PayPoint plc Half Year Financial Report

PayPoint plc

Half year financial report
for the six months ended 25 September 2011

HIGHLIGHTS

	6 months ended 25 September 2011	6 months ended 26 September 2010	Increase
Transaction value	£5,588m	£4,831m	16 %
Revenue	£95.9m	£92.9m	3%
Net revenue1	£41.9m	£38.7m	8%
Gross margin	37.5%	35.3%	2 ppts
Operating profit	£16.7m	£15.3m	9%
Profit before tax	£15.8m	£14.6m	9%
Diluted earnings per share	16.7p	14.8p	13%
Interim dividend per share	8.7p	7.8p	12%

• 292 million transactions processed in the period, up 9% 

• UK & Ireland transactions increased 5% with net revenue up 9% 

• Internet payment transactions have grown by 34% and net revenue by 4% 

• Romanian retail network moved into profit  bill payment transactions increased to over 8 million in the period (2010: 5 million)  

• PayByPhone increased transactions to over 8 million, up 23% with net revenue up by 18%  

• Collect+ has processed over 1 million transactions, an increase of nearly five times and has won two national awards for its innovative parcel delivery and returns service 

• Earnings per share increase helped by lower UK tax charge 

• 8.7p dividend per share, up 12% 

David Newlands, Chairman of PayPoint plc said:
"Our retail network continues to perform well, processing 5% more transactions overall in the period, despite there being 5 million fewer mobile top-ups.  Internet payments contributed to overall growth in transactions of 8% in the established business (the UK and Ireland retail networks and internet payments).  Net revenue in the established business increased by 7%.

Our developing business, consisting of our Romanian retail network, Collect+ parcel service and PayByPhone, also made good progress.  In Romania, we made a small profit following 69% growth in bill payments and since the period end, we have introduced Western Union money transfer.  Collect+, our award-winning parcels joint venture, has won 44 new merchants and processed nearly five times as many parcels as in the same period last year.   PayByPhone has been selected by 33 new clients in the period, with a substantial number of tender decisions still awaited.  

For the current financial year, trading is in line with the company's expectations.  Our established business is strong.  We will pursue further opportunities to enhance our retail yield by introducing new technology and services, while enhanced transaction management and information services should help our internet sales in the next financial year. Continuing progress is expected in our developing business. Our Romanian retail network will focus on improving market share and further modest network growth to improve yield.  PayByPhone will continue to pursue new clients and enhance its technology to grow revenue and improve customer satisfaction.  Collect+ will continue its intensive marketing to new clients, to extend deliveries to its existing returns clients and to promote its consumer-to-consumer proposition.  We expect PayByPhone and the Collect+ parcel service to turn to profit in the next financial year.

I am pleased to announce an interim dividend of 8.7pence per share."

The condensed financial statements cover the six months from 28 March 2011 to 25 September 2011, the last Sunday in the month (2010: 6 months covering the period 29 March 2010 to 26 September 2010).

1. Net revenue is revenue less the cost of mobile top-ups and SIM cards where PayPoint is principal and costs incurred by PayPoint, which are recharged to clients and merchants.  These costs include retail agent commission, merchant service charges levied by card scheme sponsors and costs for the provision of call centres for PayByPhone clients.  Net revenue is a measure, which the directors believe assists with a better understanding of the underlying performance of the group.   

Management report

The management report has been prepared solely to provide additional information to shareholders as a body to assess PayPoint's half year performance and it should not be relied upon for any other purpose.  It contains forward looking statements made by the directors in good faith, based on the information available at the time of approval of the half yearly financial report.  Such statements should be treated with caution due to the inherent uncertainties underlying any such forecast, including both economic and business risk factors.

PayPoint is a payment service provider to retailers and consumer service companies and as such, has only one operating segment.  However, reflection on various facets helps to explain the execution of our strategy as set out on page 3 of our annual report and accordingly, in addition to the analysis of the number and value of consumer transactions, revenue and net revenue, we have shown an analysis which separates our developing business (our retail network in Romania, Collect+ and PayByPhone), from our established business (the UK and Irish retail networks and internet payments).

The channel analysis is as follows:

Retail networks:
Bill and general (prepaid energy, bills, tickets and cash out payments)
Top-ups (mobile, prepaid cards and phone cards)
Retail services (ATM, debit/credit, parcels, money transfer, SIMs and receipt advertising)

Internet (transactions between consumers and merchants, pre-authorisations and FraudGuard, where separately charged)

PayByPhone (parking and bicycle rental transactions)

Other for revenue and net revenue only (software development and configuration)

Operational review

During the period, transactions have increased to 292 million (2010: 267 million) up 8% in the established business¹ and 37% in the developing business². Transaction value increased to £5.6 billion (2010: £4.8 billion), and is up 14% in the established business and up 78% in the developing business.

