Paypoint plc : Preliminary Results
(Thomson Reuters ONE) -
PayPoint plc
Preliminary results
Year ended 25 March 2012
Year ended Year ended Increase / (decrease) %
25 March 27 March
2012 2011
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Revenue £200.0m £193.2m 3.5
Net revenue(1) £90.4m £82.7m 9.3
Gross margin 39.1% 36.6% 2.5ppts
Operating profit £38.9m £36.1m 7.8
Profit before tax £37.2m £34.5m 8.0
Diluted earnings per share 39.8p 35.1p 13.4
Dividend per share 26.5p 23.4p 13.2
(full year)
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* Record group transaction volume at 659 million, with growth in all
channels
* UK & Ireland retail network transactions increased 9% with retail services
continued strong growth of 25%
* 19 million Romanian bill payment transactions, up 56% and Romanian network
now profitable after prior years losses
* 73 million internet transactions processed, up 24%
* PayByPhone transaction volumes of 17 million, up 23%
* Collect+ transaction volumes increased to just under 4 million, up over 3.5
times on last year
* Proposed final dividend of 17.8p, up 14% on prior year
* Year end cash of £35.5 million (2011: £26.5 million) with no debt
Enquiries
PayPoint plc
RLM Finsbury
Dominic Taylor, Chief Executive 01707 600300 Rollo Head 0207 2513801
George Earle, Group Finance Director Don Hunter
A presentation for analysts is being held at 11.45 am today at Finsbury, Tenter
House, Moorfields, London, EC2.
This announcement is available on the PayPoint plc
website:http//www.paypoint.com
1. Net revenue is revenue less the cost of mobile top-ups and SIM cards where
PayPoint is principal and costs incurred by PayPoint which are recharged to
clients and merchants. These costs include retail agent commission, merchant
service charges levied by card scheme sponsors and costs for the provision
of call centres for PayByPhone clients.
CHAIRMAN'S STATEMENT
I am pleased to report the growth in earnings continued, as a result of good
performance by our UK retail network and the turnaround to profit in our
Romanian network. Although losses in Collect+ and PayByPhone have increased,
growth in Collect+ remained strong with commercial deliveries and consumer to
consumer deliveries contributing well and we have achieved success in winning
new business in PayByPhone. We have made progress in technology, with
preparation towards the introduction of the Simple Payment service (replacing
cheques, due for introduction later in the year) for the Department for Work and
Pensions (DWP), installing virtual terminals, completing the development of a
broadband communications solution for faster transactions and rolling out new
services for our retail network, including cash out and money transfer.
In the UK retail network, retail services delivered healthy growth, although
mobile top-ups continued to decline. The introduction of the Simple Payment
service for the DWP should help fuel future growth.
We have made progress in developing transaction reporting tools for PayPoint.net
which should go live in the second half of the current year and help to secure
merchants in the gaming sector and win new business. We expect to develop this
reporting tool for extension into other channels and markets. Further investment
in a new transaction processing platform will also bring more functionality and
flexibility in multi-currency, more frequent settlement and transaction
optimisation.
We have continued to invest in our Romanian retail network by increasing our
full service terminal estate by 735 sites. We accept bill payments for 36
clients and transaction volumes have increased by 56%. We have started to
introduce money transfer under our contract with Western Union®.
We have extended our parcels service through Collect+, our joint venture with
Yodel, across our UK retail network. Momentum is strong, with considerable
interest among major high street and internet retailers and internet
marketplaces. We have over 4,700 sites handling Collect+ parcels and over 125
online and multichannel retailers live, including some of the most respected
customer service leaders, including ASOS, New Look, Boden, House of Fraser, ASDA
Direct and Very. During the year, parcel volumes were up over 3.5 times and
based on March 2012 we now handle a run rate of 5 million parcels per annum.
In PayByPhone, we have increased the resources in sales, marketing and delivery
more than we originally planned, to address the increased opportunity. New
mobile phone apps have been introduced, making registration and parking easier
and we have launched one of the largest deployments in near field communications
in San Francisco. The costs of the increased sales and technology spend have
come ahead of the revenue as installations lag sales success. We will continue
to invest to stay at the leading edge of this fast moving market.
The combination of sound, profitable growth in both the UK retail network and
our internet business, substantive progress towards profitable growth in our
Romania retail network, gathering momentum in Collect+ and proper resourcing of
PayByPhone, have positioned the group for further substantial growth. We are
proposing a final dividend of 17.8 pence per share, making a total for the year
of 26.5 pence, an increase of 13.2 per cent, marking another year of
uninterrupted dividend growth since our listing.
