Smartpay turns to Australian taxi market for margin growth

Tuesday 9th September 2014

Smartpay, the listed payments terminal supplier, said it will sell into the taxi market in Australia before the end of the year to counteract a forecast 8 percent revenue drop that followed the loss of an Australian contract in December.

The NZ-based company told shareholders at their annual meeting in Auckland that the current relationship with an Australian taxi payments provider supplying Smartpay's terminals directly to taxi drivers across Australia will end on Dec. 31. To make up for the loss, Smartpay is launching Smartpay Taxis to participate directly in Australian taxi payments rather than as a wholesaler. The new service is expected to take time to develop but would eventually earn higher margins, said managing director Bradley Gerdis.

He said the company sees another year of positive growth despite the expected reduction in contracted Australian taxi revenues in the last quarter of the financial year.

Smartpay doesn't typically provide formal profit guidance, but projected another year of overall positive growth. In the 2013 March year the company's significant restructuring paid off with a milestone net profit $1.7 million from a loss of $5 million a year earlier. Australian growth was slower than expected while the New Zealand market, where Smartpay has about 30 percent of the market for eftpos terminals, remains strong and provides good cash flow for growth.

Gerdis said the company has added 1,000 terminals over the past nine months in Australia. The opportunity for growth is much higher in Australia, which has 800,000 Eftpos terminals compared to around 120,000 in New Zealand and a shift was only just beginning towards players other than banks supplying terminals directly to merchants - a move that has already occurred in the local economy.

The Australian taxi market was undergoing significant structural change, driven primarily by regulatory change, with the state of Victoria mandating a 50 percent drop in the $10 surcharge on card payments in February and other states set to follow, Gerdis said. New technologies such as booking apps for smartphones were disrupting the industry. Smartpay's taxi payment system which has a mobile booking app for smartphones and in-car payment terminals.

Smartpay's focus for the next six months is on new technologies, particularly for services for mobile phones. Its Till2Go mPOS product is aimed at smaller businesses such as plumbers or even retailers to take payments from customers in store. Last month the company said it will provide payments technology for ASB Bank 's mPOS product, which allows merchants to securely accept both credit cards and pin-based Eftpos/debit cards in stores. It is rolling out its new mobile payment terminals to tablets and smartphones.

Smartpay is still awaiting certification from Australian banks, which is expected to take six months. The company may add a third bank supplier relationship to the two it already has in Australia.

Shareholders criticised the company's marketing at today's AGM, saying they wanted it to be more than a quiet achiever and should spend money making more of a splash to get a share price boost.

Gerdis said unlike some competitors Smartpay waited until it had developed ideas beyond a pipedream before making announcements. Brian Gaynor, of Milford Asset Management which has invested in the company, said Smartpay needed to smarten up its communication with shareholders. But he was pleased with its overall progress and said last year's acquisition of terminal provider Viaduct had added depth to management, freeing Gerdis to tackle Australian opportunities.

When questioned over the lack of a dividend, chairman Ivan Hammerschlag said the company would start paying a dividend once it was more certain around revenues and how much capital was required for growth and that was unlikely in the current financial year.

BusinessDesk.co.nz

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