e-pay Asia Limited: Interim Results | Company Announcements

Wednesday 27 August, 2008

e-pay Asia Limited

Interim Results

RNS Number : 1359C

e-pay Asia Limited

27 August 2008

ASX/AIM: EPY

27 August 2008

e-pay Asia Limited

(“e-pay Asia”, the “Company” or the “Group”)

Interim Results for the six months ended 30 June 2008

Highlights:

§ 220% increase in net earnings compared to the same period last year

§ 38.7% reduction in revenue was mainly due to changed upfront software sales strategy and closure of Indonesia operation

§ Core Malaysian business continues to generate positive cash-flow

§ Management focuses on improving shareholder value by rationalising listings and reducing overhead costs

§ Directors remain confident of prospects over the medium and longer term

John Croft, Non-executive Chairman, said:

“The Group has focused on its core market in Malaysia in the first half, which has shown steady progress with increased profitability. We expect marketing activities launched in first half of 2008 will further improve revenue in the second half of this year. The 38.7% reduction in sales compared to same period last year was mainly result of discontinued software sales and closure of our operations in Indonesia. The Management has also strived to improve shareholder value through an ongoing programme of rationalisation. The AIM de-listing exercise is expected to contribute positively to profitability through significant cost savings.

“The first half of 2008 has been a challenging period with global pressure on high fuel and food prices. Malaysia inevitably experienced inflationary pressures, which has had a negative impact on consumer spending. If it continues, these pressures may affect the Company’s second half performance. However, the Directors expect the impact will not be significant and are confident of the Company’s prospects over the medium and longer term.

“Our Board members have recently purchased shares in the Company, which helps align the interest of the Board with those of our shareholders is a reflection of their confidence in the future prospects of the business.

“The Company continues to explore opportunities for growth across the South East Asian region. We will update the market of developments as they unfold.”

For further information, please contact:

Yap Chih Ming

Chief Financial Officer

e-pay Asia Limited

Tel: +6017 229 1616

investor@epay-asia.com

John Croft

Non-executive Chairman

e-pay Asia Limited

Tel: +44 7785 315 588

jcroft@epay-asia.com

Sarah Jacobs / Parimal Kumar

Seymour Pierce Limited

London, United Kingdom

Tel: +44 20 7107 8000

ABOUT epay Asia Limited

e-pay Asia Limited is one of the leading providers of electronic top up services for prepaid mobile users in South East Asia. The e-pay Asia’s electronic top up services operates in 3 countries namely Malaysia, Thailand and Pakistan with approximately 15,000 point of sales. e-pay Asia processes more than 100 million prepaid mobile top up transactions per year.

www.epay-asia.com

Chairman’s Statement

Review of operations

e-pay Asia has focused on growing and strengthening the Malaysian business during the period under review, and we are pleased to report steady progress. Market opportunities in Malaysia continue to expand as the telecommunication industry develops and usage of electronic top-up services increases.

Additionally, the closure of Mobiepay DOO Serbia and e-pay Indonesia last year has resulted in significant operating cost savings and other cost-cutting measures underway since last year have shown favourable results with overall operational costs reduced.

The Group generated positive operating cashflow of A$3.0m. This represents a reduction of 66% on the same period last year, which was the direct result of the changed upfront software sales strategy and the closure of Indonesia operations, which contributed A$2.5m in the same period in 2007.

Total revenue for the period was A$4.8m (2007: A$7.8m) with EBITDA of A$2.4m (2007: A$2.2m). Profit after tax was A$0.4m (2007: A$0.1m). Diluted earnings per share were 0.13 cents (2007: 0.05 cents).

e-pay Malaysia

The business in Malaysia remains stable, with positive operating cash flow of A$3.3m (2007:A$4.5m). The management continues to streamline the business processes to enhance operational efficiency in anticipation of achieving further cost savings.

