Half-yearly report
PayPoint plc
Half yearly financial report
for the 6 months ended 27 September 2009
HIGHLIGHTS
6 months 6 months
ended ended
27 September 28 September Increase /
2009 2008 (decrease)
£million £million %
Throughput(1) 4,446 4,041 10
Revenue 96.4 109.3 (12)
Net revenue(2) 36.0 35.6 1
Operating profit(3) 14.7 14.2 3
Profit before tax 13.8 15.3 (10)
Diluted earnings per 14.3p 16.0p (11)
share
Interim dividend 7.4p 6.0p 23
* In the traditional UK business(4), net revenue was up 2%
and operating profit was up 8%
* UK and Ireland terminal network expanded by nearly 700
sites to 22,669.
* Processed over 1.8 million Romanian bill payment
transactions with 2,260 branded PayPoint sites.
* Collect+, our joint venture, started trading during the
period, and already has over 3,500 sites live.
* Consumer satisfaction(5) 97% (82% very satisfied).
* Profit before tax lower than prior period due to the
investment in Collect+ and the much reduced interest on cash
balances.
David Newlands, Chairman of PayPoint, said: "PayPoint has delivered
first half operating profits ahead of market expectations, despite
the economic downturn. New products and services, developments in
technology, and new contracts have strengthened the traditional
business. We are continuing to invest in parcels, internet payments
and Romania and these will contribute to future growth. The outlook
for the year is in line with market expectations."
"We have again increased the dividend as there is ample capacity to
do so without adversely affecting growth prospects."
The condensed financial statements cover the 6 months from 30 March
2009 to 27 September 2009, the last Sunday in the month (2008: 6
months covering the period 31 March 2008 to 28 September 2008).
1 Throughput represents payments made by consumers using the
PayPoint service for bill and general payments,
online, cash withdrawals from ATMs and the value of
transactions via the internet.
2 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. Net revenue and
operating margin are measures which the directors believe
assist with a better understanding of the underlying
performance of the group.
3 Operating profit excludes start up losses incurred in the
current six months for our parcel joint venture Collect+
4 The group excluding PayPoint plc, PayPoint.net, PayPoint
Ireland, Collect+ and PayPoint Romania.
5 UK terminal sites, source: Ipsos MORI September 2009.
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.
Review of results
Substantial increases in the value paid by consumers (throughput)
were recorded in bill and general and internet payments. Revenue
decreased as a consequence of lower mobile top-ups. Net revenues(1),
however, increased slightly as the increase in other sources of net
revenue was more than the impact of the reduction in mobile top-ups.
As a consequence, operating profits increased. Start up losses in
our new parcels joint venture and lower interest received caused a
reduction in profit before tax.
Execution of strategy
* We aim to continue increasing economic value for
shareholders by expanding:
* UK retail payments and services (cash payments for bills,
general payments, mobile top-ups, ticketing, money transfer,
parcels 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 developments in selected developing countries for
cash payment networks and as an e-commerce payment service
provider.
UK retail payments and services
PayPoint has created the strongest retail payment collection network
in the UK, enabling the company to deliver its services through over
22,000 outlets with over 99% population coverage(2) and unrivalled
opening hours. This network provides an ideal footprint for a broad
range of payments and consumer services delivered to and through the
retail outlets. UK bill and general payment growth was offset by a
decline of 8% in mobile transactions, a lower rate of decline than
suffered by the retail channel as a whole, because of the increase in
the terminal estate and the strength of independent retailers in the
economic recession. PayPoint aims to maintain its lead in bill and
general payments (with further growth in local authority payments),
transport tickets and its strong position in mobile top-ups,
including mobile virtual network operators (MVNOs) and the
prepayment card sector, in which PayPoint is the pre-eminent cash
loading channel (working with many leading brands, including O2,
PayPal and Virgin Money). However, recent developments in energy
prepayment infrastructure have enabled clients to choose to negotiate
agreements with better transaction pricing with individual payment
networks rather than working with all three networks. PayPoint
expects to grow share, but at lower margin through this dynamic.
Retailers, from small corner stores to major multiples, including the
major grocers, increasingly value the footfall that PayPoint drives
and the unique range of payments and services. Client developments
include working with major utilities on plans for the next generation
smart meters, which will be rolled out during the next decade.
Our retail network is also providing a strong base from which to grow
value added optional services for the convenience retail community,
including ATMs (now offered through 2,300 sites), debit and credit
card acceptance through the PayPoint terminal (offered through 4,600
sites) and Western Union Money Transfers (currently rolling out the
first 400 sites). PayPoint also generates transaction-based income
through selling advertising space on the bottom of consumer receipts,
which is attracting significant interest from fast moving consumer
goods brands and government agencies, in addition to our existing
client base to promote their services and deliver public information.
The network is being used to support physical product distribution
for the first time, with the successful, recent launch of SIM card
sales on behalf of the mobile networks (active in 1,000 sites).
