Paysafe Group — Update 13 January 2016

Paysafe Group — Update 13 January 2016

Paysafe Group

Katherine Thompson

Written by

Katherine Thompson

Director

Paysafe Group

Strong H215 for the combined group

Trading update

Software & comp services

15 January 2016

Price

401.5p

Market cap

£1,926m

$1.45:£1

Net debt ($m) at end FY15e

503.7

Shares in issue

479.7m

Free float

98.75%

Code

PAYS

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

19.5

21.9

86.4

Rel (local)

19.6

28.4

99.5

52-week high/low

407.5p

198.1p

Business description

Paysafe Group is a global payment solutions specialist operating in three areas: payment processing, eWallets and prepaid services.

Next events

FY15 results

16 March 2016

Analysts

Katherine Thompson

+44 (0)20 3077 5730

Dan Ridsdale

+44 (0)20 3077 5729

Paysafe Group is a research client of Edison Investment Research Limited

Paysafe’s FY15 trading update confirms that the newly combined group saw strong growth in H2, beating both our expectations and the market’s for revenue and EBITDA. Integration is progressing well with cost synergies at the top of the recently announced range for H215. We have raised our forecasts to reflect faster achievement of cost synergies, as well as better growth in processing revenues. Further revenue and cost synergies could be possible, although at this stage of the integration process we maintain a conservative stance.

Year end

Revenue
($m)

EBITDA*
($m)

EPS*
(c)

DPS
(c)

P/E
(x)

EV/EBITDA
(x)

12/13

253.4

53.1

15.1

0.0

38.5

57.4

12/14

365.0

83.0

22.0

0.0

26.4

36.7

12/15e**

601.5

149.9

25.1

0.0

23.2

20.6

12/16e

882.7

250.9

34.7

0.0

16.8

12.2

Note: *EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Includes Skrill from 10 August 2015.

Positive FY15 update – revenue and EBITDA beaten

Paysafe expects to report FY15 revenues of c $600m (our forecast $589m), with H215 revenues of c $380m. Adjusted EBITDA is expected to be c $150m, including cost synergies at the top end of the company’s recently disclosed $5-10m range (our forecast was $135m with no cost synergies factored in). The group saw strong growth across the board, and noted the strength of the North American payment processing business (the implication being that the largest customer’s Asian business was not the driver of upside).

Upgrading forecasts

We have revised our FY15 forecasts to take account of stronger Processing revenues and cost synergies (we estimate $10m). Rolling forward the stronger Processing revenues, we raise our FY16 revenue forecast by 3.1% and EBITDA by 4.3% to $250.9m. On slightly higher tax rates (as the mix shifts to the US), our EPS forecast increases by 1.7%. For FY17, we increase revenues by 3.6%, EBITDA by 5.2% and EPS by 3.3%.

Valuation: Cash generation supports growth strategy

The stock trades broadly in line with peers on an EV/EBITDA basis, but trades at a discount on a P/E basis for FY16e and FY17e. The recent Skrill acquisition has expanded Paysafe’s product offering and balanced out its geographical exposure, while reducing exposure to its largest merchant. In addition to those cost synergies already targeted, the enlarged group has the potential to generate additional revenue and cost synergies in excess of our forecasts. Strong cash generation should quickly reduce the group’s debt position; the CEO has stated that assuming the integration of Skrill progresses well, the company would consider making further acquisitions. Now listed on the Main Market, Paysafe expects to be eligible for inclusion in the FTSE 250 and should be considered at the March 2016 quarterly review.

Exhibit 1: Financial summary

$'000s

2011

2012

2013

2014

2015e

2016e

2017e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

127,972

179,072

253,367

364,954

601,505

882,725

943,173

Cost of Sales

(53,868)

(89,648)

(121,484)

(175,830)

(297,369)

(422,686)

(454,273)

Gross Profit

74,104

89,424

131,883

189,124

304,137

460,038

488,900

EBITDA

 

 

18,738

28,275

53,106

83,044

149,871

250,861

270,214

Company EBITDA

 

 

17,453

27,563

52,213

86,063

149,871

250,861

270,214

Operating Profit (before amort acq intang, SBP and except.)

