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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 482.50 | 479.00 | 484.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Adjustment & Collection Svcs | 167.72M | 34.71M | 0.4776 | 10.08 | 349.95M |
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TIDMPAY
PayPoint plc - results for the 6 months ended 30 September 2017
Good growth in retail services supported by continued progress in
business reshaping
Reported HIGHLIGHTS
6 months ended 6 months ended
30 September 30 September
2017 2016 Change
Revenue GBP97.6m GBP101.7m (4.1)%
Net revenue([1] #_ftn1) GBP56.5m GBP58.4m (3.2)%
Gross margin([2] #_ftn2) 48.5% 49.1% (0.6)ppts
Operating profit before impairments
and business disposal GBP24.4m GBP24.2m 0.6%
Profit before tax GBP24.4m GBP24.7m (1.5)%
Earnings per share 29.1p 29.0p 0.1p
Ordinary interim dividend per share 15.3p 15.0p 0.3p
Additional interim dividend per
share 12.2p 12.2p -
Total dividend per share 27.5p 27.2p 0.3p
Operating cash flows GBP29.5m GBP28.0m 5.3%
Cash at period end GBP27.6m GBP51.4m (46.3)%
PayByPhone, our mobile payment business, which was sold on 23 December
2016, and Drop and Collect, before our renegotiation with Yodel which
completed on 16 December 2016 are included in last year's reported
numbers making this year's interim performance not directly comparable.
In order to more clearly compare our financial performance we have
included highlights of our ongoing Retail networks business below.
RETAIL NetworkS([3] #_ftn3) HIGHLIGHTS
6 months ended 6 months ended
30 September 30 September
2017 2016 Change
Revenue GBP97.6m GBP95.4m 2.3%
Net revenue(1) GBP56.5m GBP53.8m 5.0%
Gross margin2 48.5% 48.5% -
Operating profit GBP24.4m GBP25.0m (2.7)%
Profit before tax GBP24.4m GBP25.1m (3.0)%
Earnings per share 29.1p 29.6p (0.5)p
Financial highlights
-- Good revenue growth in our ongoing Retail networks business;
o Gross revenue grew by 2.3% to GBP97.6 million,
o Net revenue(1) grew by 5.0% to GBP56.5 million,
o UK retail services net revenue grew 12.5% to GBP19.0 million.
-- Announced ordinary interim dividend of 15.3 pence per share,
an increase of 2% year-on-year alongside the additional interim dividend
of 12.2 pence per share. Total dividends of GBP37.2 million paid to
shareholders during the period supported by strong operating cash
flows([4] #_ftn4) of GBP29.5 million up on prior period by GBP1.5
million. Cash at period end was GBP27.6 million.
Retail services
-- Continued successful roll out of PayPoint One, reached 6,181 sites as at
30 September 2017, an increase of 2,580 sites since 31 March 2017, with
further growth in the average weekly PayPoint One fee per site. Remain on
track to deliver target of 8,000 PayPoint One installations by 31 March
2018.
-- Strong growth in card payment net revenue of 22.4% driven by an increase
in transactions, improved margins and change in VAT treatment.
-- Further progress in the parcel business with volumes up by 13.6% to 11.9
million and the network has now increased to over 7,200 outlets ahead of
the Christmas peak season. Collect+ remains the clear market leader in
parcel shop services.
Payments
-- UK bill payments and top-up net revenue broadly flat at GBP32.4 million.
The positive growth from improvements to client mix, renegotiation of
symbol commissions, increased average top-up values and increased eMoney
volumes which have a higher margin per transaction, was offset by a 9.7%
reduction in transaction volumes.
-- Good momentum in MultiPay with transactions doubling to 6.7 million
servicing 17 clients including SSE.
-- Ongoing strong growth in Romania;
-- Net revenue increased 17.1% to GBP5.0 million,
-- Good growth in transactions which have increased by 6.6% to 38.8
million,
-- Payzone Romania acquisition completed in October 2017.
Service delivery
-- Initiatives to improve company processes are taking effect. For example,
the PayPoint One prospecting to installation timeframe has reduced by 19%
since last year.
-- Cost base grew by GBP3.3 million to GBP32.1[5] #_ftn5 million (September
2016: 28.8 million) reflecting continued investment in PayPoint One,
MultiPay and improving customer service. The increase is weighted to the
first half of the year and we expect minimal growth in the second half of
the financial year.
Dominic Taylor, Chief Executive, said: "It has been an exciting and busy
six months for PayPoint as we have continued to reshape our business.
PayPoint One is already benefiting over 6,800 retailers and we have just
launched EPoS Pro and our EPoS mobile app, innovations which will
further help our convenience retailer customers drive significant
additional efficiencies and value within their businesses. We continue
to see strong card payment growth while MultiPay, our omni-channel
payment solution, has now processed over 22.5 million transactions since
launch. Collect+ continues to perform strongly and has extended its lead
in parcels, with a network now of over 7,200 sites. Finally, our
Romanian business remains the clear market leader, further strengthened
with the acquisition of Payzone Romania following the recent clearance
of the transaction by the competition authorities.
This continued progress underpins the Board's confidence in our strategy,
allowing us to confirm the full year outlook which remains in line with
previous guidance."
Enquiries
PayPoint plc Finsbury (Tel: 0207 2513
801)
Dominic Taylor, Chief Executive (Tel: 01707 600 Rollo Head
317)
Rachel Kentleton, Finance Director (Tel: 07843 074 Andy Parnis
906)
A presentation for analysts is being held at 11.45am today (30 November
2017) at Canaccord Genuity Limited, 88 Wood Street, London, EC2V 7QR. A
webcast of the presentation can be accessed at
http://paypoint301117-live.audio-webcast.com. This announcement is
available on the PayPoint plc website: http://corporate.paypoint.com.
Chief Executives Review
The past six months represents the first set of interim results since
the completion of our restructuring programme and the good growth
reflects the progress being made reshaping the business towards future
growth opportunities in retail services. Our success is built around our
deeply embedded scalable network and low cost operating platform. We are
in approximately 29,000 stores in the UK and Ireland with a 43%([6]
#_ftn6) share of retail outlets([7] #_ftn7) and also a 43% share of the
independent retail sector outlets, whether affiliated to a symbol
operator or not. We also have 11,700 stores in Romania (with the
acquisition of Payzone this increases to over 21,000). By creating a
technology, settlement and operating platform to leverage a wide range
of payment, parcel and retail service products, we are able to deliver a
strong consumer proposition which delivers incremental revenue at a low
marginal cost driving attractive returns for our shareholders.
