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Paypoint plc (PAY)

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Thursday 20 November, 2008

Paypoint plc

Half yearly financial report for the 26 weeks e...





                            PayPoint plc
                    Half yearly financial report
              for the 26 weeks ended 28 September 2008



HIGHLIGHTS

                       26 weeks  27 weeks
                          ended     ended
                             28        30
                      September September            Like-for-like[3]
                           2008      2007 Increase %       increase %
                       £million  £million
Revenue                   109.3     103.9          5                9
Net revenue[1],[2]         35.6      34.2          4                8
Operating profit           14.2      13.9          2               11
Profit before tax          15.3      14.5          6               15
Diluted earnings per      16.0p     14.7p          9               18
share
Interim dividend           6.0p      5.3p         13



  * PayPoint's UK terminal and ATM business had like-for-like3 net
    revenues up 6% and operating costs down 3%
  * UK terminal network expanded by nearly 900 sites to 20,772 - on
    track to meet target of 1,500 additional terminals for the year
  * ATM network has increased by 7% and internet merchants have grown
    by 6% since March 2008
  * New website and restructured marketing is generating increased
    leads for our internet business.
  * Romanian bill payment service launched in August with 1,200
    branded PayPoint sites


Operating profit growth in the UK terminal and ATM business was up
22% on a like-for-like3 basis, including a slight decline in mobile
transactions and in ATM transactions per terminal, suffered in common
with other providers.  The terminal network in the UK has been
expanded to service transaction growth and mitigate the decline in
mobile volumes and the ATM estate compared to last year.

Our internet companies have been integrated to operate successfully
as a single business, PayPoint.net, and its new website and marketing
programmes have driven more leads, which will increase the number of
merchants using our service. This, combined with the introduction of
PayCash, which permits the payment in cash at PayPoint convenience
stores for consumer purchases on line, positions our internet
business for growth.

In Romania, we have launched bill payment alongside the existing
mobile top-up business and transaction volumes are growing as
expected with the four launch clients and with a further four to
follow before the year end. We also have strong interest from other
substantial bill issuers with whom we expect to sign contracts.  We
continue to invest in the roll-out of terminals in Romania at a rate
faster than we anticipated last year and this, together with the
delayed transfer of the transaction processing to the UK and the
launch of bill payment, has held back the results.  We expect the
business to be profitable next year.

David Newlands, Chairman, said "PayPoint has delivered first half
results ahead of market expectations. There are new products and
prospects in the UK and elsewhere, which provide ample opportunity
for management to continue to deliver growth."


The condensed financial statements cover the 26 week period from 31
March 2008 to 28 September 2008, the last Sunday in the month,
compared to a 27 week period ended 30 September 2007.

[1]    Net revenue is revenue less commissions paid to retail agents,
acquiring bank charges and the cost of mobile top-ups where PayPoint
is the principal.
[2]    Net revenue and operating margin are measures which the
directors believe assist with a better understanding of the
underlying performance of the group.  The reconciliation of net
revenue to statutory amounts can be found in note 2
[3]    The like-for-like basis adjusts the comparative period to 26
weeks


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

We aim to continue increasing economic value for shareholders by
expanding:

  * UK cash payments for bills, general payments, mobile top-ups,
    ticketing, money transfer and ATM cash withdrawals building on
    the strength of our brand;
  * e-commerce payments and services through PayPoint.net and new
    PayPoint products across the retail and internet businesses; and
  * international growth in selected developing countries for cash
    payment networks and as an e-commerce payment service provider.

Our terminal estate has grown by over 1,600 terminals (UK and
International) since the end of the last financial year. Transaction
volumes were up 5% and profit before tax up 6% although the period
contains one week less of trading compared to last year. Profit
before tax increased 15% excluding the extra week from the prior
period's results. Bill and general payments have grown strongly,
particularly in the UK, where prepaid gas and electric domestic price
rises have helped to increase transaction volumes. The mobile sector
overall in the UK and Ireland has seen a decrease in transaction
volumes, as consumers economise and networks offer customers more
airtime for their money. This decline has been mitigated in the UK by
the expansion of the network. In Romania, Pay Store's mobile top-ups
continued to grow and our bill payment service was launched in
September with four clients. PayPoint.net has traded as planned with
transaction volumes up 46% on last year.

Operational review
In the first 26 weeks of the financial year, PayPoint processed 249
million transactions, with a value of     £4.0 billion (2007: 236
million transactions with a value of £3.5 billion in 27 weeks), an
increase of 5% in transactions and 15% in value. On a like-for-like1
basis transaction volumes were up 10%. Commissions paid to retail
agents were reduced to £41.2 million (2007: £41.5 million), a result
of lower mobile top-ups.


