Good afternoon and welcome to the Fonix plc ivestor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll. I would now like to hand you over to Rob Weisz, CEO. Good afternoon, sir.
Thank you very much, and hello, everybody. Really appreciate your time this afternoon as we talk you through our year-end presentation, which we announced on Tuesday for FY 2026. My name is Rob Weisz. I am the CEO of the business. I am going to take you through the business, hand over to Michael, our CFO and COO, to talk us through numbers, and we will come back to strategy and where we are going. So delighted to say, as an organization, we traded ahead of market expectations this year. We have grown in a number of our areas of business line in our core product set.
We are very focused, as we always have been, on delivering revenue growth, consumer client contracts and services which provide long-term sustainable profitability. When we win a piece of business, we tend to retain that business, work to grow that business, and work with those customers for a number of years. Hence why I think our top 10 customers, the average contract length of those clients is circa over 9 years. So it gives you a good view as to the sort of long-term relationship we have with those clients.
In the period, we are going to talk a lot today about where we are going as a business internationally. We were delighted to announce that we went live in Portugal. We also went live in Switzerland, and we are building up momentum to grow into other markets, with France being named and another market in the pipeline. We will talk a bit more about that in a moment. Alongside that, in terms of where we are going as a business, as a company that traditionally works in SMS, we are looking at how consumers engage with us, the points of entry when they want to engage over a communication path when we have clients with big audiences, and then how we would take them on that journey of interactivity and how we would charge them.
We have expanded our product set in the year, and we look to evolve that product set into coming years, on how we do that, which we will come on to more detail. We increased our ordinary dividends, we have done in each year of the last six years. We were pleased to do a GBP 2.5 million buyback in the year due to some cash we had as part of our ongoing cash accretive style business, and we were able to do that. Just to recap, for those of you here that are less au fait with what we do as an organization, our business heritage has come from plugging into all the mobile operators in a particular territory. For example, in the U.K., whether it is EE, Three, Vodafone, Sky, O2, and we technically integrate to those mobile operators, and we take a couple of products from them.
We take the ability to send and receive SMS messages so that we can, on behalf of third parties, engage with a mobile number, send and receive a communication to that mobile number, and also have the capability of putting a charge on that mobile phone bill. We take that capability, that raw piping capability, and we build a whole suite of technologies, such as competition mechanics, studio, text to studio, texting donations, all sorts of alerts and reminders, surveys, information services, voting, and we take them to a particular set of verticals.
Our verticals that we have always focused on has been TV, radio, charities and entertainment businesses. We have built a relationship over the last 12 years, or a reputation over the last 12 years, of being a market leader in providing these types of services to household names, and particularly in the U.K. For those of you who are in the U.K., you will know everyone from ITV, Global Radio, Channel 5, Bauer Media Group, Comic Relief, BBC Children in Need.
Any text interaction you see that they are running, Fonix is running the back end of. We provide the, as I said, the capability to interact and charge consumers depending on what they do. All in a highly scalable, highly auditable, highly robust platform that allows our clients to report in real time, to do things like winner pick, to be able to take donation amounts and feed it through to production. So you can imagine Comic Relief on Red Nose Day, Davina McCall wanting to say on air how much they have donated any moment in time. It is our platform behind the scenes running that, providing the accounts. I am going to hand you over to Michael now, who is going to talk about the numbers, and we will come back to the business and a bit more of the strategy.
Hello, everyone. I am Michael Foulkes. I am the CFO and COO of Fonix. I am going to start by taking you through some of the operational highlights. I will talk through some of the financial KPIs, and then I will talk a little bit about the broader financial statements before a bit later talking about some of our product development as well. Firstly, looking at the operational highlights. There are two main parallel growth strategies we are pursuing as a business today and in this financial year. The first one is around product innovation. That is all about H ow do we increase the volume and the value of transactions with our existing customers, because we get paid on a revenue share on every transaction through innovation.
There are three new core products that we have been working over the last couple of years that have helped enable that in the period, and I will talk a little bit about those in more detail as we get further through the presentation. The second thing we have been pursuing in parallel is our international expansion strategy. We are pleased to say, as at today, we are either live or in the process of getting live across six markets across Europe. Alongside the U.K., Ireland, and Portugal is all being now established markets for us. We have also launched two customers in Switzerland in the pilot phase.
We have set up a company and hired two people in France, or one in France and one French national has come to the U.K. to support our French operations. We are also progressing a sixth market that we have connected into. We have not yet announced it, but we expect to hopefully by the end of the year and be live there. There is lots more opportunity within the business. To enable both of those strategies, we have, one, had to increase the size of our team. On average, we had 58 people in the business over the last financial year. That was up from 52 in the previous year. In absolute terms, not a huge number of new heads, but in percentage terms, that is quite a big increase for us.
We are up to about 60 people today, and we feel we have a lot of capacity now within our business, despite still having very high operational leverage to grow and deliver on the growth strategies that we are pursuing. We have increased our headcount, but we are expecting it to stabilize a bit more now, having grown a lot in the year. Alongside that, we added eight new connections or integrations during the period, and that is largely to enable new markets, so new connections and new geographies to mobile networks, and also enable new products.
We have connected to a number of PSPs over the last couple of years, so that is the likes of Stripe or Adyen or Checkout.com. Those are online payment providers that we have connected to facilitate payments on behalf of our customers, and that is an increasing strand of growth for our business. Throughout the period, we've had 100% platform uptime, is probably the most understated value proposition we have as a business. If you spoke to any of our customers, it's probably one of the main reasons they chose to work with us is that we have and continue to have a very good reputation for being very reliable and never having any issues.