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. Net revenue and
operating margin are measures which the directors
believe assist with a better understanding of the underlying
performance of the group.
2 99% of consumers are within 5 miles rural and 1 mile urban of
a PayPoint retailer.
The most significant new initiative using the PayPoint network has
been Collect+, a joint venture with a leading UK parcel carrier, Home
Delivery Network,. Collect+ allows home shoppers to receive and
return their purchases through over 3,500 local outlets. The ability
for consumers to send parcels to each other with collection and
delivery at Collect + outlets has also been launched since the end of
the period. Already, after only a few months, Collect+ has handled
over 100,000 parcels and is well placed to be a major player in the
UK market.
PayPoint has continued to develop its technology and process
efficiencies to increase productivity and control, particularly at
the retailer. These include innovative and complementary alternatives
to the highly successful PayPoint terminal, which up to now, has been
central to all full service retailers. New EPOS-linked modules,
known as PPods, will allow full functionality to be provided through
the retailers' own tills, reducing deployment costs, enabling faster
transactions (via broadband) and improving reconciliation and
control. This new technology will be adopted by the Co-operative
Group and is being sold into other multiple retailers, releasing
terminals to be reprogrammed and deployed internationally.
e-commerce
PayPoint recognised the growth potential in this market in creating
PayPoint.net from the acquisitions of two smaller Payment Service
Providers (PSPs). Both of them link internet merchants to acquiring
banks for credit card acceptance. PayPoint.net will also stand in for
the bank in managing debt risk with the merchant, enabling us to work
with a broader range of merchants than other PSPs. This has provided
us with differentiation through specialisation in risk management and
fraud screening, both highly regarded services provided by
PayPoint.net. This differentiation is extended through our ability to
link internet merchants to cash payments through the PayPoint
terminal network via PayCash, attracting new business including
MoonPig, Firebox and PKR over the past few months. PayPoint's
conviction that blue chip clients from our retail business would be
attracted by the ability to add an internet dimension is being
confirmed through the use of PayPoint.net platforms in the delivery
of home vending for the new smart meters.
Within PayPoint.net, there has been encouraging growth in the
underlying business, which has been substantially offset by merchants
moving from our Bureau product (where we take the merchant credit
risk and are rewarded with higher margins) to the lower margin ISO
product reflecting greater willingness among sponsoring banks to take
on such merchants' credit risk. All these merchants will have moved
by the end of the financial year.
There are good prospects for PayPoint.net in the UK and in other
countries. To support this, the range of payment types processed by
the company is growing and the scale of operations is allowing keener
wholesale rates to be negotiated with banks, thus widening the range
of merchant accounts over which PayPoint.net can be competitive.
International developments
The ability to recreate PayPoint's success in internet and retail
payments and services in other countries has major potential for the
group's development. PayPoint has already developed retail networks
in Ireland (organically) and Romania (building from an acquisition).
This experience puts PayPoint in a good position to roll out
selectively or acquire retail and/or internet based services in other
countries, using system solutions and operational processes that are
already proven.
Whilst bill payment volume is delivering high growth, our Romanian
business has suffered this year from substantial reductions in the
mobile top-up market, as the mobile networks have offered more
airtime for the same or lower top-up values. There are some signs
that this adverse dynamic has slowed. Romania should move to
break-even in 2010 as the linkage of bill payment and mobile volumes
to give differentiation allows PayPoint to secure higher volume
outlets. This has been coupled with a focus on costs and margin,
which has resulted in PayPoint reducing the volume of low margin
physical scratch cards and increasing penetration of cash banking in
our retail base, thereby removing the need to collect the cash from
retailers. In Romania, nearly all the major utilities are now working
with PayPoint, with some only recently launched. PayPoint Romania
recently processed its three millionth bill payment transaction from
a standing start in just over 12 months and currently has an annual
run rate in excess of five million bill payment
Transactions per annum.
Operational review
During the period, PayPoint processed 252 million transactions, with
a value of £4.4 billion (2008: 249 million transactions with a value
of £4.0 billion), an increase of 1% in transactions and 10% in value.
Commissions paid to retail agents were reduced to £36.2 million
(2008: £41.2million), a result of lower mobile top-ups which pay
higher than average commissions to retail agents in the UK.
Analysis of transactions
Bill and general payments comprises energy prepayments, budget and
other utility bill payments and transport tickets. Online includes
mobile top-ups as well as other online products such as international
calling cards, e-currency and pre-pay debit cards. ATM transactions
comprise cash withdrawals and balance enquiries. Internet payments
include consumer payments on the internet.