Revenue has increased 3% overall, comprising 1% in the established business and 16% in the developing business.  Net revenue³ increased by 8% overall.  In the established business, net revenue increased by 7% and in the developing business (including Collect+), by 52%.

Operating profit in the established business was £17.8 million, up 9% on last year.  The operating loss in the developing business, including our share of the losses of Collect+, was £2.0 million (2010: £1.5 million). The Romanian retail network made a small profit in the period (2010: loss of £0.3m).

		Established business1	Developing business2	Total	Adjust Collect+4	As reported
Transactions          (million)
6 months 2011		273	19	292	-	292
6 months 2010		253	14	267	-	267
Year ended 2011		559	31	590	-	590
Transaction value  £million
6 months 2011		5,395	193	5,588	-	5,588
6 months 2010		4,723	108	4,831	-	4,831
Year ended 2011		10,316	285	10,601	-	10,601
Revenue                  £000
6 months 2011		81,365	15,939	97,304	(1,381)	95,923
6 months 2010		80,337	12,835	93,172	(274)	92,898
Year ended 2011		167,700	26,535	194,235	(1,002)	193,233
Net revenue3           £000
6 months 2011		38,544	4,521	43,065	(1,135)	41,930
6 months 2010		35,977	2,973	38,950	(222)	38,728
Year ended 2011		76,811	6,539	83,350	(627)	82,723

In the established business, following our tender success announced in March 2011, the UK retail network duly signed a contract with Citibank to be the retail network for the DWP's replacement for giro-cheques.  The service is expected to go live next financial year and is unlikely to affect the current financial year's profit to any material extent.  The internet channel growth was constrained by the impact of one large merchant changing its business model.  We have re-started processing for this merchant since the period end.

In the developing business, our Romanian retail network has turned from loss to a small profit in the first half of the year and will introduce money transfer with Western Union in the second half.  PayByPhone has made substantial progress, winning 33 new clients, including London Borough of Lambeth, Ottawa in Canada and Coral Gables in Florida, USA.  PayByPhone parking is due to go live in San Francisco across 22,000 spaces this year. Cash payments for parking have been introduced in Barnet and Islington.  Collect+ has extended its consumer proposition by introducing two resellers, Parcel2Go and myParcelDelivery and has also won 44 new merchants for returns, including JD Sports, Monsoon and Accessorize, Asda Direct, Argos Outlet, Aurora (Karen Millen and Oasis) and Wiggle.  Collect+ has been recognised with prestigious industry awards for logistics and innovation. Since the period end, Collect+ has started processing deliveries for on-line clothing retailer, M and M Direct.

1. The established business includes the UK and Irish retail networks and internet payments. 

2. The developing business includes the Romanian retail network, Collect+ and PayByPhone. 

3. Net revenue is revenue less the cost of mobile top-ups and SIM cards where PayPoint is principal and costs incurred by PayPoint, which are recharged to clients and merchants.  These costs include retail agent commission, merchant service charges levied by card scheme sponsors and costs for the provision of call centres for PayByPhone clients.  Net revenue is a measure, which the directors believe assists with a better understanding of the underlying performance of the group.  

4. Collect+  revenue and net revenue is included in the developing business revenue and net revenue, but as Collect+ is reported in the Consolidated Income Statement on a profit after tax only basis, revenue and net revenue needs to be eliminated to reconcile to reported revenue and net revenue. 

Analysis of transactions

There has been growth in transaction volumes across all payments types except UK and Ireland mobile top-ups, which have decreased as a result of market decline.

	6 months ended 25 September 2011 thousands	6 months ended 26 September  2010 thousands	Increase / (decrease) %	Year ended 27 March 2011 thousands
Retail networks
Bill and general payments	165,419	152,286	9	350,970
Top-ups	55,496	60,597	(8)	117,670
Retail services	29,108	22,658	28	48,425
Internet payments	33,914	25,326	34	58,544
PayByPhone	8,068	6,557	23	14,059
Total	292,005	267,424	9	589,668

Bill and general payment transactions were ahead of the same period last year as a result of an 11% increase in prepaid energy volumes.  There was strong growth in Romania, where we processed over 8 million transactions (2010: 5 million).

