TIDMNETW
RNS Number : 3880L
Network International Holdings PLC
30 April 2020
Network International Holdings Plc
Q1 2020 and current trading update
Network International plc, the leading enabler of digital
commerce across the Middle East and Africa (MEA), announces a
scheduled trading update to cover the first quarter period from the
start of the financial year on 1(st) January 2020, including a
current trading update.
-- Payments and processing operations remain unaffected by the COVID-19 pandemic
-- Delivery of a number of strategic and business initiatives:
merchant wins and enabling online payments; alongside new issuer
solutions and online wallet customers
-- Group revenue broadly flat in Q1. Subsequent to lockdown
measures being implemented; Merchant Solutions TPV and revenue
declined c(60)% y/y, and Issuer Solutions more resilient with
revenue down c(10-15)% y/y
-- Taken prudent actions to protect cashflows including the
deferral of the ordinary dividend (as previously announced) and
pausing on capital expenditure related to Saudi Arabia expansion
and the separation from Emirates NBD
-- Strong balance sheet and liquidity position; further bolstered by our recent refinancing
-- Long term industry and business fundamentals remain strong;
seeing a rising awareness and demand for digital transactions
amongst multiple stakeholders
Business operations
In light of the continued COVID-19 pandemic, our focus remains
on colleague and customer wellbeing, and business continuity. Our
colleagues are working from home, and payments and processing
activities remain unaffected, enabled by the investments we have
made in our technology platforms. We have implemented a number of
practical support measures for customers across the business and
our programme of cash support to micro-SMEs has been very well
received.
Business model
We are a diversified payments business operating across the
acquiring and issuing value chain, as a partner to over 70,000
merchants and 200 financial institutions. In the Middle East (73%
of 2019 revenue, within which the United Arab Emirates represents
60% of group revenue), our business is broadly based across
Merchant and Issuer solutions, whilst in Africa (27% of 2019
revenue) we have a much greater presence in Issuer Solutions. Over
96% of our revenues are either USD denominated or from currencies
pegged to the USD, and in those countries where revenues are
received in local currency, these are offset by a larger local cost
base.
In Merchant Solutions, which comprised 46% of 2019 revenue; we
provide direct acquiring services to merchants in the UAE and
Jordan, as well as white-label and acquirer processing services to
a number of customers across Africa and the Middle East. Our
revenues are generated through fees dependent upon the value of
transactions (Total Processed Volume, or TPV), as well as through
value added services. We serve a diversified range of merchants and
within the direct acquiring business, our sector exposures as a
proportion of TPV in 2019 were: Government services, 17%;
supermarkets, 12%; general retail, 19%; travel and entertainment,
29% (of which airlines and travel agents 11%, hotels 9%, duty free
and other entertainment 9%); education and healthcare services, 6%;
and other industries, 17%. In the current year, a further reduction
in airline TPV was incorporated into our plans and budgets, even
prior to COVID-19, as a result of our proactive strategy to reduce
our exposure in this sector. Whilst tourism is an important driver
of spending in our regions, 75-80% of TPV is represented by
domestic transactions.
In Issuer Solutions, which comprised 53% of 2019 revenue, we
generate revenue from three broadly proportional streams: fees
linked with the number of cards hosted on our platform; fees linked
to transaction volumes; and from value added services. Our
customers are typically financial institutions, where we have
multi-year contracts in place and a number have contractual
minimums.
Trading update
We are pleased to have delivered on a number of strategic and
business initiatives during the first quarter. In the Middle East,
we have won a number of new direct acquiring merchant customers
across POS and online. These include Zomato, the global online food
delivery aggregator; Luxury Fashion Group, who operate Yves Saint
Laurent stores; and Western Union, where we will enable the growing
remittances sector. We also secured a tender to provide exclusive
Issuer Solutions across five countries for Careem PAY (part of
Careem/Uber), an online wallet, which is available to 35 million
Careem users as an option to pay for taxi rides, food deliveries
and transfer funds to one another. We have enabled the popular
Chinese payments services, WeChat Pay and UnionPay, for our
merchants; and have rolled out a total of 18,000 N-Genius(TM) POS
devices in the UAE. The migration of existing merchants onto our
propriety N-Genius(TM) online gateway is progressing well,
alongside 650 new customers. We have a further gateway pipeline of
nearly 2000 merchants, which reflects our recent marketing
campaigns and the desire for merchants to develop ecommerce
capabilities or enable PayByLink for consumers.
In Africa, we have secured new Issuer Solutions customers;
including Globus Bank in Nigeria and Republic Bank in Ghana. We
will also see a significant increase of around two million accounts
hosted on our platform, for RCS Bank in South Africa. Additionally,
Standard Bank has started to use our N-Genius(TM) point of sale
capabilities in two countries, with rollout planned in a further
three countries over coming months.
Our Mastercard partnership is making progress and we expect to
deliver on the agreed first year initiatives during 2020. This
includes a corporate card solution for financial institutions, and
enabling QR code payment acceptance for merchants through the use
of their own smartphones.
