Tech Chat – November 2020
Powering donations to Children in Need
This week, we take on the role of the narrator in How Do They Do It? to explain how Children in Need maximise donations by text to support disadvantaged children and young people around the UK.
It’s Children in Need tonight and that has always meant the return of a big yellow bear to our screens. Years ago it also brought the reassuring warmth of Sir Terry Wogan’s broad brogue; non-uniform school days with a pocket full of 50ps; and occasionally dressing up as the ‘118 Runners’ to race around a freezing cold field.
Most children probably won’t have any idea what 118 now is, with easy access to Google removing the need to call someone to ask a question. Donating to charity has also changed because of the internet, as you can now go online, enter your details, enter your address, enter your card details, and then click for gift aid. But that process isn’t very impulsive, and charities lose donations as people stop mid-way through and don’t return to finish their donation. Instead, texting a code is a great option, and as the COO of Children in Need has said: ‘Mobile is such an important channel for maximising donations, helping us to raise as much money as possible to support disadvantaged children and young people around the UK. Donating by text is a quick and simple way for people to help change young lives.’ In April this year for The Big Night In Appeal, mobile donations raised Children in Need and Comic Relief £10.3m of the £27.3m total on the night.
Powering these mobile donations was Fonix, a mobile payments and messaging platform that we are delighted to have IPO’d in October and initiated on this week. It connects clients, consumers, and mobile phone companies so that consumers can easily pay or donate through their mobile phone bill and avoid filling in cumbersome details. Its proprietary, cloud-based platform can handle over 2,000 transactions per second, and readily scale for major events such as Children in Need tonight.
To make sure it is thoroughly prepared for its clients’ plans throughout the year, Fonix focuses on developing strong, close relationships, and this level of strategic integration enables Fonix to evolve its platform to meet and exceed its clients’ expectations. Proof of that comes from Fonix experiencing no churn from major customers in the past 6 years, and feedback from clients such as radio company Bauer Media (Kiss, Magic, Planet Rock, etc) that: ‘No one knows the broadcast market better than Fonix. Our audiences expect the best from Bauer, so naturally we chose to work with the best supplier in this space. The products that Fonix have presented us with enable us to provide listeners with a great experience when engaging with their favourite radio shows’; or from Comic Relief of: ‘Fonix have provided a fantastic technology and support function to the charity. Fonix’s platform continues to demonstrate its ability to handle mass volumes of donations and generate ground-breaking fundraising to support our cause to help vulnerable people in the UK and around the world.’
As you’d expect, Fonix only aims to cover its costs from its work with charities, so that as much as possible of the funds donated flow through to the charities. However, its work with charities demonstrates the potential of its platform to clients from a wide range of sectors, and the successful execution of its strategy has grown Fonix’s gross profit from £3.7m in FY17 to £10.0m in FY20. The operational gearing of Fonix’s platform has then translated FY20 gross profit growth of +22% to +36% in EBITDA, and after this strong performance, we’re conservatively forecasting gross profit, EBITDA, and EPS growth of just +11-12% in FY21 and FY22. That leaves ample room for upgrades, and at a current 12 month forward valuation of 12x EV/EBITDA, an EFCF yield of 6% and a dividend yield of 5%, we think Fonix is definitely worth taking a thorough look at.
You can also try out its platform tonight if you donate through your mobile to Children in Need, and as we can all only remember what it was like when we could see other people/groups of people at the moment, we hope you enjoy however and whatever you do for Children in Need this year. Thankfully, with schools open a major part of the day can still take place, and this morning parents up and down the country will have been saying ‘Don’t forget your 50p!’ Alongside the 118 Runners that could soon become a memory too though… and thankfully we can all donate by mobile through Fonix instead.
Happy Friday