Preliminary Results
(Thomson Reuters ONE) -
PayPoint plc
Preliminary results
Year ended 28 March 2010
+-----------------------------------+----------+----------+------------+
| | Year | Year | |
| | ended | ended | Increase/ |
| | 28 March | 29 March | (decrease) |
| | 2010 | 2009 | |
+-----------------------------------+----------+----------+------------+
| Revenue | £196.6m | £224.4m | (12.4)% |
+-----------------------------------+----------+----------+------------+
| Net revenue(1) | £76.4m | £76.4m | - |
+-----------------------------------+----------+----------+------------+
| Gross margin | 32.3% | 28.5% | 3.8 ppts |
+-----------------------------------+----------+----------+------------+
| Operating profit | £34.1m | £33.7m | 1.2% |
+-----------------------------------+----------+----------+------------+
| Profit before tax | £32.6m | £34.6m | (5.7)% |
+-----------------------------------+----------+----------+------------+
| Basic earnings per share | 32.9p | 35.6p | (7.6)% |
+-----------------------------------+----------+----------+------------+
| Proposed final dividend per share | 14.4p | 11.6p | 24.1% |
+-----------------------------------+----------+----------+------------+
OPERATIONAL HIGHLIGHTS
* Continued leadership of the UK retail cash payment sector
* Bill payment network and transaction volume growth in Romania
* 22% transaction growth in internet payments and the successful introduction
of energy meter home vending solutions for major utility clients,
demonstrating the success of a multi-channel approach
* Successful launch of Collect+, a ground-breaking, new consumer parcel
collection and delivery service into 3,400 outlets, in a joint venture with
Home Delivery Network
* Acquisition of PayByPhone, worldwide leader in parking payments by mobile
phone
Enquiries
PayPoint plc
Dominic Taylor, Chief Executive 01707 600300
George Earle, Finance Director
Finsbury
Rollo Head 0207 2513801
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 commissions paid to retail agents, the cost of
mobile top-ups and SIM cards where PayPoint is principal and acquiring bank
charges.
CHAIRMAN'S STATEMENT
PayPoint has continued to grow and invest in new business areas despite the
tough economic climate. Margins, operating profit and dividends have increased.
PayPoint's established business streams delivered to plan and provide a solid
base for ongoing development. We added over 650 net new retail outlets in the UK
and Ireland. PayPoint.net has continued to grow but margins for larger merchants
reduced as they reached volumes that justified lower pricing.
Our investment is focussed on developing new business streams: bill payment,
top-ups and retail services in Romania; developing and building our parcel
collection and delivery joint venture; and by extending our payment channels
using PayByPhone.
We have continued to transform PayPoint Romania into a full service network by
rolling out 900 more full service terminals, whilst removing mobile top-up only
sites. We plan to replace the remaining mobile top-up only sites with full
service sites. We accept bill payment for 22 clients and volumes have grown to
over 5.5 million transactions, an increase of nearly six times the number of
transactions in the prior year.
Collect+, our parcels joint venture with the Home Delivery Network, was
successfully launched in May 2009 and we are continuing the roll out of this
service across the network. Momentum is building, with considerable interest
among major internet retailers. We have over 3,400 sites able to take Collect+
transactions and thirteen clients live.
In March, we completed the acquisition of PayByPhone (Verrus Mobile Technologies
Inc. and Verrus UK Limited), adding mobile payments capability to our existing
retail and internet channels. This service has considerable potential beyond its
existing market leadership in mobile phone parking payments.
In the established business streams, our focus is on yield in our retail
networks, extending retail services and on growth in our internet channel.
We have provided the National Lottery Commission (NLC) with a robust response to
Camelot's application to provide bill payment and mobile top-ups. We argue that
the application should be rejected, primarily on competition grounds, for which
we have received strong independent legal advice, including counsel's opinion
and are reserving our position. Whatever the decision, we are well prepared and
our new developing business streams, which are unaffected by this threat,
provide opportunity for strong profitable growth. It is clear that the
uncertainty arising from this consultation process, with a decision still
pending, has had some adverse impact on our share price, which is disappointing.
We have core strength in the attractive UK cash payments sector to which our
skills are well suited. In addition, consumer behaviour, regulatory change and
technical innovation are leading to a proliferation of new payment media
utilising a variety of new channels. With our key skills in client and retail
management, transaction processing and financial settlement, we are well placed
to take advantage of the new markets opening up to us.
These opportunities are supported by strong cash generation and the stability of
the underlying industries in which our clients operate.
We are proposing a final dividend of 14.4 pence per share, which together with
the interim dividend of 7.4 pence makes a total for the year of 21.8 pence, an
increase of 24 percent.
For the current financial year, trading is in line with the company's
expectations.
