<b>Home » Market News » BrokerTalk » A record number of payments being processed in the UK in 2024, a payments industry trade body has predicted.</b>
A record number of payments being processed in the UK in 2024, a payments industry trade body has predicted.
A rise in the number of transactions made via credit and debit cards, the internet and mobile devices will lead to a record number of payments being processed in the UK in 2024, a payments industry trade body has predicted.
Payments UK said that it anticipates only a slight rise in the average number of payments each UK adult consumer will make a year by 2024 compared to 2014, from 656 to 679 payments, but that it expects consumers to move away from using cash and rely instead on other means of payment instead over the next decade.
The number of cash and cheque payments made annually by UK adults is likely to fall over the next decade, Payments UK said. Next year it is expected that the total volume of all non-cash payments made by consumers will exceed the volume of consumer cash payments for the first time, and by 2024 it is anticipated that cash payments will account for just a third of all transactions made in the UK, the trade body said. In 2014 cash payments accounted for 53% of the market.
An all-time record 44 billion payments will be made in 2024, up 3.4 billion over 10 years, equating to 120 million payments per day, Payments UK said. The increase will be driven by rises in card, internet and mobile banking payments.
Financial services and technology law expert John Salmon of Pinsent Masons, the law firm behind Out-Law.com, said the payments market will be subject to significant reform as a result of impending new EU legislation, the second Payment Services Directive (PSD2). Pinsent Masons is hosting its Global Payments Conference in London on 17 November 2015 where the PSD2 reforms will be a main topic of discussion.
PSD2, now finalised, will open up the payments market to new businesses, Salmon said. A greater number of companies will be involved in the processing of payments, creating greater competition in the market and posing a threat to existing business models but also opportunities for new players in the sector.
This is because the new regime envisages alternative ways for consumers to pay and to gain control over their financial data through technology like APIs on the basis of customers consent, he said. The opportunity also remains for banks to move first and provide customers with the services that PSD2 will be opening up to other players.
Contactless payment technology and growth in the e-commerce market will see debit cards become more popular for making payments over the next decade, Payments UK said.
Cards (both debit and credit) accounted for 51% of the volume of non-cash payments in 2014, but by 2024 they are projected to account for 60% of non-cash transactions, Payments UK said. Within this, the volume of debit card purchases is expected to grow from 9.2 billion in 2014 to 16.0 billion in 2024.
The Faster Payments payment system is also likely to become busier as consumers increase the number of automated credit payments they make, Payments UK said.
In terms of percentage growth in payment volumes, the strongest growth over the next ten years will be experienced by one-off automated credits processed through the Faster Payments Service, which is forecast to nearly double by 2024, it said.
GBG, the identity intelligence specialist, provides the following trading update for the six months to 30 September 2015 in advance of the release of its half year results.
Group Trading Performance
Revenue is expected to be approximately £32.3 million (2014:£23.2 million) representing a year-on-year growth of approximately 39% (2014: 28%) and includes strong organic growth of 18%.
The Group expects to show adjusted operating profit of £4.5 million (2014: £3.7 million), an increase of over 21% on last year after investing an additional £1.3m during the period in product and business development to drive future growth.
Richard Law, CEO of GBG, commented: "The team at GBG has achieved another excellent performance in the period, both in terms of our high growth and continuing to lay the strategic groundwork to support our expansion in the UK and globally."
<b><u>The Group's detailed half year results will be announced on 1 December 2015.</b></u>
Adjusted operating profit means profits before amortisation of acquired intangibles, share based payment charges, exceptional items, share of results from associates, net finance costs and tax.
For further information, please contact:
Richard Law, Chief Executive
Dave Wilson, Group Finance Director & Operations Director
Name GB Group Epic GBG
Sector Software & Computer Services ISIN GB0006870611
Activites GB Group, the UK's leading identity management business, helps organisations realise the full value of their customer base by recognising and verifying all elements of a consumer's identity at every interaction. We know that identity matters. Through the application of our leading technology, we protect, predict and provide information that is used to maximise customer value for some of the largest companies in the UK. The company provides an integrated and comprehensive range of data services to clients allowing them to interact effectively with their customers, improve long term profitability and reduce fraud. Index n/a
Latest share price (p) 269.50 Net gearing (%) 26.67
Market cap (£m) 322.52 Gross gearing (%) 45.35
Shares in issue (m) 120.74 Debt ratio 13.99
P/E ratio 66.78 Debt to equity ratio 0.20
Divs per share (p) 1.85 Assets / equity ratio 1.83
Dividend yield (%) 0.69 Price to book value 6.99
Dividend cover 2.76 ROCE 11.06
Earning per share (p) 4.00 EPS growth (%) 25.00
52-week high / low (p) 290.00 / 141.50 DPS growth (%) 12.12
<b><u>GB Group broker views</u></b>
Date Broker Recommendation Price Old target price New target price Notes
03 Nov Peel Hunt Buy 269.50 300.00 300.00 Reiterates
03 Nov finnCap Buy 269.50 290.00 290.00 Reiterates
Been following these recently, note dividend was paid in Summer, but they have progressed well as a company from when Telme.com was their previous name, and although the price has risen too in the last 1/4 there may be more rise up to results, but always expect some profit-taking. Your former suggestment
might just happen if they reach £3 +.