In the UK and Ireland, mobile top-up volumes were down 9%. In Romania, mobile top-up volumes increased 8% although the net revenue per transaction fell. E-currency volumes in the UK continue to grow and were up 9% on the same period last year, with over 3 million transactions processed.

Retail services volumes have increased across most products. ATM transactions increased by 14%, credit and debit transactions by 29%, SIM card sales by 56% and parcels by five times over the same period last year.

Internet transactions were up 34% to 34 million as we continue to add large merchants and through organic growth in our existing merchants.  

PayByPhone transactions have increased 23% as we have started to implement PayByPhone in new parking authorities and some existing authorities have removed other payment options.

Transaction value

There has been growth in the transaction value paid by consumers, primarily in bill and general, and internet payments.

 

	6 months ended 25 September  2011 £000	6 months  ended 26 September 2010 £000	Increase /  (decrease)             %	Year ended 27 March  2011 £000
Retail networks
Bill and general	3,005,334	2,759,418	9	6,198,171
Top-ups	549,448	573,689	(4)	1,114,809
Retail services	211,005	194,174	9	394,727
Internet payments	1,790,612	1,277,867	40	2,838,147
PayByPhone	31,916	26,252	22	55,020
Transaction value	5,588,315	4,831,400	16	10,600,874

The increase in bill and general transaction value results from higher transaction volumes with broadly similar average values.

The reduction in top-up transaction value is primarily as a result of a decline in the prepay mobile market, partially offset by increases in the average transaction values in the UK and Ireland and an increase in e-currency transactions.

The increase in retail services is accounted for by ATM cash withdrawals. The transaction value in other retail services is relatively small as SIM sales are low value transactions and for credit and debit card transactions (where merchants are settled by the card sponsor, not PayPoint), receipt advertising and parcels, there is no transaction value.

Internet consumer spending has increased by 40% over the same period last year and the average transaction value has increased 5% to £52.80 (2010: £50.46).

PayByPhone transaction values have increased by 22%.  The average value of a transaction has remained broadly the same.

Revenue

 

	6 months ended 25 September 2011 £000	6 months ended 26 September 2010 £000	Increase /  (Decrease)                %	Year  ended 27 March 2011 £000
Retail networks
Bill and general	28,032	25,429	10	57,889
Top-ups	47,066	50,177	(6)	98,843
Retail services	11,693	9,437	24	19,602
Internet payments	4,372	4,190	4	8,939
PayByPhone	2,560	2,183	17	4,501
Other	2,200	1,482	48	3,459
Revenue	95,923	92,898	3	193,233

Bill and general payment revenue is higher than the same period last year mainly as a result of growth in prepaid energy and local authority housing transactions in the UK and 70% growth in Romanian bill payment transactions.

The reduction in mobile top-up revenue is driven by the migration of prepaid consumers to contract in the UK and greater value for money offered by mobile operators.

Retail services revenue has increased as a result of an increase in both the number of retailers taking the services and increased volumes of SIM, parcel, debit and credit card, and ATM transactions.

Internet payment revenue growth has been explained on page 3.

PayByPhone revenues are up 17% against the same period last year. Although PayByPhone has won a good share of tenders as a consequence of the increased resources we have put in, client delays in implementations have delayed revenue growth into the second half of the year.

Other revenue includes one-off set-up fees and the recharge of development costs, but is not expected to continue at the same rate for the second half of the current year.

Net revenue

Net revenue is revenue less the cost of mobile top-ups and SIM cards where PayPoint is principal and costs incurred by PayPoint which are recharged to clients and merchants.  These costs include retail agent commission, merchant service charges levied by card scheme sponsors and for PayByPhone clients, costs for the provision of call centres.  Net revenue is a measure which the directors believe assists with a better understanding of the underlying performance of the group and is shown in the table below:

 

	6 months ended 25 September 2011 £000	6 months ended 26 September 2010 £000	Increase / (decrease) %	Year  ended 27 March 2011 £000
Retail networks
Bill and general	16,179	14,892	9	33,806
Top-ups	10,747	11,539	(7)	22,683
Retail services	6,671	5,137	30	10,827
Internet payments	4,372	4,190	4	8,939
PayByPhone	1,761	1,488	18	3,009
Other	2,200	1,482	48	3,459
Net revenue	41,930	38,728	8	82,723

Net revenue on bill and general payments has increased from volume growth in energy prepayment and local authority housing in the UK and bill payment in Romania, offset by some UK clients migrating bill payments to direct debit. Net revenue is in line with transaction growth.