For the current financial year, trading is in line with the company's
expectations. This is an important year for investment in infrastructure and
tools to ensure the efficient delivery of future growth. Our established
business (UK and Irish retail networks and internet payments) is strong, with
further opportunities to enhance retail yield through the introduction of new
technology and services. In addition, improvements in our service offering to
online merchants will provide opportunities for growth. We will benefit from
rolling out services in our developing business (Collect+, PayByPhone and
Romanian retail network), growing our market share and improving profitability.
Together, our businesses provide a solid foundation to deliver increasing value
for our shareholders.
David Newlands
24 May 2012
CHIEF EXECUTIVE'S REVIEW
PayPoint has had another good year, in which we have delivered earnings growth
in line with market expectations and our strategic plans. Our UK and Irish
retail business has continued to grow and remains highly profitable and cash
generative, our Romanian business is now profitable with good prospects for
further growth and our Collect+ and PayByPhone businesses have made good
progress.
The essence of the group's capability is the processing of high volume, consumer
transactions, whether for payment or value added services, for example parcel
fulfilment, through a flexible platform, adding value to clients in specific
vertical markets. In the case of payments, these transactions are of low value
and embrace retail, internet and mobile technologies and include money flowing
to, as well as from, the consumer. The platform is connected to retailers and
internet merchants across a number of different geographies, to whom we seek to
add value through the provision of relevant additional services. Core to our
proposition is to provide consumers with greater convenience. We are able to
grow the business through targeting more clients in vertical markets, more
verticals, more retailers and more merchants, driving more consumers to use our
services.
Our strategy:
Our strategy remains unchanged. Since the flotation of the original UK & Irish
retail network business in 2004, PayPoint has evolved into a specialist payments
company. Our strategy has four key elements:
* Breadth of payments capability
The acceptance of a broad range of payments (cash, cards, e-money, etc.) through
multiple channels (retail, internet and mobile phone)
* Strength in vertical markets
Targeting sectors with high volume, recurring consumer payments
* Value added content / services
Providing additional content or services to the payment channels and chosen
vertical markets to create differentiation
* Geographic reach
Identifying regions with attractive payment dynamics to create value through
exporting our know-how
PayPoint has succeeded in introducing this broad payment hub capability to
clients in a number of key vertical markets (energy/utilities, telecoms and
media, financial, transport/parking, public sector/social housing, retail and
gaming/leisure), with the ability to process payments using the consumer's
preferred method of payment and channel. The delivery of payments from consumers
to our clients encompasses transaction authorisation, processing, clearing and
settlement and interfacing to banks, card schemes/networks and other financial
intermediaries. PayPoint also provides value added content and services within
each channel, to differentiate the PayPoint proposition from those of its
competitors.
In our retail channels, differentiation is achieved through providing retailers
with a broad range of retail services, including ATMs, credit and debit card
processing, parcel collections and returns service, SIM cards and international
money transfer. The high quality of service delivery to retailers is also
critical to differentiation.
In the internet channel, differentiation to merchants is driven through a
widening base of acquiring bank relationships (increasingly in different
geographies) and payment types, together with the quality of our fraud screening
and reporting products.
Our mobile channel, delivered through PayByPhone, will similarly drive
differentiation through its ability to leverage our cash retail payment
capability and internet payment services, combined with improving the consumer
experience.
The extension of our geographic reach is progressing.
Growth and prospects:
Technology
Technology is at the heart of our service delivery and differentiation in all
our businesses and we plan to invest heavily in this area. We see increasing
opportunities to integrate our payment channel technologies to provide better,
more efficient and complete solutions to our clients across a single platform,
irrespective of whether their customer has paid in a store, online or on their
phone. As our businesses grow, investments in improved reporting and retail
agent management systems will continue to enhance our ability to provide
customers with a unique service and will contribute to further profitable
growth. The reporting system under development for internet clients will be
developed further for extension to other clients across all distribution
channels. As we invest in this more integrated solution we also plan to
consolidate our data centres on two hosted sites.
In our UK retail network, we have rolled out our virtual terminal to multiple
retailers - a software variant of our terminal which is integrated into the
retailers' till systems, in conjunction with a bespoke PayPoint plug-in reader
to provide the full functionality of the physical terminal more efficiently and
at lower cost. In-store, this allows our service to be available at every check-
out lane, eliminates the need for reconciliation with the main till system,
accelerates transaction speed, and saves communications and till roll costs.
Over 2,600 sites now have this technology in retailers such as McColls and One
Stop and these stores have benefitted not only from increased efficiency, but
also an uplift in volume. Where existing terminals are replaced by virtual
terminals, we refurbish them for deployment in Romania.
An increasing number of our terminals are being connected through broadband
links rather than dial-up, dramatically improving the speed of online
transactions and the breadth of services that we can potentially offer the
retailer in-store. The transition to broadband links will continue through the
year.
We have introduced an agent extranet for our UK agents. Currently agent
invoicing and financial details for each agent are available using this
facility. We plan to roll this out to all agents, which will reduce paper,
postage and some incoming agent calls to the call centre. We will further
develop the agent extranet as a means of marketing to and communicating with our
retail agents.
