West continues to expand, and with satisfactory profitability. In 2016 the gross margin increased from 41 to 45 per cent and operating profit more than tripled in comparison with the previous year. Through our investment in card terminals we have achieved a significant increase in the value added of our products and services. Today West is a company where its core business consists of developing and supplying software.
During the last few years we have worked with the internationalisation of West. We have established a platform with several important strategic contracts, and we now have coverage in a number of exciting emerging markets, e.g South Africa, Asia and Australia.
Our focus will now gradually switch towards building up the business volumes on these markets. Our strategy on all these new markets is, by working through local distribution partners, to enable the further expansion of sales without high sales costs. This cooperation means, however, that we are dependent on the success of our partners. Their work of both technically and commercially rolling out new card terminals does not always take place at the pace we would like.
A lot of work is involved, from drawing up a contract with a new customer on a new market, until the card terminal can be put into operation. The most important aspects are the different certifications and approvals required by the card industry and the banks.
To simplify these efforts and to gain better control over our product offering, West has during the last two years also made extensive investments in technology. We have built up our own payment gateway, which gives us several advantages from now on. By having our own payment gateway that handles our card terminals we also reduce our dependency on external partners and we get completely new opportunities to further develop the business model, with for example transaction-based earnings.
I am especially pleased and proud that in January we could conclude a business deal with ClearOn, Sweden’s leading provider of financial services to the retail trade. The deal consists of two parts, where ClearOn has acquired the rights to our unique cash withdrawal service cash2go, which they will deliver to their whole network of payment service agents. Cash2go will in this way reach out to considerably more shops and consumers. ClearOn will also be an important partner for West in the development and distribution of future payment systems for small and medium-sized stores on the Swedish market.
The variations between quarters we have seen in 2016 will continue, where larger individual business transactions can be postponed. We do what we can to even out these variations, but always in consultation with the customer. As I mentioned earlier we have built up a solid platform of business contracts for the future, and 2017 is going to be an exciting and profitable journey of growth for West!
Sten Karlsson, CEO of West International AB