SPY Smartpay Limited

SMARTPAY ANNOUNCES SIGNIFICANT BOOST IN REVENUE

SmartPay Posts 2,227 Percent Increase In Group Revenue

Auckland, 31 May 2007 - SmartPay Ltd (NZX: SPY) New Zealand's leader in the development and supply of innovative electronic prepaid solutions including mobile phones, international calling cards, internet and POS based services, gift cards and a range of other products today announced an audited 2,227 percent increase in operating revenue of $34.279 million for the 12 months ended 31 March 2007 ($1.473 million to 31 March 2006).
Correspondingly, SmartPay did also experience an operating loss of $1.414 million compared with $1. 197 million for the previous financial period although this was an improvement of 18.1 percent overall.

Since it was established in 2004 and following a successful back door listing through Cube Capital Ltd in May 2006, SmartPay's strategy has been to target the electronic payments market including prepaid telephony which is estimated at $600 million.

Financial Highlights
SmartPay Chief Executive Officer, Linc Burgess said the company's significant revenue growth is the result of a deliberate strategy which is focused on the development of a strong national network of retail merchants across New Zealand.
"The focus of the SmartPay Group during the year has been to invest in the development of our network and to make acquisitions that enhance the capability and future earning capacity of the overall business," says Burgess.

Accordingly, SmartPay has signed contract agreements with major telecommunications networks and product suppliers including with Vodafone and Telecom NZ for prepaid top-up electronic vouchers and international calling cards through to EFTPOS and more than 3,000 SmartPay outlets including a number of high profile route/convenience and retail stores throughout New Zealand. These include Harvey Norman, Retravision, Smiths City/Powerstore, Gasoline Alley, 100% Electrical, and Hill and Stewart. Through the Group, SmartPay also works with well-known corporate brands such as PaperPlus, Palmers, VTNZ, Mitre 10, YHA and Super Liquor.

Burgess also says that SmartPay's investment in infrastructure (both software and network) has strongly positioned the Company to continue driving revenue growth in pre-paid, gift cards and bill payments both nationally and internationally. A key platform in this was the acquisition of all of the company's Intellectual Property (IP) software and source code from Cardtrend. This means that SmartPay now has a much greater earnings potential through owning all of its technology from the terminal through to the back office.

Significant potential for SmartPay is the growth in prepaid solutions in New Zealand which following international trends, are becoming attractive to those who do not have, or prefer not to use, credit cards and others who seek to make transactions anonymously.

SmartPay also concluded a long-term agreement with gift card and loyalty programme operator eCard Solutions for the processing and hosting facilities. This agreement was part of SmartPay's overall strategy to position itself at the "cutting edge" of POS technology and the ability to launch its transaction processing in New Zealand with like-minded businesses.

The acquisition of 100 percent of Card Processing Services Limited (CPSL) has given SmartPay a robust and extensible network which allows delivery of a complete electronic payments solution. As a subsidiary of SmartPay, CPSL provides a hosting and transaction processing service covering prepaid transactions, bill payment services, loyalty systems, taxi payment systems and mobile payment services. This mobile terminal sector has provided another potentially lucrative market for SmartPay in both New Zealand and Australia.

SmartPay also acquired a 33 percent interest in Retail Radio, a successful business that provides an in-store private radio environment for retailers to allow them to play fully licenced music and to deliver highly targeted advertising to customers.
Another highlight was SmartPay's delivery of a groundbreaking POS software solution for Gasoline Alley Service's (G.A.S) 130 nationwide service stations. This unique retail innovation combined the SmartPay application for prepaid top-up vouchers and calling cards with an EFTPOS capability and a host of other applications embedded in a single POS terminal providing more counter space as well as the ability to process a range of other services such as fleet management/fuel cards.

SmartPay also developed technology for offline terminals to assist the New Zealand retail market use their prepaid voucher terminal and separate EFTPOS terminal at the same time. This allows retailers to process EFTPOS transactions without tying up the phone line, and enabling major retailers like PaperPlus to serve customers a lot quicker with seamless processing of prepaid sales.

Electronic prepay provides a number of benefits for retailers including reduced risk of fraud and theft of card based products, continuous product supply and stores not having to purchase stock until it's sold. A good example of this is Australasian retail giant Kmart which installed throughout its nationwide 13 stores, SmartPay's terminals with electronic mobile top-up and international calling card technology.

Strong Management Team
Steve Smith was appointed as SmartPay's Chief Operating Officer and brings the Company an extensive background in telecommunications including start-ups through to corporates requiring restructuring. In addition, Steve has extensive experience in general funding, corporate finance, and launching a 3G network in Europe with companies including Verizon and InQuam in UK and Europe.

SmartPay will continue to hire and build a senior management team with both local and international experience as one of the key drivers for identifying and delivering on both new opportunities in the electronic payments market, as well developing new products and services.

Looking Ahead
SmartPay also progressed plans for the opening of a sales office in Wellington and expects to have this established in the next financial period along with a sales team.

