Q3 2022 trading update

RNS Number : 3262D

Network International Holdings PLC

19 October 2022

 

19^th October 2022: Network International Holdings Plc , Q3 2022 trading update

Strong strategic delivery; 2022 guidance reiterated; new acquiring partnership with Emirates NBD

			Q3 22 vs Q3 21
Total revenue			+28 %
Merchant Solutions revenue			+39 %
N etwork Merchant Solutions revenue excluding DPO			+17%
DPO Group revenue1			+16% (+29% constant FX)
Issuer Solutions revenue		+15%
1. DPO was acquired on 28 Sept 2021 and therefore DPO revenue is not present in the Q3 2021 base. Proforma revenue is presented for information only.

Another quarter of financial and strategic delivery, underpinning full year expectations

•	2022 guidance reiterated : Revenue growth of 27-29%2 y/y and modest EBITDA margin expansion.

Merchant Solutions supported by strong UAE consumer spending and a record period of new wins

•	Direct-to-merchant Total Processed Volume (TPV) in the UAE and Jordan up 27% y/y, with domestic volumes up 19% y/y (27% vs. 2019) and international volumes up 84% y/y (9% vs. 2019).
•	Direct-to-merchant TPV in Africa (DPO) up 30% y/y in constant FX. New partnership signed with IATA Financial Gateway, significantly broadening DPO's potential airline customer base.
•	Another quarter of record signups, supported by DPO. Merchant wins reached a new high, supported by SME signings and the cross-sell of 'DPO Pay' into the UAE.
•	Deepening and expanding our relationship with Emirates NBD through a strategic acquiring partnership, the first extension of this major customer relationship into Merchant Solutions.
•	Positive licensing updates to access new revenue pools: Egypt direct-to-merchant services will launch in Q4, having received license approval. We have also been approved to receive a Major Payment Institution license from the Saudi Central Bank to commence merchant payment services3.

Issuer Solutions performance driven by new business and strong digital transaction growth

•	Four financial institution wins in Q3, totaling 13 year-to-date. We also renewed a five-year contract in Jordan and signed our first credit processing agreement in South Africa.
•	Launched commercial payment services, driving a new revenue opportunity, with a number of wins in the space, most recently for debit and prepaid commercial processing with Warba Bank.
•	Saudi Arabia market entry progressing to plan, with existing clients providing a 20%+ underpin to our revenue target and a healthy customer pipeline in place.

Nandan Mer, Chief Executive Officer, commented: "We continue to make positive strides in executing against our strategy, delivering yet another high growth quarter with 28% y/y revenue growth. During the period we won record levels of new business in the UAE and continued our market entry in Saudi Arabia. I am also thrilled to see Network leading the industry with positive licensing updates in the UAE, Egypt, Kenya and Saudi Arabia, whilst continuing to strengthen our relationship with major customer Emirates NBD. We face the future with excitement knowing we have several growth levers available, supported by the scale, capabilities, people and trusted brand to fulfill our purpose; of helping the economies and customers we serve to grow and prosper."

2. Revenue guidance of 27-29% y/y is based on 2021 revenue of USD345m, excluding the three-month contribution from DPO. 3. Licenses will be granted upon satisfaction of a number of customary conditions which Network is in the process of addressing before the expected date of launch/grant of license. 

Strategic update, twelve months post Capital Markets Day

The largest consumer payments business across the Middle East and Africa

Network is a high growth payments business operating at scale across countries with large consumer spending pools, young populations and an accelerating secular shift from cash to digital payments. We are the largest acquirer delivering payment services directly to over 150,000 merchants in the UAE, Jordan, South Africa and a further 20 markets across Africa. We also manage over 17 million digital payment credentials for over 200 financial institutions in more than 50 countries. Whilst operating at scale, we remain a local business with on-the-ground presence in over 20 markets.

Successful delivery of strategic priorities

Our growth orientated strategy is focused on scaling existing markets, targeting new markets, expanding capabilities and diversifying revenue streams. Our focus markets remain the UAE, Saudi Arabia, Jordan, Egypt, South Africa and Kenya. At our Capital Markets Day in September 2021, we set out a new strategy to drive faster growth and have already delivered on a number of key commitments:

•	Financial growth: on track to deliver 2022 financial guidance of 27-29%1 revenue growth and modest underlying EBITDA margin expansion; returning excess cash of up to USD 100m through a buyback.
•	UAE direct-to-merchant business: delivering accelerated revenue growth and growing market share through new merchant wins, strength in the SME segment and expanded capabilities.
•	Acquisition of Africa direct-to-merchant business (DPO): has broadly doubled our e-commerce revenue, added alternative payment capabilities and accelerated SME signings across the Group.
•	Financial institution processing business: seeing record levels of revenue growth as a result of new customer wins, accelerated transaction growth and the cross-selling of value-added services.
•	New market entry to Saudi Arabia: completed our technology deployment and signed two additional customers for processing services, providing a solid underpin to our medium-long term revenue target.
•	Further growth opportunities : launching direct-to-merchant services in Egypt and have successfully started to establish contract wins in the commercial payments processing space.

