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Strictly Private and Confidential
Full Year Results 2019Presentation9 March 2020
Disclaimer
2
This announcement contains certain forward-looking statements with respect to the financial condition,results or operation and businesses of Network International Holdings plc. Such statements and forecastsby their nature involve risks and uncertainty because they relate to future events and circumstances.
There are a number of other factors that may cause actual results, performance or achievements, orindustry results, to be materially different from those projected in the forward-looking statements. Thesefactors include general economic and business conditions; changes in technology; timing or delay insigning, commencement, implementation and performance of programmes, or the delivery of products orservices under them; industry; relationships with customers; competition; and ability to attract personnel.
You are cautioned not to rely on these forward-looking statements, which speak only as of the date of thisannouncement. We undertake no obligation to update or revise any forward-looking statements to reflectany change in our expectations or any change in events, conditions or circumstances.
Strategic Update
3
Simon Haslam, CEO
4Notes: 1. For definitions of Alternative Performance Measures and Key Performance Indicators, see pages 34-35
Performance
Heritage & scale
Network & reach
>25 yearsOperating in payments
Technology & capabilities
USD43.8bnTotal processed
volume1
752mTotal number of
transactions1
14.2mTotal number of cards
hosted1
>70,000Merchants
>200Financial Institutions
>50Countries across the MEA
Network OneNetwork Lite
Market leading technology platforms
>USD120mInvested in our
completed technology transformation
>15,000Customers already using our new POS
devices
USD334.9mRevenue
48.6%Industry leading underlying
EBITDA margins1
13.3%Underlying EBITDA1
growth
Only pan-regional provider of digital payment solutions
at scale, with presence across the entire payments
value chain, delivering integrated omnichannel payments services to our
customers
Enabling commerce in the world’s most underpenetrated payments markets
Strong financial performance and positive strategic progress
5
Notable customer wins and contract renewals
Successful N-Genius rollout and good traction on other products
Customers migrated to next generation technology platforms and transformation complete
Growth accelerators and Mastercard initiatives well underway
Underlying EPS1
USD21.0 cents+7.5% YoY
Underlying EBITDA1
USD172.3m+13.3% YoY
Notes: 1. For definitions of Alternative Performance Measures and Key Performance Indicators, see pages 34-35
Underlying FCF1
USD103.2m(5.7)% YoY
Revenues
USD334.9m+12.4% YoY
Our strategic priorities remain unchanged
6
OUR STRATEGYProviding solutions that allow our customers to
bring digital payments to more consumers,
leveraging our scale and competitive advantage
• Leveraging technology and building capabilities
• Developing commercial arrangements with strategic partners
• Pursuing opportunities for acceleration
• Capitalising on digital payments adoption and supporting financial inclusion
• Expanding customer base and focusing on high value segments
• Expanding product range and market penetration
7Source: Edgar Dunn and Company (EDC) Market Attractiveness Report, 2017 data
Notes: 1. POS transactions, excludes ATM transactions
Middle East Africa
USD0bn
USD100bn
USD200bn
USD300bn
2012 2017 2022
Market growth in value of card transactions1
10% CAGR
USD0bn
USD100bn
USD200bn
USD300bn
2012 2017 2022
Market growth in value of card transactions1
16% CAGR
End-to-end capabilities anchor our competitive position
• Long-term track record, entrenched relationships
• Market leading technology and products
• Barriers to entry high and new entrants present opportunities
• Localised approach (schemes, currencies, languages, regs)
• Continued outsourcing, exemplified by new customer wins
• Bringing best in class service and products
Capitalising on digital payments adoption:Growth opportunity in our regions remains significant
Pursuing opportunities for acceleration – Saudi Arabia: Potential to become our second largest market
8Source: EDC Market Attractiveness Report, 2017 data; General Authority For Statistics KSA.Notes: 1. Annual population growth in 2017. 2. Projected 2022 volume of non-cash transactions by percentage
Well positioned as an outsourcing partner
Card and digital payments adoption
at an early stage
70%
14%
9%
Vision 2030 target
2022 projection
2017
Market data: card share of transactions by volume
2
33.4mTotal population
Growth of 2.5%1
(Versus the UAE at 15%)
c50%Of the population <30 years of age
• Majority of transactions processed in-house by domestic banks
• No significant independent payments processors of scale or with on-soil presence
• Intention to deploy on-soil presence to meet outsourcing regulatory requirements
• Successful track-record of delivery in neighbouring UAE
• Working collaboratively with the regulator - SAMA
cUSD1bn addressable payments revenue pool
1.4Cards per adult
Pursuing opportunities for acceleration – Saudi Arabia: Considered and phased investment approach
9
To expand our services; regulator requires on-soil presence
Investment in local data centre and technology capabilities
Capital investment up to USD20m
Strategic plans for 2020
Set up legal entity and office