Net revenue for the past six months was GBP56.5 million (September 2016:
GBP58.4 million), on revenues of GBP97.6 million (September 2016:
GBP101.7 million). Transactions of 295.2 million (September 2016: 337.2
million) were processed over the six months representing a transaction
value of GBP4.7 billion (September 2016: GBP4.9 billion). Note that the
results of the mobile payments business (PayByPhone), which was sold on
23 December 2016, are included in the 2016 comparative.
Our Retail networks([8] #_ftn8) performed well with net revenue
increasing by GBP2.7 million to GBP56.5 million, up 5.0% from the same
period last year, driven mostly by the increase in service revenue from
PayPoint One. However, our cost base([9] #_ftn9) increased by GBP3.3
million to GBP32.1 million as a result of our continued investment in
PayPoint One, MultiPay and improving customer service. The increase is
weighted to the first half of the year and we expect minimal growth in
the second half of the financial year as the investment required to
deliver PayPoint One to our retailers decreases.
Earnings per share increased to 29.1 pence (September 2016: 29.0 pence)
primarily as a result of the effective tax rate([10] #_ftn10) reducing
to 18.8% (September 2016: 20.2%). The higher effective tax rate in the
prior period was primarily due to the losses in the mobile payments
business incurring no tax relief.
With this set of results we have declared an interim ordinary dividend
of 15.3p per share, an increase of 2% year-on-year alongside the
additional interim dividend of 12.2 pence per share, resulting in an
incremental payment of GBP18.7 million to our shareholders.
As outlined in our full year results the management team is focused on
reshaping the business to build on the strength of our Retail network,
so as to drive growth in retail services and to improve retailer
experience through our investment in customer service and position
PayPoint at the heart of our customers businesses. To execute our
strategy, we set out five clear priorities for this financial year on
which we have made good progress over the past six months, these are:
1. Drive profitable growth in UK retail services.
2. Deliver parcels volume growth in the UK.
3. Optimise profits in UK bill payments and top-ups.
4. Drive continued organic growth in Romania.
5. Business optimisation.
1. Drive profitable growth in UK retail services
Convenience retailing is a strong, resilient and growing sector which
has benefitted from a shift towards regular top-up shopping,
complementing online purchasing and taking share from big weekly shops.
The total food and grocery market in the UK in 2017 is estimated to be
GBP184.5bn with the convenience sector taking 21.7% of the market share.
The convenience market is expected to increase by 17.7% by 2022 driving
its share to 22.1%([11] #_ftn11) . PayPoint is well placed through our
strong convenience coverage of approximately 29,000 stores in the UK and
Ireland, to grow retail services by selling to retailers as our
customers and serving consumers through retailers as our distributors.
This dynamic has underpinned our continuing retail services growth which
are on track to exceed bill payment revenues in the coming years.
Progress in the six months
-- UK retail services net revenue grew 12.5% to GBP19.0 million driven by
strong growth from PayPoint One service fees.
-- PayPoint One installed in 6,181 sites as at 30 September 2017, an
increase of 2,580 since 31 March 2017;
-- PayPoint One is already the largest EPoS capable estate in the UK
convenience sector,
-- Average weekly revenue per site increased to GBP14.29 as a result
of an improving mix within our three price points of GBP10, GBP15
or GBP20 per week per site,
-- 57% (3,947 sites)[12] #_ftn12 of PayPoint One users now have EPoS
Core with the remainder taking our Base proposition,
-- Over 80%[13] #_ftn13 of PayPoint One users would recommend
PayPoint One,
-- Retailers are increasingly using more functionality within
PayPoint One EPoS; 47% of goods are now being scanned vs 43% at
January 2017.
-- EPoS Pro and the EPoS mobile app were launched at the beginning of
November with enhanced features including stock management, news
management and wholesaler links. EPoS Pro will retail at GBP30 a week;
-- Roll out to commence from January 2018,
-- EPoS Pro integration with Nisa agreed providing a seamless link to
their in-house stock management systems with more symbol links in
development,
-- EPoS mobile app to provide PayPoint One customers with access to
data on any device, anywhere, whether they are using EPoS Base,
Core or EPoS Pro.
-- ATM transactions increased to 20.4 million (September 2016: 19.8 million)
an increase of 3.4%;
-- Replaced over 500 legacy ATMs with broadband connected machines
which are faster, more reliable, and improve the consumer
experience.
-- Card payment transactions increased 5.4% to 46.7 million with growth in
card payment net revenue of 22.4% driven by an increase in transactions,
improved margins and the change in VAT treatment in the second half of
the last financial year.
-- Standardised service fees for legacy terminals introduced across 14,000
sites; experienced small churn in customer base of 1.9%, in line with
expectations.
Delivery to the end of the financial year
We remain on target to achieve 8,000 PayPoint One sites by March 2018.
With the launch of EPoS Pro and our focus on increasing our pricing mix,
we expect continued growth in the average weekly fee per site. We also
plan to implement an option for retailers to have net settlement for
card payments. This will be a unique differentiator for PayPoint,
reducing our retailers' banking costs and improving their working
capital.
In ATMs we intend to grow our network in the second half of the year
while also reviewing the implications from LINK's recent proposals to
reduce the interchange rate for our ATM business. ATMs remain an
important business for us although we may adjust our network plans to
remove sites that become un-profitable should LINK's recent proposals to
reduce interchange revenue go ahead.
1. Deliver parcels volume growth in the UK
Collect+ is the biggest pick up and drop off network in the UK and
provides consumers with the ability to collect parcels or send returns
from over 7,200 local convenience stores nationwide. The UK parcel
market has continued to grow strongly. Year to date the market has
increased by 16.4%([14] #_ftn14) to an estimated 2.4 billion per annum,
driven by the growth in online orders. Within the total parcels market,
Click & Collect accounts for 120 million parcels and returns have even
higher volumes.
Progress in the six months
-- Continued growth in parcel volumes, up 13.6% to 11.9 million.
-- Collect+ sites increased by 627 to 6,794 on 30 September 2017, now at
over 7,200 in advance of the Christmas peak.
-- Collect+ remains the market leader;
-- Improvement in Trust Pilot score, score up to 9.3 out of 10 (31
March 2017: 9.2),
-- Ranked in the top three delivery services, with 89% neutral or
positive reviews[15] #_ftn15 .
-- Proposition remains highly attractive to retailers including a trial
participation from Tesco Express.
Delivery to end of the financial year
Underlying trends in parcels remain favourable with increasing outlets
and continued growth in UK online shopping. Following the successful
restructure of our Collect+ joint arrangement with Yodel last year, we
now have the opportunity to extend our network to other carriers,
providing PayPoint with an exciting opportunity to capture a greater
share of the market. As a result, we expect continued growth in parcel
volumes with the addition of new carriers.
