Half yearly financial report for the 26 weeks e...
PayPoint plc
Half yearly financial report
for the 26 weeks ended 28 September 2008
HIGHLIGHTS
26 weeks 27 weeks
ended ended
28 30
September September Like-for-like[3]
2008 2007 Increase % increase %
£million £million
Revenue 109.3 103.9 5 9
Net revenue[1],[2] 35.6 34.2 4 8
Operating profit 14.2 13.9 2 11
Profit before tax 15.3 14.5 6 15
Diluted earnings per 16.0p 14.7p 9 18
share
Interim dividend 6.0p 5.3p 13
* PayPoint's UK terminal and ATM business had like-for-like3 net
revenues up 6% and operating costs down 3%
* UK terminal network expanded by nearly 900 sites to 20,772 - on
track to meet target of 1,500 additional terminals for the year
* ATM network has increased by 7% and internet merchants have grown
by 6% since March 2008
* New website and restructured marketing is generating increased
leads for our internet business.
* Romanian bill payment service launched in August with 1,200
branded PayPoint sites
Operating profit growth in the UK terminal and ATM business was up
22% on a like-for-like3 basis, including a slight decline in mobile
transactions and in ATM transactions per terminal, suffered in common
with other providers. The terminal network in the UK has been
expanded to service transaction growth and mitigate the decline in
mobile volumes and the ATM estate compared to last year.
Our internet companies have been integrated to operate successfully
as a single business, PayPoint.net, and its new website and marketing
programmes have driven more leads, which will increase the number of
merchants using our service. This, combined with the introduction of
PayCash, which permits the payment in cash at PayPoint convenience
stores for consumer purchases on line, positions our internet
business for growth.
In Romania, we have launched bill payment alongside the existing
mobile top-up business and transaction volumes are growing as
expected with the four launch clients and with a further four to
follow before the year end. We also have strong interest from other
substantial bill issuers with whom we expect to sign contracts. We
continue to invest in the roll-out of terminals in Romania at a rate
faster than we anticipated last year and this, together with the
delayed transfer of the transaction processing to the UK and the
launch of bill payment, has held back the results. We expect the
business to be profitable next year.
David Newlands, Chairman, said "PayPoint has delivered first half
results ahead of market expectations. There are new products and
prospects in the UK and elsewhere, which provide ample opportunity
for management to continue to deliver growth."
The condensed financial statements cover the 26 week period from 31
March 2008 to 28 September 2008, the last Sunday in the month,
compared to a 27 week period ended 30 September 2007.
[1] Net revenue is revenue less commissions paid to retail agents,
acquiring bank charges and the cost of mobile top-ups where PayPoint
is the principal.
[2] Net revenue and operating margin are measures which the
directors believe assist with a better understanding of the
underlying performance of the group. The reconciliation of net
revenue to statutory amounts can be found in note 2
[3] The like-for-like basis adjusts the comparative period to 26
weeks
Management report
The management report has been prepared solely to provide additional
information to shareholders as a body to assess PayPoint's strategies
and their potential to succeed, and it should not be relied upon for
any other purpose. It contains forward looking statements that have
been made by the directors in good faith based on the information
available at the time of approval of the half yearly financial report
and such statements should be treated with caution due to the
inherent uncertainties, including both economic and business risk
factors, underlying any such forecast.
We aim to continue increasing economic value for shareholders by
expanding:
* UK cash payments for bills, general payments, mobile top-ups,
ticketing, money transfer and ATM cash withdrawals building on
the strength of our brand;
* e-commerce payments and services through PayPoint.net and new
PayPoint products across the retail and internet businesses; and
* international growth in selected developing countries for cash
payment networks and as an e-commerce payment service provider.
Our terminal estate has grown by over 1,600 terminals (UK and
International) since the end of the last financial year. Transaction
volumes were up 5% and profit before tax up 6% although the period
contains one week less of trading compared to last year. Profit
before tax increased 15% excluding the extra week from the prior
period's results. Bill and general payments have grown strongly,
particularly in the UK, where prepaid gas and electric domestic price
rises have helped to increase transaction volumes. The mobile sector
overall in the UK and Ireland has seen a decrease in transaction
volumes, as consumers economise and networks offer customers more
airtime for their money. This decline has been mitigated in the UK by
the expansion of the network. In Romania, Pay Store's mobile top-ups
continued to grow and our bill payment service was launched in
September with four clients. PayPoint.net has traded as planned with
transaction volumes up 46% on last year.
