Final Results

22 November 2013

Earthport plc

("Earthport" or the "Company")

Final Results

Earthport (AIM: EPO.L), the cross-border payments service provider, is pleased to announce final results for the year ended 30 June 2013.

Financial Highlights

· Revenue grew 37% to £4.14 million (2012: £3.02 million)

o Substantial contracts with significant guaranteed minimum commitments in negotiation and expected to close in the coming month(s)

o Net revenue impact of three customer relationships discontinued by Earthport of £0.33 million

· Gross profit increased by 36% to £3.18 million (2012: £2.35 million)

· Gross margin broadly consistent at 77% (2012: 78%)

· Loss before taxation and share-based payment charge decreased by 23% to £6.50 million (2012: £8.48 million)

· Successful placing in October 2012 raised £8.00 million gross to accelerate growth, expand geographically and execute on direct sales strategy

· USD10.00 million (£6.49 million) investment in May 2013 by IFC, part of World Bank Group, to drive further expansion of Earthport's global network

· Net cash used in operating activities decreased to £5.91 million (2012: £9.44 million). This marks a turning point in terms of cash used versus revenue growth

· Cash and cash equivalents at 30 June 2013 of £13.42 million (2012: £5.77 million)

Operational Highlights

· Substantial progress with top tier institutions and other providers of payment services

o Bank of America Corporation (NYSE: BAC), the world's 3rd largest bank, signed in December 2012 and now live with one business unit

o HyperWALLET Systems Inc, a leading provider of global payment solutions, announced in March 2013 and now live

o Viamericas, a leading money transfer company in Latin America, announced in May 2013 and now live

o American Express (NYSE: AXP), the world's largest card issuer, announced in March 2013, now in implementation phase and expected to go live in 2014

o BB&T Corporation (NYSE: BBT), one of the world's largest financial services holding companies, announced in January 2013 and awaiting implementation

o Integration with Fiserv (NASDAQ: FISV) completed and two large global custody banks signed to the channel

· Several consultancy projects with regional and global banks underway, generating professional services revenues and expected to lead to full implementations

· Banking network expanded to 58 countries as at 30 June 2013 (2012: 54). Currently there are 60 countries in the network, with more in progress

· Market drivers of globalisation, increasing migration, international trade and regulations continuing to drive sales pipeline with new and existing customers

Post Period Highlights

· Acquisition of Baydonhill plc in October 2013

Hank Uberoi, CEO of Earthport plc, commented: "This year has been one of substantial progress for Earthport. The compelling nature of our cross-border payments solution and the need for the industry to revolutionise money transfer services have been demonstrated both by our agreements with global industry leaders as well as the strategic investment received from the International Finance Corporation (IFC), part of the World Bank Group.

"We were delighted post period end to announce the acquisition of Baydonhill, further enhancing our product offering in the FX space and strengthening our proposition.

"Having reached an important turning point in terms of cash usage, our focus for the year ahead will be on significant revenue growth from existing and new clients, further product and network expansion, platform enhancement and the development of an ecosystem around our capabilities. We now have a non-competitive but disruptive offering in cross-border payments, supporting the evolution of major changes in the financial services industry. Based on the current run rate, already signed clients and advanced pipeline we are on course to reach a positive cash flow position within the expected timeframe. With a strong financial standing, heightened industry profile and growing market presence we are confident in our ability to execute on the significant opportunity ahead."

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About Earthport

Earthport plc, a regulated global financial services organisation, specialises in the provision of a white-label cross-border payments service.

Through its innovative payments framework, specifically designed for high volumes of low value cross-border payments, Earthport provides a cost-effective and transparent service for secure international payments. Earthport's clients include banks, foreign exchange businesses, money transfer organisations, payment aggregators and e-commerce businesses. Through Earthport's well-established payments infrastructure, clients can clear and settle payments directly to banked beneficiaries in 60 countries.

The company is headquartered in London and is listed on the Alternative Investment Market (AIM) on the London Stock Exchange. It operates globally with additional regional offices in New York and Dubai. Earthport plc is authorised and regulated by the Financial Conduct Authority under the Payment Service Regulations 2009 for the provision of payment services. To learn more, please visit www.earthport.com and follow us via RSS or on social channels, Twitter@Earthport, LinkedIn, Youtube and Slideshare.