Analysis of transactions


                      26 weeks  27 weeks                     53 weeks
                         ended     ended Increase/  Like for    ended
                            28        30 (decrease) like [1] 30 March
                     September September            increase     2008
                          2008      2007          %        % millions
                      millions  millions
Bill and general           152       141          8       13      311
payments[2]

Mobile top-ups              74        77        (4)      (1)      151
ATMs                         7         7          -        1       15
Internet payments           16        11         46       51       26
Total[3]                   249       236          5       10      503



[1]    The like-for-like basis adjusts the comparative period to 26
weeks
[2]    Includes debit/credit transactions
[3]    Included within the total is 9 million of international bill
and general payments and mobile top-ups (2007: 9 million).
.

Bill & general payments
PayPoint has continued to perform well in this sector with an 8%
increase in transaction volumes.

On a like-for-like[1] basis volumes were up 13%, driven by an
increase of 16% in prepaid energy volumes and growth with local
authority and water bill payments.

This increase resulted from network growth, new customer payment
options and increases in domestic energy prices during the year,
partially offset by an increase in average transaction values.


Mobile top-ups
The mobile sector overall in the UK and Ireland has seen a decrease
in transaction volumes as consumers reduce their spending and
networks offer customers more airtime for their money.

Our UK transaction volumes were down 1% on a like-for-like basis[1].
This decrease is lower than the market as we have installed nearly
900 new UK sites since the last half year.  Our share of retail cash
top-up transactions has increased to c.32% whilst our share of the
overall top-up sector has remained constant as the use of ATMs for
mobile top-ups has increased.

Pay Store mobile volumes were up 8%. In Ireland, volumes have fallen
slightly as mobile operators are offering better rates to consumers
and have been promoting internet top-ups.


ATMs
We have increased our net installations to 25 per month (2007: 17 per
month) by reducing churn.

The focus on sales continues with the strengthening of the sales team
from October to increase the number of new ATM sign-ups.

The number of transactions processed by self-fill Independent ATM
Deployers (IAD's) was down by 2% on the same period last year. We
have not seen a decrease in the number of transactions processed due
to our continual expansion in site numbers, however the average
transactions per site in the first half of the year have decreased to
568 per month (2007: 600), a reduction broadly in line with the IAD
self-fill market, which may reflect more difficult economic times for
consumers suppressing the demand for cash.


PayPoint.net - internet payments
PayPoint.net traded profitably and has added a net 303 merchants in
the first half of the year. Transaction volumes were up 46% and net
revenues have increased by 12% on last year.

Our PayCash product, which allows internet merchants' customers to
pay for goods with cash at a PayPoint retailer, has been launched.
Initially this is being offered to PayPoint.net merchants, but will
be offered more widely next year.

PayPoint Romania
We have continued to make good progress in Romania.  We have now
completed the transfer of transaction processing to our operations
centre in the UK, at the same time allowing us to process mobile
top-ups for Cosmote, the third largest mobile operator in Romania.
 We have appointed a new Managing Director and restructured the sales
team, increasing the sales force by 30% compared to the same time
last year.

We have launched bill payment with four clients, including the
national telecoms provider Romtelecom and Distrigaz, one of the two
leading gas suppliers on our newly developed international platform.
Bill payment transaction volumes are growing.  We have rolled out
1,200 bill payment enabled terminals and plan to install at least a
further 800 terminals this financial year.  A delay in transferring
processing to the UK adversely impacted results as bill payment and
Cosmote top-ups were delayed.  Both these issues have been resolved.
We expect the business to be profitable next year.


[1.]  The like-for-like basis adjusts the comparative period to 26
weeks
Network growth
Terminal sites have increased to 25,515 (30 March 2008: 23,895) an
increase of 1,620.

The retail network in the UK and Ireland has grown to 20,772 (30
March 2008: 19,878) an increase of 4% on last year end.

A total of 3,136 sites (30 March 2008: 2,833) already equipped with
our terminals also have electronic point of sale (EPoS) connections,
to allow mobile top-ups transactions over the retailers' own till
systems.



Analysis of sites                  At           At                At
                         28 September 30 September Increase 30 March
                                 2008         2007        %     2008
PP terminal only               17,636       16,492        7   17,045
PP terminal and EPoS            3,136        2,525       24    2,833
PP terminal sites              20,772       19,017        9   19,878
Pay Store terminal sites        4,743        3,607       31    4,017
Total terminal sites           25,515       22,624       13   23,895
ATM sites                       2,165        1,957       11    2,016
Internet merchants              5,111        4,545       12    4,808


EPoS only sites in the UK and sites in Romania that sell only scratch
cards are not included in the table above.


New services
PayPoint continues to introduce new services to stimulate further
transaction growth in both retail and
e-commerce payments and services. For example, we are benefiting from
the increases in transaction volumes in electronic money from
services such as prepay debit cards, saving schemes, internet
currencies, stored value cards and money transfers. We have continued
to attract new clients directly and through partners including the
new PayPal prepay debit card. We are established as the premier
convenience loading channel for cash on to both prepay and stored
value cards.