Operational review
In the first 26 weeks of the financial year, PayPoint processed 249
million transactions, with a value of £4.0 billion (2007: 236
million transactions with a value of £3.5 billion in 27 weeks), an
increase of 5% in transactions and 15% in value. On a like-for-like1
basis transaction volumes were up 10%. Commissions paid to retail
agents were reduced to £41.2 million (2007: £41.5 million), a result
of lower mobile top-ups.
Analysis of transactions
26 weeks 27 weeks 53 weeks
ended ended Increase/ Like for ended
28 30 (decrease) like [1] 30 March
September September increase 2008
2008 2007 % % millions
millions millions
Bill and general 152 141 8 13 311
payments[2]
Mobile top-ups 74 77 (4) (1) 151
ATMs 7 7 - 1 15
Internet payments 16 11 46 51 26
Total[3] 249 236 5 10 503
[1] The like-for-like basis adjusts the comparative period to 26
weeks
[2] Includes debit/credit transactions
[3] Included within the total is 9 million of international bill
and general payments and mobile top-ups (2007: 9 million).
.
Bill & general payments
PayPoint has continued to perform well in this sector with an 8%
increase in transaction volumes.
On a like-for-like[1] basis volumes were up 13%, driven by an
increase of 16% in prepaid energy volumes and growth with local
authority and water bill payments.
This increase resulted from network growth, new customer payment
options and increases in domestic energy prices during the year,
partially offset by an increase in average transaction values.
Mobile top-ups
The mobile sector overall in the UK and Ireland has seen a decrease
in transaction volumes as consumers reduce their spending and
networks offer customers more airtime for their money.
Our UK transaction volumes were down 1% on a like-for-like basis[1].
This decrease is lower than the market as we have installed nearly
900 new UK sites since the last half year. Our share of retail cash
top-up transactions has increased to c.32% whilst our share of the
overall top-up sector has remained constant as the use of ATMs for
mobile top-ups has increased.
Pay Store mobile volumes were up 8%. In Ireland, volumes have fallen
slightly as mobile operators are offering better rates to consumers
and have been promoting internet top-ups.
ATMs
We have increased our net installations to 25 per month (2007: 17 per
month) by reducing churn.
The focus on sales continues with the strengthening of the sales team
from October to increase the number of new ATM sign-ups.
The number of transactions processed by self-fill Independent ATM
Deployers (IAD's) was down by 2% on the same period last year. We
have not seen a decrease in the number of transactions processed due
to our continual expansion in site numbers, however the average
transactions per site in the first half of the year have decreased to
568 per month (2007: 600), a reduction broadly in line with the IAD
self-fill market, which may reflect more difficult economic times for
consumers suppressing the demand for cash.
PayPoint.net - internet payments
PayPoint.net traded profitably and has added a net 303 merchants in
the first half of the year. Transaction volumes were up 46% and net
revenues have increased by 12% on last year.
Our PayCash product, which allows internet merchants' customers to
pay for goods with cash at a PayPoint retailer, has been launched.
Initially this is being offered to PayPoint.net merchants, but will
be offered more widely next year.
PayPoint Romania
We have continued to make good progress in Romania. We have now
completed the transfer of transaction processing to our operations
centre in the UK, at the same time allowing us to process mobile
top-ups for Cosmote, the third largest mobile operator in Romania.
We have appointed a new Managing Director and restructured the sales
team, increasing the sales force by 30% compared to the same time
last year.
We have launched bill payment with four clients, including the
national telecoms provider Romtelecom and Distrigaz, one of the two
leading gas suppliers on our newly developed international platform.
Bill payment transaction volumes are growing. We have rolled out
1,200 bill payment enabled terminals and plan to install at least a
further 800 terminals this financial year. A delay in transferring
processing to the UK adversely impacted results as bill payment and
Cosmote top-ups were delayed. Both these issues have been resolved.
We expect the business to be profitable next year.
[1.] The like-for-like basis adjusts the comparative period to 26
weeks
Network growth
Terminal sites have increased to 25,515 (30 March 2008: 23,895) an
increase of 1,620.
The retail network in the UK and Ireland has grown to 20,772 (30
March 2008: 19,878) an increase of 4% on last year end.
A total of 3,136 sites (30 March 2008: 2,833) already equipped with
our terminals also have electronic point of sale (EPoS) connections,
to allow mobile top-ups transactions over the retailers' own till
systems.
