Mi-Pay Group PLC (LON:MPAY) Chief Executive Officer John Beale caught up with DirectorsTalk for an exclusive interview to discuss their interim results, the increase in payment transactions processed, driving stronger growth and their strategy for the near & longer term.
Q1: First of all, congratulations on your results that you announced this morning. Can you just talk us through the highlights?
A1: The first half of 2018 I think has been a great progress for the Mi-Pay team and if we split into sections the highlights:
Firstly, from a growth point of view, we’ve seen our core annuity-based transactions grow 11% during the period, primarily down to our clients’ customers migrating on to our secured digital payment channels.
We’ve also crucially now integrated fully into our largest client who we renewed terms with last year, it’s been a challenging project, but we’re pleased that as of August this year, we’re now their sole digital payment provider and we expect that to deliver longer term growth for us.
Thirdly, we’re also very pleased that we’ve extended and grown our managed fraud services that we commenced on a trial the end of last year, so we’ve now managed and secured over £17.8 million in payment transactions for them. The importance of that is that firstly, it’s driven a new revenue stream of £0.1 million for the year and we expect that to grow but crucially, it gives us access to a wider European market. It also it enables to refocus also not be reliant on our core mobile operators which generally is a slow burner from a sales point of view, so we’ve got a faster route to market.
From a performance point of view, again I think we’ve made good progress. As you would’ve seen in an announcement previously, the management restructure delivered £0.1 million of cost savings to the business with no detrimental effect. The subsequent placing and conversion of deferred director salaries added £0.4 million to the asset base of the business and then further on from this, we’ve renewed our relationships with our core infrastructure providers which will deliver a further £2 cost savings million annualised moving forward from H2
I guess the final point to note in August we also received our R&D tax credits for the year that related to 2017 which underpins and benefits our cash position.
So, overall, we’ve effectively improved our financial performance materially, secured the financial stability and we’re now looking to drive into profitability in H2.
Q2: As you just mentioned, Mi-Pay’s total value of payment transactions processed in the period increased by 11% to £50.2 million and saw £17.8 million on managed fraud services. Can you tell us more about this?
A2: The growth to £50.2 million transactions is important and it’s important because it is that that drives our core annuity transaction revenues and that’s really where we focus our strategy on developing and growing. I think it’s important to note that back in 2014 when we first listed, we were processing £25 million per annum and as at August, we’re now processing annualised over £110 million so I think we’re making really strong progress. What’s important in that is that our existing clients are all growing, and our market is going in the sense that all of their consumers are gradually migrating from their traditional retail voucher-based channels onto their digital services. So, not only do we target new customers, but our existing clients gives us great routes for new growth and we’re certainly seeing that with our largest client in Ireland.
From the fraud service, that’s a new revenue stream for us, we’ve always had the solution in-house, we have our own IP, our own people that run this platform and we think we’re market leading at it. What we’re able to do is now sell that as a direct service, indemnifying and tasking the risk which is fairly unique in the market, certainly in the high-risk digital content market. The experience and knowledge that we’re gaining that it’s crucial for future growth, so it gives us a new revenue stream, new access to new geographies and certainly, a quicker route into markets.
Q3: You’ve successfully integrated into your largest client’s infrastructure following your contract extension in 2017, how are you expecting this to drive stronger payment transaction growth?
A3: That’s a good question. It’s taken longer than we’d all hoped, our client was integrating two technology stacks together and I’m sure you understand for a major network operator, that is no small job.
So, it’s been a challenging project for us to support and invest in and it has slowed our revenues below where we’d hoped but the great news is they’ve completed their piece of work now and we are now fully integrated into it. What that means is they are now combining their original consumer base which we always delivered but now building into it the recently acquired customer base when they took over a competitor. In doing that, we now become the sole digital payment provider for that client, picking up both sides.
So, not only are we seeing growth as their natural client base grows, or consumer base grows, but also adding on this new set of customers will enable larger H2 growth for us.
Q4: What can you tell us about Mi-Pay Group’s strategy in the near and long term?
A4: So, first and foremost, we’ll continue to build on the work we’ve done to date, it’s starting to deliver for us from the growth in transaction value and that’s really at our heart. How are we going to enable that? We’ll continue to support and drive our clients from a marketing and a product perspective to drag their own consumers from the retail environment into the digital world, they’re all looking to digitally transform their solutions and we want to be their key strategic partner to do that.
To assist that, we’ll continue to work on developing and bringing to market new connection channels with our consumers, we already do apps, webs, IVR solutions but also moving backwards into running secure payment solutions for contact centres. Also, looking forward to the next generation of consumer contact around voice services such as the Alexa, we see that as a next stage, so we will invest in those areas.
We also have to remain market-leading in digital payments, that is our heart, so we will be bringing in new payment methods such as Apple Pay just to complement what we’ve already got and also keep a very close eye on the banking industry and new payment solutions coming out from there. We will be the partner that can bring those solutions to the mobile community.
I think thirdly, we also see a continuing trend in data security with GDPR coming on line and also all the recent negative news on hacking etc., we’ll become very relevant because we offer highly secure solutions for our clients. Certainly, the operators in terms of protecting their brand, it’s crucial that their data is well protected, so we see that as a good growth area.
Obviously as we talked about and touched on, enhancing our fraud management solutions, we’ve now proven that adds a market value, we’ve proven we can do it well and we’ll look to grow that and investing that as a commercial model moving forward.
I think, finally, as we will always look for wider geographical reach, we’ve now got more experience in wider areas in Europe to grow on, but I also note that within the Asia Pacific, whilst that remains slow we still see that as a long-term growth opportunity, certainly with our enhanced fraud solution. We see that as place for longer term simply because of the volumes out there.