Takepayments was established following the acquisition of Stockport-based Payzone by a management team led by Clive Khan, with funding from Grovepoint Capital, a very low profile private equity firm founded by Sir Bradley Fried, the European chair of Goldman Sachs. Kahn has a track record in building successful ISOs, having previously sold Card Save to Worldpay in 2010.
Sales at takepayments rose by 29% to £52.7m for the year ending in August 2022. The lion’s share of the revenue comes from card acceptance, including terminal rentals and commission fees from merchant acquirers, with Barclaycard being the most prominent. Management attribute higher sales to increased numbers of merchants, now standing at 64,000, and higher average transaction values. Each merchant generates an average of £823 revenue. Income from ancillary services, such as merchant cash advance and PCI fees, made a very positive contribution, growing 59% to £4.9m.
Administrative expenses were up £10m to £49.9m, as takepayments recruited a substantial number of staff. Headcount increased from 371 to 478, with hiring in both sales and administrative teams. The average cost per employee increased by 6% to £47,433.
Operating profit grew strongly, by 32% to £5.1m, with operating margins rising from 9.4% to 9.7%. Underlying EBITDA, the company’s preferred measure of profitability, increased by 20% to £13.2m. The difference between operating profit and underlying EBITDA can be attributed mainly to the £7.75m of depreciation and amortisation, mainly linked to takepayments’ extensive estate of payment terminals. The company spent £11m on new payment terminals during the year.
SaltPay’s 2021 accounts reveal spectacular growth matched by equally spectacular losses as its ambitious management spent heavily on acquisitions. The mastermind is Eduardo Pontes, a Brazilian entrepreneur with a track record in building payments businesses. He has raised $1.1b capital for SaltPay from Tiger Global and others to build a European SME-focused payment service provider.
Where Stripe, Adyen and Square have built a modern payment stack from scratch, London-based SaltPay is doing the same through buying the individual pieces as separate business acquisitions. We’ve listed 24 transactions at the bottom of this post and it’s a remarkable roll-call. This is a bold plan and one fraught with execution risk. But management says that if it succeeds, “the unit economics will provide strong financial returns.”
The frantic pace of deal-making saw annual revenues growing from €74m in 2021 from €20m the previous year with merchant numbers rising to c.100,000.
Payment acceptance generated €26m revenues in 2021. This division includes Salt Pay Iceland (formerly Borgun) which provides acquiring/processing as well as ISO’s in UK, Hungary, Slovakia, Portugal and Czech Republic. The report shows RMS Group, a large UK ISO bought by SaltPay for $267m at the end of the financial year, lost €3.3m in 2021.
SaltPay was hit by the continued impact of Covid on acquiring revenues from the travel sector. It decided to “end the relationships with larger enterprise merchants… which represented complexity in the service model.”
SaltPay wants to offer a full acceptance service with no third-party involvement and has even written its own software for the payment terminals. Acquiring payment volume was €14.1b giving a rather low take rate of 0.2% which suggests that little ISO volume had yet been moved across to SaltPay’s processing. This is likely to be a key focus in future plans.
Software revenue was €18m. SaltPay has several ePOS vendors – Storyous (Czech), SalesCloud (Iceland) and Loyverse (Cyprus) as well as a Weasy, a webshop vendor (Portugal). It has also purchased businesses that bring capability in booking software, bill payments and tax-free shopping. €2m of hardware sales were related to the ePOS businesses.
Issuer services revenue was also €18m. The largest components were Paymentology and Tutuka which have now merged and trade under the Paymentology brand. Management intends to use this capability to issue cards to its small business customers as an alternative to business bank accounts.
Lending revenue was €5m. This includes merchant cash advance and a consumer BNPL product.
Turnover came from a variety of businesses across Europe, Turkey and South Africa that span the whole payment value chain from processing to software.
Cost of sales was €32m resulting in gross profit of €42m.
Saltpay has taken on significant expenses related to the integrating its many platforms into a simple merchant proposition that delivers a consistent customer experience. This is proving harder than anticipated with management stating, “we realised more complexity than originally forecast in our plan.”
Staff numbers grew to c.1,500 by the end of 2021 and total employee costs were €66m. The company reported difficulties in recruiting technology specialists and software developers.