Our established business is strong, with opportunities to enhance retail yield
and increase the number of online merchants we serve. In our developing
businesses, there is substantial growth potential as we roll out our services to
a wider base, to improve profitability. Together, these businesses provide a
solid foundation from which we aim to deliver long term value for shareholders.
David Newlands
Chairman
27 May 2010
CHIEF EXECUTIVE'S REVIEW
PayPoint has had a satisfactory year in which we delivered profit just ahead of
market expectations and reinforced our prospects for further growth. Our
established business streams (delivered through our retail networks in the UK
and Ireland and the internet) continue to be highly profitable and cash
generative. Our developing business streams (bill payment and mobile top-ups in
Romania, parcels through Collect+ and mobile payments through PayByPhone) are
important to our strategic development and longer term value creation, although
we recognise that the decline in mobile top-ups in Romania has resulted in a
delay to profitability. The developing business streams are currently loss
making but bill payment in Romania, parcels and PayByPhone are growing strongly
and we expect them to generate profits and cash next year.
The last year has been significant in the evolution of our strategy,
particularly through the acquisition of PayByPhone, as we broaden our position
as a leading specialist payments company. At the time of flotation, PayPoint's
capabilities centred on its UK and Irish based retail networks. PayPoint has now
also become a leading player in web and mobile phone payments through
PayPoint.net and PayByPhone, as well as operating a retail cash network in
Romania. We have expanded the sectors which we serve and moved into new
geographies. The profit yield of outlets in PayPoint's retail networks is also
being enhanced by additional services including ATMs, debit and credit card
payments, international money transfer and the ground-breaking new Collect+
service, allowing consumers to send and collect parcels from their local store.
The payments industry is changing. Technology advances are creating new channels
for secure and convenient payments, providing greater accessibility for
consumers to the internet through sophisticated computers and smartphones.
Client and retailer requirements are for multi-channel solutions. Consumers
value new technology's convenience and speed, and better access to information.
Developments such as Wave & Pay and growth in prepaid cards, e-money and other
payment media require underlying processing and financial settlement between
consumers and businesses. At the same time, regulatory changes such as the
Payment Services Directive and plans to phase out cheques, are opening up parts
of the payments industry which were previously the exclusive domain of banks.
Banks are having to focus on their core businesses and enhanced payment security
standards are leading other businesses to focus on efficiencies and their core
activities.
These developments lead us to believe that there will be new opportunities for
the outsourcing of payment and related transaction processing. Cash payments
markets also continue to deliver a high proportion of regular payments,
demonstrating entrenched preference for cash among many consumers.
PayPoint's strategy places the group in a strong position to benefit its
existing business streams and from changes in technology, regulation and
competitor focus which external influences are providing. Our strategy, which
aims to reinforce our position as a specialist payments provider, is built
around four key elements:
Payments capability
The acceptance of multiple payment media (cash, cheque, cards, e-money, etc.)
through different channels (retail based terminal networks, internet and mobile
phone);
Attractive vertical markets
Targeting high volume, recurring consumer payments;
Value added content / services
Providing additional content or services to the payment channel and chosen
vertical markets to create differentiation; and
Geographic reach
Identifying regions with attractive payment dynamics where we can create value
through importing know how.
PayPoint has succeeded in establishing broad payment capability in a number of
key vertical markets. We provide a vital payments hub to our clients in many
sectors (energy, telecoms, household bills, transport, e-commerce and parking),
with the ability to process consumer payments and related transactions across
the consumer's choice of payment media or channel. The delivery of the payment
from the consumer to our client touches various elements such as the payment
medium used (cheque, cash or credit/debit card); the channel through which the
payment is made (by post, in a shop, via the internet or mobile); the processing
company (for example PayPoint, banks and internet payment service providers);
and the financial intermediary (acquiring banks, card schemes and card issuers).
PayPoint either runs operations within each channel directly (such as our retail
proposition for cash collection, internet payment service provision and mobile
payment for parking) or works closely with partners (retailers, internet
merchants and acquiring banks) to drive a secure and efficient consumer payment
to the client, from whichever consumer source.
PayPoint also provides value added content and services within each channel,
which differentiates the PayPoint proposition from competitors. In the case of
our retail channel, this differentiation is achieved through providing retailers
with a broad range of retail services, including ATMs, parcels, SIM cards and
international money transfer. With respect to our internet channel,
differentiation to merchants will be driven through having a wider base of
acquiring bank relationships, combined with value adding products such as
Fraudguard and superior reporting to merchants. 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 with appropriate smartphone
applications.
The execution of the final element of our strategy to extend geographic reach
has commenced. We entered into the Romanian market to replicate our UK retail
success in cash payments, and we have recently acquired PayByPhone which has
contracts in the UK, Canada, USA and France.
