myPOS World, supplier of mPOS devices and payment processing to over 200,000 small businesses across Europe, is a rare beast in the fintech jungle – growing, profitable and with a strong balance sheet. This makes a stark contrast with its main competitors – SumUp and Dojo – both of which have reached breakeven with a mountain of debt.
A fast growing company with a strong balance sheet is of great interest to private equity. It’s no surprise that Christo Geogiev, the Bulgarian entrepreneur who founded myPOS in 2014 sold the business to Advent earlier this year for a very generous €500m. The price is equivalent to 6x 2023 revenues or 65x EBITDA.
Advent was an early investor in Worldpay and still has a number of European paytech interests including Planet. Advent has placed myPOS at the heart of a new vehicle called Circle which is chaired by Fabio Calli, a former consultant at Bain & Co. Georgiev will no longer be involved with myPOS.
Advent has wasted no time in tidying up myPOS World’s rather complex web of European entities including buying out minority interests in its Bulgarian and Italian subsidiaries and closing an abortive attempt to enter the US market. The group has bought Cyris, a Bulgarian sister company to myPOS, which provides whitelabel issuer/acquirer processing, for €34m.
myPOS revenue was up 39% in 2023 to €84m and has doubled over the past two years. The business has widened its range of terminals to include SoftPOS and unattended but, in common with most mPOS vendors, the vast majority of turnover comes from commission charged on transactions processed. Sales of hardware and value-added services make up just 10% of revenue.
Although myPOS is based in London, over 80% of sales come from EU markets. UK sales have only begun to grow recently but almost tripled in 2023 to €15m.
Management has kept a keen eye on merchant pricing. Cost of goods sold (mainly fees paid to merchant acquirers) were up 75% so gross profit rose just 22% to €49.9m. Unlike some of its competitors which offer essentially the same price list in every country, myPOS is willing to adapt its commercial offer to each market. For example, processing fees for EU cards are 1.1% + 7p per transaction in the UK but 1.59% + 5c in Ireland and 1.69% in France with no transaction fee.
myPOS also differentiates by its willingness to open stores to showcase its products. These have opened in 21 cities including London, Brussels, Palmero and Sofia as you can see in this video.
Advent has appointed a new CTO, Abdenour Bezzouh, to modernise the core technology. In this interview, he explains his objectives of transforming myPOS from a “monolithic structure” to a more modular architecture. This should allow the proposition to evolve from simple payment acceptance to offering all the financial tools SME’s need to grow and prosper. One example is a new partnership with Liberis to offer merchant cash advance in 10 countries.
Administrative expenses rose 44% at €43m in 2023. The largest item was staff costs which rose 42% to €24m as employee numbers grew to 589 at year end. Headcount is expected to continue to expand under the new ownership, especially in technology. Most staff are in Bulgaria which kept the cost per employee at a modest €48K although this was 17% higher than 2022.
Investment in price and product saw operating margins fall from 12% in 2022 to 3% in 2023. Operating profit was down 69% at €2.3m. The main capital item in 2023 was “substantial investment in data centres” to support a new EMI license in Dublin which allows myPOS to directly settle EU merchants.
The EMI is already paying back as the merchant settlement float yielded almost €3m in net finance income. myPOS had almost €300m+ of client funds at year end. Pre-tax profit was down 19% at (still very creditable) €5.24m.
Advent has bought itself a very solid business and there is a clear opportunity to leverage myPOS’s strong payment acceptance proposition into a wider portfolio of small business financial products. But the new management will need to move quickly to fend off competition from other mPOS suppliers such as SumUp and Dojo as well as as the ePOS software vendors, many of which have begun bundling payment acceptance and other financial services with their core products.