TIDMMPAY
RNS Number : 8637W
Mi-Pay Group PLC
24 April 2019
The information contained within this announcement is deemed by
the Company to constitute inside information stipulated under the
Market Abuse Regulation (EU) No. 596/2014. Upon the publication of
this announcement via the Regulatory Information Service, this
inside information is now considered to be in the public domain
24 April 2019
Mi-Pay Group plc
('Mi-Pay', the 'Group', or the 'Company')
Final Results
Mi-Pay (AIM: MPAY), a leading provider of digital transformation
and mobile payment solutions, is pleased to present its Final
Results for the year ended 31 December 2018.
Financial Highlights
-- GBP106.0m of payment transaction value processed in 2018 from
7.4 million processed transactions (2017: GBP94.0 million
and 6.7 million respectively).
-- Delivered fraud management services indemnifying GBP43.6m
of payments against fraud, driving GBP0.3 million of new revenue
from its first full year of trading (2017: Nil).
-- Total Revenue of GBP3.3 million for the year (2017: GBP3.1
million), comprising:
o Transaction Services Revenue of GBP2.6 million (2017: GBP2.7
million);
o Fraud Services Revenue of GBP0.3m (2017: Nil); and
o Professional Services Revenue of GBP0.4 million (2017: GBP0.4
million).
-- Gross profits increased to GBP2.1 million (2017: GBP2.0 million)
due to new fraud services.
o Transaction Services gross margin remained stable at 63%
(2017: 63%).
o New Fraud Services gross margin was 39% (2017: Nil).
-- Administrative costs fell by GBP0.3m during the year as a
result of the reorganisation and infrastructure cost renegotiation.
These savings are expected to continue into 2019 and beyond.
-- Operating loss reduction to GBP0.2 million (2017: GBP0.6 million).
-- Cash and cash equivalents as at 31 December 2018 increased
to GBP3.5 million (31 December 2017: GBP2.9 million).
-- Basic loss per share 0.5 pence (2017: 1.5 pence).
Operational Highlights
-- 12 month contract signed to deliver indemnified fraud services
on mobile top up and digital content services in mainland
Europe.
-- Successfully integrated into our largest client's new infrastructure,
transferring their acquired customer base onto our platform,
driving increased revenues.
-- Post year end contract extensions announced with clients representing
43% of 2018 revenue.
-- Long term extension of core transaction processing software
license and global technology infrastructure delivering scalable
stability and reducing our recurring cost base.
-- Board restructure successfully implemented.
-- Continued strong metrics from our in-house cyber security,
fraud and content management solutions driving the growth
in revenue and gross profits:
o Average chargeback rate 0.04% (2017: 0.06%).
o Average payment success percentage 87.8% (2017: 89.2%).
o Increased consumer data consumption drove average revenue
per transaction to GBP14.37 (2017: GBP14.09).
Michael Dickerson, Executive Chairman of Mi-Pay Group plc
commented on the results:
"2018 has been a year of strong progress for Mi-Pay in which key
milestones have been achieved. We processed over GBP100 million in
fully managed payment transactions for the first time and
successfully delivered indemnified payment fraud management
services driving GBP0.3 million of profitable new revenue. This,
combined with a continuing ability to scale efficiently and improve
our cost base, delivered a material reduction in losses for the
year and a profit after interest, tax, depreciation, amortisation
and share based payments in H2 2018. We enter 2019 having secured
long term contractual extensions for clients representing 43% of
our 2018 revenue and long-term infrastructure relationships which
will provide real stability as we grow and as such a strong
platform for the future."
"The market we operate in continues to change as new European
payment compliance directives impact solution providers and our
clients consolidate their offerings and vendors, especially as they
increasingly focus on the transition to digital solutions, our core
offering. This offers both opportunities and risks, however our
knowledge, in house solutions and efficiencies in digital
e-commerce provides a strong platform to build from."
Both the full Annual Report and Financial Statements and the
notice of AGM, convening a general meeting of the Company, to be
held at 30 Crown Place, London, EC2A 4ES on the 21(st) May 2019 at
11 a.m. are available on our website at
www.mi-pay.com/investor-document-centre/ and will be posted to
Shareholders shortly.
For further information please contact:
Mi-Pay Group plc Allenby Capital Limited IFC Advisory
Tel: +44 207 112 Tel +44 203 328 5656 Tel: +44 203 053 8671
2129
Michael Dickerson, James Reeve Graham Herring
Chairman John Beale, Asha Chotai Tim Metcalfe
CEO Heather Armstrong
About Mi--Pay Group
Founded in 2003, Mi-Pay Group plc delivers fully outsourced
online and related payment and fraud management solutions to
digital ecommerce clients, primarily in the mobile and digital
content sector. Its product offering provides the infrastructure to
enable pre-paid mobile devices to be topped up via a variety of
channels such as websites, mobile applications and social media
applications and customers include Mobile Network Operators (MNOs)
and Mobile Virtual Network Operators (MNVOs), additionally managing
and indemnifying the data security and payment fraud risks. Mi-Pay
sells, integrates and operates its products and solutions on a
global basis. For further information, please visit www.Mi-Pay.com
or contact details as shown above.
Chairman's Statement
I am delighted to write a very positive Chairman's statement
following a good transitional year for Mi-Pay. During the year the
business passed a number of milestones and delivered on a number of
fronts.
Firstly, the new Board structure that was announced on the 1
March 2018 has been bedded in and has delivered the predicted
savings. I would like to thank my fellow Board members for making
this a successful transition and for entering into their new roles
with an enthusiasm that has helped deliver tangible benefits to the
Company.
I am also delighted to have welcomed Huub Sparnaaij to the Board
of the Company as a non-executive director. Huub brings to the
Board a wealth of experience of mobile payment solutions and
digital content sales in mainland Europe. I believe that Huub's
knowledge and experience - from a digital content, product and
geographical perspective, will bring increased value to the
Group.
In summary, the Company has used 2018 to set in place the
bedrock for future growth, building on and enhancing its previous
investments in solutions and efficiencies. We have secured key
client relationships, delivered new products and ensured the
stability of our infrastructure resulting in the delivery of
adjusted EBITDA (earnings before interest, tax, depreciation,
amortisation and share based payments) profit and cashflow positive
trading in the second half of 2018.
Outlook
The changes implemented in 2018 have continued to deliver
improvements in the Company's performance. We expect this to
continue into 2019 and drive future growth from existing clients
and deliver new ones, underpinned by:
-- Consumers continuing to use mobile technology to consume digital
content and our clients are targeting digitalisation of their
payment offerings. The market in which we operate will grow
as existing consumers will spend more and an increasing number
will transact through our digital channels.
-- Extending our contracts and solutions with our existing clients
where Mi-Pay's competitive pricing will result in the Company
being the provider of choice,
-- The continued delivery of market leading fraud detection solutions
which have now reached the point of profitability and will
continue to add value during 2019.
-- The opportunity to launch new products into the market - we
are excited by the new services we are currently developing
and are looking forward to delivering new and innovative products
for our clients to enjoy.
We now have an efficient cost structure, an ongoing ability to
invest and an enhanced revenue growth potential. This is
underpinned by our recent announcements of two contract extensions
securing major client revenue beyond 2022.
We remain proud of our record on platform security and
compliance and will continue to focus on this in 2019 ensuring that
we are PSD2 ready and that our systems remain secure and
robust.
On behalf of the Board I would like to thank all of our
employees, clients, investors and partners who have enabled Mi-Pay
to deliver on its core targets for 2018 and continue to support our
growth in 2019.
Michael Dickerson
Executive Chairman
23 April 2019
CEO Review of Operations
We are focused on enabling our clients to digitally transform
their customer interactions, improve customer experience and
mitigate their risks. Our solutions directly resolve these
challenges:
-- Increasing consumer demand and availability of digital content
is driving an exponential increase in data consumption via
mobile and tablet devices.