Our objective is to increase shareholder value through accessing the range of
opportunities which build around the four key elements of our strategy. We aim
to:
1. grow our established UK market position through incrementally adding new
payments to our existing portfolio; by focusing on optimising the retail network
to enhance our yield; by adding further payment schemes and online merchants to
our internet business; and by continually adding content and services to attract
consumers and clients.
2. accelerate growth in our developing businesses as we expand our PayByPhone
business in parking and into new markets and applications. We have opportunities
to add services from the UK to our Romanian business such as international money
transfer, to leverage our retail presence in Romania. Collect+ should benefit
from the continued roll-out to stores across the UK, greater take-up by online
merchants and through increased consumer adoption.
3. add content and services to our payment channels, which is fundamental to
maintaining our competitive differentiation. We have a number of developments
aimed at offering new content-rich services to our retailers and online
merchants and by extending our role in financial settlement where it is to our
clients' advantage. We also aim to enhance functionality around PayByPhone, the
terminal networks and PayPoint.net, notably where these functions build bridges
between the different payment channels by offering choice to consumers.
4. take the opportunity for improved and more rapid returns from new
geographies, which is substantially greater with the combination of PayByPhone,
the internet and a retail-based network, than through entering a new market with
a single proposition. PayByPhone already has a presence in Canada, USA, France
and the UK, with opportunities in other countries under investigation.
As we move to maximise these opportunities, we are strengthening the management
in our established business streams to ensure senior management attention is
directed proportionally to the developing business streams.
These are exciting times to be an innovator in the payments industry and we look
forward to the opportunities and challenges presented. At the same time, we
continue to maintain our status as the market leader in our more established
business streams.
Dominic Taylor
27 May 2010
BUSINESS REVIEW
The business review has been 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 14.
PayPoint is a payment service provider for consumer 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 consumer
transactions (throughput), revenue and net revenue, we have shown an analysis
which separates our developing business streams (bill payment and top-ups in
Romania, Collect+ and PayByPhone), from our established business streams.
In addition, we have expanded and altered the channel analysis as follows:
Retail networks:
Bill and general (prepaid energy, bills and tickets)
Top-ups (mobile, pre-paid cards and phone cards)
Retail services (ATM, debit/credit, parcels, money transfer and SIMs)
Internet (transactions between consumers and merchants, pre-authorisations,
fraudguard where separately charged and failed transactions)
PayByPhone (parking transactions)
Other for revenue and net revenue only (software development, configuration and
customisation and settlement of claims)
Growth opportunities are centred around retail services in the UK retail network
including parcels; new merchants for internet payments; the expansion of the
retail network and new retail services in Romania; new parking contracts for
PayByPhone and building and developing Collect+.
Operational review
Transactions have increased to 552 million (2009: 545 million), up 1% in the
established business streams and 20% in the developing business streams.
Throughput increased to £9.7 billion (2009: £8.9 billion), an increase of 8% in
the established business streams and over a threefold increase in the developing
business streams despite the reduction in mobile top-ups in Romania.
Revenue in developing business streams and in the remainder of our business
(shown in the table below as established business streams) has fallen as a
result of fewer mobile top-up transactions, especially where PayPoint is
principal and accounts for the face value of the top-up as revenue. Net revenue
in the developing business streams was up 20% but was down slightly in the
established business streams.
Operating profit in the established business streams was flat and the operating
loss including our share of Collect+ in the developing business streams was £4
million (2009: £3 million), an increase of £1 million as a result of a full year
of losses in Collect+ (2009: two months)(1).
+--------------+--------------+-------------+---------+--------+-----------+
| |Established |Developing | |Adjust | |
| |business |business |Total |Collect+|As reported|
| |streams(2) |streams(3) | | | |
+--------------+--------------+-------------+---------+--------+-----------+
|Transactions | | | | | |
|(million) | | | | | |
+--------------+--------------+-------------+---------+--------+-----------+
| 2010| 540| 12| 552| -| 552|
+--------------+--------------+-------------+---------+--------+-----------+
| 2009| 535| 10| 545| -| 545|
+--------------+--------------+-------------+---------+--------+-----------+
|Throughput | | | | | |
|£000 | | | | | |
+--------------+--------------+-------------+---------+--------+-----------+
| 2010| 9,560,776| 127,647|9,688,423| -| 9,688,423|
+--------------+--------------+-------------+---------+--------+-----------+
| 2009| 8,845,846| 35,291|8,881,137| -| 8,881,137|
+--------------+--------------+-------------+---------+--------+-----------+
|Revenue | | | | | |
|£000 | | | | | |
+--------------+--------------+-------------+---------+--------+-----------+
| 2010| 171,933| 24,875| 196,808| (205)| 196,603|
+--------------+--------------+-------------+---------+--------+-----------+
| 2009| 188,870| 35,482| 224,352| (1)| 224,351|
+--------------+--------------+-------------+---------+--------+-----------+
|Net revenue(4)| | | | | |
|£000 | | | | | |
+--------------+--------------+-------------+---------+--------+-----------+
| 2010| 74,589| 2,981| 77,570| (164)| 77,406|
+--------------+--------------+-------------+---------+--------+-----------+
| 2009| 74,922| 2,477| 77,399| (1)| 77,398|
+--------------+--------------+-------------+---------+--------+-----------+
Collect+ is a joint venture and its profit after tax is therefore included in
our consolidated profit and loss account after operating profit. In the table
above, the developing business streams figures for revenue and net revenue
include our 50% share of Collect+ to render a like-for-like comparison. The
figures are reconciled to the relevant figures in the profit and loss account
and elsewhere in the operating and financial review.