Financial review
Revenue for the first 26 weeks was £109.3 million (2007:27 weeks
£103.9 million), up 5% driven by the increase in transaction volumes
in particular from mobile top-ups where PayPoint acts as
principal[1]. On a like-for-like basis revenue was up 9%. Cost of
sales was £80.9 million (2007: £76.6 million), an increase of 6%,
which is slightly greater than the rate of increase in revenue
because of the increase in mobile top-ups where PayPoint is
principal. Agents' commission of £41.2 million (2007: £41.5 million)
is lower than last year due to the extra week in the comparative
period and a reduction in commission of 1% by Vodafone. Depreciation
and amortisation have increased to £3.2 million (2007: £2.6 million)
up 20% as a result of our continued terminal roll out in the UK and
Romania.

Net revenue[2] of £35.6 million (2007: £34.2 million) was up 4%,
driven primarily by volume growth.

Gross profit improved to £28.4 million (2007: £27.3 million), 4%
ahead of the same period last year, with a gross margin of 26% (2007:
26%). Gross margin, excluding the cost of Irish and Romanian
mobile-top-ups1 improved to 36% (2007: 35%).


[1]   In Ireland and Romania, PayPoint is principal in the sale of
mobile top-ups and accordingly the face value of the top-up is
included in sales and the corresponding cost in cost of sales
[2]   Net revenue is revenue less commissions paid to retail agents,
acquiring bank charges and less the cost of mobile top-ups where
PayPoint is the principal

Operating costs (administrative expenses) have risen to £14.2 million
(2007: £13.4 million), an increase of 7%. Operating costs in the UK
terminal and ATM business were down 3% on last year, whilst costs in
PayPoint.net and Pay Store have increased.

Operating profit was £14.2 million (2007: £13.9 million), up 2%,
although the operating margin[1] decreased slightly to 40% (2007:
41%), mainly as a result of the loss in Romania and the extra week in
the comparative period last year.  On a like-for-like basis[2]
operating profit was up 11%.

Profit before tax was £15.3 million (2007: £14.5 million), up 6% on
last year. On a like-for-like basis[2], profit before tax was up 15%.
The tax charge was £4.5 million (2007: £4.4 million) and the
effective tax rate was 29% (2007: 30%) reflecting the reduction in
the UK corporation tax rate and unrelieved losses in Romania.

Operating cash flow was £13.3 million with no change in client
cash[3] (2007: £10.9 million including an inflow of £0.5 million in
respect of client cash), reflecting strong conversion of profit to
cash. Capital expenditure of £2.1 million (2007: £1.9 million)
reflected spend on new terminals in the UK and Romania, ATMs, and the
international processing platform.

Net interest received was £1.1 million (2007: £0.6 million) and
equity dividends paid were £7.0 million
(2007: £6.2 million).

Related party transactions
Related party transactions are disclosed in note 6.

Risks
Risks to PayPoint's business, financial condition or operations are
disclosed on page 16.

Dividend
The board have declared an interim dividend payable on 22 December of
6.0p per share (2007: 5.3p) to shareholders on the register at 5
December 2008.

Economic climate
The company's bill and general payments sector is robust in a
recession, where the consumers' discretion in expenditure is limited
for essential services.   The internet payment market continues to
grow substantially, although now forecast at lower rates. Modest
adverse impact on mobile top-ups in developed economies and in ATM
cash withdrawal rates is evident.

PayPoint's exposure to agent debt is limited as credit granted to
retailers is restricted by daily direct debiting for all UK and Irish
transactions other than EPoS mobile top-ups (which are collected
weekly) although there is some concentration of risk in multiple
retailers.  Most of the group's clients in the UK other than mobile
operators bear the cost of agent bad debt.  In Pay Store, the risk of
bad debt lies with the company.  In PayPoint.net, exposure is limited
to receivables from merchants for fees, except in the case of bureau
internet merchants, where PayPoint.net retains credit risk on
merchant default for charge backs but this is mitigated by cash
retention.

The company has strong operating cash flow, net cash and a revolving
credit agreement for £35 million with a three year term`.


[1]    Operating margin is operating profit as a percentage of net
revenue
[2]    The like-for-like basis adjusts the comparative period to 26
weeks
[3]    Client cash is held on behalf of clients where PayPoint has
title to the funds. An equivalent balance is included within trade
payables.


Outlook
We expect further growth in transaction volumes and revenue in the UK
from increases in our market share, and the growth in our network. In
Romania, we have already installed 1,200 bill enabled terminals and
we anticipate exceeding our plan of 1,500 by at least 500 additional
terminals. We expect Pay Store to trade profitably next financial
year. In PayPoint.net, which increased its revenue and profits,
revenue growth should accelerate in the second half of the year,
following the introduction of the new website, unified new branding
and the launch of PayCash.

