ANNUAL REPORT 2016
PAYMENTS FOR A NEW ERA
At VocaLink we operate a world-class payment system that enables money to flow smoothly and in real-time, driving the UK economy. In 2016 we processed 11.7 billion transactions, up 4% on 2015. Transactions through the UK Faster Payments System increased by 14%.
Our UK business is a profitable, well-oiled machine that continues to perform strongly, enabling us to innovate and invest in new products. Internationally we continue to service our customers in Sweden and Singapore. During 2016 we launched new programs with The Clearing House in the US and National ITMX in Thailand. We see a number of further opportunites in North America, Asia, the Middle East and Latin America.
The diversification of our business has enabled us to fill the order book beyond 2016, both by securing existing contracts and by winning new ones. Our anticipated acquisition by Mastercard should enable us to further build momentum in our international business.
Our 2016 financial performance was strong, with revenues increasing by £13m to £195m. This includes a growth in revenues from new markets of £15.3m to £26.6m. We achieved an underlying EBITDA* of £73.7m (2015: £64.8m), operating profit of £18.6m (2015: £8.6m) and a cash balance of £35.7m.
We successfully renegotiated the LINK contract, a key step to securing our underlying UK business and strengthened our capability in developing cheque clearing products. Agreements with Discover and Union Pay will enable their cardholders to use ATMs in the UK, expanding the use of foreign cards and driving ATM transactions.
We’ve secured a healthy order book for 2017 with a strong new business pipeline set for 2018. Immediate Payment Solution (IPS) for The Clearing House in the US and PromptPay in Thailand are on track for roll-out in 2017. Pay by Bank app consumer payments service was launched in June to 3m Pingit customers and we engaged with government, banks and industry parties for our Accura system to help combat growing global transaction fraud.
The anticipated acquisition by Mastercard, which we hope to conclude in the first half of 2017, is a significant achievement. In Mastercard we will have a new shareholder and partner who shares our vision of transforming payments on a global scale and providing economies with more payment options than ever before.
A sizeable increase in capital investment from £35.7m in 2015 to £55.3m in 2016 is testament to our commitment to diversifying and expanding our products, services and international footprint. As a result of our success and new business wins internationally, our customer base has broadened and their needs have evolved. In order to meet these needs we have optimised our ways of working, both in terms of structure and process.
In the UK we’re providing input to the UK Payments Regulator’s newly established Payment Strategy Forum. As markets across Europe start to digest the implications of regulatory efforts to increase competition and open the payment landscape, we’re preparing our customers for the European-wide PSD2 Directive, the Open Payments Initiative and convergence of global payment standards.
As well as receiving national recognition, VocaLink’s work has also been highly praised on an international level with a number of award wins accumulated from across the industry. These accomplishments illustrate our unrivalled payment industry expertise and reinforce our solid reputation as both a sector leader and an employer.
In 2016 we launched Accura, delivering fact-based, timely insights that help businesses to make informed decisions and providing advanced Management Information (MI) services. We also explored ways in which we could detect financial crime throughout the UK payments network.
We continue to invest in our underlying infrastructure and in our people to drive innovation and to meet the growing needs of our international customers.
Real-time is an essential component of innovation in payments today and delivering world-class payment technology will require sustained investment.
With the precedent for our international business now set and the diversification of our offering well underway, 2017 will be about translating early successes into a significant global pipeline of opportunities, deepening our international relationships and realising limitless payment choices for customers.
Combining improved efficiencies with industry-leading customer service and world-class execution is vital to our success in the UK and internationally. As the business grows in 2017 we are instilling the discipline to ensure that any improvements we make to our UK capabilities are reflected throughout our international businesses.