Thank you for standing by, and welcome to Tyrell Payments Limited Financial Year 2021 Full Year Results Briefing. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. I would now like to hand the conference over to Mr. Robbie Cook, Managing Director and CEO.
Please go ahead.
Thanks. Good morning, and welcome, everybody, to Taro's full year results call. I'm joined by Krafft Parler, our CFO, who will be presenting with me this morning. Our plan today is to focus on our published full year results for FY 2021 and our key accomplishments in the year. We'll also provide an update on our trading in July August, and we'll talk about some of the key areas of focus for FY 2022 and beyond.
Prav and I will spend about 40 minutes running through our results and then we'll take questions and we'll talk to the slide pack circulated earlier today, which is also available on our website. And just a noting, a recording of this morning's call will be posted on the Investors section of our site shortly after this session to ensure those who are not able to dial in live can listen at their convenience. So with the formalities out of the way, we'll get started. And if you could turn to Slide 2 in the pack, please. But before I talk about our results, I just wanted to reinforce what Tyros stands for and our position in the market.
We're a technology focused and values driven company. We provide more than 58,000 Australian Merchants Payment solutions and complementary banking products largely developed on our core proprietary technology platform. We're creating an integrated ecosystem with payments at its core enhanced by value adding features and products designed to attract new merchants and retain existing ones. The majority of our customers are small and medium sized enterprises operating in the core verticals of health, hospitality and retail. Our purpose built solutions have been designed with these most needs and preferences in mind.
Turning to Slide 3 And just looking at some of the major accomplishments the teams achieved in the year. As I'm sure you know, we have strong growth ambitions. Notwithstanding the disruption that COVID caused us and many of our merchants, we continue to successfully execute against plan for the year. There are a number of key callouts I'd like to highlight. Firstly, completing the transformational Bendigo Bank Alliance, which added more than 18,000 new merchants to our portfolio and around $5,000,000,000 in annualized transaction value.
Also acquiring Health Fintech Medibar to continue building out our health vertical, continuing to invest in our Cairo Connect integration hub, which amongst other things is providing unique data insights to some of our merchants on the Connect platform. Starting to provide the in app payment solution for the leading tap order and pay platform, Me and You, using our e commerce capabilities. And most significantly, lifting the transactions executed through our platform by 26% in what has been a challenge year We hit an all time high of $25,500,000,000 and increasing our merchant numbers by more than 80%, demonstrating the power of our solution in the market. Notwithstanding these impressive growth stats, We still only have a 3.8% share of the total addressable card present and card not present market. As can be seen from Slide 4 of the pack, our 5 year CAGR of nearly 25% is an impressive 5 times above system growth.
Turning now to Slides 56. We have a high conviction In our ability to continue to leverage our platform to maintain and expand our growth trajectory. There are 7 core areas that we believe will drive that growth. Firstly, our focus on our core verticals and providing built for purpose payment tech tailored for Australian merchants in those verticals. We have demonstrated the traction here consistently over the years.
But just looking at our performance since our IPO in December 2019, our transaction value CAGR is 0.29 percent And our merchant count CAGR is 59%. We have every expectation this dynamic continues. Secondly, we are able to drive economies of sales and are demonstrating the operating leverage in our business, which will under in continued EBITDA growth in the 4 years. Delivering strategic partnerships only possible with a proprietary platform that can scale is another core area for growth. We've developed unique IP in our Bendigo alliance and have a keenness to explore opportunity to partner with others where we can access step changes in segment share is our demonstrated capability to make strategic investments to enhance solutions for our merchants and this remains an area of focus.
Examples here are our investments in Miu Miu and Paper Plane and our acquisition of Medipar. On Slide 5, we highlight our native e commerce offering and the opportunity to expand, particularly working with ISVs or independent software vendors such as me and you, which are seen as opportunities to gain scale more quickly. The 6th pillar for growth is cross selling our ancillary products to our merchant base, such as our merchant cash advance loans, which are a perfect product for many SMEs. And finally, adding new core verticals. This is where the Tyrogate dongle has a key role to play.
It opens up the trade vertical, provides a queue busting solution for larger format retail and provides a fit for purpose solution for micro merchants. Turning now to Slide 7 and looking at our financial results at a high level, And Praful will spend a bit more time on this in a moment. But it continued to be a volatile year with trading conditions for many of our merchants remaining difficult with unpredictable and rolling COVID lockdowns across the country. Given this environment and as was the case last year, We maintained our focus on actions and initiatives designed to assist merchants in navigating the COVID impacts. In addition, we had to traverse the challenge of the terminal connectivity incident in January, along with the distraction that inevitably comes with undertaking a in a major transnational project such as our alliance with Bendigo Bank, which was a major technical and operational exercise for the team.
So despite these headwinds, we're proud to have processed a record $25,500,000,000 in transactions for our merchants and have delivered record gross profit and a record EBITDA result. In summary, our transaction values were up 26%. Revenue was up over 13% at $238,500,000 influenced by a COVID impact impacted card mix shift, which I'll discuss in more detail shortly. Gross profit was up 28% to $119,400,000 EBITDA adjusted for expenses associated with the terminal connectivity events and transaction costs was a positive $14,200,000 compared with a $4,400,000 loss in the prior year. Operating leverage is demonstrated in our With operating expenses increasing a well controlled 7.9 percent and our EBITDA margin sitting at circa 12% in the reporting period.
