DNA Payments, a group of UK-based payment businesses backed by Alchemy Partners, reported decent sales growth in 2023 but is still making significant losses.
DNA was founded by two Kazakh bankers, Nurlan Zhagiparov and Arif Babayev in 2018. It received £100m investment from Alchemy Partners in 2021 to build “one of the largest independent, vertically integrated omnichannel payments companies in the UK and EU.”
While the most successful payment players have done this by building a platform from scratch, DNA (like Teya) chose to buy and integrate a series of businesses. To their credit, DNA has finally built a competitive SME proposition for the UK market but management has clearly found this taking longer than anticipated. An early objective to be the “4th largest payment provider in the UK by close of 2022” has long been missed.
DNA’s technology is based on the acquisition of Optomany, a technically strong omni-channel payment gateway, which was purchased for a bargain price of £2.5m in 2019. 123 Send, a leader in short-term rental of payment terminals also came as part of the deal. Since then, DNA acquired many more businesses, mainly small UK ISOs. These have finally been integrated into a DNA-branded core sales and marketing engine although 123 and Optomany also trade independently.
Group turnover rose 15% in 2023 to £26m, powered by strong growth from the fast-growing in-house acquiring business which more than tripled revenue to £17m. This good performance outweighed falls in revenue from sale/leasing of payment terminals (-24%) and processing fees (-23%).
DNA includes interchange and scheme fees in its gross revenue number. Despite the higher revenues, gross profit was down 23% at £8.9m reflecting the lower gross margin of acquiring. Overall gross margin fell to 33% from 51% in 2022.
DNA’s website claims 100.000 terminals and checkout pages supported at 65,000 customers and £11bn transaction volumes. In-house acquiring will only account for a fraction of total volume so there is plenty of room for growth. The acquiring portfolio has been extended to include Union Pay and acceptance widened to Paypal and Klarna. DNA’s terminals can now generate Alipay+ QR codes. There is a new merchant portal too. The product team has been busy.
DNA has strengthened its management team with the appointment of a JP Lips, Adyen’s former head of Unified Commerce, as its new CEO. Lips has a background in loyalty which might indicate which elements DNA will add next to its SME product bundle.
The ISV market is very competitive but DNA has a credible offer by leveraging the technical skills of the Optomany team. Recent wins include K3 Mstore (visitor attractions), HDS (football grounds) and Sunday (pay at table). DNA is also now available as an option in the Oracle Cloud Marketplace where Planet and Adyen are the main alternatives.
Good cost control saw administrative expenses held steady at £30.2m. Employee numbers fell from 306 to 287 although average cost per head was up 5% at £54K.
EBITDA losses (the company’s preferred measure of profitability) narrowed to £17m from £27m in 2022. Tight management of terminal stocks saw a £1.2m improvement in working capital.
Operating losses held steady at £31m which saw accumulated losses rise to £55m.
The parent company injected a further £27m equity during 2023 and another £23m during 2024. There cannot be much left of the original £100m fundraise. Alchemy Partners, which normally invests in “distressed and undervalued or underperforming businesses” and has no track record in Fintech, remains publicly committed and has provided a letter of support.