Top-up net revenue has decreased slightly more than revenue because margins in Romania and Ireland have reduced, offset by the positive impact of mix in the UK where the reduction in top-ups in independents is less severe than in multiple retailers. Retail services net revenue has a larger percentage increase than revenue, as credit and debit card transactions and receipt advertising do not attract retail agent commission.

Growth in net revenue from internet transactions has been explained on page 3.

PayByPhone net revenue was up 18%, lower than the growth in transactions as margin in the UK has reduced.

Network growth

Outlets have increased to 30,545 (March 2011: 29,508), an increase of 1,037. In the UK and Ireland, outlets increased by 649, more than expected, as a consequence of unfulfilled orders at last year end and lower churn.  Our new virtual terminal, a software variant which can be loaded onto retailers' till systems, has been rolled out to 1,400 outlets. Our focus in the UK since the year end remains on increasing retail agent yield.  In Romania, we have installed 388 outlets.

In our internet payments channel, we have added over 250 new merchants during the period, focussing on winning higher volume merchants, rather than start-ups that process little volume.

We introduced Collect+ to 584 of our retail outlets, bringing the total to 4,252.

	At 25 September 2011	At 26 September 2010	Increase / (decrease)1 %	At 27 March 2011
UK and Ireland	24,162	23,021	3	23,513
Romania	6,383	5,012	6	5,995
Total	30,545	28,033	4	29,508
Internet merchants	5,464	5,522	5	5,213
Collect+ outlets	4,252	3,350	16	3,668

⁽¹⁾ Increase/(decrease) measured against position at 27 March 2011

Financial review

Movement in revenue and net revenue have been addressed in the operational review above.  

Gross profit was £36.0 million (2010: £32.8 million), up 9.7% and the gross profit margin improved to 37.5% (2010: 35.3%) as a result of the reduction in agent commission, due to lower mobile top-ups.

Operating costs (administrative expenses) were £19.3 million (2010: £17.5 million), up 10.3%, due to some initial costs relating our new benefits contract, signage for Collect+ sites and our continuing investment in increased resources for PayByPhone.

Operating profit was £16.7 million (2010: £15.3 million), up 9.0%, excluding PayPoint's share of losses in Collect+.  The operating margin¹ increased slightly to 39.8% (2010: 39.5%), mainly as result of improved performance in the UK retail network.

Our share, in the period, of the loss in our parcels joint venture, Collect+, increased to £0.9 million (2010: £0.7 million) as it continues to invest in resources to grow the business.

Profit before tax was £15.8 million (2010: £14.6 million), up 8.7% on the same period last year.  The tax charge was £4.5 million (2010: £4.5 million) and the estimated effective tax rate for the current financial year is 28.5% (year ended 27 March 2011: 30.9%). The reduction in tax rates reflects the decrease in the UK corporate tax rate.

Operating cash flow was £8.1 million (2010: £9.4 million) after corporation tax payments of £5.3 million (2010: £5.9 million).  Capital expenditure of £1.7 million (2010: £1.1 million) comprised expenditure on new terminals, software development and ATMs.  Collect+ funding was £0.8m (2010: £0.4 million). Equity dividends paid were £10.6 million (2010: £9.8 million). Net cash and cash equivalents at the period end were £21.5 million (27 March 2011 £26.5 million), including client cash of £3.0 million, down from £6.1 million at 27 March 2011. The reduction in client cash results from a change in practice in respect of ATM monies, which LINK recommended be held in trust for the benefit of retailers, which at the period end were £3.1 million (27 March 2011 £3.3 million).

(1)        Operating margin is operating profit (which excludes Collect+) as a percentage of net revenue.

Related party transactions

Related party transactions are disclosed in note 5.

Risks

Risks to PayPoint's business, financial condition and operations are disclosed on pages 22 and 23.

Dividend

We have declared an interim dividend of 8.7p per share (2010: 7.8p) which will be paid on 21 December 2011 to shareholders on the register at 2 December 2011.  

Liquidity and going concern

The group is profitable, cash generative, had cash of £21.5 million at the period end and an undrawn £35 million revolving term credit facility with an unexpired term of over four years.  Cash and borrowing capacity is adequate to meet the foreseeable needs of the group, taking account of any risks (pages 22 and 23).  The financial statements have therefore been prepared on a going concern basis.