Development work on cash out services, the Simple Payment service for the DWP is
at an advanced stage and will be ready for implementation during the course of
this year. As a result, our retailer settlement systems will be more
streamlined, reducing exposure to retailers and will allow the cash balances we
generate through bill payment to be recycled back to consumers, saving retailers
bank charges, and increasing in-store spend.
In Romania, we have completed the development of our money transfer proposition
on the terminal and the service is now live and is showing encouraging growth.
In the internet channel, we are developing substantial improvements to our
services to online merchants. These include transaction optimisation, an
advanced management and reporting solution, a PCI compliance offering and
additional payment methods, which should provide significant competitive
advantage. PayByPhone is introducing a new, consumer friendly mobile web
parking registration and payment system.
UK retail network
We are focused on providing increased retail services through our retail
networks and have increased the size of the field sales force by 50 per cent to
help deliver growth in revenue. Net revenues from these services increased 28
per cent last year. These services include parcels, ATMs, SIM cards, debit and
credit card acceptance, advertising on till receipts and money transfer. We
will continue to invest in the retail network with technologies such as our
virtual terminal, broadband communication links and in new ATMs to optimise the
growth of existing and future retail services. We are planning to launch our
Simple Payment service for the DWP (to replace cheque benefit payments later in
the year), which will provide us with a larger scale cash out opportunity to
supplement existing cash out schemes.
Romanian retail network
The Romanian network is now profitable, driven by the optimisation of existing
sites and increasing bill payment volumes and which we expect to continue as we
market to consumers. The launch of money transfer, as the first retail service
proposition, is showing early signs of success as Romanians opt for the
convenience provided by their local shop instead of travelling to a bank.
Internet
Alongside the introduction of the new integrated systems referred to under
Technology above, we expect to sign up further new merchants and to benefit from
the launch of a new enterprise level, real time data reporting platform. This
will offer PayPoint.net the opportunity to differentiate further its payments
capability to merchants both in the UK and abroad and will add profitable
growth.
PayByPhone
PayByPhone, one of the worldwide leaders in mobile phone parking, has the
potential to replace traditional parking meters or provide a system for payment
for parking where none exists in many major cities around the world. We have
added significant sales and development resources and we are currently tendering
to several large parking authorities as well as a large number of smaller
opportunities in the UK, France and North America. Sales lead times are extended
in this market and somewhat unpredictable, but our momentum continues to be
encouraging, with wins in Hackney, Lambeth, City of London, Swindon, Coral
Gables in Florida and Ottawa in Canada amongst others over the past year. We
have also made encouraging progress in applying our mobile payment capability
beyond parking, in winning a tolling contract for a major road bridge in Canada,
further bicycle rental contracts in France and an integration into Veolia's
French bus ticketing system.
We continue to focus on improving the consumer experience through mobile phone
apps and improved registration processes as well as reducing the cost to serve.
The launch of our contactless NFC parking solution in San Francisco was one of
the world's largest implementations of NFC technology and is being adopted by
other cities in North America and Europe. PayByPhone is now integrated into
PayPoint.net and is now able to benefit from the latter's payment processing
capability. We have spent more than we anticipated in addressing the sales
opportunities, including technology. This expenditure has been rewarded by 66
new business wins, more than any of our competitors, but the revenue lags the
win as it takes time to contract, install and ramp up the service. We will
continue to invest at this high rate, the consequence of which will be a further
loss in the current year.
Collect+
Our parcels joint venture (50:50) with Yodel has continued to progress strongly,
with substantial endorsement from the online retailing community and resulting
growth in transaction volumes. Collect+ has been recognised in prestigious
industry awards for its innovative parcel delivery and returns service. Yodel's
current integration of two businesses into one completes in the first half of
our current reporting year. Collect+ processes over five million transactions
per annum (based on transaction volumes in March 2012) and is making good
progress towards breakeven volume.
Our plans for the current year
We will continue to make further progress in the four elements of our strategy
to increase shareholder value: more payment/channel options, specialisation in
vertical markets, value added services and geographic reach. We plan to make
good progress in both the established and developing businesses, notably through
continuing growth of retail services (in both the UK and Romania) and internet
payments and by adding new customers to Collect+ and PayByPhone.
Early benefits from the synergy between our various business streams, with more
clients in our selected verticals taking multi-channel services have encouraged
us to push this dynamic more strongly as newer business areas bed in and system
platforms can be developed across the group. We have strengthened the management
in our UK retail network with the appointment of a UK Managing Director and the
business is already benefiting from his increased level of focus.
PayPoint is one of the companies best placed to make further gains in the fast
moving payment industry, particularly in e-commerce, and has a market leading
position in retail services, on which we intend to build.