Analysis of sites At At At
28 September 30 September Increase 30 March
2008 2007 % 2008
PP terminal only 17,636 16,492 7 17,045
PP terminal and EPoS 3,136 2,525 24 2,833
PP terminal sites 20,772 19,017 9 19,878
Pay Store terminal sites 4,743 3,607 31 4,017
Total terminal sites 25,515 22,624 13 23,895
ATM sites 2,165 1,957 11 2,016
Internet merchants 5,111 4,545 12 4,808
EPoS only sites in the UK and sites in Romania that sell only scratch
cards are not included in the table above.
New services
PayPoint continues to introduce new services to stimulate further
transaction growth in both retail and
e-commerce payments and services. For example, we are benefiting from
the increases in transaction volumes in electronic money from
services such as prepay debit cards, saving schemes, internet
currencies, stored value cards and money transfers. We have continued
to attract new clients directly and through partners including the
new PayPal prepay debit card. We are established as the premier
convenience loading channel for cash on to both prepay and stored
value cards.
Financial review
Revenue for the first 26 weeks was £109.3 million (2007:27 weeks
£103.9 million), up 5% driven by the increase in transaction volumes
in particular from mobile top-ups where PayPoint acts as
principal[1]. On a like-for-like basis revenue was up 9%. Cost of
sales was £80.9 million (2007: £76.6 million), an increase of 6%,
which is slightly greater than the rate of increase in revenue
because of the increase in mobile top-ups where PayPoint is
principal. Agents' commission of £41.2 million (2007: £41.5 million)
is lower than last year due to the extra week in the comparative
period and a reduction in commission of 1% by Vodafone. Depreciation
and amortisation have increased to £3.2 million (2007: £2.6 million)
up 20% as a result of our continued terminal roll out in the UK and
Romania.
Net revenue[2] of £35.6 million (2007: £34.2 million) was up 4%,
driven primarily by volume growth.
Gross profit improved to £28.4 million (2007: £27.3 million), 4%
ahead of the same period last year, with a gross margin of 26% (2007:
26%). Gross margin, excluding the cost of Irish and Romanian
mobile-top-ups1 improved to 36% (2007: 35%).
[1] 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 sales and the corresponding cost in cost of sales
[2] Net revenue is revenue less commissions paid to retail agents,
acquiring bank charges and less the cost of mobile top-ups where
PayPoint is the principal
Operating costs (administrative expenses) have risen to £14.2 million
(2007: £13.4 million), an increase of 7%. Operating costs in the UK
terminal and ATM business were down 3% on last year, whilst costs in
PayPoint.net and Pay Store have increased.
Operating profit was £14.2 million (2007: £13.9 million), up 2%,
although the operating margin[1] decreased slightly to 40% (2007:
41%), mainly as a result of the loss in Romania and the extra week in
the comparative period last year. On a like-for-like basis[2]
operating profit was up 11%.
Profit before tax was £15.3 million (2007: £14.5 million), up 6% on
last year. On a like-for-like basis[2], profit before tax was up 15%.
The tax charge was £4.5 million (2007: £4.4 million) and the
effective tax rate was 29% (2007: 30%) reflecting the reduction in
the UK corporation tax rate and unrelieved losses in Romania.
Operating cash flow was £13.3 million with no change in client
cash[3] (2007: £10.9 million including an inflow of £0.5 million in
respect of client cash), reflecting strong conversion of profit to
cash. Capital expenditure of £2.1 million (2007: £1.9 million)
reflected spend on new terminals in the UK and Romania, ATMs, and the
international processing platform.
Net interest received was £1.1 million (2007: £0.6 million) and
equity dividends paid were £7.0 million
(2007: £6.2 million).
Related party transactions
Related party transactions are disclosed in note 6.
Risks
Risks to PayPoint's business, financial condition or operations are
disclosed on page 16.
Dividend
The board have declared an interim dividend payable on 22 December of
6.0p per share (2007: 5.3p) to shareholders on the register at 5
December 2008.
Economic climate
The company's bill and general payments sector is robust in a
recession, where the consumers' discretion in expenditure is limited
for essential services. The internet payment market continues to
grow substantially, although now forecast at lower rates. Modest
adverse impact on mobile top-ups in developed economies and in ATM
cash withdrawal rates is evident.