6 months 6 months Increase/ Year
ended ended (decrease) ended
27 September 28 September % 29 March
2009 2008 2009
thousands thousands thousands
Bill and general 159,640 151,954 5 351,476
payments(1)
Online (2) 65,924 73,778 (11) 142,823
ATMs 7,419 7,236 3 14,645
Internet payments 19,005 16,341 16 35,653
Total 251,988 249,309 1 544,597
PayPoint has continued to perform well in bill and general payments,
with an increase of 7.7 million transactions, of which 1.8 million
are in Romania following the introduction of bill payment in the
latter half of last year. The increase in the UK has resulted from
network growth and previous increases in domestic energy prices,
partially offset by an increase in average transaction values. There
has been particularly good growth in the council and local authority
payment sector. A new long term contract with British Gas has been
signed which provides that, in the second half of this year, new gas
cards and electricity keys issued by British Gas will only operate on
the PayPoint and Post Office networks. From 2011, this will be
extended to all British Gas over-the-counter payments for cards, keys
and regular bill payments.
Online volumes have declined 8% in the UK, 37% in Romania and 29% in
Ireland. In the UK, in the second half of the year, transactions are
expected to benefit from the combined effect of the roll out of new
sites and the recent new contract with McColls, which added 1,400
sites to our network from July. E-currency and pre-pay debit card
volumes have increased 35% on the same period last year. In Romania,
we have deliberately reduced sales of our mobile scratch cards, which
are low margin products and prone to shrinkage, in favour of
electronic mobile top-ups, which deliver better margins. This has
contributed to the decline in the number of transactions. The roll
out of new sites in Romania and the re-siting of existing low volume
terminals should improve performance.
ATM transactions have increased by 3%, a rate lower than the 7% net
increase in ATM sites, as the number of transactions per ATM has
declined. New machines, whilst profitable, are not reaching the
volumes of ATMs placed in earlier years. Balance enquiries, which
produce a lower income than cash withdrawals, are a slightly greater
proportion of the transactions than in the same period last year.
Internet payments have increased both in existing merchants and from
new merchants that have been signed in the last 12 months, including
moneysupermarket.com, Severn Trent Water, Ann Summers, Pacel2Go and
Fair FX.
1 Includes debit/credit transactions
2 Online consists mainly of mobile top-ups but also prepay debit
cards, e-money schemes, international calling cards
and the sale of mobile phone SIMs.
Throughput
Throughput represents payments made by consumers using the PayPoint
service for bill and general payments, online (mainly mobile
top-ups), cash withdrawals from ATMs and the value of transactions
via the internet.
6 months 6 months Increase / Year
ended ended (decrease) ended
27 September 28 September % 29 March
2009 2008 2009
£000 £000 £000
Bill and general 2,657,269 2,421,747 10 5,549,154
payments
Online(1) 600,363 625,300 (4) 1,234,662
ATMs 172,359 171,089 1 343,238
Internet payments 1,016,385 822,810 24 1,754,286
Throughput 4,446,376 4,040,946 10 8,881,340
The increase in bill payment value reflects the increase in
transactions processed and an increase in the average transaction
value. Online payments reflect the reduction in the overall value of
mobile top-ups as a consequence of mobile operators offering more
airtime for the same or less cost to consumers. The increase in ATMs
was offset by lower average number of cash withdrawals. Internet
throughput has increased at a greater rate than the transaction
growth, as average consumer spend per transaction has increased by
6%.
Revenue analysis
Revenue comprises the value of sales (excluding VAT) of services and
includes commissions billed to clients and then passed on to retail
agents, the sales value to retailers of mobile top-ups in Romania and
Ireland where PayPoint acts as principal and external processing
charges on internet payments billed to merchants that are passed on
to the sponsoring banks.
6 months 6 months Year
ended ended Increase/ ended
27 September 28 September (decrease) 29 March
2009 2008 % 2009
£000 £000 £000
Bill and general 26,661 25,436 5 61,301
payments
Online(1) 56,600 70,297 (19) 135,013
ATMs 6,808 6,780 - 13,615
Internet payments 4,634 5,295 (12) 11,798
Other 1,707 1,533 11 2,624
Revenue 96,410 109,341 (12) 224,351
Bill payment revenue has increased broadly in line with the number of
transactions. Online revenue (mainly mobile top-ups) has decreased
as mobile operators continue to increase the airtime offered at the
same or lower cost to the consumer. ATM revenue has increased, but
average revenues per ATM have declined as a consequence of lower cash
withdrawals on more recently placed ATMs and lower rental income, as
five year term rental agreements expire and fully depreciated
machines are rolled over on lower rentals. Internet payment revenues
are lower, largely as a result of the migration of larger merchants
to a lower margin service, which will complete this year. Overall
revenue in the UK is down 7% and in Romania and Ireland 28% and 19%
respectively. The decline in revenue is greater than the decline in
transactions, because of the impact of acting as principal in mobile
top-ups in Romania and Ireland.
1 Online consists mainly of mobile top-ups but also prepay
debit cards, e-money schemes, international calling
cards and the sale of mobile phone SIMs.