Introduction

Earthport is a regulated, global financial services organisation providing a transparent and cost-effective white-labelled cross-border payments service, specifically designed to process high volumes of low value payments with a straight-through-processing efficiency rate of 99%+.

The Company's service proposition is attractive to a wide range of institutions needing or offering cross-border payment services, and, who are challenged by the existing infrastructure and emerging regulatory demands placed on legacy platforms and processes that support low value cross border payments.

With a number of the world's largest financial services brands now adopting Earthport, the business has seen heightened interest in all forms of cross-border activity, as demonstrated by its participation at SIBOS, the largest financial services conference this year. Momentum is building and from the traction to date, it is clear that Earthport's low value, cross-border payments service is being considered as an attractive alternative to existing cross-border payment methods.

In providing the core infrastructure to the global low value payment ecosystem. Earthport provides a unique service, and a much needed transparent alternative to existing outdated cross-border payment models.

The year under review has seen some of the leaders in the global financial services industry adopt our platform, and we are confident that the success of these early adopters will drive accelerated adoption.

The Board believes Earthport has become a non-competitive, but highly disruptive, offering in cross-border payments. Through product expansion and platform development we will support an ecosystem around our capabilities, driving major changes in the financial services industry and facilitating the creation of new business models.

The global cross-border payments market is vast and continues to grow at pace

Traditional methods of international payments are struggling to cope with increased demand as they are ill-suited to modern-day low value cross-border payments, which are increasing exponentially driven by global trade, e-commerce and international remittances. Additionally, new regulations are being introduced, adding further burdens. These trends are favourable to Earthport, and although it can be a slow process, there is a growing acceptance of outsourcing services in the banking industry and our growing customer base means we are becoming a de facto industry standard.

Constructive, disruptive force

Earthport is providing an infrastructure solution, central to the entire international payments ecosystem. Earthport has a partnership model, and its service can be white-labelled by any organisation conducting international payments in an agnostic and uncompetitive manner.

Customer traction provides significant growth opportunity

While increases in revenues and early transaction volumes have been encouraging, they do not fully represent the potential scope of the business. Many of the world class customers signed by Earthport are either in the earliest stage of their evolution or undergoing implementation and are consequently not yet live.

The timing of growth in each customer is difficult to predict, given that the sales process and implementation can be protracted; therefore Earthport has introduced minimum commitments and professional services fees. Transaction volumes typically follow four to twelve months after contracting with a client, with larger clients taking longer than smaller ones to fully launch the service to their customers. The growth in transaction volumes in the year, therefore although satisfactory, does not represent the potential the Board believes its current Tier 1 customer base can deliver.

There are significant additional customer opportunities in the pipeline, meriting upfront investment and these have been a key focus in the second half of the year and into the current fiscal year. 

Outlook

Momentum is building and Earthport's cost-effective, efficient and transparent solution is receiving increasing interest and recognition in light of the shortcomings of traditional methods, coupled with increasing regulatory burdens faced by the industry. Although only at the beginning of the realisation of the opportunity, the Company has over the past year put in place the systems, key customers, extensive marketing, corporate profile and growing network reach to produce accelerated growth in the years to come.

The focus in the year ahead will be on growing revenue from existing and new clients, going live with global clearing banking partners for additional routes, continuing to implement proof of concepts and pilot projects with non-signed major potential customers ahead of full implementation, and further geographic expansion.

Earthport has a clear aim to be a core white-labelled utility infrastructure in the global low value payment ecosystem and the Board believes the Company is at an exciting stage in its development, is gaining momentum and is well positioned to exploit its significant market opportunity. Based on the current run rate, already signed clients and advanced pipeline we are on course to reach a positive cash flow position within the expected timeframe.

Financial Review 

Total revenue for the year ended 30 June 2013 was up 37% to £4.14 million (2012: £3.02 million). Growth in revenues is driven by transactions and consulting engagements with existing and new customers, which contribute professional services fees in the lead up to formal contractual agreements and full implementations in due course.