PayPoint's exposure to agent debt is limited as credit granted to
retailers is restricted by daily direct debiting for all UK and Irish
transactions other than EPoS mobile top-ups (which are collected
weekly) although there is some concentration of risk in multiple
retailers. Most of the group's clients in the UK other than mobile
operators bear the cost of agent bad debt. In Pay Store, the risk of
bad debt lies with the company. In PayPoint.net, exposure is limited
to receivables from merchants for fees, except in the case of bureau
internet merchants, where PayPoint.net retains credit risk on
merchant default for charge backs but this is mitigated by cash
retention.
The company has strong operating cash flow, net cash and a revolving
credit agreement for £35 million with a three year term`.
[1] Operating margin is operating profit as a percentage of net
revenue
[2] The like-for-like basis adjusts the comparative period to 26
weeks
[3] Client cash is held on behalf of clients where PayPoint has
title to the funds. An equivalent balance is included within trade
payables.
Outlook
We expect further growth in transaction volumes and revenue in the UK
from increases in our market share, and the growth in our network. In
Romania, we have already installed 1,200 bill enabled terminals and
we anticipate exceeding our plan of 1,500 by at least 500 additional
terminals. We expect Pay Store to trade profitably next financial
year. In PayPoint.net, which increased its revenue and profits,
revenue growth should accelerate in the second half of the year,
following the introduction of the new website, unified new branding
and the launch of PayCash.
Trading since 28 September has been in line with the company's
expectations and the directors are confident that the company will
continue to deliver growth.
David Newlands Dominic Taylor
Chairman Chief Executive
20 November 2008
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
26 weeks 27 weeks 53 weeks ended
ended ended 30 March
28 September 30 September 2008
2008 2007 £000
Continuing operations Note £000 £000
Revenue 2 109,341 103,950 212,145
Cost of sales 2 (80,931) (76,645) (155,591)
Gross profit 28,410 27,305 56,554
Administrative expenses (14,244) (13,359) (27,354)
Operating profit 14,166 13,946 29,200
Investment income 1,142 586 1,262
Finance costs (4) (43) (58)
Profit before tax 15,304 14,489 30,404
Tax 3 (4,475) (4,353) (9,424)
Profit for the period 10,829 10,136 20,980
Earnings per share
Basic 5 16.1p 15.0p 31.1p
Diluted 5 16.0p 14.7p 30.8p
CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME & EXPENSE
Unaudited Unaudited Audited
26 weeks 27 weeks 53 weeks
ended ended ended
28 September 30 September 30 March
2008 2007 2008
Note £000 £000 £000
Exchange differences on
translation of foreign 9 (19) 34 318
operations
Net (loss) / income (19) 34 318
recognised
directly in equity
Profit for the period 10,829 10,136 20,980
Total recognised income and
expenses for the period 10,810 10,170 21,298
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
28 September 30 September 30 March
2008 2007 2008
Note £000 £000 £000
Non-current assets
Goodwill 27,428 26,256 27,428
Other intangible assets 2,264 3,222 2,742
Property, plant and equipment 12,235 13,428 13,114
Deferred tax asset 1,530 1,552 1,571
Investment 375 - 375
43,832 44,458 45,230
Current assets
Inventories 1,865 1,088 1,250
Trade and other receivables 24,257 25,431 28,285
Cash and cash equivalents 7 28,224 15,981 27,727
54,346 42,500 57,262
Total assets 98,178 86,958 102,492
Current liabilities
Trade and other payables 39,999 40,125 45,275
Current tax liabilities 6,536 4,858 7,226
Obligations under finance 28 156 70
leases
46,563 45,139 52,571
Non-current liabilities
Other liabilities 317 274 334
317 274 334
Total liabilities 46,880 45,413 52,905
Net assets 51,298 41,545 49,587
Equity
Share capital 8 226 226 226
Investment in own shares 8 (926) (935) (935)
Share based payment reserve 8 1,996 1,789 2,281
Translation reserve 8 299 34 318
Retained earnings 8 49,703 40,431 47,697
Total equity 9 51,298 41,545 49,587
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
26 weeks 27 weeks 53 weeks
ended ended ended
Note 28 September 30 September 30 March
2008 2007 2008
£000 £000
£000
Net cash from operating 11 13,322 10,920 29,618
activities
Investing activities
Interest received 1,016 549 1,252
Purchase of property, plant (2,128) (1,854) (5,519)
and
equipment
Proceeds from disposal of 31 53 110
property, plant
and equipment
Acquisition of subsidiary 10 (2,108) (8,219) (8,227)
Investment - - (375)
Purchase of own shares 6 (2,489) (3,489) (3,467)
Net cash used in investing (5,678) (12,960) (16,226)
activities
Financing activities
Repayments of obligations (41) (144) (246)
under finance
leases
Dividends paid (7,023) (6,159) (9,738)
Net cash used in financing (7,064) (6,303) (9,984)
activities
Net increase/(decrease) in 580 (8,343) 3,408
cash and
cash equivalents
Cash and cash equivalents at 27,727 24,324 24,324
beginning
of period
Effect of foreign exchange (83) - (5)
rate changes
Cash and cash equivalents at 28,224 15,981 27,727
end of
period
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Accounting policies
These condensed financial statements have been prepared in accordance
with IAS 34 on a historical cost basis and the same accounting
policies, presentation methods and methods of computation are
followed in this condensed set of financial statements as applied in
the group's latest annual audited financial statements.