Trading since 28 September has been in line with the company's
expectations and the directors are confident that the company will
continue to deliver growth.



David Newlands             Dominic Taylor
Chairman                   Chief Executive

20 November 2008




CONDENSED CONSOLIDATED INCOME STATEMENT


                                Unaudited    Unaudited        Audited
                                 26 weeks     27 weeks 53 weeks ended
                                    ended        ended       30 March
                             28 September 30 September           2008
                                     2008         2007           £000
Continuing operations   Note         £000         £000
Revenue                    2      109,341      103,950        212,145
Cost of sales              2     (80,931)     (76,645)      (155,591)
Gross profit                       28,410       27,305         56,554
Administrative expenses          (14,244)     (13,359)       (27,354)
Operating profit                   14,166       13,946         29,200
Investment income                   1,142          586          1,262
Finance costs                         (4)         (43)           (58)
Profit before tax                  15,304       14,489         30,404
Tax                        3      (4,475)      (4,353)        (9,424)
Profit for the period              10,829       10,136         20,980
Earnings per share
Basic                      5        16.1p        15.0p          31.1p
Diluted                    5        16.0p        14.7p          30.8p




CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME & EXPENSE


                                      Unaudited    Unaudited  Audited
                                       26 weeks     27 weeks 53 weeks
                                          ended        ended    ended
                                   28 September 30 September 30 March
                                           2008         2007     2008
                              Note         £000         £000     £000
Exchange differences on
translation of foreign           9         (19)           34      318
operations
Net (loss) / income                        (19)           34      318
recognised
directly in equity
Profit for the period                    10,829       10,136   20,980
Total recognised income and
expenses for the period                  10,810       10,170   21,298


CONDENSED CONSOLIDATED BALANCE SHEET


                                      Unaudited    Unaudited  Audited
                                   28 September 30 September 30 March
                                           2008         2007     2008
                              Note         £000         £000     £000
Non-current assets
Goodwill                                 27,428       26,256   27,428
Other intangible assets                   2,264        3,222    2,742
Property, plant and equipment            12,235       13,428   13,114
Deferred tax asset                        1,530        1,552    1,571

Investment                                  375            -      375
                                         43,832       44,458   45,230

Current assets
Inventories                               1,865        1,088    1,250
Trade and other receivables              24,257       25,431   28,285
Cash and cash equivalents        7       28,224       15,981   27,727
                                         54,346       42,500   57,262
Total assets                             98,178       86,958  102,492
Current liabilities
Trade and other payables                 39,999       40,125   45,275
Current tax liabilities                   6,536        4,858    7,226
Obligations under finance                    28          156       70
leases
                                         46,563       45,139   52,571
Non-current liabilities
Other liabilities                           317          274      334
                                            317          274      334

Total liabilities                        46,880       45,413   52,905

Net assets                               51,298       41,545   49,587
Equity

Share capital                    8          226          226      226
Investment in own shares         8        (926)        (935)    (935)
Share based payment reserve      8        1,996        1,789    2,281
Translation reserve              8          299           34      318
Retained earnings                8       49,703       40,431   47,697
Total equity                     9       51,298       41,545   49,587


CONDENSED CONSOLIDATED CASH FLOW STATEMENT


                                      Unaudited    Unaudited  Audited
                                       26 weeks     27 weeks 53 weeks
                                          ended        ended    ended
                              Note 28 September 30 September 30 March
                                           2008         2007     2008
                                           £000         £000
                                                                 £000
Net cash from operating         11       13,322       10,920   29,618
activities

Investing activities
Interest received                         1,016          549    1,252
Purchase of property, plant             (2,128)      (1,854)  (5,519)
and
equipment

Proceeds from disposal of                    31           53      110
property, plant
and equipment

Acquisition of subsidiary       10      (2,108)      (8,219)  (8,227)

Investment                                    -            -    (375)

Purchase of own shares           6      (2,489)      (3,489)  (3,467)

Net cash used in investing              (5,678)     (12,960) (16,226)
activities



Financing activities

Repayments of obligations                  (41)        (144)    (246)
under  finance
leases

Dividends paid                          (7,023)      (6,159)  (9,738)

Net cash used in financing              (7,064)      (6,303)  (9,984)
activities
Net increase/(decrease) in                  580      (8,343)    3,408
cash and
cash equivalents
Cash and cash equivalents at             27,727       24,324   24,324
beginning
of period

Effect of foreign exchange                 (83)            -      (5)
rate changes
Cash and cash equivalents at             28,224       15,981   27,727
end of
period




NOTES TO CONDENSED FINANCIAL STATEMENTS

1. Accounting policies
These condensed financial statements have been prepared in accordance
with IAS 34 on a historical cost basis and the same accounting
policies, presentation methods and methods of computation are
followed in this condensed set of financial statements as applied in
the group's latest annual audited financial statements.

