Bill Express

Bill Express offered a slither of clarity to the market with an announcement to the ASX late today:

• The standstill agreement with financiers and key suppliers had been executed.
• Four Directors have resigned.
• The company’s CFO (who joined the company late last year) has been appointed a Director.
• The company is proceeding in its discussion with the Al Othman Group about restructuring and recapitalisation.
• The company is not proceeding with the previously announced APN/ETT transaction.

Coincidentally, ETT today sought suspension from the ASX as it seeks to resolve a commercial dispute with IPStar. Bill Express owns 43% of the shares in ETT.

I’d expect the discussions with Al Othman to proceed at speed given that they are already significant shareholders in Bill Express and licencees of its technology overseas.

Bill Express has made no statement about the reported Federal Police investigation into its affairs. Nor is there any update on its deal with Swish Group about managing its retail screen network or the advice the company has received that it would be a respondent in proposed Class Action by newsagents.

I would expect Bill Express to now seek to mend its relationship with newsagents. I’d expect the company to seek to do this through a third party. Work has been done on this over the last two months with several prospective “partners” since the end of the commercial agreement with the ANF.

The ANF confirmed today that it has 176 expressions of interest from newsagents to support its proposed legal action against Bill Express. My understanding is that more than double this number is supporting the more advanced Federal Court action originally commenced out of NSW.

I and some colleagues have been doing some research into Technology Business International Pty Ltd (TBI), the company through which newsagents signed lease agreements with for the Bill Express equipment.

• TBI is owned by Technology Business Holdings Pty Ltd (TBH) and has two Directors, one of whom is Sandro DiDonato.
• Technology Business Systems Pty Ltd (TBS) is owned by TBH and has one Director, Sandro DiDonato.
• TBH has four shareholders, the largest (96.5% of issued capital) being Equip Rentals Pty Ltd and one Director, Sandro DiDonato.
• Equip Rentals Pty Ltd was deregistered on 9 December, 2007. It had one shareholder, Sandro DiDonato and two directors, one of whom was Sandro DiDonato.

It would appear from letters received by newsagents recently that TBI has moved from the Bill Express Eaglemont Head Office to Helen Street in West Heidelberg. It has been suggested that this move coincides with the move of treasury functions to the Helen Street address. This is the address used for Australian Private Networks.

• APN is primarily owned (95.5% of issued capital) by Telecards Asia Pty Ltd and has one director, Sandro DiDonato.
• Telecards Asia Pty Ltd is owned by Sandro DiDonato and has one director, Sandro DiDonato.

In their February 29 announcement of half yearly results, Bill Express announced that it would acquire a controlling stake in APN.  The announcement talked up the Activ8me business.  The due diligence for the purchase was expected to be completed in the first week of March.  The company has not made an announcement regarding APN since.  There is a question as to whether Bill Express should have disclosed that this is a related party transaction.  While I am not saying it was, if I were a shareholder in Bill Express I would want the question asked.

I would like to know more about the reported visit to Bill Express headquarters by the Federal Police and what their visit relates to.

There are many questions which come to mind as I go through the tangled web of companies:

• Questions about APN and its financial and otherwise relationship to Bill Express.
• Questions about ETT, a public company linked to the Bill Express / OnQ group.
• Questions about OnQ itself and its tangled relationship with Bill Express and associated companies.
• Questions about the legal battle between OnQ shareholders.
• Questions about where the intellectual property which is at the heart of the Bill Express proposition is actually held.

These and other questions go to the heart of the viability of Bill Express, a matter of great interest to newsagents.

Bill Express announced to the ASX today an extension to its suspension to August 22.  The waiting game continues.  The company says it has received a recapitalisation proposal from a subsidiary of Al Othman Group.  While Al Othman houses several businesses which could provide synergy with the Bill Express model, I am surprised that the company has had to go so far from home and current partners for a financial lifeline.

There was little interest among Victorian newsagents in a meeting by the ANF which was to include a discussion about Bill Express.  The meeting was canceled.  This and poor numbers elsewhere must cast doubt on the legal action proposed by the ANF.

Given the advanced state of the Class Action already on foot and the considerable grassroots support, I would expect this to emerge as the only court action backed by newsagents. 