Included in the SAMA sandbox
Processing a small volume of payments out of Dubai for 4 customers
Milestones in 2019
Incremental revenue generation from the start of 2022
Initial focus on prepaid card solutions, followed by debit, credit and acquiring
Remainder of capital investment up to USD5m
2021 and onwards
Long-term objectives Establish leadership in market Potential to generate up
to 10% of total revenues
EBITDA margin slightly below Group average
Expanding customer base and focusing on high value segments: Diversified customer base across the business
10
Merchant solutions customers Issuer solutions customers
>90% of revenues are recurringTop 10 customers contribute c37% of revenue
Expanding customer base and focusing on high value segments: New business generation across regions
11
New customer wins and partnerships
Contract extensions and expanded mandates
Effective cross-sell of products and value-add
services
Middle East Africa
12
Expanding product range and market penetration: Reinventing the point of interaction for our customers
POS Online On-The Go
Network One Network Lite 3rd party platforms
Analytics & ReportingFraud& SecurityFXSolutionsAlt Payments
• Omnichannel approach provides a single view of consumer data and behavior
• Proprietary software and cloud based system enable swift and agile product updates
• Can swiftly integrate alternative payments such as Google Pay, Apple Pay, Alipay
• Fresh look and feel – modern, lightweight, unobtrusive
Benefits of our N-Genius product suite
13
Expanding product range and market penetration:Over 15,000 N-Genius POS rolled out in the UAE
Allows consumer purchases to be processed live in-flight
No need to wait until landing and batch process
Substantially reduces failed or fraudulent transactions
N-Genius POS being rolled out across fleet
N-Genius in action: Emirates case study
Expanding product range and market penetration: Growth in cross-selling and Value Added Services
14
Strong Internal Governance
Strong Internal Governance
• Customer demand encouraging
• N-Genius POS now live in four countries
• Rollout aligned with major customers and markets
• Online gateway to follow
N-Genius in rollout across Africa Next generation POS in development
Good demand for N-Genius online Issuer solutions in strong growth
Proprietary, market leading online gateway
Giving our customers a truly omnichannel approach
In rollout and used by over 300 UAE customers
• Micro POS device that allows consumer to use their smartphone as the PIN keypad
• Our lowest cost device
• Planned launch H2
• Card Control in demand by a number of financial institutions; ADCB in UAE, First Bank of Nigeria
• Falcon has seen strong uptake since launch across all regions
First to launch Direct Currency Conversion (DCC) at ATMs for Visa in the region
Fully integrated• Improved service levels for customers• Cross-selling more effectively• Omnichannel approach
Agile• Greater ease of innovation• Flexible tech assist software development• Enabled 15x increase in processing capacity
Pan-regional• Serves customers across our regions• Faster entry to new markets• Enables uniform sales approach
15
Leveraging technology and building capabilities: Successfully transitioned customers to new platforms
Network One
Network Lite
Developing commercial arrangements with strategic partners: Digitising our capabilities
16
Develop new solutions and alternative payment methods:
• Enabling QR code or text message supported payments, through mobile devices, for issuers and merchants
• Enabling mobile based virtual card creation for consumers
Drive payments growth: Using existing card and POS models, with a future vision to extend beyond
Address regional trends: Need for low cost solutions, low levels of financial inclusion, fragmented infrastructure
Put customers first: By improving interoperability between participants in the ecosystem and working with mobile network operators
Developing capabilities to lead and respond to
digital trends in our region
Developing commercial arrangements with strategic partners: Enabling digital payment capabilities
17
Technical and functional requirements• Core digital platform will be integrated with card schemes, as well as Network
International’s card management systems & acquiring systems
Payment process• Merchant launches app and generates QR code by entering payment amount
• Scanned by customer with payment confirmation through SMS or app notification
Alignment with our digital strategy• Lowers the cost of acceptance significantly for merchants
• Removes expensive barrier of POS hardware
Merchant set up• Merchant downloads app and acquirer provides authentication and credentials
We are developing additional capabilities which will enable numerous mobile use cases including, QR code paymentfunctionality for small merchants which have no existing payment acceptance capabilities
Financial Review
18
Rohit Malhotra, CFO
Strong financial performance, in line with expectations
19
Underlying FCF1
USD103.2m(5.7)% YoY
Tech transformation capex complete. Growth capex deducted from uFCF in line with best practice
Underlying EPS1
USD21.0 cents+7.5% YoY
Strong growth, even after absorbing finance cost increase and investing to grow
RevenuesUSD334.9m+12.4% YoY
>90% of revenues are recurring
Underlying EBITDA1
USD172.3m+13.3% YoY
Stable margin after incremental plc costs
Notes: 1. This is an Alternative Performance Measures (APM). See pages 34-35.
