# Mi-Pay Group plc deliver further growth as consumers transfer to on-line digital payment services

- Link: https://www.directorstalkinterviews.com/mi-pay-group-plc-deliver-further-growth-as-consumers-transferred-to-on-line-digital-payment-services/412793680
- Published: 2019-09-25T07:35:53+01:00
- Author: Giles Arbor

**Mi-Pay Group plc** (LON: MPAY), a leading provider of digital transformation, 
mobile payment and payment fraud management solutions to Tier 1 Mobile Network Operators,
Mobile Virtual Network Operators and digital content providers, has today presented
its unaudited interim results for the six months ended 30th June 2019.

**Operational Highlights**

· Renewed contracts with 2 major Clients:

o 2-year extension to 31 March 2022 with our largest client (31% of annual revenue
in 2018).

o 5-year extension from 1 January 2019 with our third largest client (12% of annual
revenue in 2018).

· Continued to deliver operational excellence with high payment success rates and
low fraud levels.

· Delivered an 85% reduction in payment fraud levels within our direct managed fraud
service resulting in a 46% gross margin (H1 2018: 7%).

· Significant investment in delivering Mi-Pay’s full compliance to the new European
wide payment regulation framework PSD2 (Payment Services Directive) ahead of the
majority of the market and the implementation date, mitigating our clients’ risks.

**Financial Highlights**

· Delivered a 15% increase in fully managed payments to £58.1 million (H1 2018: 
£50.2 million).

• Successfully managed and indemnified £29.2 million of payments for fraud versus
£17.8 million for the first 6 months of 2018, driving an increase in revenue of 
£0.1 million.

• Total revenue recognised in the period was £1.7 million (H1 2018: £1.6 million).

• Total gross margin remained strong at 63% (H1 2018: 62%).

• Total gross profit increased to £1.1 million (H1 2018: £1.0 million).

• Administrative expenses flat at £1.1 million (H1 2018: £1.1 million) despite continuing
volume growth.

• Approximately breakeven at EBITDA level (H1 2018: £0.1 million loss).

• Cash & cash equivalents as at 30 June 2019 remained at £3.1 million (30 June 2018:
£3.1 million).

• Operational cash outflow for the period of £0.2 million (H1 2018: £0.3 million
outflow) which is expected to be offset post period end by the receipt of a £0.3
million annual research and development tax credit in October 2019.

• Basic and diluted loss per share 0.2 pence (H1 2018: 0.3 pence loss per share).

**Michael Dickerson, Chairman of Mi-Pay Group plc commented:**

> “In the six-month period to 30 June 2019, we delivered further growth as consumers
> transferred to our on-line digital payment services, building on our previous 
> periods of growth to EBITDA profitability. We are pleased to have further supported
> this by extending two of our major contracts and expect these clients to increase
> their volumes over the longer term. Our growth has enabled us to maintain our 
> EBITDA break-even position for the 12 months to 30 June 2019.
> We have continued to invest in delivering new market compliance regulations and
> are well placed to take advantage of the ongoing uncertainty this is bringing.
> Short-term growth is impacted by this uncertainty and the previously announced
> Client consolidation. Over the longer term, we expect to continue to build on 
> our long term, naturally growing transaction flows and proven ability to deliver
> our secure payment services into the expanding and increasingly complex e-commerce
> market, underpinned with our ongoing investment in our solutions and our free 
> cash position.”

**Chief Executive Officer’s review**

**H1 2019 Operational Review**

**Trading**

We have continued to grow and have now delivered an approximately breakeven Earnings
Before Interest, Tax and Depreciation (EBITDA) for the 12 months to June 2019 (£
0.3 million loss for the 12 month period to June 2018).

Our processed payment transactions grew during the period to £58.1 million (H1 2018:
£50.2 million) driven from existing clients. The period under review represents 
our tenth consecutive six-month period of growth in terms of payment values processed,
and this growth was underpinned by the renewal and extension of two of our major
clients’ contracts. Our fully indemnified payment fraud management service delivered
£0.2m million of revenue in the period (H1 2018: £0.1 million), from £29.2 million
of payment transactions (H1 2018: £17.8 million). We achieved gross profit margins
of 46% on our revenue of £0.2 million (H1 2018: 7%) as we continued to enhance the
solution.

Our professional services revenue remained flat at £0.2 million for the period and
continues to be supported by our secure card vault solution that collects and processes
all the payment transactions for a major UK Mobile Network Operator, securely transferring
over £292 million of payments in the period (H1 2018: £264 million).

Our total revenue therefore increased to £1.7 million (H1 2018: £1.6 million) against
which we continued to deliver strong gross profit margins of 63% (H1 2018: 62%).

Whilst we have continued to grow over the period and secured over 43% of our 2018
revenues in longer contracts, it is disappointing that, due to an internal restructure,
during September 2019 one of our larger clients (13% revenue in 2018) consolidated
their payment transactions to another existing provider as they restructure and 
downsize their own operation. When combined with the slowing of new business growth
due to the market challenges with new legislation, this will affect our full year
performance growth expectations. Over the longer term, we will continue to build
on our naturally growing client base and have taken positive action in relation 
to budgets and spending to mitigate such losses to seek to ensure that the Group
remains EBITDA positive and continues to invest in and develop its solutions.

From an investment and market perspective, we have continued to invest and develop
the key areas of the business, which we are able to do efficiently with our in-house
teams:

**Payment Compliance and Optimisation**

From September 2019, the new Payment Services Directive (PSD2) comes into effect
across Europe, which affects all e-commerce payment providers. The regulation has
required significant internal development to ensure we protect our Clients and retain
compliance. We are on track and expect to meet all requirements in full. However,
it is clear that many areas of the payment market will not be compliant in the original
targeted timeframe and, as such, we expect to see a challenging period of adoption
in H2 2019 and into 2020. We have ensured Mi-Pay is in a strong position to take
advantage of these new opportunities to support retailers and solution providers
struggling to navigate the challenges. We will monitor this closely and adapt accordingly.
Regulators have recently announced delays of up to 18 months on this directive and
as such we expect short term impacts to be reduced.

**Payment Fraud Management**

Whilst the new payment directives “Strong Customer Authentication” mandates card
issuers to adopt stronger consumer authentication practices to prevent payment fraud
risk, this mandate excludes recurring, voice activated and low value transactions;
which are the majority of our managed payments. Therefore, our current fraud management
capability will remain highly relevant in our market and, as such, we will continue
to invest and build on our market leading performance in the area of payment risk
management. We will continue to introduce new additional capabilities to improve
performance and enhance our proven capability in optimising and managing risk in
lower value, high-risk transactions.

**Business Intelligence**

Given all the changes in the processing regime and its increasing complexity, our
Clients will need enhanced intelligence on how their consumers use their service
and the impact of the new regulations. Through our systems we are able to provide
deeper analysis on consumer behaviour than more traditional payment institutions
and will look to use this to help drive new revenues for the Company and help our
Clients better understand their e-commerce solutions.

The growth of our solution in Asia remains slow, however we continue to work with
our contracted client in the region to drive growth via new payment methods and 
wider country expansion.

Share on: