PayPoint plc : Annual Report & Notice of 2017 AGM

PayPoint plc (the 'Company')

21 June 2017

Publication of Annual Report and Notice of 2017 Annual General Meeting

The Company has today published its Annual Report and Financial Statements for the year ended 31 March 2017 ('2017 Annual Report') on its website www.paypoint.com

In accordance with Listing Rule 9.6.1, the 2017 Annual Report and notice of Annual General Meeting will shortly be available for public inspection on the National Storage Mechanism (NSM) - Morningstar (www.morningstar.co.uk/uk/nsm ).

The Company will hold its 2017 Annual General Meeting on Wednesday, 26 July 2017 at 12 noon at the offices of Canaccord Genuity, 88 Wood Street, London EC2V 7QR.

In addition, following the release on 25 May 2017 of the Company's preliminary results for the year ended 31 March 2017, which are also available at www.paypoint.com, the Company makes the following additional disclosure in compliance with Rule 6.3.5 of the Disclosure and Transparency Rules of the UK Financial Conduct Authority. Together these constitute the information required to be communicated to the media in unedited full text through a Regulatory Information Service. This information is not a substitute for reading the full 2017 Annual Report and Financial Statements.

Statement of directors' responsibilities

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law, the directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and Article 4 of the International Accounting Standard (IAS) Regulation and have also chosen to prepare the parent company financial statements under IFRS as adopted by the EU. Under company law, the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, International Accounting Standard 1 requires that directors:

- properly select and apply accounting policies;

- present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

- provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

- make an assessment of the Company's ability to continue as a going concern.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge:

- the financial statements, prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

- the strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

- the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

The Annual Report on pages 1 - 67 was approved by the Board of Directors and authorised for issue on 25 May 2017 and signed on behalf of the Board by:

Nick Wiles, Chairman
Dominic Taylor, Chief Executive

Risks and uncertainties

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 secure use of consumer and other sensitive information. Electronic commerce requires the secure transmission of confidential information over public networks. Increasingly, internal systems make use of third party hosted services (cloud services) and several of our products are accessed through the internet. Fraudulent activity, cyber-crime or security breaches in connection with maintaining data and the delivery of our products and services could harm our reputation, business and operating results.	The Group has established physical security controls at its data centres and rigorous cyber security, anti-fraud and whistleblowing standards, procedures, and recruitment and training schemes, which are embedded throughout its business operations. The Group also screens new employees carefully. Continued investments are made in cyber security, including the significant use of data and communications encryption technology, improvements in e-mail and web filtering and testing and removal of system vulnerabilities. We have also developed plans for responding to a breach of security.
Interruptions in business processes or systems	The Group's ability to provide reliable services largely depends on the efficient and uninterrupted operation of our computer network systems, financial settlement systems, data and call centres, as well as maintaining sufficient staffing levels. System or network interruptions, recovery from fraud or security incidents or the unavailability of key staff or management resulting from a pandemic 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.	Comprehensive business continuity plans and incident management programmes are maintained to minimise business and operational disruptions, including fraudulent activity, system failure or pandemic incidents. Support arrangements have been established with third party vendors and there are strict standards, procedures and training schemes for business continuity.
Clients, agents & other third parties
Dependence upon third parties to provide data and certain operational services	The Group's business model is dependent upon third parties to provide operational services, the loss of which could significantly impact the quality of our services. Similarly, if one of our outsource providers, including third parties with whom we have strategic relationships, were to experience financial or operational difficulties, their services to us would suffer or they may no longer be able to provide services to us at all, significantly impacting delivery of our products or services.	The Group selects and negotiates agreements with strategic suppliers and agents based on criteria such as delivery assurance and reliability. Single points of failure are avoided, where practicable and economically feasible. Controls are regularly reviewed and improved to minimise risk of retailer churn caused by financial loss to retailers through fraudulent third party activity.
Consolidation among clients and markets	Consolidation of retailers and clients could result in reductions in the Group's revenue and profits through price compression from combined service agreements or through a reduced number of clients.	The Group monitors client and retailer concentration risk to ensure that no one client or retailer accounts for a disproportionate share of the Group's net revenue. 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 non-compliance	The Group is largely unregulated by financial services regulations, although in the UK we have Payment Institution status (through PayPoint Payment Services Limited), which enables the provision of regulated payment services, under the Payment Services Regulations 2009, including certain CashOut services. The Group's agents which offer money transfer on behalf of third party clients are licensed as Money Service Businesses by HMRC. We are subject to Payment Card Industry Data Security Standards regulated by the card schemes. Regulatory reform could increase the cost of the Group's operations or deny access to certain territories in the provision of certain services. Non-compliance with law, regulation, privacy or information security laws could have serious implications in cost and reputational damage to the Group.	The Group's legal department works closely with senior management to adopt strategies to educate legislature, regulators, consumer and privacy advocates and other stakeholders to support the public policy debate, where appropriate, to ensure regulation does not have unintended consequences over the Group's services. The Group has in place a business ethics policy which requires compliance with local legislation in all the territories in which the Group operates. A central compliance department co-ordinates all compliance monitoring and reporting. Subsidiary managing and finance directors are required to sign annual compliance statements. A review is underway to ensure that the Group is compliant with the requirements of the General Data Protection Regulations prior to the May 2018 deadline.
Materially adverse litigation	The Group contracts with a number of large service organisations for which it provides services essential to their customers. Failure to perform in accordance with contractual terms could give rise to litigation.	The Group seeks to limit exposure in its contracts. Mitigating actions are taken where contractual exposures are above the norm, including insurance coverage, where appropriate and economically sustainable.
Loss or infringement of intellectual property rights	The Group's success depends, in part, upon proprietary technology and related intellectual property rights. Some protection can be achieved but in many cases, little protection can be secured. Third parties may claim that the Group is infringing their intellectual property rights or our intellectual property rights could be infringed by third parties. If we do not enforce or defend the Group's intellectual property rights successfully, our competitive position may suffer, which could harm our operating results.	The Group, where appropriate and feasible, relies upon a combination of patent, copyright, trademark and trade secret laws, as well as various contractual restrictions, to protect our proprietary technology and continues to monitor this situation. The Group also defends vigorously all third party infringement claims.
HR/Personnel
Dependence on recruitment and retention of highly skilled personnel	The ability of the Group to meet the demands of the market and compete effectively is, to a large extent, dependent on the skills, experience and performance of its personnel. Demand is high for individuals with appropriate knowledge and experience in payments, IT and support services. The inability to attract, motivate or retain key talent could have a serious consequence on the Group's ability to service client commitments and grow our business.	Effective recruitment programmes are on-going across all business areas, as well as personal and career development initiatives. The executive management reviews talent potential twice a year and retention plans are put in place for individuals identified at risk of leaving. Compensation and benefits programmes are competitive and also reviewed regularly.
Economic Growth
Brexit	The effect on inter-company transactions and the Group's international expansion plans may be adversely affected by the outcomes of the negotiations between the UK government and the other member countries during the UK's exit from the European Union.	Due to the current uncertainties with the Brexit negotiations the Group is still considering appropriate mitigation strategies. However, the bulk of the Group's operations and revenues are UK-based. Romania and Ireland will 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 exposed to the risk of currency fluctuations and the unpredictability of financial markets in which it operates.	The Group's financial risk management seeks to minimise potentially adverse effects on the Group's financial performance.
Product/project management
Technological changes and increasing competition	The Group operates in a number of geographic, product and service markets that are highly competitive and subject to rapid technological changes, for example the introduction of smart meters, new payment solutions and the movement of UK consumers away from cash payments. Competitors may develop products and services that are superior to ours or that achieve greater market acceptance than our products and services, which could result in the loss of clients, merchants and retailers or a reduction in revenue.	The Group is committed to continued research and investment in new data sources, people, technology and products to support its strategic plan. IT development resource is directed at a Group level and developments are in hand to ensure the Group has relevant products in place to meet the demands brought about by changing technology. For smart meters, MultiPay has been launched.