And finally, our merchant numbers were up, as I mentioned, 81% with more than 58,000 merchants choosing to work with us. Turning now to Slide 15 and providing some more color around our payments operations. As I've mentioned, the value of transactions processed in the year listed 26 $25,500,000,000 notwithstanding the challenges in the year. The addition of the Bendigo alliance for the month June added approximately $440,000,000 to this transaction value amount. This growth was assisted by 20 3% increase in merchants selecting Tyro with their payments provider, which excludes the 18,500 Bendigo merchants.
With the Bendigo Merchants Week, we ended the year with 58,186 active merchants on the books to be precise. Health, hospitality and retail represented 85% of our merchants by count and made up 91% of our transaction value for the year. Our strongest transaction value growth was delivered in our hospitality vertical at 34%, with retail growing 18%, while our health vertical improved from a negative position at the end of the first half to 13% growth. Our largest states by transaction value contributed to the group with New South Wales at 37%, followed by Queensland at 22% and Victoria at 20%. All states other than Victoria It's double digit transaction value growth.
Queensland and Western Australia were strongest at 39% 38%, respectively, followed by South Australia at 31% and then New South Wales at 20%. New merchant sign ups Approximately 1,000 new applications per month on average with an all time record month in May with 1482 applications. Our e commerce solution grew strongly, albeit from a low base. This solution enables merchants to work with us, both for the in store and online transactions. This solution simplifies the day to day for our merchants by providing one point of contact together with a single settlement and reconciliation, removing the need to manage multiple payment providers, While still very much a work in progress, at 30 June, transaction value process had increased 5 36 percent to $70,000,000 While transaction values were up 26%, our payment revenue was only up 13.7% $230,200,000 Now this reflected a change in our card mix and arose from a significant drop in international credit card usage due to COVID's impact on travel and also an increase in debit card usage.
International credit cards attract significantly higher merchant service fees and a mix shift away from transactions via these cards negatively impacts our revenue. These international cards, however, carry significantly higher interchange and scheme fee costs And that's a mix shift away from transactions by international cards positively impacts our profits. International credit cards represented 0.73 percent of our transaction value of 21% compared to 3.2% in FY 2020. The converse applies in relation to debit card. In the period, we processed more lower merchant service fee debit card transactions, which attract lower scheme and interchange fees and as such have a more positive profit impact.
Debit cards represent 61% of our transaction value in FY 2021 compared with 58% in FY 2020. Prabh will talk to our merchant service fee and merchant acquiring fees later, But of note, this change in card mix positively impacted our payment operations gross profit, which lifted 28.6% to $110,800,000 With close to 105,000 terminals now in the field, We remain the 5th largest merchant acquiring bank in the market, sitting ever closer to the 4 major banks. Our focus on brand and retention continued to shine through in the year. Our prompted brand awareness has lifted to 20%, up impressively from 14% a year ago. And our customer retention rates remained very strong, with customer churn measured by transaction value at 8.7% compared to 8% a year ago and our churn rate metric by customer number reduced from 11.7% a year ago to 11.3% this year.
When talking to you about half year results back in February, I did say our key priority in the second half was to do all that we could to rebuild Trust with those of our merchants who were impacted by the connectivity issue, and that has been the reality. Our efforts here have been affected. In particular, the absence of any noticeable increase in merchant churn together with application numbers setting record highs a very pleasing outcome to this asset. The event did negatively impact our net promoter score, which was a positive 43 before the event. Our NPS fell at the peak of the event to a low of negative 25%.
However, Our NPS has improved every month since January, and we ended the year at a positive 21 and it's currently sitting at a positive 27. Our remediation program for those merchants financially impacted by the event is making strong progress, and we are rapidly resolving all make good claims. All financially impacted merchants were invited to register with us to enable remediation claims to be assessed. As of 23 August, we have settled claims with approximately 85% of those merchants for sort of mediation and the balance are being progressed at pace. The remediation process remains available for clients of financially impacted merchants and it provides a fast and straightforward assessment aimed at resolution without the cost, Delay and uncertainty inherent in legal proceedings.
Clearly, this event did not sit comfortably with us. And notwithstanding 18 years of operation with no similar issues, we are building a failover solution that will see us provide All our merchants with a dongle solution in combination with their standard terminals as an extra level of redundancy. This is an industry first moment. Turning now to Slide 19 and just talk a little bit about our banking products. Now although our banking operations still only represents a small part of our overall business, it presents an alternative to the major banks and has strong prospects for continued growth.
Our products are focused on providing our customers with innovative ways to meet their transactional banking Our Taro bank account is a fee free interest earning transaction account. Around 4,600 Taro Merchants were actively using the Taro Bank account, up from approximately 3,600 a year ago. With $72,500,000 on deposit at the end of the year, up from $49,700,000 at the same time last year. Our term deposit offering, which is available through the Taro app, held about $3,000,000 in term deposits at 30 June, up from $800,000 a year back. Our cash flow based unsecured loan product is designed to assist SMEs in growing their business.
