TIDMNETW
RNS Number : 6174L
Network International Holdings PLC
14 January 2021
14(th) January 2021: Network International Holdings Plc , Q4
2020 trading update
Continued improvement in trading and full year outturn ahead of
expectations
Network International Holdings plc, the leading enabler of
digital commerce across the Middle East and Africa, provides an
update on trading performance in the fourth quarter of the
financial year. Unless otherwise stated, all growth figures reflect
the Q4 2020 period compared with Q4 2019.
-- FY20 revenue ahead of guidance, totalling USD284m. Underlying
EBITDA(1) also anticipated to be slightly ahead of market
expectations
-- Q4 2020 total revenue (19)% y/y, although absolute revenues
in Q4 were higher than Q3 , reflecting the continuing recovery in
card and digital transactions across our markets, and particularly
encouraging trading in December
-- Q4 Merchant Solutions revenue (31)% y/y, exiting 2020 with domestic TPV equal to prior year
o Strong TPV growth from online merchants of 68% y/y (excluding
Government and airline online TPV) within directly acquired Total
Processed Volume (TPV) growth of (18)% y/y
o In direct TPV, domestic volumes improved, down (3)% y/y, and
we saw a full recovery to 2019 levels as we exited the year.
International volumes were down (61)% y/y due to tougher
comparables, but we saw a stronger than expected recovery in UAE
tourism
o Take rates were lower y/y; reflecting merchant sector mix, the
regulatory impact on acquiring fees in Jordan, and higher non-TPV
related revenue streams in the prior year
-- Q4 Issuer Solutions revenue (13)% y/y , against a strong
comparator in the prior year. Absolute revenues were higher than
the Q3, reflecting improving KPIs across cards and transactions
-- DPO's strong revenue growth continues, with over 30%(2) Q4 TPV growth in constant currency
-- Balance sheet remains strong and we are comfortably inside
financial covenants Total liquidity position of cUSD325 million,
comprised of cUSD190 million in undrawn lending facilities and a
cash balance of cUSD135 million (excluding the funds raised for the
DPO acquisition)
-- New products and market entry delivered:
o Mastercard partnership collaborations: new digital platform
and corporate card products launching, which will support the
acceleration towards digital payments across all our markets
o Africa: new market entry to Sudan in conjunction with
Mastercard, providing Issuer Solutions services to Faisal Islamic
Bank
o Middle East: renewed our contract with ADCB for fully
outsourced Merchant Solutions services; and signed new merchants
and partnership arrangements with several global brands in the
online acquiring space
Simon Haslam, Chief Executive Officer, commented:
"We continued to see encouraging market trends throughout the
final quarter and are pleased to report that we exited the year
with positive momentum across all of our business lines. In our
core market of the UAE, domestic direct acquiring TPV has fully
recovered to 2019 levels, supported by strong e-commerce spending,
while international volumes also benefitted from a pick-up in
tourism over the holiday period.
Our acquisition of DPO is expected to complete in the first
quarter and it is pleasing to see their business going from
strength-to-strength, with strong Q4 performance supported by Black
Friday trading. We have already seen a strong indication of
interest from a number of our existing bank customers, for DPO's
services, demonstrating both the highly complementary nature of our
businesses and our ability to generate anticipated strong revenue
synergies. DPO remains one of our key future growth
accelerators.
The long-term structural trends toward digital payment
acceptance continue apace, with an acceleration across the MEA
region. Looking ahead, whilst we remain cautious around the
development of the pandemic, there are signs of improving consumer
spending, underpinning our confidence in our ability to take
advantage of the exciting opportunities on offer in the world's
most underpenetrated markets."
Strategic and business initiatives
Market shift to digital payments
We continue to see a shift in consumer behaviour towards digital
payments. This shift is supported by trends in the card data we
host on behalf of bank customers. For example; if we look at a
cohort of consumers who used their cards almost exclusively at ATMs
in January 2020, one year later, those consumers are now only using
their card at the ATM for less than half of their transactions,
with the remainder taking place at a POS terminal or online.
(Please follow this link to access this release in a PDF version,
with accompanying chart data on customer cohorts)
Middle East
Customer wins and contract renewals: In the Middle East, we
secured several new merchant wins alongside customer contract
renewals. Most notably, we renewed a significant contract with Abu
Dhabi Commercial Bank to provide fully outsourced Merchant
Solutions, with acquirer processing and value added services,
reflecting our longstanding relationship with another leading
regional financial institution. We have also signed new merchants
and partnership arrangements with several global brands in the
online acquiring space.