Economic climate

Bill and general payments which account for 39% (2010: 38%) of our net revenue, have continued to be resilient, as consumers' discretion in expenditure is limited for essential services and our service continues to be popular.  Utility providers in the UK continue to install new prepay gas and electricity meters, which will have a beneficial impact on our transaction volumes.    There has been adverse impact on our top-up volumes as a consequence of migration from prepaid to contract and more value for money being offered to consumers. Mobile top-ups account for 23% of our net revenue (2010: 27%).  The internet payment market continues to grow substantially.  PayByPhone is able to offer parking authorities a more cost effective collection system for parking compared to pay and display machines, which should continue to make PayByPhone's services attractive. The convenient service for users of the fast growing online market provided by Collect+ offers opportunity for substantial growth in parcel volumes.

Outlook

For the current financial year, trading is in line with the company's expectations.  Our established business is strong.  We will pursue further opportunities to enhance UK retail yield by introducing new technology and services, while enhanced transaction management and information services should help our internet sales in the next financial year.  Continuing progress is expected in our developing business. Our Romanian retail network will focus on improving market share with modest network growth to improve yield.  PayByPhone will continue to pursue new clients and the development of technology to grow revenue and improve customer satisfaction.  Collect+ will continue its intensive marketing to new clients, to extend deliveries to its existing returns clients and promote its consumer to consumer proposition.  We expect PayByPhone and the Collect+ parcel service to turn to profit next financial year.

David Newlands   Chairman 24 November 2011

Dominic Taylor Chief Executive

CONDENSED CONSOLIDATED INCOME STATEMENT

 

Continuing operations	Note	Unaudited 6 months ended 25 September 2011 £000	Unaudited 6 months ended 26 September 2010 £000	Audited Year ended 27 March 2011 £000
Revenue	2	95,923	92,898	193,233
Cost of sales	2	(59,913)	(60,079)	(122,567)
Gross profit		36,010	32,819	70,666
Administrative expenses		(19,316)	(17,510)	(34,614)
Operating profit		16,694	15,309	36,502
Share of loss of joint venture		(935)	(726)	(1,541)
Investment income		87	38	88
Finance costs		(23)	(64)	(143)
Profit before tax		15,823	14,557	34,456
Tax	3	(4,510)	(4,496)	(10,614)
Profit for the period		11,313	10,061	23,842
Attributable to:
Equity holders of the parent		11,329	10,061	23,883
Non-controlling interest		(16)	-	(41)
		11,313	10,061	23,842
Earnings per share
Basic	4	16.7p	14.9p	35.2p
Diluted	4	16.7p	14.8p	35.1p

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

	Note	Unaudited 6 months ended 25 September 2011 £000	Unaudited 6 months ended 26 September 2010 £000	Audited Year ended 27 March 2011 £000
Exchange differences on translation of foreign operations	8	655	(837)	(72)
Other comprehensive income / (loss) for the period		655	(837)	(72)
Profit for the period		11,313	10,061	23,842
Total comprehensive income for the period		11,968	9,224	23,770
Attributable to:
Equity holders of the parent		11,984	9,224	23,811
Non-controlling interest		(16)	-	(41)
		11,968	9,224	23,770

CONDENSED CONSOLIDATED BALANCE SHEET

 

	Note	Unaudited 25 September 2011 £000	Unaudited 26 September 2010 £000	Audited 27 March 2011 £000
Non-current assets
Goodwill		56,744	56,058	57,133
Other intangible assets		1,344	1,277	1,329
Property, plant and equipment		14,566	13,851	14,520
Investment in joint venture		-	-	135
Deferred tax asset		1,079	904	1,116
Investment		435	405	435
	2	74,168	72,495	74,668
Current assets
Inventories		1,412	1,582	915
Trade and other receivables		19,006	18,470	17,103
Cash and cash equivalents	7	21,511	22,928	26,464
		41,929	42,980	44,482
Total assets		116,097	115,475	119,150
Current liabilities
Trade and other payables		28,834	30,563	32,996
Current tax liabilities		4,491	3,930	5,287
Short-term borrowings		-	10,000	-
Obligations under finance leases		9	11	32
		33,334	44,504	38,315
Non-current liabilities
Other liabilities		225	175	240
		225	175	240
Total liabilities		33,559	44,679	38,555
Net assets		82,538	70,796	80,595
Equity
Share capital	8	226	226	226
Investment in own shares	8	(216)	(216)	(216)
Share premium	8	25	25	25
Share based payment reserve	8	2,566	2,476	3,005
Translation reserve	8	1,126	(294)	471
Retained earnings	8	78,868	68,579	77,125
Total equity attributable to equity holders of the parent company		82,595	70,796	80,636
Non-controlling interest		(57)	-	(41)
Total equity		82,538	70,796	80,595

