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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Paypoint Plc | LSE:PAY | London | Ordinary Share | GB00B02QND93 | ORD 1/3P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 10.00 | 1.86% | 548.00 | 543.00 | 547.00 | 549.00 | 524.00 | 524.00 | 131,602 | 16:35:20 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Adjustment & Collection Svcs | 167.72M | 34.71M | 0.4776 | 11.45 | 397.55M |
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PayPoint plc
Preliminary results
Year ended 31 March 2017
STATUTORY HIGHLIGHTS
Year ended Year ended
31 March 31 March
2017 2016 Change
Revenue GBP211.9m GBP212.6m (0.3)%
Net revenue([1] #_ftn1) GBP123.9m GBP123.6m 0.2%
Gross margin([2] #_ftn2) 50.0% 49.9% 0.1ppts
Operating profit before impairments and
business disposal GBP52.3m GBP50.3m 4.0%
Profit before tax GBP69.1m GBP8.2m -
Earnings per share 87.5p (3.1)p -
Ordinary dividend per share 45.0p 42.4p 6.1%
Disposal proceeds dividend per share 38.9p 21.0p 85.3%
Additional dividend per share 36.7p - -
Total dividend per share 120.6p 63.4p 90.2%
Mobile and Online are included in our statutory results up to the date
of their respective disposals resulting in this year's performance not
being directly comparable to last year. To more clearly review our
financial performance, we have included highlights of our ongoing Retail
networks in addition to the reported statutory highlights.
RETAIL NETWORKS HIGHLIGHTS([3] #_ftn3)
Year ended Year ended
31 March 31 March
2017 2016 Change
Revenue(3) GBP203.4m GBP196.4m 3.6%
Net revenue(1) GBP117.5m GBP110.7m 6.2%
Gross margin(2) 49.5% 48.2% 1.3ppts
Operating profit(3) GBP53.3m GBP52.8m 1.1%
Profit before tax(3) GBP53.3m GBP52.8m 1.0%
Earnings per share(3) 64.3p 62.5p 2.9%
Strong delivery against our strategic priorities
-- PayPoint One, our new retail platform, successfully launched in June,
with 3,600 sites at year end and 4,227 today
-- Continued growth in Retail networks of 3.2% to 40,500 sites, including
11,300 in Romania
-- Collect+ arrangement successfully restructured to allow PayPoint to serve
other UK carriers; expected to drive a step change in our parcels
business over time
-- Sale of Mobile completed in December 2016 for GBP26.5 million, with gross
proceeds of 38.9 pence per share returned to shareholders
Financial highlights
-- Good growth in core Retail networks
-- Gross revenue3 grew by 3.6% to GBP203.4 million
-- Net revenue1 grew by 6.2% to GBP117.5 million
-- Operating profit3 grew by 1.1% to GBP53.3 million
-- Retail services net revenue1 grew to GBP39.9 million, an increase of
31.6%
-- Profit on sale of Mobile of GBP19.5 million. Mobile sale proceeds of
GBP26.5 million returned to shareholders. Mobile goodwill of GBP30.8
million was fully impaired in 2016
-- Final ordinary dividend of 30.0 pence per share, total ordinary dividend
of 45.0 pence per share, an increase of 6.1%
-- Additional dividend of 36.7 pence per share paid as part of commitment to
return surplus cash to shareholders over a five year period to 2021.
Total dividends of 120.6 pence per share paid to shareholders in the year
to 31 March 2017
-- Cash and cash equivalents at year end of GBP53.1 million, net cash
generated from operating activities of GBP42.2 million
Dominic Taylor, Chief Executive Officer, commented:
"We have continued to deliver a significant transition in our business
to respond to the needs of our retail clients and the changing world of
payments. Our transition has involved the sale of our Mobile business, a
renegotiated agreement with our partner on Collect+ and, most
importantly, launched our new terminal PayPoint One, which includes an
industry-leading EPoS solution. This past year has seen further good
growth in our core retail network, with net revenue up 6% and an
increase in sites of 3%, up to 40,500. Looking beyond the current
financial year, I see significant opportunities for our retail services
business, accelerating the growth of ATM's, parcels and EPoS and we will
continue to work to build our retailer relations. Our strategy is
supported by balance sheet strength and the ability to continue to make
superior returns to shareholders"
Enquiries
PayPoint plc Finsbury (telephone: 0207 2513 801)
Dominic Taylor, Chief Executive (telephone: 01707 Rollo Head
600 317)
Rachel Kentleton, Finance Director (mobile: 07843 Andy Parnis
074 906)
A presentation for analysts is being held at 11.45am today (25 May 2017)
at Canaccord Genuity Limited, 88 Wood Street, London, EC2V 7QR. This
announcement is available on the PayPoint plc website: www.paypoint.com
CHAIRMAN'S STATEMENT
Delivering our strategy
I am pleased to report that the past year has been one of further
progress as we seek to simplify and refocus the Group on our Retail
network business, in line with our declared strategy. The sale of our
mobile payments business was completed in December 2016 and concludes
our programme of rationalisation. In addition, we have restructured the
Collect+ arrangements, enabling us to add new carriers to our UK retail
services offering. We also successfully launched PayPoint One, our next
generation PayPoint terminal with integrated Electronic Point of Sale
Solutions (EPoS), till and card functionality, and had rolled out 3,600
by the end of this financial year. We also continue to drive existing
and new retail services while seeking to improve service delivery
throughout the network.
The business is now more streamlined and focused on driving value from
the strength of our established retail network. Whilst the board
recognises there are structural changes in UK cash payments and the
energy sector, PayPoint is well positioned to respond to these changes
and to deliver continuing growth in its UK retail services and Romanian
businesses.
Delivering for our stakeholders
Total dividends declared in the year to 31 March 2017 will deliver a
total of GBP82.1 million or 120.6 pence per share to shareholders. This
includes the ordinary dividend of 45.0 pence per share, the first annual
instalment of the additional dividend of 36.7 pence per share and the
gross proceeds from the sale of Mobile of 38.9 pence per share.
The board recognises that successful execution of the PayPoint strategy
is dependent on delivering first class service to our retailers. To
ensure we are consistently measuring how we are performing against
important key metrics, a new 'Retailer Pledge' has been developed and
published.
Our people are critical to the successful execution of the strategy and
I would like to thank all colleagues for their hard work and dedication
over the past year.
Board appointments
In early 2017, Rachel Kentleton joined the board as Finance Director
following George Earle's retirement. I would like to thank George for
his significant contribution over his 12 years of service since joining
us upon our listing on the London Stock Exchange in 2004. Two of our
non-executive directors, Neil Carson and David Morrison, will step down
on 26 May 2017 and 26 July 2017 respectively. The board wishes them well
and thanks them for their valued contributions. David has served as a
director since 1999 and has been instrumental in the development of the
Company. We welcome Rakesh Sharma, who was appointed to the board on 12
May 2017 and will chair the Remuneration Committee.
Conclusion
PayPoint is now a significantly more focused business. Looking ahead,
our priorities are to continue to drive growth in retail services,
manage the decline in cash payments through developing new payment
channels, improve our service delivery and to run our business more
efficiently. We are also excited by the growth opportunities for our
Romanian business as we deepen and extend our presence in a rapidly
growing market.
Alongside this, we maintain our commitment to the capital allocation
programme outlined in May 2016, to return GBP125 million of surplus cash
to shareholders over five years to 2021 alongside our ordinary dividend.
The board remains confident in the prospects for the business and the
value creation opportunity for our shareholders.
Nick Wiles
Chairman
25 May 2017
CHIEF EXECUTIVE'S REVIEW
The past year has been one of significant strategic progress in
reshaping and simplifying the business. We have restructured the Group,
with a new Executive Board in place and a focused single company vision,
set of values and culture which together will drive ongoing improvements
in effectiveness and customer service. We have rationalised the
portfolio of businesses within the Group, with the sale of Online in
January 2016 for GBP14.3 million being followed in the year to 31 March
2017 by the sale of Mobile to VW Financial Services for GBP26.5 million.
We have also concluded our discussions with Yodel, with a new Collect+
arrangement agreed that enables PayPoint to add new carriers to our UK
retail services offering.
We continue to focus on the needs of our retail customers. This year we
launched our next generation terminal, PayPoint One, which received
positive early feedback and at 31 March 2017 there were 3,600 sites
operational. The terminal, with enhanced functionality, changes the
proposition we can offer retailers and is a critical milestone for the
business. We are excited about the growth potential from the rollout of
the new terminal across our retail network alongside the other
initiatives underway in the business.
Our financial results reflect the refocusing of the business with
reported profit before tax of GBP69.1 million (2016: GBP8.2 million),
including the profit on the sale of Mobile to VW Financial Services of
GBP19.5 million partially offset by the loss of GBP3.8 million on the
restructure of the Collect+ arrangement with Yodel. The 2016 year
included impairment charges on Mobile and Online of GBP49.0 million.
This financial year also saw several non-recurring items, some of which
will impact our operating profit performance in the financial year to 31
March 2018. These include a non-recurring VAT recovery of GBP2.0 million
(included in retail services), the agreement to reduce Yodel parcel fees
by GBP3.0 million over the next 3 years effective from December 2016,
and the closure by the Department for Work and Pensions ("DWP") of their
Simple Payment Service which has been generating over GBP4.0 million in
net revenue per annum.
Our Retail networks business delivered a profit before tax([4] #_ftn4)
of GBP53.3 million, an increase of GBP0.5 million. This was driven by
growth in net revenue([5] #_ftn5) from retail services of GBP9.6 million,
but offset by a decline in bill payments and top-ups of GBP2.8 million
and additional investment costs arising from PayPoint One, EPoS and
MultiPay development and deployment.
In total this financial year we paid GBP78.5 million to shareholders by
means of the GBP29.5 million ordinary dividend, the first instalment of
the additional dividend of GBP8.3 million and the return of GBP40.7
million from the proceeds of the sale of Online and Mobile. Our business
model continues to be highly cash generative with GBP42.2 million of
cash generated from operating activities in the year.
Business model
We have unrivalled strength in convenience retail payments and services
with over 40,000 outlets across the UK and Romania. In both markets our
business has two highly complementary business streams, payments and
retail services. These operate from a common retail servicing capability
and secure technology infrastructure. This technology platform and our
site network form the foundation from which we will drive future value.
Our first business stream, payments, provides convenient bill payment
channels for the customers of major utilities and service companies. The
PayPoint network supports the broadest range of payment types including
bills, energy prepayments, mobile and eMoney top-ups, licences, rents,
taxes, transport tickets, debt collection, deposits and repayments. We
also pay out cash benefits and rebates. In payments, our retail partners
are our distributors, earning commission and benefiting from the
hundreds of millions of customer visits we generate. Some customers
prefer to pay online and our MultiPay product extends to mobile app,
web-site, IVR and text payments so we can help our clients to help
customers pay in the way that suits them best.