Total expenses were €120m resulting in an operating loss of €78m which is slightly larger than total revenues. After impairment of €7m goodwill from the acquisition of Yoyo Wallet and losses from sales of assets, the final pre-tax loss was €97m.
During 2021, seven acquisitions added a total of €614m of goodwill onto the balance sheet. Even so, SaltPay still managed to exit the year with €524m of cash. Some of this would have been spent on a further 20 corporate transactions noted between the end of 2021 and March 2023.
The business is very much a work in progress. For SaltPay to succeed, it will need to join together its wide array of capabilities into a consistent and coherent merchant proposition. And it will need to master the art of cross-selling products from one service line and one country to the next. These are not trivial tasks. Fortunately, SaltPay is very well resourced for the challenge ahead.
List of businesses acquired or invested in by SaltPay since 2019
Acquirer/processor
Borgun, the Icelandic acquirer (renamed Saltpay IS) was purchased in 2020 from two local banks – Islandsbanki and Eignarhaldsfelagia. for an undisclosed sum. According to its 2021 report and accounts, pe-tax losses in were c.€10m but management now expects break-even in 2024 as the outlook for travel to Iceland improves. SaltPay has injected additional capital. Borgun serves clients in Iceland, UK, Hungary, Czech, Croatia and Slovakia.
ISOs & PSPs
B-Payment – a successful Hungarian ISO which has been working with Borgun as its acquirer for many years. B-payment services 10,000 clients generating c.6m transactions per month and has 50 staff. The business is now called Salt Hungary.
Merchant Payment Acquiring Services– a leading ISO in Slovakia, with 3,500 SME customers with 58K POS terminals. MPAS operated in both Slovakia and Czech Republic and was an early adopter of PAX Android in Europe. In 2021, the business lost €0.4m on €9.4m revenues.
Pagaqui Pagamentos – Portuguese ISO with 3,400 merchant customers. Its main service is a network of bill payment locations in convenience stores. In 2021, lost €3.8m on revenues of €2.5m.
Retail Merchant Services – one of the larger UK ISO, RMS uses Elavon and Global Payments as acquirers. RMS was acquired from its founder by TCV, a US investment fund, in 2017 and sold to SaltPay in 2022 for $267m. In 2021, RMS Group lost €3.3m on revenues of €41.2m.
Mea Wallet – Oslo HQ’d tokenisation specialist which provides services to banks, issuers and merchants including Islandsbanki, former owner of Borgun. SaltPay invested €19m in July 2022 according to a local blog and reportedly took full control at the end of 2022.
Paymentology – London based, cloud issuer processing platform with clients including Natwest, Islandsbanki and Quicko. Paymentology competes with GPS and FIS. SaltPay has merged Paymentology with Tutuka, an issuer processor headquartered in Mauritius. In 2021, the two companies lost €5.7m on revenues of €10.7m.
Switch Payments – gateway and orchestration platform based in Portugal. It claims 300 merchant customers including TAP Air Portugal. In 2021, Switch lost €1.2m on revenues of €2m.
Flexpay – South African issuer of pre-pay Mastercards to help companies pay wages to staff without bank accounts.
Small business software
Storyous – a Czech ePOS business focused on restaurants/cafes. It claims over 5,500 customers and offers integrated payment processing from SaltPay, ČSOB or Global Payments. In 2021, the business lost €1.3m on €3.1m revenue.
Salescloud, – Icleandic ePOS with customers in Iceland, UK, Denmark, Sweden and Portugal. Saltpay led a $4m funding round to take a 12% stake. Salescloud processes via the Valitor gateway.
Weasy – based in Portugal, Weasy offers webshops to small businesses with 85,000 accounts created. Weasy offers a great many payment options including Multibanco, Stripe and Braintree.
Fanbase Technology – Edinburgh HQ’d software for lower league football and rugby clubs. SaltPay has a 20% stake but also formed a JV company with Bobby Skinstad, the ex-Springbok South African investor who is listed as an advisor to Fanbase.
Odeal Odeme Kulus – Saltpay paid $3.5m for a 10% stake in this leading Turkish POS terminal and ePOS provider. Odeal has 75,000 merchants and offers access to five banks processing through its integrated POS terminals. SaltPay subsequently raised its share to 25%.