Merchant Solutions performance reflects solid TPV growth
20
136.3
152.5
2018 2019
11.9%
Revenue (USDm)
39.9
43.8
2018 2019
KPITotal processed volume (TPV) (USDbn)1
9.6%
• Solid TPV growth, driven by
- Direct acquiring, underpinned by Government, Education & Retail sectors
- Expanded acquirer processing relationships
- Focus on growing SME relationships
• Growth in contactless diluted average TX value
• Product cross-sell with N-Genius, Multi-Currency Pricing (MCP) and Value Added Services
Value Added Services
Gross merchant servicecharge
Scheme fee
Interchange fee
-
-
Net merchant service charge=
TPV Other revenue drivers
Sale and rental of POS terminals
Transaction fees and other charges (FX markup, chargeback, etc.)
Notes: 1. This is a KPI. See pages 34-35
Strong transaction growth in Issuer Solutions
21Notes: 2. Growth in number of cards hosted, adjusted for the exit of First Gulf Bank.
Notes: 1. This is a KPI. See pages 34-35
157.1
177.6
2018 2019
13.1%
Revenue growth (USDm)
• Strong underlying volume growth in cards hosted (adjusting for FGB exit) and transactions
• Supported by cross-sell of product capabilities: Card Control, DCC for Visa at ATMs, and others
• Project revenues also showed strong growth
Number of cards
Fee per card
Number of transactions
Fee per transaction (Blended or tiered)
Other revenue drivers
Value Added Services (Fixed fee or fee per
card/transaction)
13
14.2
2018 2019
+4.4%
0.6+9.3%2
681.4 752.0
2018 2019
+10.4%
Average number of cards hosted1 (m) Number of transactions1 (m)KPIs
13.0
Regional performance demonstrates the strong structural opportunity
22
Middle EastHealthy growth in both business lines
• Strong TPV and transaction growth
• Supported by N-Genius rollout and cross-selling
• Contract renewals, new customers wins and key new merchants signed
AfricaHigh growth underpinned by nascent payments market and new customer wins
• Strong growth in cards hosted and TPV across all regions
• Number of outsourcing contracts won
• Supported by contract renewals and cross-selling
USD179.6mcontribution1
73.5% (+30bps)contribution margin
USD244.4m revenue
9.2%increase year-on-year
USD64.0mcontribution1
70.6% (flat y/y)contribution margin
USD90.5m revenue
22.2%increase year-on-year
Notes: 1. This is an Alternative Performance Measures (APM). See pages 34-35
Stable underlying EBITDA margins while absorbing public company costs
23
Underlying EBITDA1 bridge (USDm)
Underlying EBITDA increased 13.3% year-on-year
• Revenues converted to contribution efficiently; normalising for incremental plc costs, margins were 100 bps higher YoY
• Good control of personnel cost growth, while investing to strengthen our capabilities in certain functions
• Increase in selling, operating & other expenses largely reflects third party processing costs, which are directly linked to revenue growth and new products
• Share of TG Cash EBITDA increased due to acquisition of G4S Cash Services and organic growth in the business
152.0 172.3
37.0 3.2
(6.4)(13.5)
2018 Underlying EBITDA Revenue Underlying Personnel Costs Underlying SGA Expenses TG Cash EBITDA 2019 Underlying EBITDA
48.9%248.6%2
Notes: 1. This is an Alternative Performance Measures (APM). See pages 34-35
Notes: 2. Underlying EBITDA margin excludes share of an associate, TG Cash.