Dominic Taylor
24 May 2012
KEY PERFORMANCE INDICATORS
In order to realise its strategic aims, PayPoint has identified areas of
strategic focus and has put in place a number of KPIs to measure progress
against them. Whilst these KPIs are helpful in measuring the group's
performance, they are not exhaustive and the group uses many other measures to
monitor progress.
Measuring our performance
Strategic focus KPI Description 2012 2011
--------------------------------------------------------------------------------
Shareholder Earnings per Profit after tax 39.8p 35.1p
return share (diluted) attributable to
equity holders of
the parent
divided by the
weighted average
number of
ordinary shares
in issue
(including the
impact of shares
which are likely
to be issued
under share
schemes) during
the year.
Dividends per Proposed final 26.5p 23.4p
share dividend and
interim dividend
divided by the
number of fully
paid shares at
the end of the
year.
Economic profit Operating profit £20.4 £17.4
after tax and a million million
charge for
capital employed
based upon the
group's cost of
capital.
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|
|
Growth Retail networks Number of 569 million 517 million
transactions transactions
processed in the
year on our
terminals, ATMs
and on our
retailers' EPoS
systems.
Internet Number of 73 59
transactions transactions million million
processed in the
year by
PayPoint.net.
PayByPhone Number of 17 14
PayByPhone million million
transactions
processed in the
year.
Transaction value The value of £12.1 £10.6
transactions billion billion
processed via our
terminals,
retailers' EPoS
systems, internet
merchants, ATMs,
PayByPhone and
the sale of other
retail services.
Net revenue Revenue less: £90 million £83 million
commissions paid
to retail agents;
the cost of
mobile top-ups
and SIM cards
where PayPoint is
principal;
acquiring bank
charges and call
centre costs
recharged to
clients.
Operating margin Operating profit 41.0% 41.7%
including our
share of joint
venture losses as
a percentage of
net revenue.
--------------------------------------------------------------------------------
Asset Return on capital Total operating 58% 53%
optimisation employed profit for the
year divided by
average monthly
end capital
employed
excluding cash.
--------------------------------------------------------------------------------
People Labour turnover Number of
permanent
employees who
left during the
year divided by
average total
permanent
employees.
UK & Ireland 26% 25%
Rest of world 28% 35%
BUSINESS REVIEW
The operating and financial review complies with the guidance set out in the
Accounting Standards Board's Reporting Statement: Operating and Financial Review
and is prepared solely to provide additional information to shareholders as a
body to assess PayPoint's strategies and their potential to succeed. 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 annual report and such statements
should be treated with caution due to the inherent uncertainties, including both
economic and business risk factors, underlying any such forward looking
information.
Our key performance indicators are shown on page 6.
PayPoint is a payment service provider for consumer and business payment
transactions and, as such, has only one operating segment. However, reflection
on various facets helps explanation of the execution of our strategy in
developing the group and, accordingly, in addition to the analysis of the number
and value of transactions, revenue and net revenue, we have shown an analysis
which separates our developing business (bill payment and top-ups in Romania,
Collect+ and PayByPhone), from our established business (the UK and Irish retail
networks and internet channel).
In addition, we have analysed our results by channel as follows:
Retail networks:
Bill and general (prepaid energy, bills and transport tickets)
Top-ups (mobile, pre-paid cards, phone cards and Health Lottery)
Retail services (ATM, debit/credit, parcels, money transfer, SIMs and receipt
advertising)
Internet (transactions between consumers and merchants,
pre-authorisations and Fraudguard, where separately charged)
PayByPhone (parking and bicycle rental transactions)
Other for revenue and net revenue only (software development, configuration and
customisation and settlement of claims)
Growth opportunities include retail services in the UK retail network; new
merchants for internet payments; the expansion of the retail network and new
retail services in Romania; new parking contracts and driving consumer adoption
for PayByPhone and building and developing Collect+.
OPERATING REVIEW
Transactions have increased to 659 million (2011: 590 million), up 11% in the
established business and 34% in the developing business.
Transaction value increased to £12.1 billion (2011: £10.6 billion), up 13% in
the established business and up 54% in the developing business.
Revenue in the developing business was up 24% with the strongest contribution
coming from Collect+. Established business revenue was up 2%, with growth in UK
bill and general, retail services and internet payments offsetting the reduction
in mobile top-ups.
Net revenue in the developing business was up 44%, with strong growth in
Romanian bill payment, Collect+ and PayByPhone. Established business net revenue
was up 9% despite being held back by the decline in mobile volumes.
Operating profit in the established business was £41.2 million (2011: £38.4
million) and the operating loss, including our share of Collect+, in the
developing business was £4.2 million (2011: £3.9 million), an increase of £0.3
million. The small increase in the loss in developing businesses is the result
of the increased loss in the year in Collect+ and PayByPhone offset by an
improved performance in Romania.
