TechFinancials announces a 42% YoY decrease in revenues in FY18

TechFinancials converts loan into Footies

Fintech software provider of financial solutions TechFinancials Inc (LON:TECH) announced earlier this week its results for the year ended 31 December 2018, and as expected, they don’t look good at all.

Financial Highlights

  • Revenues of US$7.8 million (2017: US$13.4 million) a decrease of 42%
  • Blockchain trading technology revenues of US$3.8 million (2017: US$0.24 million) increased by 1,479% – predominantly representing services provided to CEDEX
  • Core software licensing revenues of US$1.3 million (2017: US$4.3 million) a decrease by 70%
  • Trading platform revenues of US$2.7 million (2017: US$8.9 million) decreased by 70%
  • Net cash used by operating activities of US$0.9 million (2017: cash generation of US$0.2 million)
  • Gross margins increased to 79% (2017: 76%)
  • Impairment provision of US$2.4 million made to write-down the value of goodwill relating to the Group’s 51% investment in DragonFinancials
  • Reversal of asset recognised as a gain of US$9.48 million in the interim financial statements of 30 June 2018 in respect of the option to acquire up to an additional 90% of CEDEX shares
  • Trading in second half adversely impacted by tightening regulation
  • Operating loss of US$4.8 million (2017: operating profit of US$0.8 million)
  • EBITDA loss attributable to shareholders of US$1.9 million (2017: EBITDA profit of US$0.3 million)
  • Pre-tax loss attributable to shareholders of US$5.3 million (2017: loss of US$2.5 million)
  • Cash position of US$1.7 million as at 31 December 2018 (2017: US$3.5 million). Cash at 31 May 2019 stood at US$1.1 million
  • The Board continues a policy of prudent cash management and monitoring to ensure adequate funding
  • Basic earnings per share (‘EPS’) has decreased further to (US$0.066) (2017: (US$0.036))
  • DragonFinancials, the Company’s 51% subsidiary, paid dividends of US$1.7 million during 2018 with TechFinancials receiving US$0.9 million for its 51% interest (2017: US$7.2 million with
    TechFinancials receiving US$3.7 million)
  • In January 2019, MarketFinancials entered into legally binding, conditional Share Purchase Agreement with a Cyprus incorporated company, to sell its entire shareholding in MF, consequently
    the associated assets and liabilities of the Company are presented as held for sale within these financial statements

Operational Highlights

Blockchain Trading Technology Activity

  • The Company continues to deepen its experience in blockchain-related projects, whilst providing the infrastructure and key software components to the CEDEX exchange used by it to complete a
    successful Token Sale and the launch of the Cedex blockchain diamond exchange.
  • Signed a binding agreement with Footies Tech Ltd (“Footies”) in December 2018, a Blockchain based ticketing venture for sports venues and teams, to establish a new subsidiary (Footies Ltd was incorporated in UK on 7 February 2019) with TechFinancials holding a 75% interest.

Software Licensing (B2B)

  • The number of brokers and their volumes have continued to decline, directly impacting revenues.
  • Further tightening of regulation continued to impact the Group’s historical business throughout markets across the world, including Asia. In February 2018, the B.O. Trade Financials Limited (“BOT”) closed OptionFair and returned the license to Cyprus Securities and Exchange Commission (“CySEC“). The B2C no longer has a presence in European markets (although the B2B business has retained some customers in Europe).

Trading Platform (B2C)

  • All of the Group’s B2C revenues (except for US$26 thousand from B.O. TradeFinancials Limited (“BOT”) ) were generated by DragonFinacials which itself suffered because of the tighter regulatory environment.
  • In February 2018, the Group withdrew its immediate plans to sell BOT and MarketFinancials Limited (“MF”) after the potential buyer failed to secure regulatory consents for the acquisitions.
  • BOT ceased its OptionFair trading operation in February 2018 and returned its CIF license to CySEC in August 2018.
  • The Company is currently in the process of selling MF and in January 2019, it entered into a conditional Share Purchase Agreement with a Cypriot incorporated company, to sell its entire stake in MF for cash of EURO 100 thousand. As of the reporting date the Seychelles Financials Securities Authority (“SFSA”) is reviewing the application of the buyer for ownership change being a precondition for the completion of transaction. The consent of the SFSA is required under the sale and purchase agreement to be received by 30 June 2019.

The complete annual report can be seen here.

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