Smartpay : Half Yearly Report and Accounts

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HALF YEAR REPORT 2021

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Welcome to Smartpay's half year report for 2021

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Smartpay designs, develops and implements innovative payment solutions for customers in New Zealand and Australia. Smartpay offers a variety of advanced payment solutions for retail, business payment and transactional processing requirements.

Contents

1

Chairman & Chief

Executive's Review

9

Condensed Statement of Comprehensive Income

11

Condensed Statement of Financial Position

13

Condensed Notes to the Financial Statements

5

Director's Holding Office

10

Condensed Statement of Changes in Equity

12

Condensed Statement of Cash Flows

26

Directory

1	Smartpay	Half Year Report 2021	2

Chairman and Chief Executive's

The regional lockdowns in New South Wales and Victoria had an effect on our transacting terminals through the period with 6,737 transacting at the end of September

21. Pleasingly we were able to maintain

We have continued to invest through the first half of FY22 in our Australian marketing and sales capacity and activity to support our growth execution plans in Australia. The bulk of the investment has been targeted

onlyReview

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useOur organisational" performance and execution strength continued to deliver

We are very pleased with the overall performance of the business in the first half of FY22 in what was a very challenging period for our customers and our team. Throughout the months of July, August and September 2021 we had the majority of our people in Australia and New Zealand working remotely due to lockdown restrictions in Sydney and Auckland

Our Business Continuity Plans again proved very effective as we successfully transitioned the bulk of our people across our business to working from home, and then back into our offices again as the restrictions lifted.

our customer acquisition performance

throughout the lockdown affected months.

Current transacting terminals has increased

to 8,083 at the end of October, as our

customer acquisition efforts continue to

deliver results and the majority of lockdown

impacted customers in Victoria and New

South Wales return to trading.

Our ongoing customer acquisition, with an increase in revenue per terminal, has delivered top line revenue growth through the period. Customer preference for our Smartcharge product, and the economies of scale advantage we are getting through overall fleet growth, has also resulted in further improvements in acquiring margin in October 2021.

towards refining our digital and social channel message and reach. Additionally, our brand awareness efforts have increased with PR activity through the period and the completion of the initial stages of our merchant insights work - the first stage of our brand strategy.

In New Zealand we continue to focus on reinforcing our market presence and developing additional products to enhance our customer product suite and further monetise our significant network of terminals.

great results and personalr

positive customer outcomes, a clear testament to the quality of our leadership team,

culture and people

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Throughout the lockdown periods in both countries we maintained a growth focus and continued to operate as normal. Our organisational performance and execution strength continued to deliver great results and positive customer outcomes, a clear testament to the quality of our leadership team, culture and people.

The momentum in Australian customer acquisition, seen through the second half of FY21, continued through the first half of FY22, further reinforcing our view that the Australian SME market is open to disruption by a specialist payments provider with targeted, customer focused propositions. Whilst many of our customers experienced a downturn in trading in the second quarter the majority have returned to pre-lockdown levels as trading restrictions have eased across both countries.

Six Month Financial Highlights

Overall Revenue		Australia acquiring
	Transactional Revenue
$21.0m		$12.6m
up 45% from previous year $14.5m	99% increase on the prior year $6.3m
EBITDA*		After Tax Profit	Net Debt	)
$3.7m		$0.4m	(
	$5.5m
a 10% increase on the	compared to prior	compared to ($4.8m)
prior year $3.4m	year loss ($9.2m)	in the prior year

*EBITDA = Earnings Before Interest, Tax, Depreciation, Amortisation (including share option amortisation), impairments and foreign exchange adjustments. EBITDA is a useful non-GAAP measure as it shows the contribution to earnings prior to finance costs and non cash items.

3

Operating Performance

Overall revenues were $21.0m, up 45% on	Our expectation of post lockdown trading
the prior year $14.5m. The key driver of	performance is a prompt return to expected
our revenue growth continues to be the	EBITDA levels and ongoing top line revenue
strong growth in our Australian acquiring	growth.
transactional revenues, $12.6m compared to
$6.3m in the prior period.	NPAT of $0.4m is a positive result in a lockdown
	impacted period and includes a non-cash
Our efforts at targeting specific higher	gain ($0.9m) as a result of the conversion
value market verticals with our marketing	of the remaining Convertible Notes during
i vestment, and the majority of newly	the period. The conversion of the Notes also
acquired customers choosing our	increases the Net Assets of the business, when
Smartcharge product, are contributing to an	compared to year end FY21, by $5.0m.
ng ing increase in revenue per terminal.
only	With Net Debt of ($5.5m) at the end of
Monthly acquiring revenues in October 21,
following the easing of trading restrictions	September 21 the business has a strong
in N w South Wales and Victoria during the	balance sheet to support our execution
month, were $2.74m.	plan and continued growth through the
	remainder of FY22.
Total Transaction Value (TTV) of $1.1b over the
ix months was an increase of 103% versus	The graph below shows the impact to
$545m in the prior year.	both transacting terminals and acquiring
	revenues through the lockdown impacted
The EBITDA increase of 10% year on year	months of June, July, August and September.
use	Also evident is the speed of recovery in
reflects the impact of the lockdowns in
New South Wales and Victoria during	October, in both metrics, resulting from our
the reporting period and the focus of the	ongoing customer acquisition throughout
business on maintaining our investment in	the lockdown period and the easing of
growth and customer acquisition cadence.	restrictions in New South Wales and Victoria.

nalosrep	Australian Acquiring Revenues
Transacting Terminals Monthly Revenue
r

We experienced a similar trend in the level of activity of our New Zealand terminal fleet during the months of August and September, however the revenue impact was significantly mitigated due to the predominantly fixed rental fee nature of our New Zealand business model. A portion of our Auckland terminal fleet in New Zealand remains subject to lockdown trading restrictions and we are providing short term rental support to assist our customers on a case by case basis.