-- Our clients require new ways to manage margins and retain customers
via digital payment channels. Our solutions and low cost of
delivery provide a single solution for clients offering automated
promotional and retention solutions.
-- High profile data security breaches and increasing global compliance
requirements have driven the protection of customer data to
be strategically critical to our clients' success and brand
value.
-- E-commerce payment fraud is increasing with the proliferation
of new payment solutions adding complexity to risk management.
-- In contrast, consumers now expect a quick, simple e-commerce
experience with flexible payment solutions. Third party mobile
friendly 'wallet' payment solutions such as PayPal, Amazon
Payments and Apple Pay are increasingly the choice of consumers.
Over time, this will become more complex as direct banking
solutions and crypto-currencies enter the market.
We will continue to invest, learn, experience and build
solutions to simplify these challenges for our clients.
Revenue
We deliver three core revenue streams from our clients:
Transaction Services Revenue is driven by the processing of transactions
on behalf of our clients. This is our core business and can deliver
strong gross margins, which in turn creates recurring, annuity-based
revenue in a naturally expanding market. This provides a solid,
sustainable and growing source of revenue.
Fraud Services Revenue is driven from the need for clients to
reduce exposure to fraud via payment processes. We offer a fully
managed service that eliminates the risk of fraud for our clients
through our market leading technology and history of experience
and knowledge.
Professional Services Revenue relates to the development, delivery
and hosting of our platform and client solutions. Critically,
this revenue traditionally relates to the implementation of new
services for clients, which in turn increases our long-term Transaction
Services Revenues.
2014 2015 2016 2017 2018
Payment Transaction Value GBP50.1m GBP64.7m GBP83.4m GBP94.0m GBP106.0m
Processed
------------------------------------- -------- -------- -------- -------- ---------
Fraud Transaction Value Processed - - - GBP1.7m GBP43.6m
------------------------------------- -------- -------- -------- ---------
Combined Payment & Fraud Transaction GBP50.1m GBP64.7m GBP83.4m GBP95.7m GBP149.6m
Value Processed
------------------------------------- -------- -------- -------- -------- ---------
Total Revenue GBP2.7m GBP3.0m GBP3.3m GBP3.1m GBP3.3m
------------------------------------- -------- -------- -------- ---------
Total gross profit % 45% 56% 64% 64% 62%
------------------------------------- -------- -------- -------- -------- ---------
Total revenue increased by GBP0.2 million to GBP3.3 million
(2017: GBP3.1 million) with the increase driven by a GBP0.3 million
rise in revenue from the commencement of our fraud monitoring
service, offsetting a slight decrease in our transaction revenue as
new rates from extended contracts came into effect. Whilst our
Fraud Services revenue will deliver lower revenue per transaction
than our full indemnified payment solution revenues, its easier
implementation and wider market opportunity offers new growth
opportunities for us outside of our traditional verticals and
territories. We expect this to ultimately deliver gross margins
comparable with those of our traditional full payment solution.
For our core Transaction Services product, we focussed on
driving volume growth within our key clients which crucially
included the successful integration with our largest client' new
infrastructure resulting in Mi-Pay becoming their single digital
payment partner. As a result, our Payment Transaction value
processed increased in the year to GBP106 million from GBP94
million. For the first time in our history we processed over GBP100
million of fully managed payment transactions on behalf of our
clients which continued to grow throughout the period. As at 31
December 2018 we were processing annualised payments in excess of
GBP110 million as the naturally recurring and growing nature of our
model underpins our longer-term opportunities.
Our Transaction Services Revenue remained flat at GBP2.6 million
despite the transaction growth. Whilst our client's digital
transactions are driving our growth this in turn ultimately leads
to commercially improved offers. Our percentage revenue per
transaction has decreased from 3.5% in 2014 to 2.5% in 2018 which
has limited transaction revenue growth, however we have offset this
at gross profit level with improved commercial terms with our
payment partners, growing gross margins from 36% to 63% over the
same period. This in turn has led to longer term relationships with
our clients. In early 2019 we successfully extended contracts
relating to 43% of our 2018 revenue to 2022 and beyond. This gives
us a stable, growing and investable annuity-based revenue
model.
Professional Services Revenue remained flat at GBP0.4 million,
in line with expectations, as we continue to deliver our in house
hosted secure vault and card tokenisation solution that underpins
this annually recurring revenue stream. We expect this to continue
in the coming period.
Underlying Revenue Trends
-- Our largest client grew to 31% of our revenue as the processed
volumes increased, offset by improved commercial terms. We
are pleased to have secured a further extension to this contract
to deliver longer-term security and growth delivering commitment
through to April 2022 as their single digital payment partner.
-- Our current clients' average over 5 years of continuous service
with us. 90% of our revenue for 2018 was spread across 10
clients, with whom we have worked with for an average of 7
years, with 43% recently now signed up to long term contracts.
The remaining clients operate under a rolling contract basis
and therefore there is a potential for loss of revenue with
limited notice period.
-- We saw our growth driven primarily from increasing volumes
through mobile applications (Apps) and device-optimised websites
with a continuing reduction in more traditional Interactive
Voice Recognition (IVR). As we deliver all these channels,
we are well protected.
-- We continue to see growth in Alternative Payment solutions
delivering Apple Pay to the Operator market and wider mainland
European alternative payment solution to assist our client's
wider European expansion plans in 2019.
-- The inaugural year of our Fraud Services Revenue delivered
profit enhancing business and we were very pleased with the
results achieved. The performance this year delivers a stable
base from which to grow in 2019.
Key Performance Metrics & Operational Investments
Our major contracts indemnify our clients from fraudulent
transactions and we only charge for those successfully completed.
This offering is more strategically aligned with our clients than
that of the general payments market. As such, it is critical that
we continue to deliver world-class payment fraud management and
payment transaction optimisation rates to both protect our gross
profit margins but also deliver real business value to our clients
and their customers. It is here that we target our investments. Our
in-house fraud service and our existing European client base gives
us further insight and knowledge in the management of payment
fraud.
We continued to see high levels of transaction success rates at
88%, (2017: 89%) and we again delivered excellent performance in
payment fraud management for our internal fraud management services
achieving 0.04% (2017: 0.06%) of transaction value. This has
enabled us to maintain our Transaction Services gross margin at 63%
(2017: 63%) despite the reduction in pricing with our largest
client.
Our direct managed Fraud Service incurred a higher fraud rate
than our internal fully indemnified service as we managed higher
risk transactions, however we expect this to improve as our data
sets, experience and technology develops.
The Group also considers its revenues, gross profit margins and
administration expenses as key performance metrics and these are
reviewed in the Financial Review.
Infrastructure Investments
We continue to invest in the development of our solutions and
maintained our Research and Development expenditure at GBP0.6
million in 2018 despite a reduction in general and administrative
costs. We remain at the forefront of compliance and security and
have invested to deepen relationships with existing clients and
target growth into new vertical and geographical markets ensuring
what we do is built to scale efficiently. Our key areas of focus
are:
-- Security and Compliance. The management of payments in
e-commerce is increasingly complex and risky with both payment
fraud and legislative burden increasing. Under the 'Payment
Services Directive 2 (PSD2)', to be implemented in 2019, material
changes will occur in how payment transactions will need to be
managed. This area will drive continued investment in 2019 and
beyond.
- Our investment in payment fraud management solutions continues
to deliver excellent performance and our experience and
improvements in delivering services directly to our new client in
Europe has enhanced our solution and market understanding. We will
continue to expand our knowledge and develop new fraud detection
technologies to enable us to scale and enhance our solution;
- Under new European wide legislation to be implemented in 2019,
we will deliver enhanced customer authentication and security
solutions (3DS2.0) to improve and protect the customer experience
and ensure our clients remain fully compliant with all
legislation;
-- Data Security. The security of the data we hold is critical
to our success. We continue to invest in our infrastructure and
people from a cyber-security perspective to protect the consumer
data we hold. We remain PCI/DSS 3.2 compliant and continue to
ensure we remain fully compliant with the General Data Protection
Regulation.