1. Optimise profits in UK bill payments and top-ups
Cash prepay energy payments is a sector where PayPoint continues to be
the market leader. The prepay energy sector has however, been impacted
by a number of factors including the Big Six energy providers losing
market share, reduced levels of consumer energy debt, higher
temperatures and the continued uncertainty around the impact of smart
meters and the delays to their national roll out. We believe our
MultiPay service, which complements our existing business by enabling
consumer choice of digital channels, is well placed to capture digital
payments from smart meters through its integrated platform as well as
enabling PayPoint to service new non-energy clients.
Progress in the six months
-- Net revenue of GBP32.4 million (September 2016: GBP32.6 million) was
broadly flat compared to prior period as improvements to client mix,
renegotiation of symbol commissions, increased average top-up values and
increased eMoney volumes which have a higher margin per transaction, were
offset by the decline in bill payments and top-up transactions.
-- UK bill payments and top-up transactions reduced by 9.7% to 174.7 million,
a large part of which was caused by the ongoing decline in the UK mobile
top-ups and energy prepay markets.
-- Launched Amazon Cash as Amazon's first partner in the UK.
-- 18 new clients secured in the six month period of which nine are
challenger energy providers.
-- MultiPay transactions doubled to 6.7 million, with 17 clients, including
SSE, now live on the service.
-- A new contract was secured for the replacement of the Department of Work
and Pensions simple payment service, albeit at a lower value than the
previous contract.
-- Renewed and extended contracts with six clients, including the BBC.
Delivery to end of the financial year
There is a strong residual demand for cash payment that we will continue
to serve successfully and expand where possible. In addition, we will
continue to add more clients to our MultiPay service and extend it to
other sectors. There is however uncertainty relating to the roll out of
smart meters and the general long-term decline of cash and top-ups which
will continue to impact our payments business, but we expect to continue
to renew key contracts with an improvement in revenue per transactions
rates.
1. Drive continued organic growth in Romania
In Romania, there are an estimated 418 million bill payments per year
and cash is expected to be the dominant settlement method for the
foreseeable future. PayPoint is a well-known market leading brand which
has relationships with clients from all sectors. We estimate our current
share of the bill payments issued by our clients is 23.6%.
Progress in the six months
-- Good transaction growth of 6.6% to 38.8 million.
-- Strong growth in net revenue, up 17.1% to GBP5.0 million; underlying net
revenue growth excluding exchange rate movements was 11.1%.
-- Network sites increased to 11,771, up by 469 since 31 March 2017.
-- Successfully added a further 14 clients; total clients now in excess of
140.
-- Parcels trial continues with over 200 sites in Bucharest and five online
merchants.
-- Completed Payzone acquisition in October 2017; consideration paid
totalled GBP1.4 million with a contingent GBP0.4 million deferred.
Delivery to end of the financial year
The Payzone acquisition presents a step change for our Romanian business
increasing our stores in Romania to over 21,000. Our focus for the next
six months will be to start network optimisation, integrating the
businesses to increase revenue and services portfolio and to drive cost
efficiencies. We will also look to maximise market share with existing
clients, extend our presence in multiples and add new clients from other
sectors.
1. Business optimisation
We intend to invest in tools and capabilities to enable our client and
field teams to more effectively sell a portfolio of products. In
addition, we have also publicly pledged to our UK retailers that we
intend to deliver first class service through the entire lifecycle of
on-boarding, operational support and status changes. This will require
us to invest in an efficient workflow and in billing systems with
accurate and timely supporting information so we can serve them
effectively.
Progress in the six months
We have made good progress in improving our processes so as to meet our
pledge of delivering first class service to our UK retailers. Our end to
end process for on-boarding retailers has significantly improved over
the last six months with average days from prospecting to installation
across all products reducing by over 10% and for PayPoint One by 19%. We
have also improved our calls answered ratio by 3.3ppts compared to last
year.
Delivery to end of the financial year
The first phase of our new customer relationship management and billing
systems will go live in the first half of 2018. These systems will allow
us to further improve our service to retailers, our sales capability and
our ability to generate operational efficiencies.
Outlook
This continued progress underpins the Board's confidence in our strategy,
allowing us to confirm the full year outlook which remains in line with
previous guidance.
OPERATING REVIEW
PayPoint is a multi-channel service provider for consumer transactions,
processing high transaction volumes, managing retailers and clients,
settling funds (collection and transmission) and transmitting data in a
secure environment, by the application of technology.
The application of technology is directed 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 basis and,
therefore, the group has only one operating segment.
Retail networks([16] #_ftn16)
The group has established Retail networks in the UK, Ireland and Romania
which grew by 2.2% (September 2016: 3.2%) to 40,512 sites.
At At At
30 September 30 September Change 31 March
Analysis of sites/internet merchants 2017 2016 % 2017
UK and Ireland terminal sites 28,741 28,973 (0.8) 29,176
Romania terminal sites 11,771 10,662 10.4 11,302
Total terminal sites 40,512 39,635 2.2 40,478
In the UK, we introduced standardised service fees for legacy terminals
across 14,000 sites and, as expected, experienced small churn in
customer base of 1.9%. Overall the UK network reduced by a net 435 sites
to 28,741 in the first half of the year. Our main priority is to deploy
PayPoint One across our existing site base in the UK.
PPoS, our solution for symbol groups and Multiples who want to integrate
through their own EPoS, grew to 8,561 sites (September 2016: 8,178
sites).
In Romania, we increased the number of terminal sites by 469 in the
period, an increase of 4.1% since year end.
Transactions in our Retail networks declined by 11.9 million (5.3%) to
295.2 million (September 2016: 307.1 million), with the UK declining by
5.3% offset by growth in Romania of 6.6%. Transaction value of GBP4.7
billion (September 2016: GBP4.8 billion) was 2.0% lower than prior
period. Net revenue of GBP56.5 million was 5.0% up on last year driven
by increased service revenue from PayPoint One. The impact of declining
transactions on net revenue was mitigated by improvements to client mix,
renegotiation of symbol commissions, increased average top-up values and
increased eMoney volumes which have a higher margin per transaction.
At At At
30 September 30 September Change 31 March
2017 2016 % 2017
UK transactions (million) 256.4 270.7 (5.3) 579.8
Romania transactions
(million) 38.8 36.4 6.6 75.0
Total transactions
(million) 295.2 307.1 (3.9) 654.8
Transaction value (GBPm) 4,721.9 4,819.0 (2.0) 10,409.6
Revenue (GBPm) 97.6 95.4 2.3 203.4
Net revenue([17] #_ftn17)
(GBPm) 56.5 53.8 5.0 117.5
We distinguish between three business categories within our Retail
networks, namely bill and general, top-ups and retail services and each
is reviewed separately below.
Bill and general
Bill and general is our most established category and consists of
prepaid energy, bill payments and cash-out services.
