Smartpay Undertakes $4.3m Private Placement

Smartpay Undertakes $4.3m Private Placement
Additional Funds To Provide Working Capital

Smart Pay (NZX: SPY), New Zealand’s leading merchant services provider today announced it has raised a further $4.3M through a placement of shares that will be used as working capital to meet customer orders and deliveries.

To remain within the NZX rules, the capital will be issued in two tranches with an initial $1.1M of shares being issued immediately. The balance of the shares will be issued after the AGM, planned to be held on 4th October, and is subject to certain shareholder approvals being obtained. The funds will be used to the provide working capital needed to ensure the high volume of corporate sales are delivered within the timeframes agreed with its customers.

SmartPay’s Ian Bailey says that the Company has already secured and has either in trust or contractually committed the entire $4.3M and does not expect to have to raise any further working capital in the near future.

“SmartPay has grown rapidly over the last year and has been expanding and developing its business using internal cash resources. As signalled in its annual report, SmartPay needs to ensure its capital base and ratios are appropriate for its business growth and direction,” says Bailey.

“The capital markets have been very difficult over the last year, with low investment into smaller companies listed on the share market, making the ability for SmartPay to raise $4.3M a huge endorsement of its direction, strategy and announced performance. The placement, at 2c per share, was made to a number of private individuals and investment companies, and will increase working capital, and support the balance sheet, providing funders and shareholders with a more robust company. “

Bailey adds that it is important to note that the market capitalisation of SmartPay increased from circa $8M to almost $30M after the purchase of the ProvencoCadmus payments business last year.

“Significantly, we see further significant growth potential for the business. This placement, whilst at a major discount to market, is not expected to have any lasting effect on the overall market capitalisation of SmartPay but ensures that the company strengthens its balance sheet, ensures it has the working capital to meet its sales obligations and provides a solid basis to implement its growth plans.”

In addition, Bailey notes that the new investors, and the market, seem to be starting to recognise the value of SmartPay.

“Investors have noticed that our core business is in the development of customer bases with recurring revenues streams as opposed to one-off sales. We have canvassed a number of shareholders and they have indicated their support of the placement which will require certain shareholder approvals at the upcoming AGM. Given the growth and turnaround that SmartPay has demonstrated with a 16% growth in revenue for the financial year ended 31 March 2010 and an improvement in gross profit of 533% over the previous year – this all augurs well for another great year,” says Bailey.

Bailey adds that SmartPay continues to renew as well as secure valuable contracts with big brand names including the likes of Restaurant Brands, Mitre 10 and Postie Plus.

“SmartPay has worked hard to grow its merchant customer base as well as benefit from improved margins which are really starting to show in the significantly improved performance of the Company.”

“SmartPay is now performing well with a series of significant sales. This gives us the scale to achieve sustainable revenue growth. All of this is expected to translate into an improved bottom line with higher margins helping ensure that SmartPay remains on track for a projected operating profit of between $7 million and $10 million for the 2010 – 2011 year,” says Bailey.

The Company also advises that it intends to undertake a share consolidation. This will follow the AGM and the issue of the balance of shares under the current share placement, on the basis of a one for ten consolidation. It will consolidate the number of shares on issue from approximately 1 billion to closer to 100 million. The consolidation is expected to move the share price out of the current low priced trading to a more acceptable level.

ENDS

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