Following the announcement yesterday of what were excellent Interim Results at Fonix Mobile, I have been fortunate enough to catch up once again with CEO Rob Weisz for a few words on the performance.
Fonix, is a familiar subject here on the blog and is a stock that I have been holding from shortly after its IPO, the shares performing strongly following that and now taking on the look of a really positive growth prospect.
As I often say with companies where I am invested and follow, there is plenty of previous information on the business here, but for any newcomers that may be visiting, I will just run through the business briefly. The company operates in the mobile payments space where via its own platform it works directly with major entertainment, media and telecom companies enabling payments made by consumers, to be charged directly to their mobile phone bill.
Major and high profile relationships exist, which see Fonix’s involvement spanning the likes of Children In Need and Red Nose Day.
Typically, in these cases, Fonix will handle audience participation and donations using a code through its SMS text service which enables a payment to be transacted through a mobile device.
As with other carrier billing companies Fonix takes a small percentage of transactional value, but given the area in which it operates, that percentage is higher in value terms when compared to the likes of Bango, which although I mention it, is worth noting is not a competitor given the difference in where they operate. The company is based in London and has historically undertaken its business here in the UK where it has connections to all of the nations mobile operators.
More recently though it has extended its reach into Europe with ambitions for continued expansion and a leveraging of its offering to drive further growth.
Looking at the H1 numbers the company demonstrated a strong performance with revenue increasing on the prior period to £28.6m from £24.6m which in turn saw adj- EBITDA move from £4.6m to £5.5m.
Adj- pre-tax profits were also positive, with £5.2m being delivered which provided for EPS of 4.4p, with a full year expectation of 7.9p.
As an added attraction to what is essentially a growth play, Fonix is committed to a progressive dividend policy driven by the positive cash generation.
This sees a total payment earmarked for full year 2022 of 6p per share which should provide for a degree of underpinning on the share price in such volatile times.
That said, the shares have performed well in what are very tricky markets, currently trading at £1.53p per share which sees the stock trading a PER of 19 falling to 17 on next years projected numbers.
CEO Weisz sounds as grounded as ever though, as he commented on yesterday’s results. “We’re doing ok and we had a good period which is great, and although there was a bit of seasonality with our media sectors we are growing across the board with all of our sectors progressing”.
Although the UK remains the key geography with the company taking a circa 30% slice of what is a £600m plus market, overseas expansion has been on the agenda for sometime. It is an area we touched upon last time we spoke, particularly around early developments and laying the foundations in Austria, so Weisz was happy to revisit. “Obviously we don’t make money from contracts and integration, we make money on the transactions, so last year we perhaps spoke too early on Austria, but we are very much continuing to progress with that which is a very key part of our strategy. We are also working towards a couple of other deals at the moment which is great, so what we are keen to do is announce them when they are actually up and running, where we can then put a bit more meat on the bones. So, we are currently continuing with our plans in the core sectors and identifying key opportunities in other markets and pursuing those on a commercial basis”.
Regarding the expansion programme Weisz says that although the couple of deals that they are looking at presently are in Europe, they aren’t, as a business into a particular geography.
Rather, they are focused on the key market recipe of a good client or a good merchant and market with a decent populace with a positive regulatory environment along with mobile operators they can do business with.
In relation to new areas on which to target the CEO speaks of one, that being the transport and ticketing space, which would also appear to offer a decent opportunity. “Across everything we do, we recognise that there are certain key vertical sectors which will really benefit from messaging and carrier payments. We have already done a couple of small but quite effective deals in transport ticketing and we recognise the size of the market which is a multibillion pound one. Whether that is parking, bus or even mobility, providing messaging with a code for renting or purchase along with mobile payment, provides customers with flexibility particularly as we become more cashless and where convenience is key”.
Weisz adds that their offering is simple and user friendly which will appeal to those that are perhaps less proficient with a mobile device.
With the company demonstrating positive momentum since coming to the market I ask as to what shareholders may have to look forward to in the coming months and beyond. “As a business we have always been pretty cautious” says the CEO, “although we did a small upgrade in January we are very much concentrating on sticking to our knitting. But, we have got prospects in all of our sectors, so we would be hopeful to be able to announce particular deals in time, and although for us the key is the timing we are seeing positive momentum in each one of our sectors that we are focusing on. What we don’t want to do is overpromise and under deliver so our focus is very much one of keeping things going and having something tangible to talk about at the right time”.
Clearly things do appear to be going the right way for Fonix, with what seems emerging growth opportunities from a number of angles. But, what of a potential slow down, given the current head winds and rumbles of an imminent recession.
Weisz comments “I have been in this market twenty years and been through a couple of recessions and obviously the pandemic, but in each one of those scenarios we are definitely seeing that are products prove pretty resilient”.
Whilst the crystal ball is probably foggier than it has ever been, Weisz is nevertheless as comfortable as is possible at present, particularly with Fonix’s major focus along with what is a lower level of spend in transactional terms, arguably less likely to be something put on the back burner.
Any short term distractions or disruptions to the market can be unnerving at the best of times, so it is understandable in periods such as this, investors may decide to exit or refrain from buying shares.
That said, Fonix to my eye remains an excellent longer term prospect with ambitions to grow beyond its current size, so any wider market negative sentiment that may impact, could provide for an opportunity to add to my position.
Equally, any newcomer eying the company may find it worth homing in on for a closer look.
Looking at broker FinnCap’s numbers for next year the expectation is for revenue of £58.4m with EBITDA at £11.1m and pre-tax profits of £10.6m. EPS of 8.8p has been pencilled in with a 6.6p per share dividend.