Fonix Mobile – charging to your mobile

What do Cancer Research, Comic Relief, Children In Need, Sport Relief, The Big Night, Fishing TV, Global Media, Zing Flowers and The National Trust all have in common?

The answer is Fonix Mobile (LON:FNX). All the above utilise this group’s platforms to enable the user base of their supporters to seamlessly charge donation payments through to their mobile phone bills.

A recent AIM newcomer

This fast-growth London-based company, which was established way back in 2006, floated on the AIM market in early October last year.

Brokers finnCap handled the Vendor Placing of 50m shares @ 90p each, in which three of the company’s Directors and a major shareholder sold down half of their holdings.

Float Placing attracted top name investors

There are 100m shares in issue, with new shareholders like Slater Investments (10.24%), Kestrel Partners (4.08%), Blackrock Investment Management (3.35%), and AXA Investment Managers (3.00%) coming on board the equity.

Fonix is easy work for its clients

For the various charities involved the attractions in using the company’s services is immensely attractive, practical, and easily administered. Fonix also offers messaging solutions.

Using the service for the provision of mobile payments and messaging services gives its 100 plus clients the ability to benefit from direct connections into all the UK carriers and through a solid infrastructure.

Wide range of clients

The company has a highly skilled team of industry specialists across commercial, product and technology.

Its clients span across the media, telecoms, entertainment, enterprise and commercial sectors.

The business is driven by blue-chip clients such as ITV, Bauer Media, BT, and those mentioned earlier in this profile, to name just a few. Its top 10 clients account for 83% of gross profit and, once integrated with the company, they become firmly embedded.

That is evidenced by no client terminating their contract between 2018 and 2020 and an average contract length of the top 10 clients being over 5 years.

Who pays?

When consumers make payments, they are charged to their mobile phone bill. This service can be used for ticketing, content, cash deposits and donations. The service works by charging digital payments to the mobile phone bill, either via Carrier Billing or SMS Billing.

The current regulation to which Fonix is subject, stipulates a maximum spend of £40 per single transaction and £240 in aggregate per user per month.

Last week’s statement

On Thursday of last week, the company announced its Trading Update for the six months to end December.

The mobile Total Payment Volume of £123m in the first half, was up 18% over the previous period, while gross profit of £5.8m was 21% better.

The company’s TPV in the year to end June 2020 was £212m. Its gross profit rose from £3.7m in 2017 to £10m last year, while its adjusted pre-tax profit was £7.3m.

As expected, each of its three business segments, namely payments, messaging and managed services, have grown during the period.

As for new business, the company has a robust pipeline of prospects for H2, while continuing to attract new media, charity, gaming and digital services sector clients.

Operating costs have remained steady, while it has been successful in the handling of record customer activity in the period.

Results expectations

The company’s interim results will be declared on Monday 22 February.

For the full year to end June 2021 finnCap is estimating £45.1m of revenue (£40.1m) and £8.2m profit. Next year it is going for £49.6m of revenues and £9.1m of profits, worth 7.6p per share in earnings and covering a 5.7p dividend.

The broker is currently forecasting a price of 200p a share, they closed at 136p last Friday night.

My view

I await with interest the forthcoming interims and, in the meantime, I put the shares out with a Target Price of 170p.