6 months ended 6 months ended Year ended
30 September 30 September Change 31 March
2017 2016 % 2017
Transactions (million) 182.9 195.0 (6.2) 430.5
Transaction value (GBPm) 3,750.0 3,860.3 (2.9) 8,489.9
Revenue (GBPm) 36.8 37.8 (2.8) 82.5
Net revenue([18] #_ftn18)
(GBPm) 26.7 26.9 (1.0) 58.5
Bill and general transactions decreased to 182.9 million, down 6.2%
(September 2016: 4.0%) compared to the same period last year. As
anticipated, UK energy transactions declined 9.0% (September 2016: 7.1%)
due to a number of factors including the Big Six energy providers losing
market share, reduced levels of consumer energy debt, higher
temperatures and the continued uncertainty around the impact of smart
meters and the delays to their national roll out. However our MultiPay
service, which complements our existing business by enabling consumer
choice of digital channels, performed well doubling transactions to 6.7
million in the period. Continued strong growth in Romania resulted in a
market share([19] #_ftn19) improvement to 23.6% (September 2016: 23.1%)
and the addition of 14 new clients. Romania had good transaction volume
growth of 6.2% (September 2016: 11.7%) to 34.6 million transactions
(September 2016: 32.6 million).
Net revenue of GBP26.7 million decreased 1.0% (September 2016: increased
2.8%). The decline in transactions was mitigated by improvements to
client mix.
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.
6 months ended 6 months ended Year ended
30 September 30 September Change 31 March
2017 2016 % 2017
Transactions (million) 31.3 35.8 (12.4) 68.9
Transaction value (GBPm) 349.5 370.0 (5.5) 731.6
Revenue (GBPm) 32.6 31.9 2.4 63.6
Net revenue1 (GBPm) 10.3 9.6 7.6 19.1
As expected, top-up transactions reduced by 12.4% (September 2016:
14.1%) as a result of the continued decline in the UK mobile top-up
volumes which was partly offset by an increase in UK eMoney top-ups and
Romanian top-ups.
Net revenue increased 7.6% to GBP10.3 million, despite transactions
declining as a result of renegotiation of symbol commissions, increased
average top-up values and increased eMoney volumes which have a higher
margin per transaction.
Retail services
Retail services are services we sell to retailers in our networks.
Services include the provision of the PayPoint One platform (which
includes our Base, Core and Pro EPoS solutions), ATMs, card payment,
parcels, money transfer and SIMs.
6 months ended 6 months ended Year ended
30 September 30 September Change 31 March
2017 2016 % 2017
Transactions (million) 81.0 76.3 6.1 155.4
Transaction value (GBPm) 622.4 588.7 5.7 1,188.1
Revenue (GBPm) 28.2 25.7 9.9 57.3
Net revenue([20]
#_ftn20) (GBPm) 19.5 17.3 13.0 39.9
Overall retail services transaction volumes increased 6.1% (September
2016: 11.8%) over the same period last year. Parcels volumes increased
by 13.6% (September 2016: 5.7%), card payment transactions increased by
5.5% (September 2016: 14.7%) and ATM transactions by 3.4% (September
2016: 9.3%).
Net revenue growth of 13.0% (September 2016: 14.7%) was greater than
transaction growth, mainly as a result of strong growth from PayPoint
One service fees, standardised service fees for legacy terminals,
improved card payment margins and the change in VAT treatment in the
second half of the last financial year for card payments resulting in
benefit of GBP0.5 million. An associated increase in irrecoverable VAT
costs of GBP0.3 million is included in administrative costs. These
benefits were partially offset by the revised commercial terms with
Yodel for parcels with an impact of GBP1.4 million on a like for like
volume basis.
The number of sites in the UK with various retail services is as
follows:
6 months ended 6 months ended Year ended
30 September 30 September Change 31 March
Service 2017 2016 % 2017
PayPoint One 6,181(2) 1,142 >100 3,601
Collect+ 6,794(2) 5,960 14.0 6,167
Card payment 9,684 10,076 (3.9) 10,024
ATM 4,153 4,120 0.8 4,165
Mobile
The group disposed of its mobile payments business on 23 December 2016.
The results below show the trading of this business for the comparative
interim period.
6 months ended 6 months ended Year ended
30 September 30 September Decrease 31 March
2017 2016 % 2017
Transactions (million) - 30.1 (100.0) 40.3
Transaction value
(GBPm) - 100.6 (100.0) 136.0
Revenue (GBPm) - 6.3 (100.0) 8.5
Net revenue1 (GBPm) - 4.6 (100.0) 6.4
FINANCIAL REVIEW
Movements in revenue and net revenue have been addressed in the
operational review above.
Gross profit was down by 5.3% to GBP47.3 million (September 2016:
GBP50.0 million). Excluding the mobile payments business from the prior
period, Retail networks'([22] #_ftn22) gross profit was up 2.3%
reflecting gross profit margin of 48.5%, the same as September 2016.
Administrative expenses of GBP23.0 million were 8.3% higher than the
prior period of GBP21.2 million after excluding GBP4.5 million from the
comparative figure related to the mobile payments business. The higher
costs relate to PayPoint One roll out, IT investment costs in relation
to CRM, PayPoint One and data centre migration, people costs and
irrecoverable VAT. Irrecoverable VAT increased by GBP0.3 million due to
the change in the VAT treatment of card payments, however included in
revenue is a corresponding benefit of GBP0.5 million.
The changes in revenue and costs described above have led to a decrease
in our Retail networks operating margin([23] #_ftn23) to 43.1%
(September 2016: 46.5%).
Profit before tax was GBP24.4 million (September 2016: GBP24.7 million).
The conversion of Romania's results into sterling benefited profit
before tax by GBP0.1 million compared to the prior year.
The tax charge was GBP4.6 million (September 2016: GBP5.0 million)
resulting in an effective tax rate([24] #_ftn24) of 18.8% (March 2017:
20.2%). The reduction in the effective tax rate was primarily caused by
the removal of the losses incurred by the mobile payments business in
North America for which there was no tax relief.
Cash flow and liquidity
Operating cash flows, before movements in working capital, continue our
strong conversion of profit to cash. We generated GBP29.5 million in the
period, an increase of GBP1.5 million when compared to prior period.
Working capital absorbed GBP5.0 million in the period of which GBP2.0
million relates to a decrease in client funds. The balance mainly
relates to our Salesforce CRM implementation and data centre migration.
We expect full year working capital to be broadly flat excluding
movements for client funds.
Corporation tax payments of GBP5.0 million (September 2016: GBP3.1
million) are for payments on account. Included in the net GBP3.1 million
tax paid last period were tax refunds of GBP1.7 million for the 2014 and
2015 financial years. Capital expenditure of GBP8.1 million (September
2016: GBP9.1 million) relates to the purchase of PayPoint One terminals
and continued development of EPoS, MultiPay and Salesforce CRM.