Our second business area builds on the strength of our retail networks
and our technology, enabling us to provide multiple retail services to
retailers. These additional services are highly competitive offers to
retailers, charging fees for some services and earning commission for
others. The range of retail services is already extensive but we
continually innovate to generate new revenue streams. Our retail
partners, in turn, are able to offer their customers a widening range of
convenience payment products and services which keeps them coming into
the store. The principal retail services are ATMs, card and other
non-cash electronic payment solutions, Western Union agencies, SIM card
sales, parcels and EPoS. As noted above, we have recently renegotiated
the terms of our parcels joint arrangement with Yodel, to allow PayPoint
to open the Collect+ network to other carriers. Our intention is to
create the definitive industry solution, allowing consumers to pick up
and drop off parcels at their local shop irrespective of the carrier.
Retail services have continued to grow strongly in recent years and this
business area is becoming increasingly significant within our business
mix.
In payments, we remain committed to delivering our strategy which is
focused on delivering multi-channel payments solutions and services to
our customers where we have retail networks. In retail services, we see
significant growth opportunities for our unique retailer network and our
differentiated and established technology platform to benefit from the
high street evolution towards convenience.
In order to execute our strategy we have set out five clear priorities
for the year ahead:
1. Drive profitable growth in UK retail services
Market context
PayPoint's services are particularly attractive to the convenience
retail sector which includes newsagents, general convenience stores, off
licences and petrol station forecourts. We are also complementary to the
convenience offers of larger format supermarkets. We build our
relationship with retailers through our field sales force of 50
professionals located throughout the UK and through our contact centre
which is situated in Welwyn Garden City. We also hold quarterly Retailer
Forums attended by PayPoint retailers and management to ensure open
dialogue and communication.
PayPoint has payment relationships extending to over 29,000 UK outlets
drawn from an available market of approximately 51,000 stores comprising
37,500 independents (of which 14,000 symbol-affiliated stores) and
13,500 multiple and managed symbol stores. These 51,000 stores are
PayPoint's core marketplace, with growth and any extension beyond the
convenience sector also representing an opportunity for our retail
services. Historically, PayPoint has restricted supply of its branded
payments footfall rather than looking to achieve blanket coverage of the
entire convenience retail sector. As a result, PayPoint retailers are
typically of good quality, desired by our clients and envied by our
competitors. Overall, PayPoint pays our retailers over GBP50 million
annually in commission for their critical role in our payments and
retail services delivery.
Our retailers can be segmented into 3 broad sub-groups. We have 8,500
outlets that are in multiple chains, including The Co-op, McColls, One
Stop and many other fuel and convenience chains. We also have coverage
in all Asda stores, many Sainsbury's Locals and increasingly in Tesco
Express, as even the major grocers see the power of our footfall
generation. The balance of our network is in independents, who may be
unaffiliated or linked to a symbol group such as Spar, Costcutter, Nisa
or Booker Premier. We have 11,500 unaffiliated independents, out of
23,500 in the UK and a further 9,000 symbol-affiliated outlets out of
15,400 independent and managed symbol stores in the UK.
To serve multiples, we deploy our PPoS solution, a virtual terminal that
integrates into the retailer's own EPoS system for maximum operational
efficiency.
For independents, we offer a standalone terminal. Most of our retailers
have our second generation yellow machine (T2) that has been deployed
since 2003. Last year we launched PayPoint One, a transformational
terminal platform, with a full range of connectivity options including
WiFi and Bluetooth, which we will rollout across our estate over the
next few years. With PayPoint One, we have also introduced a new EPoS
capability which has seen encouraging uptake to date and that we expect
to be a platform for significant future growth. PayPoint One provides
our retailers with the ability to serve customers quickly, while
providing advanced connectivity and improving business efficiency all
within a flexible and fully-supported technology platform.
Each of our retail services has its own market context and competitive
dynamics, which are explained briefly here:
ATMs - we provide 4,100 ATMs out of an overall population in the LINK
network of 70 million, of which 52 million are non-bank branch
machines([i] #_edn1) . Our machines are typically located in-store and
are filled by our retailers using their own cash, including much of the
money collected from our bill payments. We offer both free to use and
surcharge machines with most new deployments being free to use. In
general, cash withdrawal volumes are expected to decline steadily as the
use of cash is eroded by contactless payments. However, while this
decline is reflected in a rise in bank branch closures, growth in
non-bank branch ATMs has continued and PayPoint's position in the market
gives us plenty of scope to grow.
Card Payments - we provide 10,000 of our retailers with in-store card
payment solutions including Chip and PIN and contactless cards and
mobile schemes such as Apple and Android Pay. We earn a margin on each
payment through revenue share arrangements with merchant acquirers. In
common with the market generally, we have been experiencing very strong
contactless payment growth. These payments have a lower transaction
value, earning us slightly less per transaction but for a much greater
volume. This is a highly competitive market with many offers from
merchant acquirers and intermediaries.
Money Transfer - we provide 1,100 outlets in the UK with Western Union
agencies to serve the international money transfer market. This is a
value-added, rather than strategic, service and we expect to remain a
minor player.
SIM sales - we are selling mobile phone SIMs to 15,000 outlets and have
approximately a 6% market share, making a strong net revenue
contribution. We earn commissions based on the top-up values on
activated SIMs which we share with our retailers, and bonuses for
achieving predetermined targets.
EPoS - this is a new market for PayPoint which we entered in June last
year, with a price scanning solution built on the Android tablet
characteristics of PayPoint One, with its large interactive screen,
ergonomic design and advanced scanning capability. PayPoint One provides an integrated all-in-one solution, combining EPoS with card payments, bill payments, proprietary hardware, cloud management, business intelligence, service support and Android applications to support our retailers' businesses. We expect our EPoS solution to be attractive to the independent sector, many of whom may be first time users, but we also expect strong symbol group adoption when we launch our Pro version in summer 2017. The Pro version will have sophisticated stock management and ordering capability, managed in the cloud, representing a step change in EPoS market technology. We are also currently putting in place the necessary links to integrate with symbol group wholesalers, to make the product more attractive. There are numerous EPoS providers in the UK typically serving more than one vertical, such as retail and hospitality. In convenience retailing, EPoS provision is more fragmented outside of the suppliers to the multiple chains. Suppliers service a few thousand locations at most and often work with legacy software, sitting on older Microsoft Windows platforms, with localised back office functions which do not take advantage of cloud technology. EPoS products tend to carry an upfront hardware investment, with additional charges for installation and ongoing fees for service, support and licensing. As a consequence take up can be limited. With PayPoint's modern technology and no upfront fees for the hardware, we expect to make inroads into this market and have been encouraged by the early take up. Overall, the launch of PayPoint One integrates PayPoint's payments stream with card payments and EPoS into a single leading edge hardware device. Our retail services success over many years has built a balanced portfolio of strong and highly competitive products with a good mix of strategic and tactical services across high growth and maturing markets. The market leading qualities of the PayPoint One platform will enable us to significantly increase our revenue over time by charging fees for the platform and its EPoS capabilities. Progress in year Overall, retail services accounted for 36% of UK net revenues, generating GBP39.0 million net revenue which represented growth of 30.9% on the previous year. We enjoyed continued growth in ATMs, card payments and SIMs net revenues. We also secured a VAT recovery of GBP2.4 million in card payments. The recurring net revenue benefit from the corrected treatment is approximately GBP1.0 million per annum. We launched PayPoint One and have installed over 3,600 new terminals of which 60% have EPoS activated, with the remainder opting just to upgrade from our second generation terminal to use our Till App. We have also largely completed our EPoS Pro development for testing ahead of launch in a few months' time and have secured our first symbol group integration agreement. Future Delivery We expect to achieve a PayPoint One network size of 8,000 sites by March 2018, with high EPoS and card payment attachment. This will include symbol retailers as the Pro version of EPoS is launched and wholesaler links are implemented. Nisa is the first symbol retailer to contract to be integrated with our EPoS Pro platform and we expect to sign up others soon. Our card payments volume should continue to grow strongly. We will focus on protecting margins in a fiercely competitive market fuelled by the growth in contactless payments, which has made the convenience sector increasingly attractive. This year we plan to extend our net settlement capability from ATMs to card payments which should be a unique differentiator for PayPoint by off-setting our retailers' banking costs. We will be investing in our ATM network to continue to expand our presence throughout our retail network and to upgrade legacy hardware. 1. Deliver parcels volume growth in the UK Market context We provide 6,100 outlets with our Collect+ service, our joint arrangement with Yodel, a leading carrier. Collect+ was the first successful parcel collections and returns retail network in the UK, launched in 2009. The service has subsequently been copied by several other carriers but has not been matched in scale or customer popularity. This is a large market; IMRG states there are 250 million parcel returns a year and 165 million click & collect parcels, both growing rapidly. Progress in the year Collect+ is available in over 6,100 sites and the number of parcels processed in the year was over 23 million. Collect+ has gained a Trust Pilot score of 9.2 out of 10 and is now a trusted and well regarded consumer brand. The restructured terms of the Collect+ joint arrangement are now in place. In return for a reduced transaction fee, PayPoint is no longer exclusively tied to using Yodel and now has the opportunity to extend the network of carriers we work with. Future delivery PayPoint has an exciting opportunity to capture a significant share of the market. We have appointed a new Parcel Services Director with a significant track record in the parcels market to lead our efforts to capture new volumes. In the coming years, we expect strong growth with many more outlets and millions of extra parcels as the new approach beds in, supported by strong continuing delivery from our existing partner, Yodel. The new approach has come at a short-term cost as we have agreed to progressively reduce fees received from Yodel by GBP3.0 million over three years. On a like-for-like volume basis this is expected to impact the year to 31 March 2018 by GBP1.7 million with a further GBP1.0 million impact in the year to 31 March 2019. 1. Optimise profits in UK bill payments and top-ups Market context Payments have traditionally been PayPoint's most successful business area and we have developed a market leadership position in payment collection through convenience retail outlets. Our UK network numbers 29,100 sites, meaning that we are in the majority of available convenience retail outlets and we handle approximately 500 million transactions per annum through the network to a value of GBP9.0 billion. There are over 4.9 billion regular consumer payments a year([ii] #_edn2) , but the majority of these are made by direct debit through the banks, which would be the billers' preferred collection method. However, this does not suit all customers. PayPoint's strength is in serving the millions of householders who prefer to pay their bills in cash over the counter. This has been a resilient sector which has fuelled our growth despite the long-term steady decline in cash as a payment method in the UK economy, relative to electronic and card payments. PayPoint has always been particularly strong in energy payments as the breadth of our coverage in convenience retail outlets, combined with extended opening hours, provides an ideal solution for those who need to quickly and conveniently switch their energy back on. Growth in the prepay energy sector peaked four years ago when a combination of factors including high tariffs, cold weather, high energy debts and high prepay meter installation rates created strong demand. Recently however growth has slowed, as the impact of these factors has reduced. We expect that the introduction of smart meters, which has been subject to delays in commissioning by the Data Communications Company (DCC), will open more digital payment options for consumers, and that payments by app or web-site will erode some cash volumes in prepay mode. As of 31 December 2016 there was a total of 22.8 million gas meters and 27.5 million electricity meters([iii] #_edn3) operated by large and small energy suppliers in domestic properties across Great Britain. Active smart meters (gas and electric) accounted for 4.9 million of the total number of meters, an increase of 2.9 million compared to 2015. In order to address this opportunity, PayPoint has been developing its MultiPay service in recent years and is well placed to serve retail and digital payments through an integrated platform for energy clients. From 1 April 2017 the Competition and Markets Authority has introduced a price cap for prepayment customers which it estimates will reduce households' heating bills by on average GBP75([iv] #_edn4) a year. It is too early to fully understand the impact this will have on PayPoint, however we estimate each prepay customer's average top-up value is around GBP15 a visit. The slowdown in the energy payments sector and uncertainty around smart meters, combined with the longer term decline in mobile top-ups and in cash as a payment method in the UK economy means that we anticipate reducing net revenue in PayPoint's traditional sectors. As a result, our focus is on maximising profitability in UK bill payments and top-ups, managing margins and cashflow through both continuing innovation and a relentless focus on business process and cost efficiency. Progress in year Bill payment volumes reduced by 6.6% in the year because of softening energy prepay and a reduction in CashOut transactions. CashOut transactions reduced as a consequence of the two year government electricity rebate scheme coming to an end. Top-up transactions declined 15.3% as a result of the continuing long-term decline in UK mobile top-ups. Payments account for 64% of overall UK net revenues. Net revenues held up better than volumes as bigger clients lost share to challengers, benefiting our pricing mix. MultiPay volumes have been growing strongly and we handled 10.3 million payments, up 4.9 million from last year, through our non-retail digital channels. We have also recently completed the implementation for SSE, our first big 6 energy client for MultiPay. The service is also proving particularly attractive to some of the main challengers in the energy market as well as smaller suppliers. At the end of the financial year 15
clients had contracted to use the service.