-- Platform Stability. During the year we renewed the five year
lease for our core transaction processing platform on similar terms
and with an increased scalability capability renewing and enhancing
our global data centre infrastructure for a further three years.
Both of these events will deliver long term cost savings as we take
advantage of new technologies, remove the need for material capital
investments and enhance our platform stability with full system
failover and disaster recovery solutions to protect our
Clients.
-- New Channels. During the year we delivered the capability of
new payment methods such as Apple Pay, Sofort and Giropay and will
continue to ensure our payment capabilities remain in line with the
market requirements. We continue to assist our clients in enhancing
their e-commerce customer journeys and mobile application solutions
and will develop new services such as Voice Activated Services (for
example Amazon Alexa) to drive new growth;
-- Data & Content. As data usage continues to grow
exponentially, we have enhanced our capability to work with
operators and content providers to manage real time data bundles
and responsive top-ups alongside developing business intelligence
solutions to enhance our client's abilities to manage their
customers' needs. The data we hold and how we manage it is critical
to our ability to better manage and optimise the payment experience
as we increasingly work with the marketing teams of our clients to
drive their growth.
These investments are primarily delivered by our own people,
which enables us to retain intellectual property and ensure the
solution is applicable across all of our clients. This increasing
customer data provides us with more experience and knowledge to
build on. In 2018, we built on our market relevance and delivered
solutions that are of increasing strategic importance to our
clients. We now offer a full suite of fully managed digital
customer channels and payment solutions and will continue to expand
them - most importantly, we do so in a fully secure environment
with an underlying profit to support continued investment with
strong, growing client relationships. Our investments and
technology developments continue to ensure we scale efficiently as
demonstrated in recent years and expect to build on these
efficiencies in the future.
We will look to build on this in 2019 and have clear targets to
deliver new growth, improve efficiencies and develop wider
opportunities with mobile operators and digital content providers
in new geographies and services. All of this built upon a scalable,
secure platform.
The knowledge and skills, hard work and dedication of our
employees have built this capability and I look forward to working
with them over the coming years to deliver further success and
sincerely thank them for their support in my role as CEO. They are
our most valuable resource and continue to create the platform and
environment for success.
John Beale
Chief Executive Officer
23 April 2019
Financial Review
We continue to deliver a growing annuity-based revenue stream
with strong gross margins whilst controlling the risks and
demonstrating an ability to scale within existing cost levels.
Trading Results
-- GBP3.3 million total revenue for the year ended 31 December 2018 (2017: GBP3.1 million).
-- GBP2.1 million Gross Profit (2017: GBP2.0 million).
-- GBP0.6 million research and development investment, net of
GBP0.3 million tax recovery paid in August 2018.
-- GBP0.3 million reduction in total administrative expenses.
-- GBP0.2 million Operating Loss (2017: GBP0.6 million).
-- 0.5p Loss per share (2017: 1.5p Loss).
Assets, Liabilities and Reserves
-- GBP0.3 million increase in non-current assets due to 5-year
operating lease commitment from 1 July 2018, payable quarterly over
the term. Offset by lease liability.
-- GBP0.1 million deferred salary accrual (2017: GBP0.4 million).
-- GBP0.2 million expected tax credit recovery for research and development.
-- GBP3.5 million Cash (2017: GBP2.9 million).
-- GBP0.6 million Share options reserve written off to Retained
deficit as previous share options issued were cancelled in March
2018.
Transaction Services performance
Financial 2018 2017 2016 2015
Payment Transaction Volume
Processed 7,373,325 6,668,732 6,180,119 5,225,148
----------- ---------- ---------- ----------
Payment Transaction Value
(GBP) 105,968,398 93,982,712 83,404,805 64,666,714
----------- ---------- ---------- ----------
Average Transaction Value
(GBP) 14.37 14.09 13.50 12.37
----------- ---------- ---------- ----------
Transaction Services Revenue
(GBPm) 2.6 2.7 2.7 2.3
----------- ---------- ---------- ----------
Transaction Services Gross
Profit (GBPm) 1.6 1.7 1.5 1.1
----------- ---------- ---------- ----------
Gross Profit Margin % 63% 63% 60% 48%
----------- ---------- ---------- ----------
% of total revenue 78% 87% 78% 75%
----------- ---------- ---------- ----------
% revenue per transaction 2.5% 2.8% 3.1% 3.5%
----------- ---------- ---------- ----------
Payment transactions processed increased as we saw our largest
client grow following our successful integration into their
centralised infrastructure and further natural migration to our
digital e-commerce channels across our wider client base.
We continue to see an increasing average transaction value as
more consumers look for larger data bundles and we look to increase
the volume of digital bill payment transactions that drive a higher
transaction value. This enables us to drive higher margins and
better control our payment fraud risks.
Our Transaction Services Revenues reduced to GBP2.6 million from
GBP2.7 million in 2017 due to the impact of reduced pricing with
our largest client, which will be offset by the incremental growth
in transaction volumes over the longer term. We do expect to see
strong growth in the coming periods as we fully deliver our new
contracts.
Our percentage revenues per transaction declined to 2.5% (2017:
2.8%), due to:
-- improved commercial contracts with our clients as they sign
longer term, higher volume contracts;
-- increased bill payment transactions which deliver lower %
fees per transaction but lower risk; and
-- reduced market pricing for payment processing which we pass onto our clients.
We maintained our gross profit margin as we continued to deliver
strong payment optimisation, see low payment fraud levels, but also
were able to mitigate commercial pressures as we deliver improved
relationships with our payment partners. The continuing pressure on
margins will be compensated by larger volume growth and improved
commercial terms with our partners.
Fraud Services performance
Financial 2018 2017
Transaction Volume Indemnified 2,389,235 65,243
---------- ---------
Total Fraud Transaction Indemnified
(GBP) 43,617,611 1,652,055
---------- ---------
Fraud Services Revenue (GBPm) 0.3 n/a
---------- ---------
Fraud Services Gross Profit (GBPm) 0.1 n/a
---------- ---------
Gross Profit Margin % 39% n/a
---------- ---------
% of total revenue 10% n/a
---------- ---------
% revenue per transaction 1% n/a
---------- ---------
No revenue in 2017 during trial period
Our new Fraud Service, initially launched in October 2017 as a
trial, saw its first full year of transactions and operation,
delivering a new profitable revenue stream. The direct fraud
management solution in Europe, reviewed over GBP43 million payment
transactions and delivered a gross margin of 39% over the year. In
the six month period to 30 June 2018 the revenue stream was
break-even as we deployed, developed and enhanced the solution and
in the second half of 2018 delivered profit from the service. We
expect this to continue and deliver increased benefits in the
future.
Professional Services performance
Financial 2018 2017 2016 2015
Professional Services Revenue
(GBPm) 0.4 0.4 0.7 0.8
---- ---- ---- ----
Professional Services Gross
Profit (GBPm) 0.3 0.3 0.6 0.6
---- ---- ---- ----
Gross Profit Margin % 80% 72% 81% 79%
---- ---- ---- ----
% total revenue 12% 13% 22% 25%
---- ---- ---- ----
Our Professional Services Revenues remained constant at GBP0.4
million (2017: GBP0.4 million) with stable gross profits at GBP0.3
million (2017: GBP0.3 million). We will continue to drive more
growth through existing delivered channels and see larger
transaction based relationships develop where there is limited
upfront revenue. As a result, our reliance on this revenue stream
has reduced from 25% of total revenues in 2015 to 12% in 2018.
Our total gross profits grew to GBP2.1 million (2017: GBP2.0
million) and closed the period with a stronger underlying
annuity-based revenue stream, a proven new fraud product and strong
total gross margins at 62%. We expect these to be consistent across
geographies, however, our revenue segments drive differing gross
profit margins and as such, our revenue mix impacts our overall
performance.
