Tyro Payments Ltd (ASX: TYR) has released another COVID-19 trading update as part of its efforts to provide transparency into the impact of the pandemic on its operations.
Tyro’s shares are up 1.2% today, and up around 37% since a short report was published by Viceroy Research in January in response to its terminal connectivity issue.
Transaction value improves
The month of March began strong for Tyro, with total transaction value up 28% to $0.358 billion (up until 5 March). On a year-to-date basis, TTV was up 10% on FY20 to $16.4 billion, from $14.9 billion.
The terminal connectivity issue was first detected on 5 January, and despite there being nearly 500 merchants that didn’t have one fully operational terminal at the end of the month, TTV remained fairly resilient, with January and February values both up 10% on FY20. This was significantly lower than TTV growth in previous months, with December 2020 showing an increase of 19% on the pcp.
Are things back to normal?
Tyro indicated that the number of active terminals has returned to pre-accident levels as of the end of January, but it also said there were still a number of merchants who were affected by the incident.
Despite the challenges from COVID-19, Tyro managed to increase merchants in H1 FY21 by 13% to 37,000 and achieve gross profit and EBITDA of $61.2 million and $8.5 million, respectively.
These results were for the half-year ended December 2020, so it’s unclear at this stage how the terminal connectivity issue has affected the number of merchants that might’ve chosen to switch to another provider.
Are Tyro shares a buy?
Tyro shares remain on my watchlist for now. When the short report was released in January, it also appeared that there might’ve been a class action on the cards, which could have involved Tyro compensating customers for lost sales.
It doesn’t look like anything has eventuated from this as of yet, but it’s still something I’m mindful of.
Whichever way you look at it, the reputation of the company has been damaged by the recent incident, and it might take some time for the company to rebuild the trust of its customers.
In saying that, I like the disruptive industry that Tyro operates in and believe there is still a large growth runway in an area that’s typically been dominated by the incumbent banks.
There is also a potential reopening play as new businesses emerge, which could be further accelerated by COVID-19 towards cashless payments.
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