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Mi-Pay Group Plc

Q&A with Mi-Pay Group PLC: 2019 Expansion & Growth (LON:MPAY)

Mi-Pay Group PLC (LON:MPAY) Chief Executive Officer John Beale caught up with DirectorsTalk for an exclusive interview to discuss their final results, Board changes and key targets for expansion & growth in 2019.

 

Q1: John, you’ve released final results this morning, can you talk us through the highlights?

A1: The brief summary from a financial perspective, we grew our revenues to £3.3 million from £3.1 million which was driven primarily by our new implementation of fraud services, that drove gross profits up to £2.1 million from £2 million. We were also able during the year to reduce our administrative costs by £0.3 million. So, crucially for us, this greatly reduced our operating loss from £.6 million to £0.2 million for the year and all of this was in line with our expectations.

I think the very important note, was in closing out the year, in the second half we delivered a profit after interest, tax, depreciation share base payments for the second half and the second half was cash positive. This was a major milestone and a key target from Mi-Pay Group.

From a wider perspective, we entered the year with three core areas to focus on; growth, efficiency and stability.

So, from a growth perspective, we were very pleased to grow our managed payment transaction services which is the core driver of our revenues to £106 million, up from £94 million, I think the key metric for us is that for the first time we’re able to deliver over £100 million in transactions. We expect this to continue as this was driven primarily from existing clients, it’s a demonstration that we are in naturally rowing market.

We also, as noted, introduced our new managed fraud services utilising our in-house IPO so selling that as a direct service where we managed and indemnified over £43 million in digital payment transactions in mainland Europe. Again, this drove new revenue and profit.

From an efficiency perspective, as we’ve seen, we’ve reduced our administrative expenses by £.3 million, partly driven by the reorganisation of the Board in March ‘18 but also in the renewal of contracts with our existing infrastructure partners in the second half of the year. I think what the important metric for us is we managed to reduce our administrative costs by 25% since 2014 whilst doubling our payment transaction services managed and adding on the new fraud services which gives us a great sense of an ability to scale effectively.

Thirdly, from a stability perspective, as noted, we extended the core infrastructure contracts for a further 3-5 years which really limits our requirement for any major capital investments and allows us to really focus on growth. Also, you may have seen, in Q1 ’19, we successfully extended contracts with two of our major clients that related to 43% of our 2018 revenue which again, gives us a real sense of stability and where to focus and grow in the coming period.

So, all of these leave us entering into 2019 with a strong base and a great opportunity and platform to grow in a scalable fashion.

 

Q2: Just looking at the changes, I see you’ve made some changes over the Board last year, can you talk us through them? Also, the appointment your new non-executive director, can you provide us with a little background on him?

A2: So, there was three things happen in the year in relation to the Board. In March of ’18, we restructured the Board, Michael Dickerson moved to the role of Chairman, myself I moved to the role of CEO and the other directors remained as non-exec directors. I think the important point there it that it did reduce the cost base but it gave us a real focus for the business and that transition has been successful for us.

However, as you point out, in December ’18, we were delighted to welcome Huub Sparnaay to the Board as non-executive director. So, Huub joined as a shareholder in March when we did the fundraise and then we have a close relationship via the ownership of the Dutch-based business who we work with for our fraud services so we knew Huub well.

We know that Huub brings a wealth of experience in mobile and digital content solutions and specifically sales in mainland Europe, his business focussed on digital content and delivering services into mobile operators and beyond. So, his product knowledge, mainland Europe knowledge and his ability to grow business in this space is going to add real value to us as a Board team as we look to expand.

In February’19, we were also pleased to welcome Andrew Bowen to the Board in the role of CFO and again, it’s on a part-time basis but it’s really to help us as we look to expand and grow to give us the governance and development support that we need moving forward.

 

Q3: You talk about expansion and growth, what are Mi-Pay Group’s key targets for 2019?

A3: First and foremost, we’ll continue to do what we’re doing, we will look to continue to grow our clients and migrate their customers to our digital services which we’ve proven to be successful and the contract extensions that we’ve talked about will underpin this.

I think one of the important things to note was in August ’18, we successfully integrated into our largest client’s new infrastructure, that brought with it new customers onto our platform but probably more importantly, left us as their sole digital pre-pay provider. With the contract extension that underpins this, we will now expect to see strong growth from this client over the coming period.

I think in terms of the fraud services, this is a key area for expansion, it is easier for us to sell this service and integrate into new clients so it an area for us to grow. Again, with our experience, certainly in mainland Europe and with Huub’s support we also expect to see good progress there.

We look to continue to invest in the platform products and services, we again recovered another £300,000 in R&D reclaims, expected to deliver more in 2019.

I think specifically continued investment in our fraud services, we’ll expand that, new payment methods, we’ve delivered Apple Pay and new European alt payment methods, we’ll keep us very relevant to our market.

In 2019, we see the implementation of new compliance requirements with the European Payment Services Directive so we’re focussing hard on ensuring we remain compliant to that. We also see that bringing more complexity and more requirement for fraud-based controls in high risk environments so we think whilst that brings risk to the market, it also means that we’re at the leading-edge of what’s going on to take advantage.

So, at the end, this it targeted at continue to grow the business and deliver the profitability we achieved in H2 of 18.