As outlined in the compliance section below, three revenue generating customers were discontinued during the course of the year. This had a net impact of £0.33 million on revenue. Without this impact, the revenues would have increased by 45% compared to the prior year.

Gross profit was up 36% to £3.18 million (2012: £2.35 million). Gross margin was broadly consistent at 77% (2012: 78%).

Administrative expenses decreased by 11% to £9.68 million (2012: £10.83 million).The primary reason for this fall was a decrease in staff and contractor costs (excluding non-cash share-based payments) for the year ended 30 June 2013, which reduced by 13% to £5.67 million (2012: £6.52 million) due to the capitalisation of IT staff and contractor costs. Given the increasing customer base, pipeline and implementation projects underway, Earthport expects to increase the sales team headcount in the year ahead, and will continue to invest in technology in line with growth.

The share-based payment charge of £1.65 million (2012: £1.11 million) is a non-cash item. This relates to options granted to employees and Directors during the year and in the past.

Operating loss before share-based payment charge decreased by 23% to £6.50 million (2012: £8.48 million). Including the share-based payment charge of £1.65 million (2012: £1.11 million), operating loss decreased by 15% to £8.14 million (2012: £9.59 million).

Overall, the loss for the year decreased by 16% to £8.13 million (2012: £9.63 million).

Cash balances at 30 June 2013 were £13.42 million (2012: £5.77 million) due to the IFC investment in May 2013 and a fundraising in October 2012.

Operational Review

Earthport has made substantial progress in what has been a year of milestones, having signed with several significant customers including Bank of America N.A., BB&T and American Express. The investment of USD10.00 million (£6.49 million) received from the International Finance Corporation (IFC), part of the World Bank Group, to drive the expansion of Earthport's global network provides the financial power to continue to invest in building our ecosystem as well as demonstrating the importance placed on facilitating secure, reliable and transparent money transfer services by key members of the global finance community. In addition, the Company has further strengthened its proposition through the acquisition of Baydonhill, a foreign exchange service provider, post period end.

Although only at the beginning of the adoption of its international payments service by financial institutions, the Company has over the year put in place the systems, key customers and growing network reach to produce rising transaction volumes in the years to come. Evolving regulation for international payments transparency has driven increased traction in the sales pipeline, resulting in new signings as well as consulting engagements.

During the year, 21 new customers were signed and 13 customer implementations went live. Despite the termination of three customers that did not meet Earthport's rigorous compliance criteria, revenues and transaction volumes increased throughout the period. Transaction volumes grew by approximately 42% compared to the prior year. Gross profits have increased in line with revenues and costs were lower than in the previous year.

We have entered the current financial year in an excellent position. We are now working with some of the largest financial institutions in the world and these contracts testify to the appeal of the Earthport service and its long term growth prospects. Several key additional customers are in pilot stages, contributing consultancy revenues and are expected to lead to full implementations in due course and accelerated growth. A significant number of these opportunities are of a size to have warranted upfront pre-sales costs. Pursuit of these opportunities has been a priority in the second half of the year and into the first half of the current fiscal year.

Market developments continue to work to Earthport's advantage. The long term dynamic supporting expansion of global trade remains in place. Remittance payments are increasingly bank-to-bank payments as opposed to cash delivery, due to an ever-more global mobile workforce in combination with a greater need for transparency and risk control. eCommerce has grown through the proliferation of the internet. Regulation, particularly Dodd- Frank (DFS 1073) in North America and Payments Services Directive (PSD) in Europe, are seeking greater transparency in cross-border payments in terms of cost and delivery timing.

Customers

Earthport has signed some of the largest industry leaders globally during the year. In total, 21 new customers were signed and 13 customers went live during the year, with a further 7 customers contracted but not yet live.