Prior to the COVID-19 pandemic, the business continued its
positive momentum from the prior year, however, the pandemic has
impacted consumer spending patterns. As a result, during the first
quarter, total revenues were broadly flat compared with the prior
year. This represented good performance across the majority of the
period; a slowdown in tourism related spending from mid February;
and a significant impact to trading in the last few weeks of March,
linked to the social distancing and lockdown measures implemented
across nearly all of the markets in which we operate and the
closure of Dubai International Airport to commercial flights.
When the lockdown measures were implemented in the final weeks
of March, we saw a c(60)% y/y reduction in acquiring TPV, and
similar reduction in revenue, in the Merchant Solutions business.
This has remained at a consistent level through to the current
week. Whilst we have seen a significant increase in supermarket
spending, and up to 20% growth in online transactions from a number
of retail merchants, this has been more than offset by the overall
reduction in transactions taking place. Issuer Solutions benefits
from defensive fee streams, such as card hosting, alongside fixed
revenue elements and/or minimums in some contracts. Taking this
into account, we have seen more resilience and a c10-15% y/y
reduction in Issuer Solutions revenue since the lockdown measures
were implemented. We continue to monitor refunds and chargebacks
for our direct acquiring customers, where we have not seen any
significant increases in our losses to date. Whilst we would
naturally expect to see some increase in refunds and chargebacks in
the current environment, we have taken appropriate steps to manage
our risk, including recovery from merchants and requesting cash
reserves from customers where appropriate.
There has been no formal update on the announcement from the UAE
Central Bank in relation to the potential regulation of fees
incurred by merchants when consumers use debit or credit cards. As
we have stated previously, interchange fees, charged by issuing
banks, represent the largest proportion of fees paid by merchants.
We therefore expect interchange fees will be regulated, which would
have very little impact on our business, as it is typically a pass
through cost.
Management actions
Given the uncertainty surrounding the length of COVID-19 impact,
we have taken a number of prudent measures to protect cashflows in
the business, including the previously announced decision to defer
the ordinary dividend in respect of the 2019 financial year. Whilst
around two thirds of our operational expenditure is largely fixed,
we are proactively taking action to reduce outgoings in the
variable element. This includes a hiring freeze, strict controls
around and reductions in discretionary spend, and an expected
slowdown in variable costs associated with transaction and new
business growth. In addition, our CEO, Simon Haslam, has advised
the Board that he will forgo the following components of his
compensation package for the 2020 financial year: the annual pay
increase on base salary; any LTIP award; and any annual cash bonus
(that would have been payable in 2021). Our Chairman and the rest
of the Board will also reduce their fees by 25% for the remainder
of the financial year.
We have decided to pause on capital expenditure related to the
separation of shared services with Emirates NBD, and to support our
entry to the Saudi Arabian market, which were anticipated to be
USD40 million in total during 2020. Saudi Arabia remains an
important future growth accelerator for the business and we are
committed to entering this market when more normal circumstances
resume.
Liquidity position
We have a strong balance sheet and liquidity position, in
particular following the successful refinancing of our syndicated
debt facility. At the end of the Q1 period we have a cash balance
of USD 40m and total available headroom on our revolver and new
syndicated debt facility of cUSD 270m. These are distinct from the
dedicated overdraft facilities used to fund settlement related
working capital cash requirements, as is normal.
Simon Haslam, Chief Executive Officer, commented:
"I want to thank all of our colleagues, who are continuing to
deliver an exceptional level of service to our longstanding
merchant and financial institution customers during these
challenging times. The speed of the COVID-19 pandemic has impacted
individuals and businesses across the board and our focus is on
supporting our colleagues, customers and the communities in which
we operate. This includes measures to facilitate online merchant
payments and cash relief to the micro SME sector. Whilst our
business is seeing a significant impact from the downturn in
consumer spending, some positive trends have emerged. In
particular, e-commerce and supermarket retail have flourished and
in line with WHO recommendations to go cash free, we are already
seeing an increase in contactless payments and a rising demand for
digital and online transaction acceptance amongst many
stakeholders. Our business has a long established and highly
successful track record, with a strong liquidity position which
will support us as we navigate through this period. I am confident
that the long term fundamentals remain strong, supported by secular
tailwinds of cash to digital payments conversion across our
regions."
Conference call
A conference call and short slide presentation for analysts and
investors will be held today at
9am UK / 1pm GST with a conference call dial-in facility
including live Q&A, as well as a listen only webcast option,
which will show the accompanying slides:
-- Conference call dial-ins: UK: +44 (0)330 336 9105 / UAE: 8000
3570 2653 / US: +1 646-828-8193 using the confirmation code:
1610611
-- Webcast link: https://webcasts.eqs.com/networkint20200430
A replay will also be available following the presentation
through the same link above one hour after the presentation
finishes.
Investor Relations enquiries
Network International InvestorRelations@Network.Global
Amie Gramlick, Head of Investor Relations
Media enquiries
Finsbury Network-Lon@Finsbury.com
Andy Parnis, Rob Allen
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
TSTSEWFMUESSEFL
(END) Dow Jones Newswires
April 30, 2020 02:00 ET (06:00 GMT)
Network (LSE:NETW)
Historical Stock Chart
From Apr 2024 to May 2024
Network (LSE:NETW)
Historical Stock Chart
From May 2023 to May 2024