Settlement of the 2014 DSB share incentive schemes absorbed GBP0.3
million (September 2016: GBP0.4 million). Equity dividends paid in the
period were GBP37.2 million (September 2016: GBP33.5 million).
The group had cash of GBP27.6 million at the period end (September 2016:
GBP49.6 million, March 2017: GBP53.1 million) and a GBP45.0 million
revolving term credit facility. Cash includes amounts held to settle
short-term client settlement obligations, which at the period end,
amounted to GBP18.1 million (September 2016: GBP15.4 million, March
2017: GBP20.2 million).
The balance sheet remains strong with group net assets of GBP56.6
million. This is a reduction of GBP16.5 million from 31 March 2017 and
reflects the reduction in cash balances as a result of the additional
dividend returning surplus cash to shareholders.
Risks and going concern
Risks to PayPoint's business, financial condition and operations have
not changed significantly since 31 March 2017 and are disclosed on pages
22 and 23. Taking account of these key risks, PayPoint's profitability,
cash balances and borrowing capacity which are adequate to meet the
foreseeable needs of the group, the interim financial statements have
been prepared on a going concern basis.
Dividend
An interim dividend of 15.3p per share (September 2016: 15.0p) and an
additional dividend of 12.2p (September 2016: 12.2p) per share have been
declared. Both dividends will be paid on 21 December 2017 to
shareholders on the register at 8 December 2017. Total dividends of
GBP37.2 million (54.5p per share) were paid during the period and
comprised of the final ordinary dividend for the year ended 31 March
2017 totalling GBP20.5 million (30.0p per share) and the final
additional dividend of GBP16.7 million (24.5p per share).
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 September 30 September 31 March
Note 2017 2016 2017
Continuing operations GBP000 GBP000 GBP000
Revenue 2 97,593 101,713 211,924
Cost of revenue 4 (50,244) (51,730) (106,008)
Gross profit 47,349 49,983 105,916
Administrative expenses (22,978) (25,769) (53,640)
Operating profit before
impairments and disposal 24,371 24,214 52,276
Profit on disposal of
businesses - - 15,660
Operating profit after
impairments and disposal 24,371 24,214 67,936
Share of profit of joint
venture - 443 1,193
Finance income 47 93 132
Finance costs (48) (19) (120)
Profit before tax 24,370 24,731 69,141
Tax 5 (4,570) (4,987) (9,508)
Profit for the period 19,800 19,744 59,633
Attributable to:
Equity holders of the
parent 19,800 19,743 59,622
Non-controlling interest - 1 11
19,800 19,744 59,633
Earnings per share
Basic 6 29.1p 29.0p 87.5p
Diluted 6 28.9p 28.7p 87.2p
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
Items that may subsequently be reclassified to the
consolidated income statement:
Exchange differences on translation of foreign
operations 314 1,324 675
Accumulated foreign exchange translation recycled
to the income statement (net of nil tax) - - 2,047
Other comprehensive profit for the period 314 1,324 2,722
Profit for the period 19,800 19,744 59,633
Total comprehensive income for the period 20,114 21,068 62,355
Attributable to:
Equity holders of the parent 20,114 21,067 62,344
Non-controlling interest - 1 11
20,114 21,068 62,355
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
Note GBP000 GBP000 GBP000
Non-current assets
Goodwill 8,406 8,507 8,236
Other intangible assets 13,769 9,778 11,867
Property, plant and equipment 28,868 25,048 27,168
Investment in joint venture - 2,072 -
Deferred tax assets 438 - 354
51,481 45,405 47,625
Current assets
Inventories 327 669 357
Trade and other receivables 119,358 100,393 98,771
Cash and cash equivalents 8 27,574 49,647 53,080
Assets held for sale - 5,166 -
147,259 155,875 152,208
Total assets 198,740 201,280 199,833
Current liabilities
Trade and other payables 137,407 117,211 121,603
Current tax liabilities 4,249 5,391 4,548
Liabilities directly associated with assets classified
as held for sale - 2,925 -
141,656 125,527 126,151
Non-current liabilities
Other Liabilities 471 - 537
Deferred tax liability - 64 -
471 64 537
Total liabilities 142,127 125,591 126,688
Net assets 56,613 75,689 73,145
Equity
Share capital 9 227 227 227
Share premium 2,907 2,633 2,633
Share-based payment reserve 2,305 3,174 4,404
Translation reserve (2) (1,714) (316)
Retained earnings 51,176 71,482 66,197
Total equity attributable to equity holders of the
parent company 56,613 75,802 73,145
Non-controlling interest - (113) -
Total equity 56,613 75,689 73,145
CONDENSED 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 company interest equity
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Audited equity
31 March 2016 227 2,365 3,956 (3,038) 84,467 87,977 (114) 87,863
Profit for the
period - - - - 19,743 19,743 1 19,744
Dividends paid - - - - (33,515) (33,515) - (33,515)
Exchange
differences on
translation of
foreign
operations - - - 1,324 - 1,324 - 1,324
Equity-settled
share-based
payment expense - - 547 - - 547 - 547
Vesting of share
scheme 10 - 268 (1,329) - 653 (408) - (408)
Deferred tax on
share-based
payments - - - - 134 134 - 134
Unaudited equity
30 September 2016 227 2,633 3,174 (1,714) 71,482 75,802 (113) 75,689
Profit for the
period - - - - 39,879 39,879 10 39,889
Dividends paid - - - - (45,028) (45,028) - (45,028)
Exchange
differences on
translation of
foreign
operations - - - (649) - (649) - (649)
Sale of Mobile - - 2,047 - 2,047 103 2,150
Equity-settled
share-based
payment expense - - 1,005 - (2) 1,003 - 1,003
Deferred tax on
share based
payments - - 225 - (134) 91 - 91
Audited equity
31 March 2017 227 2,633 4,404 (316) 66,197 73,145 - 73,145
Profit for the
period - - - - 19,800 19,800 - 19,800
Dividends paid - - - - (37,150) (37,150) - (37,150)
Exchange
differences on
translation of
foreign
operations - - - 314 - 314 - 314
Equity-settled
share-based
payment expense - - 848 - - 848 - 848
Vesting of share
scheme 10 - 274 (2,925) - 2,329 (322) - (322)
Deferred tax on
share-based
payments - - (22) - - (22) - (22)
Unaudited equity
30 September 2017 227 2,907 2,305 (2) 51,176 56,613 - 56,613
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
Note GBP000 GBP000 GBP000
Net cash flow from operating activities([25]
#_ftn25) 12 19,457 8,734 41,807
Investing activities
Investment income 47 93 132
Purchase of property, plant and equipment (4,136) (6,383) (12,116)
Intangible asset development (3,922) (2,741) (5,335)
Net proceeds from disposal of property, plant and
equipment 3 (11) -
Net proceeds on disposal of subsidiary - - 22,674
Net cash (used)/ generated in investing activities (8,008) (9,042) 5,355
Financing activities
Dividends paid (37,150) (33,515) (78,543)
Decrease in cash and cash equivalents (25,701) (33,823) (31,381)
Cash and cash equivalents at beginning of period 53,080 83,221 83,221
Effect of foreign exchange rate changes 195 1,963 1,240
Cash and cash equivalents at end of period 27,574 51,361 53,080
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
Reconciliation of items disclosed on the consolidated
statement of financial position:
Corporate cash 9,501 34,211 32,876
Client cash 18,073 15,436 20,204
Cash and cash equivalents on the statement of financial
position 27,574 49,647 53,080
Cash and cash equivalents included in assets held
for sale - 1,714 -
Cash and cash equivalents on the statement of cash
flows 27,574 51,361 53,080
NOTES TO Interim FINANCIAL STATEMENTS
1. Accounting policies
Reporting entity
PayPoint plc ('the company') is a company domiciled
in the United Kingdom. These consolidated interim
financial statements ('interim financial statements')
as at and for the six months ended 30 September 2017
comprise the company and its subsidiaries (together
referred to as the 'group'). The group is primarily
involved in providing innovative and time-saving technology
to our retailers and is a service provider for consumer
transactions (see note 3).