We have had a steady stream of new business and have added 67 new
schemes in the year including, for the first time, local authorities
deciding to work with us directly and exclusively, having previously
split their volumes across the Post Office and PayPoint. We have also
added clients for digital voucher services, including a new arrangement
with Amazon which is still in its early days.
We also went live with our new FCA regulated Payment Institution,
PayPoint Payment Services Limited, which allows us to provide certain
regulated payment services and to extend the range of our CashOut
services.
Future delivery
The payments business is likely to continue to be affected by the
uncertainty relating to smart meters and the general long-term decline
of cash and top-ups. However, there is a strong residual demand for cash
payment that we will continue to serve successfully and expand where
possible, with new schemes and products for our customers. As more
challenger businesses take share from the big traditional suppliers, we
would also expect to see some margin benefits through less revenue
concentration. We have also been able to renegotiate terms with
retailers and symbol groups, improving margin, as a result of the
diminishing importance of mobile top-up volumes.
We expect the year ahead to be adversely affected by a recent decision
of the DWP to discontinue its Simple Payment Service from this summer,
for which we have been the retail partner. Unfortunately, the service
has been a victim of its own success in migrating customers away from
the traditional girocheque into other methods, giving the DWP the
ability to close down the option. This service has generated revenue for
PayPoint of over GBP4 million per annum historically.
PayPoint will continue to handle hundreds of millions of payments for
the UK's leading consumer service organisations and payments will remain
a critical element in our business mix going forward. Our unique
payments portfolio is central to the popularity of our brand with
retailers and consumers and provides the platform on which our retail
services are thriving. In addition, we are well placed to drive further
MultiPay growth with more challengers, our first volumes for a big 6
supplier and the potential to extend into other bill payment sectors,
including housing.
1. Drive continued organic growth in Romania
Market context
PayPoint Romania follows a similar business model to the UK, but in a
market in which cash bill payment is a mass market proposition. Over 10
years, PayPoint has become one of Romania's most successful and popular
financial brands, handling on average 24% of our clients' payments. We
expect cash to be the dominant bill payment method well into the future.
The range of payments solutions offered by PayPoint is extensive
including energy, telecoms and pay TV bills, road tax, eMoney vouchers,
insurance premiums and loan repayments. As in the UK, we work with all
the leading suppliers.
Romania is also a strong remittance market, mainly as receivers of
payments from overseas. As in the UK we work with the market leaders
Western Union in what is still a high growth sector.
Progress in year
We have continued to make strong organic progress in the year growing
our net revenues in Romania to GBP9.1 million, an increase of 28.2% on
the prior year. Our retail network has grown to 11,300 sites and
includes strong representation from independents and multiples,
including Profi, Cora and Carrefour. We enjoyed record volumes of 75
million transactions, including growth in mobile top-ups, not just bill
payments.
Future delivery
The Romanian payments market continues to evolve with clients moving
away from the local post office creating further opportunities for us.
We will continue to expand our market share with existing clients and to
add new clients. In the year we successfully added our first local
authority which we will use as a case study to entice other local
authorities.
We plan to extend our retailer services offering in Romania. We are
trialling a parcels service, Colet Expres, in Bucharest, working with
the leading Romanian carrier, FAN courier. The home shopping market in
Romania is still developing and is generally based on cash on delivery,
but we are excited about the opportunity the parcels service presents.
In addition, we are trialling a card payment service for retailers.
We currently have an agreed offer to buy Payzone in Romania, which is
subject to competition authority approval.
1. Business optimisation
Our refocus on our retail businesses has highlighted opportunities for
us to invest in tools and capabilities to enable our client and field
teams to more effectively sell a portfolio of products. In conjunction
with the rollout of PayPoint One, we have also publicly pledged to our
UK retailers that we intend to deliver first class servicing of their
requirements through the entire lifecycle of on-boarding, operational
support and status changes. This will require us to invest in efficient
workflow and billing systems with accurate and timely supporting
information, for our retailers and ourselves, so we can serve them
effectively. We are making a considerable investment of GBP4.0 million
over 18 months in these tools and capabilities but are expecting
significant improvements in sales and operational efficiencies.
We are also reviewing our processes to ensure we are innovating
efficiently and driving maximum return from our investments in product
and technology.
Outlook
We have made good progress in reshaping the business, including the
disposal of Mobile and Online. This enables greater focus on our retail
network specifically by providing EPoS solutions to our retailers and on
pursuing a multi-carrier strategy for parcels, both of which are
exciting prospects going forward. In time I believe there will be
opportunities to further extend our geographic footprint, leveraging the
scale and capability of our platform, however international expansion
will be a lower priority for the immediate future.
To support our growth agenda, we are making incremental investment in
capabilities and tools to improve our sales productivity, foster
continued innovation, accelerate commercial deployment and deliver
greater operational efficiencies.
For the current financial year, we expect robust net revenue growth in
UK retail services and Romania. This will broadly offset the impact of
our additional investments, the reduced fees earned from Yodel and the
expected continuing net revenue reduction in UK cash payments, including
the ending of the Simple Payment Scheme and the changing energy market
dynamics.
We are confident that PayPoint is well positioned to continue to drive
sustainable medium-term earnings growth, generate cash and support
superior returns to shareholders.
Dominic Taylor
Chief Executive
25 May 2017
KEY PERFORMANCE INDICATORS
In order to realise its strategic aims, PayPoint has identified areas of
strategic focus and records a number of KPIs to measure progress against
them. The KPIs presented this year have changed in that they exclude the
disposed activities of Mobile and Online. Whilst these KPIs are helpful
in measuring the Group's performance, they are not exhaustive and the
Group uses many other measures to monitor progress.
Strategic focus KPI Description and purpose 2017 2016
Retail earnings (see note 6) divided by the weighted
average number of ordinary shares in issue during
Earnings per share the year (including potential dilutive ordinary shares)
(Retail networks)([6] Earnings per share is a measure of the profit of the
Maximise shareholder return #_ftn6) ongoing business attributable to each share 64.3p 62.5p
Proposed final dividend and interim dividend divided
by the number of fully paid shares at the end of the
year
Dividend per share provides a measure of the return
Dividends per share to our shareholders 45.0p 42.4p
Operating profit before impairments and profit on
business disposals after tax and a charge for capital
employed, excluding cash, based upon the Group's cost
of capital
Economic profit provides a consistent measure of the GBP39.2 GBP32.8
Economic profit(1) profit aligned to the remuneration of management million million
Number of transactions processed in the year on our
terminals and ATMs
Drive profitable growth in UK retail services and Retail networks Transaction volume provides a measure of the source
continued organic growth in Romania transactions of revenue which is earned on a per transaction basis 654.8 million 668.2 million
The value of transactions processed via our terminals
and ATMs
Transaction value provides a measure of the source
Retail networks of revenue which is earned on a percentage of the GBP10.4 GBP10.4
transaction value transaction value billion billion
Revenue less: commissions paid to retail agents and
the cost of mobile top-ups and SIM cards where PayPoint
is principal
Net revenue reflects the benefit attributable to PayPoint's
performance eliminating pass-through costs and is
Retail networks net a reliable indication of contribution from business GBP117.5 GBP110.7
revenue(1) operations million million
The number of sites with our PayPoint One platform
This provides a measure of the source of service fee
PayPoint One sites revenue from PayPoint One terminals and EPoS 3,601 38
Operating profit before impairments and profit on
business disposals as a percentage of net revenue
Retail networks Operating margin provides a broad overview of the
Business optimisation operating margin(1) efficient and effective management of the cost base. 45.3% 47.7%
Operating profit before impairments and business disposal
including our share of joint venture result for the
year divided by average month end capital employed
(net assets excluding cash)
Return on capital employed provides a broad overview
Return on capital of the efficient and effective use of capital in our
employed(1) business 184.3% 70.4%
Growth / (decline) in net revenue from retail networks
Growth/ (decline) in divided by the average number of sites in the year
retail networks yield Network yield provides a broad overview of the efficient
per site(1) and effective use of our network 2.2% (2.9%)
Number of permanent employees who left during the
year divided by average total permanent employees
Labour turnover provides an indication of employee
People Labour turnover job satisfaction 29.0% 33%
REVIEW OF BUSINESS
The review of business presented includes highlights on page 1, the
Chairman's statement on page 3 and the Chief Executive's review on pages
4 to 8.
OPERATING REVIEW
PayPoint is a service provider for consumer transactions through various
distribution channels, involving the processing of high volume
transactions, the management of retailers and clients, the settlement of
funds (collection and transmission) and transmission of data in a secure
environment, by the application of technology.
The application of technology is directed on a Group basis by the
Group's Executive Board to develop products across the business,
prioritised on an economic value basis (generally by product), rather
than on a subsidiary by subsidiary basis and therefore the Group has
only one operating segment.
We have however, included an analysis of the number and value of
consumer transactions, revenue and net revenue distinguishing between
our Retail networks and Mobile and Online.
Retail networks
The Group has established retail networks in the UK, Ireland and Romania
which continued to grow by 3.2% to 40,478 sites.
