Directors of BPAY Group have sent a signal that they might not be interested in merging the company’s operations with NPP Australia and Eftpos.
Knowledge of the proposal has been a matter of public record since June 4 when NPP Australia revealed plans to explore the merits of a merger in a press release posted on its website.
Moreover, NPP Australia revealed in its annual report lodged with ASIC on 21 October that it had formed a new entity to facilitate strategic talks for a merger of the three payments companies.
The process for assessing whether a three-way merger would be in the public interest has also won backing from the Reserve Bank of Australia.
However, in a curious omission, BPAY’s directors did not acknowledge in their 2020 financial accounts any details of the merger proposal or the process established to facilitate a transaction.
The BPAY accounts for the 12 months to the end of June 2020 were signed by directors on 27 October.
“There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material or unusual nature likely, in the opinion of the directors of the Group, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years,” BPAY’s board told its four major bank shareholders.
The disclosure appears to indicate that BPAY’s board does not believe NPP Australia’s merger proposal is likely to succeed.
However, some industry participants might have reason to question why the merger proposal was not referenced at all in the financial accounts.
ANZ and CBA – two of BPAY’s shareholders – are reported to be supporters of the three-way union proposal.
The prospect of a merger probably qualifies as an “unusual event” and one that has the potential to affect the state of affairs of the BPAY Group.
Financial disclosures in the BPAY accounts also reveal the payments processor had another challenging year operationally.
Directors confirmed that the group has been forced to rein in key parts of its fintech investment program after operating losses from two startup subsidiaries pushed the group’s bottom line into the red for the third year in a row.
Financial accounts lodged with ASIC reveal that BPAY Group Holdings posted a net loss of A$2.5 million for the 12 months to the end of June.
The pre-tax operating loss was $2.6 million, a slight improvement on the 2019 operating loss of $3.9 million.
The payments processor has not recorded a bottom line profit since 2017.
BPAY’s directors attributed the group result chiefly to negative returns from the Lodge and Sypht fintech subsidiaries that were each launched in 2018.
“BPAY Group Pty Ltd and BPAY Pty Ltd have continued to experience growth in BPAY services,” the directors said in commentary contained in the accounts.
“However Lodge Technology Pty Ltd and Sypht Pty Ltd were operating at a loss, offsetting BPAY services’ operating surplus at a consolidated level.
“Business activities in the period have been focused on developing and sustaining existing products and operations and investing in the development of new products and services to launch in subsequent years.”
BPAY announced in May plans to close the Lodge business, which provided online property management services for investors and landlords.
“Although Lodge developed a loyal customer base, its usage did not reach the required level to grow the business,” BPAY said at the time.
BPAY filed an application with ASIC to wind up the subsidiary earlier this month.
Sypht is an AI-platform that is used by businesses to capture data trends from documents.
The business continues to trade with the backing of BPAY and minority owner, NCI.