Several regulatory approvals in key markets

We welcome the increasing regulatory frameworks being introduced across our markets, having recently received approvals to provide direct-to-merchant business in four markets :  

•	United Arab Emirates: We have been approved to receive a Category 1 License by the Central Bank of the UAE under the recently enacted Retail Payments Services & Card Scheme Regulations. This will enable us to continue to provide direct-to-merchant payment services2.
•	Egypt: We have approval to operate as a payment facilitator and a Payment Service Provider working through local Financial Institutions. We intend to launch direct-to-merchant payment services during the fourth quarter. (As a reminder, Network's existing processing activities on behalf of financial institutions do not require a license).
•	Kingdom of Saudi Arabia: We have been approved to  receive a Major Payment Institution category license from the Saudi Central Bank which will enable us to provide direct-to-merchant services 2 .
•	Kenya: We have been authorised by the Central Bank of Kenya to act as a Payment Service Provider and continue provid ing payment gateway services in Kenya , with direct-to-merchant services by DPO.

1. Revenue guidance of 27-29% y/y is based on 2021 revenue of USD345m, excluding the three-month contribution from DPO. 2. Licenses will be granted upon satisfaction of a number of customary conditions which Network is in the process of addressing before the expected date of launch/grant of license . 

Merchant Solutions business line review

Total Merchant Solutions revenue		+39%
Network Merchant Solutions revenue excluding DPO		+17%
DPO Group revenue 1		+16% (+29% in constant FX)
Direct-to-merchant TPV in UAE/Jordan		+27%
of which domestic consumers		+19%
of which international consumers		+84%
Direct-to-merchant TPV in Africa (DPO Group)1		+14% (+30% in constant FX)

Direct to merchant TPV y/y	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep
Direct TPV in UAE & Jordan	24%	44%	47%	29%	25%	23%	27%	27%	27%
Retail	15%	34%	41%	37%	17%	22%	34%	32%	38%
Supermarkets	3%	4%	11%	11%	7%	9%	8%	14%	16%
Travel & Entertainment	59%	112%	116%	57%	62%	44%	48%	50%	43%
Other (Govt, Healthcare, Education, Other)	19%	37%	33%	20%	17%	20%	21%	21%	20%
Direct TPV in UAE & Jordan	24%	44%	47%	29%	25%	23%	27%	27%	36%
Domestic consumers	13%	27%	26%	21%	16%	19%	18%	18%	20%
International consumers	70%	139%	164%	69%	73%	49%	94%	92%	70%
Direct TPV in Africa (DPO Group)1,2	33%	31%	34%	34%	33%	34%	31%	29%	29%

1. DPO Group was acquired on 28 Sept 2021 and therefore DPO TPV and revenue is not present in the Q3 21 base. Proforma data is presented for information. 2. Constant FX.

Merchant Solutions revenue momentum driven by strong consumer spending in the UAE    

UAE and Jordan: Domestic TPV (which represents spending from consumers domiciled in the region) continued to see elevated growth, up 19% y/y in Q3 (27% vs. Q3 2019). Domestic trends have been driven by the buoyant economic backdrop and resultant strength in consumer confidence. International TPV (which represents consumer spending by overseas visitors) was also very strong, up 84% y/y (9% vs. Q3 2019), despite a continued absence of visitors from China and a stronger prior year comparative which benefitted from COVID-19 recovery. Trends across strategic focus segments remained robust, with Q3 online TPV (excluding Government & airline TPV) growing 36% y/y and SME volumes up 41% y/y.

Africa (DPO Group): DPO saw TPV up 14% y/y or 30% in constant FX¹, whilst revenue grew 16% y/y or 29% in constant FX¹.

Expanding our relationship with Emirates NBD to provide merchant payment services

We will be expanding our relationship with Emirates NBD Bank PJSC , one of the Middle East's leading financial institutions, providing merchant acquiring services to Emirates NBD's large corporate banking clients. Emirates NBD is already a long standing and major customer for Network, where we provide a range of Issuer Solutions and value-added services to the bank across the UAE, Egypt and Saudi Arabia. This partnership represents the first extension of the relationship into Merchant Solutions, where Network will provide white-labelled merchant payment acceptance services to a number of Emirates NBD's institutional clients in the UAE; including payment acceptance terminals, processing and settlement of funds. The partnership will also extend to SME merchants, through a referral agreement that spans digital payment acceptance, lending and other banking services. The partnership will increase

Network's merchant reach and scale in the UAE, whilst also supporting Emirates NBD in providing additional services to their existing and potential corporate and SME banking clients.

Merchant signings have reached new record levels, supported by SME wins

New signings in Q3 reached record levels, above the rates seen in the first half of the year, with no significant customer losses. Notable names include four hotels under the Abu Dhabi National Hotel group, such as Le Meridien, Radisson Blue and Sheraton; and Sharjah Airport International Free Zone for both face-to-face and online payments. The pace of SME signings accelerated through the period, which has been supported through the recent launch of 'DPO Pay' services in the UAE and tap-on-phone signings, which allows a merchant to take payments through an app on their own mobile phone.