New Telecommunications operators (‘Telcos’) have been granted licenses to operate 3G and WIMAX services in Malaysia and are expected to launch their services starting in Q3 2008. These new products present fresh opportunities for the Company. We believe the new Telcos will prefer electronic top-up solutions for their prepaid products rather than traditional scratch card, due to the much lower production and distribution costs that electronic top-up provides. MNP (Mobile Network Portability), which is expected to be launched in October 2008, will inevitably further heighten competition amongst Telcos. They will need to offer better call packages to retain or attract consumers. This may erode Telcos’ margins, so switching from scratch card to electronic top-up will be one way to decrease costs and maintain profitability.

The Company continues to focus on introducing more products and services in its market offering to broaden its revenue stream. Opportunities to offer services like the collection of TV subscriptions and toll road charges are in the pipeline and should be commercialised in the near future.

New markets

The Chinese market joint venture progress has been delayed due to the demerger of the telecommunication industry in China. The Chinese Government expects the entire telecommunication industry restructuring process to be completed by end of September. Despite the potential risks, the Board remains convinced that this strategy will secure better long-term returns for the business.

Outlook

Despite an uncertain global economic outlook, the Company’s core business in Malaysia remains stable. The management will focus on operational efficiency to counteract any adverse impact on the business. The continuous positive operating cash position reduces the reliance on external financing and adequate banking facilities are available to underpin business expansion. The Board is confident of prospects over the medium and longer term and looks forward to updating shareholders on progress in due course.

John Croft

Chairman

London, 27 August 2008

e-pay Asia Limited

ABN 99 089 227 887

AND CONTROLLED ENTITIES

AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF

THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF E-PAY ASIA LIMITED

AND CONTROLLED ENTITIES

I declare that, to the best of my knowledge and belief, during the year ended 30 June 2008 there have been :

· no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to this audit; and

· no contraventions of any applicable code of professional conduct in relation to the audit.

Hall Chadwick

Level 29, St Martins Tower

31 Market Street, Sydney NSW 2000

DREW TOWNSEND

Partner

Date: 27 August 2008

e-pay Asia Limited

Consolidated Income Statement

For the half-year ended 30 June 2008

		Half-year
		2008	2007
	Notes	A$	A$

Revenue		4,798,931	7,834,736

Other income		81,757	20,640
Employee benefits		(1,297,603)	(2,146,303)
Impairment of goodwill	5	-	(926,797)
Other operating expenses		(1,186,010)	(2,546,847)
Profit before finance costs, depreciation, and income tax		2,397,075	2,235,429
Finance costs		(564,712)	(882,740)
Depreciation & amortisation		(847,220)	(1,111,923)
Profit before income tax		985,143	240,766
Income tax benefit/(expense)		15,312	(25,844)
Net profit after income tax		1,000,455	214,922
Net profit attributable to outside equity interests		(645,273)	(103,766)
Net profit attributable to members of the parent entity		355,182	111,156

Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the company:
Basic earnings per share (cents)		0.13 cents	0.05 cents
Diluted earnings per share (cents)		0.13 cents	0.05 cents

The above consolidated income statement should be read in conjunction with the accompanying notes.

e-pay Asia Limited

Consolidated Balance Sheet

As at 30 June 2008

	Notes	30 June 2008	31 December 2007
		A$	A$
Current Assets
Cash & cash equivalents	6	9,070,427	13,367,423
Trade and other receivables		3,249,378	3,141,979
Other financial assets	3	2,717,000	2,624,000
Prepaid airtime top-ups		5,795,135	8,374,507
Current tax assets		16,562	-
Other assets		152,439	178,996
Total Current Assets		21,000,941	27,686,905

Non-Current Assets
Property, plant and equipment		2,360,103	2,817,727
Intangible assets		1,844,162	2,293,034
Available-for-sale financial assets		33,734	84,337
Total Non-Current Assets		4,237,999	5,195,098

Total Assets		25,238,940	32,882,003

Current Liabilities
Trade and other payables		5,700,815	7,078,777
Short-term financial liabilities		6,407,391	12,073,563
Current tax liabilities		-	1,834
Short-term provisions		72,668	84,476
Other-deferred income		-	70,000
Total Current Liabilities		12,180,874	19,308,650