Growth in online payments and cross-sell of value added
services: Our N- Genius (TM) roll-out continues apace and we now
have c1,900 merchants using our online gateway; an increase of
c1,600 during the year, and we saw record volumes processed through
our platform during December. Our performance in the region is
supported by the structural shifts toward online payments
solutions, as well as our ability to successfully cross-sell
services to existing customers. As part of this, we have expanded
our contracts with UAE based tourism authorities, that will see
them leverage merchant spending data in order to better understand
domestic consumer and tourist spending patterns, including specific
seasonal events such as festivals and religious holidays, building
on the existing data analytics services we already provide to
them.
Africa
Customer wins and expanded contracts: New business wins have
accelerated in the fourth quarter, where we won outsourcing
contracts for Access Bank Kenya, providing both Issuer and Merchant
Solutions, and for CCA Cameroon Bank to provide Merchant Solutions.
We continue to upsell to existing customers across the region,
signing expanded contracts with Polaris Bank Nigeria and ARCA
Nigeria. We will also be supporting Wema Bank in Nigeria with
virtual card issuance and processing; and e-commerce Merchant
Solutions using our N-Genius payment gateway for NBS Bank
Malawi.
New market entry: In Africa, we will be launching services in
Sudan, a new market entry which has been supported through our
partnership with Mastercard. We will be providing Issuer Solutions
to Faisal Islamic Bank, enabling the bank to issue and accept
Mastercard branded debit, credit and prepaid cards through ATMs,
Point-Of-Sale terminals, and online. This makes Faisal Islamic Bank
one of the first in the country to obtain a card issuing and
acquiring license from Mastercard.
DPO
DPO continues to perform well, with TPV growth of over 30% in
constant currency, supported by Black Friday performance. We expect
the acquisition to complete in the first quarter, as we work
towards the final regulatory approvals and pre completion diligence
activities. We are excited by the opportunity to cross sell DPO's
services to our existing clients. Initial conversations with a
number of our bank customers indicate a strong interest that
reinforces our belief in delivering revenue synergies over the
coming months and years. The feedback from clients has conveyed
that they believe DPO's capabilities can underpin their
acceleration into e-commerce.
Mastercard strategic partnership
Our strategic partnership with Mastercard is progressing well
and we are launching a new digital product platform, which will
accelerate the adoption of digital payments across all our markets.
With this new digital platform, we will help our customers to
enable mobile-based payments for their end-consumers and merchants
across various payment channels. Merchants will now have one
simple-to-use technology interface through which they will be able
to accept multiple payment types, ranging from USSD (text message),
QR codes, to POS terminals and ecommerce, with mobile money and
SoftPoS (technology which allows merchants to accept contactless
card payments directly on their smartphone or tablet) coming later
in 2021. Payment issuers and banks will be able to offer their
consumers state-of-the-art payment solutions including digital
wallets, person-to-person (P2P) payments and virtual cards. The
launch of this platform is the first in a series of steps towards
delivering simplified, collaborative payment solutions across the
payments value chain in the Middle East and Africa.
Fourth quarter trading
y/y growth Q1 Q2 H1 Q3 Q4 FY
------------------------------- ----- ------ ------ ------ ------ ------
Total revenue 0% (23)% (12)% (17)% (19)% (15)%
of which Merchant Solutions (8)% (43)% (26)% (30)% (31)% (28)%
of which Issuer Solutions 2% (10)% (4)% (6)% (13)% (7)%
Total revenues in the fourth quarter were (19)% compared with
the prior year, which was the largest quarter in 2019. Revenues in
the fourth quarter were sequentially higher than the third quarter
across both business lines, reflecting the ongoing recovery in
digital transactions across our markets.
In Merchant Solutions , revenue was (31)% y/y, within which
directly acquired TPV was (18)% y/y. We have seen a continuous
improvement in domestic volumes, which were down only (3)% y/y for
the quarter, but had recovered fully to 2019 levels as we exited
the year. International volumes (which are largely spends from
international travellers) remained significantly lower at (61)%
y/y, but as we exited the year were at (45)% y/y which was ahead of
our expectations, driven by the UAE being one of the few nations
open to tourism amidst the pandemic. We have seen an increase in
visitor numbers from the UK and Russia, alongside those from Israel
(albeit still a small number in total) and are pleased to note the
opening of borders with Qatar in recent days.
