Release Date: March 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CAB Payments Holdings PLC (CABPF, Financial) reported a 7% growth in total volumes despite a declining overall market in 2024.
- The company expanded its client base by 7% and its network by 18%, indicating strong market presence and client trust.
- CAB Payments Holdings PLC (CABPF) maintained a strong CET1 ratio of 19.2%, showcasing its robust capital position.
- The company is strategically expanding its operational hubs to key financial centers like Amsterdam, New York, and Abu Dhabi to enhance proximity to opportunities.
- CAB Payments Holdings PLC (CABPF) is diversifying its income streams with a focus on fee-driven activities, enhancing revenue predictability and stability.
Negative Points
- Total gross income fell by 23% compared to 2023, primarily due to lower flows from IDOs and a stronger dollar impacting transaction values.
- The wholesale FX payments business experienced a 39% decline, highlighting challenges in maintaining previous revenue levels.
- Operating costs increased by 6% year-on-year, driven by investments in technology and new office spaces, impacting profitability.
- The company faced a significant reduction in cash conversion due to lower revenues and higher capital expenditures.
- Emerging market volumes declined, attributed to a stronger dollar and reduced demand for hard currency in key frontier jurisdictions.
Q & A Highlights
Q: How should we think about the impact of trade finance on the P&L and its capital intensity?
A: Neeraj Kapur, CEO, explained that while CAB Payments does not have the capital to be a large-scale trade finance provider, they leverage relationships with development banks and guarantee providers to support trade finance in emerging markets. This approach allows them to originate and service trade finance deals without significant capital strain, focusing on short maturity and high-return opportunities.
Q: Can you elaborate on how the payments and FX flows are becoming stickier and more relevant to clients?
A: Claire Gates, Global Head of Payments, highlighted that CAB Payments has enhanced its infrastructure to handle lower transaction volumes more cost-effectively through partnerships like Visa. This allows them to offer comprehensive solutions, including mobile wallets and account-less services, making their offerings more integrated and appealing to clients.
Q: How should we model the business given its FX and payments nature?
A: Neeraj Kapur, CEO, stated that while the business remains fundamentally an FX and payments organization, they are enhancing revenue through fee-driven activities. This includes providing additional services like local currency solutions, which add value beyond the traditional take rate and volume model.
Q: What is the competitive advantage in the same currency payments segment?
A: David Bee, Chief Commercial Officer, explained that CAB Payments' extensive proprietary network and strong relationships with central banks and local commercial banks provide a competitive edge. Their ability to offer constant liquidity and solutions across 120 currencies and 700 currency pairs makes them a major competitor in this space.
Q: How will the new product launches impact capital requirements and CapEx?
A: Neeraj Kapur, CEO, noted that the new product set is capital-light, focusing on fee-driven solutions rather than capital-intensive products. The CapEx will primarily support income-generating initiatives, with a reduction from GBP15 million in 2024 to GBP8 million in 2025, focusing on product development and regulatory compliance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