1. The group's operating profit (which excludes Collect+) was £34,072k (2009:
£33,684k).
2. Established business streams include the whole of PayPoint less the
developing business streams.
3. Developing business streams include bill payment and mobile top-ups in
Romania, Collect+ and PayByPhone.
Net revenue is revenue less commissions paid to retail agents, the cost of
mobile top-ups and SIM cards where PayPoint is principal and acquiring bank
charges.Analysis of transactions
There has been growth in transaction volumes across most sectors with the
exception of top-ups where, for mobile top-ups, in all territories, there has
been a decrease in the market. Mobile operators are offering more value for the
same or lower cost per top-up to consumers, resulting in fewer transactions.
+------------------+----------+----------+------------+
| | Year | Year | |
| | ended | ended | Increase/ |
| Transactions | 28 March | 29 March | (decrease) |
| | 2010 | 2009 | % |
| | million | million | |
+------------------+----------+----------+------------+
| Retail networks | | | |
+------------------+----------+----------+------------+
| Bill and general | 339 | 334 | 1.5 |
+------------------+----------+----------+------------+
| Top-ups | 129 | 143 | (9.7) |
+------------------+----------+----------+------------+
| Retail services | 39 | 32 | 23.4 |
+------------------+----------+----------+------------+
| Internet | 44 | 36 | 22.1 |
+------------------+----------+----------+------------+
| PayByPhone | 1 | - | - |
+------------------+----------+----------+------------+
| Total | 552 | 545 | 1.3 |
+------------------+----------+----------+------------+
Prepaid energy volumes (included in bill and general) in the UK have increased
by 1% on last year despite reductions through the year in domestic gas and
electricity prices. The cold winter had a beneficial impact on volumes in the
second half of the year.
Bill payments in Romania have grown significantly and include a full year of
transaction volumes compared to last year (launched August 2008). Volumes
continue to grow as more terminal sites are rolled out and consumers become
aware of the service. In the year, we have processed over 5.5 million bill
payment transactions an increase of nearly six times on the previous year and
our current run rate is c.160,000 transactions per week.
Mobile top-ups in UK, Ireland and Romania have continued to decline. E-money
volumes are up 43% with the introduction during the year of the O(2) pre-pay
debit card and a full year of trading for PayPal's pre-pay debit card.
Retail services volumes have increased as a result of the growth in credit/debit
card transactions performed by the retailers on the PayPoint terminal.
Internet transactions of 44 million are up 22% on last year as we continue to
add new merchants and existing merchants grow organically. New merchants in the
last 12 months include Moneysupermarket.com, Severn Trent Water, Ann Summers and
British Gas Home Vend.
Throughput
There has been substantial growth in the value paid by consumers (throughput),
primarily in bill and general payments and internet payments.
+------------------+-----------+-----------+------------+
| | Year | Year | |
| | ended | ended | Increase/ |
| Throughput | 28 March | 29 March | (increase) |
| | 2010 | 2009 | % |
| | £000 | £000 | |
+------------------+-----------+-----------+------------+
| Retail networks | | | |
+------------------+-----------+-----------+------------+
| Bill and general | 5,925,249 | 5,549,152 | 6.8 |
+------------------+-----------+-----------+------------+
| Top-ups | 1,166,507 | 1,199,186 | (2.7) |
+------------------+-----------+-----------+------------+
| Retail services | 377,271 | 378,714 | (0.4) |
+------------------+-----------+-----------+------------+
| Internet | 2,216,319 | 1,754,285 | 26.3 |
+------------------+-----------+-----------+------------+
| PayByPhone | 3,077 | - | - |
+------------------+-----------+-----------+------------+
| Total | 9,688,423 | 8,881,337 | 9.1 |
+------------------+-----------+-----------+------------+
Bill and general throughput reflects the increase in transactions and in the
average transaction value. There has been strong growth in higher value
transactions for local authority and housing authority payments and a small rise
in the average value for gas prepayments.
The reduction in top-ups throughput reflects the reduction in the overall market
value of mobile top-ups as a consequence of mobile operators offering more
airtime for the same value or less to consumers and the migration of pre-paid
mobile top-up customers to contracts offset by the increase in e-money top-ups.
