Smartpay Buys Ethos Platform

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Smartpay Buys Ethos Platform & Looks On Track For $7m To $10m Ebitda

New Zealand’s largest EFTPOS Company Issues Profit Guidance for Financial Year beginning April 2010

AUCKLAND, 9 October 2009 – SmartPay (NZX:SPY), New Zealand’s leading Merchant Services provider today announced that SmartPay Ethos Limited, a wholly-owned subsidiary of SmartPay Cadmus, has entered into an unconditional agreement to purchase the ETHOS operating system software from Cadmus Developments Limited (CDL) (in Rec.)

SmartPay Cadmus previously used the software under license from CDL. The purchase enables SmartPay Cadmus to control all aspects of its product delivery and development.

Ian Bailey, Managing Director of SmartPay says that the purchase price will be a minimum of $2M.

“This will be paid over three years on a per unit fee basis for each EFTPOS terminal produced by SmartPay Cadmus. The purchase price is capped at $7.5M over the three year payment term,” says Bailey.

Bailey adds that the ETHOS operating system is a core aspect of the SmartPay Cadmus software development environment.

“The purchase allows SmartPay Cadmus to have total control over its future developments. Furthermore, the agreement will provide CDL with the ability to make payments to its note holders over time,” says Bailey.

In addition, Bailey notes that the purchase of the ETHOS operating system makes a big difference to future profitability, as there will no longer be a royalty payment built into the overall cost of terminals produced. This will positively impact SmartPay’s profits going forward.

SmartPay Cadmus recently purchased the payments division of ProvencoCadmus (in Rec.) for $6M, and has completed the integration of that business into SmartPay, along with the relocation of all its operations to the old Cadmus offices at 182 Wairau Road, Glenfield.

Bailey adds that SmartPay also recently announced it had achieved an unaudited net profit of $224K for the first quarter of the current financial year.

“With the acquisition of the ProvencoCadmus payments business, and based on current sales forecasts, appropriate profit guidance for the SmartPay Group is expected to be in the range of $7m to $10m EBITDA for the financial year commencing 1 April 2010,” says Bailey.

“Prior to the merger of Provenco and Cadmus in 2008, Cadmus was reported as making circa $7M EBITDA on $25M revenues and with a base of around 15,000 customers. SmartPay now has approximately 30,000 customers and the model has reverted back to the one implemented by Cadmus prior to its merger with Provenco.”

Bailey adds that the profit guidance of $7M to $10M EBITDA will result from a combination of completing a major restructuring, leading to a streamlined business model, better overall margins, as well as major synergies from the ProvencoCadmus acquisition.

“SmartPay intends to maintain its growth strategy through organic expansion as well as key acquisitions,” says Bailey.

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