Just so people know Lambrini Girl is a serial de-ramper. Has appeared on all the sites of shares that I have had significant increases with saying they are about to crash. As ever people have to make their own decisions despite noise and self-interested mails.
I am slightly cynical about acquisitive companies. What starts as a strategy becomes a habit which can be abused by CEO's to get them out of holes when revenues or profits aren't growing except when they are making acquisitions.
My guiding star is cash generation, but this in turn gets confused when companies place shares, and you lose track of the fact, and assume a great lump of cash sitting on the balance all the natural cash generation of the business, not the reinvestment by shareholders
It also becomes increasingly hard to benchmark what true performance there is when every year or several times a year an acquisition is made.
Once CEO's get in the habit of adjusting the p&l because of various amortisation issues, and exceptional costs right down (funny how exceptional costs are exceptional every year!) they find it hard to stop.
I am not saying this is true of GB Group, but beware of acquisition as a habit.
You would never know that the business that the business GB Group recently acquired was significantly loss making from its announcement on acquisition. Those losses may have arisen from sunk development costs, which may not be recurring. GB group may be significantly trimming down to an appropriate size a badly managed business. It may be taking the core development it likes and dispensing with other cost overhead. Let's hope it won't be earnings enhancing purely because GB has capitalised the development costs, an habit of some financial engineers.
Many a time cash generative businesses have got out the torpor of boring daily business by an acquisition strategy that uses its cash to acquire, and gradually leverages the balance sheet with borrowings, and deferred acquisition costs. That's all well and good when the cycle is ever upward, but not so much fun when the cycle turns. Just saying....
Multiple appears to be apprx 7.5 x operating profits of Dectech of £2.8m or 4x revenues. Of this apprx £6.2m is deferred for 2 years based on an earn-out.
Revenues of the acquired company are only £5.8m so the net margins of the business appear to be very high.
The mixture of debt and share placing is probably structured to allow earning per share to grow assuming the acquired company hits it profit targets.
The challenges will arise from running an Australian business from a UK entity, and making the cross sell potential work, which is generally slower and harder to achieve than managers believe. Also we don't know the profit history of Dectech, so hopefully the baseline profit margins are sustainable rather than being a peak. If they don't the deferred payments will I guess kick in, and reduce the purchase price?
As ever making an acquisition requires some skill. However, making it work requires a lot more, and is often a rarer outcome. This is a case of watch and wait.
As to whether GBG are over priced it would depend on them delivering on the potential of new products being taken up abroad in a big way. If they are it could be that the SP will be a lot higher than at present. For me I am going to hold as they seem to be well managed and not over hyped or over spent, it might take some time to bear fruit in a big way but I live in hope and like you have a big margin to play with. Time will tell.
No thing wrong with the figures, I make P/E of 19 on adjusted earning or closer to 30 on profits AFTER share of results from associates, interest, tax, share based payment charges, amortisation of acquired intangibles, acquisition related costs and non-recurring acquisition integration costs.
The share based payment charges of nearly £500K, ouch!
Yep 2 trades for about £2.5M about 10:00, sounds like somebody abandoning ship. One small but has got the price back up again, nearly to where GBG started.
Actual results published on 3/6/2013, so I wouldn't expect a huge amount of action until then. I'm really looking for some action in the USA, otherwise it really will be hail and farewell, even if the remaining holding is "free" i.e. original stake move on long ago
In the past GBG has been criticized for not releasing much information. Here we have had a Trading Statement (18/4/2013) and a Pre-close Trading Statement (26/3/2013) within 4 weeks of each other.
The bottom line has increased by £400K (£5.1m on 26/3/2013) to (£5.5m on 18/4/2013).
I'm afraid the rest of the statement is just padding to me, with the exception of "a renegotiation of the commercial relationship with BT, GB Group's partner in URU. The net effect of this re-negotiation is margin enhancing in the year to 31 March 2013 and in future periods".
I still have a residual holding in GBG, given that I sold my last chunk @97p before Christmas, GBG has been close to the exit door a couple of times.
However, it appears at long last there is some action in US online gambling, with both Nevada and New Jersey legalizing it in the passed week.
888 Holdings, an on-line bookie based in Gibraltar, as go up 50% in the last month, apparently based on the "wild west" opening up. Reported in Tuesday's Indie: " Numis, which reckons the company is poised to win big in America. Nevada's governor has legalised online gambling in the state, home to America's gambling capital Las Vegas, and Numis's Ivor Jones reckons other states will follow suit."
Mr Jones was correct in that New Jersey followed suit PDQ.
US online gambling will be where GBG can get some revenue growth, IF it gets its act together.
A fair point that Profit before Tax is actually down. This was caused by "Amortisation of acquired intangibles" i.e. writing down/off Goodwill on the acquisitions. Personally I like this in that a very acquisitive company just keeps it on the accounts, until a change of management comes in writes it off; passes the dividend; as an emergency rights issue. Everything is blamed on the previous management and a new set of management share options is declared at the significantly lower SP.
Whilst on the subject of "Share-based payments charge" these are far too high at £200K for a firm that only making £500K. Finally exceptions were £265K roughly half staff re-organisation and half takeover costs.
GBG doesn't currently merit a PE of 25. To quote "The Hitchhiker's Guide to the Galaxy": "... Thanks for All the Fish"
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