Retail services include ATMs where throughput is flat. Whilst credit/debit
transactions have grown, we report no related throughput as the merchant
acquirer settles direct with our retailer.
Internet throughput has increased at a greater rate than the transaction growth,
as the average consumer spend per transaction has increased.
Revenue analysis
+------------------+----------+----------+------------+
| | Year | Year | |
| | ended | ended | Increase/ |
| Revenue | 28 March | 29 March | (decrease) |
| | 2010 | 2009 | % |
| | £000 | £000 | |
+------------------+----------+----------+------------+
| Retail networks | | | |
+------------------+----------+----------+------------+
| Bill and general | 58,564 | 60,566 | (3.3) |
+------------------+----------+----------+------------+
| Top-ups | 108,508 | 135,013 | (19.6) |
+------------------+----------+----------+------------+
| Retail services | 16,168 | 14,527 | 11.3 |
+------------------+----------+----------+------------+
| Internet | 9,968 | 11,798 | (15.5) |
+------------------+----------+----------+------------+
| PayByPhone | 283 | - | - |
+------------------+----------+----------+------------+
| Other | 3,112 | 2,447 | 27.2 |
+------------------+----------+----------+------------+
| Total | 196,603 | 224,351 | (12.4) |
+------------------+----------+----------+------------+
Bill and general payments revenue is lower than last year because the amount
billed to clients in respect of agent commission has reduced mainly as a result
of a new British Gas contract which includes a reduction in agent commission.
In Romania and Ireland, PayPoint is principal for mobile phone top-ups and, as a
result, the sales value of the top-up is recorded as revenue, with the cost of
the top-up recorded in cost of sales. In the UK, PayPoint is not principal and
only the commission income is recorded as revenue. The decline in mobile
volumes, as a result of mobile operators offering more airtime, affects revenue
from Romania and Ireland more than from the UK.
Retail services revenue has increased as a result of the growth in the number of
sites processing credit/debit transactions to 4,998 sites live at the year end
(2009: 3,930), and growth in revenues from parcels, SIM card sales, advertising
on till receipts and money transfer.
Retail services also includes ATM machine rental and revenue for ATM withdrawals
and balance enquiries. Average revenue per ATM has decreased as a consequence of
lower cash withdrawal volumes on more recently installed ATMs and lower rental
income, as five year term rental agreements expire and fully depreciated
machines are rolled over on lower rentals.
Internet revenues are lower, largely as a result of the migration of larger
merchants from our higher margin bureau service (where we take credit risk and
arrange settlement) to our lower margin gateway service (where we are not
exposed to merchant credit risk). We expect this to complete early in the next
financial year. In addition, the need to change our bureau sponsoring bank, when
Pago decided to exit the market, required the switching of all bureau internet
merchants to our new acquirer by March 2010. This was completed without loss,
but diverted considerable resources and delayed sales activity.
Other revenue includes rechargeable software development work, configuration and
customisation and settlement of claims.Net revenue analysis
Net revenue is revenue less commissions paid to retail agents, acquiring bank
charges, the cost of mobile top-ups and SIM cards where PayPoint is the
principal. Net revenue is a measure which the directors believe assists with a
better understanding of the underlying performance of the group and is shown in
the table below.
+------------------+----------+----------+------------+
| | Year | Year | |
| | ended | ended | Increase/ |
| Net revenue | 28 March | 29 March | (decrease) |
| | 2010 | 2009 | % |
| | £000 | £000 | |
+------------------+----------+----------+------------+
| Retail networks | | | |
+------------------+----------+----------+------------+
| Bill and general | 33,586 | 33,653 | (0.2) |
+------------------+----------+----------+------------+
| Top-ups | 24,272 | 25,692 | (5.5) |
+------------------+----------+----------+------------+
| Retail services | 8,684 | 7,553 | 15.0 |
+------------------+----------+----------+------------+
| Internet | 7,469 | 8,053 | (7.3) |
+------------------+----------+----------+------------+
| PayByPhone | 283 | - | - |
+------------------+----------+----------+------------+
| Other | 3,112 | 2,447 | 27.2 |
+------------------+----------+----------+------------+
| Total | 77,406 | 77,398 | - |
+------------------+----------+----------+------------+
Bill and general net revenue is flat because the benefit of the increase in
Romania bill payment and UK local authority housing payments has been offset by
margin reduction in respect of energy clients which have taken advantage of
developments in energy prepayment infrastructure which have enabled them to
negotiate agreements with better transaction pricing with individual payment
networks rather than working with all three networks.
The decrease in top-ups net revenue is lower than the decrease in revenue as a
result of the growth in e-money transactions which have higher than average net
revenue.
Retail services net revenue has a greater percentage increase than revenue
because debit/credit and advertising on till receipts attracts no retailer
commission.