Established Developing Adjust
business(1) business(2) Total Collect+(3) As reported
-------------------------------------------------------------------------------
Transactions
million
2012 618 41 659 - 659
2011 559 31 590 - 590
-------------------------------------------------------------------------------
Transaction
value
£million
2012 11,682 438 12,120 - 12,120
2011 10,316 285 10,601 - 10,601
-------------------------------------------------------------------------------
Revenue
£000
2012 171,008 33,036 204,044 (4,015) 200,029
2011 167,700 26,535 194,235 (1,002) 193,233
-------------------------------------------------------------------------------
Net revenue(4)
£000
2012 83,598 9,412 93,010 (2,568) 90,442
2011 76,811 6,539 83,350 (627) 82,723
-------------------------------------------------------------------------------
1. Established business include the UK and Irish retail networks and the
internet payment channel.
2. Developing business includes Romania, PayByPhone and for Collect+, revenue
and net revenue only.
3. Collect+ revenue and net revenue is included in developing business revenue
and net revenue, but as Collect+ is reported in the Consolidated Income
Statement on a profit before tax only basis, revenue and net revenue needs to be
eliminated to reconcile to reported revenue and net revenue.
4. Net revenue is revenue less the cost of mobile top-ups and SIM cards where
PayPoint is principal and costs incurred by PayPoint which are recharged to
clients and merchants. These costs include retail agent commission, merchant
service charges levied by card scheme sponsors and costs for the provision of
call centres for PayByPhone clients.
Analysis of transactions
There has been growth in transaction volumes across all services, despite the
continued decline in mobile top-ups in all territories except Romania where a
small increase was driven by the increase in terminals. Mobile operators are
offering more value for the same or lower cost per top-up to consumers,
resulting in fewer transactions and, in the UK in particular, mobile operators
promote monthly contracts over prepay to migrate prepaid consumers to contracts.
Year Year
ended ended Increase /
25 March 27 March (decrease)
2012 2011 %
'000 '000
--------------------------------------------------------
Retail networks
Bill and general 383,332 350,970 9.2
Top-ups 125,163 117,670 6.4
Retail services 60,493 48,425 24.9
Internet payments 72,820 58,544 24.4
PayByPhone 17,307 14,059 23.1
--------------------------------------------------------
Total 659,115 589,668 11.8
--------------------------------------------------------
UK & Ireland bill and general transactions increased by 8% despite the
relatively mild winter compared to the previous year. The increase was due to a
12% rise in prepaid energy volumes driven by the impact of the British Gas
contract, under which PayPoint became one of only two providers in July 2011
offset by a decline in post bill payment.
Bill payments in Romania have continued to grow, as more terminal sites are
rolled out and consumers become aware of the service. In the year, we processed
just under 19 million bill payment transactions, an increase of 56% on the
previous year.
Top-ups increased versus last year despite mobile top-ups in UK and Ireland
being down 10% overall, the same as last year. The overall growth was driven by
the introduction of the Health Lottery for which 18 million transactions were
processed and a small increase in Romanian mobile top-ups resulting from retail
network growth. E-money top-ups were also ahead compared to last year.
Retail services transaction volumes have increased across most products
including ATMs, debit/credit, parcels and SIMs. Debit/credit card transactions
were up 25% on last year. We sold just under one million SIMs in the year (2011:
700,000). Parcel volumes grew over 3.5 times on last year to just over 3.8
million transactions.
Internet transactions of 73 million were up 24% on last year, as we continued to
add new merchants and existing merchants grew organically.
PayByPhone transactions increased by 23% on last year. PayByPhone continues to
see the number of tenders issued by councils and parking authorities increase,
as they look for a more cost effective method for collecting parking charges.
Transaction value
There has been substantial growth in the value paid by consumers (transaction
value), primarily in bill and general payments, internet payments and
PayByPhone.
Year Year
ended ended Increase/
25 March 27 March (decrease)
2012 2011 %
£000 £000
------------------------------------------------------------
Retail networks
Bill and general 6,757,902 6,198,171 9.0
Top-ups 1,071,947 1,114,809 (3.8)
Retail services 426,527 394,727 8.1
Internet payments 3,796,569 2,838,147 33.8
PayByPhone 66,949 55,020 21.7
------------------------------------------------------------
Total 12,119,894 10,600,874 14.3
------------------------------------------------------------
Growth in bill and general transaction value reflected the increase in
transactions with the average transaction value similar to last year.
The reduction in top-ups transaction value reflects the overall decline in the
pre-pay mobile market. The additional transaction value of the Health Lottery
transactions was not enough to offset the overall drop as the average value per
transaction is lower than that of mobile top-ups.