Our business loan is repaid from a merchant selected predetermined percentage of card transaction volume as generated by the individual business and is offered on the basis of an upfront fee. The innovative feature of this product is that repayment cycle up fall down in accordance with the merchant's daily cash transaction volumes. Prior to the onset of COVID, Our loan application process is streamlined, giving all Taro merchants the ability to check their eligibility for a loan through the Taro app. If eligibility was not automatically satisfied through the app, information and assessing the application with the benefit of this data. Post COVID and from 1 April 2020, Our assessment process is adjusted making use of our manual assessment path rather than our automated functionality.
This proactive step was implemented to ensure our credit risk in the COVID operating environment did not exceed our internal risk appetite. We returned to our automated processes in February this year. As expected, the decision to adjust the credit assessment process saw originations fall sharply in that manual assessment period. Originations at the end of January 2021 totaled $3,200,000 compared to $43,800,000 in the same period in the prior year. Since returning to the automated process in February, we've averaged $4,500,000 in originations per month and achieved a record $8,100,000 in originations in May.
The team managed the risk within the portfolio closely over the period with lending losses to origination sitting at 2.7 percent equating to $700,000 in the year compared with $1,100,000 in the prior year. The average loan size in the year was around $35,000 compared to 32,000 a year ago, with an average length of 6 months or 6.5 months, slightly up from last year's average, which is just under 6 months. I'll now hand over to Karl, who's going to step us through our financial performance in more detail, and then I'll return to discuss our outlook. Thanks, Rob.
Thanks, Ravi, for that business update. FY 2021 had a number of achievements. And from a financial perspective, I'd like you to take away 3 themes. Firstly, the execution of our growth strategy secondly, the demonstration of operating leverage with scale and finally, our capital position. Tyro is presenting its results for the first time as a group this year following the acquisition of Medipass and the alliance with Bendigo Bank.
If you could turn to Slide 22, and I'll start with the financial performance for FY 'twenty one. In reviewing the performance, I recognize All businesses saw significant volatility in both FY 2020 and FY 2021. Our weekly transaction value update to the market was not only an indicator of the health of the Tyro business, but an insight into the overall SME sector. While I will talk about the FY 'twenty one metrics where appropriate, It would be useful to review a 2 year CAGR to highlight the underlying business performance. We were already in the 1st national lockdowns as we started the year, rebounding from our historical growth of negative 38% in April 2020.
The recovery was swift and strong, And we processed $25,500,000,000 in transaction value for FY 2021, a growth of 26% to the comparative period. Our 2 year CAGR on transaction value was 20.5%, which is strong given significant COVID lockdowns in both FY 2020 and FY 2021, and it compares favorably to a 5 year CAGR of 24%. Breaking down our transaction value by quarters. Quarter 1 began to show a recovery compared to PCP, although dampened by the start of the extended Victorian lockdown from 7th July. Victoria accounted for approximately 24% of our total transaction value at that time.
Quarter 2 grew 14% to PCP As lockdowns across the nation other than Victoria eased and people started returning to major cities, quarter 3 continued to improve Compared to normal pre COVID quarter 3 in FY 2020, we grew 19% notwithstanding the January terminal incident. End quarter 4 had an average growth of 85 percent to PCB, combining both tailwinds of recovery and recycling over the softer quarter 4 of FY 2020. Our gross profit grew 28 percent to $119,400,000 slightly ahead of the transaction value growth. Again, this represented a 2 year CAGR of 20%, which is almost back to our 5 year CAGR of 21%. The gross profit metric is the main indicator of our business growth as revenue shifts with the underlying card mix and its associated transaction costs like scheme and interchange fees.
I spoke in detail about the impacts of card mix last year, where the significant change in the card mix in quarter 4 of FY 2020 lowered top line revenue but improved gross profit. The run rate of this card mix has persisted through the whole of FY 2021. International borders effectively remained closed and premium and commercial cards did not materially come back into play. Debit card usage therefore continued to dominate asset competition by schemes for this card category, further lowering the underlying direct costs and driving up our transactional profitability. I will provide more analysis on this on the next slide.
However, as an overview, transaction value grew by 26% with more than 60% of the mix being debit cards for the full year. Gross revenue on payments grew by 13.7%, contributing an additional $27,000,000 While the underlying direct costs grew only by 2.3 percent, increasing $2,700,000 the net FY 2021 uplift from payments were $24,000,000 Banking income grew by $1,400,000 largely driven by fair value adjustments to the loan portfolio from FY 2020. Although small, our loan portfolio performed better than expected, with most of the merchants on a repayment holiday returning stronger after the lockdowns, Paying down the loans as their businesses recovered, a fair value gain of $1,300,000 was recognized in the results, a swing from negative $2,400,000 in the previous year. We expect the Banking segment to contribute more meaningfully to the results as we grow the lending book. In total, gross profit therefore grew by 28 percent to $119,400,000 largely made up of the payments business, which contributed a net increase $24,000,000 a pleasing result.
The main driver of the increase is the additional $5,400,000,000 in transaction value processed. Before moving on to expenses, I'd like to provide some financial details on a few significant events in the year, Seeing the impacts of COVID, the terminal incident and thirdly, M and A activity. Firstly, COVID. For FY 2021, COVID continued to impact transaction value growth, although as noted above, our 2 year CAGR of 21% was a significant recovery towards our 5 year CAGR of 24%. We continue to support our merchants by way of terminal fee waivers, a more meaningful way to provide actual relief.