Non-Current Liabilities
Long-term financial liabilities		446,904	906,719
Deferred tax liabilities		68,800	74,111
Long-term provisions		84,047	118,325
Total Non-Current Liabilities		599,751	1,099,155

Total Liabilities		12,780,625	20,407,805

Net Assets		12,458,315	12,474,198

Equity
Contributed equity	4	12,163,687	12,163,687
Reserves		477,215	1,067,199
Accumulated losses		(2,741,605)	(3,096,786)
Parent Entity Interest		9,899,297	10,134,100

Minority equity interest		2,559,018	2,340,098

Total Equity		12,458,315	12,474,198

The above consolidated balance sheet should be read in conjunction with the accompanying notes.

e-pay Asia Limited

Consolidated Statement of Changes in Equity

For the half-year ended 30 June 2008

		Half-year
		2008	2007
	Notes	A$	A$

Total equity at the beginning of financial year		12,474,198	14,055,593

Adjustment from translation of foreign controlled entities		(722,930)	(378,943)
Minority equity interest share of dividend paid		(242,806)	-
Available-for-sale financial assets, net of tax		(50,602)	-


Net income and (expenses) recognised directly in equity		(1,016,338)	(378,943)

Profit for the half-year		1,000,455	214,922

Total recognised income and (expense) for the year		(15,883)	(164,021)

Transactions with equity holders in their capacity as equity holders: - Contributions of equity, net of transaction costs - Conversion of convertible notes by way of issue of equity - Interim dividend declared		- - -	56,734 798,725 (2,780,256)

		-	(1,924,797)


Total equity at the end of the half-year		12,458,315	11,966,775


Total recognised income and expense for the half-year is attributable to:
Members of e-pay Asia Limited		355,182	111,156
Minority equity interest		645,273	103,766
		1,000,455	214,922

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

e-pay Asia Limited

Consolidated Cash Flow Statement

For the half-year ended 30 June 2008

		Half-year
		2008	2007
		A$	A$

Cash flows from operating activities
Receipts from customers		260,892,911	285,821,387
Payments to suppliers and employees		(257,748,711)	(276,511,758)
Interest paid		(331,024)	(531,738)
Interest received		152,266	207,460
Income tax paid		(3,085)	(83,972)

Net cash inflow from operating activities		2,962,357	8,901,379

Cash flows for investing activities
Purchase of plant and equipment		(261,606)	(271,411)
Proceeds from sale of plant and equipment		2,029	70,600

Net cash outflow for investing activities		(259,577)	(200,811)


Cash flows from financing activities
Proceeds from issue of shares		-	56,734
Dividend paid by parent entity		-	(2,780,256)
Proceeds from borrowings		-	8,774,458
Repayments of borrowings		(6,659,785)	(4,995,668)

Net cash inflow from investing activities		(6,659,785)	1,055,268

Net (decrease)/ increase in cash held		(3,957,005)	9,755,836
Cash at beginning of financial period		13,367,423	8,882,440
Effect on exchange rates on cash holdings in foreign currencies		(339,991)	(780,596)

Cash at end of financial period	6	9,070,427	17,857,680

The above consolidated cash flow should be read in conjunction with the accompanying notes.

e-pay Asia Limited ABN 99 089 227 887 and Controlled Entities

Notes to the Financial Statements for the half year ended 30 June 2008

Note 1 : Basis of preparation

The half-year consolidated financial statements are a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standard AASB 134: Interim Financial Reporting, Australian Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board.

It is recommended that this financial report be read in conjunction with the annual financial report for the year ended 31 December 2007 and any public announcements made by e-pay Asia Limited and its controlled entities during the half-year in accordance with continuous disclosure requirements arising under the Corporations Act 2001.

The accounting policies have been consistently applied by the entities in the consolidated group and are consistent with those in the December 2007 financial report.

The half-year report does not include full disclosures of the type normally included in an annual financial report.