Year ended Year ended
31 March 31 March Change
2017 2016 %
UK & Ireland Retail network 29,176 29,087 0.3
Romania Retail network 11,302 10,141 11.4
Total sites 40,478 39,228 3.2
In the first half of the year our focus was on the rollout of PayPoint
One terminals with 3,601 terminals installed at sites by 31 March 2017.
Our focus on rollout of PayPoint One to our existing sites resulted in
low growth in the total number of UK sites of 0.3%. PayPoint One will
replace the previous version of our terminal and is a platform from
which we can launch and offer new services to retailers.
We continue to rollout PPoS to symbol groups who want to provide
PayPoint services, but have their own till and EPoS applications and do
not take our PayPoint One platform. At year end there were 8,487 PPoS
sites (2016: 8,101 PPoS).
In Romania, we increased the number of terminal sites by 1,161 in the
year, an increase of 11.4%.
Within retail networks we distinguish between three business categories,
namely bill and general, top-ups and retail services and each is
reviewed separately below. Overall transactions declined by 13.4 million
to 654.8 million (2016: 668.2 million), with UK declining by 3.6% offset
by robust growth in Romania of 12.1%. Average transaction values in
prepaid energy and UK mobile top-ups continue to increase which has
offset the declining transaction volume. Transaction value of GBP10.4
billion (2016: GBP10.4 billion) was broadly in line with last year.
Year ended Year ended
31 March 31 March Change
2017 2016 %
UK transactions (million) 579.8 601.3 (3.6)
Romania transactions (million) 75.0 66.9 12.1
Total transactions (million) 654.8 668.2 (2.0)
Transaction value (GBPm) 10,409.6 10,390.8 0.2
Revenue (GBPm)([7] #_ftn7) 203.4 196.4 3.6
Net revenue([8] #_ftn8) (GBPm) 117.5 110.7 6.2
Despite the decline in transactions, revenue(2) increased GBP7.0 million
to GBP203.4 million (2016: GBP196.4 million) due to card payment VAT
(discussed below), change in mix of clients and growth in setup and
service fees.
In prior years, card payment revenue was treated as standard rated for
VAT purposes with the VAT element deducted from revenue. To bring our
treatment in line with the industry practice, this was changed to be VAT
exempt, resulting in a VAT recovery from HMRC of GBP2.4 million relating
to prior years. We expect that on an annualised basis revenue will be
approximately GBP1.0 million higher than when treated as standard rated.
As a result of the change in VAT treatment, irrecoverable VAT, which is
included as a cost in administrative expenses, increased by GBP1.2
million including GBP0.4 million related to prior years.
Net revenue has increased by GBP6.8 million to GBP117.5 million (2016:
GBP110.7 million) for the same reasons as revenue set out above, plus a
reduction of retailer commission (GBP1.3 million).
Bill and general
Bill and general is our most established category and consists of
prepaid energy, bill payments and CashOut services.
Year ended Year ended
31 March 31 March Change
2017 2016 %
Transactions (million) 430.5 449.2 (4.2)
Transaction value (GBPm) 8,489.9 8,557.7 (0.8)
Revenue (GBPm) 82.5 85.8 (3.7)
Net revenue([9] #_ftn9) (GBPm) 58.5 59.5 (1.7)
Bill and general transactions were lower than the previous year by 4.2%.
UK and Irish bill and general transactions were down 6.6% due to lower
prepaid and CashOut energy transactions. MultiPay continued to grow
strongly with transactions for the year ended 31 March 2017 reaching
10.3 million (2016: 5.4 million).
Growth in Romanian bill payment transactions continued with an increase
of 11.6% to 67.2 million (2016: 60.2 million). Romania continued to
expand its market share with existing clients to 23.8% in March (2016:
21.8%) and also continued to add new clients across new sectors,
including its first local authority.
Net revenue of GBP58.5 million was 1.7% down on last year's GBP59.5
million, the mix of clients (increase in smaller but higher yielding
clients) and changes to our retail commission terms reduced the impact
from the decline in transaction volume.
Top-ups
Top-ups include transactions where consumers can top up their mobiles
and prepaid debit cards. They can also purchase eMoney vouchers and
lottery tickets. In Ireland and Romania, PayPoint is principal in the
sale of mobile top-ups and, accordingly, the face value of the top-up is
included in revenue and the corresponding costs deducted when deriving
net revenue.
Year ended Year ended
31 March 31 March Change
2017 2016 %
Transactions (million) 68.9 79.0 (12.8)
Transaction value (GBPm) 731.6 767.4 (4.7)
Revenue (GBPm) 63.6 63.3 0.4
Net revenue(1) (GBPm) 19.1 20.9 (8.4)
Top-up transactions decreased 12.8% to 68.9 million. The reduction in UK
mobile top-up transactions and The Health Lottery was only partly offset
by an increase in other UK and Romanian top-up transactions. Romania
increased its top-up transactions by 16% to 7.3 million.
The average value of UK mobile top-ups continued to increase which
mitigated the reduction in net revenue, which declined 8.4% to GBP19.1
million.
Retail services
Retail services are those we provide to retailers who form part of our
networks. Services include providing the PayPoint One platform, which
has a basic till application, EPoS, ATMs, card payment, parcels, money
transfer and SIMs.
Year ended Year ended
31 March 31 March Change
2017 2016 %
Transactions (million) 155.4 140.0 11.0
Transaction value (GBPm) 1,188.1 1,065.7 11.5
Revenue (GBPm) 57.3 47.3 21.0
Net revenue(1) (GBPm) 39.9 30.3 31.6
Retail services transaction volume has increased across all major
products: ATM transactions increased by 8.0%, card payment transactions
by 12.2% and parcels by 12.6% over last year.
Net revenue growth of 31.6% to GBP39.9 million exceeded the growth in
transactions as a result of the benefit from the change in VAT rating in
card payments (see page 10 for further details), the growth of service
fees from PayPoint One, a reduction in the card payment wholesale rate
and bonuses earned on our SIM activations.
The number of sites in the UK with retail services is as follows:
Year ended Year ended
31 March 31 March Change
2017 2016 %
PayPoint One 3,601 38 -
Collect+ 6,167 5,936 3.9
Card payment 10,024 10,111 (0.9)
ATM 4,165 4,120 1.1
Mobile and Online
The Group disposed of its online payments business on 8 January 2016 and
its mobile payments business on 23 December 2016. The results below
reflect the trading of these businesses up to the date of their
respective disposals.
Year ended Year ended
31 March 31 March Change
2017 2016 %
Transactions (million) 40.3 150.5 (73.2)
Transaction value (GBPm) 136.0 3,650.9 (96.3)
Revenue (GBPm) 8.5 16.2 (47.4)
Net revenue([10] #_ftn10) (GBPm) 6.3 13.0 (50.9)
FINANCIAL REVIEW
Mobile and Online are included in our statutory results up to the date
of their respective disposals resulting in this year's performance not
being directly comparable to last year. In order to assist users to more
clearly review our financial performance for the year we have provided
an analysis of our reported statutory results split between the ongoing
Retail networks and the now disposed of Mobile and Online.
Revenue
Revenue for the year was GBP211.9 million (2016: GBP212.6 million) and
consists of Retail networks revenue of GBP203.4 million (2016: GBP196.4
million) and Mobile and Online revenue of GBP8.5 million (2016: GBP16.2
million) up to the date of their respective disposals. Revenue and net
revenue analysis is included in the operating review on pages 10 to 12.
Cost of revenue
In the current year 'cost of sales' was renamed 'cost of revenue' to
better reflect the nature of the costs included in this category. The
costs allocated to this category are consistent with prior year's
allocations.
Statutory
Cost of revenue reduced by GBP0.5 million to GBP106.0 million (2016:
GBP106.5 million), with a reduction from Mobile and Online of GBP1.5
million offset by an increase in Retail networks of GBP1.0 million.
Retail networks
Cost of revenue in Retail networks increased to GBP102.7 million (2016:
GBP101.7 million). The revenue growth achieved in Romanian top-ups,
where PayPoint acts as principal, increased the cost of top-ups by
GBP4.2 million to GBP32.3 million (2016: GBP28.1 million). Depreciation
and amortisation increased by GBP1.7 million principally due to the
launch and rollout of PayPoint One. The above increases were partially
offset by a reduction in transaction costs from the lower level of
energy CashOut schemes and commissions paid to retailers reducing to
GBP53.7 million. Retailer commissions reduced as a result of the decline
in UK bill payments and top-up transactions and revenue and changes to
the level of commission share with symbol retailers.
Statutory gross profit margin remained broadly similar to last year at
50.0% (2016: 49.9%), with Retail networks gross margins increasing from
48.2% to 49.5% driven by the GBP2.4 million VAT recovery and changes to
the level of commission share.
Operating costs
Statutory
Operating costs (administrative expenses) decreased GBP2.1 million
(3.8%) to GBP53.6 million (2016: GBP55.7 million) caused by a GBP7.6
million reduction from Mobile and Online with Retail networks increasing
GBP5.5 million.
Retail networks
Retail networks' operating costs increased by GBP5.5 million to GBP47.5
million as a result of:
-- lower VAT input recovery resulting from the VAT treatment change for card
payments;
-- the rollout of PayPoint One;
-- increase in IT people costs; and
-- an increase in LTIP and DABS bonus scheme costs.
Share of profit in joint venture
The accounting policy for joint arrangements and details of the
arrangement with Yodel are included in note 1 and note 8 to the
financial information. Our share of the Drop and Collect Limited profit
up to the date it was disposed of as part of the arrangement was GBP1.2
million (2016: loss of GBP0.2 million). A loss on disposal of GBP3.8
million was recorded at the date of sale.
The new Collect+ joint arrangement has been accounted for as a joint
operation with the Group's share of the royalty fee included in revenue.
Our share of income from 16 December 2016 to 31 March 2017 was GBP0.3
million.
Operating margin
Statutory
The improved operating margin of 1.5ppts to 42.2% (2016: 40.7%) includes
the benefit of reduced losses in the Group results from Mobile and
Online and the improved result from the Drop and Collect joint venture.
Retail networks
Operating margin in retail networks declined by 2.4ppts to 45.3% (2016:
47.7%), as a result of increased operating costs.
Profit on sale of Mobile
Mobile was sold to Volkswagen Financial Services AG for GBP26.5 million.
After deducting sale costs, a profit on sale of GBP19.5 million was
recorded, details of which are included in note 7 to the financial
information. The gross proceeds of GBP26.5 million from the sale were
distributed to shareholders on 11 January 2017.
Profit before tax and taxation
The tax charge of GBP9.5 million (2016: GBP10.2 million) on profit
before tax of GBP69.1 million (2016: GBP8.2 million) represents an
effective tax rate([11] #_ftn11) of 17.8% (2016: 20.5%). The effective
tax rate reduced due to an adjustment to prior year taxes following
finalisation of those tax returns (GBP1.1 million, effective tax rate
reduced by 2.0%), reduction in Mobile losses for which there was no tax
relief and the increase of a deferred tax asset for share based payments,
taking into account the increased likelihood of share schemes vesting
and related tax relief. The statutory tax rate reduced to 13.8% (2016:
125.7%) primarily as a result of no goodwill impairments being
recognised in the current year (2016: GBP49.0 million).
