SMARTPAY POSTS REMARKABLE TURNAROUND
Thursday, May 26, 2011
12 Month EBITDA$7,155,000 Improves By More Than 250%
AUCKLAND, 26 May 2011 - SmartPay (NZX: SPY), a leading provider of payments and transactional solutions in New Zealand and Australia, today announced its financial results for the year ended 31 March 2011 with record earnings before interest expense, tax, depreciation and amortisation (EBITDA) of $7.155 million. Consistent with the previous year EBITDA encompasses all income from terminal rentals including the finance component.
"Two years ago we set ourselves a very tough objective and provided market guidance to grow our EBITDA, take actions to improve cash flow, and develop significant on-going and recurring revenues," says SmartPay Managing Director Ian Bailey.
"The board is extremely pleased with the result. The SmartPay team has achieved the goal and delivered a 252% improvement in EBITDA, off the back of improved sales and significantly improved gross profit. Further, we have posted our first net profit after tax, albeit modest, even after significant interest costs."
Financial highlights for the year to 31 March 2011:
- Revenue, up 20% to $47.3 million (2010: $39.4 million)
- Gross profit, up 86% to $20.6 million (2010: $11.1 million)
- EBITDA at $7.155 million, up 252% (2010: $2.0 million)
- EBIT of $3.4 million compared to an EBIT loss of -$245k in 2010
- Net Profit after tax, $0.1 million, a turnaround of $2.7 million (2010: -$2.6 million)
"SmartPay has demonstrated success, proving the inherent value in the company's business model and strategy. The directors are confident that the business is capable of delivering long term and sustainable earnings growth," says Bailey.
The company's financial performance is matched by its operational performance, with a number of important steps taken to position SmartPay for future growth including:
- An imminent ASX listing to deliver improved shareholder value and liquidity.
- The launching of SmartPay Subscriptions Limited - to bulk fund the company's rapidly growing rental book at lower interest rates.
- Launching a Redeemable Preference Share offer to reduce corporate funding costs.
- Restructuring of manufacturing function to an outsourced manufacturing model.
- Obtaining certification - on both sides of the Tasman - for the PAX range of EFTPOS terminals and related products.
- Winning a significant amount of new business with some of New Zealand's best known retail brands.
- Expanding its sales development programmes into the Australian market.
"Next year we expect to maintain or improve our EBITDA despite volume reductions in New Zealand as the terminal replacement programmes concludes mid-year. Growth is expected from our Australian business as the market there requires an estimated 600,000 terminals to be replaced over the next 3 - 5 years. However with reduced overheads, better margin controls and lower interest costs we expect to see further increases in bottom line profit, with this continuing to increase for the foreseeable future as the ongoing recurring revenues streams of our subscription model continue to bring value to the business."
Bailey adds that SmartPay is also pursuing the company's ASX listing to increase liquidity and increase shareholder value.
"The ASX listing is also desirable as P/E values for companies similar to SmartPay are currently in the 10 - 14 range on the ASX, whilst SmartPay, on the NZX, remains at a P/E of around 5. Additionally, there are also significant opportunities to grow the business both organically and by acquisition in our core target markets in Australia.
"SmartPay already has a base to start from in Australia with relationships with Live Group, Bendigo Bank, and selected target vertical markets such as the club market via our relationship with Generate Group.
"After consolidating SmartPay's success in the New Zealand market, now is the right time to increase our expansion into Australia. We want to take advantage of significant opportunities using the same financial model we use in New Zealand as many of our corporate customers are Australian-based or have Australian affiliates.
"As a leader in our field, with a unique range of added value services we believe that we can replicate our success in Australia, and already have proof that our model works in that market," says Bailey.
During the year, SmartPay appointed Chief Executive Officer Andrew Donaldson, who is responsible for the New Zealand business, as Managing Director Ian Bailey and Australian-based Chairman Wayne Johnson oversee the push into Australia supported by other New Zealand based executives and sales staff.
Bailey adds that SmartPay will be seeking a full ASX listing, comprising a prospectus and full application to the ASX for access to the main board. The company's current intention is to maintain dual NZX/ASX listings.
"Naturally, we are devoting our most experienced managers and executives to this initiative. As part of this process we have already met with a number of brokers in Australia who are showing interest in supporting the stock."
With a record of three consecutive years of sales, gross profit and EBITDA growth, SmartPay wouldn't be resting on its laurels, says Bailey.
"To the contrary, we have achieved what we said we would do, but there is still more to be done. In New Zealand a key focus is to access more cost effective funding so that we can reduce interest costs and improve our bottom line, whilst in Australia it is to grow the business.
"In New Zealand, we have already secured Kiwibank as a funder for our rental book, and together with our wholly owned bulk funding subsidiary SmartPay Subscriptions Limited and the issue of redeemable preference shares we expect to see interest costs decrease significantly in the coming years.
"Now that we have delivered on our guidance, we expect that main stream banks will begin to regard SmartPay in a new light, and help us lower our cost of funds even further."
During the current year, SmartPay achieved certification for the PAX EFTPOS terminals in both trans-Tasman markets and moved to an outsourced manufacturing model to reduce costs and investment in inventories. China-based PAX is the fifth largest EFTPOS terminal supplier in the Asia Pacific markets, producing more than 300,000 units per annum.
SmartPay will offer customers a wider range of PAX-manufactured EFTPOS hardware - including S80 counter tops, SP30 pin pads, S90 mobile, S90 Wi-Fi - and software at the forefront of compliance and security standards.
SmartPay's focus will continue to provide value added payments and transaction solutions - using a rental model - to corporate and retail merchants in Australasia. The company is also well positioned to capitalise on emerging technologies such as contactless cards, mobile payments and Internet payments to drive further revenue.
"SmartPay's future is very bright. It is pleasing to announce this result, which is one that every SmartPay employee and director can be proud of."
For further information contact:
Ian Bailey, Managing Director, SmartPay, Mobile +64 21 664 941
Wayne Johnson, Chairman SmartPay Mobile +61 411 544 449
Andrew Donaldson, CEO, SmartPay +64 27 255 4682
Julien Leys, JML Communications, +64 21 655 598
About SmartPay Limited
SmartPay is a leading provider of integrated merchant services utilising the Internet and broadband connectivity.
SmartPay's product set includes:
- Telecommunications products and services including Voice Over IP, Broadband, EFTPOS terminals and secure EFTPOS internet connectivity
- Audio and video, music, messaging and media via its Retail Radio product set.
- Prepayment products and transactional processing services for the taxi industry.
SmartPay Core Products include:
• Wi-Fi - one of the largest networks in New Zealand
• In-store Audio Visual Promotional Systems - Retail Radio
• Internet enabled EFTPOS equipment sales and rental
• Gift Cards
• Secure Internet Payments
• Mobile Top-up
• Calling Cards
• Bill Payment Solutions
• Voice over IP (VOIP)
• Online Payments
For more information visit - www.smartpayltd.com