In total for the year, we waived approximately $1,000,000 in terminal rental income for COVID impacted merchants. The impact on loan originations was more severe. Compared to $60,100,000 originated in FY 2020, We made a conscious decision to restrict our automated lending. In FY 2021, we originated $25,800,000 of which close to $20,000,000 was in the last quarter of the year. As a result, interest income on loans was $2,000,000 down from $4,200,000 in FY 2020.
While restricting lending was the right decision at the time, this product should experience growth as we build out of the pandemic. The negative financial impact to the results was neutralized by JobKeeper income of $4,500,000 received in FY 2021 compared to $3,900,000 received in FY 'twenty. Secondly, the terminal incident. The terminal incident has been covered in detail over the period. We are committed to remediating all financially impacted merchants as well as ensuring a failover solution.
The financial impact of the incident is as follows. We estimate the incident impacted our transaction value by about 1 percentage point growth in January 2021. We waived an additional terminal rental of approximately $1,000,000 The operating costs incurred, including rebates provided, were $3,300,000 Finally, the results reflect $9,000,000 in provisioning for remediation over the next financial year. This is made up of agreements we have already committed to An estimate of payments to merchants who have registered and are currently working with us on a resolution as well as those who have not registered and where we continue to try and contact them in case they may have overlooked our comprehensive resolution pathway. In total, the $13,300,000 in the incident costs compares to an indicative $15,000,000 we had provided in the half year account and has been updated for actual experience.
And finally, a word on M and A activity in the second half. The last quarter of FY 2021 was extremely busy, with the team concluding a business combination and an alliance. Approximately $4,700,000 in one off have been reflected in the results relating to these activities. We announced the alliance with Bendigo Bank in October 2020. Commercial completion occurred on 1 June 2021.
The key financial implications of the transaction in FY 2021 were an upfront consideration to Bendigo Bank of $9,000,000 which is carried as an intangible asset on our balance sheet. Total costs incurred in implementing the alliance of $3,700,000 And by way of results, Bendigo contributed 18,490 merchants to Tyros customer base, dollars N400,000,000 in transaction value in the month of June 2021. I will talk in more detail on the impact of the Bendigo Alliance on our balance sheet shortly. In pursuing investment in the health space, we acquired Medipass Payment Solutions on 31 May 2021 for a total consideration of $22,500,000 The acquisition of CELTIRA gained ownership of the multi sided platform, linking healthcare funders, healthcare providers and patients to streamline medical claims approval and payments. Approximately $1,000,000 in one off Expenses have been included in the results for the acquisition.
Normalizing for the terminal incident costs and the one off M and A expenses, Our operating expenses grew to $105,600,000 up 7.9% from $97,800,000 in the previous year. As per our comments last year, we managed expenses in the first half given the external uncertainties, including a freeze in both headcount and salary increases. We increased salaries at an annualized average rate of 4.4 percent effective 1 January 2021 after an 18 month period. You should factor this annualization into your forecast for next year. In breaking down our total normalized expenses, Excluding share based payments expenses, our staff costs of $75,000,000 equated to about 71% of total operating expenses.
Of this, 49% represents staff in product development and management, including information security, Sales and marketing made up 21%. General and administrative costs comprised around 19%, while while customer delivery was around 11%. The next largest category was the administrative cost category, which has gone down year over year from $16,600,000 to $16,100,000 a reduction of $500,000 mainly due to movements in licensing costs, which were circa $8,000,000 for the year, which is up $2,000,000 on PCP. Spend with our cloud based partners have gone up as we continue to migrate away from an on premise footprint, reducing future capital expenditure and maintenance requirements. We use industry leading SaaS providers, including AWS, which is our preferred public cloud infrastructure provider, as a preference over building non differentiated Commodity Services.
Training, travel and entertainment reduced by $1,300,000 given restrictions placed due to COVID conditions And savings across a number of other different categories of approximately $1,000,000 Given the competitive market in the technology space, We have arrangements with some of our suppliers where we can flex in particular development resources at comparable rates on demand. Total contractor and consulting expenses increased to $7,200,000 compared to $5,900,000 in the prior year. Marketing costs were slightly lower in the year at $5,400,000 compared to $5,700,000 last year. We were targeting in our market in the year and kept investment steady given external conditions. In spite of this, our prompted brand awareness increased from 14% to 20%, demonstrating effectiveness of our brand spend over the past few years.
Overall, therefore, our normal operating expenses grew $7,700,000 Our EBITDA grew from negative $4,400,000 in FY 2020 to positive $14,200,000 in FY 2021, demonstrating operating leverage. For completeness, some highlights on the noncash items. Share based payments expenses for the year was $9,300,000 down from $10,900,000 last year. The notable decrease was the runoff of the 1 off liquidity event performance rights granted in mid-twenty It is worth noting that the vesting of the remaining performance based rights will only occur on meeting specific growth Depreciation and amortization increased from $12,500,000 last year to $15,400,000 in FY 2021. The $2,900,000 increase can be broken down into $1,200,000 from the greater number of terminals, Approximately $900,000 in amortization of intangibles recognized from the Bendigo Alliance, with the remainder spread across a number of asset classes.
And then finally, our investment in paper plane in the first half as well as the change in the accounting treatment for our investment in Me and You to equity accounting Mainstream recognized about $1,100,000 in share of losses from associates. You should factor this non cash item into your forecast for next year as well. On the next slide, I provide an update of our key trading metrics trend over the last 6 years. This visual summarizes the profitability drivers on one page. If you could please turn to Page 23.