Net revenue analysis
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. 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 6 months Year
ended ended Increase/ ended
27 September 28 September (decrease) 29 March
2009 2008 % 2009
£000 £000 £000
Bill and general 15,030 14,174 6 34,388
payments
Online(1) 12,588 13,025 (3) 25,692
ATMs 3,303 3,331 (1) 6,641
Internet payments 3,362 3,498 (4) 8,053
Other 1,707 1,533 11 2,624
Net revenue 35,990 35,561 1 77,398
Net revenue on bill payments is broadly in line with transaction and
revenue growth. Online net revenue has not decreased as much as
throughput or revenue as a consequence of a richer mix of e-money
transactions at higher net revenue per transaction and independent
retailers maintaining mobile top-up volumes. ATM net revenue has
fallen as a consequence of lower average transactions per ATM and
lower rental income. Internet payment net revenues have fallen as a
consequence of the lower margin from ISO product sales that migrated
from the Bureau product.
Net revenue in the UK is up 1%, in Romania up 12% and in Ireland down
16%.
Collect+
At the end of the last financial year, PayPoint announced a 50:50
joint venture with Home Delivery Network, a leading UK carrier, to
provide consumers with a more convenient solution for parcel delivery
and collection, through a national network of outlets selected from
within the PayPoint network. The service has been launched with some
of the leading mail order and online e-commerce brands, including
Littlewoods, Very, Great Universal and Marshall Ward from within the
Shop Direct Group. These retailers make the Collect+ outlets
available to their customers as alternative delivery addresses and
for returning goods. These services should also prove attractive to
other major e-commerce retailers and to online marketplaces including
eBay Power Sellers.
At the end of the period, we had 3,063 parcel sites within our
existing retailer base. We have launched a C2C (consumer to consumer)
service booked and paid for over the internet (www.collectplus.co.uk)
as well as the returns service for Shop Direct Group. Initial
volumes are encouraging and we plan to have c.4,000 sites live by the
end of this financial year. Collect+ parcels are tracked throughout
the delivery process from dispatch to delivery.
1 Online consists mainly of mobile top-ups but also prepay debit
cards, e-money schemes, international calling cards
and the sale of mobile phone SIMs.
Network growth
Terminal sites have increased to 28,413 (29 March 2009: 27,692) an
increase of 721. The retail network in the UK and Ireland has grown
to 22,669 (29 March 2009: 21,990) an increase of 3% on last year end.
Following the appointment of an administrator to two medium sized
multiple retailers, we have revised the target for terminal growth in
the UK to 1,100 from 1,500.
Analysis of sites At At At
27 September 28 September Increase 29 March
2009 2008 % 2009
UK and Ireland terminal 22,669 20,772 9 21,990
sites
PayPoint Romania terminal 5,744 4,743 21 5,702
sites
Total terminal sites 28,413 25,515 11 27,692
ATM sites 2,306 2,165 7 2,249
Internet merchants 5,243 5,111 3 5,160
Financial review
Revenue for the first six months was £96.4 million (2008: £109.3
million), down 12%, driven mainly by the decline in transaction
volumes in mobile top-ups where PayPoint acts as principal(1).
Cost of sales was £67.6 million (2008: £80.9 million), a decrease of
17%, which is greater than the rate of decrease in revenue, mainly
due to the reduction in mobile top-ups where PayPoint is principal(1)
and the reduction in commission payable to retail agents.
Depreciation and amortisation have decreased to £2.6 million (2008:
£3.2 million), down 17%, mainly due to some ATMs and intangible
assets becoming fully written down in the period. Acquiring bank
charges are down 29% as internet merchants are moving from the Bureau
product to ISO.
Net revenue(2) of £36.0 million (2008: £35.6 million) was up 1%,
driven primarily by volume growth and mix of transactions. Gross
profit improved to £28.9 million (2008: £28.4 million), 2% ahead of
the same period last year, with a gross margin of 29.9% (2008:
26.0%).
Operating costs (administrative expenses) were £14.2 million (2008:
£14.2 million). Operating costs in the UK terminal and ATM businesses
were down 3% on last year, whilst costs in PayPoint.net and PayPoint
Romania have increased, as we continue to invest in these companies.
Operating profit was £14.7 million (2008: £14.2 million), up 3%,
excluding the losses in Collect+. The operating margin(3) increased
to 40.7% (2008: 39.8%).
Our share of the loss in the period of our parcels joint venture,
Collect+, was, as expected, £1.0 million (before tax relief).
Profit before tax was £13.8 million (2008: £15.3 million), down 10%
on the same period last year as a consequence of the start up loss in
Collect+ and substantially lower investment income on surplus cash
balances. The tax charge was £4.1 million (2008: £4.5 million) and
the effective tax rate was 30% (2008: 29%).
