Strong underlying secular growth drivers supported by attractive macroeconomic and demographic trends
Network International is at the nexus of the two overarching trends of strong secular growth drivers and attractive macro and demographic conditions, supported by four growth factors:
- Highly attractive macroeconomic and socioeconomic trends
- Continued shift from cash to digital payments in the world’s most underpenetrated markets
- Expanding payments markets
- Increased outsourcing by banks
Strong secular growth drivers
We believe we are well-positioned to benefit from the rapid and transformational structural global shift from cash towards digital payments, which is particularly powerful in our MEA target markets, which are at a significantly earlier stage of development in terms of non-cash payments penetration compared to more mature markets. Future growth is expected to be driven by fast adoption of digital payments, higher penetration of cards, developing payments infrastructure and rapid growth of e-commerce and mobile payments in the region.
We also expect to benefit from the continued strong growth in e-commerce in our markets. E-commerce transactions still have a relatively low share of total commerce transactions in the MEA region compared to developed markets and are expected to grow at a CAGR of 20% in volumes between 2017 and 2022.
Attractive macroeconomic and demographic trends
The total population of the MEA region consists of 1.5 billion individuals, many of whom are un-banked or under-banked. In addition, the markets in which we operate benefit from a young and growing population, with growth rates comparing favourably to North America and Europe. The MEA region has a high share of young population with the highest adoption rates for digital payments. Alongside attractive demographics, consumer spending is rising across the region, which we expect will lead to continued strong growth in our business.
Market leading scale in the MEA region
We have a leading market position in the MEA region and are the only pan-regional provider of digital payments solutions across the region. We are also deeply entrenched with our customers, and believe that as a result of our broad geographic reach, significant investment and ongoing innovation, Network International has become the platform powering much of the digital payments ecosystem in many of its markets.
This combination of leadership position and regional scale provide us with deeper market insight and expertise developed through our long-standing presence in the MEA region and larger volumes of transactions processed and customers served compared to its competitors. This allows us to benefit from economies of scale and to invest and develop our extensive and innovative product and service offering, which caters to specific regional requirements and can be rapidly deployed through its flexible technology platforms.
Track record of resilient growth underpinned by a proven and diversified business model
Over the past two decades, we have expanded our geographic reach from the UAE to serve customers in over 50 countries across the MEA region, including presence in more than six countries in the Middle East and over 40 countries in Africa, demonstrating a long-term track record of diversification and success in entering new markets.
We serve a broad customer base across its business segments and business lines, having historically focused on expanding both our merchant solutions and issuer solutions business lines and developing a relatively balanced revenue mix, with 53% of our 2018 revenues generated from issuer solutions and 46% from merchant solutions in 2018.
Client-led and flexible value proposition that covers the entire payments value chain
We have been able to establish and maintain deeply entrenched relationships with a diverse customer base. Our merchant solutions customers include more than 65,000 merchants, both leading global and regional merchants, such as Zara, and small merchants, as well as more than 220 leading financial institutions in the markets in which we operate, including Emirates NBD and ADCB in the Middle East and First Bank and Access Bank in Africa. Our customer portfolio illustrates the flexibility of our technology platform in providing services to a large range of customer sizes, advancement and geographical reach.
Well-invested, highly scalable, integrated and omni-channel technology platforms
We operate two purpose-built integrated, omni-channel, scalable, reliable and highly secure, pan-regional technology platforms across our merchant and issuer solutions businesses – Network One and Network Lite. We believe that these platforms provide us with strong operating efficiency, enhanced broad-based functionality, agility and the ability to support ongoing product innovation.
Network One caters to larger customers with more sophisticated requirements and Network Lite to customers with standardised requirements. Both platforms are tailored to the specific needs and complexities of customers in the MEA region, providing us with rich data sets and a full view of fast-changing customer requirements while supporting cross-selling products to new and existing customers.
Industry-leading financial profile
Our revenues increased by a CAGR of 13% from $235 million in 2016 to $298 million in 2018. Furthermore, our business model allows us to generate more than 96% of our revenue from USD-denominated or USD-pegged contracts. Highlights include:
- A loyal customer base that provides a high proportion of recurring revenues, with 93% of recurring revenues in 2018
- Revenue growth has been strong across the MEA region, with a CAGR of 9.7% in the Middle East and 23.3% in Africa between 2016 and 2018
- Strong Underlying EBITDA margins (excluding share of an associate) of 49.8%, 50.5% and 48.9% in 2016, 2017 and 2018, respectively
- High Underlying Free Cash Flow conversion rate of 79.6% in 2017 and 82.9% in 2018
Experienced management team with significant industry knowledge
Our management team, which includes executives with regional and international experience, has been instrumental in developing Network International into a leading digital payments provider in the MEA region.
This team has on average 20 years of industry experience in the financial services, payments and technology sectors and a track record of execution at leading organisations regionally and internationally.