Key new customers integrated during the course of the year have contributed to transaction growth and are outlined below:

· Yandex.Money, the leading e-wallet service in Russia and the CIS, fully integrated and live with Earthport to offer wider international payment options to their customers, in July 2012

· Bank of America Corporation (NYSE: BAC), announced in December 2012 and now live, transacting payments for corporate customers with one business unit

· HyperWALLET Systems Inc, a Canada-based financial services technology company, announced in March 2013, is fully integrated and live, transacting payments for its corporate customers

· Viamericas, a leading provider of remittance payments for Latin America, signed with Earthport to support its strategic growth outside of the Americas, in May 2013

· American Express (NYSE: AXP) agreement to expand its existing foreign exchange international payment service as announced in March 2013. American Express is in implementation phase and has plans to go live in 2014

· BB&T Corporation (NYSE: BBT), one of the largest financial services holding companies in the U.S. signed an agreement with Earthport to complement the bank's existing solutions for retail person-to-person payments, in January 2013. BB&T is in implementation phase and has plans to utilise Earthport's service as part of its Dodd-Frank 1073 solution

· Azimo post period, in September 2013. Azimo is one of a new wave of consumer facing financial services start-ups, which through building on Earthport's established, cost-effective, transparent system can address segments of the market not yet effectively served by banks or other payment providers, facilitating currently unbanked and under-banked to take part in global commerce

Regulatory change in North America with the introduction of the Dodd-Frank Act, specifically Section 1073 in February 2013, has had an impact on institutions that transmit consumer originated payments out of North America. The original rules have however been relaxed and so the impact has been slower than originally expected. Earthport is perfectly placed to help banks with a permanent solution to Dodd-Frank 1073 and we continue to be engaged in revenue generating opportunities in this space. Dodd-Frank 1073 will be fully implemented by US regulators in 2015 and Earthport is accelerating its sales efforts aligned to this market opportunity.

Although the sales and implementation cycle has proven longer than anticipated, Earthport is engaged in several contractual discussions and revenue earning relationships with leading regional and global banks. The pipeline of business with both new and existing customers continues to increase.

As the positioning of Earthport's products strengthens in terms of awareness and acceptance, the Company is seeing a trend of growing significance of new clients. For example, large global transaction banks are demonstrating interest in collaboration. Customers therefore have more confidence and are looking to make greater commitments in terms of anticipated rollouts.

As outlined, certain opportunities in Earthport's pipeline are sizeable enough to warrant up-front investment, and as is usual with larger clients have elongated sales cycles. Some of these opportunities provide significant guaranteed minimum commitments.

Banking Network

Earthport's network expansion continued to demonstrate steady progress throughout the financial year, completing several critical territory initiatives and paving the way for further growth phases to follow. The available territory coverage now encompasses 60 markets, with further expansion in process (30 June 2013: 58, 30 June 2012: 54).

New territories added in the financial year include India, which is the largest remittance market globally, and Morocco which is one of the top remittance receiving countries on the African continent.

Africa remains a relatively untapped opportunity for Earthport, and a region that it expects further geographical expansion in over the next 12-18 months.

Post Period Acquisition of Baydonhill plc ("Baydonhill")

In September 2013, Earthport announced it had reached an agreement on the terms of a recommended cash offer of the entire issued share capital of currency exchange broker service, Baydonhill plc. Earthport had worked with Baydonhill for several years and the product offering and expertise represent an ideal fit with Earthport's strategy to provide a comprehensive, white-labelled cross-border payment service.

The acquisition represents a strategic opportunity for Earthport to augment its current foreign exchange services by providing additional services and expertise to existing clients. In addition, the acquisition provides revenue, gross margin and cost saving synergies, primarily through a pooling of shared resources and assets.

The cash offer valued Baydonhill at approximately £6.42 million on the basis of a fully diluted share capital of 58,333,751 Baydonhill shares. Since 84.2% of the Baydonhill shareholders accepted the earn-out offer, the upfront cash used will amount to £3.37 million. If the full earn-out is achieved, an additional £1.28 million in cash and 13,799,042 Earthport shares will be issued; the additional cash will be funded from Baydonhill's future cash flows.

Service Enhancements

Earthport brings together a platform specifically developed to process high volume, low monetary value transactions. Its worldwide payment network and team with deep domain expertise together provide transaction processing services on a white-label basis.

Earthport's objective is to increase its capabilities to better leverage its assets and serve its clients with additional payment-related services. The acquisition of Baydonhill will enhance foreign exchange capabilities and is therefore complementary to this objective.

The past twelve months have seen the continued strengthening of the quality in delivery and deployment. Functionality and other service improvements across the Earthport Payments Platform centred on both strategic initiatives and customer requested enhancements. The Company will continue to invest in the scalability, robustness and functionality of its platform as it rolls out with customers.