That's been really critical. We've had that throughout the period again. As always, 99% of the opportunities we pursue as a business are of a repeating nature. They're not subscriptions, but we look to do things that are repeating with our customers. That might be on an annual basis with charity telethons. Some of our customers, they repeat services on a monthly basis. Some now increasingly repeat them on a weekly basis. The same services running week after week after week with consumers transacting on those services.
If I move on to the KPIs of the business, the number one growth metric for us as a business is gross profit. For anyone who's not familiar with our company, I can explain a little bit later why, but revenue is not a meaningful metric to us. It never has been. Gross profit is the number one indicator of growth for us. That's grown really strongly in the period at nearly 13% growth. That has largely come around from one strong growth in our U.K. media customers. Alongside that, we've added Portugal as a new market. It's become established in the year, having not had any income in the previous year. That's the main driver of profit growth.
The second most important metric to us as a business is adjusted EBITDA, so it's what we consider the bottom line of our P&L. That's largely grown in line with gross profit, apart from we've made some additional investment in people to support new growth initiatives. Particularly in France, we've hired two people, not yet generating any revenue there, but we expect that to pay back in future periods. There's been a little bit more cost than there has been gross profit growth, but that's all about investment in future opportunities.
Adjusted profit before tax hasn't quite grown as strongly as EBITDA growth. That's partly because of the compound investment we've been making in our product over the last few years. We amortize all our software development on a three-year basis. There's been gradual increases in our amortization expense that have impacted that. Alongside that, we hold quite a lot of cash, and we make interest income on that cash. That has gradually tapered off due to falling base interest rates.
We still make significant amounts of interest income, but it's come down a little bit, and that's why the profit before tax hasn't quite grown as strongly as the EBITDA growth. The other metric on here is TPV. That means total payment volume. To a degree, it's a leading indicator of growth on the payment side of our business. That's the total volume of consumer transactions we are processing as a business. That's grown to 8% in the year. It's largely in line with the gross profits growth in our mobile payments business.
Apart from we actually lost a couple of low-margin gaming or gambling customers in the period who left the U.K. market because of changes in the U.K. tax legislation back in October. It actually came into force in April. They have left the market. It had a disproportionate impact on our transaction volume in comparison to our gross profit. That is not a growth core market for us anymore. If I look at the long-term performance of the business, this is a graph of our EBITDA and gross profit over the last eight years. We IPO'd the business back in October 2020.
As you can see from this chart, both pre-IPO and post-IPO, we have had a very pretty consistent growth trajectory. Over the last eight years, gross profit has grown at about an average rate of 19% per year, and EBITDA has grown at an average of 23% per year on a compound basis. This year, we returned to double-digit growth in both of those metrics, having had slightly steadier growth in the previous financial year. That growth rate in the previous financial year was indicated to the market that it was expected, and it was just us transitioning to a new growth strategy, which is what we are now delivering on. It is an international focus growth strategy alongside some new products that we are launching.
I have talked down to. Oh, sorry, this is looking at the segmental analysis of our business. I have already described how revenue is not a meaningful metric to us. To add a bit more color why that is the case, gross profit to us represents our share of every transaction that we process. For a payment, it is our commission on a consumer payment. For an outbound marketing communication, it is the fee that we charge to our customers to send that message to a consumer. So it is the most important part. It is where we make our money.
Revenue, on the other hand, for certain business lines where we are working with a mobile network, because it is not all our business lines, we are seen as an agent of the mobile network, selling effectively telecoms payments or telephone messaging on behalf of the operator. As a result, for accounting reasons, we have to include the operator's profit that we think they have made on those services within our revenue number. So it is our profit plus the operator's profit. It is a little bit of a meaningless number.
It can jump around for all sorts of reasons. It jumps around depending on geography, type of service, change in different products mix. For example, we lost several gambling customers in the period that were low margin to us, but the operators were making quite high margin from those services. So it has an impact for lots of different reasons. The number one thing to focus on here is gross profit growth. Mobile payments has grown really strongly, 11% growth, for the reasons that I described earlier. That is strong growth in our U.K. media customers alongside the introduction of Portugal.
Both of those factors have also paid into the strong growth in our messaging business line, with the addition that we also run some enterprise messaging services for overseas CPaaS businesses that connect looking for connectivity in the U.K. That has also grown strongly in the period as well, contributing to that strong growth in mobile messaging. The final business line, in absolute terms, it is not as significant, and there has been a very small decline in absolute terms, if you look at the GBP number. Managed services has come down slightly.
That just relates to some additional fees that we incurred from a mobile network in the period, or a couple of mobile networks in the period. It does not relate to any loss of clients or business in the background. I have talked down to gross profit growth, so I will just go a little bit further down the P&L. The next line on the P&L is adjusted operating expenses. Those have grown at 20% in the year t hat is all really to do with the increase in headcount that I described earlier. We have added two people in France. We have increased the number of developers in our business. We only capitalize 66% of our development expenditure, so that also has an impact on our P&L when we are making new hires there.
We have now got to such a scale that we felt it necessary to bring in our first senior legal counsel internal within our business, because we are working with so many different partners, operators and customers in new territories, it was important that we had someone dealing with that full-time. There has been some additional overhead that we have absorbed, largely focused around growth opportunities. As I described, two heads in France that are not yet making a return for us, but we expect them to in the future. Arguably, there is probably GBP 200,000 worth of exceptional expenditure we could have added back that we chose not to.