Basis of preparation
These interim financial statements have been prepared in accordance with
IAS 34 Interim Financial Reporting, and should be read in conjunction
with the group's last annual consolidated financial statements as at and
for the year ended 31 March 2017 ('last annual financial statements').
They do not include all of the information required for a complete set
of IFRS financial statements. However, selected explanatory notes are
included to explain events and transactions that are significant to an
understanding of the changes in the group's financial position and
performance since the last annual financial statements. The interim
financial statements contained in this report are unaudited, but have
been formally reviewed by the auditor and their report to the company is
set out on page 24.
The information shown for the year ended 31 March 2017, which is
prepared under International Financial Reporting Standards (IFRS), does
not constitute statutory accounts within the meaning of section 434 of
the Companies Act 2006. The report of the auditor on the statutory
accounts for the year ended 31 March 2017, prepared under IFRS, was
unqualified, did not draw attention to any matters by way of emphasis
and did not contain a statement under sections 498 (2) or (3) of the
Companies Act 2006 and has been filed with the Registrar of Companies.
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. The group's
liquidity and going concern review can be found in the Finance review on
page 10.
Impact of IFRS 15
IFRS 15 is a new standard and is effective for accounting periods
commencing on or after 1 January 2018. It is based on a five step model
framework, which replaces all existing revenue standards. The principles
of the standard are that revenue is recognised as the group fulfils its
performance obligations. In the 2017 annual report the initial
assessment identified SIMs revenue recognition as potential change. The
impact assessment of IFRS 15 has progressed, although is not fully
complete. The key identified areas of change are now:
1. Deferral of setup and development revenue
Current revenue recognition for setup and development revenue is
dependent on contracted terms resulting in certain fees being recognised
as contractually earned. Under IFRS 15, fees earned in advance of the
provided services will initially be deferred and subsequently recognised
as the performance obligations are satisfied.
1. Deferral of costs associated to setting up clients and retailers on
PayPoint's network
Costs for setting up client and retailers, to the extent they were not
capitalised under other accounting policies, are expensed as incurred.
The setup costs directly attributable to contracts with clients and
retailers incurred prior to providing the services (satisfying the
performance obligations) will be capitalised and recognised as an
expense as the performance obligation is satisfied.
1. Contracts with tiered pricing structures
Certain contracts contain tiered pricing structures where either the
transaction fees vary over the term of the contract or vary after
achieving volume thresholds. Under the current accounting policy, the
transaction fees are recognised as the transaction is processed at the
fee attributable to those transactions. Under IFRS 15, an estimate will
be made of the average transaction fee over the life of the contract and
revenue recognised according to that average transaction fee. The rate
will be subsequently revised for updated estimates at each reporting
period.
The impact of IFRS 15 on implementation may change as a result of
changes to existing contract terms or new contracts entered into before
the standard's implementation. If the standard had been adopted in the
31 March 2017 financial year, it is estimated deferred costs would
increase gross assets by GBP2.0 million and deferred income would
increase total liabilities by GBP1.3 million. The overall impact on
earnings for the 2017 financial year would not be significant, as
revenue which would have been deferred by an estimated GBP0.8m is
broadly similar to deferred costs of GBP0.9m.
1. 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 which have remained consistent with prior
periods. These measures are included in these interim 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 (non-IFRS measure)
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 charge.
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:
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
Service revenue 76,867 83,005 173,880
Sale of goods 20,131 18,708 37,695
Royalties 595 - 349
Revenue 97,593 101,713 211,924
less:
Retail agent commissions (23,912) (25,801) (53,645)
Cost of mobile top-ups and SIM cards
as principal (17,174) (15,779) (32,296)
Card scheme sponsors' charges([26]
#_ftn26) - (1,737) (2,130)
Net revenue 56,507 58,396 123,853
Reconciliation from the group income statement to Retail networks
PayByPhone, our mobile payment business, which was sold on 23 December
2016, and Drop and Collect, before our renegotiation with Yodel which
completed on 16 December 2016 are included in last year's reported
numbers making this year's interim performance not directly comparable.
In order to assist users, the reconciliation from the reported income
statement to Retail networks income statement has been presented. This
will aid with the users' understanding of the ongoing results for the
period. The mobile payments business did not meet the definition of a
discontinued operation set out in IFRS 5 Non-current assets held for
sale and discontinued operations as it did not constitute a separate
major line of business.
Group Less Less Retail
For the period ended 30 September result Mobile Collect+ networks
2016 GBP000 GBP000 GBP000 GBP000
Revenue 101,713 (6,346) - 95,367
Cost of revenue (51,730) 2,631 - (49,099)
Gross profit 49,983 (3,715) - 46,268
Administrative expenses (25,769) 4,543 - (21,226)
Operating profit 24,214 828 - 25,042
Share of joint venture result 443 - (443) -
Investment income 93 - - 93
Finance costs (19) - - (19)
Profit before tax 24,731 828 (443) 25,116
Tax (4,987) - - (4,987)
Profit for the period 19,744 828 (443) 20,129
Effective tax rate (non-IFRS measure)
Effective tax rate is the tax cost as a percentage of net profit before
tax excluding significant items including profit or loss on business
disposals and impairments. Effective tax better reflects the underlying
tax rate because it excludes the effect of significant items.
1. Segmental reporting
PayPoint provides innovative and time-saving technology to our retailers
and 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.
