INTERIM REPORT JANUARY-MARCH 2006
· Net turnover increased to KSEK 4,832 (KSEK 524). Compared with the fourth quarter of 2005, the net turnover increased by 22.5 per cent
· Profit/loss after tax amounted to KSEK -13,412 (-8,276). Compared with the fourth quarter of 2005 the post-tax result decreased by 7.2 per cent
· Earnings per share amounted to SEK -0.6 (-0.6). Compared with the fourth quarter of 2005 the result per share decreased by 14.2 per cent
· The transaction volume increased to KSEK 88,906 (KSEK 13,763). Compared with the fourth quarter of 2005, the transaction volume increased by 1.5 per cent
· The agreement concerning the acquisition of the newly established US sales and support company LDL West LLC provides access to significant established transaction volumes, with operations estimated to start during the second quarter of 2006
· Comprehensive investments within operation, support, risk management and marketing ensure capacity ahead of volume increases in Europe and North America. This work will continue into the second quarter
· Partnership agreement with the American technology and service company Creative Conversion Technologies. This means that Paynova’s payment service will be integrated into a complete solution for the distribution of streamed media over the Internet
· The expanded cooperation with SJ has developed well and is now a significant reference for marketing to travel companies in the rest of Europe
SIGNIFICANT EVENTS AFTER THE END OF THE INTERIM PERIOD
· An agreement concerning the acquisition of the new American company Global Product Management (“GPM”). With this due to start in June 2006, the seller is guaranteed a transaction volume of just over MSEK 20 per month with strong incentives for further significant volume increases and considerable reinforcement of resources for both installation work and operation and support adapted for the US transaction volumes
“NEW PARTNERSHIP AGREEMENTS AND EXPANDED RESOURCES STRENGTHEN PAYNOVA AND FORM A BASIS FOR FURTHER SIGNIFICANT VOLUME INCREASES”
It has been an intense start of the year for Paynova. Interest in our payment service continues to be high and the volume potential for the second half of the year looks promising. Therefore, resource and quality assurance has been one of our main focal points during the first quarter, in order to ensure that all systems and procedures function when we enter into a period of rapid growth in transaction volumes.
We have devoted a lot of effort to quality-assure the installations within the framework of the acquisition of LDL West, which was concluded in March 2006. Here we have confirmed that the installation of the American volumes imposes more stringent requirements on quality assurance and risk management than we had previously expected.
We have therefore continued to invest in operations, support and risk management during the quarter. As part of this work, we have recently been careful in our switching on of new e-retailers. This is a reason why the potential volume growth we saw at the start of the quarter has been pushed into the background during the second half of the quarter. The transaction volumes seen overall during the quarter are therefore on a level with the previous quarter.
START-UP OF TRANSACTION VOLUMES IN THE USA DELAYED – BUT POTENTIAL UNCHANGED
This development does not, however, change the underlying conditions for the North American market. Our assessment is that the potential of LDL West remains as before, but that the installation of the volumes will be postponed somewhat. Against the background of the significant value that this acquisition presents, we have therefore opted to increase our investments and balance part of the costs related to the installation in the USA. All in all, quite simply more resources are required to cope with the demand and rate of expansion on the American market.
So in May we were very pleased to be able to present an agreement concerning the acquisition of the US company Global Product Management (“GPM ”). The deal is significant for Paynova in several respects, not only because it will bring Paynova significant volumes, but also because the acquisition of GPM will gain us an established industrial partner in the USA that will bring significant resources adapted to the American market.
PAYNOVA’S INSTALLATION AND OPERATIONAL CAPACITY IS POWERFULLY REINFORCED IN NORTH AMERICA
Acquisition of GPM will give us immediate access to the resources we previously partially lacked in the USA. It means that the processes that took up a lot of our time in the USA during the first quarter will be speeded up, while the volume potential within the framework of the GPM acquisition can be installed in just a few months.
The agreement with GPM involves monthly volumes guaranteed by the seller of around MSEK 20, starting as soon as June. The agreement also covers variable remuneration for additional volumes up to MSEK 110 per month within a six-month period.
CONTINUED POSITIVE DEVELOPMENT IN EUROPE TOO
The increased investment must also be seen against the background of Paynova’s operations developing positively in Europe too. In Sweden it is particularly pleasing to follow the successful partnership with SJ, which forms a good basis for canvassing the major travel companies in Europe. Here the cooperation with SAS concerning the new mobile-adapted payment service also constitutes an important reference.
The payment services agreed and installed in 2006 in partnership with STRATO, Germany’s largest Internet Service Provider, have evolved promisingly and after just six months have generated around 200 agreed and commissioned e-retailers. This partnership has also formed the basis for ongoing negotiations with several similar European partners, with operations planned to start in the second half of 2006. The previously reported start according to Paynova’s agreement with Ryanair was determined by the airline’s work on developing the whole of its booking system, in which Paynova’s payment service will be integrated. The date for start of operations has not yet been finalised. However, Paynova is ready to start up as soon as Ryanair requests it.
The immediate future will remain intensive for Paynova. With the investments we have now made, we have good conditions for meeting the increasing demand and expanding activities for profitable volumes in the future.
Stockholm, 11 May 2006
Lars Ekstedt
CEO and Group President
The full Interim Report is available at www.paynova.com.
SUBSCRIPTION OPTION TO2
The Board wishes to draw attention to the fact that the final date for trading TO2 subscription options at the NGM Equity is 19 May 2006. The final date for subscription is 31 May 2006.
FOR MORE INFORMATION, PLEASE CONTACT:
Lars Ekstedt, CEO and Group President
Paynova AB
Mobile: +46 (0)70 374 27 37
Direct: +46 (0)8 517 100 37
E-mail: lars.ekstedt@paynova.com
About Paynova
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 more secure and simpler, 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 prioritised segments: travel, retailing and media/network games. The company has been listed on NGM Equity since February 2004. For more information: www.paynova.com