Operating Loss
During the year, the business continued to deliver savings
whilst at the same time looking to maintain and continue with
investment in key areas. We invested in Research and Development at
similar levels to 2017 and saw a reduction of GBP0.3 million in
Total administrative expenses due to our previously announced
restructure and an extension of our global, PCI secure
infrastructure in August 2018 - these savings are ongoing in
nature. Our focus on delivering business efficiency has reduced our
Total administrative expenses from GBP3.1 million in 2014 to GBP2.3
million in 2018, an GBP0.8 million reduction. These costs savings
when combined with the small increase in gross profits helped to
reduce our losses by 62% to GBP0.2m (2017:GBP0.6 million loss).
Crucially in the six month period to 31 December 2018 we made a
profit before interest, tax, depreciation, amortisation and Share
Based payments. A milestone for the Group.
Cash flow, assets and liabilities
Financial 2018 2017 2016 2015
Cash (including deposits)
(GBP) 3,487,185 2,925,766 3,518,217 3,530,154
----------- ----------- ----------- -----------
Total assets (GBP) 5,267,242 4,381,753 4,812,142 4,716,205
----------- ----------- ----------- -----------
Total current liabilities
(GBP) (4,735,782) (4,359,813) (4,140,921) (3,539,741)
----------- ----------- ----------- -----------
Non-current liabilities
(GBP) (211,344) (20) (32,915) (99,000)
----------- ----------- ----------- -----------
Shareholders' funds
(GBP) 320,116 21,920 638,306 1,077,464
----------- ----------- ----------- -----------
Loss per share (0.5)p (1.5)p (1.1)p (3.6)p
----------- ----------- ----------- -----------
The Group ended the year with GBP3.5 million in cash and cash
equivalents (2017: GBP2.9 million). GBP2.9 million (2017: GBP2.5
million) of this balance related to the client related funds and
GBP0.6 million (2017: GBP0.6 million) related to our core trading
and operating cash. Total cash movement in the year was GBP0.6
million. This is reconciled as:
-- Client related funds increased by GBP0.6 million during the
period as we grew our transactions processed. We expect to look to
settle funds quicker in the future to ensure we remain competitive
in the market.
-- There was no change in our core trading and operating cash
balances during the period, however we note there was a:
- GBP0.1 million outflow related to expenditure on our core
business operation and working capital. This included a GBP0.3
million inflow from Research and Development Tax credits (2017:
GBP0.3 million). We expect to recover in excess of GBP0.2 million
in 2019.
- GBP0.1 million outflow related to capital expenditure and
finance lease payments in respect of our core transactional
infrastructure and technology investment. This lease was renewed
for five years on 1 July 2018 on similar terms, payable quarterly
over the life of the lease. We do not capitalise development costs
from our employees.
- These outflows were offset by a GBP0.2 million inflow related
to the new issue of share capital on 1 March 2018 as part of the
Board restructure previously announced.
The Group had limited capital expenditure exposure and does not
meet the IAS 38 criteria to enable it to capitalise its internal
development costs. The Group now services a finance lease related
to the five-year licence arrangement for our core
transaction-processing platform, effective from 1 July 2018 of
which GBP0.3 million remained outstanding as at 31 December 2018.
This ensures continuity to the Group in infrastructure and service
levels.
Excluding the increase in client funds, there were no other
material movements in working capital with the Group being
protected from risk in this area as its debtor fees relating to its
core Transaction Services Revenues are deducted at source before
net payments are made to clients. The Group has no external
borrowings.
The net assets of the Group increased to GBP0.3 million (2017:
nil) due primarily to the positive impact of the Board restructure
on 1 March 2018. This led to:
-- GBP0.3 million reduction in non-current liabilities as
previously deferred salaries and bonuses were converted to Ordinary
shares in conjunction with the placing.
-- GBP0.3 million incremental cash for the Group through the
placing offset by GBP0.1 million of costs.
In March 2018, 3,763,425 share options with an exercise price of
41 pence were cancelled, leading to GBP0.6 million reduction in
Share Options Reserve and crediting Retained Deficit. The Company
issued new options over a total of 3,750,000 Ordinary Shares (under
the terms of the Company's existing share option scheme), with an
exercise price of 13 pence per Ordinary Share, this created a Share
based payment expense of GBP0.04 million in administrative
expenses.
We enter 2019 with higher annuity based revenues, stable gross
margins and a lower run rate cost base. This is underpinned by a
stronger cash position, reduced liabilities and strong contractual
relationships with both our clients and our core infrastructure
partners.
John Beale
Chief Executive Officer, Company Secretary
23 April 2019
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2018
Year ended 31 Dec 2018 Year ended 31 Dec 2017
Note GBP GBP
Payment Transaction Value Processed 105,968,398 93,982,712
---- ---------------------- ----------------------
Transaction Services Revenue 2,606,781 2,640,029
---- ---------------------- ----------------------
Fraud Services Revenue 329,602 14,149
---- ---------------------- ----------------------
Professional Services Revenue 400,642 395,922
---- ---------------------- ----------------------
Revenue 3 3,337,025 3,050,100
---- ---------------------- ----------------------
Cost of sales (1,257,437) (1,085,922)
---- ---------------------- ----------------------
Gross profit 3 2,079,588 1,964,178
---- ---------------------- ----------------------
Administrative expenses
---- ---------------------- ----------------------
General and administration (1,495,603) (1,837,862)
---- ---------------------- ----------------------
Research and Development (646,549) (578,816)
---- ---------------------- ----------------------
Depreciation (120,345) (97,229)
---- ---------------------- ----------------------
Share Based payments (38,992) 0
---- ---------------------- ----------------------
Exceptional items 0 (71,758)
---- ---------------------- ----------------------
Total administrative expenses 4 (2,301,489) (2,585,665)
---- ---------------------- ----------------------
Operating loss (221,901) (621,487)
---- ---------------------- ----------------------
Finance income 721 198
---- ---------------------- ----------------------
Finance expense (34) (25)
---- ---------------------- ----------------------
Loss before taxation (221,214) (621,314)
---- ---------------------- ----------------------
Taxation (14,122) (257)
---- ---------------------- ----------------------
Loss for the year from continuing
operations (235,336) (621,571)
---- ---------------------- ----------------------
Other comprehensive expense for
the year
---- ---------------------- ----------------------
Exchange differences on translation
of foreign operations 3,567 5,185
---- ---------------------- ----------------------
Total comprehensive expense for
the year attributable to the
owners of the parent (231,769) (616,386)
---- ---------------------- ----------------------
Basic and diluted loss per ordinary
share for continuing operations (0.5)p (1.5)p
---- ---------------------- ----------------------
Consolidated Statement of Financial Position
For the year ended 31 December 2018
31 Dec 2018 31 Dec 2017
Note GBP GBP
ASSETS
---- ------------ ------------
Non-current assets
---- ------------ ------------
Property, plant and equipment 371,699 87,710
---- ------------ ------------
Total non-current assets 371,699 87,710
---- ------------ ------------
Current assets
---- ------------ ------------
Trade and other receivables 7 1,208,358 1,138,277
---- ------------ ------------
R&D credit receivable 200,000 230,000
---- ------------ ------------
Cash and cash equivalents 3,487,185 2,925,766
---- ------------ ------------
Total current assets 4,895,543 4,294,043
---- ------------ ------------
Total assets 5,267,242 4,381,753
---- ------------ ------------
LIABILITIES
---- ------------ ------------
Current liabilities
---- ------------ ------------
Trade and other payables 8 (4,597,844) (4,326,813)
---- ------------ ------------
Obligations under finance lease 9 (137,938) (33,000)
---- ------------ ------------
Total current liabilities (4,735,782) (4,359,813)
---- ------------ ------------
Non-current liabilities
---- ------------ ------------
Obligations under finance lease 9 (211,344) (20)
---- ------------ ------------
Total non-current liabilities (211,344) (20)
---- ------------ ------------
Total liabilities (4,947,126) (4,359,833)
---- ------------ ------------
Net assets 320,116 21,920
---- ------------ ------------
Equity 10
---- ------------ ------------
Share capital 4,573,429 4,159,324
---- ------------ ------------
Share premium 1,480,791 1,403,923