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
Revenue
UK 73,447 75,974 161,664
Ireland 2,151 2,697 5,110
Romania 21,996 19,155 39,765
North America([27] #_ftn27) - 3,277 4,459
France(1) - 610 926
Total 97,594 101,713 211,924
Non-current assets (excluding deferred tax)
UK 41,631 36,107 38,164
Romania 9,412 9,298 9,107
Total 51,043 45,405 47,271
1. Cost of revenue
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
Cost of revenue
Commission payable to retail agents 23,912 25,801 53,645
Cost of mobile top-ups and SIM cards as principal 17,174 15,779 32,296
Card scheme sponsors' charges and call centre charges([28]
#_ftn28) - 1,737 2,130
Cost of revenue deducted for net revenue 41,086 43,317 88,071
Depreciation and amortisation 4,606 3,265 7,473
Other 4,552 5,148 10,464
Other costs of revenue 9,158 8,413 17,937
Total cost of revenue 50,244 51,730 106,008
1. Tax on profit of ordinary activities
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
Current tax 4,676 4,855 9,704
Deferred tax (106) 132 (196)
Total 4,570 4,987 9,508
Tax for the six month period was charged on profits at an effective tax
rate([29] #_ftn29) of 18.8% (September 2016: 20.2%, March 2017: 20.4%).
The higher effective tax rate in the prior period was primarily due to
the losses in the mobile payments business incurring no tax relief.
1. Earnings per share
The basic and diluted earnings per share are calculated on the following
profit and number of shares.
Earnings for the calculating of earnings per shares is the net profit
attributable to equity holders of the parent.
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
Profit for group basic and diluted earnings per share
is the net profit attributable to equity holders of
the parent 19,800 19,743 59,622
Adjustments:
Loss/(profit) related to Mobile - 828 (18,508)
Non-controlling interest - 1 11
(Profit)/loss related to Collect+ - (443) 2,650
Profit for the purpose of basic and diluted earnings
per share (Retail networks) 19,800 20,129 43,775
Number of Number of Number of
Shares shares shares
Weighted average number of ordinary shares in issue
(for basic earnings per share) 68,156,122 68,110,140 68,118,438
Potential dilutive ordinary shares:
Long-term incentive plan 235,449 517,496 190,484
Deferred annual bonus scheme 37,107
Deferred share bonus - 82,643 59,725
SIP and other 3,629 - 373
Diluted basis 68,432,307 68,710,279 68,369,020
1. Dividends
The interim dividend of 15.3p (September 2016: 15.0p) and additional
dividend of 12.2p per share declared on 30 November 2017 have not been
recorded as a liability at 30 September 2017. Total dividends of GBP37.2
million (54.5p per share) were paid during the period and comprised of
the final ordinary dividend for the year ended 31 March 2017 totalling
GBP20.5 million (30.0p per share) and the final additional dividend of
GBP16.7 million (24.5p per share).
1. 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. At 30
September 2017, the group's cash was GBP27.6 million (31 March 2017:
GBP53.1 million).
Included within cash and cash equivalents is GBP18.1 million (September
2016: GBP15.4 million, March 2017: GBP20.2 million) relating to monies
collected on behalf of PayPoint clients where PayPoint has title to the
funds (client cash). An equivalent balance is included within trade
payables.
Funds which are held in trust for clients in the UK and Ireland are not
included within cash and cash equivalents.
1. Share capital
Share capital as at 30 September 2017 was GBP227,235. During the period
the group issued 37,016 (September 2016: 36,047) shares for the 2014 DSB
and SIP schemes.
1. Share-based payments
The total charge of GBP2.9 million (September 2016: GBP1.3 million)
recognised directly to equity for schemes which have lapsed or vested
was transferred from the share-based payments reserve to retained
earnings during the period.
On 26 July 2017, 237,070 shares under the LTIP scheme were granted with
50% of the vesting based on total shareholder return (TSR) and 50% on
earnings per share (EPS) growth. The performance condition for the TSR
element is the same as the vesting period. The performance period for
the EPS element is for the three financial years up to 31 March 2020.
Other share base payments include 11,620 restricted shares which were
issued to eligible employees which do not contain any performance
criteria and will vest over three years on 25 July 2020 and 26,542
shares issued under the DABS scheme with vesting over three years to 31
May 2020.
1. Fair value of financial assets and liabilities
The directors consider there to be no material difference between the
book value and the fair value of the group's financial instruments at 30
September 2017, 30 September 2016 and 31 March 2017.
1. Notes to the statement of cash flows
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2017 2016 2017
GBP000 GBP000 GBP000
Profit before tax 24,370 24,731 69,141
Adjustments for:
Depreciation on property, plant and
equipment 3,028 2,547 5,302
Amortisation of intangible assets 1,579 718 2,171
Share of profit of joint venture - (443) (1,193)
Research and development credit - (171)
Profit on sale of investments - - (15,660)
Loss on disposal of fixed assets - 409 414
Net interest income charge/(income) 1 (74) (12)
Cash element of share-based payment (322) (408) (410)
Share-based payment charge 848 547 1,552
Operating cash flows before
movements in working capital 29,504 28,027 61,134
Decrease/(increase) in inventories 38 (108) 196
(Increase)/decrease in receivables (520) 2,851 (338)
(Decrease)/increase in payables
- client cash (2,004) (15,556) (11,641)
- other payables (2,535) (3,343) 1,219
Cash generated by operations 24,483 11,871 50,570
Corporation tax paid (4,978) (3,118) (8,643)
Interest and bank charges paid (48) (19) (120)
Net cash from operating activities 19,457 8,734 41,807
Items in the course of collection and settlement payables are included
in this reconciliation on a net basis through the client cash line. The
directors have included these items on a net basis to best reflect the
operating cash flows of the business.
1. Post balance sheet events
On 12 October 2017 the group acquired the entire share capital of
Payzone SA in Romania for an initial consideration of GBP1.4 million
paid in cash plus GBP0.4 million in deferred consideration contingent on
the collection of specific debts over the two years following the
acquisition. The initial accounting of the business combination is yet
to be finalised and therefore allocation of the purchase price has not
been disclosed. Based on the management accounts, Payzone SA had gross
assets of GBP9.1 million and profit before tax of GBP0.2 million for the
six months ended 30 September 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 similar to those disclosed in the 2017 annual report.
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.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
1. the set of interim financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting;
2. the half yearly financial report includes a fair review of the
information required by DTR 4.2.7R (indication of important events during
the first half and description of principal risks and uncertainties for
the remaining half of the year); and
3. the half yearly financial report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the board.