Basis of preparation
The condensed financial statements contained in this report are
unaudited, but have been formally reviewed by the auditors and their
report to the company is set out on page 17. The information shown
for the 53 weeks ended 30 March 2008, which is prepared under IFRS,
does not constitute statutory accounts within the meaning of section
240 of the Companies Act 1985. The report of the auditors on the
statutory accounts for the 53 weeks ended 30 March 2008, prepared
under International Financial Reporting Standards (IFRS), was
unqualified and did not contain a statement under section 237 of the
Companies Act 1985 and has been filed with the Registrar of
Companies.
At the date of authorisation of these condensed financial statements,
the following standards and interpretations which have not been
applied in these condensed financial statements were in issue but not
yet effective:
IAS1 (Revised) Presentation of financial statements
IAS23 (Revised) Borrowing costs
IAS27 (Revised) Consolidated and separate financial statements
IFRS3 (Revised) Business combinations
IFRS8 Operating segments
IFRIC13 Customer loyalty programme
The directors do not anticipate that the adoption of these standards
and interpretations will have a material impact on the condensed
financial statements of the group. The condensed financial statements
are presented in pounds sterling because it is the currency of the
primary economic environment in which the group operates. The
directors consider that there are no critical accounting judgements
and key sources of estimation uncertainty in applying the group's
accounting policies.
2. Segmental reporting, net revenue analysis, cost of sales and gross
throughput
(i) Segmental information
(a) Geographical segments. The group operates in the UK, Republic
of Ireland and Romania but the group has only one reportable
geographical segment as defined in International Accounting Standard
14 Segment Reporting due to the fact that principally all operations
occur in the UK.
(b) Classes of business. The group has one class of business,
being payment collection and distribution services.
(ii) Analysis of net revenues by sector, cost of sales and gross
throughput
Revenue comprises the value of sales (excluding VAT) of services in
the normal course of business and includes amounts billed to
customers to be passed on to retail agents as commission payable, the
face value of mobile top-ups where PayPoint acts as principal and for
Metacharge it includes external processing charges which are amounts
billed to merchants that are passed onto the sponsoring bank. Cost of
sales includes the cost to the group of the sale, including
commission to retail agents, the cost of mobile top-ups where
PayPoint is the principal in the supply chain and sponsoring bank
charges.
Revenue performance of the business is measured by net revenue which
is calculated as the total revenue from clients less commission
payable to retail agents, acquiring bank charges and the cost of
mobile top-ups where PayPoint is the principal in the supply chain.
Although there is only one class of business, since the risks and
returns are similar across markets in which the group operates, the
group monitors net revenue (see below) with reference to each sector.
Gross throughput represents payments made by consumers using the
PayPoint service, for bill and general payments, mobile top-ups
(including scratch cards), cash withdrawals from ATMs and the value
of transactions via the internet.