I spoke about the card mix as a key pullout in our half year results. If I broadly group the card types into 4 categories of debit, standard credit, commercial and international, The significant mix change from last year was a drop in international and a rise in debit. International cards generally have higher scheme and interchange fees assessed by the card schemes, which creates higher gross merchant service fee, but a lower gross profit margin for Tyro. On the other hand, debit card debt can reverse, reducing gross revenue, but increasing our margin relatively speaking. The changes in the mix of other categories was immaterial.
For FY 2021, the theme remains unchanged. The only difference is that the card mix change impacted the results for the full year rather than 1 quarter only last year. To provide some specifics, In the last quarter of FY 2020, international cards had dropped from 4.5% of total transaction value to 0.8%, while debit cards had increased from 56.6 percent to 61.5 percent. For the full FY 2021 year, Debit cards were 60.9 percent of total transaction value, while international cards were 0.7%. Anecdotally, Merchant service fees for international cards averaged circa 2.6%.
The average direct costs for these cards, however, are also just around 2.5 Leaving a very narrow transaction margin. For debit cards, including EFTPOS, the range in the last This year for MSF was between 39 basis points and 75 basis points, while the direct costs were between 9 basis points and 29 basis points. The average margin for debit cards was approximately 38 basis points. Our overall transaction margin for payments, therefore increased year over year by 1 basis point. You can see these dynamics play through on the trend lines on the page.
Our direct costs decreased sharply from 53.7 basis points to 42.4 basis points, driven by the full year impact The swing from expensive international cards to cheaper debit cards. 45% of our portfolio is priced on a cost plus basis, where we pass along any change in the underlying costs to the merchants. For merchants on this pricing structure, the reduction in direct cost was priced through, with a corresponding decline in the merchant services from 89.5 basis points to 80.8 basis points. Of the remaining portfolio, where Tayo takes a view on the merchant card mix in favor of a more simplified and predictable pricing structure, The cost reductions were accretive to gross profit. As a proportion of transaction value, our gross profit improved from 46.4 basis points in FY 2020 to 47 basis points in FY 2021.
We manage unit margins closely and the result of 47 basis points is a positive result when you Consider the challenges presented by COVID as well as the support provided by Tyra to its merchants by way of fee waivers. Syrah's business model is 1 of scale, with operating leverage coming through in line with the growth of the business. Operating expenses as a proportion of transaction value continues to progressively decline from a higher 60 2 basis points in FY 2017 to now circa 42 basis points in FY 2021. The gap between the gross profit and expenses line has consistently narrowed over the past few years and was delayed due to COVID in the last quarter of FY 2020. However, operating leverage can now be seen with a positive EBITDA result demonstrated in FY 'twenty one.
Please turn to the next slide for a summary of our financial position. We leveraged our strong capital position to complete investment in Paper Plane and Miu Miu during the year, The alliance with Bendigo Bank and the acquisition of Medipass, our balance sheet structure at 30 June 2021, As a result, it's quite different from 2020, and it is worth spending a few minutes on our financial position. Our cash decreased from $122,000,000 to $104,000,000 a reduction of $18,000,000 or $39,000,000 if you take out the banking business, which included deposits increasing from $50,000,000 to $75,000,000 and loans increasing from $12,000,000 to $15,000,000 Notable cash investments during the period were $18,000,000 in terminal purchases to cater for BAU growth, the Bendigo device swap out and to maintain a buffer of stock given COVID disruptions. $13,500,000 was paid in cash for the acquisition of Pedipass, representing 60% of the total consideration. The remainder was paid for in shares.
Dollars 9,000,000 for the upfront consideration of the Bendigo Bank Alliance and finally, Investments in associates of $2,500,000 The investments with Bendigo and MediPaths favorized the significant intangibles and goodwill that you see on the balance sheet. For Bendigo, the alliance does not meet the technical accounting definition of business combinations. The customer contracts and relationships acquired based on the initial agreement term of 10 years have been recognized as an intangible asset totaling $112,000,000 with a corresponding upfront liability taken on the balance sheet. This treatment is as a result of the alliance being structured with a view to gross profit sharing over the agreement term. Of the intangibles, the guaranteed component and the upfront consideration totaling $50,000,000 is a deduction to our prudential capital.
For MediPASS, we acquired 100 percent of MediPASS on 31st May 2021 for a total consideration of $22,500,000 Other than minor adjustments, the acquisition was classified as $5,500,000 for internally generated software, $2,900,000 for customer contracts and relationships and $13,700,000 in goodwill. I highlight that the purchase price allocation is provisional only, and this will be subject to a possible reset in the next financial year. As mentioned, the intangibles and goodwill are a deduction Our capital ratio reduced from 162% last year to 73%. The ratio is more efficient and remains solid to allow Tayo sufficient capacity to continue growing both its payments and banking businesses. Our banking business balances grew compared to last year.
