Steady progress for Nexi in Q1, indicates more acquisitions ahead

Nexi’s revenue and profits picked up in Q1 after a quiet final quarter of 2022. 

Total revenue increased by 9% to €742m excluding two businesses now “held for sale” – Nets NBS and Ratepay, the troubled German buy now, pay later (BNPL) unit which Nexi inherited with its purchase of Nets.

All geographies contributed to growth in Q1 including Southeast Europe, where Nexi has now completed the acquisition of the Intesa Sanpaolo merchant book in Croatia. This deal brings an additional 13,000 merchants and €5bn in annual payment volume, at a cost of €180m and an implied EBITDA multiple of 10.5.

Extending its reach into Iberia for the first time, Nexi announced that the €350m purchase of 80% of Sabadell’s merchant services business will close in Q4.  Sabadell boasts 20% of POS market share and has been growing volume swiftly as Spain rebounds from the pandemic. 

Paolo Bertoluzzo, CEO, said “”Everywhere … banks continuously revisit their payments strategies” and he predicts more acquisitions in the next 12 months. This may include Nexi’s home market of Italy where two banks have announced possible divestments of their merchant services arms. 

Banco BPM will select a partner for its card business by the end of June. Nexi is said to be in the running although the bank is looking to stay “in the driving seat” by selling only a minority stake. This is not Nexi’s normal operational model which may leave the door open for a competitor to enter the Italian market in alliance with Banco BPM. 

Italy’s second largest bank, Unicredit, is also reviewing its payment operations across 13 markets. The bank expects the process to be complete by the end of September and Nexi, as the incumbent partner, is likely in pole position. 

Speaking about the Italian government’s plans to regulate and cap merchant service charges for small businesses, Bertoluzzo said the the process was “taking longer than we expected” but he didn’t anticipate material impact on Nexi’s financial results.

Turning to Nexi’s Q1 financial results, Merchant Solutions once again outperformed the two smaller divisions, showing an 11% increase in revenue to €413m, representing 45% of total sales.

Merchant Solutions volume grew by 11% to reach €181bn, with higher-margin international scheme volume growing at 17%, rather faster than domestic card volume. Nexi’s Italian revenues are still boosted by the rebound in foreign card transactions (see chart below). These grew over 50% in Q1 with the good performance persisting into April.

A picture containing text, line, diagram, font

Description automatically generated

Outside Italy, volume grew by 13% to €79bn. Average transaction value (ATV) declined across the board, down 7% to €58 in Italy and falling 2% to €34 elsewhere. Across all markets, Nexi expanded its total point-of-sale (POS) base by 170,000 compared to the previous year.

Turning to Nexi’s two other business units. Issuing solutions revenue increased by 8% to €246m, benefiting from the post-Covid rebound in international travel and commercial cards. Digital banking solutions revenue remained flat at €82m. Strong volume growth was offset by the ongoing impact of consolidation among Nexi’s Italian clients.

Total group costs rose by 6% to €406m, primarily driven by a 9% increase in personnel expenses as Nexi invested in “high-growth areas” and was hit by wage inflation. In contrast, operating costs only rose by 3%, benefiting from efficiencies and synergies resulting from Nexi’s recent acquisitions.

EBITDA rose by 14% to €336m.

Leave a Reply