Reporting Basis and Conventions

The half-year report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied.

e-pay Asia Limited ABN 99 089 227 887 and Controlled Entities

Notes to the Financial Statements for the half year ended 30 June 2008

Note 2 : Segment information

Primary Reporting - Business Segments

	Prepaid Top-up	Software Solutions	Corporate/ unallocated	Total
Segment revenue	Half Year 2008 A$	Half year 2008 A$	Half Year 2008 A$	Half Year 2008 A$
Sales to external customers	4,598,610	68,483	131,838	4,798,931
Other revenue	74,621	-	7,136	81,757
Total revenue	4,673,231	68,483	138,974	4,880,688
Segment result	1,588,471	(220,779)	(382,549)	985,143

Profit before income tax expense				985,143
Income tax expense				15,312
Profit after income tax				1,000,455

Segment assets	19,779,382	1,685,078	3,774,480	25,238,940
Segment liabilities	11,697,873	800	1,081,952	12,780,625
Acquisition of plant and equipment and intangibles	17,655	-	-	17,655
Depreciation and amortisation expenses	568,611	266,223	12,386	847,220

Primary Reporting - Business Segments

	Prepaid Top-up	Tele communications	Software Solutions	Corporate/ unallocated	Total
Segment revenue	Half Year 2007 A$	Half Year 2007 A$	Half year 2007 A$	Half Year 2007 A$	Half Year 2007 A$
Sales to external customers	5,332,828	-	2,401,579	100,329	7,834,736
Other revenue	-	-	-	20,640	20,640
Total revenue	5,332,828	-	2,401,579	120,969	7,855,376
Segment result	178,422	-	1,329,576	(1,267,233)	240,766

Profit before income tax expense					240,766
Income tax expense					(25,844)
Profit after income tax					214,922

Segment assets	30,817,769	20,000	4,526,163	3,737,282	39,101,214
Segment liabilities	23,857,920	-	291,894	2,984,625	27,134,439
Acquisition of plant and equipment and intangibles	271,411	-	-	-	271,411
Depreciation and amortisation expenses	805,872	-	293,665	12,386	1,111,923

e-pay Asia Limited ABN 99 089 227 887 and Controlled Entities

Notes to the Financial Statements for the half year ended 30 June 2008

Note 2 : Segment information (continued)

Geographical Segment

The consolidated entity operates mainly in Asia in prepaid mobile top-up services in Malaysia, Thailand and Pakistan, prepaid diesel top-up services in Malaysia, and software solutions business throughout the Asian region.

Note 3 : Other Financial Assets

The group subscribed for a convertible note (“note”) issued by a company on 10 September 2007. The subscription price of the note is $2,500,000 and the note is non-interest bearing, unsecured and expires on 10 September 2008. The note was measured at its amortised cost using the effective interest method resulting in a carrying value of $2,469,000 and a fair value of $248,000 for the option premium issued as part of the convertible note. The group has the option of either converting the note into ordinary fully paid shares in the issuer of the note or may request the subscription price to be repaid in full.

At 30 June 2008, the company who issued the convertible notes was in the process of establishing a business based on telecommunications products distribution arrangements in China. The directors are of the opinion that upon the successful negotiation of the above, the new business venture will earn a return equivalent or greater than the above carrying values.

Note 4 : Equity securities issued

	2008	2007	2008	2007
	Shares	Shares	$	$
Issues of ordinary shares during the half-year

Exercise of options issued	-	283,670	-	56,734

Deferred Consideration of acquisition of e-pay Asia Holdings Ltd	-	72,500,000	-	-*

Issued as a result of conversion of convertible note during the period	-	2,732,349	-	798,725

	-	75,516,019	-	15,355,459

e-pay Asia Limited ABN 99 089 227 887 and Controlled Entities

Notes to the Financial Statements for the half year ended 30 June 2008

Note 4 : Equity securities issued (continued)

* the issue of 72,500,000 shares to e-pay Asia Holdings Limited has been accounted for as an adjustment to the initial accounting for the cost of combination arising from the reverse take-over of e-pay Asia Limited by e-pay Asia Holdings Limited in the 2005 financial year. Refer further details in Note 2 to the 31 December 2006 Annual Report.