That explains why, adjustively with us, growth is slightly below gross profit. A little bit further down the P&L, amortization has increased because of the compound investment in our product. This is effectively capitalized staff costs that are now being amortized on a three year basis. A little bit further down the P&L, again, where it says financial expense and income, that is actually net income to us. Interest income, that has fallen slightly because of falling interest rates or base rates in the background. If I then move on to the cash flow, the other dynamic to be very aware alongside revenue not being meaningful is that the actual cash balance within our balance sheet is not particularly meaningful to us.
We earn interest income on it, so it is important from that perspective, but it includes all the working capital and cash we hold on behalf of our customers. For that reason, we also, in our financial results, present an underlying cash flow. That is our cash that we hold as a business. It strips out all the working capital on behalf of customers. That is the important thing to look at. It has been relatively stable in the period. It has come down slightly because we made some additional one-off distributions to shareholders. We chose to do a GBP 2.4 million share buyback a few months ago.
In the previous year, there was a GBP 3 million special dividend o ver the last few years, as we have had excess cash, we have either done a special dividend and a buyback. It just happened this year, we chose to do a buyback. Buybacks are generally a little more challenging for us because we have a concert party in place. We were able to engineer something this year where a member of the concert party participated in the buyback, so that allowed us to avoid a whitewash. It is very likely in future years that we will have some excess cash again.
Our underlying dividend policy is to distribute 75% of adjusted earnings per share. Over time, that extra 25% that we are holding back tends to get distributed because we do not really have a need for cash. We are not capital intensive in any of our strategies f or products, it is all built through internally with our in-house development team. When we have gone internationally, we are just using the same product hosted in the same infrastructure and from the same team largely in the U.K. There has been no need to make any capital investment there either. So we are not really capital intensive at all as a business. Actual cash has moved quite a bit in the period just because of the timing of some operator payments. It is not to do with anything else going on in the background.
Thank you, Michael. That was a whistle-stop tour of all of our finances. I am going to just cover off the international expansion as a business as we go forward, and let Rob, who has very much led on the product strategy for the organization under his COO role, talk a bit more around the products, which you will see that totally befit into our international plan. When we listed on the stock market in 2020, we were very much a U.K. business, and we knew that. We had plenty of growth in the U.K., as we do today, and as we have shown in the last year, with a lot of our core propositions being with our existing clients continuing to grow, but also new clients that we can bring on into the market with what we are currently doing.
We knew that naturally, as a business, that we are a business that has no debt, makes lots of money, pays dividends, and sort of crosses the bridge as a company of both being an income dividend-paying business, but also a growth business. But in our D&A, we are very much mindset of growth. We knew that whilst the U.K. was fantastic, we always wanted to grow internationally and it would be another pillar of our growth strategy.
We have started to execute that. In 2022, as is well documented now, we went live in Ireland, which is now a significant contribution to our overall organization. We are delighted to say that we went live in Portugal in September, and that is very much plugging into the mobile operators in Portugal, talking to the broadcasters there, going live with one of the broadcasters there and looking to expand that. Growing the existing relationship, which is paid for interactive services on TV and radio, using all the tools that Fonix have built, so it is all the same platform, all the same skill set, all the same dev team, all the same operational infrastructure that we have based out of the U.K. and exporting that.
The only real cost is that we have put in a country manager who, in essence, account directs the supply chain from managing relationships with mobile operators through to working with the media organizations. We are only seven, eight, nine, well, coming up to 12 months, I should say, on that. We have always maintained, and it is worth noting that we are beholden to the upside in the medium term. It takes us a long time to grow our clients to their full potential, and we are on that journey now.
We are really excited by the opportunity in Portugal, and we will continue to focus on that. In the meantime, we recognize that we want to look at other markets, and we are looking for a few key things. First of all, from a regulatory perspective, can you run interactive prize draw competitions for broadcasters, and under what regulatory requirements are there to do that? In each one of these markets that we talk about, you can, just as we do in the U.K. Switzerland came up with that criteria, and we approached the Swiss market. I am going to talk about them in a second because we have a case study. We are really delighted to say we are obviously live with two clients out there now.
France, we are not yet live with, but we felt that it was important to mention it on this roadshow. For those of you that would have done any sort of digging and research into Fonix will recognize that we have an entity in France. We have hired French people, and we are establishing a French business. On that basis, it is pretty obvious we are looking at the French market. We only make money once we are trading with the mobile operators and broadcasters running services. Even at the beginning of that journey, we are never making the sort of income we want to be making, that we tend to make in the long term. These things, in essence, sometimes take one to two years at least to get going.
At the moment, where we are at with the French market is we are in discussions with all the mobile operators and, in essence, being given the green light to go to contractual and API as an integration stage so we can have the capability to do what we do in the other markets, which is send and receive SMS messages and charge consumers on their mobile phone bill. At the same time, we are talking to a number of the broadcasters in the French market, and to establish a reputation for Fonix and why we are good at what we do. There is a real opportunity in France. It has roughly the same population as the U.K. The GDPs are parallel, the regulation is parallel to the U.K.
It is interesting that the French market for paid for interactive services for broadcasters is circa EUR 100 million in consumer spend, where the U.K., which is totally comparable, as I just said, is worth between GBP 250 million and GBP 300 million. There is clearly something that is not happening in the French market that we can leverage. We are really experienced, having done this for 12 years, in one of the most established, mature, and robust markets in the world for this stuff in the U.K., to understand, as we go into other markets, where the opportunities lie.