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Enquiries:

Susan Court
Company Secretary, PayPoint plc
Tel: [phone]

ABOUT PAYPOINT

We operate market leading national networks across 40,400 convenience stores in the UK and Romania so that our customers are always close to a PayPoint store. At these locations, as well as at home or on the move, people use us to better control  their household finances, make essential payments and use in-store services, like parcel drop and collect.

Our UK network contains more branches than all banks, supermarkets and Post Offices together, putting us at the heart of communities for over 10 million regular weekly customers.

We have a proven track record of decades of tech-led innovation, providing retailers with tools that attract customers into their shops. Our recently launched PayPoint One platform offers EPoS, card payments and PayPoint services, and is designed to help retailers run their whole store from one device.

Coupled with our industry-technology solutions, we provide a first class service to the customers of over 1,500 clients - utility companies, retailers, transport firms, mobile phone providers, government and more.

We are on and offline; providing for payments by cash, card including contactless; retail, phone and digital; at home, work and whilst out and about from Land's End to the Highlands and Islands - helping to keep modern life moving.

Multichannel payments

MultiPay is our multichannel payment service, offering consumer service providers a ready-made solution for their full range of payments via app, web, phone, text and IVR, complementing our cash in store services.

Clients benefit from streamlining their consumer payment processing and transaction routing in a seamlessly integrated and cost effective solution. The services are available either as a full portfolio or by the client's choice of preferred channels, including our app which has a 4 star rating on the Google Play and Apple App Stores. Clients can choose to access our services as a full outsourced model or by linking their own digital solutions to our MultiPay payment suite.

MultiPay is particularly targeted to serve the rollout of smart meters within the energy market. For example, our service has helped Utilita to become the fastest growing, challenger prepay energy supplier and we have also signed several other energy companies, including SSE, our first Big 6 energy client. Among other relevant sectors, MultiPay is available to the local authority and social housing sectors through a framework with Procurement for Housing.

Retail networks

In the UK, our network includes over 29,200 local shops including Co-op, Spar, Sainsbury's Local, Tesco Express and thousands of independent outlets. These outlets are quick and convenient places to make energy meter prepayments, bill payments, benefit payments, mobile phone top-ups, transport ticket payments, TV licence payments, cash withdrawals and more.

Our Romanian network continues to grow profitably. We have more than 11,300 local shops, helping people to make cash bill payments, money transfers, road tax payments and mobile phone top-ups. Our clients include all the major utilities and telcos and many other consumer service companies.

In the UK, our Collect+ network offers parcel collection and return services in over 6,100 convenient outlets. Customers use Collect+ for their parcels from major retailers including Amazon, eBay, ASOS, New Look, John Lewis, House of Fraser, M&S and Very. The Collect+ brand is jointly owned with Yodel.

The UK network also includes over 4,100 LINK branded ATMs, and 10,000 of our terminals enable retailers to accept debit, credit and contactless payments, including Apple Pay. We operate over 4,100 Western Union agencies in the UK and Romania for international and domestic money transfers.

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Source: PayPoint plc via Globenewswire