6,698

20,599

42,888

71,257

131,225

224,315

238,668

Amortisation of acquired intangibles

(4,700)

(4,100)

(3,300)

(9,200)

(16,700)

(14,700)

(14,700)

Exceptionals

(25,675)

(7,123)

(1,368)

7,219

(47,190)

(6,000)

0

Share-based payments

(1,007)

(3,931)

(4,512)

(8,274)

(14,000)

(14,000)

(14,000)

Operating Profit

(24,684)

5,445

33,708

61,002

53,335

189,615

209,968

Net Interest

(1,540)

(1,800)

(995)

(2,024)

(11,714)

(17,436)

(15,970)

Profit Before Tax (norm)

 

 

5,158

18,799

41,893

69,233

119,511

206,879

222,698

Profit Before Tax (FRS 3)

 

 

(26,224)

3,645

32,713

58,978

41,621

172,179

193,998

Tax

27

(2,461)

(1,235)

(1,303)

(4,162)

(25,827)

(29,100)

Profit After Tax (norm)

5,185

16,338

40,311

67,703

107,560

175,847

189,293

Profit After Tax (FRS3)

(26,197)

1,184

31,478

57,675

37,459

146,352

164,898

Average Number of Shares Outstanding (m)

216.8

221.6

252.2

277.7

400.6

480.7

483.9

EPS - normalised (c)

 

 

2.4

7.0

15.1

22.0

25.1

34.7

37.4

EPS - FRS 3 (c)

 

 

(12.1)

0.5

12.5

20.8

9.4

30.4

34.1

DPS (c)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Gross Margin (%)

57.9%

49.9%

52.1%

51.8%

50.6%

52.1%

51.8%

EBITDA Margin (%)

14.6%

15.8%

21.0%

22.8%

24.9%

28.4%

28.6%

Company EBITDA Margin (%)

13.6%

15.4%

20.6%

23.6%

24.9%

28.4%

28.6%

Operating Margin (before am and except.) (%)

5.2%

11.5%

16.9%

19.5%

21.8%

25.4%

25.3%

BALANCE SHEET

Fixed Assets

 

 

72,672

67,393

65,551

294,837

1,646,459

1,635,712

1,622,966

Intangible Assets

63,337

58,526

53,231

281,479

1,630,177

1,617,977

1,605,777

Tangible Assets

9,335

8,867

12,320

13,358

16,282

17,735

17,189

Other Fixed Assets

0

0

0

0

0

0

0

Current Assets

 

 

172,743

219,167

184,490

177,275

125,413

253,711

403,524

Cash & cash equivalents

 

 

57,956

82,174

164,379

109,893

45,069

157,958

304,458

Restricted NETELLER cash

 

 

108,925

123,514

6,198

8,777

8,777

8,777

8,777

Cash held as reserves & settlement assets

 

 

0

0

0

38,607

38,607

38,607

38,607

Receivable from Members & Merchants

 

 

608

796

0

0

0

0

0

Trade and other debtors

 

 

5,254

12,683

13,913

19,998

32,960

48,370

51,682

Current Liabilities

 

 

143,957

192,104

117,634

113,618

144,095

144,095

142,063

Creditors

44,234

81,639

107,524

57,448

58,125

58,125

56,093

Payable to Members/Merchant liability

97,741

110,248

0

30,591

30,591

30,591

30,591

Short term borrowings

1,982

217

10,110

25,579

55,379

55,379

55,379

Long Term Liabilities

 

 

31,340

9,394

801

150,173

521,373

451,573

383,805

Long term borrowings

8,440

9,394

801

107,205

493,405

438,605

383,805

Other long term liabilities

22,900

0

0

42,968

27,968

12,968

0

Net Assets

 

 

70,118

85,062

131,606

208,321

1,106,404

1,293,755

1,500,621

CASH FLOW

Operating Cash Flow

 

 

36,319

31,869

94,542

51,469

90,396

229,451

264,870

Net Interest

0

0

(158)

(1,873)

(11,714)

(17,436)

(15,970)

Tax

424

(932)

(1,191)

(1,564)

(4,162)

(25,827)

(29,100)

Capex

(11,222)

(6,467)

(13,567)

(11,094)

(18,000)

(18,500)

(18,500)

Acquisitions/disposals

(25,833)

(1,667)

(5,281)

(169,192)

(1,197,448)

0

0

Financing

(2,755)

3,294

1,188

(13,689)

660,104

0

0

Dividends

0

0

0

0

0

0

0

Net Cash Flow

(3,067)

26,097

75,533

(145,943)

(480,824)

167,689

201,300

Opening net (debt)/cash

 

 

64,207

58,718

85,829

118,389*

(22,891)

(503,715)

(336,026)

HP finance leases initiated

0

0

0

0

0

0

0

Other

(2,422)

1,014

(1,697)

4,663

0

0

0

Closing net (debt)/cash

 

 

58,718

85,829

159,665*

(22,891)

(503,715)

(336,026)

(134,726)

Source: Paysafe, Edison Investment Research. Note: *Difference based on new basis for reporting cash.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

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Germany

London +44 (0)20 3077 5700

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London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Epigenomics — Update 12 January 2016

Epigenomics

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