Tuesday 24 October 2017

Duke Street puts €240m Payzone Group up for sale

MIKE MOLONEY: Managing director confirmed the sale
MIKE MOLONEY: Managing director confirmed the sale
Sarah McCabe

Sarah McCabe

Payzone is to be dismantled and sold at the request of private equity backers Duke Street.

The sale should value the e-payments empire that once had revenues of €3.4bn at €240m.

It represents the end of the road, for now, for the Irish group's global ambitions.

The company has completed several sales of subsidiaries of late. This week it announced the sale of its Swedish business to Denmark company Nets, while its large ATM businesses in Britain and Germany were sold to the ATM services provider Cardtronics for €125m last year. Its ultimate future, however, was unclear.

But managing director Mike Moloney has confirmed that its owners have decided to sell the entire group. This includes businesses in the UK, Greece and Romania as well as Ireland.

A formal sale process has already begun in Greece, while the sale of the Irish business is expected in the next 12 months.

It provides a wide variety of services in Ireland, ranging from machines that allow customers to pay utility bills to the M50 toll payments service, E-Flow. It also runs Dublin's Leap Card transport payment system and a mobile payments service for car parking.

Payzone has a troubled history. It emerged from the 2007 merger of Irish e-payments group Alphyra and British ATM operator Cardpoint.

At its peak it was valued at around €1bn, but accrued massive debts in the wake of the financial crisis and struggled to survive.

Shareholders ousted founder John Nagle in 2008 alongside a de-listing from the London Stock Exchange. Mr Moloney, an ex-army man and former BT chief operations officer, was brought in to guide a restructuring of its debts.

It was rescued in 2010 by a debt write-down and an injection of cash from private equity group Duke Street, which paid €45m for a 69pc stake and later bulked this up to 80pc.

Duke Street is now pushing the sale. As a private equity firm, its investments carry a short shelf life and clear exit strategy.

Duke Street is expected to earn a return of about 2.5 times its investment from the sale of the group.

The remainder of Payzone is owned by management (16pc) and banks (4pc).

In the meantime, it is business as usual for the Irish unit, which employs 70 people.

Its Irish business is the most successful of the group. It is performing "really, really well", Mr Moloney said. Profits are up 30pc on the previous year.

The company recently won the contract to provide a payments service for Irish Water bills, and last year renewed its contract to operate E-Flow.

The e-payments market is incredibly competitive, dominated by billion-dollar technology companies like Paypal and Stripe, the company founded by Limerick-bor brothers John and Patrick Collison.

But unlike its competitors, Payzone has a vast network of physical units - convenience stores, post offices and supermarkets around the country. This allows customers to pay bills with cash as well as other forms of payment. Despite EU-led moves towards a cashless society, including the widespread use of direct debit and the abolition of cheques, cash is still a popular method of paying bills in Ireland.

The company is investing heavily in technology and payment apps, Mr Moloney said.

Its online and SMS parking payment service has been particularly successful, he added. Around 55,000 customers have signed up, with 500 new customers joining a week.

The same payments technology could be applied to household waste collection, Mr Moloney added.

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