Summary and Outlook

We are very pleased with the execution against our strategic objectives and overall business performance in the first half FY22 in a very challenging trading environment in both Australia and New Zealand.

Despite lockdowns affecting trading conditions we delivered 10% EBITDA growth compared to the prior period with monthly EBITDA improving to $0.8m in October 21 as trading conditions begin to improve off the back of easing of restrictions.

With the ongoing momentum in our Australian customer acquisition through the period and a strong 'bounce back' effect seen in our Australian transacting terminals and acquiring revenues, we look forward to a strong second half performance to Financial Year 22.

Gregor Barclay	Marty Pomeroy
Chairman	Chief Executive

5

Board of Directors

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only	Gregor John Barclay (Greg)
Chairman and Independent Director - LLB, Dip. Bus
Greg joined the board of Smartpay in 2010 and he was appointed
	Chairman in 2016.
	He is a commercial lawyer with over 30 years of experience in
	advising a range of commercial and corporate clients. In 1997
	he was a founder of Claymore Partners, an Auckland based
	commercial law and business advisory firm. He continues to act as
	a consultant to that firm at present.

He is an experienced company director and Chair having held various directorships and advisory roles across a number of New Zealand and off-shore entities. Greg has also had an

usext nsive involvement in the business of sport, both as an advisor and director of a number of sporting entities. He is a director (and immediate past Chair) of the International Rugby League, a former Chairman of New Zealand Cricket and is currently the Chairman of the International Cricket Council based in Dubai.

In addition to being on the board, Greg serves on the board's Audit and Finance Committee. He is an approved Chartered Member of the New Zealand Institute of Directors.

Greg resides in Auckland, New Zealand.

personaland service with EFTPOS New Zealand. He brings over 20 years of experience in the NZ Payments industry to the Board.

Martyn Richard Pomeroy (Marty)

Managing Director

Marty joined Smartpay in January 2013 post the acquisition of

Viaduct Limited. Marty joined the Smartpay Board in April 2014.

Prior to joining Smartpay Marty was one of the two founding

Directors of Viaduct Limited.

Marty was instrumental in the development and success of the Viaduct business from a startup in 2001, through a period of growth to it becoming the third largest provider of EFTPOS terminals in New Zealand. Prior to Viaduct Marty held managerial roles in sales

Marty has a detailed understanding of the operational, sales and commercial elements of the Smartpay business and is driving the strategy of the business, and leading the teams in New Zealand and Australia.

Marty resides in Auckland, New Zealand.

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Smartpay

Half Year Report 2021

6

Carlos Gil

Non-ExecutiveDirector - B Ec, GradDipAppFin SIA, MAppFin FSIA

Carlos Gil is the founder and current CEO of ASX listed Microequities Asset Management, Smartpay's largest shareholder. He has extensive experience in stockbroking, funds management, and investment research gained over a career spanning more than 20 years. He has held various senior management positions in Europe, including roles

as Head of International Securities at BM Securities, and at Banesto Bank (Santander Group).

Carlos holds a Bachelor of Economics from Sydney University, a Graduate Diploma in Applied Finance and Investment Analysis from the Australian Securities Institute and a Master in Applied Finance and Investment Analysis from the Financial Services Institute of Australia.

In addition to being on the Board, Carlos serves on the Board's Audit and Finance Committee

Carlos resides in Sydney, Australia.

William Robert Pulver (Bill)

Independent Director - BCom Marketing

Bill Pulver is currently a Director of his new business, Mona Farm Pty Ltd, which offers luxury accomodation, bespoke weddings and events in Braidwood NSW. Prior to that Bill was Chief Executive Officer of Australian Rugby Union from 2013 - 2018. From 2010 - 2013 Bill was CEO of Appen Pty Ltd, who provide high quality training data from

their leading technology platform, managed services, and global crowd to power artificial intelligence globally.

From 2008 - 2010 he was Chairman of Repucom International, a global leader in sports marketing research. Bill spent eight years as President and Chief Executive Officer of the New York based, NASDAQ-listed internet media research company NetRatings Inc. He spent 17 years at global marketing research company ACNielsen, in roles that included Managing Director in Australia, Group Chief Executive for Japan and Korea based in Tokyo; and President of ACNielsen eRatings. com, an internet audience measurement company based in London.

Bill holds a Bachelor of Commerce degree, with a major in marketing from the University of New South Wales in Sydney. In addition to being on the Board, Bill Chairs the Board's Remuneration and Nominations Committee.

Bill resides in Sydney, Australia.

Matthew George Turnbull (Matt)

Independent Director - BCom, CA

Matt joined the Board of Smartpay in April 2013, he is a Chartered Accountant and is a member of Chartered Accountants Australia and New Zealand. He commenced his career with PWC (then Price Waterhouse) and has over 20 years experience providing accounting and corporate advisory services. Matt has a detailed understanding

of Smartpay, having assisted the company in the 2012 recapitalisation and restructure, and the acquisition of Viaduct Limited. In addition to being on the Board, Matt serves on the Board's Remuneration and Nominations Committee and is the Chair of the Audit and

Finance Committee.

Matt resides in Auckland, New Zealand.