Bill Express – small fry?

An interesting story about Bill Express was on page 61 of yesterday’s Australian Financial Review:

Small fry that nearly got away

The earnings announcements of many small financial services names may appear to have slipped by unnoticed in the February reporting season. But they yielded noteworthy results – some good, some ugly.

Bill-payment network Bill Express released its results on friday after the market closed. It revealed a net loss of $2.05 million for the six months to December 31, against a net profit of $3.9 million last time.

The company had a $1.8 million accounting loss on its investment in prepaid technology providor ETT, as well as $3.4 million in marketing costs for its bopo prepaid Visa card business.

Bill Express said, however, that the loss on ETT would be offset in the second half, when it sold the investment at an expected profit of more than $2.5 million.

Bill Express is using newsagents, its key retail network with 3,500 outlets, to help turn the financial situation around. Two weeks ago they announced the removal of a marketing subsidy of $250 a month paid to newsagents. This subsidy was like an income guarantee. Many newsagents only took on Bill Express because of the minimum income guarantee. The guarantee was not part of any agreement between Bill Express and the newsagents.

In response to the removal of the marketing subsidy, many newsagents are looking at how they can quit the Bill Express network. If this happens in any numbers, the pressure Bill Express is under in terms of share price will escalate. With its shares down 46.9% over the last year and 30% in the last six weeks, the last thing Bill Express would want is further share price pressure.