Loyverse – Cypriot ePOS vendor operating in Europe, North and South American as well as Australia. Its website claims 1m merchants have registered although Salt Pay’s report gives a more modest customer number of 134,000. In 2021, Loyverse lost €0.3m on revenues of €2.3m.
Value added services
Stamp – Amsterdam based Tax Free Shopping start-up competing with the established players – Planet and Global Blue. Salt Pay has a minority stake.
Noona – booking software for appointment scheduling, Noona claims 600 customers and sells in Portugal, Czech and UK as well as its home market of Icleand. SaltPay invested $1.2m for a minority stake. Borgun is its processor.
Yoyo Wallet – a very high profile UK startup that span out of Imperial College, Yoyo provides loyalty solutions to quick service restaurants such Dunkin Donuts and KFC in the UK and South Africa. Yoyo claims 5m active monthly users spending at 18,000 stores. SaltPay controls 94% of the company. In 2021, Yoyo lost €6m on revenues of €10m. SaltPay’s parent company has taken a €66m impairment charge on this investment.
DineOut – a booking engine for Icleandic restaurants, SaltPay has invested in the business which claims to have processed 1.8m table bookings in Iceland and also offers automatic payments.
So Connect – based in Amsterdam, So Connect claims to have empowered more than 50,000 local businesses by improving their online visibility by boosting listings and reviews. The service is live in UK and Spain.
Flow Money Automation – 10% investment in this Dutch openbanking money management tool which raised €3.5m total in April 2022.
PayPoint, a provider of bill-paying locations and one of the UK’s leading independent sales organisations (ISOs), has released a trading update for the three months ending December 31, showing total revenue rising by 10% to £32.5m, roughly in line with inflation. The update revealed a strong Christmas for instore parcel pickups, offset by continuing weak performance in merchant services.
Card payment net revenue rose just 1% to £7.8m, with the total volume processed falling 2% to £1.7bn. The company’s recently acquired ISO, Handepay, had a particularly weak quarter as its legacy Worldpay merchants quit in droves. Handepay lost over 20% of its Worldpay merchants between April and December 2022. PayPoint has signed a four-year contract extension with Worldpay with improved commercial terms, in hopes of protecting this part of its business.
The update also revealed recruitment challenges are still holding back sales efforts, and the company’s original ISO business with Lloyds Cardnet, which has finally introduced next day settlement, had a marginally better performance than Handepay. Payment volume and merchant locations were steady at £0.6bn and 17,500 respectively.
PayPoint’s ISO troubles contrast with Paymentsense which reported 89% growth in payment volume in its most recent results but management points to investment in both the Handepay and PayPoint propositions including a new Android terminal. Nick Wiles, CEO, said “ Sales momentum has continue to build in the quarter across both Handepay and PayPoint, supported by our most competitive and attractive proposition ever and allied with a more detailed focus on customer service and retention, leveraging our AI and data analytics capabilities.”
In other divisions, the highlight was eCommerce. This is a service in which shoppers can pick up parcels from Paypoint merchants that they’ve ordered online. Transaction volume was up 84% to 16.9m in a bumper Christmas season. Although growing swiftly, PayPoint’s revenue equates to just 14p per transaction so it’s hard to see this business line growing into a major revenue earner.
Payments and banking revenue was up 11% at £14.7m driven by the increasing trend to digital transactions and a particular boost from the Government’s Energy Bills Support Scheme vouchers. Householders could redeem these at PayPoint’s network partners.
Elsewhere, PayPoint reports its first customer for its OBConnect Open Banking solution which, it claims, is the first confirmation of payee service offered by an organization other than a bank.
Looking forward, the major news for PayPoint is the acquisition of Appreciate Group for £83m, announced in November 2022, which brings prepayment savings products and a strong voucher and employee rewards business. This purchase is expected to be immediately earnings enhancing.
Paymentsense, a leading payments provider based in London, has reported spectacular growth in the year ending March 2022, with total payment volume rising 89% to £21.6bn.
The company, founded by two low-profile entrepreneurs – Juan Farrarons and George Karibian – has long been one of the UK’s largest and most innovative independent sales organisations (ISOs). The duo also founded Judopay, a mobile payment gateway, and Capital on Tap which issues credit cards to SMEs.
