SafeCharge's numbers were mixed today and maybe that is at the kind end of the spectrum.

The company has grown transaction volumes considerably, up 30% . That's good as SafeCharge earns its money as it charges a fee per transaction, the fee level depends however on the whether they are just connecting the client to the banks, known as "connect" or routing the money back to the client, known as "collect". 

SafeCharge has a good roster of clients like William Hill, Betfair, but where it really makes its money are from the smaller clients maybe selling online video games, online dating (although they say its not porn) etc All of these are card not present transactions, conducted online. SafeCharge has really great risk management tools to help prevent fraud and chargebacks and boost acceptance rates by the banks for their merchants. 


The value of transactions grew by 7% in H1 17. However revenues grew less fast at only 2% as SafeCharge made the decision in Q3 last year to reduce higher risk, but higher margin, activities such as "online dating" (read into that what you will). This has impacted H1 17 as these revenues have been foregone. It has replaced these transaction volumes with lower risk but lower margin volumes eg online dating may have been prepared to pay SafeCharge 4% of the value of the transaction processed, whereas a high volume unattended vending machine operator like Nayax may only pay 1%. This explains why revenues have grown less fast than transaction volumes and also why gross margins have fallen from 60.5% to 57.3%. If the business turned off ( ie higher risk) is added back then the Group says that 'underlying' revenues grew by 11%. There is some merit to this, but financial markets arent stupid and the business would attract a lower multiple if the revenue streams are perceived to have a large exposure to less palatable business lines.

Profits were negatively impacted by above changes. EPS fell 18%. The dividend was raised 10%, but I am told this is more due to a 50% split H1 / H2 of the dividend, rather than 40 / 60 as previously. Underlying the dividend was raised more like 4% but I cant see this in the statement. Poor communication on this point.

For me I have topped up my position in a…

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