Ø Client Integrations

In the financial year under review, Earthport's primary focus has been on improving the ease of client integrations through the development of various new API service offerings, and support of new message formats, such as NACHA IAT, csv with further capability to cater for ISO20022 and MT103. These integration improvements have catered predominately to the banking market segment and aggregators, but at the same time Earthport has built generic services that can be re-used to the benefit of other potential market segments.

Specific customer requested and funded enhancements this year have been delivered for Western Union, Fiserv, American Express, IBM and another large global non-US bank.

Ø Platform Operational Efficiency

Earthport has continued to make improvements to efficiency and straight-through-processing. These improvements facilitate better cut-off times and a reduction of settlement periods, and support an increase in transaction volumes to consistently meet SLA's.

Ø Screening & Monitoring

Further investment has been made in developing and enhancing compliance screening functionality and transaction monitoring capability to support Earthport's growth in transaction volumes by increasing efficiency, accuracy and enhancing controls of screening and issue resolution.

Ø Professional Services Engagements

The number of professional services engagements continues to grow and a formalisation of new robust processes has been developed to underpin consultancy, scoping requirements and managing the delivery of funded service changes.

Ø FX enhancement from use of Baydonhill platform

Given the increasing demand from existing customers and prospects for greater FX capabilities as part of our cross-border payments offering, the acquisition of Baydonhill will now allow us to serve a greater portion of our clients' needs and create additional revenue opportunities. We now have an unparalleled offering in terms of efficiency, accuracy, product capability and geographic footprint in the area of white-labelled cross-border payments.

Compliance

Earthport's service is supported by strong compliance processes, controls and a risk based analysis of clients. The Company has maintained its focus on selling to regulated providers, and as a result banks now represent an increasing portion of current business and prospects; this is particularly so in our European and North American territories.

As of February 2013, due to the business focus on the banking community, the Company has strived to improve the quality of customers and transactions. As a result of this review, Earthport took the step of discontinuing transacting relationships with three revenue generating clients who did not align with the Company's stated strategic direction. Earthport is proud to have not otherwise lost a client to another provider since the initiation of the current strategy in early 2010.

The decision to adopt and enforce strict compliance procedures has been received positively by our expanding customer base. Earthport has an exemplary compliance department, and that in itself has proven to be attractive with potential customers given the burdens specifically placed in this respect on the industry.

Sales and Marketing

Earthport continues to broaden its reach, increase its profile and consolidate its market position. To this end, Earthport has channel partner programmes which complement its direct to market sales activity. In addition, the Company takes part in steering committees, industry presentations and hosting webinars alongside some of the world's largest banks and technology providers. It is particularly pleasing that our presence exceeds that which is typical of a company of our size, reflecting Earthport's unique and thought-leadership position within the international payments ecosystem.

Ø Sales

Earthport has continued to refine its sales processes, and as outlined in this report, has seen success from its direct sales strategy with industry leaders. During the year the sales force has been added to on the basis of this traction with customers.

Earthport complements its direct to market sales activity through a channel partner program, where a partner offers products and services that represent synergies to the core Earthport proposition. We are confident this strategy will leverage channel partners' existing relationships and support a drive to reduce the sales cycle. This program has already resulted in partners funding the integration to the Earthport service and investing in go-to-market activities. Significant partners include Fiserv (NASDAQ: FISV) in North America and GWT in Japan.

Ø Marketing

During the year, Earthport has again been invited to participate at some of the largest and notable financial services industry events. A highlight in particular was contributing to the opening Innotribe session of SIBOS 2013 in Dubai, where Hank Uberoi discussed how banks can adapt existing infrastructure to respond faster to customer demand for innovation. An interesting event attended in October 2013, included the Fintech and ePayments CEO Summit in Washington U.S; a private event hosted by the International Finance Corporation (IFC), part of the World Bank Group, attended by top regulators entrusted with the safety and stability of financial systems.