Statement of financial position and capital expenditure
Non-current assets of GBP47.6 million were GBP8.4 million higher than
last year driven by substantially higher capital expenditure (GBP17.5
million). Working capital increased by GBP7.4 million caused by reduced
client funds within trade and other payables. Prior year client funds
held were higher than in previous years and this year due to the early
Easter holiday delaying transfers to clients.
Cash flow and liquidity
Cash generated by operations was GBP51.0 million (2016: GBP69.0 million),
reflecting strong conversion of profit to cash and the reduction in
client funds from last year.
Corporation tax of GBP8.6 million (2016: GBP9.9 million) was paid in the
current year and was net of refunds for over payments made in prior
years. Capital expenditure of GBP17.5 million (2016: GBP8.2 million)
comprised the purchase of the freehold of the adjacent building at
Welwyn Garden City for GBP3.6 million, which we already partly occupied,
PayPoint One terminals, EPoS and MultiPay development, data centre
development and purchase of ATMs.
Share incentive schemes settled in cash absorbed GBP0.4 million (2016:
GBP0.6 million). Dividends paid were GBP78.5 million (2016: GBP27.4
million) details of which are included in note 5 to the financial
information.
The Group has cash of GBP53.1 million, and has an undrawn GBP45.0
million revolving term credit facility expiring in May 2019. Cash
includes amounts held to settle short-term client settlement obligations,
which at the year end, amounted to GBP20.2 million.
The additional dividend and final dividend, if approved by shareholders,
will utilise GBP37.1 million cash. The financial statements have been
prepared on a going concern basis having regard to the identified risks
and viability statement on pages 15 and 16. The Group's cash and
borrowing capacity provide sufficient funds to meet the foreseeable
needs of the Group including dividends.
Economic profit
PayPoint's own measure of economic profit (defined as operating profit
excluding impairment and profit on disposals of businesses, less tax and
a nominal capital charge of 10%) was GBP39.2 million (2016: GBP32.8
million), an increase of 19.6%.
Dividend
We propose to pay a final dividend of 30p per share on 31 July 2017
(2016: 28.2p) to shareholders on the register on 23 June 2017, subject
to the approval of the shareholders at the annual general meeting
together with the additional dividend of 24.5p per share. An interim
dividend of 15.0p (2016: 14.2p) was paid on 15 December 2016, making a
total ordinary dividend for the year of 45.0p per share (2016: 42.4p),
up 6.1%.
Rachel Kentleton
Finance Director
25 May 2017
PRINCIPAL RISKS AND Uncertainties
Risks
PayPoint's business, financial condition or operations could be
materially and adversely affected by the risks summarised below.
Although management takes steps to mitigate risks where possible or
where the cost of doing so is reasonable in relation to the probability
and seriousness of the risk, it may not be possible to avoid the
occurrence of some or all of such risks. The Group's level of risk in
each area remains broadly the same as last year except for exposure to
country and regional risk which has reduced due to the sale of the
mobile business, together with the risk of acquisitions not meeting
expectations and the addition of the risk associated with Brexit.
Risk area Potential impact Mitigation strategies
Cyber, technology & process and Fraud
Loss or inappropriate usage of data The Group's business requires the appropriate and The Group has established physical security controls
secure use of consumer and other sensitive information. at its data centres and has rigorous cyber security,
Electronic commerce requires the secure transmission anti-fraud and whistleblowing standards, procedures,
of confidential information over public networks. recruitment and training schemes, which are embedded
Increasingly, internal systems make use of third party throughout its business operations. The Group also
hosted services (cloud services) and several of our screens new employees carefully. Continued investments
products are accessed through the internet. Fraudulent are made in cyber security, including the significant
activity, cyber-crime or security breaches in connection use of data and communications encryption technology,
with maintaining data and the delivery of our products improvements in e-mail and web filtering and testing
and services could harm our reputation, business and and removal of system vulnerabilities. We have also
operating results. developed plans for responding to a breach of security.
Interruptions in business processes or systems The Group's ability to provide reliable services largely Comprehensive business continuity plans and incident
depends on the efficient and uninterrupted operation management programmes are maintained to minimise business
of our computer network systems, financial settlement and operational disruptions, including fraudulent
systems, data and call centres, as well as maintaining activity, system failure or pandemic incidents. Support
sufficient staffing levels. System or network interruptions, arrangements have been established with third party
recovery from fraud or security incidents or the unavailability vendors and there are strict standards, procedures
of key staff or management resulting from a pandemic and training schemes for business continuity.
outbreak could delay and disrupt our ability to develop,
deliver or maintain our products and services, causing
harm to our business and reputation and resulting
in loss of customers or revenue.
Clients, agents & other third parties
Dependence upon third parties to provide data and The Group's business model is dependent upon third The Group selects and negotiates agreements with strategic
certain operational services parties to provide operational services, the loss suppliers and agents based on criteria such as delivery
of which could significantly impact the quality of assurance and reliability. Single points of failure
our services. Similarly, if one of our outsource providers, are avoided, where practicable and economically feasible.
including third parties with whom we have strategic Controls are regularly reviewed and improved to minimise
relationships, were to experience financial or operational risk of retailer churn caused by financial loss to
difficulties, their services to us would suffer or retailers through fraudulent third party activity.
they may no longer be able to provide services to
us at all, significantly impacting delivery of our
products or services.
Consolidation among clients and markets Consolidation of retailers and clients could result The Group monitors client and retailer concentration
in reductions in the Group's revenue and profits through risk to ensure that no one client or retailer accounts
price compression from combined service agreements for a disproportionate share of the Group's net revenue.
or through a reduced number of clients. In addition, the Group continues to acquire new clients
and retailers to reduce reliance on existing sources
of revenue.
Legal, regulatory & compliance
Legislation or regulatory reforms and risk of The Group is largely unregulated by financial services The Group's legal department works closely with senior
non-compliance regulations, although in the UK we have Payment Institution management to adopt strategies to educate legislature,
status (through PayPoint Payment Services Limited) regulators, consumer and privacy advocates and other
which enables the provision of regulated payment services, stakeholders to support the public policy debate,
under the Payments Services Regulations 2009, including where appropriate, to ensure regulation does not have
certain CashOut services. The Group's agents which unintended consequences over the Group's services.
offer money transfer on behalf of third party clients The Group has in place a business ethics policy which
are licensed as Money Service Businesses by HMRC. requires compliance with local legislation in all
We are subject to Payment Card Industry Data Security the territories in which the Group operates. A central
Standards regulated by the card schemes. Regulatory compliance department co-ordinates all compliance
reform could increase the cost of the Group's operations monitoring and reporting. Subsidiary managing and
or deny access to certain territories in the provision finance directors are required to sign annual compliance
of certain services. Non-compliance with law, regulation, statements. A review is underway to ensure that the
privacy or information security laws could have serious Group is compliant with the requirements of the General
implications in cost and reputational damage to the Data Protection Regulations prior to the May 2018
Group. deadline.
Risk area Potential impact Mitigation strategies
Materially adverse litigation The Group contracts with a number of large service The Group seeks to limit exposure in its contracts.
organisations for which it provides services essential Mitigating actions are taken where contractual exposures
to their customers. Failure to perform in accordance are above the norm, including insurance coverage,
with contractual terms could give rise to litigation. where appropriate and economically sustainable.
Loss or infringement of intellectual property The Group's success depends, in part, upon proprietary The Group, where appropriate and feasible, relies
rights technology and related intellectual property rights. upon a combination of patent, copyright, trademark
Some protection can be achieved but in many cases, and trade secret laws, as well as various contractual
little protection can be secured. Third parties may restrictions, to protect our proprietary technology
claim that the Group is infringing their intellectual and continues to monitor this situation. The Group
property rights or our intellectual property rights also defends vigorously all third party infringement
could be infringed by third parties. If we do not claims.
enforce or defend the Group's intellectual property
rights successfully, our competitive position may
suffer, which could harm our operating results.
HR/Personnel
Dependence on recruitment and retention of highly The ability of the Group to meet the demands of the Effective recruitment programmes are on-going across
skilled personnel market and compete effectively is, to a large extent, all business areas, as well as personal and career
dependent on the skills, experience and performance development initiatives. The executive management
of its personnel. Demand is high for individuals with team reviews talent potential twice a year and retention
appropriate knowledge and experience in payments, plans are put in place for individuals identified
IT and support services. The inability to attract, at risk of leaving. Compensation and benefits programmes
motivate or retain key talent could have a serious are competitive and also reviewed regularly.
consequence on the Group's ability to service client
commitments and grow our business.
Economic growth
Brexit The effect on inter-company transactions and the Group's Due to the current uncertainties of the Brexit negotiations
international expansion plans may be adversely affected the Group is still considering appropriate mitigation
by the outcomes of the negotiations between the UK strategies. However, the bulk of the Group's operations
government and the other member countries during the and revenues are UK based. Romania and Ireland will
UK's exit from the European Union. remain within the EU and are unlikely to be significantly
affected by Brexit.
Foreign exchange fluctuations As the Group operates in Romania and Ireland, it is The Group's financial risk management seeks to minimise
exposed to the risk of currency fluctuations and the potentially adverse effects on the Group's financial
unpredictability of financial markets in which it performance.
operates.
Product/project management
Technological changes and increasing competition The Group operates in a number of geographic, product The Group is committed to continued research and investment
and service markets that are highly competitive and in new data sources, people, technology and products
subject to rapid technological changes, for example to support its strategic plan. IT development resource
the introduction of smart meters, new payment solutions is directed at a Group level and developments are
and the movement of UK consumers away from cash payments. in hand to ensure the Group has relevant products
Competitors may develop products and services that in place to meet the demands brought about by changing
are superior to ours or that achieve greater market technology. For smart meters, MultiPay has been launched.
acceptance than our products and services, which could
result in the loss of clients, merchants and retailers
or a reduction in revenue.
Viability and going concern statements
The directors consider the Group's viability over a three year period,
on an annual basis, as part of their risk monitoring programme. The
three year period is considered appropriate as it aligns with the
Group's financial planning cycle. In determining the Group's viability
its business activities together with factors likely to affect its
future development and performance described in the Chief Executive's
review on pages 4 to 8 (in particular changes to the Group's structure,
strategy and priorities) and the principal risks set out on pages 15 and
above were considered. It was determined that none of the individual
risks in isolation would compromise the Group's viability and therefore
a number of different severe but plausible principal risk combinations
were considered. These included the downside scenario of the loss of
large clients, slower than anticipated growth in retail services and a
quicker than expected decline in the cash payments business. In making
the assessment, the directors have also considered the Group's robust
capital position, the cash-generative nature of the business, the
ability of the company to reduce costs and the access to available
credit.