With so many newsagents behind the Federal Court action, newsagents will be looking to leaders in their channel to take a position supporting a single action, they will want to know that their leaders support the most unified legal move ever undertaken by newsagents.

A flurry of of emails and communication overnight about the status of Bill Express. The reports range from KPMG being called in to conduct a forensic audit through to police involvement to a story that the CEO will not return from overseas. Mark Hawthorne writing at The Age has some details.

Some of what I have been told cannot be confirmed. Interesting movement I have verified surrounds activity connected with developments in Vietnam as announced by OnQ. This relates to BOPO in Vietnam, another joint venture of the business. While the announcement is a year old, it points to a relationship which, it has been suggested to me, is now key to how the Bill Express situation may play out. The Vietnamese venture is not owned by the company. Similarly, the Singapore BOPO operation.

I’d expect greater interest in BOPO as investigators look more into the Bill Express business.

If receivers are appointed to Bill Express, newsagents would be well served to make urgent representations to the receiver on the relationship between Bill Express and Technology Business International (TBI). This will matter because newsagents entered into agreements with TBI to fund $25,000 worth of Bill Express equipment on the basis of rebates promised and even “guaranteed” by Bill Express. The viability of the newsagent commitment to TBI was determined by the rebate commitment by Bill Express.

This is on my mind today because some newsagents think that Bill Express collapsing will end their liability over the lease of Bill express equipment.

Representatives from seventy newsagencies in Queensland met in Brisbane yesterday and endorsed the Federal Court class action commenced against Bill Express, Technology Business International and the Australian Newsagents’ Federation.

This class action, commenced by a group of newsagents in NSW and facilitated through the state association now has strong eastern seaboard support. Newsagents are unifying behind this action as a result of the withdrawal of rebates by Bill Express which were the difference between newsagents breaking even and losing money on the service.

It is good to see Mark Hawthorne continue coverage of the Bill Express saga in the Full Disclosure column in The Age today. There is plenty more yet to surface on the Bill Express story. I would like to see some digging into the companies associated with Bill Express / OnQ. Here is what I wrote last month about one such company, Loyalty Direct:

I have been told that a company called Loyalty Direct Pty Ltd terminated the services of 35 employees on Friday of last week without redundancy or accrued benefits paid. I have also been told that another group of Loyalty Direct employees were terminated and immediately offered contracts with a business called Payroll Express which provides the same services as Loyalty Direct.

Loyalty Direct is registered at the Eaglemont address of Bill Express’ Head Office. An ASIC search shows that Loyalty Direct is under “external administration and/or controller appointed. My understanding is that Loyalty Direct is a private company delivering some services to On Q and or Bill Express. I am not able to verify the location and ownership of Payroll Express.

I note the irony of the Loyalty Direct name.

Since writing this I’ve been told that Payroll Express is not the name of the phoenix company, it is Express Payroll Solutions Pty Ltd (ABN 12 113 484 432). The terminated employees have not, as I understand it, been paid their entitlements.

The ANZ has more at stake than the Bill Express indebtedness. It has merchant terminals across the Bill Express retail network. These generate excellent fees for the bank on every transaction processed. I’d expect that this is a key consideration in its efforts to find a resolution to the Bill Express mess.

For information on Bill Express’ UAE connections, check out the iPay website.  Navigate to strategic partners and read about Bill Express:

Through our Bill EXPRESS® and DialTime® operation, the company owns and operates one of Australia’s largest electronic retail distribution networks.

Over the past 6 years Bill Express has established a robust and proven electronic network of nearly 14,000 terminals throughout Australia generating a revenue exceeding $1 billion.

I am not sure that newsagents would say the Bill Express network is robust, certainly not since late last year.

The iPay website also lists the troubled OnQ as a strategic partner.   OnQ is a substantial shareholder in Bill Express and the holder of the “technology” on which Bill Express is based.

Click here to read the press release announcing the iPay joint venture developed out of Vodatel.

My speculation is that parties associated with iPay are the parties who acquired shares in Bill Express within the last year.  If the reports of Bill Express CEO Ian Christiansen traveling to the UAE are accurate, I would expect him to be seeking more funds from his shareholders there.