---- ------------ ------------
Share options reserve 38,992 624,729
---- ------------ ------------
Reverse acquisition reserve 6,920,115 6,920,115
---- ------------ ------------
Merger reserve 6,808,742 6,808,742
---- ------------ ------------
Retained deficit (19,501,953) (19,894,913)
---- ------------ ------------
Total equity attributable to
the equity shareholders of the
parent 320,116 21,920
---- ------------ ------------
Consolidated Statement of Cash Flows
For the year ended 31 December 2018
Year ended Year ended
31 Dec 2018 31 Dec 2017
Note GBP GBP
Cash flows from operating activities
----- ------------ ------------
Loss before tax from continuing operations (221,214) (621,314)
------------ ------------
Adjusted for:
----- ------------ ------------
Depreciation 120,345 97,229
------------ ------------
Exchange differences on translation
of foreign operations 3,567 5,185
------------ ------------
Finance income (721) (198)
------------ ------------
Finance expense 34 25
------------ ------------
Share based payment 38,992 0
------------ ------------
R&D credits (254,081) (267,516)
------------ ------------
(Increase)/decrease in trade and other
receivables (70,081) (241,087)
------------ ------------
Increase in trade and other payables 528,662 281,892
------------ ------------
Adjusted profit/(loss) from operations
after changes in working capital 145,503 (745,784)
------------ ------------
Interest received 721 198
------------ ------------
Interest paid (34) (25)
------------ ------------
Income taxes paid (14,122) (257)
------------ ------------
R&D credit (paid)/received 284,081 257,516
------------ ------------
Net cash flows from operating activities 416,149 (488,352)
------------ ------------
Cash flows from investing activities
----- ------------ ------------
Purchase of property, plant and equipment (35,501) (38,204)
------------ ------------
Net cash flows from investing activities (35,501) (38,204)
------------ ------------
Cash flows from financing activities
----- ------------ ------------
Issue of Shares 233,342
------------ ------------
Finance lease payments (52,571) (65,895)
------------ ------------
Net cash flows from financing activities 180,771 (65,895)
------------ ------------
Net (decrease)/increase in cash and
cash equivalents 561,419 (592,451)
------------ ------------
Cash and cash equivalents at beginning
of period 2,925,766 3,518,217
------------ ------------
Cash and cash equivalents at end of
period 3,487,185 2,925,766
------------ ------------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2018
Reverse
For the year Share Share Share options acquisition
ended capital premium reserve reserve Merger reserve Retained deficit Total
31 December 2018 GBP GBP GBP GBP GBP GBP GBP
At 1 January
2018 4,159,324 1,403,923 624,729 6,920,115 6,808,742 (19,894,913) 21,920
--------- --------- ---------------- --------------- -------------- ---------------- ---------
Loss for the
year from
continuing
operations (235,336) (235,336)
--------- --------- ---------------- --------------- -------------- ---------------- ---------
Other
comprehensive
income for the
year 3,567 3,567
--------- --------- ---------------- --------------- -------------- ---------------- ---------
Total
comprehensive
income for the
year - - - - - (231,769) (231,769)
--------- --------- ---------------- --------------- -------------- ---------------- ---------
Shares issued
in year 414,105 76,868 490,973
--------- --------- ---------------- --------------- -------------- ---------------- ---------
Share options
issued 38,992 38,992
--------- --------- ---------------- --------------- -------------- ---------------- ---------
Share options
cancelled (624,729) 624,729 -
--------- --------- ---------------- --------------- -------------- ---------------- ---------
Total
contribution
by and
distribution
to owners 414,105 76,868 (585,737) - - 624,729 529,965
--------- --------- ---------------- --------------- -------------- ---------------- ---------
At 31 December
2018 4,573,429 1,480,791 38,992 6,920,115 6,808,742 (19,501,953) 320,116
--------- --------- ---------------- --------------- -------------- ---------------- ---------
Reverse
For the year Share Share Share options acquisition
ended capital premium reserve reserve Merger reserve Retained deficit Total
31 December 2017 GBP GBP GBP GBP GBP GBP GBP
At 1 January
2017 4,159,324 1,403,923 624,729 6,920,115 6,808,742 (19,278,527) 638,306
--------- --------- ---------------- --------------- -------------- ---------------- ---------
Loss for the
year from
continuing
operations (621,571) (621,571)
--------- --------- ---------------- --------------- -------------- ---------------- ---------
Other
comprehensive
expense for
the year - - - - - 5,185 5,185
--------- --------- ---------------- --------------- -------------- ---------------- ---------
At 31 December
2017 4,159,324 1,403,923 624,729 6,920,115 6,808,742 (19,894,913) 21,920
--------- --------- ---------------- --------------- -------------- ---------------- ---------
Notes to the Financial Statements
1. Accounting policies
General information
Mi-Pay Group plc quoted on the AIM - London Stock Exchange on 29
April 2014, registered at 30 Crown Place, Earl Street, London, EC2A
4ES. Mi-Pay Group plc was incorporated in England and Wales under
the Companies Act 2006. The principal activity of the Group for the
year continued to be specialising in delivering fully outsourced
on-line and related payment solutions to digital e-commerce
clients, primarily in the mobile sector, enabling them to monetise
their on-line proposition risk free.
Basis of preparation
The Consolidated Financial Statements have been prepared in
accordance with International Financial Reporting Standards
(IFRSs), as adopted by the European Union, and with those parts of
the Companies Act 2006 applicable to Groups preparing financial
statements under IFRSs.
The accounting policies applied in the preparation of these
Financial Statements are consistent with those used in the prior
year.
Basis of consolidation
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The Consolidated Financial Statements present the results of the
Company and its subsidiaries ('the Group') as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
New International Financial Reporting standards in the year
The adoption of the new standards and amendments effective from
1 January 2018 have not impacted the classification or measurement
of the Group's assets and liabilities.
IFRS 9 (Financial Instruments) - IFRS 9 is effective for annual
periods beginning on or after 1 January 2018. The standard
introduced a new approach to how financial assets and liabilities
are classified and an expected loss impairment model.
As a result of adopting IFRS 9, the Group adopts a simplified
approach using a provision matrix in the determination of lifetime
expected credit losses. This approach takes into consideration both
historic credit losses and future factors. However, as trade
debtors are paid via an automatic mechanism whereby the company has
control over the payment dates and process via the requirement to
transfer client money, impairment losses on such balances are not
expected.
The standard was applied on 1 January 2018, considering the
cumulative impact at this date in assessing whether an adjustment
to opening reserves is required. However, the application of the
standard had no impact on the current or previous reporting
periods.
The first set of interim accounts that was prepared in
accordance with IFRS 9 was the 30 June 2018 interims.
IFRS 15 (Revenue from Contracts with Customers) - IFRS 15 became
effective for annual periods beginning on or after 1 January 2018.
The Group has transitioned to the new standard through means of the
cumulative effect method as at 1 January 2018 (the date of initial
application). It has performed an impact assessment, taking
advantage of the practical expedient not to apply IFRS 15 to any
contracts that were completed contracts at that date. There has
been no impact on revenues reported nor assets and liabilities as a
result of adopting the standard. Revenues for the group is growing
but the contracts with clients are not complex. Transactional
revenues are recognised as commissions when the transactions being
the performance obligations complete and as a result recognition of
revenue did not change under IFRS 15. Project revenues are already
broken down to performance obligations components of the contract
and then measured on a percentage completion basis. Adoption of
IFRS 15 has not impacted on the timing of revenue recognition and
reported revenues for this category. Revenues derived from the
Fraud Services are again based on delivery of transactions and a
commission on the delivery of the transaction. The income from this
new stream of revenue is not impacted by the implementation of
IFRS15.
New International Financial Reporting standards and
interpretations issued but not yet effective
The IASB have issued the following relevant standards which
became mandatory or are not mandatory for the current period.