Basis of preparation
The condensed financial statements contained in this report are
unaudited, but have been formally reviewed by the auditors and their
report to the company is set out on page 17. The information shown
for the 53 weeks ended 30 March 2008, which is prepared under IFRS,
does not constitute statutory accounts within the meaning of section
240 of the Companies Act 1985. The report of the auditors on the
statutory accounts for the 53 weeks ended 30 March 2008, prepared
under International Financial Reporting Standards (IFRS), was
unqualified and did not contain a statement under section 237 of the
Companies Act 1985 and has been filed with the Registrar of
Companies.

At the date of authorisation of these condensed financial statements,
the following standards and interpretations which have not been
applied in these condensed financial statements were in issue but not
yet effective:

IAS1 (Revised) Presentation of financial statements
IAS23 (Revised) Borrowing costs
IAS27 (Revised) Consolidated and separate financial statements
IFRS3 (Revised) Business combinations
IFRS8 Operating segments
IFRIC13 Customer loyalty programme

The directors do not anticipate that the adoption of these standards
and interpretations will have a material impact on the condensed
financial statements of the group. The condensed financial statements
are presented in pounds sterling because it is the currency of the
primary economic environment in which the group operates. The
directors consider that there are no critical accounting judgements
and key sources of estimation uncertainty in applying the group's
accounting policies.

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

(i)  Segmental information
   (a) Geographical segments. The group operates in the UK, Republic
of Ireland and Romania but the group has only one reportable
geographical segment as defined in International Accounting Standard
14 Segment Reporting due to the fact that principally all operations
occur in the UK.
   (b) Classes of business. The group has one class of business,
being payment collection and distribution services.

(ii) Analysis of net revenues by sector, cost of sales and gross
throughput
Revenue comprises the value of sales (excluding VAT) of services in
the normal course of business and includes amounts billed to
customers to be passed on to retail agents as commission payable, the
face value of mobile top-ups where PayPoint acts as principal and for
Metacharge it includes external processing charges which are amounts
billed to merchants that are passed onto the sponsoring bank. Cost of
sales includes the cost to the group of the sale, including
commission to retail agents, the cost of mobile top-ups where
PayPoint is the principal in the supply chain and sponsoring bank
charges.

Revenue performance of the business is measured by net revenue which
is calculated as the total revenue from clients less commission
payable to retail agents, acquiring bank charges and the cost of
mobile top-ups where PayPoint is the principal in the supply chain.

Although there is only one class of business, since the risks and
returns are similar across markets in which the group operates, the
group monitors net revenue (see below) with reference to each sector.

Gross throughput represents payments made by consumers using the
PayPoint service, for bill and general payments, mobile top-ups
(including scratch cards), cash withdrawals from ATMs and the value
of transactions via the internet.


                                      26 weeks     27 weeks  53 weeks
                                         ended        ended     ended
                                  28 September 30 September  30 March
                                          2008         2007      2008
                                          £000         £000      £000


Revenue - transaction processing       108,494      103,030   210,528
               - lease rental of           847          920     1,617
ATMs
Revenue                                109,341      103,950   212,145

less:

Commission payable to retail          (41,234)     (41,463)  (83,439)
agents
Cost of mobile top-ups as             (30,749)     (26,688)  (55,468)
principal

Acquiring bank charges                 (1,797)      (1,618)   (3,378)

Net revenue                             35,561       34,181    69,860

Net revenue by sector

Bill payments                           13,828       13,644    30,652
Mobile top-ups                          13,025       12,834    25,153
ATMs                                     3,331        3,275     6,561
Internet payments                        3,498        3,124     4,927
Other                                    1,879        1,304     2,567
Net revenue                             35,561       34,181    69,860

UK                                      33,870       32,709    66,507
International[1]                         1,691        1,472     3,353

Net revenue                             35,561       34,181    69,860

Commission payable is included within cost of sales as shown below

Cost of sales
Commission payable to retail          (41,234)     (41,463)  (83,439)
agents
Cost of mobile top-ups as             (30,749)     (26,688)  (55,468)
principal
Acquiring bank charges                 (1,797)      (1,618)   (3,378)
Depreciation and amortisation          (3,177)      (2,643)   (5,719)
Other                                  (3,974)      (4,233)   (7,587)

Total cost of sales                   (80,931)     (76,645) (155,591)

Gross throughput

Transactions via PayPoint
terminals, retailer                  3,028,095    2,774,365 5,931,224
EPoS systems and sale of scratch
cards
Withdrawals via ATMs                   171,005      167,961   328,237
Internet transactions                  822,810      545,619 1,286,887
Gross throughput                     4,021,910    3,487,945 7,546,348



[1] International comprises of Ireland and Romania
3. Tax on profit of ordinary activities


                 26 weeks     27 weeks 53 weeks
                    ended        ended    ended
             28 September 30 September 30 March
                     2008         2007     2008
                     £000         £000     £000
Current tax         4,433        4,373    9,423
Deferred tax           42         (20)        1
Total               4,475        4,353    9,424



4.  Dividend
The interim dividend of 6.0p (2007: 5.3p) was declared on 20 November
2008 and accordingly has not been recorded as a liability as at 28
September 2008. The total dividend in respect of the 53 weeks ended
30 March 2008 was 15.7p per share.