We see the French market as a real opportunity in the future. It is obviously going to take us a bit of time to get there. We are a British business trying to enter the French market. With that comes an obvious sensitivity that we need to have the right language, the right approach, the right cultural matches for what we want to do and how our platform technologies will integrate to that. We are doing all those things, and we are really excited about the medium-term opportunity there. We are not mentioning the sixth market yet just because we are such a nascent period, but I think what is safe to say is we are in connectivity stage.
We are close to agreeing in principle with a significant national broadcaster in this market. We are hopeful to announce that in the certainly in this financial year. We would love to be doing that by the interims that we are live in that market. Just touching on Switzerland, I think it is really important. We are ultimately running a niche business that from the outside looking in, looks quite straightforward, but it is complicated.
I want to just put a bit of flavors into how does Fonix sit there and the leadership team sit here and go, right, okay, how do we continue to grow our business from an international exploitation perspective? The first thing, as I mentioned a moment ago, is we look at the regulation. What markets in the world are we allowed to run paid-for prize draw competitions for broadcasters? We are looking for regulation that really clear that we can do that. Each one of the markets we work in, it is clear where we stand and what we can do. The Swiss market gave us an opportunity to do that.
What was interesting in the Swiss market, it was there was no SMS billing, there was no real premium rate. Broadcasters were not really doing it, and we did not understand why. I think it is worth noting that if you look back over the history of paid-for mobile carrier billing services, there are some amazing things that happen, like the stuff that Fonix does for all of its markets, or certainly the charity billing, or you can pay for stuff on your phone via Apple, through on the App Stores or Netflix or Spotify or PlayStation. You can buy things with your mobile phone bill.
On the flip side, there is, we all remember Crazy Frog and sort of less content valuable subscription services that many markets, even the U.K., got caught up in this many years ago, and they got regulated out. The Swiss took an approach about 10 years ago to turn it all off, which was fair enough, I think at the time, because they did not have any confidence in the market.
We had spoke to all the Swiss carriers at the beginning of this year and said, "Look, there is an opportunity in the Swiss market to bring high-value pay for services back with broadcasters." They were incredibly receptive to the idea. Our credentials from the U.K., Ireland, Portugal, thankfully sort of put us in good stead. We then went and spoke to the broadcasters about what we do, how we do it, and how we would approach the market. Needless to say, as we come into the year-end roadshow, we have got two live broadcasters. You can see the comments on this slide.
We are very much in a growth phase with these guys, where we are looking to expand, run services on a continual basis, but on careful basis to grow consumer confidence and frankly, grow confidence through the stakeholders, from the broadcasters through the telcos, that this is very consumer-centric. There is powers of trust in this, and we can build a very sustainable business into the long term. We are delighted with the results so far, and we are really looking forward to the opportunity moving forward. On the flip side of our growth strategy, I am going to hand over to Michael, who is going to talk about product.
As I mentioned at the beginning, we sort of have a dual strategy. Rob has just talked about our international expansion strategy. The other avenue we are pursuing in parallel is how can we leverage different additional growth opportunities through expanding and innovating on our product. Largely that is looking to, in the short term, to generate additional revenue from our existing customers, but in the longer term, also expanding to other markets or sort of neighboring markets that are a good fit for the products we have built. In order to do that, there are three main products that we have been focusing on.
The bread and butter of Fonix's business historically has been in SMS, so that is a combination of short codes displayed on TV or read out on radio for a user to make a request to pay a broadcaster through an inbound request or an outbound SMS communication to the user's handset with the option for them to effectively buy something within their messaging app on their phone. So that is where we have built our business up over many years.
Over the last sort of 5- 10 years it has been, or certainly in the last five years, there has been an increasing movement from our customers to also promote online channels alongside the SMS avenue, which we have always been involved in. Over time, we estimate that some of our bigger customers have as much as 25% of their audience are now engaged in an online environment rather than an SMS channel.
We do some communications there where we might send marketing messages to those users. They've signed up on a website somewhere, and we then are promoting that website on behalf of our customers via an SMS message. But largely, we don't really transact with those consumers. There's 25% of our customers' CRM database that we're not transacting with. If it's 25% of their database, it's likely to be as much as a third of the size of our own database. There's a big opportunity there for us to grow our business.
What we've then decided to do is we focused on three very complementary products that allow us to gradually present new growth opportunities with our customers. New revenue for them, but also gradually, hopefully allow us to access some of those users that we're not currently transacting with. The first one in the middle is CompsPortal. That's basically an online channel or a website for a user to enter a broadcast competition.
We launched the product. We built the product over the last couple of years. We launched it in December 2025 with Channel 5, a big broadcaster in the U.K. We've been live with them ever since. It's performing well, and we're constantly adding new functions to that. Alongside that, we have a number of other prospects, particularly in the U.K. market and actually also in international markets that are really interested in using this, rolling this out to their consumers as well.
As well as generating additional transaction, it's been a very compelling proposition to present to new broadcasters in international markets. It's also allowed us to build effectively tooling that we are then leveraging in other ways. We have one tokenizing online payments, and we've integrated to lots of PSPs to facilitate that product. We're also building accounts for users so they can register with an online environment and then have repeat transactions with a business.
That's the first thing we've done. The second thing we've done is we've thought about users that effectively get caught between SMS and an online environment. They might initially engage with us to make an SMS payment with a brand because they've heard a shortcut code read out on air. But when they go to make that payment, we get a rejection from their mobile operator. Over the last few years, we've seen rejection rates from when operators go up as high as 10% of the transactions that we're trying to process get rejected, and they can get rejected for a whole stream of valid reasons.