Internet net revenue is down 7% for the reasons noted under revenue. The
reduction is proportionally lower because bureau revenue, which has reduced,
includes the charges from sponsoring banks.
Collect+
On 5 February 2009, PayPoint announced a 50:50 joint venture with Home Delivery
Network, a leading logistics and parcel network company, to provide consumers
with a more convenient solution for parcel delivery and collection, by
leveraging our retail network of agents as parcel drop-off and collection
points.
At the end of the year, we had 3,418 (2009: 1,250) convenience retailers
offering the parcel service within our existing retailer base.
During the year, we processed 247,000 transactions for thirteen clients. The
service is growing and major internet merchants are showing interest.
PayByPhone
On 9 March 2010, PayPoint acquired 100% of the share capital of Verrus Mobile
Technologies Inc. and Verrus UK Limited (together known as PayByPhone) for £29
million (including deferred consideration of £4 million) with a further
potential consideration of £4 million dependent on results to March 2013.
PayByPhone is a leading international provider of services to parking
authorities allowing consumers to use their mobile phones to pay for their
parking by credit or debit card. It has contracts in the UK, Canada the USA and
France.
Network growth
Terminal sites overall have decreased by 1% to 27,459.
In the UK and Ireland, sites have increased by 653, an increase of 3%, but
reflect the current economic climate, where two medium retailers, with over 500
terminal sites, went into administration.
In Romania, we installed over 900 new full service terminals in the year and
have removed over 1,700 of the old mobile top-up only terminals.
+----------------------+---------------+---------------+-----------------------+
| | 28 March 2010 | 29 March 2009 | Increase / (decrease) |
| Analysis of sites | | | % |
+----------------------+---------------+---------------+-----------------------+
| UK & Ireland | | | |
+----------------------+---------------+---------------+-----------------------+
| Terminal sites | 17,830 | 18,705 | (4.7) |
+----------------------+---------------+---------------+-----------------------+
| Terminal and EPoS | 4,813 | 3,285 | 46.5 |
+----------------------+---------------+---------------+-----------------------+
| | 22,643 | 21,990 | 2.9 |
+----------------------+---------------+---------------+-----------------------+
| Romania | | | |
+----------------------+---------------+---------------+-----------------------+
| Terminal sites | 4,816 | 5,702 | (15.5) |
+----------------------+---------------+---------------+-----------------------+
| Total terminal sites | 27,459 | 27,692 | (0.8) |
+----------------------+---------------+---------------+-----------------------+
| Internet merchants | 5,618 | 5,160 | 8.9 |
+----------------------+---------------+---------------+-----------------------+
Financial review
Revenue for the year was 12.4% lower at £197 million (2009: £224 million),
driven by the decrease in mobile top-ups. This revenue reduction is also
reflected in cost of sales which, at £133 million (2009: £160 million), was down
17.1%. Agents' commission decreased to £73 million (2009: £84 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 fallen to £43 million
(2009: £59 million).
Net revenue(2) of £77.4 million (2009: £77.4 million) was flat with operating
margin(3) of 44.0% (2009: 43.5%) as a result of reduced operating costs.
Operating costs (administrative expenses) were 2% lower at £29.4 million (2009:
£30.2 million) despite investment in parcels and the acquisition of PayByPhone.
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 commissions paid to retail agents, the cost of
mobile top-ups and SIM cards where PayPoint is principal and acquiring bank
charges.
3. Operating margin is calculated as operating profit as a percentage of net
revenue.
Our share of the loss in developing Collect+ was £1.6m as expected (2009: loss
of £0.3m). This reflects a full year of trading compared to two months in the
previous year.
Profit before tax was £32.6 million (2009: £34.6 million), a decrease of 6%, as
a result of the loss in Collect+ and lower interest rates impacting investment
income. The tax charge of £10.5 million (2009: £10.8 million) represents an
effective rate of 32.2% (2009: 31.3%). The tax charge is higher than the UK
nominal rate of 28% because of unrelieved losses in Romania and the write off of
a deferred tax asset relating to tax relief for share based payments which are
unlikely to be released in June 2010, on the third anniversary of their award.
Cash flow from operating activities was £25 million (2009: £33 million),
reflecting strong conversion of profit to cash offset by corporation tax paid of
£14 million (2009: £8 million), bringing the group's tax payments into line with
the charge for tax over the last two years. Capital expenditure of £3 million
(2009: £9 million) reflected spend on new terminals, ATMs and IT equipment. In
2009, the freehold of our Welwyn operations base was purchased for £6 million.
Net interest received was £0.2 million (2009: £1.2 million) as a result of low
interest rates.
Equity dividends paid were £12.9 million (2009: £11.1 million).
As part of the funding for the purchase of PayByPhone, the company has drawn
down £6 million (2009: £nil) from its £35 million loan facility.
