INTERIM REPORT JANUARY-SEPTEMBER 2006
SUMMARY OF THE INTERIM PERIOD
· Net turnover for the third quarter increased to KSEK 3,351 (975). For the first nine months of the year, net turnover amounted to KSEK 11, 388 (2,335).
· Losses after tax amounted during the third quarter to KSEK -12,523 (-9,732). The corresponding loss for the first nine months of the year was KSEK -41,745
(-29,529). Excluding restructuring costs related to the Xponse agreement, losses after tax amounted to KSEK -10,523 for the third quarter and up to KSEK
-39,745 for the nine-month period.
· Loss per share for the third quarter amounted to SEK -0.4 (-0.5). For the first nine months of the year the loss per share was SEK -1.6 (-1.7).
· The transaction volumes for the third quarter increased to KSEK 81,601 (29,816), an increase of 174 percent. Compared to the second quarter the transaction volumes increased by 26 percent. For the first nine months of the year the transaction volumes amounted to KSEK 235,261 (67,512), an increase of 249 percent.
· Paynova has entered into an agreement to acquire the new American company Global Product Management. The acquisition is made through an issue of 767,644 shares and a transaction volume-related conditional additional purchase sum of 400,000 subscription options.
· During the period, shares have been subscribed to via subscription options TO2 and TO7, to a value of MSEK 32.5.
· Paynova has entered into a comprehensive management and structural agreement with the Xponse IT Services Ltd (“Xponse”) based in India and the USA. This cooperation covers streamlining and adapting of Paynova’s operations in the areas of development, operations and support. The agreement with Xponse is conditional on a decision to be taken at the extraordinary general meeting. The agreed services and additions will be paid for with new share issues, which means that Paynova will gain a strong new industrial co-owner with a direct interest in taking part in the development of the business. Xponse also provides a credit facility up to MSEK 15.
· An extraordinary general meeting approved the Xponse agreement on September 14th. In September, Xponse delivered services for KSEK 2,000.
KEY EVENTS AFTER THE END OF THE PERIOD
· In October, the transaction volume reached a new all-time-high of approximately MSEK 45.
· In October and November, Xponse has continued to deliver services in accordance with the agreement. The services have primarily consisted of Operational Management Services, Strategic Advice and Marketing Management Services. Paynova’s board has addressed the general guidelines and determined the direction for future restructuring. The first payment to Xponse through an offset issue is planned for November 2006.
· Together with Xponse, the board has appointed Per Sunnemark, previously recruited to lead Paynova’s operations in the restructuring efforts, to be the president and CEO of Paynova. (also see the press release dated November 9th.)
MESSAGE FROM THE CEO
“Transaction volumes recover from second-quarter dip”
After having spent some time leading the operative restructuring efforts together with Xponse, I can now say that Paynova is entering an exciting period of change with great development opportunities. This is why, as the new CEO, I am confidently looking forward to assuming leadership for Paynova’s ongoing development and improvement.
RECOVERY FOR TRANSACTION VOLUMES
Creating a balance between Paynova’s income and costs is our highest priority, and we have recently taken several important steps in this direction, Compared to the second quarter, it is nice to see that we have now reclaimed the level of transaction volumes established earlier this year: the volumes increased from MSEK 64.7 to MSEK 81.6 on a quarterly basis. Furthermore, October brought us a new all-time-high in transaction volumes of about MSEK 45. There is growth across the whole line, and the trend remains positive even after October, evident in November’s continued increase of transaction volumes.
A factor contributing to the development includes the cooperation with the Swedish State Railway, which continues to improve, but there is also positive growth in volume on the European market. The American volumes are also growing, but we still have an obvious delay from what was outlined in our plans. The generated volumes are also on a lower level than we previously expected.
The goal for Paynova and Xponse’s cooperation - to be cash-flow positive on a monthly basis by the end of June 2007- remains as planned. This goal will be reached through more effective operations with a combination of increased income and reduced costs.
OPERATIONAL AND PROFIT IMPROVEMENTS THROUGH RESTRUCTURING
In terms of profitability, there are primarily two important issues for the third quarter. The first is that we have increased our profits and reduced our costs compared to the second quarter. Losses amounted to MSEK -12.5, which is an improvement of MSEK 3.3 compared to the second quarter. The second is that we have begun our cooperation with Xponse, which means that we now assume large costs for the ongoing restructuring of the business. Xponse’s first partial delivery of MSEK 2 was made in September. However, these costs do not affect the cash flow since payment is made with newly issued Paynova shares. The first of these share issues is planned for November. Excluding these restructuring costs, the loss during the quarter amounted to MSEK -10.5 – an improvement of MSEK 5.3 compared to the second quarter. In the beginning of November Paynova’s board has also addressed the general guidelines for the restructuring work ahead of us.
We will continue to assume large development and restructuring-related costs on the profit and loss statement due to the cooperation with Xponse. But as all the planned activities are set into motion, we also count on considerable improvements in both transaction volumes and cost rationalizations.
In the near future, we will devote even more energy to reducing our costs, especially considering the delay for the USA volumes, and the fact that they are at lower levels than expected. I will also focus on developing the organization in the areas of operations and Paynova’s services in the market – activities I can approach with full concentration when Lars Ekstedt assumes responsibility for the time-consuming efforts to develop Paynova in North America and establish international bank relationships. I look forward to Paynova’s continued positive development in the fourth quarter and a successful 2007.
Stockholm November 9, 2006
President and CEO
The full English version of the Interim report January-September 2006 will be published shortly on www.paynova.com.
FOR FURTHER INFORMATION, PLEASE CONTACT
Per Sunnemark, president and CEO
Telephone: +46 (0) 70-147 67 55
Paynova offers an international, account-based payment service via the Internet. With Paynova as the only counterpart, e-retailers get a payment guarantee for around twenty payment options in 10 languages with 8 currencies in a security-certified interface (PCI). Consumers can open an account, a Paynova wallet, for free on the Internet to make purchases simpler and more secure, as well as look after transfers between family members, friends and acquaintances.
Paynova has agreements with around 1,000 e-retailers. Most are found in the following prioritized segments: travel, retailing and media/network games. The company has been listed on NGM Equity since February 2004. For more information: www.paynova.com
(For complete report see attached file)