3 Oct 2013

Milford Asset Management significant Smartpay shareholder

7:50 am on 3 October 2013

One of New Zealand's largest fund managers has emerged as a significant shareholder of the apparently perennially struggling stock market minnow, Smartpay.

Milford Asset Management now owns 6.3%, or 10.8 million shares, in the eftpos machines company after buying 3 million shares at 28 cents each last week, where the shares closed on Wednesday.

Smartpay, which has a market capitalisation of just over $48 million, reported a $5 million loss for the 12 months to the end of March, down from a $12.4 million loss the previous year.

Milford portfolio manager William Curtayne says the company has changed significantly with the appointment of three new directors and after the purchase of a competitor whose management now leads the company's New Zealand team.

He says it has been a poorly run and managed company which has kept disappointing investors, but a new manager joined the board and became chief executive last year.

Mr Curtayne says the chief executive has initiated a series of changes which has turned around the business in New Zealand, and he will also implement a strategy to gain market share in Australia.

He says the New Zealand business has never been poor from a product point of view, the product has been good, it has had good market share and it has good relationships with the merchants.

But Mr Curtayne says it had a lot of expensive debt financing, which is at an effective interest rate of about 30%.

"It's cleaned that out, it's raised equity, it's taken out a new bank loan from ASB at a more conventional interest rate, it's turned out some unnecessary staff, reemployed good staff."

Mr Curtayne says it has turned around the situation in New Zealand but it is now about Australia and where the company can gain a foothold in that market.