It might be the user's on a corporate handset, and their handset doesn't allow them to charge their mobile phone bill. It might be that they have an inherent cap or bar on their handset that has been there since they started their contract, and it prevents them from charging premium services to their handset. It can often just be a temporary error from the mobile network that's not allowing us to bill that consumer.
Historically, that user is then left. We don't respond to them, and they have to navigate themselves to the online environment, online channel, to pay and enter another way. What we decided to do is, actually, that's not the right way to handle it. We have the user's intention. We know their attention. We know what they're intending to do. We should offer them an immediate mechanic to pay another way, and that's what we've built with PayFlex. We immediately send a real-time response back to the user, and they can click to pay via Apple Pay, Google Pay, or card, or PayPal as an option.
We're converting for every message that we send to a user, if we're getting up to 10% failures of those that we're then sending a link, we're recovering as much as 20%. It was something we introduced gradually over the financial year. We saw about 20% of the error message, which we're receiving that PayFlex link. We've now evolved the product, and we've onboarded more and more customers. We hope by the end of this financial year, 100% of the error message will be getting a PayFlex link, and we expect to recover 20% of those.
It's completely new revenue to both us and our customers. That's the second thing we've been doing. The third thing we've been doing is we've been thinking about how can we present a new channel or a complementary channel to market to their CRM database. If they have a lot of online users that are used to using online payments, we wanted to introduce a very slick channel for them to receive an offer and have the option to check out via an online payment mechanic that they're used to. We've built this RCS messaging product, which we've called RichMessaging. RCS, for anyone that's not familiar, is effectively a richer form of SMS.
You can send images and videos, but also you can send multiple calls to action and buttons to a user, and you can send embedded payment requests to a user. Instead of historically sending that user to a website for them to complete a payment, our vision of the product in the future is that we can send an immediate request to pay or purchase something without even needing to leave the channel. It's something we've been exploring with customers over the last year. We've gradually built out the product, and we feel very confident over the next couple of years, it will be something that we can gradually grow and grow and grow with our customers. Not necessarily just in the prize draw space we're working in today.
It could be Omaze, it could be BOTB, any of those online competition businesses, or it could be other retailers where there's just an urgency for a user to need to buy something within a limited amount of time. The alternatives of sending email might not be quite the right fit because emails are crowded in space, and it's also not really great for time-sensitive transactions. It's something we're very excited about, and we hope to expand over the next few years in parallel to our international expansion.
Thank you, Michael. I think we've rattled through that. I think it's important just to recap as an organization. Our existing clients have always underpinned everything we do. We work very hard to service those clients through our technology and support. That's how we've created such a sustainable long-term outlook business where we grow the business steadily. We're very excited by what's happened over the last couple of years in terms of our existing markets and client base have grown in revenue terms. What we're excited by looking forward is that we have a clear international strategy, which I think, to be blunt, a couple of years ago, we were interested in, but we were planning on executing and had planned, but I think some of that's coming to fruition now.
Furthermore, as Michael's just touched upon across our product set, the SMS interactive element of our business to a lot of people will feel like, "Oh, this stuff has been around forever, is not a bit done." To be honest with you, it's an incredibly powerful, ubiquitous, frictionless method of interaction that is still the go-to, the bulk of any interaction when a broadcaster or charity runs these things. The products we're looking to expand are providing additional either ARPU possibility to drive the basket size bigger or to expand our capability of when a consumer might be able to engage with us. We're really excited by that. On that note, I think that might wrap up our presentation, and we will go to questions.
That's great. Thank you very much for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab situated on the right-hand corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you the recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. As you can see, we have received a number of questions throughout today's presentation. Could I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end.
Okay. Thank you very much. We will rattle through these. I think we'll try and cover as many as we can. There are a few, so we'll start from the top. Here we go. I think there's been a lot of questions about growth opportunity in the likes of internationally and what it actually means. I think it's worth just. We stated in the presentation, we don't make any money once we're technically integrating and, or when we're actually had an agreement with a broadcaster. We only start making money once we're trading with them and actually once we get to. Then it starts to grow over time. There's been a few questions about, what is the opportunity gains? How much are we trying to gain in the likes of France or Portugal?
I have noticed a few of you asked about constraints in Portugal, which I will come onto in a second. I think it is important to say, we look at the population of a market, and we look at what is being spent, what we see as the addressable market. You take the French market, where we assume there is GBP 100 w e understand from the research there is GBP 100 million worth of transactional value. If you look at the metrics of what is going on in the U.K., we would holistically assume there is probably EUR 5 million worth of gross profit today to go after. It is obviously running through incumbents, and we are not necessarily going to win it all, and this would take us quite a while to get there. I think there are two things we can do in the likes of France.
We would grow that market because we see the opportunity, and we feel like, given our experience, we can take a large proportion of that market. That is going to take time, and I think everything we do internationally is probably looking at a three to five year horizon in terms of maturity, isn't it? I think, we will like to see revenue in each of these markets in FY27, and that will be good. I think we will see that grow over FY 2028, FY 2029, and FY 2030. We cannot really go into more specifics than that. Hopefully, that gives a picture of the growth. A few people have asked about constraints in Portugal. Portugal has just been— I would not say there has been constraints.
