07:00 Thu 14 Jan 2021
Network Intnl Hldgs - Q4 2020 Trading Update
14th
Continued improvement in trading and full year outturn ahead of expectations
Network International Holdings plc, the leading enabler of digital commerce across the
· FY20 revenue ahead of guidance, totalling
· 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
o Take rates were lower y/y; reflecting merchant sector mix, the regulatory impact on acquiring fees in
· 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
o
"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
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
Customer wins and contract renewals: In the
Growth in online payments and cross-sell of value added services: Our N-GeniusTM 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
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
New market entry: In
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
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
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
Take rates were lower in the period when compared with the prior year, reflecting merchant sector mix, the regulatory impact on acquiring fees in
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
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
Full year outturn
Total revenue for FY20 was
Full and audited financial results will be released on
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
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