Retail services transaction value is relatively small as SIM sales are low value
and debit/credit transactions (where the card sponsor settles direct with our
retailer), parcel transactions and terminal advertising have no associated
transaction value.
Internet transaction value has increased by 34% as a consequence of the increase
in the number of transactions, combined with higher average transaction value at
£52.14 (2011: £48.47).
PayByPhone value reflects the impact of the delivery of the new contracts with
average transaction value broadly similar to last year.
Revenue analysis
Year Year
ended ended
25 March 27 March Increase/
2012 2011 (decrease)
£000 £000 %
--------------------------------------------------------
Retail networks
Bill and general 62,990 57,889 8.8
Top-ups 94,450 98,843 (4.4)
Retail services 23,659 19,602 20.7
Internet payments 9,670 8,939 8.2
PayByPhone 4,751 4,501 5.6
Other 4,509 3,459 30.4
--------------------------------------------------------
Total 200,029 193,233 3.5
--------------------------------------------------------
The growth in bill and general payments revenue reflected the growth in UK
prepaid energy volumes and Romanian bill payments (driven by growth in terminal
sites and increased consumer awareness).
In Romania and Ireland, PayPoint acts as principal for mobile phone top-ups for
which the sales value is recorded as revenue, and the purchase cost is recorded
in cost of sales. In the UK, PayPoint acts as an agent and only the commission
income is recorded as revenue. In the UK and Ireland, mobile top-up revenues
have declined broadly in line with transaction volumes. The Health Lottery, e-
top ups and Romanian mobile top-up revenue increased.
Retail services revenue grew strongly across several products as more retailers
took the additional services on offer including parcels, SIMs, debit and credit
card and money transfer. Revenue has grown more slowly than transactions as not
all services earn revenue based on transactions.
Internet payment revenue growth was less than transaction and value growth due
to high transaction growth in some large, key merchants who have lower average
transaction revenues.
PayByPhone revenue increased less than transaction and value growth
predominantly due to the reduction in call centre income which is recharged to
some clients. The reduction in call centre recharges reflects the drive to shift
customer volume away from the costly interface of an operator telephone call to
a web-based mobile application or interactive voice response.
Other revenue includes rechargeable software development work, configuration and
customisation, early settlement and claims.
Net revenue analysis
Net revenue is revenue less retail agent commission, merchant service charges
levied by card scheme sponsors, costs of SIM card, recharges for the provision
of call centres for PayByPhone clients and the purchase value of Romanian and
Irish mobile top-ups for which we act as 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.
Year Year
ended ended
25 March 27 March Increase /
2012 2011 (decrease)
£000 £000 %
--------------------------------------------------------
Retail networks
Bill and general 36,379 33,806 7.6
Top-ups 22,756 22,683 0.3
Retail services 13,844 10,827 27.9
Internet payments 9,670 8,939 8.2
PayByPhone 3,284 3,009 9.1
Other 4,509 3,459 30.4
--------------------------------------------------------
Total 90,442 82,723 9.3
--------------------------------------------------------
Bill and general net revenue increased less than revenue as prepaid energy
transactions have lower average net revenue than other transactions.
Top-ups net revenue was broadly similar to the prior year as a result of the
introduction of the Health Lottery and increased e-money top-ups.
Retail services net revenue has increased more than revenue as there is no
commission payable on some services, including debit and credit card
transactions and receipt advertising.
Internet net revenue is the same as revenue because merchant service charges are
levied directly to our merchants by the card scheme sponsors.
Collect+
During the year, we processed over 3.8 million transactions for 125 clients
(2011: 1.1 million transactions for 30 clients). Transaction volumes continue to
grow and our annual run rate, based on March 2012, is now over 5 million
transactions.
Network growth
Terminal sites overall have increased by 6% to 31,117.
In the UK and Ireland, sites have increased by 874, an increase of 4%. During
the year, we continued to roll out our new EPoS integrated solution to 2,600
retailers, which combines a virtual terminal through software in the retailer's
till system with plug in reader to provide full functionality at lower costs. As
well as enhancing our service to retailers, this frees terminals for use in
Romania.
In Romania, we installed 735 net new full service terminals in the year.
In our internet channel, we added over 450 new merchants during the year, an
increase of almost 9%.
We continued to add more Collect+ sites as transaction volumes increased and as
retailers recognised the benefits of offering this service.
Increase/
Analysis of sites 25 March 27 March (decrease) %
2012 2011
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UK & Ireland terminal sites 24,387 23,513 3.7
Romania terminal sites 6,730 5,995 12.3
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Total terminal sites 31,117 29,508 5.5
Internet merchants 5,670 5,213 8.8
Collect+ sites 4,721 3,668 28.7
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FINANCIAL REVIEW
Income statement
Revenue for the year was 3.5% higher at £200 million (2011: £193 million). The
increase results from growth across the majority of services. Cost of sales
reduced to £122 million (2011: £123 million). Agents' commission decreased to
£70 million (2011: £71 million) due to fewer mobile top-up transactions, which
pay a higher than average commission, and reductions in the amount paid for
commission by the mobile operators. The cost of mobile top-ups in Ireland and
Romania(1) has risen to £38 million (2011: £37 million).