Cash and cash equivalents were £20.8 million (including client cash of £6.8
million), down from £36.3 million (including client cash of £7.5 million) last
year due to the acquisition of PayByPhone, costing £29 million.
Economic profit
PayPoint's economic profit (operating profit less tax and capital charge) was
£18.5 million (2009: £19.5 million) reduced as a result of the losses in
Collect+.
Dividend
We propose to pay a final dividend of 14.4p per share on 16 July 2010 (2009:
11.6p) to shareholders on the register on 18 June 2010, subject to the approval
of the shareholders at the annual general meeting. An interim dividend of 7.4p
(2009: 6.0p) per share was paid on 15 December 2009 making a total dividend for
the year of 21.8p (2009: 17.6p).
Liquidity and going concern
The group has cash of £20.8 million and a loan of £6 million drawn down on its
unsecured loan facility of £35 million, with a remaining term of over one year.
Cash and borrowing capacity is adequate to meet the foreseeable needs of the
group taking account of any risks (see page 15). 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.
Employees
We would like to take this opportunity to thank PayPoint's employees for their
commitment, energy and enthusiasm in the delivery of these results.
Economic climate
The company's bill and general payments sector, which accounts for 43% (2009:
43%) of our net revenue, continues to be reasonably resilient in the recession
as consumers' discretion in expenditure was limited for essential services.
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. There has been an adverse impact on our mobile
top-ups and in ATM cash withdrawal rates.
PayPoint's exposure to retailer bad debt is limited as most of the group's
clients in the UK, other than mobile operators, bear the risk of retailer bad
debt. Credit granted to retailers is restricted by daily direct debiting for all
UK and Irish transactions via a terminal and weekly for EPoS mobile top-ups. In
Romania, the risk of the bad debt lies with PayPoint Romania. 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. This risk is mitigated to some extent by withholding
settlement of funds to merchants.
National Lottery Commission
We have provided the National Lottery Commission (NLC) with a robust response to
Camelot's application to provide bill payment and mobile top-ups. We argue that
the application should be rejected, primarily on competition grounds, supported
by strong, independent legal advice, including counsel's opinion and are
reserving our position. Whatever the decision, we are well prepared and our new
developing business streams, which are unaffected by this threat, provide
opportunity for strong profitable growth. It is clear that the uncertainty
arising from this consultation process, with a decision still pending, has had
some adverse impact on our share price, which is disappointing.
Outlook
For the current financial year, trading is in line with the company's
expectations.
Our established business is strong, with opportunities to enhance retail yield
and increase the number of online merchants we serve. In our developing
businesses, there is substantial growth potential as we roll out our services to
a wider base, to improve profitability. Together, these businesses provide a
solid foundation from which aim to deliver long term value for shareholders.
KEY PERFORMANCE INDICATORS (KPIs)
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 additional
measures to monitor progress.
Measuring our performance
+-----------------+-----------------+-----------------+------------+-----------+
|Strategic focus |KPI |Description | 2010| 2009|
+-----------------+-----------------+-----------------+------------+-----------+
| | |Profit after tax | | |
| | |attributable to | | |
| | |equity holders of| | |
| | |the parent | | |
|Shareholder |Earnings per |divided by the | 32.9p| 35.6p|
|return |share (basic) |weighted average | | |
| | |number of | | |
| | |ordinary shares | | |
| | |in issue during | | |
| | |the year | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Proposed final | | |
| | |dividend and | | |
| | |interim dividend | | |
| |Dividends per |divided by the | 21.8p| 17.6p|
| |share |number of fully | | |
| | |paid shares at | | |
| | |the end of the | | |
| | |year | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Operating profit | | |
| | |after tax and a | | |
| | |charge for | £18.5|£19.5 |
| |Economic profit |capital employed | million|million |
| | |based upon the | | |
| | |group's cost of | | |
| | |capital | | |
+-----------------+-----------------+-----------------+------------+-----------+
| |Terminal sites in|Number of live | | |
|Growth |the UK, Ireland |terminal sites at| 27,459|27,692 |
| |and Romania |the end of the | | |
| | |year | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Number of live | | |
| |Internet |internet | 5,618|5,160 |
| |merchants |merchants at the | | |
| | |end of the year | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Number of | | |
| | |PayPoint | | |
| | |transactions | | |
| |Retail networks |processed in the | | |
| |transactions |year on our | 507 million|509 million|
| | |terminals, ATMs | | |
| | |and on our | | |
| | |retailers' EPoS | | |
| | |systems | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Number of | | |
| |Internet |transactions | | |
| |transactions |processed in the | 44 million|36 million |
| | |year by | | |
| | |PayPoint.net | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Number of | | |
| | |PayByPhone | | |
| |PayByPhone |transactions | 1 million| n/a|
| | |processed in the | | |
| | |year since | | |
| | |acquisition | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |The value of | | |