Representatives from Earthport have also presented, or exhibited, at Money2020 in Las Vegas, U.S; EBAday in Berlin, Germany; NACHA Payments in San Diego, U.S; the International Payments Summit in London, UK; and, NACHA Global Payments Forum in Vienna, Austria. Information on these can be found online at www.earthport.com/events/recent-events and associated materials can also be found online at www.earthport.com/what-we-think/industry-presentations.

Market Developments

The increasing amount of migration worldwide, economic development objectives and technology advances are revealing the shortcomings of the traditional methods of cross-border payments. Retail payments account for 87% of total cross-border volume, and are expected to grow by 13% per year over the next decade to reach nearly 24 billion transactions per year (Boston Consulting Group, Global Payments 2011).

Market forces driving demand for Earthport's service include:

Ø Global workforce

215 million people live outside their countries of birth. Despite the current global economic weakness, remittance flows are expected to continue to grow, with global remittances expected to reach USD594 billion by 2014, of which USD449 billion will flow to developing countries (The World Bank 2013).

The global employee base is not just an asset belonging to multinational corporations. More and more companies are delivering international payroll to contractors, developers, agency workers and permanent employees. The ease of people moving to another country brings with it demand for cross-border pensions. The need for cost efficient, transparent and predictable electronic money transfer has never been greater.

Ø International trade

Globally, the volume of cross-border transactions will rise at a projected CAGR of 8% from 2012 to 2022 (Boston Consulting Group, Global Payments 2013). The trend is growing in open account trade and credit transfers for multiple suppliers on the long tail of the supply chain, resulting in the need for more efficient low value payment services.

Ø Drive towards financial inclusion

The G8 pledged to an objective in 2009 to reduce the cost of international remittances from 10% to 5% in 5 years, the '5 x 5 initiative'. The fees charged can erode a significant proportion of the GDP of smaller developing nations. Regulators, and as a result financial institutions, are putting measures in place to increase the risk oversight of international transfers. Electronic transfers to bank account payment services are emerging as an alternative to cash-to-cash remittance services. Initiatives like those from the Bill and Melinda Gates Foundation are working with financial institutions on how they bring lower income people (the underserved) into the financial system and how they may do so profitably. The IFC investment in Earthport endorses the drive towards a more effective long term infrastructure for international payments. With Earthport's transparent and cost effective service, financial institutions can provide lower cost remittances product, helping to empower financial inclusion in the recipient's country.

Ø Consumer protection regulation

The Payments Services Directive (PSD) in Europe is an initiative increasing transparency in payments services throughout the European Union (EU) and European Economic Area (EEA) to ensure consumers are aware of fees.

Dodd-Frank 1073 in the U.S. is a regulation which focuses specifically on protecting the consumer for all U.S. originated payments, ensuring the upfront disclosure of the details of a transaction. However, the very nature of traditional open-loop (correspondent banking or wire) payment models makes it extremely difficult for any institution to understand and easily disclose to the consumer when a payment will arrive, what the upfront charges are and how much the beneficiary will receive.

Following much feedback from the banking community on how difficult it is to achieve this level of transparency with regard to international payments, the regulation was relaxed so that banks could provide what they reasonably have available. Earthport is perfectly placed to enable banks to provide full transparency as they move towards this standard.

Ø Collaboration agenda

Banks have traditionally competed and provided services to each other. The industry is now experiencing a shift towards collaboration whereby a bank does not manufacture everything themselves. This concept was outlined at the Future of Money session at SIBOS where the bank of the future was described as a 'regulated branded service integrator'. Banks are being dis-intermediated along the fringes of their offerings by start-up companies who can be agile and responsive to customer requirements. Rather than looking at these companies as threats, banks can choose to integrate best of breed services from partners whilst retaining ownership of the customer and brand value.

Earthport as best of breed in low value cross-border payments is being adopted by progressive and industry-leading financial institutions who recognise the advantages of collaboration.

Ø Existing infrastructure

The correspondent banking model for cross-border payments is not suitable for large volumes of low value payments. With many correspondents involved in the path of a payment, transparency is difficult to achieve and validation challenges can cause manual workarounds disproportionate to the payment value and fees.

For many banks, maintaining licences in multiple country jurisdictions, as well as nostro accounts, means major investment. Global transaction banks can look to Earthport to expand their geographic reach to countries where they cannot provide a low value payments service directly. Regional banks can use Earthport's service to build more innovative low value payments product targeted for pensions, payroll, accounts payable, remittances and much more.

