Mi-Pay warns of second half risks after first half growth
By Josh White
Date: Monday 12 Aug 2019
(Sharecast News) - Outsourced mobile payment solutions provider Mi-Pay updated the market on its trading for the year-to-date on Monday, reporting that the first half of 2019 was "broadly in line" with management expectations, delivering a 15% increase in fully-managed payment transactions processed to £58.1m.
The AIM-traded firm said it also successfully indemnified £29.2m of payments for fraud, up from £17.2m year-on-year.
That increased revenues to £1.7m for the first half, from £1.6m, with gross profit margins remaining "strong" at 63%, and administrative expenses said to be in line with prior periods.
The company said it delivered an approximate breakeven EBITDA for the period, compared to a £0.1m EBITDA loss a year ago, with two major contracts renewed with clients representing 43% of the 2018 revenue during the period, and "strong" operational metrics delivered.
Mi-Pay said that, as a result of uncertainties in the e-commerce payment market with respect to the adoption of new European wider payment services directives (PSD2) in September and the current economic climate, new business growth in the second half was expected to be slower than anticipated.
As a result, trading for the full year was expected to be behind current market expectations.
The company said it had invested to ensure it continued to deliver compliant solutions for its clients, and to take advantage of market uncertainties in the coming period.
Looking at its customers, Mi-Pay said one of its clients was a mobile network operator, which had been a customer for 12 years.
The company provided payment and fraud management services to the client under a rolling contract, and therefore the board said there was a risk that the revenues received under that contract could be lost with a limited notice period.
It said on Monday that, as a result of a rationalisation exercise, the client was likely to consolidate the services provided by the company to another provider.
Mi-Pay said it did not know when that would occur, however, should it becomes effective, it was expected that it would no longer generate revenues from that client going forward.
In the year ended 31 December, the client accounted for £0.5m of turnover for the group, equivalent to 13% of its revenue for that year, with that level of revenue continuing in 2019 so far.
Until the client ceased to utilise Mi-Pay's services, it was not known what the financial impact of the client loss would be on its trading for the current year.
The board said it would adjust its budgets and spending accordingly to mitigate the expected loss, and would continue to develop relationships with its long-term contracted clients to drive growth, remaining focussed as a firm on delivering long-term profitable performance.
"We are pleased with the continued growth and performance in the first half of 2019 and have invested in our solutions to ensure we continue to deliver fully compliant services to our clients," said Mi-Pay chairman Michael Dickerson.
"Whilst we are disappointed with the potential impact of the client loss, we will focus on mitigating the loss of revenue and margin and continuing the consistent growth we have delivered from our existing client relationships.
"In addition, we believe we are well placed to take advantage of the expected payment market uncertainties and risks over the longer term with our technology solutions and commercial flexibility."
Mi-Pay said it would announce its interim results for the six months ended 30 June on 25 September.
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