Fonix Mobile may only have arrived on the market at the back end of last year, but it has already delivered a positive Trading Update for its shareholders and in addition, seen its share price increase by more than 50%.
It’s a company where I invested soon after the IPO and one that appeared to have the right credentials for both near and longer term growth and share price appreciation with seemingly plenty on which to concentrate.
As a leading UK focused provider of mobile payments and messaging services, Fonix has carved out a decent spot for itself, where it works with the likes of the BBC, ITV, BT, Bauer Media and the Daily Mail to name but a few.
Speaking with the CEO Rob Weisz in order to gain further insight into the business and its prospects, it soon becomes apparent that the aspirations to build on the company’s early success are certainly high.
Weisz is without doubt passionate about this business which sees a total headcount of 34 people, all of whom he says have successfully transitioned to home working during the pandemic.
Coming to market during such a difficult and unprecedented period though must surely have had its challenges and I wondered as to whether such a situation could have blown things off course for the AIM debutant.
“From an operational perspective we have been very pleased, tech development has been unaffected and we have done some great deals over the last 12 months”.
Understandably, as CEO of a private company coming to market at that time, Weisz says he was naturally worried, particularly with the lack of networking and events that would normally be attended.
However, he adds “the good news is that we won a number of new customers and business and that has been great. The situation didn’t change our targets or our outlook which remains the same as it was pre-Covid, so that gives an indication as to where we are at”.
Indeed, the Trading Update announced last month ahead of reporting its Interim Results February 22nd 2021 made for positive reading as the company stated that it had delivered continued growth comfortably in line with management expectations.
Within the period, Fonix’s platform handled £13.9m of the total donations for the BBC Children in Need campaign whilst Total Payment Volume grew 18% during the first half to £123m.
Broker FinnCap currently has revenue of £45.1m pencilled in for full year 2021 with adjusted pre-tax profits at £8.2m and EPS of 6.8p which with the share price presently standing at £1.45p puts the stock on a PER of 21.
For a company in growth mode that has net cash and is committed to a progressive dividend policy with a decent prospective yield looks worthy of my keeping on the right side of.
Although for now revenues are focused on the UK where Weisz says that there is plenty to go for in a growth context, plans are very much afoot for international growth as he explained.
“We have been looking at international expansion and there are now plans to execute on that, so we expect over the course of this calendar year to start delivering with revenues.
We have seen existing customers in other markets come to us for help, so the idea is to address key markets where there are decent people numbers, with high populace and high regulation”.
As a shareholder, like others I welcome such news, but equally, the UK prospects also resonate, as the CEO readily calls out the numbers on various areas that provide for additional growth potential at Fonix.
“The UK pay TV market is worth some $6bn, then there is Gaming which is $5bn, whilst across Charities there was £10bn donated last year” Weisz says. “As a small UK focused business we have been successful over the last 7 years through Identifying a gap in the market that now sees us serving the likes of ITV and Comic Relief”.
Expanding he adds, “Our product set can form a really powerful part of the market in the UK which is growing and where many as yet do not actually have carrier billing, so we can form a really key part of that, so yes, there is plenty of scope in the UK”.
Despite coming to market as something of a fledgling, Fonix is taking on the guise of something more punchier with serious growth prospects and credentials where the CEO sees it as being a real leader in its field.
“We straddle two areas where we can transact and take payments on mobile phones along with communicating too, so our core propositions are around messaging or carrier billing and really understanding that business”.
Weisz also says that with a highly experienced team they are able to apply their product set and leverage it across spaces such as media and broadcasting and that has thus far been a key factor in their success.
Although news of the cancellation this year of Britain’s Got Talent is a disappointment, it doesn’t appear at all likely to derail the Fonix plans or outlook. “We provide a whole variety of things and that is just one of many, many, that we are handling which sees us with anywhere from 20 to 40 going on at any time”.
As a business regulated under OFCOM there are certain areas that are not open to Fonix such as buying items in the likes of a supermarket on a phone and when it comes to transactions across the space and clients it serves, there is a £40.00 limit on spend.
Whilst that may appear to some as a negative, the reality is arguably the opposite, as witnessed by its numbers and continued progress, as there are high barriers to entry in the field it operates, arguably leaving Fonix in something of a sweet niche spot.
Operating in a different arena to peers such as Bango and Boku which are focused across the global app store space, Weisz talks of Fonix being concentrated on a unique mid tier spot where it successfully acts as an aggregator and its lack of churn is testament to its offering, performance and success to date, where only one customer appears to have been lost since 2014.
There should be more flesh on the bones come the Interim Results and it will be interesting to see the numbers, particularly the net cash position as posted at the period end.
Looking ahead to next year, the Broker has pencilled in revenue at £49.6m with adjusted pre-tax profits of £9.1m providing for EPS of 7.6p, with an expected dividend of 5.7p.
This sees the shares trading on a forward PER of 19 at the current price, although it is quite conceivable that with the UK market continuing to offer ongoing growth, plus overseas expansion coming on stream then those numbers may prove conservative.