News
Cashbox announces intention to float on AIM
27 February 2006Cashbox plc ("Cashbox"or "the Company"), a leading independent ATM deployer and operator, today announces its intention to seek admission of its shares to trading on the AIM Market ("AIM") of the London Stock Exchange. Dealings are expected to commence on AIM in March 2006.
The Company began trading in September 2003 and was established by brothers Carl and Matt Thomas. Cashbox installs and operates an estate of ATMs, typically on five to seven year contracts, at sites throughout the UK where there is a demand for cash withdrawal services and where customers are willing to pay a convenience fee. Typically, the sites operated by Cashbox are not, Cashbox believes, of interest to banks or building societies as the low number of ATM transactions would not support their non-fee charging ATMs. As at 31 December 2005, the Company owned and operated an estate of 845 ATMs in the UK of which 89% are located in corporate estates, with the remainder in commercial estates and independent retailers.
Cashbox has planned a further 583 ATM installations, and believes there is potential to install a further 5,510 ATMs. Cashbox's sales strategy is based on selecting amongst three models to maximise the profit potential of each ATM site - the Sale Model, the Placement Model and the Fully Managed Model. In addition to the transaction-based revenue that merchants earn by installing an ATM, research shows that additional benefits include: increased footfall, customer retention, increased cash spend, increased turnover and bank charge savings.
The Company intends that the majority of new installations will use the Placement Model, whereby the ATM is purchased by Cashbox under lease hire, placed with the merchant and replenished by the merchant, eliminating the need for third party cash handling costs.
As at 31 December 2005, a total of 95 transacting Placement Model ATMs were installed. Cashbox believes this business model, married to their detailed site surveys, enables Cashbox to predict profitability of a site prior to deploying a machine. This allows the Company to target lower footfall sites that would otherwise not be offered the opportunity to install an ATM and effectively expands the market available to the Company. Merchants would also benefit from additional revenue generated from an ATM on their premises.
For sites with higher footfall, Cashbox will deploy a Fully Managed business Model (whereby ATMs are replenished by third party cash handling firms). Detailed site surveys are employed for each business model and an ATM is only deployed if the site is expected to generate a gross profit contribution.
Carl Thomas, Chief Executive of Cashbox, said: "Since Cashbox's incorporation the business model has evolved so that we now largely offer a Placement Model to our customers. This is a business model that we believe no other independent ATM deployer ("IAD") focuses on, which has the major benefit of us targeting low footfall areas that our competitors would most likely consider too small. It also makes the decision for our customers to have an ATM an easy one to make, as there is no capital outlay on their part.
"Under our model an ATM only needs to make 2.3 transactions per day to make a machine profitable. Consequently in December 2005 89.5% of our deployed ATMs were already profitable at a gross profit level."
The UK is the third largest ATM market in Western Europe, representing over 16% of installations in the region, and the eighth largest ATM market in the world. In 2004, the UK was the fastest growing ATM market in Western Europe largely driven by the increase of ATMs in remote locations due to IADs. Over the five years ended 31 December 2004, the number of ATMs in the UK has nearly doubled, with 80% of the ATMs deployed during those years being installed in locations other than banks and building societies. By the end of 2004, 54,412 ATMs were in operation in the UK. Over nine out of every ten new ATMs deployed during 2004 were supplied by an IAD. (Source: Association for Payment Clearing Services "APACS").
Transaction volumes have also grown in line with ATM deployment; 1.3 billion transactions took place in the UK in 1994, growing to 2.5 billion transactions, or £161 billion dispensed cash, in 2004, and industry analysts expect the trend to continue. Currently 50% of cash in circulation is sourced in the UK from ATMs and this is predicted to rise to 75% by 2011 (Source: APACS).
Cashbox generates revenue from its ATMs via transaction revenues, where convenience fees are incurred by the cardholder at the time of withdrawing cash from an ATM; also by Interchange fees paid to Cashbox by the cardholder's bank or building society on ATM balance enquiries and rejected transactions and transactions where no convenience fee is charged. Revenues are also generated by the sales of ATMs to merchants under the Sale Model.
Since 2003 Cashbox has achieved rapid growth. It won its first major contract with the drinks merchant Thresher Group, and in September 2003, Cashbox installed its first ATM. Cashbox installed its 50 th ATM during October 2003 and its 100 th ATM during November 2003. The following month, Cashbox installed its first machine for the pub group Greene King.