We are looking for the blend of commercial drivers that the mobile operators can give us so that we can go and make sure that the whole value chain works, so they can give away better prizes, et cetera. They are not used to t hey have never had a supplier like Fonix go in and go, "Okay, we need more off you, Mr. Mobile Operator, so that we can incentivize the market, that can give bigger prizes away." That is something that we have worked very hard at doing t hat opportunity exists. We are really happy with the way it has started.
As I said, there has been some opportunity costs in terms of our focus on integrating there. Apart from that, we have a really great account director who is overseeing the Portuguese market with our support. It is contributing a really material income to us on a monthly basis that is growing. We hope to— And we will see the full year of that this year, given that in FY 2026, we did not have the full year. It only started at the end of September, really. We will see that grow this year. Can we use that one?
We can use that one. I think just to reiterate on that, there is a question around what is the percentage growth rate in Ireland versus Portugal versus the U.K. In Ireland, there has been low single-digit percentage growth over the last 12 months. The delta. It is a bit sensitive to say exactly what we made in Portugal because we only have a single customer there. But the delta on that would be our Portuguese operations, which has made a contribution.
They have asked if something has happened in Ireland in the second half of the year. There is nothing that continues to ebb. All our services ebb and flow. Some halves of the year are bigger than others because customers just move around competitions at different times of year. Nothing underlying has happened in Ireland that says it suggests that anything slowed down in H2. It is just, as I said, over the year, they have continued to grow at low single-digit percentage growth.
There are a lot of questions. Obviously, we have come out of FY 2026 with a certain number in terms of our growth, and I think there are a few questions about the guidance from Cavendish now going back to lower growth, Michael. I think.
Yeah. Someone has asked why previously management has said you were H2 weighted. But this hasn't been the case for three years. I don't know where you would've picked up that unless we were talking about calendar year at some point. We have always been H1 weighted, and H1 being the second half of the calendar year, and that's because Christmas, the period running from October to December, for all our broadcast customers, is always the biggest time of the year. It's just their consumers' spend significantly increases on services at that time of the year. That's always been the case. I can't think of a time when that hasn't been the case.
Then it was just obviously this guidance that we're going back down to a smaller growth in the U.K.
Yeah.
I think the U.K.'s a really mature market, and there are a number of key drivers in FY 2026 that drove, in particular, that H2 growth. We're very cautious and conservative. I think some of the growth has come through now, and as we look forward, that growth is going to continue into FY 2027, which is fantastic. But it doesn't necessarily mean we're going to get sustained growth at that momentum year on year. I think we, being the prudent sort of business that we are, will continue to guide carefully and try and over-deliver if we can. There's a mention of us only having 30% market share, but I think if you're looking at the Ofcom stats of carrier billing and phone-paid services, yes, we are 30%.
However, what is in that pool of 100% is 118 services, 090 premium rate phone lines, all the carrier billing that Apple and Netflix and Google do that the likes of Boku and Bango provide. What I would say is in the interactive services provided to the broadcast and charity market, we're doing probably over +95% of it, if not 99% of it.
We service all the major broadcasters for SMS interactivity that run it. Really our opportunity to grow there is one or two businesses that don't do it, the likes of Sky, the likes of Channel 4, DAZN. There's a number of other media organizations that don't run SMS paid for interactive services, and of course, they're targets for us. But we would rather guide carefully, and if those were to come through, fantastic. There is talk about our budgeting FY. Do we lose anything in France by not going live in France in FY 2026? No.
There was a couple of 100 grand worth of cost related to the French market in that year. You've asked what's the budget for next year. It's a little bit sensitive to us.
Taxing income or budget, though?
There was a couple of hundred grand lost last year. That cost is going to mostly continue into this financial year. We are budgeting to hopefully get break even over the next 18 months or so. It will take us a bit of time because there is cost in the French market, but we're hoping to be trading in France by the end of the year.
Yeah.
Get a financial year.
The market stage of Portugal are just time to market and some natural commercial things in terms of working through time lag with broadcasts, et cetera. Nothing to talk about there. I think it is important to talk about France's loss-making. France's loss-making is as far as we have one country manager and an account director as we establish that market. The rest of the investment to France is really opportunity costs that the leadership team are working through our internal council, working through the contracts with the carriers and our dev team working on integration, just like any other market we would go into. It is a relatively modest cost currently that we gate at every stage and will continue to spend that money whilst we see the French market coming on board.
There was a question around why is there still no independent non-exec with international expertise a year after it was promised. I do not think we have ever promised to have an international non-exec in place. We have committed that we will continue to try and find the right candidate, which we have. We have interviewed a few people. Unfortunately, the reality is we have not found the right candidate yet with the right market experience. We are looking for someone that understands geographies, but more importantly, understands the broadcaster landscape is our preference. Unfortunately, we just have not found the right candidate yet, but we do continue to try and find people.
The next one was a question. Obviously, in the tax changes in the budget last year, tax on gambling increased significantly, and about 60% of our gambling business left the U.K. market. There is a question about how much gross profit was lost. It was significant.
Yeah.
It's really difficult to talk about, but it was material all the while, but there was nothing we could do about it. As the dust has settled on that, we're naturally trying to establish whether there's an opportunity
Yeah
to bring some of that back into the market.
Gambling was probably somewhere in the region of 5%-6% of our business 12 months ago, it is down to more like 3% or 4% of our business today. It wasn't something we anticipated at the beginning of the financial year. It's something we've had to carry, but luckily we have been able to carry it within our numbers.