Condensed Consolidated statement of changes in equity

 

	Note	Unaudited 6 months ended 25 September 2011 £000	Unaudited 6 months ended 26 September 2010 £000	Audited Year ended 27 March 2011 £000
Opening equity		80,595	70,744	70,744
Profit for the period		11,313	10,061	23,842
Dividends paid		(10,565)	(9,765)	(15,041)
Movement in own shares	5	-	154	154
Exchange differences on translation of foreign operations		655	(837)	(72)
Movement in share based payment reserve		(439)	(208)	321
Adjustment on share schemes vesting		979	647	647
Closing equity		82,538	70,796	80,595

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

 

	Note	Unaudited 6 months ended 25 September 2011 £000	Unaudited 6 months ended 26 September 2010 £000	Audited Year ended 27 March 2011 £000
Net cash flow from operating activities	9	8,098	9,444	31,137
Investing activities
Investment income		69	30	70
Purchase of property, plant and equipment		(1,670)	(1,051)	(3,160)
Proceeds from disposal of property, plant and equipment		23	-	61
Investment		-	-	(30)
Loan to joint venture	5	(800)	(400)	(1,350)
Net cash used in investing activities		(2,378)	(1,421)	(4,409)
Financing activities
Repayments of obligations under  finance leases		(23)	(3)	(22)
Receipt / (repayment) of short-term borrowings		-	4,000	(6,000)
Dividends paid		(10,565)	(9,765)	(15,041)
Net cash used in financing activities		(10,588)	(5,768)	(21,063)
Net  (decrease)/increase in cash and cash equivalents		(4,868)	2,255	5,665
Cash and cash equivalents at beginning of period		26,464	20,769	20,769
Effect of foreign exchange rate changes		(85)	(96)	30
Cash and cash equivalents at end of period		21,511	22,928	26,464

NOTES TO CONDENSED FINANCIAL STATEMENTS

1. Accounting policies
These condensed financial statements have been prepared in accordance with IAS 34 as adopted by the European Union on an 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 24.  The information shown for the year ended 27 March 2011, 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 auditors on the statutory accounts for the year ended 27 March 2011, 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 Management Report on page 9.

2. Segmental reporting, net revenue analysis and cost of sales

(i)   Segmental information

PayPoint is a service provider for consumer payment transactions (payments and receipts) through various distribution channels, involving the processing of high volume transactions, the management of retail agents, clients and online merchants, the settlement of funds (collection and transmission) and transmission of data in secure environments, by the application of technology.  

The application of technology is directed on a group basis from the group's executive team (consisting of the Chief Executive Officer, Finance Director, Business Development Director and Chief Information Officer) to develop products across the business, prioritised on an economic value basis (generally by product), rather than on a subsidiary by subsidiary basis.  As the business has high fixed operating costs, the company regards the analysis of net revenue as the most reliable indication of contribution on a product by product basis and analysis of net revenue is shown in the Management Report.

Whilst the group has a number of different products, these do not meet the definition of different segments under IFRS 8 and, therefore, the group has only one reportable class of business, being a payment service provider for consumer payment transactions.

(ii) Reconciliation of revenue to net revenue, analysis of cost of sales

Revenue comprises the value of sales (excluding VAT and sales taxes) of products and services in the normal course of business.  

Net revenue is revenue less the cost of mobile top-ups and SIM cards where PayPoint is principal and costs incurred by PayPoint which are recharged to clients and merchants.  These costs include retail agent commission, merchant service charges levied by card scheme sponsors and cost for the provision of call centres to PayByPhone clients.

Net revenue

 

	6 months ended 25 September 2011 £000	6 months ended 26 September 2010 £000	Year ended 27 March 2011 £000
Revenue - transaction processing	95,240	92,135	191,742
- rental income of ATMs	683	763	1,491
Revenue	95,923	92,898	193,233
less:
Commission payable to retail agents	(33,120)	(34,579)	(71,322)
Cost of mobile top-ups and SIM cards as principal	(20,076)	(18,896)	(37,696)
Card scheme sponsors' charges and call centre charges	(797)	(695)	(1,492)
Net revenue	41,930	38,728	82,723