IFRS 16 (Leases) - IFRS 16 is effective for annual periods
beginning on or after 1 January 2019 and has been endorsed by the
EU. The standard establishes principles for the recognition,
measurement, presentation and disclosure of leases and involves the
recognition of a right-of-use asset and corresponding lease
liability.
-- The Group has exposure to an operating leases with a
contractual liability of EUR21,000 in 2019 with the lease
termination in April 2022
-- Instead of recognising an operating expense for its operating
lease payments, the Group will instead recognise interest on its
lease liabilities and amortisation on its right to use assets
The Group does not expect any other standards issued by the
IASB, but not yet effective, to have a material impact on the
Group.
Research and Development Tax Credits
Research and Development tax credits are included within and
offset against the Research and Development line within
administrative expenses.
During the year ended 31 December 2018, the Group has invested
GBP900,630 (2017: GBP846,332) in Research and Development
activities. When deducting the Research and Development credit of
GBP254,081 (2017: GBP267,516) the net effect and total within the
Research and Development line of the Consolidated Statement of
Comprehensive Income is GBP646,549 (2017: GBP578,816).
Going concern
The Group made a total comprehensive loss of GBP231,769 for the
year ending 31 December 2018 (year ended 31 December 2017: Loss of
GBP616,386). As at the year end the Group does however have healthy
cash balances, with cash and cash equivalent balances totalling
GBP3,487,185 and in addition expects to receive at least GBP200,000
during 2019 in relation to annual Research and Development tax
reclaims, an annual recovery, paid in cash it expects to continue
in future periods until profitable.
The Directors have prepared a cash flow forecast covering a
period extending beyond 12 months from the date of approval of
these Financial Statements with this plan demonstrating that the
Group will be able to fully settle its liabilities over the period.
The renewal and expected growth with our biggest client, new
delivery of fraud service and other opportunities, combined with
our continuing growth in transaction volumes in 2018 which we
expect to continue, combined with the additional reduction in the
operating cost base of the business due to the restructure gives
the Directors confidence that the Group will move to a monthly
positive cash flow position without requiring further
investment.
The Directors therefore are confident that sufficient funds are
in place to support the going concern status of the Group and as
such consider that it is appropriate to prepare the Group's
Financial Statements on a going concern basis.
Use of estimates
The preparation of the Financial Statements requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the Financial Statements and
the reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results may
ultimately differ from those estimates. The areas involving higher
degree of judgement or complexity, or areas where assumptions and
estimates are significant to the consolidated financial statements
are disclosed in note 2, critical accounting estimates and
judgements.
Property, plant and equipment
Property, plant and equipment are initially recognised at cost
and subsequently measured under the 'cost model' at cost less
accumulated depreciation. Cost comprises the purchase price plus
any directly attributable costs. If required, cost will also
include the estimated present value of any future avoidable costs
such as dismantling and removing items, with the corresponding
liability recognised within provisions.
The gain or loss arising on the disposal of an asset is
determined as the difference between the sale proceeds and the
carrying amount of the asset. The gain or loss is recognised in the
consolidated statement of comprehensive income.
Depreciation is provided to write off the cost less estimated
residual value, in equal instalments over the estimated economic
useful life as follows:
-- Fixtures and fittings The shorter of three years or the life
of the building lease
-- Computer equipment 33% per annum straight-line
Depreciation of computer equipment held under a finance lease is
depreciated over the shorter of the lease term and the estimated
economic useful life:
-- Computer equipment Finance lease 5 years (lease term)
Revenue recognition
Revenue represents amounts chargeable for the transactional
services and other related professional services rendered in the
normal course of business and measured when, and to the extent
that, the associated performance obligations have been
fulfilled.
Transactional revenues are predominantly derived from the
management of transaction processing services for mobile operators,
virtual network operators and pre-paid calling card companies
around the world. Transactional revenues represent commissions
earned on the successful completion of the processing of each
individual transaction, and thus commissions are recognised in
revenues at the point of the successful completion of the
transaction.
Professional Services Revenues are derived from the provision of
professional services, such as implementation, platform hosting
services, development, training and consultancy. These are
recognised over time on a percentage-of-completion basis.
Professional services revenues are recognised over time as the
client simultaneously receives and consumes the benefit from
Mi-Pay's service delivery and that the Group has an enforceable
right to payment.
The transaction price is determined by the contractual agreement
in place for the delivery of the services and revenues are
recognised to the extent that this performance obligation is
considered to be satisfied with reference to costs incurred as a
proportion of total costs to complete.
At each reporting period, receivables are recognised for
revenues yet to be invoiced or settled to the extent that it is
highly probable that there will not be a significant reversal of
the amounts accrued in the future.
Where invoices are raised to the client in excess of the value
of the consideration recognised as revenue based on the stage of
completion, deferred income balances are recorded that represent
unfulfilled performance obligations.
Provisions - customer refunds
A provision in respect of customer refunds is recognised when
the Company has a present legal or constructive obligation as a
result of a past event and it is probable that an outflow of
economic benefits will be required to settle an obligation.
Expected costs of customer refunds arise:
-- By way of chargebacks made by credit cards and debit card
companies where the card holder disputes the charge taken;
-- As indemnity payments against contested direct debit payments;
-- As other customer refunds when a transaction is subsequently
reversed because the transaction has failed to complete; and
-- Goodwill in nature where service has not been delivered to a suitable standard.
Any differences between provisions recognised and amounts
actually paid are taken directly to the Consolidated Statement of
Comprehensive Income.
The provision in respect of customer refunds is not material in
2018 or the prior year and is included within accruals.
Leased assets
Where substantially all of the risks and rewards incident to
ownership of a leased asset are transferred to the Company, the
lease will be treated as a finance lease, with the asset treated as
if it had been purchased outright. The asset is capitalised and a
corresponding liability recognised at fair value or; if lower, the
present value of the minimum lease payments. The asset is
depreciated over the shorter of the useful life and the lease term
(useful life if reasonably certain the Company will obtain
ownership). Interest finance is charged to the Consolidated
Statement of Comprehensive Income and calculated and applied to
give a constant rate on the outstanding liability. Lease payments
are analysed between capital and the interest finance charge and
reduce the liability and accrued interest accordingly. The
non-current and current portions of the liability are disclosed
separately.
Where substantially all of the risks and rewards incident to
ownership of a leased asset are not transferred to the Company, the
lease will be treated as an operating lease. Rentals payable under
operating leases are charged to the Consolidated Statement of
Comprehensive Income on a straight-line basis over the term of the
relevant lease except where another systematic basis is more
representative of the time pattern in which economic benefits from
the leased asset are consumed.
Foreign currency
Transactions entered into by the Company other than the currency
of the primary economic environment in which the Company operates
('their functional currency') are recorded at the rates ruling when
the transactions occur. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the reporting
date.
On consolidation, the results of overseas operations are
translated into sterling at rates approximating to those ruling
when the transactions took place. All assets and liabilities of
overseas operations are translated at the rate ruling at the
reporting date.
Employee benefits
All employee benefit costs, notably holiday pay, bonuses and
contributions to the Company defined contribution pension scheme
are charged to the Consolidated Statement of Comprehensive Income
on an accruals basis.
Research and Development
Expenditure on Research and Development is recognised as an
expense and charged to the Consolidated Statement of Comprehensive
Income in the period in which it is incurred.
Development expenditure relating to specific projects intended
for commercial exploitation is capitalised as an intangible fixed
asset where the following conditions are met:
-- It is technically feasible to complete the intangible asset
so that it will be available for use or sale;
-- It is the intention of the Company to complete the intangible asset and use or sell it,
-- The Company has the ability to use or sell the intangible asset;
-- The intangible asset will generate probable future economic benefits;
-- The technical, financial and other resources needed to
complete the development and to use or sell the intangible asset
are available to the Company; and
-- The expenditure attributable to the intangible asset during
its development can be measured reliably.