Operating cash flow was £6.6 million, (2008: £13.3 million),
reflecting corporation tax payments of £9.5 million (2008: £5.1
million). Capital expenditure of £1.6 million (2008: £2.1 million)
reflected spend on new terminals in the UK and Romania and on ATMs.
Collect+ funding was £0.9m and the purchase of own shares for Long
Term Incentive Plans cost £0.5 million (2008:£2.5 million). Equity
dividends paid were £7.8 million (2008: £7.0 million). Net interest
received reduced to £0.1 million (2008: £1.0 million) as a result of
lower interest rates. Net cash and cash equivalents at the period end
were £32.2 million (2008: £28.2 million) including client cash of
£7.2 million (2008: £8.0 million).
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
3 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 or operations are
disclosed on page 20.
Dividend
The board has reviewed the dividend and in the light of the group's
ability to generate strong operating cash flows, its cash reserves
and undrawn borrowing facilities, has concluded that there is ample
capacity to increase substantially the dividend, without adversely
affecting the group's growth prospects. Accordingly, the directors
have declared an interim dividend of 7.4p per share (2008: 6.0p)
payable on 15 December to shareholders on the register at 4 December
2009.
Liquidity and going concern
The group has cash of £32 million, no debt and an unsecured loan
facility of £35 million with a remaining term of nearly two years.
Cash and borrowing capacity is adequate to meet the foreseeable needs
of the group taking account of any risks (see page 20). The condensed
financial statements have therefore been prepared on a going concern
basis.
Economic climate
The bill and general payments sector is robust in a recession, where
consumers' discretion in expenditure is limited for essential
services. The internet payment market continues to grow
substantially. 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 PayPoint Romania, 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 chargebacks but this is mitigated by cash
retention.
Outlook
We expect further growth in transaction volumes and net revenue in
the UK from increases in our market share and the growth in our
network. In Romania, we have already completed signing up most of the
major utilities for bill payment and installed 2,260 bill enabled
terminals and we plan to roll out a further 700 bill payment
terminals in the second half. We expect PayPoint Romania to be
break-even next financial year. In PayPoint.net, the migration of
large merchants to our ISO product at lower margins, which has held
back results, will complete in the second half, following which,
growth will resume.
Trading since 28 September has been in line with the company's
expectations and the directors are confident that the company will
meet market expectations.
David Newlands Dominic Taylor
Chairman Chief Executive
19 November 2009
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
6 months 6 months Year ended
ended ended 29 March
27 September 28 September 2009
2009 2008 £000
Continuing operations Note £000 £000
Revenue 2 96,410 109,341 224,351
Cost of sales 2 (67,555) (80,931) (160,496)
Gross profit 28,855 28,410 63,855
Administrative expenses (14,195) (14,244) (30,171)
Operating profit 14,660 14,166 33,684
Share of loss of joint (964) - (323)
venture
Investment income 118 1,142 1,275
Finance costs (3) (4) (34)
Profit before tax 13,811 15,304 34,602
Tax 3 (4,102) (4,475) (10,818)
Profit for the period 9,709 10,829 23,784
Earnings per share
Basic 4 14.4p 16.1p 35.6p
Diluted 4 14.3p 16.0p 35.3p
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
+-------------------------------------------------------------------+
| | | Unaudited | Unaudited | Audited |
| | | 6 months | 6 months | Year |
| | | ended | ended | ended |
| | | 27 | 28 | 29 March |
| | | September | September | 2009 |
| | Note | 2009 | 2008 | £000 |
| | | £000 | £000 | |
|-------------------------+------+-----------+-----------+----------|
| Exchange differences on | | | | |
| translation of foreign | 8 | 140 | (19) | 190 |
| operations | | | | |
|-------------------------+------+-----------+-----------+----------|
| Net income / (loss) | | 140 | (19) | 190 |
| recognised directly in | | | | |
| equity | | | | |
|-------------------------+------+-----------+-----------+----------|
| Profit for the period | | 9,709 | 10,829 | 23,784 |
|-------------------------+------+-----------+-----------+----------|
| Total comprehensive | | | | |
| income for the period | | 9,849 | 10,810 | 23,974 |
+-------------------------------------------------------------------+
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
27 September 28 September 29 March
2009 2008 2009
Note £000 £000 £000
Non-current assets
Goodwill 27,767 27,428 27,628
Other intangible assets 1,658 2,264 1,973
Property, plant and equipment 15,639 12,235 16,161
Investment in joint venture 64 - 177
Deferred tax asset 1,300 1,530 1,128
Investment 405 375 375
46,833 43,832 47,442
Current assets
Inventories 1,253 1,865 1,213
Trade and other receivables 23,013 24,257 26,260
Cash and cash equivalents 7 32,180 28,224 36,345
56,446 54,346 63,818
Total assets 103,279 98,178 111,260
Current liabilities
Trade and other payables 35,886 39,999 40,853
Current tax liabilities 4,110 6,536 9,153
Obligations under finance 1 28 9
leases
39,997 46,563 50,015
Non-current liabilities
Other liabilities 293 317 278
293 317 278
Total liabilities 40,290 46,880 50,293
Net assets 62,989 51,298 60,967
Equity