The financial statements have, therefore, been prepared on a going
concern basis and the directors have a reasonable expectation that the
Group will remain viable over the three year assessment period.
CONSOLIDATED INCOME STATEMENT
Year ended Year ended
31 March 31 March
2017 2016
Note GBP000 GBP000
Continuing operations
Revenue 2 211,924 212,556
Cost of revenue 3 (106,008) (106,539)
Gross profit 105,916 106,017
Administrative expenses (53,640) (55,689)
Operating profit before impairments
and business disposals 52,276 50,328
Impairments 7 - (48,986)
Disposal of businesses 7 15,660 7,014
Operating profit after impairments and
business disposals 67,936 8,356
Share of joint venture result 8 #Investments 1,193 (224)
Investment income 132 123
Finance costs (120) (103)
Profit before tax 69,141 8,152
Tax 4 (9,508) (10,247)
Profit / (loss) for the year 59,633 (2,095)
Attributable to:
Equity holders of the parent 59,622 (2,111)
Non-controlling interest 11 16
59,633 (2,095)
Earnings / (loss) per share
Basic 6 87.5p (3.1)p
Diluted 6 87.2p (3.1)p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 March 31 March
2017 2016
Note GBP000 GBP000
Items that may subsequently be reclassified to the
consolidated income statement:
Exchange differences on translation of foreign
operations 675 968
Accumulated foreign exchange translation recycled
to the income statement (net of nil tax) 7 2,047 -
Other comprehensive income for the year 2,722 968
Profit / (loss) for the year 59,633 (2,095)
Total comprehensive income / (expense) for the year 62,355 (1,127)
Attributable to:
Equity holders of the parent 62,344 (1,143)
Non-controlling interest 11 16
62,355 (1,127)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 March 31 March
2017 2016
Note GBP000 GBP000
Non-current assets
Goodwill 8,236 8,068
Other intangible assets 11,867 8,038
Property, plant and equipment 27,168 21,452
Investment in joint venture 8 - 1,629
Deferred tax asset 354 -
47,625 39,187
Current assets
Inventories 357 523
Trade and other receivables 9 98,771 109,247
Cash and cash equivalents 10 53,080 80,831
Assets held for sale - 4,794
152,208 195,395
Total assets 199,833 234,582
Current liabilities
Trade and other payables 11 121,603 140,095
Current tax liabilities 4,548 3,487
Liabilities directly associated with assets classified
as held for sale - 3,070
126,151 146,652
Non-current liabilities
Trade and other payables 11 537 -
Deferred tax liability - 67
537 67
Total liabilities 126,688 146,719
Net assets 73,145 87,863
Equity
Share capital 12 227 227
Share premium 2,633 2,365
Share-based payment reserve 4,404 3,956
Translation reserve (316) (3,038)
Retained earnings 66,197 84,467
Total equity attributable to equity holders of the
parent 73,145 87,977
Non-controlling interest - (114)
Total equity 73,145 87,863
These financial statements were approved by the board of directors and
authorised for issue on 25 May 2017 and were signed on behalf of the
board of directors.
Dominic Taylor
Chief Executive
25 May 2017
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-
Share Share Total equity attributable to equity holders of the controlling Total
capital premium Share based payment reserve Translation reserve Retained earnings parent interest equity
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Opening equity
1 April 2015 227 1,977 3,926 (4,006) 113,348 115,472 (130) 115,342
(Loss) / profit for the year - - - - (2,111) (2,111) 16 (2,095)
Exchange differences on translation of foreign
operations - - - 968 - 968 - 968
Equity-settled share-based payment expense - - 1,660 - - 1,660 - 1,660
Vesting of share scheme - 388 (1,630) - 666 (576) - (576)
Dividends - - - - (27,436) (27,436) - (27,436)
Closing equity
31 March 2016 227 2,365 3,956 (3,038) 84,467 87,977 (114) 87,863
Profit for the year - - - - 59,622 59,622 11 59,633
Exchange differences on translation of foreign
operations - - - 675 - 675 - 675
Exchange differences transferred to income statement
on sale of business 7 - - - 2,047 - 2,047 103 2,150
Equity-settled share-based payment expense - - 1,552 - - 1,552 - 1,552
Vesting of share scheme 13 - 268 (1,329) - 651 (410) - (410)
Deferred tax on share-based payments - - 225 - - 225 - 225
Dividends 5 - - - - (78,543) (78,543) - (78,543)
Closing equity
31 March 2017 227 2,633 4,404 (316) 66,197 73,145 - 73,145
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended Year ended
31 March 31 March
2017 2016
Note GBP000 GBP000
Net cash inflow from operating activities 15 42,217 59,014
Investing activities
Investment income 132 123
Purchases of property, plant and equipment (12,116) (4,633)
Purchases of intangible assets (5,335) (3,586)
Net proceeds on disposal of businesses 22,674 11,966
Net cash from investing activities 5,355 3,870
Financing activities
Cash-settled share-based remuneration (410) (576)
Dividends paid (78,543) (27,436)
Net cash used in financing activities (78,953) (28,012)
Net (decrease) / increase in cash and cash
equivalents (31,381) 34,872
Cash and cash equivalents at beginning of year 83,221 47,198
Effect of foreign exchange rate changes 1,240 1,151
Cash and cash equivalents at end of year 10 53,080 83,221
Reconciliation of cash and cash equivalents
Year ended Year ended
31 March 31 March
2017 2016
GBP000 GBP000
Corporate cash 32,876 50,665
Client cash 20,204 30,166
Cash and cash equivalents on the statement of financial
position 53,080 80,831
Cash and cash equivalents included in assets held
for sale - 2,390
Cash and cash equivalents on the statement of cash
flows 53,080 83,221
NOTES TO THE FINANCIAL INFORMATION
1. Accounting policies
Basis of preparation
While the financial information included in this preliminary
announcement has been computed in accordance with International
Financial Reporting Standards as adopted for use by the EU (IFRS), this
announcement does not itself contain sufficient information to comply
with IFRS. The company expects to publish full financial statements that
comply with IFRS in due course.
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 March 2017 or 31
March 2016, but is derived from those accounts. Statutory accounts for
2016 have been delivered to the Registrar of Companies and those for
2017 will be delivered following the company's annual general meeting.
The auditor has reported on those accounts; the auditor's report was
unqualified, did not draw attention to any matters by way of emphasis
without qualifying its report and did not contain statements under
s498(2) or (3) of the Companies Act 2006.
The financial information complies with the recognition and measurement
criteria of IFRS, and with the accounting policies of the Group which
were set out on pages 68 to 71 of the 2016 annual report and accounts.
No subsequent material changes have been made to the Group's accounting
policies with selected accounting policies included below.
The directors are satisfied that the Group has adequate resources to
continue in operational existence for the foreseeable future, a period
of not less than 12 months from the date of this report.
Alternative performance measures
Non-IFRS measures or alternative performance measures are used by the
directors and management for performance analysis, planning, reporting
and incentive setting purposes and have remained consistent with prior
years. These measures are included in these financial statements to
provide additional useful information on performance and trends to
shareholders.
These measures are not defined terms under IFRS and therefore they may
not be comparable with similarly titled measures reported by other
companies. They are not intended to be a substitute for, or superior to,
IFRS measures. These measures include net revenue, Retail networks
earnings per share and effective tax rate.
Net revenue
Net revenue is revenue less the cost of mobile top-ups (where PayPoint
is principal), SIM cards and other costs incurred by PayPoint which are
recharged to clients and merchants. These costs include retail agent
commission, card payment merchant service charges and costs for the
provision of call centres for PayByPhone clients.
Net revenue reflects the benefit attributable to PayPoint's performance
eliminating pass-through costs and further assists with comparability of
performance where PayPoint acts as a principal for some clients and as
an agent for others. Net revenue is a reliable indication of
contribution on a business sector and product basis and is shown in the
operating and financial review.
The reconciliation of revenue to net revenue is as follows:
Year ended Year ended
31 March 31 March
2017 2016
GBP000 GBP000
Service revenue 173,880 179723
Sale of goods 37,695 32,833
Royalties 349 -
Revenue 211,924 212,556
less:
Retail agent commissions (53,645) (57,650)
Cost of mobile top-ups and SIM cards as principal (32,296) (28,082)
Card scheme sponsors' charges (2,130) (3,191)
Net revenue 123,853 123,633
Reconciliation from the Group statutory income statement to Retail
networks
Following the sale of Mobile and Online, the ongoing business of the
Group is Retail networks. In order to assist users, a reconciliation has
been presented of the Group's results for the year from Group's
statutory income statement to Retail networks to aid with the users'
understanding of the results for the year. Neither Mobile nor Online met
the definition of a discontinued operation set out in IFRS 5 Non-current
assets held for sale and discontinued operations as each did not
constitute a separate major line of business.
For the year Less Less
ended 31 March Statutory result Mobile and Online Collect+ Retail networks
2017 GBP000 GBP000 GBP000 GBP000
Revenue 211,924 (8,495) - 203,429
Cost of revenue (106,008) 3,348 - (102,660)
Gross profit 105,916 (5,147) - 100,769
Administrative
expenses (53,640) 6,131 - (47,509)
Operating
profit before
impairments
and business
disposals 52,276 984 - 53,260
Impairments - - - -
Profit on
disposals
business 15,660 (19,503) 3,843 -
Operating
profit after
impairments
and business
disposals 67,936 (18,519) 3,843 53,260
Share of joint
venture
result 1,193 - (1,193) -
Investment
income 132 - - 132
Finance costs (120) 11 - (109)
Profit before
tax 69,141 (18,508) 2,650 53,283
Tax (9,508) - - (9,508)
Profit for the
year 59,633 (18,508) 2,650 43,775
For the year Less Less
ended 31 March Statutory result Mobile and Online Collect+ Retail networks
2016 GBP000 GBP000 GBP000 GBP000
Revenue 212,556 (16,160) - 196,396
Cost of revenue (106,539) 4,841 - (101,698)
Gross profit 106,017 (11,319) - 94,698
Administrative
expenses (55,689) 13,754 - (41,935)
Operating
profit before
impairments
and business
disposals 50,328 2,435 - 52,763
Impairments (48,986) 48,986 - -
Profit on
disposals of
business 7,014 (7,014) - -
Operating
profit after
impairments
and business
disposals 8,356 44,407 - 52,763
Share of joint
venture
result (224) - 224 -
Investment
income 123 - - 123
Finance costs (103) 23 - (80)
Profit before
tax 8,152 44,430 224 52,806
Tax (10,247) - - (10,247)
Profit for the
year (2,095) 44,430 224 42,559
Significant accounting policies
Cost of revenue
In the current year 'cost of sales' has been renamed 'cost of revenue'
to better reflect the nature of the costs included in this category. The
costs allocated to this category are consistent with prior year's
allocations.
Cost of revenue primarily consists of expenses related to delivering our
services and products. These include commissions payable to retailers,
cost of mobile top-ups and SIM cards (where PayPoint is principal), card
scheme sponsors' charges, transaction costs, terminal and ATM
maintenance costs, telecommunications costs, field service/customer
service employee costs and depreciation and amortisation.
