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The coronavirus pandemic has caused a surge in demand for contactless payments, and has undoubtedly accelerated the shift from the traditional cash transactions to digital and electronic methods. Inevitably, these fast-emerging digital payment methods, together with the companies providing such service, have become the main intermediaries between consumers and retailers of all sorts.
More specifically, the online offering proposition has now become the norm for many companies, rather than a necessity. To this extent, this pandemic has deepened the reliance on services offered by payment processing companies, with many experiencing unbudgeted revenue streams over the past couple of months.
It is thus worth noting that RS2 Software plc (RS2), being a local payments processing company, is well positioned to assist struggling businesses make the necessary business model adjustments to mitigate the implications brought about virus, and even thrive in a post pandemic world. To this extent, management recently confirmed that this crisis has resulted into additional business for RS2 which was not previously expected.
Moreover, the Group is also at present reaping the benefits of the investments implemented in prior years, as witnessed through the Kalicom acquisition, the partnership with MoviiRed and the conclusion of a major processing outsourcing agreement with a large US bank.
Upon detailed discussions with the Group’s executive management, other major announcements, which amongst others include an update on the Group’s banking licence application, are expected to be unveiled within the coming months. This is crucial for the new revenue structure to take place, as without the licence, the acquiring business does not take off.
Additionally, through the acquisition of new premium clients, RS2 has significantly increased transaction volumes processed on its platform over the past two years. Ultimately, transaction volumes are expected to elevate even further as contracted clients continue ramping up their volumes and consolidate their entire cross-regional business on the platform and expand their regional presence using RS2‘s service offerings.
Following detailed discussions with the Group’s executive management, we anticipate that the Group can continue building on its growth trajectory, leveraging further on its unique business model and ultimately reach its targets. Imperatively, the Group’s end-to-end payment platform combining acquiring and issuing capabilities in one platform is a potential key differentiator going forward which could possibly lead to incremental revenues.
Based on this, combined with the continued development of RS2’s products offering, we believe that RS2 is well positioned to achieve its targets by continuing to attract leading financial organisations, processors and merchants. Moreover, in addition to the high level of execution risk circulating within such a dynamic and technology oriented industry, investors should adopt a long term investment horizon strategy, until the Group’s potential materialises and comes to fruition.
Preference Shares IPO
Further to a company announcement issued last week, the Group was granted regulatory approval in respect of an offer of up to 28,571,400 preference shares having a nominal value of €0.06, at an offer price of €1.75 per preference share. If subscribed in full, the net proceeds arising from the offer shall amount to circa €48,959,950.
More specifically, the preference shares shall carry the right to participate in the RS2’s profits in the form of dividends at a premium of not less than 10 per cent over the dividend distributed and payable to the ordinary shareholders.
Additionally, preference shareholders shall also have the right to attend at the general meetings of the Issuer, but save for specific circumstances as documented in the company’s memorandum and articles of association, will not have the right to vote at any general meeting of the Issuer. It is worthy to note that ordinary shares carry two voting rights, while preference shares carry one voting right, when applicable.
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