Share capital 8 226 226 226
Investment in own shares 8 (370) (926) (926)
Share premium 8 25 - 25
Share based payment reserve 8 2,239 1,996 2,489
Translation reserve 8 648 299 508
Retained earnings 8 60,221 49,703 58,645
Total equity 62,989 51,298 60,967
Condensed Consolidated statement of changes in equity
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
Note 27 September 28 September 29 March
2009 2008 2009
£000 £000 £000
Opening equity 60,967 49,587 49,587
Profit for the period 9,709 10,829 23,784
Dividends paid (7,848) (7,023) (11,077)
Investment in own shares 5 (490) (2,489) (2,489)
Exchange differences on 140 (19) 190
translation of foreign
operations
Increase in share based
payment 511 413 947
reserve
New shares issued - - 25
Closing equity 62,989 51,298 60,967
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
Note 27 September 28 September 29 March
2009 2008 2009
£000 £000 £000
Net cash from operating 9 6,591 13,322 32,619
activities
Investing activities
Interest received 85 1,016 1,192
Purchase of property, plant (1,634) (2,128) (9,158)
and equipment
Proceeds from disposal of 39 31 40
property, plant and equipment
Acquisition of subsidiary - (2,108) (2,108)
Investment 5 (30) - (500)
Loan to joint venture 5 (850) - -
Purchase of own shares 5 (490) (2,489) (2,489)
Net cash used in investing (2,880) (5,678) (13,023)
activities
Financing activities
Repayments of obligations - (41) (61)
under finance leases
Dividends paid (7,848) (7,023) (11,077)
Net cash used in financing (7,848) (7,064) (11,138)
activities
Net (decrease) / increase in (4,137) 580 8,458
cash and cash equivalents
Cash and cash equivalents at 36,345 27,727 27,727
beginning of period
Effect of foreign exchange (28) (83) 160
rate changes
Cash and cash equivalents at 32,180 28,224 36,345
end of period
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 21. The information shown
for the year ended 29 March 2009, which is prepared under
International Financial Reporting Standards (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 year ended 29 March 2009, prepared under IFRS, was
unqualified, did not draw attention to any matters by way of emphasis
and did not contain a statement under section 237 of the Companies
Act 1985 and has been filed with the Registrar of Companies.
The adoption of IFRS 8 Operating Segments has resulted in the
segmental disclosures previously required by IAS 14 Segment Reporting
being replaced by those required under IFRS 8. The segments
identified in accordance with IFRS 8 have not been changed from those
previously identified as business segments under IAS 14.
The adoption of the revision to IAS 1 has resulted in the
consolidated statement of changes in equity being presented as a
primary statement (previously disclosed as a note titled
Reconciliation of changes in equity) and disclosure of the tax impact
of individual items in the consolidated statement of comprehensive
income. In addition, the group has elected to continue to present a
separate income statement and statement of comprehensive income.
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 8.
2. Segmental reporting, net revenue analysis, cost of sales and gross
throughput
(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 retailers and clients, the settlement of funds (collection and
transmission) and transmission of data in a secure environment, by
the application of technology.
The application of technology is directed on a group basis 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 net revenue analysis 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 and geographical information
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
sales value to retailers of mobile top-ups where PayPoint acts as
principal and, for the bureau sales of PayPoint.net, it includes
external processing charges which are amounts billed to merchants
that are passed on to the sponsoring bank.
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.
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.
6 months 6 months Year
ended ended ended
27 September 28 September 29 March
2009 2008 2009
£000 £000 £000
Revenue - transaction processing 95,607 108,494 222,693
- rental income of 803 847 1,658
ATMs
Revenue 96,410 109,341 224,351
less:
Commission payable to retail (36,172) (41,234) (83,891)
agents
Cost of mobile top-ups as (22,976) (30,749) (59,317)
principal
Acquiring bank charges (1,272) (1,797) (3,745)
Net revenue 35,990 35,561 77,398
6 months 6 months Year
ended ended ended
27 September 28 September 29 March
2009 2008 2009
£000 £000 £000
Cost of sales
Commission payable to retail 36,172 41,234 83,891
agents
Cost of mobile top-ups as 22,976 30,749 59,317
principal
Acquiring bank charges 1,272 1,797 3,745
Depreciation and amortisation 2,631 3,177 5,698
Other 4,504 3,974 7,845
Total cost of sales 67,555 80,931 160,496
Geographical information:
6 months 6 months Year
ended ended ended
27 September 28 September 29 March
2009 2008 2009
£000 £000 £000
Revenue
UK 70,699 75,762 159,290
Ireland 12,577 15,429 29,579
Romania 13,134 18,150 35,482
Total 96,410 109,341 224,351
Non-current
assets
UK 45,194 41,451 45,423
Ireland
37 74 61
Romania 1,602 2,307 1,958
Total 46,833 43,832 47,442
3. Tax on profit of ordinary activities
6 months 6 months Year
ended ended ended
27 September 28 September 29 March
2009 2008 2009
£000 £000 £000
Current tax 4,274 4,433 10,355
Deferred tax (172) 42 463
Total 4,102 4,475 10,818
4. Earnings per share
The basic and diluted earnings per share are calculated on the
following profit and number of shares.