Joint arrangements
A joint arrangement is an arrangement in which two or more parties have
contractually agreed to sharing of control of an arrangement which
requires the unanimous consent when making decisions about the relevant
activities
http://eifrs.ifrs.org/eifrs/ViewContent?collection=2017_Red_Book&fn=IFRS10o_2011-05-01_en-4.html&scrollTo=F16125863
.
Joint arrangements are classified as either:
-- A joint venture whereby the Group has the right to net assets through
joint control with third parties; or
-- A joint operation whereby the Group has rights to the assets and
obligations for the liabilities relating to the arrangement.
Joint ventures are accounted for using the equity method, whereby the
investment is initially recognised at cost and adjusted thereafter for
the post-acquisition change in the investor's share of the investee's
net assets.
Joint operations are accounted for by recognising, in relation to the
interest in the joint operation:
-- the assets, including its share of any assets held jointly;
-- the liabilities, including its share of any liabilities incurred jointly;
-- the revenue from the sale of its share of the output arising from
the joint operation;
-- the share of the revenue from the sale of the output by the joint
operation; and
-- the expenses, including its share of any expenses incurred jointly.
The Group accounts for the assets, liabilities, revenues and expenses
relating to its interest in a joint operation in accordance with the
IFRSs applicable to the particular assets, liabilities, revenues and
expenses.
1. Segment reporting
As explained in the operating review on page 10, the Group provides a
number of different services and products, however these do not meet the
definition of different segments under IFRS 8 and the Group has only one
operating segment.
Geographical information
Year ended Year ended
31 March 31 March
2017 2016
GBP000 GBP000
Revenue
UK 161,664 168,172
Ireland 5,110 6,371
Romania 39,765 31,956
North America 4,459 5,303
France 926 754
Total 211,924 212,556
Non-current assets (excluding deferred tax)
31 March 31 March
2017 2016
GBP000 GBP000
UK 38,164 30,143
Romania 9,107 9,044
Total 47,271 39,187
1. Cost of revenue
In the current year 'cost of sales' was renamed to 'cost of revenue' to
better reflect the nature of the costs included in this category. The
costs allocated to this category are consistent with prior year's
allocations.
Year ended Year ended
31 March 31 March
2017 2016
GBP000 GBP000
Commission payable to retail agents 53,645 57,650
Cost of mobile top-ups and SIM cards as principal 32,296 28,082
Card scheme sponsors' charges 2,130 3,191
Depreciation and amortisation 7,473 5,784
Other 10,464 11,832
Total cost of revenue 106,008 106,539
1. Tax
Year ended Year ended
31 March 31 March
2017 2016
GBP000 GBP000
Current tax
Charge for current year 10,596 9,909
Adjustment in respect of prior years (892) (860)
Current tax charge 9,704 9,049
Deferred tax
Charge for current year - 420
Adjustment in respect of prior years (196) 778
Deferred tax charge (196) 1,198
Total income tax
Income tax charge 9,508 10,247
The income tax charge is based on the United Kingdom statutory rate of
corporation tax for the year of 20% (2016: 20%). The charge for the year
is reconciled below to the profit before tax as set out in the
consolidated income statement.
Year ended Year ended
31 March 31 March
2017 2016
GBP000 GBP000
Profit before tax 69,141 8,152
Tax at the UK corporation tax rate of 20% (2016: 20%) 13,828 1,630
Tax effects of:
Losses in countries where the tax rate is different
to the UK (213) (228)
Disallowable expenses/(non-taxable income) 107 (52)
Utilisation of tax losses not previously recognised - (38)
Losses in companies where a deferred tax asset was
not recognised - 459
Adjustments in respect of prior years (1,088) (43)
Tax impact of share-based payments (10) 208
Revaluation of deferred tax asset due to change in
tax rate 16 (25)
Disallowable loss on Collect+ arrangement 769 -
Disallowable impairments and profit on disposal (3,901) 8,336
Actual amount of tax charge 9,508 10,247
Profit before tax for purposes of calculating the effective tax rate is
as follows:
Year ended Year ended
31 March 31 March
2017 2016
GBP000 GBP000
Profit before tax 69,141 8,152
Impairments - 48,986
Profit on disposals (15,660) (7,014)
Profit before tax for purposes of calculating the
effective tax rate 53,481 50,124
1. Dividends per share
Year ended Year ended
31 March 31 March
2017 2016
GBP000 GBP000
Equity dividends on ordinary shares:
Interim ordinary dividend paid of 15.0p (2016: 14.2p)
per share 10,218 9,667
Proposed final ordinary dividend of 30.0p (2016: 28.2p)
per share 20,436 19,199
Interim additional dividend paid 12.2p per share 8,333 -
Additional final dividend 24.5p per share 16,667 -
Disposal dividend 38.9p (2016: 21.0p) per share 26,493 14,300
Total dividends paid and recommended 82,147 43,166
Amounts distributed to equity holders in the year:
Final ordinary dividend for the prior year 19,199 17,769
Interim ordinary dividend for the current year 10,218 9,667
Interim additional dividend for the current year 8,333 -
Disposal dividend 40,793 -
78,543 27,436
The proposed final ordinary dividend is subject to approval by
shareholders at the annual general meeting and has not been included as
a liability in these financial statements.
1. Earnings / (loss) per share
Basic and diluted earnings per share are calculated on the following
profit / (loss) and number of shares:
Year ended Year ended
31 March 31 March
2017 2016
GBP000 GBP000
Profit / (loss) for statutory basic and diluted earnings
per share is the net profit / (loss) attributable
to equity holders of the parent 59,622 (2,111)
Adjustments:
(Profit) / loss related to Mobile and Online (note
2) (18,508) 44,430
Non-controlling interest 11 16
Loss related to Collect+ (note 2) 2,650 224
Profit for the purpose of basic and diluted earnings
per share (Retail networks) 43,775 42,559
31 March 31 March
2017 2016
Number of shares Number of shares
Weighted average number of ordinary shares in issue
(for statutory and Retail networks' basic earnings
per share) 68,118,438 68,080,179
Potential dilutive ordinary shares:
Long-term incentive plan 190,484 -
Deferred share bonus 59,725 147,156
SIP and other 373 -
Weighted average number of ordinary shares in issue
(for statutory and Retail networks' diluted earnings
per share) 68,369,020 68,227,335
1. Impairments and disposal of businesses
In the current year (23 December 2016) the Group disposed of its
interest in the mobile payments business which comprised PayByPhone
Technologies Inc., PayByPhone Limited, Mobile Payment Services SAS and
Adaptis Solutions Limited. Included in the Group's results in the
current year was a net loss of GBP1.0 million (2016: GBP2.2 million)
related to Mobile's operations up to the date of its sale.
In the prior year (8 January 2016) the Group disposed of the online
payments business. Included in the Group's results in the prior year was
a net loss from the online business of GBP0.2 million.
The profit on disposal of these businesses is set out as follows:
Year ended Year ended
31 March 31 March
2017 2016
GBP000 GBP000
Other intangible assets - 4,258
Property plant and equipment 614 178
Deferred tax asset - 43
Trade and other receivables 2,830 1,313
Cash and cash equivalents 1,959 334
Trade and other payables (3,063) (840)
Net carrying value of disposed businesses 2,340 5,286
Exchange differences recognised in equity 2,047 -
Non-controlling interests 103 -
Gain on disposal 19,503 7,014
Total consideration 23,993 12,300
Satisfied by:
Gross consideration 26,500 14,300
Disposal costs (2,507) (2,000)
23,993 12,300
Net cash inflow arising on disposal:
Gross consideration received 26,500 14,300
Less: disposal costs paid (1,596) (2,000)
Less: cash and cash equivalents disposed of (1,959) (334)
22,945 11,966
Net profit / (loss) on disposal
Together with the loss on disposal of Drop and Collect Limited (note 8),
the profit / (loss) resulting from the disposal of businesses is shown
below:
Year ended Year ended
31 March 31 March
2017 2016
GBP000 GBP000
Disposal of Online - 7,014
Disposal of Mobile 19,503 -
Disposal of Drop and Collect Limited (note 8) (3,843) -
15,660 7,014
Impairments
In the year no goodwill impairments were recognised. In the prior year
the carrying value of the Mobile and Online assets were tested for
impairment with impairments recorded as follows:
Year ended Year ended
31 March 31 March
2017 2016
GBP000 GBP000
Online - 18,207
Mobile - 30,779
- 48,986
1. Joint arrangements
Joint venture
On 15 December 2016, PayPoint entered into an arrangement with Yodel
Delivery Network Limited ("Yodel") regarding its investment in Drop and
Collect Limited. The arrangement included the formation of the Collect+
Group consisting of Collect+ Holdings Limited, held 50:50 by PayPoint
and Yodel, and its wholly owned subsidiary Collect+ Brand Limited. Yodel
and PayPoint sold their respective investments in Drop and Collect
Limited to Collect+ Holdings Limited. The Collect+ brand was transferred
from Drop and Collect Limited to Collect+ Limited. Drop and Collect
Limited was then sold to Yodel. This resulted in PayPoint retaining its
50% share in the Collect+ brand but disposing of its share in the
remaining operations and assets of Drop and Collect Limited. The result
of the Group's share of Drop and Collect Limited up to the date of
disposal as follows:
31 March 31 March
2017 2016
GBP000 GBP000
Opening balance 1,629 1,853
Result for the year 1,193 (224)
Carrying value de-recognised at the date of sale (2,822) -
Closing balance - 1,629
Year ended Year ended
31 March 31 March
PayPoint's share of aggregated amounts relating to 2017 2016
joint ventures GBP000 GBP000
Revenues 21,393 24,794
Result for year 1,193 (224)
The loss recognised relating to the sale of Drop and Collect Limited was
as follows:
Year ended
31 March
2017
GBP000
Net carrying value of Drop and Collect Limited prior
to disposal 2,822
Disposal costs 1,021
Loss on disposal 3,843
Gross cash inflow arising on disposal -
less disposal costs paid (271)
Net cash outflow from the disposal of Drop and Collect
Limited (271)
Joint operation
The new joint operation, the Collect+ Group, has licenced the use of the
Collect+ brand to both Drop and Collect Limited (now a wholly owned
subsidiary of Yodel) and PayPoint. In consideration, PayPoint and Drop
and Collect Limited will pay royalties to the joint operation for each
parcel they introduce to the Collect+ network. The royalties in the
arrangement will then be distributed equally to Yodel and PayPoint on a
regular basis.
The only source of revenue for the Collect+ Group in the period was the
royalty income received from licencing the brand to Drop and Collect
Limited. The Group's share of GBP0.3 million has been included in
revenue and there were no operating costs incurred by the arrangement.