Net revenue(2) of £90 million (2011: £83 million) was up 9.3%.
Operating costs (administrative expenses) were 14% higher at £39 million (2011:
£35 million) as a result of increasing our IT operations and development
resources across the group ahead of major infrastructure projects expenditure.
In addition, the UK retail network now has a separate management team, a larger
field force (increased by 50 per cent) to deliver sales growth and increased
resources to deliver the Simple Payment service for the DWP. We also increased
sales resources in PayByPhone.
Operating margin(3) was broadly similar at 41.0% (2011:41.7%) as a consequence
of the increase in operating costs.
Our share of the loss in developing Collect+ was £1.8 million (2011: loss of
£1.5 million). Slower than expected integration of new merchants for commercial
deliveries and the consumer proposition led to the increased losses.
Profit before tax was £37.2 million (2011: £34.5 million) an increase of 8.0%.
The tax charge of £10.3 million (2011: £10.6 million) represents an effective
rate of 27.6% (2011: 30.8%). The tax charge is lower than last year mainly
because of the reduction in UK corporation tax rates and was higher than the UK
nominal rate of 26% because of unrelieved losses in Canada. The reduction in UK
corporation tax to 25 per cent became effective after the year end.
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 costs in cost of sales.
2. Net revenue is revenue less the cost of mobile top-ups and SIM cards where
PayPoint is principal and costs incurred by PayPoint which are recharged to
clients and merchants. These costs include retail agent commission, merchant
service charges levied by card scheme sponsors and costs for the provision of
call centres for PayByPhone clients.
3. Operating margin is calculated as operating profit, including our share of
Collect+ losses as a percentage of net revenue.
Balance sheet
Net assets of £91.4 million (2011: £80.6 million) reflect a strong balance sheet
including cash of £35.5 million (2011: £26.5 million) and no debt.
Cash flow
Cash generated by operations was £43.3 million (2011: £42.1 million), reflecting
strong conversion of profit to cash. Corporation tax of £10.4 million (2011:
£11.0 million) was paid. Capital expenditure of £5.3 million (2011: £3.2
million) reflected spend on virtual terminal rollout, ATMs, IT equipment and
software. Net interest received was £0.2 million (2011: £0.1 million net
expense). Equity dividends paid were £16.4 million (2011: £15.0 million). Cash
and cash equivalents were £35.5 million (including client cash of £5.1 million)
up from £26.4 million (including client cash of £6.1 million).
Economic profit
PayPoint's economic profit (operating profit less tax and capital charge) was
£20.4 million (2011: £17.4 million) an increase of 17%.
Dividend
We propose to pay a final dividend of 17.8p per share on 30 July 2012 (2011:
15.6p) to shareholders on the register on 29 June 2012, subject to the approval
of the shareholders at the annual general meeting. An interim dividend of 8.7p
(2011: 7.8p) per share was paid on 21 December 2011, making a total dividend for
the year of 26.5p (2011: 23.4p) up 13.2%, broadly in line with earnings.
Liquidity and going concern
The group has cash of £35.5 million (including client cash of £5.1m) and had, at
the year end, an undrawn, unsecured loan facility of £35 million, which was
agreed at the start of the financial year with an unexpired term of four years.
Cash and borrowing capacity is adequate to meet the foreseeable needs of the
group, taking account of risks (page 16). The financial statements have
therefore been prepared on a going concern basis.
Financing and treasury policy
The financing and treasury policy requires a prudent approach to the investment
of surplus funds, external financing, settlement, foreign exchange risk and
internal control structures. The policy prohibits the use of financial
derivatives and sets limits for gearing.
Charitable donations
During the year, the group made charitable donations of £23,075 (2011: £19,400)
to charities serving the communities in which the group operates. We encourage
employees to raise funds for charity and the company matches funds raised by the
employees, subject to certain limits.
During the year, our UK retail network acted as a collection agent for the BBC's
Children in Need telethon.
Employees
Our success depends upon the continuing support and commitment of all our staff.
We would like to take this opportunity to thank PayPoint's employees for their
commitment, energy and enthusiasm in the delivery of these results.
Strategy and risks
Details of the company's strategy are included in the Chief Executive's review
on page 3. An analysis of risks facing the company is set out on page 16 and
17.