Yeah. There was talk about our messaging growth between enterprise clients and media clients. I think the messaging growth is a combination of all of the above, and I'm not just trying to be avoiding that question. We've actually really had a good year in growing both our enterprise messaging business and our media messaging business. For those of you that might not understand what that is, it's we're sending a lot of outbound SMS messages on behalf of our media clients, and that's continued, that's grown well. On the flip side, we're very, very good at sending high volume messages to the mobile operators, hence why we do what we do. There are international bulk messaging businesses.
If you consider, this isn't the businesses we work with, but you will know these brands, but the likes of Twilio or perhaps MessageBird, or even the likes of Cisco, they're doing messages across the world, and some of them don't have direct connectivity with U.K. mobile operators. They look for a local partner that they feel is high quality, that's going to give them what they want. Because we don't compete with those sorts of businesses, we naturally are a decent home for them to consider using with us. We do do that. It's very price sensitive business. It's quite wholesale. It's good business for us. We have half a dozen or so clients that use us for that. But it can be quite volatile. It's good business and we continue to look after it.
Someone's asked about are mobile operator fees fixed fees? Sorry, there were some fixed fees that hit managed services, which I commented on. It says: "Are operators renegotiating terms and when do the main operator contracts renew?" All of our operator contracts are perpetual. Operators unilaterally can dictate pricing, and whenever there's a price change, we generally pass it through to a customer unless it's something that we don't feel we need to.
The reality is that we are constantly trying to force negotiations with the mobile networks. One of the reasons that our customers like working with Fonix, another reason, is that we are always fighting their corner to try and get the best commercials in the market to make sure they can grow the services that they need. Because when our customers sell more services, everyone in the value chain benefits. We have very strong relationships with both the mobile operators and our customers to make sure we are always negotiating and trying to get new tariffs in place, and that might be a new vertical that we're trying to drive transactions with, we might say, "Can we give a special tariff for that vertical?" Et cetera.
Right. PayFlex, which is one of the products Michael talked about. There's a question here about what does it contribute today to the business, and is there a challenge that Apple Pay and card payments have higher or lower transactions than carrier billing, and what sort of cannibalization are there? I think we've been working on PayFlex now in earnest for about six months. Our clients have embraced it, in particular our U.K. clients, but it's something we can export across every territory we're in.
The context of the GBP 300 million of the payments we're handling a year, as Michael said earlier, 10% of those have been failing, which means there's 30 more million GBP for the transactions we haven't billed, and that is the addressable market today for PayFlex. It's different to saying, is it higher or lower in terms of take rate on carrier billing? Whilst it seems really obvious, our Fonix O2, someone sending a message to do something for GBP 5 on O2, and O2 said to Fonix, "You can't bill this user." We go, "I'll just use PayFlex and try Apple Pay." That sounds really straightforward, and I get that.
However, in reality and in the background, we get something like 30 to 40 different error codes from some of the mobile operators. That could be, "You mustn't bill this user," to, "You can't bill this user, but we can't tell you why," to, "They've run out of credit," to, "They're out of range," to whatever it might be. There's an internal credit limit, and we have to be really specific and selective in when we do and don't send those PayFlex alternative billing transactions.
The reason why I say that is when we go back to the client and say, "Yeah, we're going to charge you 6%, 7%, 8%, 9%, 10% for this," and they go, "Hang on a minute, card payment's only 2%." They understand the complexity of what we're doing and the logic and everything we're doing. We're doing all this in real time. Actually, we're not in a stage where we're actually capturing payments they would never have got. The challenge on our take rate isn't the point here. We are generating more income that our clients could not have got because those payments had failed, and they understand we have built a quite complicated system that gives a really great consumer experience to hoover up those payments, which is what we're doing.
There's a comment on exclusivity with clients, and is it up. All of our client rates, our client contracts are always rolling, generally with a lock-in period, but we're very embedded with our customers. Once we get through a minimum period, we tend to go into a rolling period, and naturally we look to re-sign those. We've been asked about client concentration in one question here. We don't give client concentration metrics over, because it's very sensitive. We take payments from the mobile operator, we take our share, and we pass it to the clients. Our clients don't know how much money we make out of them. They obviously have an idea, and they don't know where they sit in our stack in terms of how big they are to us, or of course, they probably have an idea. But we don't list our top customers.
It's pretty clear our focus is on the media and broadcast customers. They are our big clients. We're handling lots of traffic for them, and we've worked with most of our established major broadcast clients for coming up to 10 years as a minimum, and we continue to look to do that. We're very embedded with them. We're very much in partnership with them. We're paying them lots of money, and we look to invest heavily on our side to ensure their services work seamlessly and can grow. That's really the focus.
Someone's asked, just related to that, there are two stats that we give related to customer concentration, which just to flag if anyone's not aware, is that we have three customers that are individually worth more than 10%, but for reasons Rob said, we don't disclose who they are, and our top 10 customers represent 86% of our gross profit. Those are the two stats that we give out. Not to signal to customers or competitors, we don't give any more information out than that, I'm afraid. Someone's asked about how some of our customers are adapting to the prize draw code that's been introduced over the last years. There's a voluntary code that's been introduced, for anyone that's not aware, relating to the regulation of prize draw competitions.
The reality is that our customers in the broadcast space have been running these services for 20 years, and they've well established their own codes of conduct through a trade association that we're all members of about how they should operate. The prize draw code that's been introduced recently is to try and really to try and address those people outside of the broadcast landscape. So it's the likes of Omaze and BOTB and other online prize draw competition businesses where they aren't really under any regulation, whereas our broadcasters are very clearly regulated by Ofcom and there are restrictions around that. It's worth being aware, so that regulation is currently in consultation with the government, and it's a voluntary code, and some people have signed up to that code. Our broadcast customers are just sticking to the same framework that they've always operated on for many years.