6 months 6 months Year
ended ended ended
27 September 28 September 29 March
2009 2008 2009
£000 £000 £000
Profit for the purposes of basic 9,709 10,829 23,784
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 67,384,136 67,236,551 66,754,486
shares
(for basic earnings per share)
Potential dilutive ordinary
shares: 112,486 99,693 111,828
Deferred share bonus
Long term incentive plan 490,573 409,654 515,410
Diluted basis 67,987,195 67,745,898 67,381,724
5. Related party transactions
On 5 June 2009, PayPoint released the second tranche of its long term
incentive plan awards to the three executive directors and seven
senior managers. PayPoint Network Limited Employee Investment Trust
(the Trust) acquired 23,701 ordinary shares at 532.4 pence per share
in the open market. 68,273 shares were then sold by participating
directors and managers to the Trust at 532.4 pence per share.
Accordingly, PayPoint has funded £490,000 (excluding 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 IFRS 2 of £285,000 has been charged to reserves.
PayPoint has entered into a loan agreement with its 50:50 joint
venture Drop and Collect Limited (trading as Collect +) and during
the period it has lent Drop and Collect Limited £850,000.
Investment in OB10
In March 2008, PayPoint purchased shares in OB10, a company that
specialises in electronic invoicing. During the period, PayPoint
subscribed for a further £30,000 of shares under a rights issue,
resulting in a shareholding at 27 September 2009 of 1.04% (29 March
2009: 1.05%).
6 months 6 months Year
ended ended ended
27 September 28 September 29 March
2009 2008 2009
£000 £000 £000
Investment at cost 405 375 375
In the view of the directors, the aggregate cost of £405,000
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 all hold shareholdings in OB10 as
follows:
6 months 6 months Year
ended ended ended
Directors' shareholding in OB10 27 September 28 September 29 March
2009 2008 2009
% % %
David Newlands 4.73 4.10 4.10
Dominic Taylor 1.42 0.42 0.42
George Earle 0.42 0.42 0.42
Nick Wiles (appointed 22 October 1.04
2009)
Eric Anstee 0.08 -
6. Dividend
The interim dividend of 7.4p (2008: 6.0p) was declared on 19 November
2009 and, accordingly, has not been recorded as a liability as at 27
September 2009. The total dividend in respect of the year ended 29
March 2009 was 17.6p per share
7. Cash and cash equivalents
Included within cash and cash equivalents is £7.2 million (September
2008: £8.0 million, March 2009: £7.5 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
6 months 6 months Year
ended ended ended
27 September 28 September 29 March
2009 2008 2009
£000 £000 £000
Authorised share capital
4,365,352,200 ordinary shares of 14,551 14,551 14,551
1/3p each
Called up, allotted and fully paid
share capital
67,737,619 ordinary shares of 1/3p 226 226 226
each
Investment in own shares
At start of period (926) (935) (935)
Acquired in period (see note 6) (490) (2,489) (2,489)
Used on share scheme vesting 1,046 2,498 2,498
At end of period (370) (926) (926)
Share premium
At start of period 25 - -
Arising on issue of shares - - 25
At end of period 25 - 25
Share based payment reserve
At start of period 2,489 2,281 2,281
Additions in period 460 413 759
Released in period (761) (698) (764)
Current tax on awards 51 - 515
Other adjustments - - (302)
At end of period 2,239 1,996 2,489
Translation reserve
At start of period 508 318 318
Movement in the period 140 (19) 190
At end of period 648 299 508
Retained earnings
At start of period 58,645 47,697 47,697
Profit for the period 9,709 10,829 23,784
Dividends paid (7,848) (7,023) (11,077)
Adjustment on share scheme vesting (285) (1,800) (1,759)
(see note 6)
At end of period 60,221 49,703 58,645
9. Notes to the cash flow statement
6 months 6 months Year
ended ended ended
27 September 28 September 29 March
2009 2008 2009
£000 £000 £000
Operating profit 14,660 14,166 33,684
Adjustments for:
Depreciation on property, plant 2,316 2,700 4,907
and equipment
Amortisation of intangible assets 315 477 791
Share based payment expense 460 413 759
Operating cash flows before 17,751 17,756 40,141
movements in working capital
(Increase)/decrease in inventories (39) (609) 155
Decrease in receivables 610 4,454 6,178
Decrease in payables
- client cash (335) (18) (454)
- other payables (1,895) (3,187) (5,433)
Cash generated by operations 16,092 18,396 40,587
Corporation tax paid (9,501) (5,074) (7,940)
Interest and bank charges paid - - (28)
Net cash from operating activities 6,591 13,322 32,619
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
a) the condensed set of financial statements which has been
prepared in accordance
with IAS 34 'Interim Financial Reporting'; gives a true and
fair view of the assets,
liabilities, financial position and profit of the Group as
required by DTR 4.2.4R;
b) the half yearly financial report includes a fair review of the
information required by
DTR 4.2.7R (indication of important events during the first
24 weeks and description
of principal risks and uncertainties for the remaining 28
weeks of the year); and
c) the half yearly financial report includes a fair review of
the information required by
DTR 4.2.8R (disclosure of related parties' transactions and
changes therein).