(4.2) (15.7)
Underlying Selling, Operating& Other Expenses
Solid underlying net income progression
24
Net income bridge (USDm)
Underlying net income1 increased 7.5% year-on-year
• Underlying D&A increase driven by hardware and software additions in 2019, and annualisation of 2018 maintenance and growth capex
• Net interest reflects usage of the financing facility, working capital facility and amortisation of debt issuance cost
• Favourable tax regime with stable underlying effective tax rate of 6%
172.3
59.0
104.8
( 36.1 )
( 24.8 ) ( 6.6 )
( 30.8 )
( 14.9 )
2018 UnderlyingEBITDA
Underlying D&A Net Interest Expense Taxes Underlying NetIncome
SDI - EBITDA SDI - Net Income Profit from ContinuingOperations
Notes: 1. This is an Alternative Performance Measures (APM). See pages 34-35
2019 Underlying EBITDA
SDIs predominantly related to IPO costs and expected to decline significantly next year
25
Twelve months ended 31 December 2019
USDm 2019 2018 GuidanceSDIs affecting EBITDA 30.8 21.3 Approx. USD13m in 2020
M&A and IPO related costs 16.1 3.7 IPO costs no longer recurring
Share based compensation 10.7 10.9Related to incentive programme in place prior to IPO. Will recur until
2021, after which no further costs will be incurred
Reorganising, restructuring & settlements 2.1 3.4
Arising from one-off initiatives to reduce the ongoing cost base and improve efficiency of the business
Other one-off items 1.9 3.4Primarily unrealised (gain)/loss on foreign currency balances &
provisions against unrecoverable balances and settlement accruals
SDIs affecting net income 14.9 14.1 Approx. USD18m in 2020
Amortisation linked to IT transformation 10.7 5.5 Transformation capital spend completed
Amortisation of acquired intangibles 4.2 4.2 Related to EMP acquisition in 2016
Tax expense for legacy matters - 4.4 No charge during 2019
Total SDIs 45.8 35.4 Approx. USD31m in 2020
26
Transformation1 (46% of total capex)
• Development of new technology platforms
- WAY4 card management system – includes migrations
- Upgrade Base 24 Switch including capacity increase
- Investment in proprietary online payment gateway
• Enabling a number of improvements
- Improved speed and reliability of processing
- A 15x increase in processing capacity
- Easier deployment into new markets
ii) Growth• Procurement of POS terminals for new customers
• On boarding new customers
• Product development; N-Genius suite
i) Maintenance• Enhancement of existing hardware, storage and compliance
• Procurement of POS terminals for existing customers
• One central facility in Cairo to drive productivity gains
2
1Capital expenditure (USDm)
Investment approach supports our strategy and transformation spend now complete
Notes: 1. D&A charge on transformation capex is part of SDIs affecting net income.
Core capex (54% of total capex)
USD19.9m (24%)
USD25.4m(30%)
USD38.6m(46%)
18.025.4
16.5
19.9
31.6
38.6
2018 2019
Maintenance Growth Transformation
Good underlying FCF conversion while investing for growth
27
Underlying FCF1 bridge (USDm)
172.3
103.2
(13.3)(10.4)
(25.4)
(20.0)
UnderlyingEBITDA
Changes in NarrowWorking Capital
Taxes Paid Maintenance Capex Growth Capex UnderlyingFree Cash Flow
2019
Underlying FCF conversion remains strong at 60%, while also reflecting our growth investment
• Working capital reflects movement before settlement related balances at 4% of revenue
• Tax payment reflects business growth in taxable jurisdictions and some payments related to the prior year
• Capital investment is aligned to our strategy & growth capex now deducted from uFCF in line with best practice
• Proposed dividend of USD3.1 cents per share, in line with policy
Notes: 1. This is an Alternative Performance Measures (APM). See pages 34-35
• Now deducted from uFCF in line with best practice
• Conversion before deducting growth capex would have been 71%.