| | |transactions | | |
| | |processed via our| | |
| | |terminals, | | |
| |Throughput |retailers' EPoS |£9.7 billion| £8.9|
| | |systems, internet| | billion|
| | |merchants, ATMs, | | |
| | |PayByPhone and | | |
| | |the sale of other| | |
| | |retail services | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Revenue less: | | |
| | |commissions paid | | |
| | |to retail agents;| | |
| | |the cost of | | |
| |Net revenue |mobile top-ups | £77 million|£77 million|
| | |and SIM cards | | |
| | |where PayPoint is| | |
| | |principal; and | | |
| | |acquiring bank | | |
| | |charges | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Operating profit | | |
| |Operating margin |as a percentage | 44.0%| 43.5%|
| | |of net revenue | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Total operating | | |
| | |profit for the | | |
|Asset |Return on capital|year divided by | 88%| 115%|
|optimisation |employed |monthly average | | |
| | |capital employed | | |
| | |excluding cash | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Number of | | |
| | |permanent | | |
| | |employees who | | |
|People |Labour turnover |left during the | | |
| | |year divided by | | |
| | |average total | | |
| | |permanent | | |
| | |employees | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |UK & Ireland | 20%| 23%|
| | |Romania | 49%| 56%|
+-----------------+-----------------+-----------------+------------+-----------+
| | |% women | | |
| | |% women managers | 43%| 42%|
| |Gender diversity |employed by the | 7%| 7%|
| | |group at the year| | |
| | |end | | |
+-----------------+-----------------+-----------------+------------+-----------+
RISKS
PayPoint's business, financial condition or operations could be materially and
adversely affected by the risks summarised below. Although management takes
steps to mitigate risks where possible or where the cost of doing so is
reasonable in relation to the probability and seriousness of the risk, it may
not be possible to avoid the materialisation of some or all of such risks.
+---------------------------------------+--------------------------------------+
|Risk |Future prospects depend on our ability|
| |to: |
+---------------------------------------+--------------------------------------+
| |manage growth through the employment |
|Managing growth of the business |of adequate skilled resources, whilst |
| |maintaining financial controls |
+---------------------------------------+--------------------------------------+
|Major contract loss or renewal at |renew contracts at expiry on |
|unattractive margins |attractive terms |
+---------------------------------------+--------------------------------------+
| |retain and recruit key staff through a|
|Dependence on key executives |mixture of basic salary plus short and|
| |long-term incentive schemes |
+---------------------------------------+--------------------------------------+
| |maintain financial controls, defend |
|Failure of systems |against natural disasters, terrorist |
| |attacks, sabotage and hacking |
+---------------------------------------+--------------------------------------+
|Competition |hold and gain market share |
+---------------------------------------+--------------------------------------+
| |mitigate the consequences of |
|Insolvency of a major multiple retail |insolvency both in terms of the bad |
|agent |debt risk and the impact of such |
| |insolvency on our network coverage |
+---------------------------------------+--------------------------------------+
| |keep pace with technological changes |
|Technological changes |and introduce new developments to |
| |compete effectively |
+---------------------------------------+--------------------------------------+
| |stop third parties from using our |
|Reliance on intellectual property |products and defend the use of our |
| |products from any challenge |
+---------------------------------------+--------------------------------------+
| |access any future capital on |
| |sufficiently attractive terms, |
|The need to raise capital in future |particularly in view of prevailing |
| |economic conditions and the |
| |availability of credit |
+---------------------------------------+--------------------------------------+
|Economic, political, legislative, |deal with the impact of any changes |
|taxation or regulatory changes |without affecting the growth or |
| |profitability of the business |
+---------------------------------------+--------------------------------------+
| |ensure the impact of any adverse |
|Taxation |changes is mitigated by enhanced |
| |performance |
+---------------------------------------+--------------------------------------+
|Fraudulent or criminal activity |avoid loss of client money by the |
| |rigorous application of controls |
+---------------------------------------+--------------------------------------+
|Consumers reduce number or value of |establish new products and services |
|payments via the PayPoint network |and keep abreast of technological and |
| |market changes |
+---------------------------------------+--------------------------------------+
CONSOLIDATED INCOME STATEMENT
+-----------------------------------------------------+----+---------+---------+
| | | Year| Year|
| | | ended| ended|
| |Note| 28 March| 29 March|
| | | 2010| 2009|
| | | £000| £000|
+-----------------------------------------------------+----+---------+---------+
|Continuing operations |
Unternehmensinformation / Kurzprofil:
Datum: 27.05.2010 - 08:00 Uhr
Sprache: Deutsch
News-ID 21531
Anzahl Zeichen: 0
contact information:
Town:
Welwyn Garden City, Hertfordshire
Kategorie:
Business News
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