Spenda and Carpet Court lay groundwork for future growth

Transaction services software specialist Spenda (ASX: SPX) is celebrating the signing of a significant, five-year exclusive supply agreement with Australia’s leading flooring retailer, Carpet Court.

The two companies have also agreed to collaborate on a unique pilot program offering a range of services for individual stores.

The new agreement is the culmination of the successful completion of a pilot program, involving the integration of the Spenda Platform into the operating environment of select Carpet Court stores in December 2022.

The parties have now confirmed that Carpet Court will integrate the CC Spenda Platform across its store network using a bespoke iteration of the Spenda platform.

Lending services included

Through its software infrastructure offering, Spenda is able to provide lending services across the entire Carpet Court network and the two parties will collaborate through a five-year exclusive relationship framework deed to offer working capital finance to all stores.

Through that agreement, Spenda will act as the lender and Carpet Court will act as the business partner for an initial term of five years.

The parties have also confirmed that they will each provide working capital finance to Carpet Court’s stores on a 30-day term for a fixed funding fee, calculated on a percentage of funds advanced to the store.

Solid per-store revenue

While it is yet to be determined how many Carpet Court stores will be covered under the agreement, Spenda has estimated that its potential revenue return will be up to $30,000 per store, per annum. Carpet Court has more than 200 locally owned and operated stores nationwide.

That expected revenue by source has been estimated at 43% for extended credit, 43% through payment and 14% Software as a Service (SaaS).

Flexible pilot program

The new proposed pilot program for individual stores will involve a range of products and services including a specially designed Standard Operating Environment (SOE).

The agreed too bespoke solution will combine Spenda’s procurement, service management, and centralised range, with management software including SOE tailored to the flooring industry.

Spenda managing director, Adrian Floate, has confirmed that his company may receive additional revenue streams including one-off implementation fees, ongoing monthly SaaS fees and payment processing fees, which will be calculated on the number of business to consumer (B2C) payments processed.

“The Spenda solution is rich in functionality and as such it can often be difficult to showcase the full capabilities of our software in a way that our investors can easily digest,” Mr Floate said.

“The Carpet Court roll out has allowed us to show how we phase an implementation and monetise Spenda’s services in clear stages, from acquiring a Node and delivering initial services to the connected Spoke network, and now further upgrading the Spokes with a working capital financing solution, retail software and additional payment infrastructure.”

Carpet Court chief financial officer, Mark Hogan, praised the Spenda platform and its ability to deliver efficient end-to-end payment services for the NSC and members.

“The extended terms facility continues our digital transition and provides a flexible funding solution for members. We look forward to, building on these initiatives with the SOE pilot in coming months,” he added

Software and floor covering markets looking strong

According to Ibis World, industry revenue for Australian software suppliers is anticipated to climb by an annualised 5.6% to $16.6 billion over the five years to 2022-23, including a drop of 6.4% in the current year, when profit margins will widen to 5.8%.

The Australian floor coverings sector is also performing strong.

According to Ibis World, the local floor coverings retailing industry has increased at an annualised 1.1% over the past five years and is expected to total $3.6 billion in 2022-23, with profit margins set to reach 2.1%.