The criteria required to capitalise Research and Development
expenditure has not been met and as such all expenditure has been
recognised in the Consolidated Statement of Comprehensive
Income.
Share-based payment
The Company issues equity-settled share-based payments to
certain employees. Equity-settled share-based payments are measured
at fair value at the date of the grant. The fair value determined
at the grant date of the equity-settled share-based payment is
expensed on a straight-line basis over the vesting period. At each
reporting date, the Company revises its estimate of the number of
share options expected to vest as a result of the effect of
non-market vesting conditions. The impact of the revision of the
original estimate, if any, is recognised in the Consolidated
Statement of Comprehensive Income with a corresponding adjustment
to equity so that the cumulative amount recognised in equity over
the vesting period is based on the number of share options that
eventually vest. Fair value is measured by use of the Black-Scholes
model. The expected life used in the model has been adjusted, based
on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural
considerations.
Current taxation
Current tax is the amount of income taxes payable or recoverable
in respect of taxable profit or loss for a period. Current tax
contains the current period charge, the reversal of the under or
over provision relating to the previous period and the deferred tax
movement.
Current tax is recognised in the profit or loss, or in other
comprehensive income/directly to equity if it relates to items that
have been credited or charged to other comprehensive
income/directly to equity.
Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the relevant taxation
authorities, based on tax rates and laws that are enacted by the
Statement of Financial Position date.
Deferred taxation
Deferred tax is the tax attributable to temporary differences.
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the Consolidated
Statement of Financial Position differs from the tax base used in
the computation of taxable profit and thus creating a temporary
difference.
Deferred tax assets are recognised only to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. The carrying
amount of deferred tax assets is reviewed at each reporting date
and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part
of the asset to be recovered.
Deferred tax assets and liabilities can only be offset when a
legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred tax assets and
liabilities relate to income taxes levied by the same taxation
authority.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held
at call with banks.
Financial instruments
Financial assets and financial liabilities are recognised in the
Statement of Financial Position when the Company becomes party to
the contractual provisions of the instrument.
The Group's financial assets are all classified within the
amortised cost category. The Group's accounting policy for this
category is as follows:
Assets carried at amortised cost These assets arise principally
from the provision of services to clients (eg trade receivables),
but also incorporate other types of financial assets where the
objective is to hold these assets in order to collect contractual
cash flows and the contractual cash flows are solely payments of
principal and interest. They are initially recognised at fair value
plus transaction costs that are directly attributable to their
acquisition or issue, and are subsequently carried at amortised
cost using the effective interest rate method, less provision for
impairment.
Impairment provisions for trade receivables are recognised based
on the simplified approach within IFRS 9 using a provision matrix
in the determination of the lifetime expected credit losses. During
this process the probability of the non-payment of the trade
receivables is assessed. This probability is then multiplied by the
amount of the expected loss arising from default to determine the
lifetime expected credit loss for the trade receivables. For trade
receivables, which are reported net, such provisions are recorded
in a separate provision account with the loss being recognised
within cost of sales in the consolidated statement of comprehensive
income. On confirmation that the trade receivable will not be
collectable, the gross carrying value of the asset is written off
against the associated provision.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously
recognised impairment loss is reversed. Any subsequent reversal of
an impairment loss is recognised in the profit and loss account to
the extent that the carrying value of the asset does not exceed its
amortised cost at the reversal date.
The Group's financial assets measured at amortised cost comprise
trade receivables, other receivables, client receivables and cash
and cash equivalents in the consolidated statement of financial
position. Cash and cash equivalents is comprised solely of cash in
hand
The Company assesses at each year end date whether there is
objective evidence that a financial asset or a group of financial
assets is impaired.
Segmental reporting
The Group provides segmental reporting on a basis consistent
with the provision of internal financial information used for
decision making purposes by the Chief Operating Decision maker. The
Group determines geographical information on the basis of the
location of the client.
2. Financial instruments
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Mi-Pay Group's risk management objectives and policies and,
whilst retaining ultimate responsibility for them, it has delegated
the authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the
Mi-Pay Group's finance function. The Board receives monthly reports
from the Chief Financial Officer through which it reviews the
effectiveness of the processes put in place and the appropriateness
of the objectives and policies it sets. The overall objective of
the Board is to set policies that seek to reduce risk as far as
possible without unduly affecting the Mi-Pay Group's
competitiveness and flexibility.
2018 2017
GBP GBP
---------------------------------- ---------- ---------
Financial assets (amortised cost)
Trade receivables less impairment 126,642 88,796
Client receivables 969,098 938,546
Other receivables and deposits 38,599 35,011
Cash and bank balances 3,487,185 2,925,766
---------------------------------- ---------- ---------
4,621,524 3,988,119
---------------------------------- ---------- ---------
2018 2017
GBP GBP
----------
Financial liabilities (amortised cost)
Trade payables 235,755 196,420
Client payables 3,848,251 3,283,629
Other payables and accruals 439,492 744,598
Obligations under finance lease 349,282 33,020
4,872,780 4,257,667
--------------------------------------- ---------- ---------
Financial liabilities in the prior year have been restated to
include deferred salaries within 'Other payables and accruals'.
The fair value of the Group's financial assets and financial
liabilities is not materially different to their carrying value as
shown above and in the Statement of Financial Position.
3. Segmental analysis
The Chief Operating Decision maker has been identified as the
Chief Executive Officer (CEO) of the Group. The Chief Operating
Decision maker is responsible for regularly assessing the
performance of the Group's operating segments and performing the
function of allocating resources. To assist the Chief Operating
Decision maker in this process, internally generated reporting is
prepared for each operating segment.
The Group has three operating segments that it reports on. These
operating segments are:
-- Transaction Services Revenues: This segment generates revenue
from the processing of payment transactions on behalf of clients
and is Mi-Pay Group plc's core business. For the majority of
clients, Mi-Pay Group plc collects gross transaction top up values
from acquirers less their acquirer fees, on behalf of client mobile
operators. Mi-Pay Group plc generates net commission revenue
through charging clients a commission percentage on transaction
value as per each individual client contract, with operators then
receiving the remainder.
-- Fraud Services Revenues: This segment generates revenue from
the assessment of transactions as to the likelyhood of being
fraudulent and processes or rejects based on this assessment with
the company taking a risk as to the potential fraud.
-- Professional Services Revenues: This segment generates
revenue from the development, delivery and hosting of our platform
and client solutions.
The CEO assesses the performance of the operating segments based
on revenue and gross profit. The CEO uses these measures to assess
performance because they are quick to analyse and directly relevant
to evaluating the results of each segment. The measure of assets
and liabilities attributable to each segment is not regularly
provided to the Chief Operating Decision maker of the Group, and as
such, are not disclosed below.
Both segments are continuing operations and results are as
follows:
Operating segments
2018 2017
GBP GBP
-----------
Payment Transaction Value Processed 105,968,398 93,982,712
Transaction Services Revenue 2,606,781 2,654,178
Fraud Services Revenue 329,602
Professional Services Revenue 400,642 395,922
Total revenue 3,337,025 3,050,100
Transaction services cost of sales 977,179 975,309
Fraud services cost of sales 200,510
Professional services cost of sales 79,748 110,613
------------------------------------- ----------- ----------
Total cost of sales 1,257,437 1,085,922
Transaction services gross profit 1,629,602 1,678,869
Fraud services gross profit 129,092
Professional services gross profit 320,894 285,309
Total gross profit 2,079,588 1,964,178
Transaction services gross profit % 63% 63%
Fraud services gross profit % 39% n/a
Professional services gross profit % 80% 72%
Total gross profit % 62% 64%
------------------------------------- ----------- ----------
Geographical information
All material non-current assets owned by the Group are held in
the United Kingdom.
In presenting the consolidated revenue information on a
geographical basis, revenue is based on the geographical location
of clients. The United Kingdom is the place of domicile of the
Parent Company.