26 weeks 27 weeks 53 weeks
ended ended ended
28 September 30 September 30 March
2008 2007 2008
£000 £000 £000
Revenue - transaction processing 108,494 103,030 210,528
- lease rental of 847 920 1,617
ATMs
Revenue 109,341 103,950 212,145
less:
Commission payable to retail (41,234) (41,463) (83,439)
agents
Cost of mobile top-ups as (30,749) (26,688) (55,468)
principal
Acquiring bank charges (1,797) (1,618) (3,378)
Net revenue 35,561 34,181 69,860
Net revenue by sector
Bill payments 13,828 13,644 30,652
Mobile top-ups 13,025 12,834 25,153
ATMs 3,331 3,275 6,561
Internet payments 3,498 3,124 4,927
Other 1,879 1,304 2,567
Net revenue 35,561 34,181 69,860
UK 33,870 32,709 66,507
International[1] 1,691 1,472 3,353
Net revenue 35,561 34,181 69,860
Commission payable is included within cost of sales as shown below
Cost of sales
Commission payable to retail (41,234) (41,463) (83,439)
agents
Cost of mobile top-ups as (30,749) (26,688) (55,468)
principal
Acquiring bank charges (1,797) (1,618) (3,378)
Depreciation and amortisation (3,177) (2,643) (5,719)
Other (3,974) (4,233) (7,587)
Total cost of sales (80,931) (76,645) (155,591)
Gross throughput
Transactions via PayPoint
terminals, retailer 3,028,095 2,774,365 5,931,224
EPoS systems and sale of scratch
cards
Withdrawals via ATMs 171,005 167,961 328,237
Internet transactions 822,810 545,619 1,286,887
Gross throughput 4,021,910 3,487,945 7,546,348
[1] International comprises of Ireland and Romania
3. Tax on profit of ordinary activities
26 weeks 27 weeks 53 weeks
ended ended ended
28 September 30 September 30 March
2008 2007 2008
£000 £000 £000
Current tax 4,433 4,373 9,423
Deferred tax 42 (20) 1
Total 4,475 4,353 9,424
4. Dividend
The interim dividend of 6.0p (2007: 5.3p) was declared on 20 November
2008 and accordingly has not been recorded as a liability as at 28
September 2008. The total dividend in respect of the 53 weeks ended
30 March 2008 was 15.7p per share.
5. Earnings per share
Basic and diluted earnings per share
The basic and diluted earnings per share are calculated on the
following profit and number of shares.
26 weeks 27 weeks 53 weeks
ended ended ended
28 September 30 September 30 March
2008 2007 2008
£000 £000 £000
Profit for the purposes of basic 10,829 10,136 20,980
earnings per
share being net profit
attributable to equity
holders of the parent and for
diluted earnings
per share
Number of Number of Number of
shares shares shares
Weighted average number of 67,236,551 67,688,522 67,369,600
shares
(for basic earnings per share)
Potential dilutive ordinary
shares: 99,693 100,878 119,903
Deferred share bonus
Long term incentive plan 409,654 1,036,849 669,449
Diluted basis 67,745,898 68,826,249 68,158,952
6. Related party transactions
On 13 June 2008 the company released the second tranche of its long
term incentive plan awards to the three executive directors and six
senior managers. In order to partly satisfy the company's
obligations, Paypoint Network Limited Employee Investment Trust (the
Trust) acquired 200,299 ordinary shares at the mid market closing
price of 600.2 pence per share, in aggregate £1,206,000, from RIT
Capital Partners and the Weinstock Estate (both of which are
connected to David Morrison, a non-executive director of the
company). 163,432 shares were sold at 600.2 pence per share, in
aggregate £984,000, by participating directors and managers to the
Trust. The Trust also purchased 41,395 shares at an average of 612.5
pence per share, in aggregate £253,000, in the open market.
On 19 September 2008 the company released another tranche of its long
term incentive plan awards to one senior manager, using 17,346 shares
owned by the Trust. As a result of this tranche a further 7,112
shares were sold at 650 pence per share, in aggregate £46,000 by the
senior manager to the Trust.
Accordingly, the company has funded £2,489,000 (excluding £18,000
deal costs) for the purchase of its own shares. The excess of the
cost of the shares acquired over their fair value determined at the
date of grant in accordance with IFRS2 of £1,800,000 has been charged
to reserves.
7. Cash and cash equivalents
Included within cash and cash equivalents is £8.0 million (September
2007: £7.8 million, March 2008:
£8.0 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.