5.  Earnings per share
Basic and diluted earnings per share

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


                                     26 weeks     27 weeks   53 weeks
                                        ended        ended      ended
                                 28 September 30 September   30 March
                                         2008         2007       2008
                                         £000         £000       £000
Profit for the purposes of basic       10,829       10,136     20,980
earnings per
share being net profit
attributable to equity
holders of the parent and for
diluted earnings
per share
                                    Number of    Number of  Number of
                                       shares       shares     shares

Weighted average number of         67,236,551   67,688,522 67,369,600
shares
(for basic earnings per share)
Potential dilutive ordinary
shares:                                99,693      100,878    119,903
Deferred share bonus
Long term incentive plan              409,654    1,036,849    669,449
Diluted basis                      67,745,898   68,826,249 68,158,952



6. Related party transactions
On 13 June 2008 the company released the second tranche of its long
term incentive plan awards to the three executive directors and six
senior managers. In order to partly satisfy the company's
obligations, Paypoint Network Limited Employee Investment Trust (the
Trust) acquired 200,299 ordinary shares at the mid market closing
price of 600.2 pence per share, in aggregate £1,206,000, from RIT
Capital Partners and the Weinstock Estate (both of which are
connected to David Morrison, a non-executive director of the
company).  163,432 shares were sold at 600.2 pence per share, in
aggregate £984,000, by participating directors and managers to the
Trust. The Trust also purchased 41,395 shares at an average of 612.5
pence per share, in aggregate £253,000, in the open market.

On 19 September 2008 the company released another tranche of its long
term incentive plan awards to one senior manager, using 17,346 shares
owned by the Trust. As a result of this tranche a further 7,112
shares were sold at 650 pence per share, in aggregate £46,000 by the
senior manager to the Trust.

Accordingly, the company has funded £2,489,000 (excluding £18,000
deal costs) for the purchase of its own shares.   The excess of the
cost of the shares acquired over their fair value determined at the
date of grant in accordance with IFRS2 of £1,800,000 has been charged
to reserves.

7. Cash and cash equivalents
Included within cash and cash equivalents is £8.0 million (September
2007: £7.8 million, March 2008:
£8.0 million) relating to monies collected on behalf of PayPoint
clients where PayPoint has title to the funds (client cash). An
equivalent balance is included within trade payables.

8. Share capital and reserves


                                       26 weeks     27 weeks 53 weeks
                                          ended        ended    ended
                                   28 September 30 September 30 March
                                           2008         2007     2008
                                           £000         £000     £000
Authorised share capital
4,365,352,200 ordinary shares of         14,551       14,551   14,551
1/3 p each
Called up, allotted and fully paid
share capital
67,705,116 ordinary shares of 1/3           226          226      226
p each
Investment in own shares
At start of period                        (935)          (1)      (1)
Acquired in period (see note 6)         (2,489)      (2,533)  (2,533)
Used on share scheme vesting              2,498        1,599    1,599
At end of period                          (926)        (935)    (935)
Share based payment reserve
At start of period                        2,281        1,712    1,712
Additions in period                         413          628    1,121
Released in period                        (698)        (551)    (552)
At end of period                          1,996        1,789    2,281
Translation reserve
At start of period                          318            -        -
Movement in the period                     (19)           34      318
At end of period                            299           34      318
Retained earnings
At start of period                       47,697       38,436   38,436
Profit for the period                    10,829       10,136   20,980
Dividends paid                          (7,023)      (6,159)  (9,738)
Adjustment on share scheme vesting      (1,800)      (1,982)  (1,981)
(see note 6)
At end of period                         49,703       40,431   47,697


9. Statement of changes in equity

                                       26 weeks     27 weeks 53 weeks
                                          ended        ended    ended
                                   28 September 30 September 30 March
                                           2008         2007     2008
                                           £000         £000     £000
Opening equity                           49,587       40,373   40,373
Profit for the period                    10,829       10,136   20,980
Dividends paid                          (7,023)      (6,159)  (9,738)
Investment in own shares                      9        (934)    (934)
Adjustment on share scheme vesting      (2,498)      (2,533)  (2,533)
(see
note 6)
(Decrease) / increase in                   (19)           34      318
translation reserve
Increase in share based payment
 reserve                                    413          628    1,121
Closing equity                           51,298       41,545   49,587



10. Acquisition of subsidiary
In May 2008 the company paid £2,108,000, the deferred balance due for
the acquisition of Pay Store SRL, which it acquired on 15 May 2007.
The total consideration paid was £10,242,000 of which £8,134,000 was
paid in the last financial year.


