Keeping the peace at Payzone

THE FRIDAY INTERVIEW/Mike Maloney, chief executive, Payzone:PAYZONE CHIEF executive Mike Maloney doesn't do stress. Intensive officer training during a near 10-year stint with the Army in the 1980s prepared him on how to deal with extreme mental and physical pressures.

“I always sleep well at night time,” Maloney explains, while sitting at a round table in his Sandyford office.

This is just as well, given his role these past three years as chief executive of electronic payments group Payzone – or Warzone, as it was dubbed in the media.

A bloody boardroom coup in January 2008, led by major shareholder Balderton Capital, resulted in founder and chief executive John Nagle being sacked by the company.

The merger of Dublin-based e-payments group Alphyra with UK automatic teller machine (ATM) operator Cardpoint in late 2007 had turned sour. Payzone needed to be whipped into shape.

In the circumstances, it was perhaps no surprise that the board eventually turned to a former Irish Army peacekeeper – Maloney had been a platoon leader in Lebanon in 1986 – to pick up the pieces.

“When I came in, the job was twofold,” Maloney recalls. “One, to figure out was there a business here that’s worth saving and second, to get the capital structure of the company correct.”

The business was in a “worse state” than he had imagined.

“It had expanded way too quickly, hadn’t invested enough and had done a lot of acquisitions without integrating them,” he explains.

“All of the classic mad land-grab expansion, without really thinking through why the acquisitions were done – and how ‘synergistic’ were they.”

Maloney sold the Alphyra businesses in Spain, Italy, France, the Netherlands, Germany and Poland, and pulled the plug on many loss-making ATMs.

“The businesses we kept were all profitable or had the potential to be profitable, had good scale and could generate cash flow.”

The main piece of the jigsaw was restructuring its crippling €320 million debt.

In April 2010 a major financial restructuring took place, with its lenders, led by Royal Bank of Scotland, taking a €230 million haircut on their debts.

Private equity group Duke Capital took control of the business and Maloney and six other managers bought a 15 per cent share.

A new Luxembourg-registered holding company called Prize Holdings was formed.

Maloney won’t reveal how much he personally invested. “I’m not going to disclose that, but we bought our shares. In true private equity style, they [Duke] like to see management have some skin in the game.”

The restructuring wiped out the equity of Nagle and Balderton, where Maloney’s brother Barry is a senior partner. “Everyone was a loser. My job was to save the company, and that’s what I did.”

There were whispers of nepotism when Maloney was appointed to the job, but it’s a charge he rejects. He insists that brother Barry had no role in his appointment.

“Barry never offered me the job. I was interviewed by the plc board and Balderton excused themselves from that process. I was nominated by Balderton as a potential candidate, but I had to go through an interview process like everybody else.

“At the end of the day they [Balderton] took their pain, they lost a lot of money. They placed their bet . . . they win some and they lose some.”

The Payzone brand might not mean a lot to the Irish public, but its network facilitates the payment of many utility bills, mobile top-ups, M50 tolls and virtual parking payments in Dublin city.

It has the contract, along with HP, to develop the much-talked-about integrated ticketing for public transport in Dublin. It also has operations in Sweden, Greece, Romania and Britain.

The ATM business, now rebranded as Cashzone, operates in the UK and Germany. In Britain, it recently acquired rival Omnicash, and other deals could be on the cards. “We would see ourselves as one of the big consolidators in the [UK] market,” he says.

When Maloney took charge, Payzone’s net debt to ebitda (earnings before interest, taxes, depreciation, and amortisation) ratio was a hefty eight times.

“Since the deal, we’re now in a situation where our net debt is €30 million,” Maloney explains. “Our financial year ends in September, and based on what we see we’ll have a net debt to ebitda of 1.4 times. So it’s been a complete transformation.”

Revenues have been pared back to €170 million, and 60 per cent of profits now come from the ATMs. “The actual operations of the company are performing very well,” he says.

Maloney’s back story is an interesting one. He was one of four boys in the family, all of whom attended boarding school in Newbridge.

He was a reluctant recruit to the officer ranks. His father, who worked for the United Nations for 30 years, encouraged him to apply for cadet school. “It was 1980. There were no opportunities for graduates. My father was keen for me to apply. To be honest, I was somewhat reluctant.”

Maloney studied economics in Galway, earning his degree in 1985. The following year he went to Lebanon, serving as a platoon commander for six months.

“There were times when it was so incredibly boring that you wouldn’t believe it. I actually got my platoon to paint the house we were in three times in six months just to keep them busy. Then it can get very dangerous, very quickly. It can flare up.”

Two Irish soldiers died during Maloney’s stint, although they weren’t members of his platoon. “It was horrific stuff. One guy was just unpacking, having spent Christmas with his family in Dublin. He was upstairs on his own . . . when the tank round hit the top of the building.”

Overall, Maloney is positive about his time in the military. “It’s a super organisation. I got the best management training,” he says.

In 1989, he bought out his contract and went to work in the private sector. “I had to write a big cheque. But that was fair.”

He held executive roles with multinationals Digital Equipment and Gateway, for whom he started businesses in Malaysia and Japan, and acquired one in Australia.

He then spent three years with British Telecom in Ireland, latterly as chief operations officer. He had been tipped for the top job at BT in Ireland but the company moved Chris Clark over from Britain. Maloney decided to leave. “You don’t win every shake-up, that’s life.”

Payzone was an interesting career choice, given the turmoil that surrounded it at the time. How did his wife Áine feel about the move?

“Ha, ha. My wife is very supportive. It’s worked out well so far, so we’re happy.”

When the restructuring was done last year, Payzone had an enterprise value of €115 million.

Maloney’s plan is to double that figure within three to five years.

He and Duke Capital also have an exit strategy in mind, one that involves the two arms of the business taking different paths.

“The [value of the] terminal businesses are probably best realised through a trade sale,” he says.

The ATM business, meanwhile, could end up on the stock market. “If you manage this business right it should be able to support a healthy dividend and that is why it is likely to go an IPO route some time in the future.

“That to me makes sense. It’s not going to be sold as a growth stock; it’ll be sold as a dividend stock. We’ve got good prospects and a good business now.”

On the record

Name: Mike Maloney.

Job: Chief executive, Payzone.

Age: 48.

Lives: Ranelagh, Dublin.

Family: Married to Áine with four children.

Hobbies: Keen follower of rugby and Gaelic sports and enjoys "most outdoor activities".

Something we might expect: He travels two to three days a week to keep in touch with Payzone's operations abroad.

Something that might surprise: He left the Army in 1989 but is still a member of the Army Reserve and eligible for a call-up in the event of a national emergency.

"I'd probably still pass my fitness test."