Dominic Taylor Rachel Kentleton
Chief Executive Finance Director
INDEPENT REVIEW REPORT TO PAYPOINT PLC
Conclusion
We have been engaged by the company to review the condensed set of
financial statements in the half-yearly financial report for the six
months ended 30 September 2017 which comprises the condensed
consolidated income statement, the condensed consolidated statement of
comprehensive income, the condensed consolidated statement of financial
position, the condensed consolidated statement of changes in equity, the
condensed consolidated cash flow statement and the related explanatory
notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the
half-yearly financial report for the six months ended 30 September 2017
is not prepared, in all material respects, in accordance with IAS 34
Interim Financial Reporting as adopted by the EU and the Disclosure
Guidance and Transparency Rules ("the DTR") of the UK's Financial
Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International Standard on
Review Engagements (UK and Ireland) 2410 Review of Interim Financial
Information Performed by the Independent Auditor of the Entity issued by
the Auditing Practices Board for use in the UK. A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. We read the other information
contained in the half-yearly financial report and consider whether it
contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become
aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing
the half-yearly financial report in accordance with the DTR of the UK
FCA.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with International Financial Reporting Standards
as adopted by the EU. The directors are responsible for preparing the
condensed set of financial statements included in the half-yearly
financial report in accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the
condensed set of financial statements in the half-yearly financial
report based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms
of our engagement to assist the company in meeting the requirements of
the DTR of the UK FCA. Our review has been undertaken so that we might
state to the company those matters we are required to state to it in
this report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than
the company for our review work, for this report, or for the conclusions
we have reached.
Michael Harper
for and on behalf of KPMG LLP
Chartered Accountants
KPMG LLP
15 Canada Square
Canary Wharf
London
E14 5GL
November 2017
DIRECTORS & KEY CONTACTS
Directors Dominic Taylor (Chief Executive)
Rachel Kentleton (Finance Director)
Tim Watkin-Rees (Business Development Director)
Gillian Barr*
Giles Kerr*
R Sharma*
Nick Wiles* (Chairman)
* non-executive directors
Registered office 1 The Boulevard
Shire Park
Welwyn Garden City
Hertfordshire
AL7 1EL
United Kingdom
Registered in England and Wales number 3581541
Registrars Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
United Kingdom
Press and investor relations Finsbury
enquiries Tenter House
45 Moorfields
London
EC2Y 9AE
United Kingdom
Auditors KPMG LLP
15 Canada Square
Canary Wharf
London
E14 5GL
November 2017
ABOUT PAYPOINT
In thousands of retail locations, at home and on the move, we make life
more convenient for everyone.
For retailers, we offer innovative and time-saving technology that
empowers convenience retailers in the UK and Romania to achieve higher
footfall and increased spend so they can grow their businesses
profitably. Our innovative retail services platform, PayPoint One, is
now live in over 6,800 stores in the UK and offers everything a modern
convenience store needs, from parcels and contactless card payments to
EPoS and bill payment services. Our technology helps retailers to serve
customers quickly, improve business efficiency and stay connected to
their stores from anywhere.
We help millions of people to control their household finances, make
essential payments and access in-store services, like parcel collections
and drop-offs. Our UK network of 29,000 stores is bigger than all banks,
supermarkets and Post Offices together, putting us at the heart of
communities nationwide.
For clients of all sizes we provide cutting-edge payments technologies
without the need for capital investment. Our seamlessly integrated
multichannel payments solution, MultiPay, is a one-stop shop for
customer payments. PayPoint helps over 500 consumer service providers to
save time and money while making it easier for their customers to pay -
via any channel and on any device.
([1] #_ftnref1) Net revenue is an alternative performance measure. Refer
to note 2 to the interim financial statements 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, Irish and Romanian
retail businesses. A reconciliation, for each measure, from the
statutory results to Retail networks is included in note 1 to the
interim financial statements.
([4] #_ftnref4) Operating cash flows before movements in working capital
from note 12 to the interim financial statements.
([5] #_ftnref5) Costs include administrative expenses of GBP23.0 million
and other costs of revenue of GBP9.1 million (note 4).
([6] #_ftnref6) William Reed Grocery Retail Structure 2017 and PayPoint.
([7] #_ftnref7) Retail outlets include convenience, CTNs, supermarkets,
forecourts and specialist off licences.
([8] #_ftnref8) Retail networks consists of our UK, Irish and Romanian
retail businesses. A reconciliation, for each measure, from the
statutory results to Retail networks is included in note 1 to the
interim financial statements.
([9] #_ftnref9) Costs include administrative expenses of GBP23.0 million
and other costs of revenue of GBP9.1 million (note 4).
([10] #_ftnref10) Effective tax rate is the tax cost as a percentage
of net profit before tax excluding profit on disposal of businesses.
There was no profit on disposal of businesses in the current year.
([11] #_ftnref11)
https://www.igd.com/Portals/0/Downloads/Infographics/UK-food-and-grocery.pdf.
([12] #_ftnref12) As at 27 November 2017.
([13] #_ftnref13) PayPoint One feedback from an in-house survey from 98
respondents responding agree or above.
([14] #_ftnref14) IMRG MetaPack UK Delivery Index Report September 2017.
([15] #_ftnref15) Money Saving Expert, January 2017.
([16] #_ftnref16) 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
interim financial statements.
([17] #_ftnref17) Net revenue is an alternative performance measure.
Refer to note 2 to the interim financial statements for a reconciliation
to revenue.
([18] #_ftnref18) Net revenue is an alternative performance measure.
Refer to note 2 to the interim financial statements for a reconciliation
to revenue.
([19] #_ftnref19) Market share in Romanian bill payments is our share of
the bill payments expressed as a percentage of the total bills issued by
our clients.
([20] #_ftnref20) Net revenue is an alternative performance measure. Refer to note 2 to the interim financial statements for a reconciliation to revenue. ([21] #_ftnref21) On 27(th) November 2017 PayPoint One was in 6,898 sites and Collect+ was in 7,211 sites. ([22] #_ftnref22) Retail networks consists of our UK, Ireland and Romanian retail businesses. A reconciliation, for each measure, from the reported results to Retail networks is included in note 2 to the interim financial statements. ([23] #_ftnref23) Operating profit margin is operating profit before impairments and disposal as a percentage of net revenue. ([24] #_ftnref24) Effective tax rate is the tax cost as a percentage of net profit before tax excluding profit on disposal of businesses. There was no profit on disposal of businesses in the current year. ([25] #_ftnref25) Prior period and 31 March 2017 figures have been restated for the reclassification of the cash settled share based payment from financing activities to operating activities. ([26] #_ftnref26) These costs related to PayByPhone, our mobile payment business, which was sold on 23 December 2016. ([27] #_ftnref27) These geographical areas related to PayByPhone, our mobile payment business, which was sold on 23 December 2016. ([28] #_ftnref28) These costs related to PayByPhone, our mobile payment business, which was sold on 23 December 2016. ([29] #_ftnref29) Effective tax rate is the tax cost as a percentage of net profit before tax excluding profit on disposal of businesses. There was no profit on disposal of businesses in the current year. 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
November 30, 2017 02:00 ET (07:00 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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