Revenue by location:
2018 2017
GBP GBP
---------
Transaction Services Revenue
United Kingdom 1,022,285 1,458,010
Ireland 946,722 849,672
Rest of Europe 576,259 238,593
Rest of the world 61,515 107,903
Fraud Services Revenue
Europe 329,602
Professional Services Revenue
United Kingdom 301,672 338,680
Ireland 88,504 40,917
Europe 10,466 3,453
Rest of the world 12,872
Total 3,337,025 3,050,100
The proportion of turnover that is attributable
outside the UK 60% 41%
------------------------------------------------ --------- ---------
Major clients
During the year, there were 3 (2017: 4) clients that
individually made up at least 10% of total revenue. In aggregate,
this accounted for 56% (individually 31%, 12%, 13%) (2016: 67%
(individually 28%, 19%,10% and 10%)) of total revenue.
Accrued/Deferred Income
There is deferred income of GBP18,933 (2017: GBP27,866; 2016:
GBP15,408) that represents unfulfilled performance obligations on
service contracts to be satisfied within the next twelve
months.
There is also accrued income of GBP24,532 (2017: GBP9,638; 2016:
GBP63,898) as recognised in trade and other receivables. The
amounts relate to performance obligations satisfied but not
invoiced, all of which is due to be invoiced and settled within the
next twelve months.
4. Operating loss
This is arrived at after charging/(crediting):
2018 2017
GBP GBP
---------
Expenses by nature
Total staff costs 1,457,877 1,754,833
---------------------------------------------- --------- ---------
Staff costs - operating and administration 790,828 873,414
Research and development (includes staff
costs) 646,550 578,816
Depreciation of property, plant and equipment 120,345 97,229
Operating lease expense 36,376 32,722
Foreign exchange loss/(gain) (5,655) 56,026
Exceptional items - 71,758
Share Based Payments 38,992 -
Other administration expenses 674,053 875,700
Total administrative expenses 2,301,489 2,585,665
---------------------------------------------- --------- ---------
5. Staff costs
2018 2017
GBP GBP
---------
Staff costs (including Directors) comprise:
Wages and salaries 1,359,235 1,552,916
Defined contribution pension cost 20,500 35,087
Social security contributions and similar
taxes 78,142 166,830
-------------------------------------------- --------- ---------
Total staff costs 1,457,877 1,754,833
-------------------------------------------- --------- ---------
2018 2017
GBP GBP
-------
Directors' remuneration
Aggregate emoluments 284,281 619,018
Company pension contributions to money purchase
pension scheme 6,000 11,233
290,281 630,251
------------------------------------------------ ------- -------
In 2017, wages and salaries and aggregate emoluments include
GBP157,500 accrued bonus in recognition for a reduction in salary.
This was unpaid as at 31 December 2017 and was subsequently
converted into Ordinary Shares, along with GBP42,500 of previously
deferred salary on 1 March 2018, and net of the release of
GBP108,333 of deferred salary previously accrued in relation to
Seamus Keating with was forgone as at 31 December 2017.
There was 1 Director (2017: 2) in the Group's money purchase
pension scheme during the year.
The highest paid Director received emoluments for the year ended
31 December 2018 of GBP161,697 (31 December 2017: GBP302,105).
Pension contributions in relation to the highest paid Director were
GBP6,000 (2017: GBP6,000).
2018 2017
GBP GBP
----
Staff numbers: Monthly average
United Kingdom 6 7
Europe 38 33
Other - 1
------------------------------- ---- ----
Total staff numbers 44 41
------------------------------- ---- ----
6. Loss per share
2018 2017
Loss for the year (221,214) (621,314)
Weighted-average shares outstanding 45,044,102 41,593,229
Basic EPS (pence) (0.5) (1.5)
Diluted EPS (pence) (0.5) (1.5)
------------------------------------ ---------- ----------
The numerators shown above represent the total loss from
continuing operations for the year.
As none of the share options in place at the Statement of
Financial Position date or shares after the year end were dilutive,
there was no difference between the weighted-average number of
shares used to calculate basic and diluted net loss per share.
7. Trade and other receivables
2018 2017
GBP GBP
----------
Trade receivables 126,642 88,796
Client receivables 969,098 938,546
Prepayments 74,019 75,924
Other receivables 38,599 35,011
Total trade and other receivables 1,208,358 1,138,277
---------------------------------- ---------- ---------
Client receivables are amounts due from consumers using our
service and subsequently paid on to our clients, net of our
fees.
8. Trade and other payables
2018 2017
GBP GBP
---------
Trade payables 235,755 196,420
Client payables 3,848,251 3,283,629
Accruals 214,293 263,450
Deferred income 18,933 27,866
Deferred salaries 149,267 413,417
Other payables - tax and social security
payments 59,135 74,300
Other payables 72,210 67,731
Total trade and other payables 4,597,844 4,326,813
----------------------------------------- --------- ---------
9. Loans and borrowings (secured and held at amortised cost)
Carrying Carrying
value 2018 value 2017
GBP GBP
-----------
Current
Finance lease creditor 137,938 33,000
Non-Current
Finance lease creditor 211,344 20
Total loans and borrowings 349,282 33,020
--------------------------- ----------- -----------
During the year the company entered into a lease in relation to
certain assets. The lease is secured against the funded asset.
Maturity of debt:
Finance Finance
leases leases
2018 2017
Finance leases GBP GBP
-------
Not later than one year 137,938 33,000
Later than one year and not later than five
years 211,344 20
-------------------------------------------- ------- -------
Total finance leases 349,282 33,020
-------------------------------------------- ------- -------
As at 1/1/18 33,020
New Finance leases entered into in the year 368,833
Payments made during the year (52,571)
-------------------------------------------- --------
Balance as at 31/12/18 349,282
-------------------------------------------- --------
10. Share capital and premium
Number of Share capital Share premium
Note shares GBP GBP
At 1 January 2017 41,593,229 4,159,324 1,403,923
At 31 December 2017 41,593,229 4,159,324 1,403,923
At 1 January 2018 41,593,229 4,159,324 1,403,923
At 31 December 2018 45,734,277 4,573,429 1,480,791
--------------------------- ---------- ------------- -------------
On the 1 March 2018 Mi-Pay placed 4,141,048 new ordinary shares
of 10p nominal value each ("Placing Shares") at a placing price of
12.5p per share (the "Placing Price").
11. Related party transactions
Remuneration of key management personnel
It is considered that the statutory Directors are also the key
management personnel of the Group. Details of their remuneration
under IAS 24 is set out below:
2018 2017
GBP GBP
-------
Short-term employee benefits 284,281 619,018
Post-employment benefits 6,000 11,233
National insurance contributions 26,260 33,664
316,541 663,915
--------------------------------- ------- -------
Consultancy fees of GBP81,000 were paid to Digitalia Consulting
a company owned by Allen Atwell for IT services.
Included in revenue was GBP329,602 charged to Alphacomm B.V for
amounts due under the Fraud Management contract signed on 17
December 2018. Hubertus Sparnaaij is a director of Alphacomm
B.V.
Deferred Directors' Remuneration
As at 31 December 2018 the amounts deferred and owing to current
and former Directors is as follows:
A Atwell: GBPnil (31 December 2017: GBP45,000)
J Beale: GBP49,667 (31 December 2017: GBP49,667)
M Dickerson: GBPnil (31 December 2017: GBP200,000)
E Lascelles: GBPnil (31 December 2017: GBP32,500)
M Stone: GBP65,000 (31 December 2017: GBP65,000)
G Breeze: GBP21,250 (31 December 2017: GBP21,250)
These amounts have been fully charged to administrative expenses
in the Consolidated Statement of Comprehensive Income in previous
years and accrued as trade and other payables in the consolidated
statement of financial position.
On 1 March 2018 the deferred amounts deferred and owing to A
Atwell, M Dickerson and E Lascelles were converted into new
Ordinary Shares, reducing the amounts so owed by GBP277,500.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EAKLDASPNEFF
(END) Dow Jones Newswires
April 24, 2019 02:00 ET (06:00 GMT)
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