Cautious Tyro Payments upgrades earnings ahead of ‘soft’ 2023

Tyro Payments bookends a tumultuous period by upgrading its earnings guidance, but the payments group warns tougher times are on the horizon as interest rates bite.

Tyro Payments has upgraded its earnings guidance on the back of strong customer growth and a jump in transaction values – but predicts activity will soon soften as interest rates bite.

The payments group on Monday told investors it now forecasts transaction value of between $42.5bn and $43.5bn for the six months to December 31.

The prediction is up from the previous range of $40bn and $42bn and will deliver an improvement to gross profit, which is likely to be between $187m and $191m.

“The first half of (this financial year) has been exceptionally strong, however in forecasting the second half of (the year), we are taking a cautious approach and have allowed for some softening of consumer trading conditions due to rising interest rates and other macroeconomic factors,” Tyro chief executive Jon Davey said.

Tyro told investors that statutory profits were up 45 per cent on the previous corresponding period to $102.8m with transaction value up 37 per cent to $21.7bn. Mr Davey said the increase in values was driven by a 9 per cent jump in its merchant base, growth in customer applications, and loan originations.

“External factors such as the absence of Covid-19 lockdowns and inflation have also positively impacted Tyro’s transaction values, particularly in our hospitality and retail verticals,” Mr Davey said, adding business loan originations were up 101 per cent.

Tyro said its cost reduction program was on track to achieve a $11m reduction in annualised cost base, which Mr Davey said would result in a “leaner and more efficient business”.

“The resulting focus has facilitated the accelerated delivery of key strategic priorities including the Tyro Go reader, the Tyro Pro next-generation terminal, and automated onboarding,” he told investors on Monday. “They provide a strong foundation from which we can build new customer experiences and drive further operational efficiencies.”

The results bookend a tumultuous period for the fintech.

In December, Tyro’s stock fell 20 per cent in one day after its board drew the ire of investors when it dismissed a takeover bid from Potentia Capital and Westpac ­walked away from takeover talks. Tyro rejected Potentia’s revised proposal of $1.60 per share, declaring the offer “continues to significantly undervalue Tyro and … is not in the best interests of shareholders”.

Separately, Westpac notified Tyro – backed by Atlassian founder Mike Cannon-Brookes’ Grok Ventures – that it would not submit an offer after deciding a deal was “not in the best interests” of its shareholders.

Robbie Cooke left Tyro, where he was CEO, in October after being appointed to the top job at Star Entertainment.

Its chair, David Thodey, will exit Tyro in February.