SMARTPAY - PROJECTS $4.5M TURNAROUND IN EBITDA
Thursday, March 04, 2010

SmartPay (SPY:NZX), New Zealand's leading merchant services provider, today announced market guidance for its operating (EBITDA) profit for the year to 31 March 2010 of between $1.5M and $2.0 million compared to the previous full year result of -$2.523 million, a projected EBITDA turnaround of approximately $4.5 million.


The outlook is a pleasing one as it demonstrates SmartPay has delivered on the plans and strategies established by the board and management over the last 12 months.

The profit guidance follows the recent purchase of the ProvencoCadmus payments division combined with a restructuring programme that returned the Company to profitability in September 2009. The expected operating profit for the 12 months to 31 March 2010 includes considerable one-off costs relating to the acquisition of ProvencoCadmus.

Ian Bailey, Managing Director of SmartPay says the Company also  secured the services of corporate advisers Holland Corporate, a Melbourne based advisory firm, to review SmartPay's strategy, business plan, trading performance, capital structure  and provide  advice in terms of balance sheet and related financial structure.

"The review confirms the strategy and direction of the company and based on current indications, SmartPay is expected to deliver on its forecast evidencing strong growth in cash flows and profit performance. In addition, we will also continue to investigate ways to strengthen our balance sheet and retire short term debt."

Bailey adds that the market guidance is given with only six months' trading of the ProvencoCadmus business included, which validates the underlying operating structure and business model used by SmartPay. The SmartPay business model allows for ongoing and recurring revenues and is a marked move away from the internationally focused "box moving" strategy of ProvencoCadmus.

"The SmartPay model has always been about building our customer base and providing a bundle of services, which are a combination of value-added services from payments and telecommunications through to marketing and media, utilising broadband as a delivery mechanism."

Guidance for the 2010 financial year follows recently announced EBITDA guidance for the 2010 - 2011 financial year of between $7 million and $10 million.

"We are encouraged that the independent review conducted by Holland Corporate concluded that if SmartPay continues to deliver to its business model then it is fundamentally sound with a robust financial engine driving the business. The review not only confirms SmartPay's strategic direction but it also provides investors with confidence in the company's future."

Importantly, the review also demonstrated that SmartPay's business model is potentially highly profitable, "and we are already starting to see strong signs of this", says Bailey.

Holland Corporate has also been involved in the identification and management of the debt raising required to complete the ProvencoCadmus payments acquisition as well as obtaining short term debt to fund working capital.

Bailey says: "Until we could show banks that we have a successful and repeatable financial plan and business model, which we now believe we are on course to achieve, finding the funds necessary to complete the purchase of ProvencoCadmus and allow adequate working capital required the company to look towards third party mezzanine funders.

"As part of the recent funding round, SmartPay has raised a further $3.050 million of working capital for a term of 9 months. This facility was negotiated at short notice. It accrues interest at 16% per annum and includes the requirement for the Company to issue options with each option entitling the holder to subscribe for one ordinary share in SmartPay, at 5c per share, on or before 14th October 2010. 61,000,000 options were issued in total to provide 100% cover of the funding committed. It is pleasing to see that in one of the hardest credit markets for many years, SmartPay still attracted investors who have invested a further $3.05 million on the back of raising $6 million to fund the purchase of the ProvencoCadmus payments division."

Additionally, should all options currently issued be exercised, this will provide the company with additional equity of $5,151,353 by November 2010, further strengthening the Company's balance sheet.

Bailey also adds that "SmartPay, in conjunction with Holland Corporate, is also working on a programme, during the course of 2010, to refinance existing debt facilities into traditional bank arrangements.  It is anticipated that as SmartPay continues to demonstrate that it is delivering on its plans this will have the added benefits of lowering interest rates and importantly establishing a relationship with organisations that understand and support our business and will assist SmartPay to implement its growth plans."

The Company has already indicated that it will continue to look for strategic acquisitions that will add value to the business and increase shareholder value.

"It is therefore important to ensure that we work closely with a major bank as we expand. This will now be possible as banks, shareholders, investors and the market can see that SmartPay's model works, the company is profitable, with significant opportunities going forward."

ENDS

 

For further information contact:

Ian Bailey, Managing Director, SmartPay Ltd, Mobile +64 21 664 941

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:

  1. Telecommunications products and services including Voice Over IP, Broadband, EFTPOS terminals and secure EFTPOS  internet connectivity
  2. Audio and video, music, messaging and media via its Retail Radio product set.
  3. Prepayment products and transactional processing services dominating the Taxi industry in NZ.

 

SmartPay Core Products include:

•           Wi-Fi - largest network 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)

 

For more information visit - www.smartpay.co.nz