8. Share capital and reserves
26 weeks 27 weeks 53 weeks
ended ended ended
28 September 30 September 30 March
2008 2007 2008
£000 £000 £000
Authorised share capital
4,365,352,200 ordinary shares of 14,551 14,551 14,551
1/3 p each
Called up, allotted and fully paid
share capital
67,705,116 ordinary shares of 1/3 226 226 226
p each
Investment in own shares
At start of period (935) (1) (1)
Acquired in period (see note 6) (2,489) (2,533) (2,533)
Used on share scheme vesting 2,498 1,599 1,599
At end of period (926) (935) (935)
Share based payment reserve
At start of period 2,281 1,712 1,712
Additions in period 413 628 1,121
Released in period (698) (551) (552)
At end of period 1,996 1,789 2,281
Translation reserve
At start of period 318 - -
Movement in the period (19) 34 318
At end of period 299 34 318
Retained earnings
At start of period 47,697 38,436 38,436
Profit for the period 10,829 10,136 20,980
Dividends paid (7,023) (6,159) (9,738)
Adjustment on share scheme vesting (1,800) (1,982) (1,981)
(see note 6)
At end of period 49,703 40,431 47,697
9. Statement of changes in equity
26 weeks 27 weeks 53 weeks
ended ended ended
28 September 30 September 30 March
2008 2007 2008
£000 £000 £000
Opening equity 49,587 40,373 40,373
Profit for the period 10,829 10,136 20,980
Dividends paid (7,023) (6,159) (9,738)
Investment in own shares 9 (934) (934)
Adjustment on share scheme vesting (2,498) (2,533) (2,533)
(see
note 6)
(Decrease) / increase in (19) 34 318
translation reserve
Increase in share based payment
reserve 413 628 1,121
Closing equity 51,298 41,545 49,587
10. Acquisition of subsidiary
In May 2008 the company paid £2,108,000, the deferred balance due for
the acquisition of Pay Store SRL, which it acquired on 15 May 2007.
The total consideration paid was £10,242,000 of which £8,134,000 was
paid in the last financial year.
11. Notes to the cash flow statement
26 weeks 27 weeks 53 weeks
ended ended ended
28 September 30 September 30 March
2008 2007 2008
£000 £000 £000
Operating profit 14,166 13,946 29,200
Adjustments for:
Depreciation on property, plant 2,700 2,244 4,812
and
equipment
Amortisation of intangible assets 477 399 907
Increase in share based payment 413 77 1,121
reserve
Operating cash flows before 17,756 16,666 36,040
movements in working capital
(Increase)/decrease in inventories (609) 872 580
Decrease / (increase) in 4,454 (2,300) (10,528)
receivables
(Decrease) / increase in payables
- client cash (18) 451 711
- other payables (3,187) (1,037) 9,196
Cash generated by operations 18,396 14,652 35,999
Corporation tax paid (5,074) (3,732) (6,362)
Interest and bank charges paid - - (19)
Net cash from operating activities 13,322 10,920 29,618
RESPONSIBILITY STATEMENT
The directors confirm that to the best of their knowledge:
a) the condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting';
b) the management report includes a fair review of the information
required by Disclosure and Transparency Rules (DTR) 4.2.7R
(indication of important events during the first six months and
description of principal risks and uncertainties for the remaining
six months of the year); and
c) the management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related party transactions and
changes therein).
By order of the board
David Newlands Dominic Taylor
Chairman Chief Executive
20 November 2008
RISKS
PayPoint's business, financial condition or operations could be
materially and adversely affected over the
remaining six months of the year 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 crystallisation of some or all of such risks:
+-------------------------------------------------------------------+
| Risk | Future prospects depend on our |
| | ability to: |
| | |
|---------------------------+---------------------------------------|
| Managing growth of the | manage growth through the employment |
| business | of adequate skilled resources, |
| | whilst maintaining financial controls |
| | |
|---------------------------+---------------------------------------|
| Major contract loss or | renew contracts at expiry (over the |
| renewal | next five years) on attractive terms |
| at unattractive margins | |
| | |
|---------------------------+---------------------------------------|
| Dependence on key | retain and recruit key staff through |
| executives | a mixture of basic salary, short and |
| | long-term incentive schemes |
| | |
|---------------------------+---------------------------------------|
| Failure of systems | maintain financial controls, defend |
| | against natural disasters, terrorist |
| | attacks, sabotage and hacking |
| | |
|---------------------------+---------------------------------------|
| Competition | hold and gain market share |
| | |
|---------------------------+---------------------------------------|
| Insolvency of a major | avoid the consequences of insolvency |
| multiple | both in terms of bad debt risk |
| retail agent | (where we bear it) and the impact of |
| | such insolvency on our network |
| | coverage |
| | |
|---------------------------+---------------------------------------|
| Technological changes | keep pace with technological changes |
| | and introduce new developments |
| | to maintain competitive advantage |
| | |
|---------------------------+---------------------------------------|
| Reliance on intellectual | stop third parties from using our |
| property | products and defend the use of our |
| | products from any challenge |
| | |
|---------------------------+---------------------------------------|
| The need to raise capital | access future capital needs on |
| in | sufficiently attractive terms |
| future | particularly in |
| | view of prevailing economic |
| | conditions and availability of credit |
| | |
|---------------------------+---------------------------------------|
| Economic, political, | deal with the impact of such changes |
| legislative, | without adversely affecting the |
| taxation or regulatory | growth or profitability of the |
| changes | business |
| | |
|---------------------------+---------------------------------------|
| Taxation | ensure the impact of any adverse |
| | changes is mitigated by enhanced |
| | performance |
|---------------------------+---------------------------------------|
| Fraudulent or criminal | avoid loss of client monies by the |
| activity | rigorous application of controls |
| | |
+-------------------------------------------------------------------+
INDEPENDENT REVIEW REPORT TO PAYPOINT PLC
We have been engaged by the company to review the condensed set of
financial statements in the half-yearly financial report for the
period ended 28 September 2008 which comprises the condensed income
statement, the condensed balance sheet, the condensed statement of
recognised income and expense, the condensed cash flow statement and
related notes 1 to 11. We have read the other information contained
in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies with
the information in the condensed set of financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements 2410 issued by the
Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to
them in an independent review 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 formed.