Economic climate
The company's bill and general payments, which account for 40% (2011: 41%) of
our net revenue, has continued to be resilient, as consumers' discretion in
expenditure is limited for essential services and our service continues to be
popular. Utility providers continue to install new prepay gas and electricity
meters, which will have a beneficial impact on our transaction volumes. The
internet payment market continues to grow substantially. There has been an
adverse impact on our mobile top-ups as mobile operators continue to offer more
airtime at lower cost and to promote prepay less than contract. PayByPhone is
able to offer parking authorities a more cost effective collection system for
parking compared to pay and display machines. This has led to an increase in the
number of tenders being issued as parking authorities try to reduce their costs.
PayPoint's exposure to retail agent debt is limited as credit granted to retail
agents is restricted by daily direct debiting for all UK and Irish transactions,
other than EPoS mobile top-ups (which are collected weekly). There is some
concentration of risk in multiple retail agents. Most of PayPoint's clients in
the UK, other than for top-ups, bear the cost of retail 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 credit card charge backs, a risk mitigated in part by cash
retention. In PayByPhone, exposure is limited to receivables from parking
authorities.
Outlook
For the current financial year, trading is in line with the company's
expectations. This is an important year for investment in infrastructure and
tools to ensure the efficient delivery of future growth. Our established
business (UK and Irish retail networks and internet payments) is strong, with
further opportunities to enhance retail yield through the introduction of new
technology and services. In addition, improvements in our service offering to
online merchants will provide opportunities for growth. We will benefit from
rolling out services in our developing business (Collect+, PayByPhone and
Romanian retail network), growing our market share and improving profitability.
Together, our businesses provide a solid foundation to deliver value for our
shareholders.
24 May 2012
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 crystallisation of some or all of such risks.
Risk area Potential impact Mitigation strategies
-------------------------------------------------------------------------------
Loss or inappropriate The group's business The group has established
usage of data requires the appropriate rigorous information
and secure use of security, anti-fraud and
consumer and other whistleblowing standards,
sensitive information. procedures, and
Mobile telephone and recruitment and training
internet-based electronic schemes, which are
commerce requires the embedded throughout its
secure transmission of business operations. The
confidential information group also screens new
over public networks, and employees carefully.
several of our products Continued investments are
are accessed through the made in IT security
internet. Fraudulent infrastructure, including
activity or security the significant use of
breaches in connection data and communications
with maintaining data and encryption technology.
the delivery of our
products and services
could harm our
reputation, business and
operating results.
-------------------------------------------------------------------------------
Dependence upon third The group's business The group selects and
parties to provide data model is dependent upon negotiates agreements
and certain operational third parties to provide with strategic suppliers
services operational services, the and agents based on
loss of which could criteria such as delivery
significantly impact the assurance and
quality of our services. reliability. Single
Similarly, if one of our points of failure are
outsource providers, avoided, where
including third parties practicable and
with whom we have economically feasible.
strategic relationships, Controls are continually
were to experience reviewed and improved to
financial or operational minimise risk of retailer
difficulties, their churn caused by financial
services to us would loss to retailers through
suffer or they may no fraudulent third party
longer be able to provide activity.
services to us at all,
significantly impacting
delivery of our products
or services.
-------------------------------------------------------------------------------
Exposure to legislation or The group is largely The group's legal
regulatory reforms and unregulated by financial department works closely
risk of non-compliance services regulators. The with senior management to
group's agents which adopt strategies to
offer money transfer are educate lawmakers,
licensed as Money Service regulators, consumer and
Businesses by HMRC. Our privacy advocates and
internet and mobile phone other stakeholders to
distribution channels are support the public policy
subject to Payment Card debate, where
Industry Data Security appropriate, to ensure
Standards regulated by regulation does not have
the card schemes. unintended consequences
Regulatory reform could over the group's
increase the cost of the services. The group has
group's operations or in place a business
deny access to certain ethics policy which
territories in the requires compliance with
provision of certain local legislation in all
services. Non-compliance the territories in which
with law, regulation, the group operates. A
privacy or information central compliance
security laws could have department co-ordinates
serious implications in all compliance monitoring
cost and reputational and reporting. Managing
damage to the group. and finance directors are
required to sign annual
compliance statements.
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Interruptions in business The group's ability to Comprehensive business
processes or systems provide reliable services continuity plans and
largely depends on the incident management
efficient and programmes are maintained
uninterrupted operation to minimise business and
of our computer network operational disruptions,
systems, financial including fraudulent
settlement systems, data activity, system failure
and call centres, as well or pandemic incidents.
as maintaining sufficient The group maintains full
staffing levels. System duplication of all
or network interruptions, information contained in
recovery from fraud or databases and runs back-
security incidents or the up data centres. Support
unavailability of key arrangements have been
Unternehmensinformation / Kurzprofil:
Datum: 24.05.2012 - 08:00 Uhr
Sprache: Deutsch
News-ID 149706
Anzahl Zeichen: 65549
contact information:
Town:
Welwyn Garden City, Hertfordshire
Kategorie:
Business News
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