Despite its impressive topline growth in 2022, the company reported significant losses. Typhoon Noteco, the ultimate UK holding company, recorded a pre-tax deficit of £141m on turnover of £179m in filings at Companies House.
Paymentsense’s recent turbocharged growth has been driven by its Dojo product, a rebranded PAX A920, which has taken the UK small business market by storm. The Dojo terminals can be seen everywhere, thanks to its simple and transparent pricing, next day settlement and short contracts.
Reflecting the good sales performance, merchant locations rose 39% to 120,000, with payment volume per location growing 36% to £180,000. This indicates that Dojo is increasingly penetrating larger merchants. Management has stated that the impact of Covid in accelerating cash to card switching has boosted average merchant volume by 20-30%.
All new customers will be boarded onto Dojo and the product has been further enhanced with the addition of a virtual queue and booking management system for restaurants, stemming from the acquisition of Walkup for £20m. Six hundred customers have signed up so far at a list price of £99 per month.
Management explains that the development of Dojo was only possible once the company built its own processing platform and stopped being reliant on First Data for product. As Nick Fryer, CTO explained in an interview with Fintech Magazine, “It was frustrating that we couldn’t change the product, which was very similar to everyone else’s, and our key sales tools; our salesforce [were] awesome, but we knew we could do even better by our customers. So we looked at ways of taking control of the product, trying to make it better and more customer-focused.”
Total cost of sales grew 118% to £87mm, resulting in gross profit rising just 36% to £93m. Additionally, the company has been hiring aggressively, with staff numbers growing 74% to 816 and total employee costs doubling from £20m to £40m in FY 2022.
The company points to a positive underlying operating performance and an adjusted EBITDA of £33m although this is before charging £115m in depreciation and amortisation and a further £51m in net interest expense. Total pre-tax losses were £141m and total net debt stood at £411m at the end of March 2022. The debt funding includes a £320m bond and £110m of loan notes which may need renegotiation before the next repayments are due in October 2025. If Dojo continues to grow this fast, that shouldn’t be a problem.
DNA Payments reported revenues up 12% in 2021 according to documents filed at Companies House. The company is a very well funded London-based payments roll-up which has, so far, swallowed eight businesses.
DNA was founded by two Kazakh bankers, Nurlan Zhagiparov and Arif Babayev. 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.” DNA claims 100.000 acceptance points (terminals or checkout pages), 65.000 customers and £11 bn transaction value processed annually. DNA expects to be the “4th largest payment provider in the UK by close of 2022” although it’s not clear which metric would be used to judge.
DNA’s technology is based on the acquisition of Optomany, an omni-channel payment gateway with a strong relationship with PAX, 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 has been busy acquiring many more businesses, mainly small UK ISOs.
Logically, the business plan must be to boost these ISO’s profitability by centralising operating expenses, migrating customers to the Optomany product and boosting new business through modern sales and marketing. This could be a rewarding strategy but, with £100m investment in the bank, the founders will very likely have bigger ideas.
There are now eight businesses under the DNA umbrella. In 2021 the company bought Active Merchant Services, a Barclaycard ISO for £3.1m and EFT Solutions, for £2.6m. After year-end, DNA acquired First Payment Merchant Services, a Barclaycard ISO, and Card Cutters, which works with AIBMS and EVO. The group also includes Zash, a small Swedish ePOS vendor whose software it hopes to cross-sell to its small merchant customers.
These eight businesses are all still trading but the Group has also created a DNA Payments brand to sell more complex solutions direct to larger merchants. It is having some success. Here’s a good case study from an EV charging business which needed a joined up solution of in-app and contactless payments.
Total revenue for DNA Group in 2021 was up 12% at £11.7m. The take rate of just c.10bps reflects that, despite strong omni-channel capabilities, DNA is still heavily dependent on the sale and leasing of payment terminals. These accounted for 74% of turnover.
Gross profit was up 15% at £6.6m with margins up very slightly to 56.3%.
Administrative expenses grew 90% to £14.9m as staff numbers expanded from 84 to 143.
EBITDA losses rose from £0.6m to £6.9m and total loss before tax was £8.9m. Accumulated losses now stand at £12.8m.