Financial Summary - the comparative is the trading company for the previous 12 months
Consolidated Statement Financial Performance
Previous
1 CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE
Current full Year $NZ'000; *Up/Down %; corresponding
full year $NZ'000

1.1 OPERATING REVENUE
(a) Trading Revenue 32,171; 2534.8%; 1,221
(b) Other Revenue 2,108; 736.5%; 252
(c) Total Operating Revenue 34,279; 2227.2%; 1,473
1.2 OPERATING *SURPLUS (DEFICIT) BEFORE TAXATION (1,421); 18.7%; (1,197)
(a) Less taxation on operating result
1.3 OPERATING *SURPLUS (DEFICIT) AFTER TAX (1,421); 18.7%; (1,197)
(a) Extraordinary Items after Tax [detail in Item 3]
(b) Unrealised net change in value of investment properties
1.4 NET *SURPLUS (DEFICIT) FOR THE PERIOD (1,421); 18.7%; (1,197)
(a) Net *Surplus (Deficit) attributable to minority interests 7
1.5 NET SURPLUS (DEFICIT) ATTRIBUTABLE TO MEMBERS
OF THE LISTED ISSUER (1,414); 18. 1%; (1,197)
Subject to final audit
ENDS
For further information contact:
Linc Burgess, CEO, SmartPay, Ph +64 414 2180
Julien Leys, JML Communications, Ph +64 21 655 598

About SmartPay
SmartPay is an unique business in New Zealand in that provides a complete solution for pre-paid telephony services (phone cards) through to extensive distribution channels, advanced point of sale (POS) and electronic payment solutions. SmartPay manages its own network which is fully compatible with international financial standards (IFRS) and also provides the terminals for point of sale. SmartPay has an extensible and world class business model for POS systems, and works closely with some of New Zealand's largest companies including Telecom New Zealand through to nationwide retailers like Chi-Tel. SmartPay's core business is supported by its own network, as well as by a majority investment in an advanced retail technology operation which will be a platform to support loyalty cards, and other value-added point of sale services.

Please visit our website at www.smartpay.co.nz

Chairman's report

Year in Review

It is with pleasure that the Directors and management present this inaugural SmartPay report for the year ended 31 March 2007. Although not new to the electronic commerce sector, SmartPay only became listed on the New Zealand Stock Exchange in May 2006.

During this period, SmartPay has achieved signifi cant and aggressive growth. It has gone through a rapid transformation from a technology start-up to being an electronic commerce leader. Financial Results SmartPay’s operating revenue increased by 513 percent to $34.353 million for the 12 months ended 31 March 2007 compared to $6.703 million (for the year to 31 March 2006).

This was largely driven by a deliberate strategy to invest in SmartPay’s network of more than 4,000 sites across New Zealand as well as several key acquisitions that SmartPay has made since listing. While the Company report an operating loss of $1.492 million this was largely expected given the focus on developing the infrastructure and assets that will deliver SmartPay a sustainable future revenue base.

SmartPay Strategy SmartPay’s strategy is simple – to target an increasing share of the global multi trillion dollar electronic commerce market. SmartPay’s initial focus has been to create a robust platform by investing in infrastructure (in both software and an advanced network). This strategy has positioned SmartPay to drive revenue growth across multiple revenue streams including gift cards, pre-pay and bill payments, both nationally and internationally.

Another key element in SmartPay’s strategy was the acquisition of all principle intellectual property (IP) software and source code, for which we hold international rights. What this now means is that SmartPay has a much greater earnings potential because the Company owns all of its technology from the terminals through to the back office. Smartpay is poised to capitalise on various lucrative electronic commerce opportunities.

This includes attractive prospects in diverse and vibrant markets such as the Middle East, Asia, the Pacifi c and Australia.

Key Highlights

SmartPay has had several significant milestones in its first year as a listed electronic commerce provider. These include:

> CPSL acquisition – this has given SmartPay a robust and extensible network which includes taxi payment systems and mobile payment services. With its own secure payments gateway, SmartPay is the only electronic commerce business to deliver end-to-end solutions.

> Retail Radio stake - SmartPay took a 33 percent interest in Retail Radio. This means that SmartPay has a share of the growing revenue from retailers keen to licence music to deliver highly targeted advertising to customers.

> Gasoline Alley Services (G.A.S) - SmartPay delivered a groundbreaking and innovative POS software solution for G.A.S’s 130 nationwide service stations. This solution combined the applications for prepaid top-up vouchers and calling cards with an EFTPOS capability and a host of other applications (such as fuel cards, G.A.S / Diners Club International loyalty card) embedded in a single POS terminal.

> eCard Solutions - SmartPay secured a long-term agreement with gift card and loyalty programme operator eCard Solutions for processing and hosting facilities.

> Wellington Combined Taxi’s - A deal to provide Wellington Combined Taxis with an advanced wireless payment technology platform has also been secured by Smartpay. The mobile terminal sector is providing lucrative global opportunities for SmartPay.

> Expanding retail network – with more than 4,000 active SmartPay New Zealand Limited sites around New Zealand including a number of high profi le route/convenience and retail stores, the Company added some well-known corporate brands such as Paper Plus, Palmers, VTNZ, Mitre 10, YHA and Super Liquor. "...developing the infrastructure and assets that will deliver SmartPay a sustainable future revenue base."