Smartpay first half profit slumps 90%

Smartpay Holdings [NZX: SPY], the listed payment terminal supplier, reported a 90% slump in first half profit and is in the process of rebuilding its business after losing a major wholesale contract last year.

In the six months ended September 30 net profit fell to $143,000 (or 0.08 cents per share) from $1.5 million (0.87 cents per share), a year earlier. Earnings before interest, tax, depreciation, amortisation and other charges sank 23% to $3.7 million on a 16% drop in revenue to $9.9 million, the Auckland-based company said in a statement.

At its annual meeting in September, Smartpay said earnings would probably decline to between $8 million to $8.5 million in the year ending March 31, 2016, from $9.2 million in 2015. The company didn't mention annual guidance in today's release.

"The result here represents the culmination of some challenges we faced and the tough decisions we had to make to move our business forward," the statement said. "The outcomes of these decisions, while not apparent in this period's results, are now showing clear progress and growth. While not yet evident in these half-year results, we expect this growth will be clear when we report our full-year results."

Smartpay anticipated the revenue loss when it decided to sell directly to Australia's taxi industry at the expense of its major wholesale contract, which ended in December last year. Since then, the company has been focused on developing its Australian TaxiPOS taxi payments business in the first half, and had made “substantial progress in growing this revenue and profit line,” it said.

"To date we have deployed and are earning revenue from over 1500 taxi terminals under our new model and have a substantial pipeline of opportunities which we expect will contribute to the ongoing growth of our Australian business."

Smartpay needs about 3000 terminals to replace revenue from its previous contract, with 1500 terminals representing about 7% of the Australian taxi market.

The company identified potential mergers and acquisitions among its strategies to reshape the business, saying it has a number of opportunities under consideration.

The board didn't declare a dividend.

The shares fell 6.7% to 14 cents, and have dropped 25% this year.

(BusinessDesk)

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