Payzone posts EUR166.7 million loss

20-06-2008

by Emmet Ryan

Payzone's latest results have added to its woes as the e-payments firm recorded losses of EUR166.7 million for the six months to 31 March.

The losses come during a period of upheaval at the business. Payzone, which was formed out of the merger of Irish business Alphyra and UK firm Cardpoint, has sacked two of its top executives -- John Nagle and John Williamson -- in recent months. A protracted battle with Nagle, the ousted chief executive, and former chief financial officer Williamson, is still ongoing. Adding these latest financial woes into the mix is not going to make life easy for Mike Maloney, the recently-appointed replacement for Nagle, as he tries to get the business back on track.

The firm's EUR166.7 million loss figure includes a one-off impairment charge of EUR143 million. There were some positives for Payzone as EBITDA (earnings before interest, tax, depreciation and amortisation) was up 12 percent to EUR16.3 million, while revenues amounted to EUR449 million.

The poor overall results were in large part due to the Cardpoint business underperforming. The Cardpoint problems have been compounded by an increase in non-surcharging ATMs in the UK. Cardpoint ATMs levy a surcharge on cash withdrawals and must advertise that they charge a fee. The presence of more rivals that don't charge a fee does little to aid Payzone's hopes of developing its UK business.

The electronic payments firm's management have tried to put a brave face on the results. "Despite the difficult period for Payzone following the integration of the Cardpoint and Alphyra businesses, we are pleased that the share placement and restructured banking arrangements have put the company on a firm financial footing," said Peter Smyth, chairman of Payzone.

"The Alphyra and Cardpoint businesses have operational synergies which are starting to bring value to the combined Payzone Group. We look forward to investing further in the core business to drive a profitable return for shareholders going forward."

For all of Smyth's confidence it's hard to look beyond the numbers, even when Payzone buries that nasty EUR166.7 million figure deep in its press release. This is a business where things just aren't going the right way at present.

The challenge for Smyth, Maloney et al at Payzone is to find a way to weather the storm currently engulfing the business. If Smyth's confident forecast is to come to pass then the business needs to end the war with its former executives one way or another soon and focus on returning to profitability.