By order of the board.
David Newlands Dominic Taylor
Chairman Chief Executive
19 November 2009
RISKS
PayPoint's business, financial condition or operations could be
materially and adversely affected by the risks summarised below.
Although management takes steps to mitigate risks where possible or
where the cost of doing so is reasonable in relation to the
probability and seriousness of the risk, it may not be possible to
avoid the materialisation 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 on |
| renewal at unattractive | attractive terms |
| margins | |
|----------------------------+--------------------------------------|
| Dependence on key | retain and recruit key staff through |
| executives | a mixture of basic salary, plus |
| | 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 | mitigate the consequences of |
| multiple retail agent | insolvency both in terms of the bad |
| | debt risk and the impact of such |
| | insolvency on our network coverage |
|----------------------------+--------------------------------------|
| Technological changes | keep pace with technological changes |
| | and introduce new developments to |
| | compete effectively |
|----------------------------+--------------------------------------|
| 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 any future capital on |
| in future | sufficiently attractive terms, |
| | particularly in view of prevailing |
| | economic conditions and the |
| | availability of credit |
|----------------------------+--------------------------------------|
| Economic, political, | to deal with the impact of any |
| legislative, taxation or | changes without affecting the growth |
| regulatory changes | or profitability of the business |
|----------------------------+--------------------------------------|
| Taxation | ensure the impact of any adverse |
| | changes is mitigated by enhanced |
| | performance |
|----------------------------+--------------------------------------|
| Fraudulent or criminal | avoid loss of client money by the |
| activity | rigorous application of controls |
|----------------------------+--------------------------------------|
| Consumers reduce number or | establish new products and services |
| value of payments via the | and keep abreast of technological |
| PayPoint network | and market changes |
+-------------------------------------------------------------------+
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 27 September 2009, which comprises the condensed
consolidated income statement, the condensed consolidated balance
sheet, the condensed consolidated statement of comprehensive income,
the condensed consolidated statement of changes in equity, the
condensed consolidated cash flow statement and related notes 1 to 9.
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 (UK and Ireland) 2410,
Review of Interim Financial Information Performed by the Independent
Auditor of the Entity, 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 Kingdom's 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 27 September 2009
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 LLP
Chartered Accountants and Registered Auditor
19 November 2009
London, UK
DIRECTORS & KEY CONTACTS
Directors
George Earle (Finance Director)
Dominic Taylor (Chief Executive)
Tim Watkin-Rees (Business Development
Director)
Eric Anstee*
David Morrison*
David Newlands* (Chairman)
Andrew Robb*
Stephen Rowley*
Nick Wiles * (appointed 22 October 2009)
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,
with operations also in Ireland and Romania. It handles over
£9.3billion from almost 550 million transactions annually for more
than 6,000 clients and merchants. The company operates several
businesses:
* The PayPoint branded retail network numbers over 22,600
terminals located in local shops (including Co-op, Spar, McColls,
Costcutter, Sainsburys Local, One Stop, Londis and thousands of
independents) in all parts of the UK and Ireland. The terminals
process 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 most leading utilities,
telecommunications suppliers and many consumer service companies;
* An ATM network which has over 2,300 'LINK' branded machines
across the UK, typically in convenience stores;
* PayPoint.net, an internet payment service provider, delivers
secure online credit and debit card payments for over 5,200 web
merchants, linking into all major UK acquiring banks;
* PayPoint Romania, a branded national retail network of over 2,260
terminals located in local shops which process cash bill payments
for all the major utilities and mobile top-ups and a further
3,500 terminals that process mobile top-ups only; and
* Collect+, a joint venture with Home Delivery Network Limited,
provides a parcel collection and drop off service at PayPoint
retailers.
PayPoint floated on the London Stock Exchange in September 2004 and
the company's market capitalisation at 27 September was £318 million.
PayPoint is widely recognised for its leadership in prepayment
systems, smart technology and consumer service.
19 November 2009
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.com.
---END OF MESSAGE---
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