21 Feb 2012

SmartPay issues profit warning

7:52 am on 21 February 2012

Eftpos services company SmartPay has warned it is unlikely to meet its full year earnings targets.

The New Zealand listed company which plans to list on the Australian stock market has also announced a restructure and plans to recapitalise.

When SmartPay released its half year results in November it said it expected earnings in the year to the end of March to be broadly in line with the $7 million reported a year earlier.

Now the eftpos services company says that is extremely unlikely, due to delays in finalising some of its customer contracts and a lower-than-expected uplift in New Zealand sales.

The company says it is largely a timing issue, and it still expects to complete most of the contracts, even if it is in the next financial year.

The company also announced a change to its strategy.

SmartPay's recently appointed chief executive, Bradley Gerdis, says the company's current results are characterised by lumpy and unpredictable revenue, earnings and cashflow - and it wants to smooth them out, by retaining annual rental contracts.

It also wants to move towards a more conventional bank funding model to try to reduce funding costs.

Mr Gerdis says it is still in the early stages, and no firm commitments have been received yet, but communications from potential banks on both sides of the Tasman have been encouraging.

Shares in SmartPay were placed on a trading halt Monday pending the announcements.

They resumed trading four minutes before the market closed and lost a fifth of their value, falling 2 cents to 7 cents.

SmartPay also announced it had signed a five year agreement with Bendigo and Adelaide Bank in Australia to rent 4,000 eftpos terminals to the bank's merchants.