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
Disclosure and Transparency Rules of the United Kingdoms' Financial
Services Authority.
As disclosed in note 1, the annual financial statements of the group
are prepared in accordance with IFRS as adopted by the European
Union. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with
International Accounting Standard 34, Interim Financial Reporting, as
adopted by the European Union.
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.
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 United Kingdom. A
review of interim financial information consists of making inquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland)
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.
Conclusion
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 period ended 28 September 2008
is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European Union
and the Disclosure and Transparency Rules of the United Kingdom's
Financial Services Authority.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditor
20 November 2008
London, UK
Notes: A review does not provide assurance on the maintenance and
integrity of the website, including controls used to achieve this,
and in particular on whether any changes may have occurred to the
financial information since first published. These matters are the
responsibility of the directors but no control procedures can provide
absolute assurance in this area. Legislation in the United Kingdom
governing the preparation and dissemination of financial information
differs from legislation in other jurisdictions.
PayPoint plc
DIRECTORS & KEY CONTACTS
Directors
George Earle (Finance Director)
Dominic Taylor (Chief Executive)
Tim Watkin-Rees (Business Development
Director)
Eric Anstee* - appointed 16 September 2008
David Morrison*
David Newlands* (Chairman)
Andrew Robb*
Steven Rowley* - appointed 16 September
2008
Roger Wood*
* 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
Registration Services
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
West Yorkshire
HD8 0LA
Telephone
0870 162 3100
Press and investor Finsbury
relations enquiries Tenter House
45 Moorfields
London
EC2Y 9AE
Telephone No. 020 7251 3801
ABOUT PAYPOINT
PayPoint is the leading cash and internet payments company in the UK
and Ireland, handling in excess of
£8 billion in over 515 million transactions annually for 6 ,000
clients and merchants. The company operates with several payment
networks:
* The PayPoint retail network numbers over 20,750 terminal outlets
located in local shops (including Co-op, Spar, Costcutter,
Sainsburys Local, Somerfield, One Stop, Londis and thousands of
independents) in all parts of the UK and Ireland. Terminals
handle gas and electricity meter prepayments, cash bill payments,
mobile phone top-ups, transport tickets, BBC TV licences and a
wide variety of other payment types for all of the leading
utilities, telecommunications suppliers and many consumer service
companies. This network is used by consumers, free of charge, 9
million times a week. The network has 98.9% population cover on a
1 mile urban or 5 miles rural measure;
* Additional multiple retailer connections via retailers electronic
till systems in the UK including BP and Superdrug for mobile
top-ups and selected payments from the PayPoint range;
* The PayPoint ATM network has over 2,150 'LINK' branded machines
across the UK, also typically in convenience stores;
* PayPoint.net provides secure credit and debit card payments for
over 5,100 web merchants linking into all the major UK acquiring
banks; and
* PayPoint International which operates bill payment and top-up
services in Ireland and Romania. PayStore in Romania now has
4,700 terminal outlets including 1,200 PayPoint branded sites for
the new bill payment service.
PayPoint floated on the London Stock Exchange in September 2004 and
the company's market capitalisation at 30 September 2008 was £406
million. PayPoint is widely recognised for its leadership in
prepayment systems, smart technology and consumer service.
20 November 2008
Enquiries:
PayPoint plc 01707 600 300
Dominic Taylor, Chief Executive
George Earle, Finance Director
Finsbury 020 7251 3801
Rollo Head
Don Hunter
This announcement is available on the PayPoint plc website:
www.paypoint.co.uk.
---END OF MESSAGE---
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