11. Notes to the cash flow statement

                                       26 weeks     27 weeks 53 weeks
                                          ended        ended    ended
                                   28 September 30 September 30 March
                                           2008         2007     2008
                                           £000         £000     £000
Operating profit                         14,166       13,946   29,200
Adjustments for:

Depreciation on property, plant           2,700        2,244    4,812
and
equipment

Amortisation of intangible assets           477          399      907

Increase in share based payment             413           77    1,121
reserve

Operating cash flows before              17,756       16,666   36,040
movements in working capital

(Increase)/decrease in inventories        (609)          872      580

Decrease / (increase) in                  4,454      (2,300) (10,528)
receivables

(Decrease) / increase in payables

- client cash                              (18)          451      711

- other payables                        (3,187)      (1,037)    9,196

Cash generated by operations             18,396       14,652   35,999

Corporation tax paid                    (5,074)      (3,732)  (6,362)

Interest and bank charges paid                -            -     (19)

Net cash from operating activities       13,322       10,920   29,618



RESPONSIBILITY STATEMENT

The directors confirm that to the best of their knowledge:

a)  the condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting';
b)  the management report includes a fair review of the information
required by Disclosure and Transparency Rules (DTR) 4.2.7R
(indication of important events during the first six months and
description of principal risks and uncertainties for the remaining
six months of the year); and
c)  the management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related party transactions and
changes therein).


By order of the board



David Newlands             Dominic Taylor
Chairman                   Chief Executive

20 November 2008



RISKS

PayPoint's business, financial condition or operations could be
materially and adversely affected over the
remaining six months of the year by the risks summarised below.
Although management takes steps to mitigate risks where possible or
where the cost of doing so is reasonable in relation to the
probability and seriousness of the risk, it may not be possible to
avoid crystallisation of some or all of such risks:


+-------------------------------------------------------------------+
| Risk                      | Future prospects depend on our        |
|                           | ability to:                           |
|                           |                                       |
|---------------------------+---------------------------------------|
| Managing growth of the    | manage growth through the employment  |
| business                  | of adequate skilled resources,        |
|                           | whilst maintaining financial controls |
|                           |                                       |
|---------------------------+---------------------------------------|
| Major contract loss or    | renew contracts at expiry (over the   |
| renewal                   | next five years) on attractive terms  |
| at unattractive margins   |                                       |
|                           |                                       |
|---------------------------+---------------------------------------|
| Dependence on key         | retain and recruit key staff through  |
| executives                | a mixture of basic salary, short and  |
|                           | long-term incentive schemes           |
|                           |                                       |
|---------------------------+---------------------------------------|
| Failure of systems        | maintain financial controls, defend   |
|                           | against natural disasters, terrorist  |
|                           | attacks, sabotage and hacking         |
|                           |                                       |
|---------------------------+---------------------------------------|
| Competition               | hold and gain market share            |
|                           |                                       |
|---------------------------+---------------------------------------|
| Insolvency of a major     | avoid the consequences of insolvency  |
| multiple                  | both in terms of bad debt risk        |
| retail agent              | (where we bear it) and the impact of  |
|                           | such insolvency on our network        |
|                           | coverage                              |
|                           |                                       |
|---------------------------+---------------------------------------|
| Technological changes     | keep pace with technological changes  |
|                           | and introduce new developments        |
|                           | to maintain competitive advantage     |
|                           |                                       |
|---------------------------+---------------------------------------|
| Reliance on intellectual  | stop third parties from using our     |
| property                  | products and defend the use of our    |
|                           | products from any challenge           |
|                           |                                       |
|---------------------------+---------------------------------------|
| The need to raise capital | access future capital needs on        |
| in                        | sufficiently attractive terms         |
| future                    | particularly in                       |
|                           | view of prevailing economic           |
|                           | conditions and availability of credit |
|                           |                                       |
|---------------------------+---------------------------------------|
| Economic, political,      | deal with the impact of such changes  |
| legislative,              | without adversely affecting the       |
| taxation or regulatory    | growth or profitability of the        |
| changes                   | business                              |
|                           |                                       |
|---------------------------+---------------------------------------|
| Taxation                  | ensure the impact of any adverse      |
|                           | changes is mitigated by enhanced      |
|                           | performance                           |
|---------------------------+---------------------------------------|
| Fraudulent or criminal    | avoid loss of client monies by the    |
| activity                  | rigorous application of controls      |
|                           |                                       |
+-------------------------------------------------------------------+


INDEPENDENT REVIEW REPORT TO PAYPOINT PLC

We have been engaged by the company to review the condensed set of
financial statements in the half-yearly financial report for the
period ended 28 September 2008 which comprises the condensed income
statement, the condensed balance sheet, the condensed statement of
recognised income and expense, the condensed cash flow statement and
related notes 1 to 11. We have read the other information contained
in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies with
the information in the condensed set of financial statements.

