INTERIM REPORT JANUARY – SEPTEMBER 2009
(NGM: PAY)
JANUARY – SEPTEMBER 2009 IN SUMMARY
• The transaction volume for the nine-month period was SEK 2,082,450 thousand (452,646), an increase of 360 per cent compared to the same period of last year.
• Transaction-based revenue for the first nine months was SEK 22,045 thousand (12,253), up by 80 per cent over the same period of 2008.
• Compared to the same period of last year, operating profit/loss before amortization/depreciation for the nine-month period improved by SEK 14 million to SEK -12,485 thousand (-26,374).
JULY-SEPTEMBER 2009 IN SUMMARY
• The transaction volume for the third quarter of 2009 increased by 538 per cent to SEK 962,284 thousand (150,921) compared to the same quarter of 2008.
• Transaction-based revenue for the quarter was SEK 8,733 thousand (3,729), an improvement of 134 per cent compared to the third quarter of last year.
• Compared to the third quarter of last year, operating profit/loss before amortization/depreciation for the quarter rose by SEK 7 million to SEK -471 thousand (-7,385).
SIGNIFICANT EVENTS IN THE FIRST NINE MONTHS OF 2009
• In September, Paynova generated a positive operating cash flow for the first time in the company’s history.
• Paynova’s employees acquired 1,530,000 share options within the framework of an incentive scheme that was approved by the AGM in the second quarter, of which 820,000 were acquired by the CEO and executive management.
SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD
• In October, Paynova filed an appeal with the administrative court of appeal in respect of the county administrative court’s ruling from July regarding liability for value added tax.
• In October, Paynova signed an agreement with its Chinese partner LeiXun for the formation of a joint venture company to offer new e-commerce services for the Chinese market. These operations started immediately and are expected to make a significant contribution to Paynova’s earnings already in 2010.
PROFITABILITY 2010
The third quarter of 2009 was a milestone in Paynova’s history. Our new business model has produced the desired effects, i.e. higher revenue and lower costs, and made it possible for us to meet our goal of achieving a positive operating cash flow on a monthly basis in the third quarter. This has given us a stable platform and excellent scope to achieve our next objective.
I feel great satisfaction in saying that Paynova’s business is now able to stand on its own. Our determined efforts throughout 2009 to implement the new business model and adapt our operations have contributed to both higher transaction volumes and lower costs, and therefore also a positive cash flow.
Paynova’s new offering is attractive and a number of customers have taken the opportunity to benefit from its flexibility. Our assessment was that there was a pent-up demand for more combinations of payment services than has been previously offered, either by us or other providers of payment services. On the cost side, we have looked over all our supplier contracts and negotiated better conditions. In the third quarter our costs reached a long-term sustainable level at which even significant growth in volumes would increase our costs only marginally, which clearly demonstrates the scalability of our business model. The majority of Paynova’s customers are found in the e-retail segment, consisting of online merchants that sell products like clothing, CDs, shoes and home electronics. The travel industry also continues to stand out as a key customer segment. And although Paynova’s customers in the online gaming industry are not showing the same high volumes, our cultivation of this segment is strategically important not least for cross-border commerce with the Chinese market.
JOINT VENTURE IN CHINA
Our negotiations with the Chinese e-commerce and technology company LeiXun for the formation of a joint venture in Hong Kong and China were finalized in October, at which time LeiXun acquired 51 per cent of Paynova Asia Development Ltd. LeiXun has been commissioned by state-owned ChinaPay to develop both domestic and cross-border e-commerce and chose Paynova , in competition with other players, as its partner for this undertaking. The partnership and joint venture are the result of several years of activity and relationship-building efforts in China, and expectations for the Chinese venture are high. The joint venture company will be provided with customers and transaction volumes from the very start, which will increase the company’s value and give Paynova revenue from all of the cross-border e-commerce transacted through the joint venture company. Since most of the start-up costs for the joint venture will be recognized in 2009, this will further improve Paynova’s profitability in 2010.
PROFITABILITY IN 2010
Now that we have achieved a positive cash flow it is only natural that we set a new financial target – to post a profit for the 2010 financial year. To reach this goal we will continue expanding our customer base with more Scandinavian and Western European retailers and offering our customers access to the Chinese market. Our prospecting will be focused on the areas where Paynova already has a strong position, namely the travel and retail segments.
Stockholm, November 2009
Simon Thaning, CEO
FOR ADDITIONAL INFORMATION PLEASE CONTACT
Björn Wahlgren, Chairman, +46 8-517 100 02
Simon Thaning, CEO, +46 8- 517 100 14
Robert Schönbeck, CFO, +46 8-517 100 27
ABOUT PAYNOVA
Paynova is one of the leading suppliers of payment solutions via the Internet. Paynova offers three different services mainly to larger e-retailers, Paynova Sales Partner, Paynova Processing and Paynova Account. In additions to that, Paynova enables western e-retailers to sale their products on the Chinese e-market and a version of Paynova Account that is specially designed for online-gaming, Paynova-InGame. The majority of customers are found in the prioritized segments: travel, retailing and media/network games. The company has been listed on NGM Equity since February 2004. For more information please visit www.paynova.com.
(For full report see attached file.)