We had taken steps to restrict our lending originations after a record And we ended up originating $25,800,000 in FY 2021, almost $20,000,000 of these originations were in the last quarter with May 2021 being a record of $8,100,000 As mentioned, we are looking to accelerate growth of this product into FY 2022. Deposits have been growing steadily year on year at moderate interest rates and provides Tyro with stable and cost effective source of funding As it ramps up lending growth, the Tyro bank account grew from $49,700,000 in FY 'twenty to $72,500,000 at 30 June 2021. In addition, we grew the term deposits product from $900,000 in FY 'twenty to $3,000,000 in FY 'twenty one. There are 2 other call outs in the balance sheet. An increase in current liabilities includes a provision for remediation of approximately $9,000,000 Based on a combination of agreements reached with our merchants and our modeled estimate of the quantum where we are yet to hear from the merchants despite regular attempts.
Additionally, for your FY 2022 capital planning, the step up in capital expenditure expected comprises Purchase of terminals and dongles to fund the FY 2022 growth, investments in new strategic projects internally to drive future growth and finally, The move to our new premises on 55 market trends early in the 2022 calendar year. That concludes the financial review for the year. Recapping the key takeaways. 1, executing on our growth strategy. Organically, we added $5,000,000,000 in transaction Value driving our top line growth with an additional $400,000,000 from Bendigo in the month of June alone.
In addition, We continue to invest strategically investing in Paper Plane, EMU. We completed the alliance with Bendigo Bank and we acquired 100% of Medipass solutions to accelerate our presence in the health payment space. Our banking business is still in early stages, but provides a strategic value add to our merchants within the payments ecosystem. Secondly, operating leverage demonstrated through economies of scale and the agility with which we can implement effective cost control measures when required. Our normalized EBITDA increased by $18,600,000 in the year, primarily attributed to the growth in our payments business and finally, a more efficient and prudent capital position.
Our capital has allowed us to pursue opportunities during the year, carry on delivering despite economic disruptions and sufficient to support our growth ambitions into FY 'twenty two. That is the financial update for the year. I will now pass back to Robbie for a trading update. Thanks, Robbie.
Thanks, Raj. And look, just to wrap up, if we could turn to Slide 2627. And look, just Although the COVID and lockdowns do remain unpredictable, I mean, our experience has been that the businesses rebound Rapidly as normality returns. That was experienced last year. That's definitely how things are playing out in the offshore markets currently.
So We remain optimistic, particularly as vaccination rates increase. It is an exciting time to be at horo. We've achieved a lot in the last year, But it's the opportunity in front of us that remains large and exciting. We have a mix of features and products in training that will continue to build out our payments ecosystem, Products such as the Toro Go Dongle, which I mentioned, which will open up new verticals such as trays and micro leachates and provide queue busing solutions for larger retailers. We're currently assessing our next generation terminal, which presents some exciting opportunities, including an impulse capability.
We're currently looking to extend our merchant cash advance product to make it available to a wider cohort of Tyro merchants with larger balances and advances available. And look, the digital claiming capability is now available from the MediPath acquisition, including state and federal compensation funds. We have an opportunity in combination with our existing health solutions to create a leading unified claiming and payments platform for Australian health care practitioners. As I mentioned earlier on, we've created I pay you both technical and commercial in creating our payments alliance model for Bendigo Bank, which is potential application to other market opportunities and this is an area we remain keenly exploring. And finally, we do definitely have an appetite for further bolt on acquisitions, whether large or small, so long as they present an avenue to gain scale, leverage to enhance our market position or supplement our ecosystem.
In terms of outlook, we're not providing specific But we do take this opportunity to discuss some early trading indicators and we'll provide an update on this at our AGM in early November as well. And look, just stressing that these data points are unaudited. So the highlights I'd call out, we've maintained our customer acquisition momentum with 2,205 new merchant applications received since 1st July. Our transaction value to the 20th August 24% on PPP to $3,640,000,000 And finally, our payments business gross profit The July was $10,200,000 up 34% on last year. So all those metrics are trending nicely in the right direction.
So We are definitely optimistic on the outlook. So look, that ends the formal presentation, and we'll move on to Q and A.
Thank Your first question comes from Bob Chen with JPMorgan. Please go ahead.
Hey, good morning. Just a few questions from me. I mean, in terms of the merchant acquiring momentum, that looks It is pretty robust. Can you talk a little bit about the types of merchants that you're bringing on? Are they larger or smaller?
As well as which particular verticals You're seeing it coming from?
Yes. Great question. Bob, look, thanks for the question. Look, in terms of the mix of the new the merchants we're getting, There has been no dramatic shift in the mix. So we've got a nice cross section.
We've got some nice large opportunities, which are in progress at the moment. But in terms of what we signed up in the last few months, very consistent mix with what we've said in the past. So it's in that SME Space predominantly, we are over indexed and still in the hospitality space. So no dramatic changes. We stay pretty focused on the verticals we're playing in at the moment.
And it really is not until we've got our new dongle solution that we can start pushing into some adjacent spaces. We still have an appetite, Bob, as we've talked about in the past to look at the accommodation vertical, which clearly that's remained A little bit challenged. So it is in appetite, but it's probably one that we won't start proactively pursuing Until probably calendar 2022, just given how the world's looking at the moment.
Okay, great. And then you mentioned in your closing comments that you said credit IT was the model that you have with Bendigo Bank and So looking at other market opportunities, I mean, in relation to that, I mean, what other opportunities are there? Are there further opportunities for these types of alliances with Of a books of merchants.