Successful Fundraising

We have been delighted by the level of support shown from new and existing investors during the year. In October 2012, the Company raised gross proceeds of £8.0 million through a placing and subscription of 55,186,372 new ordinary shares at 14.5 pence per share. These funds provide capital for the Company to accelerate growth, further expand geographically, and continue to execute on its direct sales strategy.

Investment from International Finance Corporation (IFC), part of the World Bank Group

In May 2013, Earthport's service was recognised as an innovative and leading solution by the IFC, which invested USD10.00 million (£6.49 million) to further expand its service infrastructure and drive financial inclusion in developing nations. The IFC subscribed for 34,990,861 new ordinary shares at a price of 18.55 pence per ordinary share.

As a for-profit entity, the IFC conducted rigorous due diligence including compliance, technology resilience, scalability and business model evaluation as part of the pre-investment process.

Earthport makes cross-border remittances more efficient and cost effective; the annual level of international remittance from citizens working abroad can be between 7%-35% of a developing nation's Gross Domestic Product. The World Bank Group has identified the high cost of international money transfer as an impediment to developing countries achieving sustainable growth, since remittance costs an average of 9.05% of the amount sent. The G8 Leaders at L'Aquila in 2009 committed to the reduction of the cost of sending remittances of 5 percentage points in 5 years, also known as "5x5."

In addition, Earthport's service will also improve international trading opportunities for SMEs in developing nations by removing the high cost barriers and delays with traditional payments.

Through the IFC investment, Earthport has also become part of the IFC's extensive network which includes over 900 financial institutions, providing Earthport with access to potential partners and clients in key geographies. Introductions are being made to these partner entities and others in the IFC's extensive network of contacts. 

Board Changes

Mohit Davar was appointed to the Board in July 2012 as a Non-Executive Director, replacing Lady Olga Maitland who stepped down in July 2012 having served as a Non-Executive Director for three years. Mohit has over 17 years of experience in the payments sector, through setting up, managing and leading global teams and operations and managing relationships within banks/financial institutions and regulators. Since 1997 Mohit has held senior level positions such as CFO and CEO, helping the formation of and leading several money transfer companies such as the MoneyGram and Thomas Cook JV and Travelex/Coinstar Money Transfer, both of which were subsequently acquired. Mohit is now on the Board of several companies, and is also the Chairman of the Advisory Committee of the International Association of Money Transfer Networks.

As previously announced at the end of October 2012, Zafarullah (Zafar) Karim stepped down from his position as Chief Financial Officer and Executive Director, to pursue other business interests.

In October 2012, Earthport was pleased to announce that Chief Operating Officer, Christopher (Chris) Cowlard, joined the Board as an Executive Director. Chris joined Earthport in January 2011 and has overseen much of Earthport's operational expansion, technical innovation and increasing sophistication of the offering.

Summary

Market trends are favourable to Earthport, and although it can be a slow process to gain traction in the banking industry, there is a growing acceptance of outsourcing services and our market positioning is ideal. Now, a business that is dependent on global payments can concentrate on their end product and white-label Earthport's cross-border ACH service.

Barriers to entry remain high to Earthport's client-based utility model as anyone looking to replicate would need to develop the technology capability, the extensive knowledge database of payments and regulations across 60+ countries and a network of banking relationships allowing access to the local clearing in 60+ countries.

The pace of regulatory change at a global level is at an all-time high, which in turn increases the burden on financial organisations, the barriers of entry into the field, and the value of a specialist provider, such as Earthport.

These factors, alongside our strong financial standing, and world class client base, provide Earthport with confidence in its future.

The Board

21 November 2013

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30 June 2013

There were no items of other Comprehensive Income for the year.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CASHFLOWS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30 June 2013

Merger reserve

The merger reserve represents the premium attributable to shares issued in consolidation of the costs of acquisition of subsidiaries in prior years.

Share-based payment reserve

The share-based payment reserve represents the cumulative charge to date in respect of unexercised share options at the balance sheet date.

Warrant reserve

The warrant reserve represents the cumulative charge to date in respect of unexercised share warrants at the balance sheet date.