This report is made solely to the company in accordance with
International Standard on Review Engagements 2410 issued by the
Auditing Practices Board.  Our work has been undertaken so that we
might state to the company those matters we are required to state to
them in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review work,
for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has
been approved by, the directors.  The directors are responsible for
preparing the half-yearly financial report in accordance with the
Disclosure and Transparency Rules of the United Kingdoms' Financial
Services Authority.

As disclosed in note 1, the annual financial statements of the group
are prepared in accordance with IFRS as adopted by the European
Union.  The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with
International Accounting Standard 34, Interim Financial Reporting, as
adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the
condensed set of financial statements in the half-yearly financial
report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on
Review Engagements (UK and Ireland) 2410, Review of Interim Financial
Information Performed by the Independent Auditor of the Entity issued
by the Auditing Practices Board for use in the United Kingdom. A
review of interim financial information consists of making inquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland)
and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us
to believe that the condensed set of financial statements in the
half-yearly financial report for the period ended 28 September 2008
is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European Union
and the Disclosure and Transparency Rules of the United Kingdom's
Financial Services Authority.


Deloitte & Touche LLP
Chartered Accountants and Registered Auditor
20 November 2008
London, UK


Notes: A review does not provide assurance on the maintenance and
integrity of the website, including controls used to achieve this,
and in particular on whether any changes may have occurred to the
financial information since first published. These matters are the
responsibility of the directors but no control procedures can provide
absolute assurance in this area. Legislation in the United Kingdom
governing the preparation and dissemination of financial information
differs from legislation in other jurisdictions.


PayPoint plc


DIRECTORS & KEY CONTACTS



Directors
                          George Earle (Finance Director)
                          Dominic Taylor (Chief Executive)
                          Tim Watkin-Rees (Business Development
                          Director)

                          Eric Anstee* - appointed 16 September 2008
                          David Morrison*
                          David Newlands* (Chairman)
                          Andrew Robb*
                          Steven Rowley* - appointed 16 September
                          2008
                          Roger Wood*

                          * non-executive directors

Registered office         1 The Boulevard
                          Shire Park
                          Welwyn Garden City
                          Hertfordshire
                          AL7 1EL
                          United Kingdom
                          Registered in England and Wales number
                          3581541

Registrars                Capita Registrars
                          Registration Services
                          Northern House
                          Woodsome Park
                          Fenay Bridge
                          Huddersfield
                          West Yorkshire
                          HD8 0LA
                          Telephone
                          0870 162 3100

Press and investor        Finsbury
relations enquiries       Tenter House
                          45 Moorfields
                          London
                          EC2Y 9AE
                          Telephone No. 020 7251 3801




ABOUT PAYPOINT

PayPoint is the leading cash and internet payments company in the UK
and Ireland, handling in excess of
£8 billion in over 515 million transactions annually for 6 ,000
clients and merchants. The company operates with several payment
networks:

  * The PayPoint retail network numbers over 20,750 terminal outlets
    located in local shops (including Co-op, Spar, Costcutter,
    Sainsburys Local, Somerfield, One Stop, Londis and thousands of
    independents) in all parts of the UK and Ireland. Terminals
    handle gas and electricity meter prepayments, cash bill payments,
    mobile phone top-ups, transport tickets, BBC TV licences and a
    wide variety of other payment types for all of the leading
    utilities, telecommunications suppliers and many consumer service
    companies. This network is used by consumers, free of charge, 9
    million times a week. The network has 98.9% population cover on a
    1 mile urban or 5 miles rural measure;
  * Additional multiple retailer connections via retailers electronic
    till systems in the UK including BP and Superdrug for mobile
    top-ups and selected payments from the PayPoint range;
  * The PayPoint ATM network has over 2,150 'LINK' branded machines
    across the UK, also typically in convenience stores;
  * PayPoint.net provides secure credit and debit card payments for
    over 5,100 web merchants linking into all the major UK acquiring
    banks; and
  * PayPoint International which operates bill payment and top-up
    services in Ireland and Romania. PayStore in Romania now has
    4,700 terminal outlets including 1,200 PayPoint branded sites for
    the new bill payment service.


PayPoint floated on the London Stock Exchange in September 2004 and
the company's market capitalisation at 30 September 2008 was £406
million. PayPoint is widely recognised for its leadership in
prepayment systems, smart technology and consumer service.


20 November 2008


Enquiries:


PayPoint plc                        01707 600 300
Dominic Taylor, Chief Executive
George Earle, Finance Director


Finsbury                            020 7251 3801
Rollo Head
Don Hunter



This announcement is available on the PayPoint plc website:
www.paypoint.co.uk.

---END OF MESSAGE---




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