Yes. Look, Bob, I mean, the Bendigo transaction, yes, there was a lot of technical work that went into that to enable us to Provide that solution. And as I think most people know, there's 2 sort of paths that you could go down. There's an alliance model like we've done and then there's another Model out there in the market, which will involve more of a incorporate JV sort of structure. So we generally believe the alliance model is a Preferable structure, it really does align both parties to the right outcomes.
And I think we've got the models from a commercial view correct in the Bendigo transaction and also the technical solution, which we've invested in, is able to be redeployed elsewhere. So Well, nothing in training at the moment, Bob. We genuinely believe there are other Opportunities in that space, whether they come to solution, time will tell. But we have the tech, we have the commercial model and we have the appetite So actually look at those type of opportunities if they were to arise.
Okay, great. And then just finally, obviously Bendigo coming online from 1st June. That was pretty good. But I believe I think Melbourne will have been impacted partially by lockdown. I mean, if you sort of Normalized for lockdowns.
I mean, what sort of volumes would you have expected from that Bendigo book?
Sorry, Bob, you just broke up there in the last bit of that. I caught the first bit, but didn't catch the last second.
Yes. I was just trying to get a sense of What's the PTV that Bendigo book could represent if you normalize the lockdown?
Yes. And look, I mean, the July number $440,000,000 in transit value are pretty representative. We're very confident that business will generate the $5,000,000,000 The lockdown yes, the book for Bendigo is more skewed to Victoria and less so to New South Wales. So Victoria is the largest market for Bendigo. Queensland is the 2nd largest and then New South Wales is 3rd.
So it's Probably in a little bit better space just given how the world sort of playing out at the moment. But the best measure I can give you, Bob, is that So the $440,000,000 for July. And look, we've in a normal world, dollars 5,000,000,000 in annualized transaction value The run rate you'd expect in that business.
Okay, great. Thanks for that guys.
Our next question is from Brandon Carrig with Macquarie. Please go ahead.
Good morning, everyone. Just a quick one. Just on the investment side or on the OpEx side of things. I know that expenses were
a little bit lower versus expectations.
Is there anything you'd like to call out there? Because I think you had been flagging that you're expecting maybe We're going to jump up with additional hires. So can we expect more of an annualization impact or were there some additions sort of towards the back end of the period?
Yes. Look, Brendon, I might just back to first with that and maybe Pat might comment as well. But look, in terms of The hiring, we definitely are in the market to bring on more engineering team members. We have some significant projects, which we've called out For the year, and that will require more headcount. So you will see an expansion in the headcount definitely, and that's what we called out in that Capitalization number as well.
So it picks up those sort of 3 big projects, the Dongle, the New Terminal and Ecom. The and as Pat called out in his note, we did put 3 pay increases for the team after a period where everybody They worked with us through the COVID period, and those increases were just under 5% And kicked in from the 1st January. The other call out I just make there on the financial side is the We've changed our review cycle now, so we will be doing reviews on a calendar year basis. So you would expect to see in So 1st January, we see a bit of a pickup in them as well or increases at that period. But Paz, maybe I hand it to you.
Yes, great. Thanks, Robbie. Hey, Brennan. So just a couple of things, just to recap. Salary increases, obviously, for this year was after an 18 month period.
So that will run Through into the whole of next year, as Robbie mentioned, the expansion in headcount, a number of these have been Again, strategic projects though. So there would be a view taken on capitalization versus expense. As I mentioned always, about 35% of our expenses are in some sort of a variable size, so sales and marketing as we grow our business. So that will Continue in that equation in line with merchant number growth and applications growth. Marketing was 1 as well.
So we It's actively kept marketing steady this year just given all the external uncertainties in the year. Now that one we have flagged Previously as well. It is an area where we would be investing more. So I'd probably model that into your forecast as well. Okay.
That's clear. And then just another question, just
on the
churn. So year on year, the numbers were sort of fairly stable, but it looks like there was a bit of 6 in the half, nothing major, but just a little bit. Do you think that that was sort of off the back of the connectivity issues and things have stabilized Now? Or can you just provide a bit more color just around the churn side of things?
Yes. Look, nothing if you look at Merchant count churn, that's I mean, those numbers are excellent, right? So the slight variation has come through in the transaction value churn. And that is really just the way we measure that and the way we capture that. So if the merchant has been inactive for 6 months, they become part of that step.
So With the COVID lockdown, that number has increased a little bit. So I'd suggest to you, Brendan, there's nothing systemic in there in terms of most of The party, it's more the environment we're operating in. So if you're trying to look for an indicator in terms of the impact of the incident, I'd say Merchant count turns and on the lookout, and I've got to say, I'm very comfortable with that sitting. I think we have by stepping in, leaning into that And actually doing the right thing and getting behind the problem and providing the right response. I think we've managed as a team to come through that very strongly, and I think we We kept our reputation intact.
We kept our merchant base intact. And it's all about doing the right thing, which is one of our core values.
Yes. Okay. And then the last one I had, just a bit of a follow on from Bob's just on the merchant additions, which I think is definitely the highlight. Can you just maybe talk to the difference between May June? Obviously, very elevated in May that 1400 number that you mentioned.
And June, maybe some impacts from the big lockdowns that were starting and pre New South Wales. So just trying to get a sense of where you think That run rate might be was exiting in a more normal pre lockdown environment.
