Tyro bets on healthcare, banking after profit jump

The payments company expects the subdued activity in retail shops, restaurants and hotels to continue, but pick up towards the end of the year.

A Tyro Payments eftpos machine. Picture: Supplied

Tyro Payments expects subdued activity in retail shops, restaurants and hotels to continue in coming months but sees a pick-up towards the end of the year, and said its expansion into banking services and non-discretionary industries such as healthcare should support profitability.

The payments company reported a 10 per cent increase in gross profit to $105m for its first half ending December, despite sluggish activity in its core retail and hospitality sectors. Higher fees, a shrinking staff base and better managed margins helped the result.

Sharp increases in interest rates have hit transaction volumes in retail – its second-largest client sector – which were down 2.1 per cent to $5.4bn. Transaction volumes in hospitality – its largest sector – grew 1.8 per cent to $9.5bn, despite a 4 per cent decline in merchant customer numbers.

Shares fell as much as 15 per cent to $1.02 each in morning trading, before recovering slightly to be trading at $1.13 at 11:56am AET.

Chief executive Jon Davey said that in the context of a challenging operating environment, the results had been “strong” and were driven by an ongoing focus on margins, cost management, and growth from non-discretionary health and services verticals.

Asked what had disappointed investors to such an extent, Mr Davey said: “we will be meeting with investors over the coming days … so we’ll get direct feedback I’m sure.”

Net profit after tax of $5.1m for the six months ended December surged over four times year-over-year, and was better than the expectations of analysts polled by Visible Alpha ($4.7m).

But earnings before interest tax, depreciation and amortisation came slightly below expectations at $27m, while full year guidance for overall transaction volumes was downgraded to between $43bn and $44bn for the full year.

Tyro Health saw a record 31 per cent increase in customers and a 24 per cent increase in transaction value $3.1bn, thanks to the non-discretionary nature of payments in that industry.

Overall, transaction value rose 2 per cent to $22bn during the half, on track to book between $43bn and $44bn for the full year ending in June, it said. Tyro also said it expects to post gross profit of between $208m to $215m for the full 2024 financial year.

No dividends were declared.

“Despite the macroeconomic environment, we are confident in the resilience of our business and opportunities for growth,” Mr Davey said.

“Our disciplined approach to operational efficiency and cost management has paid off and is engrained into our way of working”

He said the company would expand “at least one” new vertical this calendar year. Tyro’s vertical offering – currently across four industry sectors – include payment terminal solutions, deposit products and cash flow lending.

Mr Davey said the company was facing intense competition in the sectors it operates, including from the big four banks, – particularly CBA and NAB in healthcare – local fintech firms and global tech companies such as Square in the retail sector.

“We are seeing higher levels of competition … but the other factor that is certainly coming into that is discretionary spend by consumers, which we have seen moderate.

“We would hope and expect that we will see some pick up in the second half of this calendar year, but as we all know there’s a number of factors that will come into that.”

Gross profit from its banking business rose 56 per cent to $7m, thanks to the high net interest margins from its loan products, it said. Tyro is targeting to produce about 20 per cent of its profits from banking, up from about 7 per cent currently.