Mi-Pay Group plc (LON:MPAY) has released an encouraging trading statement this morning confirming FY16 revenue will be in line with ZC estimates at £3.3m (FY15: £3.0m). The yoy growth of 10% is ahead of the 5.7% reported in the interim results in late September 2016. The improvement in revenue has been driven by a c. 28% increase in transaction values processed that reached £83.0m, up from £65.0m in FY15. The net cash position of £3.5m is in line with the previous year and ahead of our £3.0m forecast. We view this positively as it provides increasing confidence that the business has the necessary cash resources to fund its self through to profitability. FY16 results, scheduled to be released on the 5th April, will provide more detail as to the underlying make-up of the performance. The group remains will positioned to deliver on its strategy and today’s statement provides confidence that our challenging growth assumption in FY17 can be met should growth in Asia come through strongly.
FY16 has been another year of progress – Revenue of £3.3m is in line with our forecasts and shows good growth, c.10%, yoy as transaction values increased significantly from £64.7m to £83.4m. It would appear that the performance in H216 built on the progress made at the HY when the value of total transactions processed saw significant growth compared to H1 2015, up 34% to £39m (HY15: £29m). This drove a 5.7% increase in revenue to £1.6m (HY15: £1.5m) and, due to the restructuring of a key client’s contract, led to a 33.5% increase in gross profit to £0.98m (HY15: £0.74m). This was driven by a 13 percentage point improvement in gross margins from 49% in H1 2015 to 62% in H1 2016. The FY16 forecasts assumes a 60% gross margin which from today’s statement we remain confident the business can achieve.
Forecasts – Forecasts were unchanged at the time of the interim results, having been updated at the time of the trading statement (3rd August). The performance throughout the year would appear to show that the operational improvements made by the management team have continued to have the required effect. FY17 forecasts are challenging assuming a significant 30% step up in revenue. We expect demand to start growing in the Philippines which will help to drive top line growth, should this not happen forecasts will prove difficult to meet. We expect operating expenses and cash requirements to continue to exhibit improving trends through the forecast period. We forecast c.25% growth in gross profit in FY17.
Outlook – There has been significant progress made to date to meet the company’s short term objective of being cash generative. Becoming the first provider to deliver Amazon Payments as a Mobile Wallet payment solution to the Mobile Operator community is evidence of some of the significant operational progress made. Having proven the business model over the last 18 months the management team must now execute on ambitious growth plans. Asia remains key to achieving this and any indication that growth in the Philippines is starting to come through would be taken well positively.