Cost of sales
	6 months ended 25 September 2011 £000	6 months ended 26 September 2010 £000	Year ended 27 March 2011 £000
Cost of sales
Commission payable to retail agents	33,120	34,579	71,322
Cost of mobile top-ups and SIM cards as principal	20,076	18,896	37,696
Card scheme sponsors' charges and call centre charges	797	695	1,492
Depreciation and amortisation	1,652	1,912	3,612
Other	4,268	3,997	8,445
Total cost of sales	59,913	60,079	122,567

Geographical information:

	6 months ended 25 September 2011 £000	6 months ended 26 September 2010 £000	Year ended 27 March 2011 £000
Revenue
UK	72,136	71,675	148,737
Ireland	11,006	11,204	22,475
Romania	11,998	9,559	21,036
North America	783	460	985
Total	95,923	92,898	193,233
Non-current assets
UK	71,642	70,486	71,850
Ireland	-	44	-
Romania	2,108	1,711	2,329
North America	418	254	489
Total	74,168	72,495	74,668

3. Tax on profit of ordinary activities

 

	6 months ended 25 September 2011 £000	6 months ended 26 September 2010 £000	Year ended 27 March 2011 £000
Current tax	4,473	4,233	10,565
Deferred tax	37	263	49
Total	4,510	4,496	10,614

4.  Earnings per share

The basic and diluted earnings per share are calculated on the following profit and number of shares.

 

	6 months ended 25 September 2011 £000	6 months ended 26 September 2010 £000	Year ended 27 March 2011 £000
Profit for the period attributable to equity holders of the parent	11,329	10,061	23,883
	Number of shares	Number of shares	Number of shares
Weighted average number of shares (for basic earnings per share)	67,772,332	67,675,017	67,721,190
Potential dilutive ordinary shares:
Deferred share bonus	157,996	117,565	157,914
Diluted basis	67,930,328	67,792,582	67,879,104
Earnings per share
Basic	16.7p	14.9p	35.2p
Diluted	16.7p	14.8p	35.1p

5. Related party transactions

PayByPhone

During the period, the company subscribed for additional share capital in Verrus Mobile Technology Inc for £1,756,000 and Verrus UK Limited has subscribed for additional share capital in Mobile Payment Services SAS for £133,000.

Collect+

During the period, PayPoint has lent Drop and Collect Limited (its 50/50 joint venture with Yodel, which trades as Collect+) £800,000, bringing the total amount of the loan outstanding to £3,900,000 (27 March 2011: £3,100,000).  This has been treated as part of the investment in the joint venture.

At 25 September 2011, there were £28,000 of unrecognised losses in Collect+ (27 March 2011: £Nil).

Investment in OB10

OB10 specialises in electronic invoicing.  PayPoint's shareholding at 25 September 2011 represented 1.02% of the issued capital of OB10 (27 March 2011: 1.02%).

 

	6 months ended 25 September 2011 £000	6 months ended 26 September 2010 £000	Year ended 27 March 2011 £000
Investment at cost	435	405	435

In the view of the directors, the aggregate cost of £435,000 represents the fair value of the investment in the shares.

David Newlands, who is also Chairman of OB10, Dominic Taylor, George Earle, Eric Anstee and Nick Wiles hold shareholdings in OB10 as follows:

 

Directors' shareholding in OB10	6 months ended 25 September 2011 %	6 months ended 26 September 2010 %	Year ended 27 March 2011 %
David Newlands	2.87	4.73	2.87
Dominic Taylor	1.44	1.42	1.44
George Earle	0.40	0.42	0.4
Nick Wiles	1.02	1.04	1.02
Eric Anstee	0.08	0.08	0.08

Share based payments

During the period, the Deferred Share Bonus plan (DSB) and long term incentive plan (LTIP) did not vest and, as a result, no treasury shares were released to the relevant executive directors and senior managers.

6. Dividend

The interim dividend of 8.7p (2010: 7.8p) was declared on 24 November 2011 and, accordingly, has not been recorded as a liability as at 25 September 2011.  The total dividend in respect of the year ended 27 March 2011 was 23.4p per share.

7. Cash and cash equivalents

Included within cash and cash equivalents is £3.0 million (25 September 2010: £6.7 million, 27 March 2011: £6.1 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. The decrease in client cash results from of a change in the practice in respect of ATM monies, where LINK recommended that monies owed to retailers be held in trust accounts. Accordingly, the balance held in trade creditors has decreased by the same amount. At 25 September, amounts held in trust, owed to retailers in respect of ATM monies amounted to £3.1 million (held by PayPoint, not in trust at 27 March 2011: £3.3 million).