All merchant segments (excluding supermarkets) have shown
improved TPV growth when compared to the height of lockdowns in
April and May, particularly travel and entertainment (as shown in
the table below). We continue to see a growing participation of
online TPV, with growth of 68% y/y from e-commerce merchants in Q4
(excluding Government and airline online TPV), which reflects an
acceleration compared with the Q3 due to: i) continuing channel
shift ii) new Apple launches iii) a strong White Friday (the
terminology used for Black Friday in the UAE).
Take rates were lower in the period when compared with the prior
year, reflecting merchant sector mix, the regulatory impact on
acquiring fees in Jordan (as previously announced), and higher
non-TPV related revenue streams in the prior year
Refunds and chargebacks remain low and within expected
tolerances through the pandemic, with no significant increases in
unrecoverable chargebacks , or single client losses.
Merchant sector trends in directly acquired Total Processed
Volume (TPV)
Directly acquired
TPV, y/y growth Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
------------------- ---- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total 5% 3% (28)% (59)% (46)% (34)% (25)% (16)% (21)% (23)% (20)% (11)%
of which
Retail 12% 2% (39)% (75)% (43)% (30)% (9)% (6)% (21)% (21)% (5)% 0%
of which
Supermarkets 5% 17% 40% 24% 6% 11% 12% 15% 4% 9% 11% 9%
of which
T&E 0% (11)% (62)% (93)% (85)% (78)% (67)% (54)% (57)% (55)% (53)% (35)%
of which
Other* 5% 10% (16)% (51)% (40)% (20)% (16)% (5)% (7)% (12)% (12)% (6)%
*Includes Government, Healthcare & Education, Other
Domestic and International trends in directly acquired Total
Processed Volume (TPV)
Directly
acquired
TPV, y/y
growth Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
--------------- ---- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Domestic 5% 9% (14)% (47)% (36)% (21)% (10)% 1% (6)% (7)% (3)% 0%
International 5% (13)% (65)% (94)% (88)% (84)% (83)% (78)% (73)% (72)% (65)% (45)%
Domestic volumes reflect the spends on cards issued by banks in
the UAE and Jordan. International volumes reflect the spends on
cards issued by banks in countries outside of those regions, and
are largely reflective of tourism and business travellers
Issuer Solutions continued to show a more resilient performance
than Merchant Solutions, with revenue (13)% y/y. This growth
profile reflects a strong comparator in the prior year, where we
would usually see higher card renewals and issuance as banks
utilise their budgets before year end. However, this still showed
an absolute improvement versus Q3 revenues, and throughout the
final quarter we saw an improvement in KPIs across both the Middle
East and Africa, with growing numbers of cards hosted and
transaction volumes.
Full year outturn
Total revenue for FY20 was USD284m, (15)% y/y and ahead of
guidance. Underlying EBITDA(1) is also anticipated to be slightly
ahead of market expectations
Full and audited financial results will be released on 8 March
2021.
Response to Shadowfall report
We take any critique of the company seriously and previously
acknowledged the report published by ShadowFall Research at the end
of December 2020. The report contains a number of factual
inaccuracies and repeats questions that have previously been raised
and responded to. For ease of reference, we intend to update our
website to include responses to frequently asked questions on a
range of topics, including material questions raised in the
Shadowfall report.
Investor Relations enquiries InvestorRelations@Network.Global
Network International
Amie Gramlick, Head of Investor
Relations
Media enquiries
Finsbury Network-Lon@Finsbury.com
James Leviton, Rob Allen
Forward Looking Statements
This announcement contains certain forward-looking statements
with respect to the financial condition, results or operation and
businesses of Network International Holdings Plc. Such statements
and forecasts by their nature involve risks and uncertainty because
they relate to future events and circumstances. There are a number
of other factors that may cause actual results, performance or
achievements, or industry results, to be materially different from
those projected in the forward- looking statements.
These factors include general economic and business conditions;
changes in technology; timing or delay in signing, commencement,
implementation and performance of programmes, or the delivery of
products or services under them; industry; relationships with
customers; competition; and ability to attract personnel. You are
cautioned not to rely on these forward-looking statements, which
speak only as of the date of this announcement. We undertake no
obligation to update or revise any forward-looking statements to
reflect any change in our expectations or any change in events,
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