Enhancing our capabilities and value-added-services

•	SHAREPay digital wallet: enabling members of UAE loyalty programme SHARE to pay, earn and redeem across major shopping malls and hotels including Mall of the Emirates, Carrefour and Westin.
•	Roll out of the WooCommerce plugin for SME merchants: creating an online store, shopping cart and checkout in 48 hours.
•	Introduced online government payments in Namibia: through our proprietary N-GeniusTM gateway in partnership with Standard Bank.
•	Continued development of Unified Commerce services: enriching 'Click & Collect' services through the option to 'Buy online and return in store' .
•	Extended longstanding data analysis partnership: with one of the region's leading retail and shopping facilities operators.

DPO's new capabilities broadening their merchant reach

Customer wins at DPO remain healthy with the group securing several key merchants in the period, including Radisson Blue, Homemark, KFC Ghana and Zamtel. DPO has integrated payment capabilities with Odoo, a widely used e-commerce software, simplifying the process for retail merchants to choose DPO as their payment provider. DPO has also partnered with IATA Financial Gateway (IFG), IATA's global distribution system, widening their potential merchant customer base to a further one-hundred airlines including British Airways and Air Canada.

Egypt direct-to-merchant payment services launching before the end of the year

We will soon be launching direct-to-merchant services in Egypt having received approval of the relevant licenses by the Central Bank. As a reminder, Network is already a large-scale provider of processing services to financial institutions in the country. Direct-to-merchant services will be a new revenue opportunity which we expect to build from 2023 and will be focused on SMEs and expanding our existing relationships with large-scale customers in the region.

Growing our acquirer processing business via partnerships across Africa

We have extended our partnership with Tymebank to support the growth of the bank's payment acceptance capabilities in South Africa through the roll-out of tap-on-phone payments; enabling its SME merchant customers to take payments using an app on their own mobile device. Similarly, we have also further extended our acquirer processing offer through agreements with I&M Bank in Kenya and Access Bank in Ghana, expanding our acquirer processing services across Africa.

Issuer Solutions business line review

			Q3 22 vs Q3 21
Total revenue			+15%
New customers signed		4

Revenue driven by new business and digital transaction growth

Solid revenue growth is reflective of the large number of customers signed in the prior year and ongoing strength in the number of transactions, which has continued to grow throughout the year-to-date. Both the Middle East and Africa saw y/y growth in the number of credentials hosted and transactions processed, with performance in Africa being particularly strong.  

Signed four new financial institutions, totaling 13 new wins year-to-date

We secured four new financial institution customers during the quarter. We also expanded our relationship with Access Bank to support the launch of their credit card services in South Africa and renewed an important existing contract with Arab Jordan Investment Bank for a further five years. New processing wins included Safa Islamic Bank in Jordan for the issuance of Islamic credit cards and El Nilein Bank in the UAE to deliver debit and credit card issuing, ATM support, value-added-services and e-wallet payment capabilities.

New capabilities include the launch of commercial payments services

· New business in commercial payments: we have started to launch commercial card processing services with a number of wins in the space, most recently with Warba Bank. The commercial payments landscape represents a potential new revenue pool for Network and a cross-selling opportunity to existing customers.

· Payment installment by SMS: introduced for two existing financial institution customers.

· Virtual debit card issuance and processing: introduced for Al Maryah Bank, enabling its customers to instantly issue a new debit card, either virtually or physically through the bank's mobile app. 

· Partnership with Mastercard expands: having collaborated with Brighterion, Mastercard's artificial intelligence arm, to provide fraud mitigating services which can identify anomalistic transaction behaviours and fraud monitoring.

Kingdom of Saudi Arabia processing progressing to plan with a healthy customer pipeline

We have made good progress with two new customer wins earlier in the year, which will supplement our existing customer revenues to provide a 20% underpin to the medium-long term USD 50 million revenue target. There is a healthy customer pipeline in place and we remain on track with this new market entry.

Upcoming events

· Q4 2022 trading statement: 19^th January 2023

Investor Relations enquiries

Network International	[e-mail]
Amie Gramlick, Head of Investor Relations
Media enquiries
Teneo	[e-mail]
Ben Foster, Andy Parnis

Forward Looking Statements

This announcement contains certain forward-looking statements with respect to the financial condition, results or operation and businesses of Network International Holdings Plc. Such statements and forecasts by their nature involve risks and uncertainty because they relate to future events and circumstances. There are a number of other factors that may cause actual results, performance or achievements, or industry results, to be materially different from those projected in the forward- looking statements.

These factors include general economic and business conditions; changes in technology; timing or delay in signing, commencement, implementation and performance of programmes, or the delivery of products or services under them; industry; relationships with customers; competition; and ability to attract personnel. You are cautioned not to rely on these forward-looking statements, which speak only as of the date of this announcement. We undertake no obligation to update or revise any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances.

 

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