Cashbox was granted membership of LINK in March 2004, allowing Cashbox to incorporate its ATMs in the LINK network. Cashbox also has a Bank of England settlement account.
The current Cashbox ATM specification is manufactured by Tidel and delivers high performance and secure cash delivery, incorporating a large 10.4 inch high definition screen, which provides opportunities for marketing and voucher promotions. The ATM is designed for straightforward, reliable operation and as such is intended for replenishment by non-specialist personnel. The ATM is quick and easy to fill, encouraging merchants to keep the machine operational and ready for use by its customers. Cashbox became the first IAD in the UK to become completely compliant with the Triple DES security standard in June 2004 and the Company installed its 500th ATM in October 2004.
In January 2005, Cashbox introduced the Placement Model on a selected test basis and has signed contracts with a number of major companies such as Scottish & Newcastle Pub Enterprises and Nisa Today's with, Cashbox believes, further significant sales potential. In addition, with regard to the Fully Managed Model, the Company has negotiated agreements to proceed to trial installations with two significant multiple site operators. Installation (following satisfactory outcome of such trials) is expected to commence during the first quarter of 2006.
On the decision to float on AIM, Carl Thomas, Chief Executive of Cashbox, commented: "The funds raised will enable us to roll out a number of pending ATMs and expand our estate. Gaining critical mass in this market is crucial and we believe we will achieve this once we have 1,900 ATMs installed around the UK and we expect to achieve this by the end of 2006.
"Our business model is highly cash generative and our lease hire of the ATMs ensures that the depreciation is taken off the balance sheet and further reduces the level of transactions to make a machine profitable. There continues to be a significant demand for convenient cash, as well as for ATMs which drive turnover for a site, and as such, industry forecasts are predicting continued growth."
Seymour Pierce Limited is acting as both Nominated Adviser and Broker to Cashbox.
For further information:
| Cashbox plc | |
| Carl Thomas, Chief Executive | Tel: +44 (0) 870 126 2274 |
| cthomas@Cashboxplc.co.uk |
| Seymour Pierce Limited | |
| Jeremy Porter, Corporate Finance | Tel: +44 (0) 20 7107 8000 |
| jeremyporter@seymourpierce.com | www.seymourpierce.com |
Media enquiries:
| Threadneedle Communications | |
| Josh Royston/Graham Herring | Tel: +44 (0) 20 7936 9606 |
Notes to Editors
Placement model
Under the Placement Model, Cashbox retains ownership of the ATM, providing it for the Merchant's use. Cashbox retains a larger proportion of the gross Convenience Fee than is the case with the Sale Model. The site owner takes responsibility for cash provision, cash replenishment (from their takings) and telecommunications.
Once cash is withdrawn from the ATM by the customer, funds are returned via the Bank of England to the Merchant by electronic transfer from Cashbox on a three-day cycle. This reduces the daily banking needs of the Merchant thus providing a saving in bank fees.
The Placement Model will become Cashbox's main basis for deploying self-fill ATMs. The significant majority of contracts signed since August 2005 by Cashbox are for the Placement Model. This business model is best suited to sites with projected transaction volumes in excess of 200 per month.
Fully Managed Model
Under the Fully Managed Model, Cashbox retains ownership of the ATM and Cashbox is responsible for providing and replenishing the cash (outsourced to a cash provider and "cash in transit"company) and maintaining these ATMs. The Merchant, therefore, has no need to intervene with the operation of the ATM at any time. The costs associated with this model makes this deployment model appropriate for locations projected to generate high transaction levels, such as car parks, cinemas, shopping arcades and petrol forecourts.
As with the Placement Model, Cashbox retains the right to remove and relocate an ATM at its own discretion. The Directors recognise that, as Cashbox now focuses on offering ATMs predominantly on the Placement and Fully Managed Model, site selection is of upmost importance and Cashbox will continue to undertake detailed, in-depth surveys of potential new sites prior to placing ATMs in new locations.
Sale model
Cashbox's Sale Model is based on the sale of the ATM to the Merchant for which Cashbox provides transaction processing and maintenance services to these ATMs. As with the Placement Model, the Merchant is responsible for filling the machine with cash and Cashbox provides transaction processing and maintenance services to these ATMs. As a result the site owner receives a greater proportion of the gross Convenience Fee than is the case under Cashbox's other deployment models. Cashbox will not actively pursue the Sale Model.
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