Note 5 : Profit for the half-year

Profit for the half-year includes the following items that are unusual because of their nature, size or incidence:

	Half-year
	2008	2007
	$	$
Expenses
Impairment of goodwill	-	926,797
Less: Applicable income tax revenue	-	-

	-	926,797

Note 6 : Cash and Cash Equivalents

		June 2007	Dec 2007
		$	$

Cash on hand and at bank		2,338,545	4,768,442
Term deposits	a	6,731,882	8,598,981
	b	9,070,427	13,367,423


a) Included in term deposits are deposits amounting to $5,825,863 (2007 : $7,136,250) pledged to the Group’s bankers as security for credit facilities granted to the Group.
		June 2008	June 2007
b) Reconciliation of Cash		$	$

Cash and cash equivalent		9,070,427	18,183,930
Bank overdraft		-	(326,250)
Total cash and cash equivalent in Cash Flow Statement		9,070,427	17,857,680

e-pay Asia Limited ABN 99 089 227 887 and Controlled Entities

Notes to the Financial Statements for the half year ended 30 June 2008

Note 7 : Events subsequent to reporting

The Group announced its intention to cancel its AIM listing on 27 August 2008 which will be effective on 30 September 2008.

Note 8 : Contingent Liabilities

There has been no change in contingent liabilities since the last annual reporting date.

e-pay Asia Limited ABN 99 089 227 887 and Controlled Entities

Directors’ Declaration

The directors of the company declare that:

1. The financial statements and notes, as set out on pages 4 to 12:

a. comply with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations; and

b. give a true and fair view of the economic entity’s financial position as at 30 June 2008 and of its performance for the half-year ended on that date.

2. In the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

John Croft

Chairman

Dated this 27 of August 2008

e-pay Asia Limited

ABN 99 089 227 887

and Controlled Entities Independent Auditor’s Review Report

to the members of e-pay Asia Limited

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of e-pay Asia Limited and Controlled Entities (the consolidated entity) which comprises the balance sheet as at 30 June 2008, and the income statement, statement of changes in equity and cash flow statement for the half-year ended on that date, a statement of accounting policies, other selected explanatory notes and the directors' declaration.

Directors' Responsibility for the Half Year Financial Report

The directors of the consolidated entity are responsible for the preparation and fair presentation of the half-year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the half-year financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor's Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity's financial position as at 30 June 2008 and its performance for the half year ended on that date; and complying with Accounting Standard AASB 134: Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of e-pay Asia Limited and Controlled Entities, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of e-pay Asia Limited and Controlled Entities on 30 June 2008, would be in the same terms if provided to the directors as at the date of this auditor's review report.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of e-pay Asia Limited and Controlled Entities is not in accordance with the Corporations Act 2001 including:

A. giving a true and fair view of the consolidated entity's financial position as at 30 June 2008 and of its performance for the half-year ended on that date; and

B. complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulation 2001.

e-pay Asia Limited

ABN 99 089 227 887

and Controlled Entities Independent Auditor’s Review Report

to the members of e-pay Asia Limited

Significant uncertainty regarding the recoverability of the other financial assets

Without qualifying our conclusion, we draw attention to Note 3 in the financial report. e-pay Asia Limited have measured the carrying value of a convertible note (“note”) subscribed to a company at its amortised cost of $2,469,000 and option premium in the same company at a fair value of $248,000. e-pay Asia Limited has the option of either converting the note into ordinary fully paid shares in the company issuing the note or may request for the subscription price to be repaid in full. The note was issued to fund a business in the company. If the investment is not profitable or the amount is not repaid, the carrying value of the note and the options may be impaired.

Hall Chadwick

Level 29

31 Market Street

Sydney NSW 2000

DREW TOWNSEND

PARTNER

Date 27 August 2008

This information is provided by RNS

The company news service from the London Stock Exchange

END

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