I think specifically, they haven't signed up to the code.
Yeah.
They can't sign up to the code because some of the regulation in there is only directed at the online prize draw market, which broadcast market doesn't. The broadcasters are heavily regulated by Ofcom for this stuff. It is clear in prize entry limits, in audit requirements, in what they have to disclose should there be an issue, pricing clarity, consumer harm. It is a super well-established regulatory environment that doesn't get any consumer complaints and has been nailed down for the best part of 20 years. I speak as a vice chair of aimm, which is our trade association for this market, with the CEO of aimm, who is in contact, is continuing dialogue with the DCMS. It's really clear that actually broadcast services are not really considered as part of this scope at this stage. So for us, it's not really something we address.
Someone's asked, "Has there been any changes to the competitive landscape since you've launched your new products?" I can't think of anything other than, I think we've got a more and more cemented view that the product strategy we're pursuing is the right thing. There isn't really any new products that we've tried to launch over the past couple of years that have phased away that I can think of. So we feel that we are making all the right decisions at the moment, touch wood.
Yeah, there's a question, there's quite a few questions about scale and how big can it be and are we at limit? We're certainly not at the limit. We've called out the markets we're in. The sixth market might seem a bit loose because I suppose some of you are going, "Oh, is this massive or is it tiny?" I think we look for a minimum criteria, of course, of the amount of GBP we could address. And we're looking for a certain amount of income from any effort like that. There are a number of markets that we've identified, not just across Europe, but outside of Europe that we're not talking about yet or talking to yet. They will naturally come across our bow in time. It's very niche, it's quite complicated, and it takes a lot of effort.
We can't just hire 10 salespeople to go and do this, go out to a new market and do it. It's complicated. It is fraught with regulatory requirements. We've got an amazing senior leadership team of eight people with a management team beneath that who are super well-versed in this stuff. When we go into a new market, we know exactly how to layer it in. So whilst it might seem, well, why aren't you blowing the socks off this and going after 10 markets at once? It wouldn't work. We've seen too many spaces and too many players over the last 20 years in this space that think that's a big thing to call out. It's not.
We would rather be. We can achieve every one of our goals from a shareholder returns perspective by nailing every market we've named over the next three to four years rather than putting any more markets on. Actually doubling down on the focus in the places we're at is a better strategy than going for spread yourself too thin and not do anything properly.
Someone's asking, "Are we continuing to invest in the new products?" I'd say of the 60 people we have in the business today, probably 40% of those people are working on product. There is maintenance in all of our products. We have to maintain all the connectivity we have with operators and make sure it's upgraded for any security bugs, et cetera. But that team is largely working on new products. We will constantly work on all of the new products that we have there, and we continue to work on our SMS product that we've had in place for many, many years because we're looking to innovate and drive new forms of innovation for our customers.
Yeah. Right, we've got two minutes one minute two minutes. There's conversation about competitive landscape with WeChat, Alipay, I suppose WhatsApp. We would embrace that. We see them like a mobile operator. I don't think WeChat or Alipay are going to enter the European market anytime soon. But of course, things like WhatsApp, RCS messaging, these are just rich internet-based messaging applications. So long as there's a payment, you can see through PayFlex and RCS what we're doing, payments integrated with a much more feature-rich messaging solution is right up our street, and we would love to embrace that.
It actually allows us to go into other markets where there might be a WeChat or an Alipay in the fullness of time, where actually you can go, "Actually, we could take all of our skill set and go and approach broadcasters where that sort of product is really prevalent and look to use that as our main telco, if you like, a way in." Opportunities for other. We're looking at podcasts. Anyone which has got large audiences, of course, we're looking at that other than just traditional state broadcasters. There's a question about ITV impact have been taken over by Sky. We have seen no impact. I don't think they can announce it till next year. If anything, we hope there's an opportunity. We mentioned Sky earlier in the presentation. That for us to be able to run interactive services on Sky would be fantastic.
I'm not saying that that's a conversation we're having, but that would be great. I suppose a final question, are you personally looking to buy shares in the open market? I am a significant shareholder. Everyone of the management team is either a shareholder or a significant share options holder in the business. We've never done a frivolous sell-down or had a rogue founding shareholder that's gone off and sold shares in the business. We are committed to long-term sustainability and profitability. As someone said to us, we run the business a bit like a private company that happens to be on the stock market, and I think that's a perfect description of how we like to run the business. That probably is all the questions.
That's great. Thank you for answering those questions you have from investors. Of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Rob, could I please just ask you for a few closing comments?
Yeah. Thank you very much. I hope that today we've given you a good synopsis of the organization. We do cross over that, I suppose, somewhat strange place where we are a money-making business that is very committed to continue that. We kick off cash. We don't need lots of capital to grow, and therefore, there is excess cash, which allows us to pay dividends and continue to grow. We are conservative and modest in our approach, hence why it seems like a lot to us, but we've gone from 30 people to 60 people over the last six years, and we've done all right so far, and we'll continue that mantra. All the while doing a strategy for us is growth, and hopefully, we've been able to demonstrate that, and we look forward to what's coming up in the future.
That's great. Thank you for updating investors today. Can I please ask investors not to close this session, as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good afternoon to you all.
Thank you very much. Thank you.