(13.3)(10.4)
(25.4)
(19.9)
2019 Underlying EBITDA
Capital allocation priorities linked to strategic delivery and driving further growth
28
Maintenance & growth capital investment1 Growth accelerators
including selective M&A2 Payment of the ordinary dividend3
Strong balance sheet
• Currently 1.6x1 Net Debt:Underlying EBITDA
• Intention to refinance with headroom up to USD525m
− Amortised repayments from 2022, interest rate in line with current facility
• Provides further flexibility for growth accelerators
Notes: 1. This is an Alternative Performance Measures (APM). See pages 34-35
2020 financial guidance: underlying business momentum remains strong
29
Underlying EBITDA margin: Slight dilution is a reflection of investing to grow our position in newer markets, accelerate our separation of shared services from Emirates NBD, and revenue mix
Underlying depreciation and amortisation charge cUSD42-44m
Core capex, for both maintenance and growth at 11-12% of revenues
SDIs will impact 2020 EBITDA and net income by cUSD13m and further cUSD18m respectively, significantly lower than prior year
Capex to unlock Saudi market up to USD20m (total project up to USD25m) and enable ENBD separation up to USD20m (total project up to USD30m)
Transition from cash to digital payments and our strong competitive position underpins our revenue growth, and will be further accelerated by the Mastercard agreement
Coronavirus has reduced client transaction volumes in recent weeks: The full impact remains uncertain and we continue to monitor closely
Closing remarks
30
Simon Haslam, CEO
Presence across the payments chain and pan MEA approach anchor our competitive advantage
Focus on strategic execution to consolidate our market position and drive growth
Our markets continue to demonstrate a fast moving transition from cash to digital payments. Coronavirus is impacting global travel and spending patterns, we are monitoring closely
Compelling growth opportunity, with potential to accelerate through disciplined investment
31
Mastercard partnership supports our development of digital and mobile payments capability
Multiple growth accelerators through market consolidation, substantial outsourcing contracts where conversations are making good progress, or selective acquisitions
Appendix
32
Strong secular growth drivers compounded by attractive macro and demographic trends
Significant scale and leadership in our markets
Diversified and resilient business model, operating across the entire payments value chain
Well-invested and integrated omni-channel technology platform
1
Growth strategy with potential for further accelerators
Experienced, world-class management team in the sector
33
Investment case
Strong financial track record
2
3
4
5
6
7
Alternative performance measures
34
The Group uses these Alternative Performance Measures to enhance the comparability of information between reporting periods either by adjusting for uncontrollable or one-off items, to aid the user of the financial statements in understanding the activities taking place across the Group. In addition these alternative measures are used by the Group as key measures of assessing the Group’s underlying performance on day-to-day basis, developing budgets and measuring performance against those budgets and in determining management remuneration.
Constant Currency Revenue: is current period revenue recalculated by applying the average exchange rate of the prior period to enablecomparability with the prior period revenue. Foreign currency revenue is primarily denominated in Egyptian Pound (EGP). The other non US backedcurrencies that have a significant impact on the Group as a result of foreign operations in Nigeria and South Africa are the Nigerian Naira (NGN) andthe South African Rand (ZAR) respectively.
Contribution : Contribution is defined as business segment revenue less operating costs (personnel cost and selling, operating & other expenses)that can be directly attributed to or controlled by the segments. Contribution does not include allocation of shared costs that are managed at grouplevel and hence shown separately under central function costs.
Underlying EBITDA : is defined as earnings from continuing operations before interest, taxes, depreciation and amortisation, impairment losses onassets, gain on sale of investment securities, share of depreciation of an associate and specially disclosed items affecting EBITDA.
Underlying EBITDA Margin Excluding Share of Associate : is defined as Underlying EBITDA before Share of Associate divided by the total revenue.
Underlying Effective Tax Rate : is defined as the underlying taxes as a percentage of the Group’s underlying net income before tax
Underlying Net Income: represents the Group’s profit from continuing operations adjusted for impairment losses on assets, gain on disposal ofinvestment securities and specially disclosed items.
Underlying Earnings per share : is defined as the underlying net income divided by the number of ordinary shares (i.e. 500,000,000).
Specially disclosed items: are items of income or expenses that have been recognised in a given period which management believes, due to theirmateriality and being one-off / exceptional in nature, should be disclosed separately, to give a more comparable view of the period-to-periodunderlying financial performance
Underlying Free Cash Flow : is calculated as underlying EBITDA adjusted for changes in working capital before settlement related balances, taxespaid, maintenance capital expenditure and growth capital expenditure
Key performance indicators
35
To assist in comparing the Group's financial performance from period-to-period, the Group uses certain key performance indicators which are defined as follows.
Total Processed Volume (TPV) (USD million)
TPV is defined as the aggregate monetary volume of purchases processed by the Group within its Merchant Solutions business line.
Number of cards hosted (million)
Number of cards hosted is defined as the aggregate number of cards hosted and billed by the Group within its Issuer Solutions business line.
Number of transactions (million)
Number of transactions is defined as the aggregate number of transactions processed and billed by the Group within its Issuer Solutions business line.