1. Trade and other receivables
31 March 31 March
2017 2016
GBP000 GBP000
Trade receivables(1) 14,743 18,645
Items in the course of collection(2) 78,340 83,252
Revenue allowance(2) (3,640) (2,803)
89,443 99,094
Other receivables 1,161 1,071
Prepayments and accrued income 8,167 9,082
98,771 109,247
1 The average credit period on the sale of goods is 25 days (2016: 33
days).
2 Items in the course of collection represent amounts collected for
clients by retail agents. PayPoint bears credit risk and will have title
to the cash collected on only GBP13.5 million of this balance at 31
March 2017 (2016: GBP17.8 million). Credit risk is mitigated by daily
direct debiting and the suspension of terminals where direct debits
fail. At the date of this report, all but GBP47,300 has been collected
from retailers.
10. Cash and cash equivalents
The Group operates cash pooling amongst its various bank accounts in the
UK and therefore individual accounts can be overdrawn without penalties
being incurred so long as the overall position is in credit.
Included within Group cash and cash equivalents are balances relating to
funds collected on behalf of clients where PayPoint has title to the
funds (client cash). An equivalent balance is included within trade
payables (note 11).
1. Trade and other payables
31 March 31 March
2017 2016
GBP000 GBP000
Amounts owed in respect of client cash(1) 20,204 21,539
Settlement payables(2) 78,340 83,252
Client payables 98,544 104,791
Trade payables(3) 6,019 22,920
Other taxes and social security 2,406 1,540
Other payables 2,047 1,867
Accruals 12,383 8,058
Deferred income 741 919
122,140 140,095
Disclosed as:
Current 121,603 140,095
Non-current 537 -
Total 122,140 140,095
1 Relates to monies collected on behalf of clients where the Group has
title to the funds (client cash). An equivalent balance is included
within cash and cash equivalents.
2 Payable in respect of amounts collected for clients by retail agents.
3 The Group aims to pay its creditors promptly, in accordance with terms
agreed for payment. The Group had 22 days purchases outstanding at 31
March 2017 (2016: 27 days) based on the average daily amount invoiced by
suppliers during the year.
12. Share capital
31 March 31 March
2017 2016
GBP000 GBP000
Authorised share capital
4,365,352,200 ordinary shares of 1/3p each 14,551 14,551
Allotted and fully paid share capital
68,133,611 (2016: 68,080,179) ordinary shares of 1/3p
each 227 227
1. Share based payments
The total charge of GBP1.3 million recognised directly in equity for the
LTIP 2013, which lapsed, and DBS scheme, which vested, was transferred
from share-based payments reserve to retained earnings during the
period. On 2 June 2016 the 2016 LTIP award was granted with vesting
based on a TSR performance over a three-year period ending on 2 June
2019. The performance period and the vesting period are the same. The
number of shares granted was 271,508.
1. Related party transactions
Remuneration of the directors, who are the key management of the Group,
was as follows during the year:
Year ended Year ended
31 March 31 March
2017 2016
GBP000 GBP000
Short term benefits and bonus(1) 2,162 1,570
Pension costs(2) 235 219
Long term incentives(3) 445 353
Other(4) 29 9
Total 2,871 2,151
1. Includes salary, fees, benefits in kind and annual bonus.
2. Defined contribution pension scheme, of which two current directors are
members.
3. Long term incentives: includes the value of 2014 DSB and LTIP awards
expected to vest after the year end (2016: 2013 DSB and LTIP awards).
4. SIP matching and dividend shares awarded in the year.
Amounts received from Drop and Collect Limited during the year totalled
GBP17.8 million (2016: GBP13.3 million) and PayPoint held a trade debtor
at year end of GBP0.6 million (2016: GBP0.5 million).
1. Notes to the consolidated statement of cash flows
Year ended Year ended
31 March 31 March
2017 2016
GBP000 GBP000
Profit before tax 69,141 8,152
Adjustments for:
Depreciation of property, plant and equipment 5,302 4,698
Amortisation of intangible assets 2,171 1,086
Share of joint venture result (1,193) 224
Research and development credit (171) (522)
Impairments - 48,986
Profit on disposal of businesses (15,660) (7,014)
Loss on disposal of fixed assets 414 25
Net interest income (12) (20)
Share-based payment charge 1,552 1,442
Operating cash flows before movements in working
capital 61,544 57,057
movement in inventories 196 193
movement in receivables (338) (1,500)
movement in payables
- client cash (11,641) 17,762
- other payables 1,219 (4,516)
Cash generated by operations 50,980 68,996
Corporation tax paid (8,643) (9,877)
Bank charges paid (120) (105)
Net cash from operating activities 42,217 59,014
Movements in items in the course of collection (see note 9) and
settlement payables (see note 11) have not been included in this
reconciliation as the directors do not consider them to be operating
working capital balances.
Trading history
Year ended March
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 212.1 224.4 196.6 193.2 200.0 208.5 212.2 218.5 212.6 211.9
Net revenue 69.9 77.4 77.4 82.7 90.4 105.7 113.7 123.1 123.6 123.9
Profit before tax([12] #_ftn12) 30.4 34.6 32.6 34.5 37.2 41.3 46.0 49.6 50.1 53.5
Tax 9.4 10.8 10.5 10.6 10.3 10.3 10.1 10.4 10.3 9.5
Profit after tax 21.0 23.8 22.1 23.8 26.9 31.0 35.9 39.1 39.8 44.0
Earnings per share(1)
Basic 31.1p 35.6p 32.9p 35.2p 39.8p 45.7p 52.9p 57.6p 58.6p 64.2p
Diluted 30.8p 35.3p 32.7p 35.1p 39.8p 45.3p 52.6p 57.4p 58.4p 63.9p
Dividend per share 10.4p 11.6p 21.8p 23.4p 26.5p 30.4p 35.3p 38.5p 42.4p 45.0p
(excluding special dividends)
This table does not form part of the audited financial statements or
notes (as listed in the Independent Auditor's Report in the company's
statutory accounts for the year ended 31 March 2017).
ABOUT PAYPOINT
We support market leading national networks across 40,400 convenience
stores in the UK and Romania so that our customers are always close to a
PayPoint store. In thousands of locations, as well as at home or on the
move, people use us better to control their household finances,
essential payments and in-store services, like parcels. Our UK network
contains more branches than all banks, supermarkets and Post Offices
together, putting us at the heart of communities for over 10 million
regular weekly customers.
We have a proven track record of decades of tech-led innovation,
providing retailers with tools that attract customers into their shops.
Our industry-leading payments systems give first class service to the
customers of over 1,500 clients - utility companies, retailers,
transport firms and mobile phone providers, government and more.
We are on and offline; providing for payments by cash, card including
contactless; retail, phone and digital; at home, work and whilst out and
about from Land's End to the Highlands and Islands - helping to keep
modern life moving.
Multichannel payments
MultiPay is our multichannel payment service, offering consumer service
providers a ready-made solution for their full range of payments via app,
web, phone, text and IVR, complementing our cash in store services.
Clients benefit from streamlining their consumer payment processing and
transaction routing in a seamlessly integrated and cost-effective
solution. The services are available either as a full portfolio or by
the client's choice of preferred channels, including our app which has a
4 star rating on the Google Play and Apple App Stores. Clients can
choose to access our services as a full outsourced model or by linking
their own digital solutions to our MultiPay payment suite.
MultiPay is particularly targeted to serve the rollout of smart meters
within the energy market. For example, our service has helped Utilita to
become the fastest growing, challenger prepay energy supplier and we
have also signed several other energy companies, including SSE, our
first Big 6 energy client. Among other relevant sectors, MultiPay is
available to the local authority and social housing sectors through a framework with Procurement for Housing. Retail networks In the UK, our network includes over 29,200 local shops including Co-op, Spar, Sainsbury's Local, Tesco Express and thousands of independent outlets. These outlets are quick and convenient places to make energy meter prepayments, bill payments, benefit payments, mobile phone top-ups, transport ticket payments, TV licence payments, cash withdrawals and more. Our Romanian network continues to grow profitably. We have more than 11,300 local shops, helping people to make cash bill payments, money transfers, road tax payments and mobile phone top-ups. Our clients include all the major utilities and telcos and many other consumer service companies. In the UK, our Collect+ network offers parcel collection and return services in over 6,100 convenient outlets. Customers use Collect+ for their parcels from major retailers including Amazon, eBay, ASOS, New Look, John Lewis, House of Fraser, M&S and Very. The Collect+ brand is jointly owned with Yodel. The UK network also includes over 4,100 LINK branded ATMs, and 10,000 of our terminals enable retailers to accept debit, credit and contactless payments, including Apple Pay. We operate over 4,100 Western Union agencies in the UK and Romania for international and domestic money transfers. ([1] #_ftnref1) Net revenue is an alternative performance measure. Refer to note 1 to the financial information for a reconciliation to revenue. ([2] #_ftnref2) Gross margin is an alternative performance measure and is calculated by dividing gross profit by revenue. ([3] #_ftnref3) Retail networks consists of our UK, Ireland and Romanian retail businesses. A reconciliation, for each measure, from the statutory results to Retail networks is included in note 2 to the financial information. ([4] #_ftnref4) Retail networks consists of our UK, Ireland and Romanian retail businesses. A reconciliation, for each measure, from the statutory results to Retail networks is included in note 2 to the financial information. ([5] #_ftnref5) Net revenue is an alternative performance measure. Refer to note 1 to the financial information for a reconciliation to revenue. ([6] #_ftnref6) These KPIs are alternative performances measures and are not directly comparable to statutory measures. ([7] #_ftnref7) Retail networks consists of our UK, Ireland and Romanian retail businesses. A reconciliation from the statutory results to Retail networks is included in note 2 to the financial information. ([8] #_ftnref8) Net revenue is an alternative performance measure. Refer to note 1 to the financial information for a reconciliation to revenue. ([9] #_ftnref9) Net revenue is an alternative performance measure. Refer to note 1 to the financial information for a reconciliation to revenue. ([10] #_ftnref10) Net revenue is an alternative performance measure. Refer to note 1 to the financial information for a reconciliation to revenue. ([11] #_ftnref11) Effective tax rate is the tax cost as a percentage of operating profit before impairments and profits and losses on business disposals. ([12] #_ftnref12) 2017 profit before tax and earnings per share excludes the profit on disposal of Mobile of GBP19.5 million and the loss on the Collect+ restructure of GBP3.8 million (2016: impairments of GBP49.0 million and the profit on disposal of the online payments business of GBP7.0 million). ([i] #_ednref1) www.link.co.uk/about-link/statistics/ ([ii] #_ednref2) Payments UK: 2016 UK Payment Markets - Summary ([iii] #_ednref3) Department for Business, Energy, & Industrial Strategy: Smart Meters Quarterly Report to end December 2016 ([iv] #_ednref4) Competition and Markets authority: Modernising the Energy Market 24 June 2016 PayPoint plc Preliminary Results: http://hugin.info/137093/R/2107708/800499.pdf This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients. The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein. Source: PayPoint plc via Globenewswire http://www.paypoint.co.uk/default.htm
(END) Dow Jones Newswires
May 25, 2017 02:00 ET (06:00 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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