Novatti Group (ASX:NOV) 1H18 results & outlook


by Rachael Jones

Novatti Group Limited (ASX:NOV) CEO, Peter Cook talks about the company's 1H18 results, the launch of its Australian remittance service, the integration of basis2 and progress towards its goal of becoming an ADI (authorised deposit-taking institution).

Rachael Jones:
Hello I’m Rachael Jones for the Finance News Network. Joining me from the Novatti Group (ASX:NOV) is CEO, Peter Cook. Peter, welcome to the Network.

Peter Cook: Rachael good afternoon.

Rachael Jones: Firstly could we just start with an introduction to your company?

Peter Cook: Novatti listed two years ago, January 2016. Our market capitalisation is about $40 million at the moment and actually, our top 20 shareholders have about 80 per cent of the company. We’re well funded, we’ve at the moment about $7 million of cash available and we’re heading towards profitability, as a near to medium term aim. The company is involved in the large markets of financial services, and financial services technology. And we have revenues coming from both technology sales and financial transactions processing.

Rachael Jones: Now to your 1H18 results. What were the highlights?

Peter Cook: The company turned over in the first half year about $2.3 million, which on a like-for-like basis, was about 109 per cent higher than the first half 2017. Most importantly and what we’re happiest about, is our financial transaction processing revenues, increased about eightfold and to just over $0.5 million. And they’re still on a strong growth path. Within the business, we also have strongly been managing our costs. We’ve brought them down and yet we’ve continued to increase, both the reach and nature of our revenues.

Rachael Jones: Now to your business. Can you tell us more about the financial technology sales?

Peter Cook: So financial technology sales, we have well-established, robust and scalable technology that’s used by both large clients, including Telstra Corporation (ASX:TLS), Cathay Pacific amongst others. And also for ourselves, we use our own technology for building new types of financial services revenues. Technology used for things such as remittances, topping up mobile phones, a number of let’s call it, banking transaction type services in Africa, Europe, North America, Asia.

Rachael Jones: What can you tell me about your transaction processing?

Peter Cook: Transaction processing, some as our own brands. So for instance, we have a global service called Flexepin, which is what they call cash vouchers, distributed in a number of countries in Europe, Canada, Australia, some African countries. We’re strongly involved in remittances, both from Australia outbound, inbound to Australia and also across border between a number of other countries. And then we’re particularly engaged with the growth in Chinese commerce, between China and Australia. Whether it be tourists coming here spending using Alipay and WeChat, online purchases through e-commerce and increasingly, bill payments, Australian bill payments, through those Chinese payment methods. So a range of revenue streams that we call financial processing.

Rachael Jones: Now to your billing services?

Peter Cook: About a year ago, we bought a utility billing company called basis2. It has got highly predictable recurring type revenues. We’ve managed to grow that business somewhat and actually continue to extend the operations of the company. Highly predictable and profitable part of our business and we continue to look for increasing work in the billing, and subscription billing space.

Rachael Jones: You’re also just in the process of becoming an authorised deposit-taking institution, or an ADI. How far advanced are you in that process?

Peter Cook: An ADI is essentially a bank licence. The Government has recently announced that they’re going to allow a restricted bank licence, as an innovation or start-up approach to bring in new types of banks. So Novatti is well preparedto submit our application for a restricted ADI. But notwithstanding that, further down the track, we wish to apply for a full bank licence. From Novatti’s point of view, we’ve got the core technology to run a bank on, that’s our own technology that’s well proven.We’ve already got our own compliance teams and we’re used to doing financial services, operations and management.

We have the capital structure to actually raise the funds that’ll be necessary for the bank licence. And we’ve brought on a serious management team to build the business plan, so that we can execute that to gain new revenue streams and new client types, that aren’t being addressed by current banks.

Rachael Jones: Last question now Peter. What are the plans for the next six months and longer term?

Peter Cook: For the next six months, we’re going to drive hard on growing our transaction revenue streams. But in parallel, we’re incubating new revenue streams and also building the application for our bank licence. So we’re a fast moving business, we’re in large growth market, we’re trying to be disruptive and to build these new revenue streams.

Rachael Jones: Peter Cook, thanks for the update.

Peter Cook: Thanks Rachael.


Subscribe to our Daily Newsletter?

Would you like to receive our daily news to your inbox?