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 25 September 2011, the group's cash was £21.5 million (27 March 2011: £26.5 million).

8. Share capital and reserves

 

	6 months ended 25 September 2011 £000	6 months ended 26 September 2010 £000	Year ended 27 March 2011 £000
Authorised share capital
4,365,352,200 ordinary shares of 1/3p each	14,551	14,551	14,551
Called up, allotted and fully paid share capital
67,806,973 ordinary shares of 1/3p each	226	226	226
Investment in own shares
At start of period	(216)	(370)	(370)
Used on share scheme vesting	-	154	154
At end of period	(216)	(216)	(216)
Share premium
At start of period	25	25	25
At end of period	25	25	25
Share based payment reserve
At start of period	3,005	2,684	2,684
Additions in period	540	558	1,088
Released in period	(979)	(801)	(801)
Other adjustments	-	35	34
At end of period	2,566	2,476	3,005
Translation reserve
At start of period	471	543	543
Movement in the period	655	(837)	(72)
At end of period	1,126	(294)	471
Retained earnings
At start of period	77,125	67,636	67,636
Profit for the period	11,313	10,061	23,842
Non-controlling interest  in loss for year included in above	16	-	41
Dividends paid	(10,565)	(9,765)	(15,041)
Adjustment on share scheme vesting	979	647	647
At end of period	78,868	68,579	77,125

9. Notes to the cash flow statement

 

	6 months ended 25 September 2011 £000	6 months ended 26 September 2010 £000	Year ended 27 March 2011 £000
Profit before tax	15,823	14,557	34,456
Adjustments for items that do not affect cash:
Depreciation on property, plant and equipment	1,494	1,753	3,295
Amortisation of intangible assets	158	159	317
Share of losses in joint venture	935	726	1,541
Net interest (income) / expense	(64)	26	55
Share based payment expense	540	593	1,088
Operating cash flows before movements in working capital	18,886	17,814	40,752
Increase in inventories	(497)	(15)	209
(Increase) / decrease in receivables	(1,706)	4,732	6,337
(Decrease) / increase in payables
- client cash	(3,128)	224	(686)
- other payables	(152)	(7,389)	(4,476)
Cash generated by operations	13,403	15,366	42,136
Corporation tax paid	(5,289)	(5,886)	(10,950)
Interest and bank charges paid	(16)	(36)	(49)
Companies PayPoint (PAY) Thursday, 21st November 2024 COMPANIES COVERED: HLMA JD. ITH JD Sports tanks after management tighten profit guidance towards the lower end of expectations, Halma finds support from strong earnings and capital return commitment cheers shareholders in Ithica Energy. Read More Full Archive UK 100 FTSE quotes by TradingView Latest directors dealings 40 minutes ago Alphawave IP Group 1 hour ago WH Smith 1 hour ago Staffline Group 2 hours ago Manchester & London Investment Trust 2 hours ago Associated British Foods All directors dealings today All intraday prices are subject to a delay of fifteen (15) minutes. Investegate takes no responsibility for the accuracy of the information within this site. The announcements are supplied by the denoted source. Queries about the content of an announcement should be directed to the source. Investegate reserves the right to publish a filtered set of announcements. NAV, EMM/EPT, Rule 8 and FRN Variable Rate Fix announcements are filtered from this site. © 2023 Stockomendation Ltd Privacy and Cookie Policy Terms Acceptable Use Policy Advertise with Us Other Stockomendation sites Stockomendation UK Share Picking Game This website is for Private Investors* I am a Private Investor *A Private Investor is a recipient of the information who meets all of the conditions set out below, the recipient: Obtains access to the information in a personal capacity; Is not required to be regulated or supervised by a body concerned with the regulation or supervision of investment or financial services; Is not currently registered or qualified as a professional securities trader or investment adviser with any national or state exchange, regulatory authority, professional association or recognised professional body; Does not currently act in any capacity as an investment adviser, whether or not they have at some time been qualified to do so; Uses the information solely in relation to the management of their personal funds and not as a trader to the public or for the investment of corporate funds; Does not distribute, republish or otherwise provide any information or derived works to any third party in any manner or use or process information or derived works for any commercial purposes. Please note, this site uses cookies. Some of the cookies are essential for parts of the site to operate and have already been set. You may delete and block all cookies from this site, but if you do, parts of the site may not work. To find out more about the cookies used on Investegate and how you can manage them, see our Privacy and Cookie Policy To continue using Investegate, please confirm that you are a private investor as well as agreeing to our Privacy and Cookie Policy & Terms.