Retained earnings

The retained earnings represent the cumulative profit and loss net of distribution to owners.

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 30 June 2013

1. GENERAL INFORMATION

Earthport plc is a public limited company incorporated and domiciled in England and Wales under the Companies Act 2006. The address of its principle place of business and registered office is 21 New Street, London EC2M 4TP. The nature of the Group's operations and its principal activities are set out in the Directors' Report.

The preliminary financial information does not constitute full accounts within the meaning of section 434 of the Companies Act 2006 but is derived from accounts for the years ended 30 June 2013 and 30 June 2012, both of which are audited. The preliminary announcement is prepared on the same basis as set out in the statutory accounts for the year ended 30 June 2012. While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), this announcement does not in itself contain sufficient information to comply with IFRSs.

The statutory accounts for the year ended 30 June 2013 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. Statutory accounts for the year ended 30 June 2012 have been filed with the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain any statement under section 498(2) or (3) of the Companies Act 2006.

2. GOING CONCERN

The Directors believe that the Group has demonstrated further progress in achieving its objective of positioning itself as an infrastructure supplier to the global payments industry. The Group raised £14.3m during the year through issuance of equity and £0.46m due to exercise of warrants. The Directors have prepared a cash flow forecast covering a period extending beyond 12 months from the date of these financial statements which incorporates the cash outflow on the acquisition of Baydonhill (see note 25) and the cash flow impact of this acquisition on the enlarged group.

After taking account of anticipated overhead costs and revenue, the Directors are confident that sufficient funds are in place to support the going concern status of the Group. Therefore the Directors consider that it is appropriate to prepare the Group's financial statements on a going concern basis, which assumes that the Group is to continue in operational existence for the foreseeable future. When assessing the foreseeable future, the Directors have looked at a period of at least twelve months from the date of approval of the financial statements.

3. REVENUE

Revenue, loss and net assets/liabilities are all attributable to one business segment operating from the Group's headquarters in London, United Kingdom. This is consistent with the information reviewed by the chief operating decision maker. The segmental analysis by location of customers is as follows:

There are two customers who individually contribute 13% and 10% respectively towards the total revenue (2012: two; 15% and 10%).

Cost of sales includes bank transaction charges and sales commission.

The loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purposes of calculating the diluted loss per share are identical to those used for basic loss per ordinary share. This is because the exercise of share options and other benefits would have the effect of reducing loss per share and is therefore not dilutive under the terms of IAS33, Earnings Per Share.

Intangible assets comprise development costs. Amortisation for all years is included in administrative expenses in the income statement.

9. EVENTS AFTER THE REPORTING PERIOD

Post Period Acquisition of Baydonhill plc ("Baydonhill")

In September 2013, Earthport announced it had reached an agreement on the terms of a recommended cash offer of the entire issued share capital of currency exchange broker service, Baydonhill plc. Earthport had worked with Baydonhill for several years and the product offering and expertise represent an ideal fit with Earthport's strategy to provide a comprehensive, white-labelled cross-border payment service.

The acquisition represents a strategic opportunity for Earthport to augment its current foreign exchange services by providing additional services and expertise to existing clients. In addition, the acquisition provides revenue, gross margin and cost saving synergies, primarily through a pooling of shared resources and assets.

The Cash Offer values Baydonhill at approximately £6.42 million on the basis of a fully diluted share capital of 58,333,751 Baydonhill Shares. Since 84.2% of the Baydonhill shareholders accepted the earn-out offer, the upfront cash used will amount to £3.37 million. If the full earn-out is achieved, an additional £1.28 million in cash and 13,799,042 Earthport shares will be issued; the additional cash will be funded from Baydonhill's future cash flows.

10. ANNUAL REPORT AND ACCOUNTS

A copy of the Annual Report and Accounts for the year ended 30 June 2013 have been published and sent to the shareholders'. Copies are available from the company's Registered Office at 21 New Street, London, EC2M 4TP or by visiting our website at www.earthport.com.

The annual general meeting of the Company will be held at the offices of Bird & Bird LLP at 15 Fetter Lane, London, EC4A 1JP on 13 December 2013 at 11 a.m.