the cost base reflects additional investments in the business as well as an impairment loss on contract of €1 million which relates to deferred costs on a specific project which is currently on hold. As a result, RS2 reported an operating loss of €3.45 million which is 6.3% lower than the operating loss of €3.68 million as forecasted in the Preference Share Prospectus. Excluding depreciation and amortisation charges, RS2 posted a negative EBITDA of €1.4 million compared to the estimated figure of negative €1.9 million.

After taking into account net finance costs of €0.44 million, RS2 reported a pre-tax loss of €3.89 million compared to a pre-tax loss of €2.12 million in 2019. The tax charge amounted to €2.07 million whilst the share of loss pertaining to minority interests in relation to the Group’s operations in North America increased to €2.18 million compared to €1.57 million in 2019. Accordingly, RS2 reported a net loss of €3.78 million which, in turn, is almost 20% higher than the forecasted net loss of €3.15 million.

The Statement of Financial Position as at 31 December 2020 shows that total assets increased by 19.7% to €38.1 million mostly driven by higher cash balances which amounted to €6.82 million compared to €2.42 million as at end 2019, as well as the increase in intangible assets. Total liabilities climbed to just over €31 million compared to €17.7 million as at end 2019 as RS2 took on additional borrowings whilst employee benefits, current tax payables and accruals also increased notably. Overall, RS2’s equity base contracted to €11.7 million compared to the net asset position of €17 million as at the end of 2019.

Outlook

In his commentary, RS2’s CEO explained that the Group will continue building on the success of its strategy by expanding its outsourcing business and grow together with its existing and new customers. Moreover, RS2 will start offering direct services to merchants which are mainly in Europe by supporting them internationally through the Group’s global platform for Issuing and Acquiring.

To further enable the Group’s rapid expansion and growth, RS2 continues to nurture its hub of internationally renowned C-Level Executives and industry specialists. In addition, the Group’s vast network and connection with banks and partners around the globe will aid the implementation of RS2’s third business pillar (‘Merchant Solutions’) and facilitate the increased roll-out and outreach in Europe. As a result, RS2 will leverage its network to offer truly global Issuing and Acquiring services that will enable its clients to control their business and access their data in real-time to mitigate risks, anticipate trends, and also manage cash flows.

Meanwhile, RS2 will continue focusing on its regional expansion. In this respect, the Group is particularly committed to investing further in North America so as to achieve deeper market penetration and client outreach amid the growing demand for one-stop-shop global services. This will also involve the further strengthening of RS2’s platform with a view of digitalising the entire customer’s journey whilst placing consumers and businesses onto one single ecosystem.

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RS2 Software plc – Annual Report & Financial Statements for the year ended 31 December 2020.

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