The Sydney Morning Herald has a good report on the Bill Express situation this morning. The Age has a smaller report. The reports miss these details:

• Bill Express unilaterally changed contract terms for its 3,500 small business newsagents, resulting in most facing an additional $495 (+GST) a month in costs to offer the service.
• At least one company housing staff which provide IT services to Bill Express has gone into liquidation and another started in its place with less then half the staff. It has been reported that the staff not taken up by the phoenix business were not paid redundancy payments.
• Newsagents have commenced class action against the company having notified them ten days ago that they are to be a respondent in a planned Federal Court action.
• The Bill Express liability to newsagents is growing at the rate of more than $1 million a month.
• The mobile phone recharge component of the Bill Express network is a day to day proposition with out of socks occurring every couple of days either network-wide or significant pockets.
• The data room referred to in both reports was established by the business seven weeks ago.
• The ANZ, somewhat cynically I suggest, doubled its eftpos break fees shortly after Bill Express got into trouble -my speculation is that they wanted to stop newsagents migrating to other eftpos providers.
• I estimate that one third of Bill Express phone recharge revenue has moved elsewhere – ePay, Comm Bank Xpos, Suncorp, St George and our own eziPass.
• The national newsagent association, the ANF, stood by and let Bill Express get to this point because it contracted away its rights to act as an association for its members in return for around $200,000 a year in fees from Bill Express.
• Bill Express did a deal with Swish group over the advertising screens in newsagencies – after it took away from newsagents the”guaranteed” funding which underscored the economic value of the screens to newsagents.

Now that the Bill Express story has hit mainstream media I expect to see quick action around the future of the business.

I have created a new Bill Express category on the blog to make it easier for people wanting to access all posts about this topic.

I bet newsagents have not heard of the Swish group.  This public company, SWG on the ASX, claims newsagencies as part of their retail signage network – see their May 2008 shareholder update.  Bill Express announced an agreement with Swish on April 28, giving Swish control of the advertising screens in newsagencies.  In February, Bill Express removed the $210 a month rebate which it had reviously guaranteed to pay newsagents in return for having the screen in their stores.

I wonder if Swish needs to make an announcement to the ASX about the Bill Express situation. I hear that many screens in newsagencies do not work and that where they do, many newsagents have them turned off because of their issues with Bill Express.   I do not plan to turn my screens on until Bill Express addresses my concerns over their breach of agreement relating to the “guaranteed” $210 a month they would pay per store.  Not that it matters in one of my newsagencies as the screen has not worked for months.

Page 23 of today’s Australian Financial Review reports about a threat of legal action against Bill Express by a group of newsagents organised through the NSW newsagents’ association. As I blogged last week, newsagent anger about Bill Express is not diminishing with time.

The legal move reportedly being taken by NANA is one of several legal fronts being pursued by groups of newsagents against Bill Express and other parties which may have played a role in getting newsagents to sign for the Bill Express service.

I understand that the ACCC is looking into the Bill Express situation as well as one or two state government authorities and another Federal authority. From what I understand, all are focused on who represented what and when to newsagents to get them to sign with Bill Express.

As newsagents trawl through their files, more are finding promotional material, articles and other documents on which they relied to sign up for Bill Express. In these documents, guarantees like the following on which I relied can be found:

Is the $210 Advertising rebate guaranteed?
Yes! The National Advertising Screen included in Package 3 includes a $210 rebate that is applied every month for the life of the agreement, as a guaranteed commitment.

This was promoted to me by Bill Express and by the Australian Newsagents’ Federation. Like many newsagents, I relied on this guarantee in making my decision.

While I am glad to see the AFR provide the Bill Express store more coverage today, I would like to see a newspaper undertake more complete reporting of the situation.

I would also like to see reporting of the current situation. Since February, the company has been unilaterally withholding around 30% of what would usually have been paid to newsagents for services rendered with the claim that the money would be used to promote the service. I have seen no evidence of any such promotion. I estimate that the company has in excess of $150,000 cash which would otherwise have been paid to newsagents but for the latest scheme the unilaterally imposed.

People wanting a summary of the Bill Express situation from a newsagent perspective ought to read by February 29 blog post.