Smartpay eyes Australia
Kiwi payment terminal company Smartpay is looking to break the banks' monopoly over point of sale payment technology in Australia.
At a special shareholders meeting in Auckland yesterday Smartpay's investors voted to accept a new $25 million banking facility with ASB in order to return the company's cashflows to positive territory.
Smartpay has also issued $13.5m worth of new shares, at 11.5 cents each, in a capital raising which the new debt facility was conditional on.
A dual listing on the Australian stock exchange has also been promised to shareholders before the end of the year.
Chief executive Bradley Gerdis, who has been in the top job about six months, said Australian banks were already passing business to Smartpay because it specialised in one of the few parts of the banking value chain that banks were willing to outsource.
Gerdis has been integral to restructuring the company's finances and making it a more stable proposition for investors. Previously Smartpay was securitising its future cashflows and selling them to third parties in return for lump sum funding, at high finance rates, to help fuel the company's fast growth.
Gerdis, alongside incoming chairman and Australian retail expert Ivan Hammerschlag, has replaced that high cost finance with bank debt and a fresh equity injection
Hammerschlag, former chief executive of Freedom Furniture and current chairman of ASX-listed Athlete's Foot owner RCG Corporation, said there was plenty more appetite in Australia for the company's proposition.
He said he was well known in the Australian capital markets and had been able to introduce Gerdis to both institutional and high net worth investors, some of whom had now taken shareholdings in Smartpay.
"If we wanted to raise more money we could have," claimed Hammerschlag after the meeting.
Smartpay's founding director and 13.3 per cent shareholder Murray Henshall said he was pleased with the pair's ability to secure interest in Australia and believed the company would now blossom.
Gerdis said banks were getting more demand from their customers for innovative payment products and software that they weren't able to provide adequately.
"They're passing us business they have merchants who may be existing customers with existing terminals who've gone to the banks and said, 'Look, we want this functionality through our payments terminal'.
"The bank puts it up the chain, but their guys can't or won't do it and it gets shifted to us."
Smartpay already had over 11,000 terminals in Australia, including 7000 in taxis, but the total market numbered about 800,000 terminals, Gerdis said.
Having previously set up an independent network of cash machines in Australia as founder of ASX-listed Customers Ltd, Gerdis said the key to the Smartpay business was not to compete with the banks but find a point in the value chain that they would be happy to outsource.
He likened payment terminals to Apple's iPhone and its accompanying App Store, saying that merchants were increasingly demanding customised applications which Smartpay was already developing through its in-house software engineers.
Last month the company announced a loss of $12.1m after tax for the year to March, after a 39 per cent drop in revenue. Much of the downside was due to restructuring costs including $6.1m worth of balance sheet write-downs while Australian revenues were up 105 per cent to $6.3m.