Mi-Pay Group PLC (LON:MPAY) Chief Executive Officer John Beale caught up with DirectorsTalk for an exclusive interview to discuss their final results
Q1: John, we saw that you released your full year results this morning, can you talk us through the highlights?
A1: Basically, we believe that Mi-Pay’s future value relies in increasing our annuity-based transaction service which we were focussing on in 2017. So, the outcome of that is we’re pleased to see that the transaction volumes and values grew so we processed over £94 million in payment value, up from £83 million the prior year and we see that that is now going be running at over £100 million annualised for 2018 so we’re in a strong position, seeing good growth.
I think the key drivers for that is that we won a major re-contract with our largest client in the year which will underpin strong growth moving forward. The important point of that is whilst we hit on short-term revenues due to the new commercial terms, we recently acquired a core competitor which, over the term of the contract, will drive significant new volumes for us and this will underpin our growth moving forward.
We also, in Q4 of 2017, delivered our first direct fraud management service which again, is a diversification away from straight payment management and is really leveraging our own internal activity on our fraud platform. So, it drives new revenues but also a different stream which gets us outside of the normal mobile operator route. We’ve also gone live with a new service in Asia-Pacific with a multi-country payment solution with our partner out there which we hope to develop further in 2018.
So, in a sense, what we’ve done is set ourselves up well for future growth and to expediate the growth in transaction volumes that will drive us to profitability. The revenues were down slightly year-on-year, primarily due to the new terms with the largest client as it grows but also our professional service revenues were down as we’ve really focussed on trying to drive a basis for long-term growth. GP was strong again which we’ll probably come on to and our cost base remains stable.
Q2: Like you say, we have seen continued strong metrics from your in-house cyber security, fraud and contact management solutions, how is this side of the business adding to your operations?
A2: Yes, you’re right, we have seen strong performance in that area and I think it’s one of the biggest assets that Mi-Pay has got, our ability to securely manage the client’s data which is ever important nowadays with all the cyber security risk, GDPR coming online so we’re in a strong position on that, our investments previously have put us in a good place.
Importantly, as we’ve always mentioned, our management of payment fraud is absolutely crucial, not only to our success but also the confidence of our consumers and customers that use our service. So, we’ve kept that at 0.6% of transaction value which, in our opinion, is market leading, certainly in our sector.
What is arguably more important is we’ve also management to, again, increase the level of successful payments going through our platform which effectively gives us happy consumers, so we get more thorough the system successfully despite managing the fraud.
So, in a sense, what we’ve done is optimised again further the customer experience that use our service and that gives us more relevance with our consumers. The result of that has driven our gross margin in our transaction services up 63% which is a year-on-year increase and we’ve done that now for the previous 5 years. So, we see ourselves in a very strong position to be both commercially flexible with our customers and our consumers but also deliver very strong digital experience for them.
Q3: Can you talk us through the recent restructuring of the business?
A3: On March the first this year, 2018, we put through the restructures so a few important points around that, just to note.
Firstly, what was important was that we retained, within the business, all the key skills, experience and knowledge that we previously had so this wasn’t a restructure to replace people, so I think it’s important that we’ve kept those skills on board. We really assessed what our targets and our focus was for the coming periods and then realigned people to give ourselves the best chance of success.
So, Michael Dickerson has moved from the role of CEO to Executive Chairman, primarily he’s based in Asia-Pacific so he’s more suited to target and focus on that region well as he continues to oversee our global commercial targets.
I, myself, am based in the UK where the majority of our clients are so I’m well placed to focus on our existing client growth which is, as we’ve talked about, where our predominant growth is coming from in the short to medium term with our offices, employees and technology over here so that’s kept us aligned.
Seamus Keating has moved to a non-executive role and will continue to look after the audit and control of the business as a non-exec.
The impact for us which I think is really the most important is positive, it benefits the financial stability of the Group. So, we’ve delivered a £200,000 a year cost saving, we’ve reduced our liabilities by £300,000 as we converted deferred salaries into equity as a placing and we also raised another £300,000 of new cash for the business. Alongside that, we expect to bring another £200,000 of cash into our annual R&D reclaim this year gives us a good stability in cash and an enhanced balance sheet and a reduced cost base moving forward. That was really at no cash outflow to the business, so we feel that we’re adding real value to the Mi-Pay proposition at that point.
Q4: What does Mi-Pay Group’s strategy look like for the next 12 months?
A4: Ok, so our key focus is to deliver what we’ve talked about earlier as our highlights from 2017; the renewing of contracts, the new fraud service expand on that and Asia-Pacific, we expect to see continued growth just as our consumers migrate onto our channels that are already in place.
Focus will be to continue to invest in next generation payment solutions, with the likes of Apple Pay, next generation bank payment led solutions through the app are becoming more elegant, so we will bring those on board.
We will continue to push our cyber security business intelligence and churn management experience that we do hold a wealth of data now which we can use to optimise our solutions and other new channels such as contact centre secure payments. Also working on voice services to the Amazon Alexa, those sorts of solutions are our next channel to market which will keep it very relevant with our consumers. So, that’s really where our investment will be.
So, this is all underpinned, alongside the restructure we did, to target the growth profitability and beyond and we feel we’re in a very strong position to go and deliver that now.