National, June was a very strong month as well. So I'm very comfortable with how we exited the FY 'twenty one Yes. It would not be unreasonable to expect New South Wales to see a bit of a slowdown with what's going on at the moment. But The thing I'd sort of call out to you, Brendan, is when we came through the first wave last year, we definitely saw a stop being an application in March April last year, but then it actually came back pretty strongly. And our takeaway there was even though things were still a bit Constrained into April last year, people were starting to look at their businesses and looking for efficiencies and looking at Yes, a number of their business solutions and we benefited from that.
So I've got to say, I'm quite bullish on The apps numbers, I mean, obviously, I'm looking at them every day, but we're seeing healthy trajectory. So I'm not feeling On the new apps?
Yes. Maybe, Jim, just what was keeping May so high? And I agree June was still a good month. I think that's probably It seems to be a reasonable exit point anyway. But putting that aside, was there anything specific in May that made it that record month?
It's a cracker sales day Brendan. You did a great job.
All right. Excellent. I'll leave it there.
Your next question is from Michael Aspinall with Jefferies. Please go ahead.
Yes. Good, Robin and Pravarthy for me. You showed headcount increasing. Is there a large part of that Bendigo deal? And what are your cost expectations just
in adding Bendigo to the platform for next year? Yes.
Look, the headcount wasn't so much driven by Bendigo. I mean, there was some extra headcount there in terms of key account management team members and customer service team members, But not predominantly through Bendigo. Look, the best guide I can give you on the Bendigo expense base is what we called out Back in October last year when we I haven't got the pack in front of me, but if you go back to that pack, we called out what the view on the operating expenses would be. The headcount increase, as I sort of pointed out, we are looking to increase our To some extent, our tech team, because we've got some projects that we want to execute and we do want to invest in those because we see them as key competitive advantages in market, Particularly things like the Dongle project in ECOM and the new terminal. So look, best I can give you is we haven't gone Line by line with the Bendigo 1, have a look back at that pack from October.
It gives you the best line of sight.
Okay. And this might be one for Pravs, but how are you accounting for the Bendigo gross profit? From memory, they're still retaining A trailing share of gross profit. Do you take all of that through the P and L or a proportionate basis?
Yes, that's a good question. So from a technical accounting Obviously, we are capitalizing the intangible. We're capitalizing the commission payable. And that's how it will come out in this statutory account. It hardly affects FY 2021, but a good one for FY 2022 onwards.
When we actually normalize our results, obviously, the profit share, we Put it back up above EBITDA because that is the commercial substance of it. So that's what we've done in FY 2021 June results as well.
Okay. So is it in gross profit though, the 100%?
It's in gross profit. The 100% gross profit minus the revenue share is in gross profit. Okay. So the gross profit is a lower number.
Okay. And then, yes, so I'm just trying to reconcile that contributing or Bendigo contributing in July I mean gross profit growth was 34% in July, which is well ahead of turnover growth of 25%. Can you
just talk to what's behind that there?
Yes. So the July growth last year, that's in the payment space. So I think in PCC, we had about $9,000,000 in Gross profit, of which $1,500,000,000 in July last year was JobKeeper. So if you notice, we went Negative in growth from April last year, right up till June, and then it slowly started recovering. Obviously, in July Yes, there is a combination of still soft because of the lockdowns and July being New South Wales and Victorian lockdown.
But the Bendigo book came back up with a total transaction value growth. I think that we had mentioned about 22% for the month of July.
Yes. So what was the driver of gross profit growth being higher than turnover growth?
All right. Okay. It literally is a card mix. So effectively, for as I mentioned in my spiel, The debit cards continue to be the key trend this year as well as the underlying costs of debit cards Decreasing for the year. Okay.
Compared to July last year.
Yes. So when did the change in the Cost of debit cards come through. Just trying to think about when we start titling that.
It came through towards the end of the Q1 last year This year. It came through by September 2020.
Okay. So we'll start cycling it kind of halfway through this half?
Yes.
Yes.
And then just last one for me. There are Quite a few new competitors emerging. We've heard from Woolworths on WPAY and Zelle has been in the What are you seeing on the competitive front in acquiring customers?
Yes, Mike. And look, it's the thing I love about the payment It's a hypercompetitive market, right? And you wouldn't be in this space if you didn't enjoy competition. And Tara is well used to. There's a number of players that have been in market we've competed with very successfully over the years.
And I've got to With the numbers we're seeing coming through the business in May, June and through July, August, very comfortable with our position in market. I think our solution, because of the way we focus on the verticals we work with and work in, we have got the best product in market. We've got the best solutions in market. We'll just keep focusing on our game. I'm very happy for the multitude of players out We'll keep focusing on what we do really well, which is having a proprietary stack, innovating and providing features which are right for the verticals we want to actually have a very strong presence in.
And I think we keep doing that right and we keep doing things like Toro Connect where we provide value adds and we provide merchants with the ability to do things a little bit differently, use their data better. I think they are the things that will make a big difference for our business and keep us winning share. As I said, still very small with 3.8 Of the term, there's a lot of opportunity there.
Okay, great. Thanks. That's all for me guys.
There are no further questions at this time. I'll now turn the call back over to Mr. Cook for closing remarks.
Thanks. So look, I'd just like to thank everybody for the time. I know we had quite a few people on the call. I think it was over 250 people. So look, appreciate everybody's time and interest.
And we'll call it to the day. Thanks.
This concludes your conference call for today. Thank you for participating. You may now disconnect your lines.