Preliminary Results Year Ended 27 March 2011
(Thomson Reuters ONE) -
PayPoint plc
Preliminary results
Year ended 27 March 2011
Year ended Year ended Increase / (decrease) %
27 March 28 March
2011 2010
--------------------------------------------------------------------------------
Revenue £193.2m £196.6m (1.7)
Net revenue(1) £82.7m £77.4m 6.9
Gross margin 36.6% 32.3% 4.3ppts
Operating profit £36.1m £34.1m 5.8
Profit before tax £34.5m £32.6m 5.5
Diluted earnings per share 35.1p 32.7p 7.5
Dividend per share 23.4p 21.8p 7.3
--------------------------------------------------------------------------------
* Record group transaction volume (590 million), with growth in all channels
* UK retail services continued strong growth, net revenue up 25%
* 12 million Romanian bill payment transactions, up 118%
* 59 million internet transactions processed, up 34%
* PayByPhone transaction volumes of 14 million
* Collect+ transaction volumes increased to over 1 million, up over 4 times on
last year
* Developed new virtual terminal which is currently being rolled out to
selected multiple retailers' till systems
* Debt repaid and year end net cash was £26.5 million
Enquiries
PayPoint plc Finsbury
Dominic Taylor, Chief Executive 01707 600300 Rollo Head 0207 2513801
George Earle, 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.
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 return to growth in earnings as a result of good
performance by our UK retail network, excellent internet payment growth and
substantial progress in our Romanian network and Collect+. We have increased
resources and improved infrastructure at PayByPhone. We have made strong
progress in technology, completing the development and starting the roll out of
our virtual terminal, developing a broadband communications solution for faster
transactions and introduced new services for our terminal network, including
cash out and money transfer.
In the UK retail network, retail services delivered healthy growth, although
mobile top-ups continued to decline. I am particularly delighted with the
recent announcement that we have won the tender to provide the retail network
for the Department for Work and Pensions' replacement of giro cheques for
benefit payments, the contract for which is under negotiation. Currently, over
20 million giro cheques are issued annually to pay benefits. We have already
demonstrated that our retailers can make payments to consumers (in addition to
our traditional strength in collecting money from them). This will
substantially increase the flow of money out, reducing banking charges to
retailers and delivering more commission and footfall to them.
Internet net revenues have increased 20% and the business had notable success in
winning gaming merchants, including Stan James, 32 Red and Sportingbet. We are
continuing to win gaming business because of our robust and resilient platform,
innovation, advanced fraud and risk management capabilities, and real-time
enterprise level reporting.
We have continued to invest in our Romanian retail network by increasing our
full service terminal estate by more than 1,100, whilst removing all the old
mobile top-up only sites. We accept bill payment for 27 clients and transaction
volumes have more than doubled to over 12.1 million transactions. Under a new
contract with Western Union, we will roll out money transfer this year.
We have extended our parcels service through Collect+, our joint venture with
Yodel, selectively across our UK retail network. Momentum is strong, with
considerable interest among major internet retailers and internet marketplaces.
We have over 3,700 sites handling Collect+ parcels and 30 home shopping
retailers live, including some of the most respected customer service leaders,
including ASOS, New Look, Boden and Very. During the year, we handled over 1
million parcels.
In PayByPhone, we have increased the resources in sales, marketing and delivery
more than we planned. We have upgraded the infrastructure to provide disaster
recovery and introduced a new consumer friendly mobile web parking registration
and payment system for the UK and North America. 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 profitability in our Romania
retail network, gathering momentum in Collect+ and proper resourcing of
PayByPhone, mark an important year in re-establishing the group for substantial
growth. We are proposing a final dividend of 15.6 pence per share, making a
total for the year of 23.4 pence, an increase of 7.3 per cent.
For the current financial year, trading is in line with the company's
expectations. Our established business streams (UK and Irish retail networks and
internet payments) are 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 streams (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.
David Newlands
26 May 2011
CHIEF EXECUTIVE'S REVIEW
PayPoint has had another good year, in which we have delivered profits in line
with market expectations and our strategic plans. Our UK retail network and
internet payments have continued to be highly profitable and cash generative.
Collect+, PayByPhone and our Romanian retail network, which are important to the
creation of value, have all made good progress during the year.
Our strategy:
Since the flotation of the original UK 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 delivering 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 across the consumer's
choice 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, parcels, SIM cards and
international money transfer through Western Union®.
In the internet channel, differentiation to merchants is driven through a
widening base of acquiring bank relationships and payment types, together with
the quality of our fraud screening and reporting.
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 smart phone applications.
The extension of our geographic reach is progressing.
Growth and prospects:
Technology
We use technology to drive value through the introduction of new payment types
and related services. These, in turn, add new revenue opportunities to our
proven recurring payment methods.
In our UK retail network, we are rolling out a new 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 and eliminates the need for reconciliation with the main till system.
As we free UK network terminals, we will deploy them in Romania.
An increasing number of our terminals are being connected through broadband
connectivity rather than dial-up, dramatically improving the speed of online
transactions.
In Romania and the UK, a development to enable money transfer on our terminal
will eliminate the expense and complication of a separate personal computer,
significantly reducing the entry cost for retailers and expanding the
eligibility criteria for the service. Development work for cash out services
will make our retailer settlement systems more streamlined and 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 the internet channel, we are developing substantial improvements to our
services to online merchants. These include new 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 and has utilised one of the group's data centres
as a back-up for business continuity.
UK retail network
We are focussed on selling retail services to our retail networks. Net revenues
from these services have increased 25% in the year. These services include
parcels, ATMs, SIM cards, debit and credit card acceptance, receipt advertising
and money transfer. Our retail network in the UK has provided energy clients
with a service to rebate cash to consumers, which reverses the traditional flow
of money in our retailers. We are currently negotiating the contract following
our success in winning the DWP's tender for a service to replace giro cheque
benefits which provides us with a scale opportunity to extend cash out.
Romanian retail network
Increasing bill payment volumes have continued to provide growth in Romania and
we will launch money transfer services this year. In addition, we are adding
new sites to cover more neighbourhoods and optimising existing sites to improve
their profitability. This business should break even in the current year.
Internet
Alongside the introduction of new systems referred to above, we expect to sign
up further new merchants and to benefit from the introduction of new card scheme
sponsors, including HSBC International for 38 countries and BNP for France,
driving growth in profits. These activities will increasingly position
PayPoint.net as an international provider and will add profitable growth.
PayByPhone
PayByPhone, one of the worldwide leaders in mobile phone parking, has the
potential to replace traditional parking meters 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, but our momentum is encouraging. We have
spent more heavily than anticipated and a further loss will result in the
current year. We expect it to turn to profit in the year ending March 2013.
Collect+
Our parcels joint venture (50:50) with Yodel has progressed strongly, with
substantial endorsement from the online retailing community and resulting growth
in transaction volumes. We expect them to grow further this year as we sign
more home shopping clients for returns and deliveries. A recently introduced
consumer to consumer service is being extended to smaller packets and is
expected to grow significantly this year, as we target online traders. This
joint venture processes around two million transactions per annum (based on
transaction volumes in March 2011) and is making good progress towards its
breakeven volume of 6-8 million parcels, which we expect to reach in the year
ending March 2013.
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, specialism in
vertical markets, value added services and geographic reach. We plan to make
good progress in both the established and developing business streams, notably
through continuing growth in retail services and internet payments, by turning
the Romanian retail network profitable through an increase in bill payment
market share, and by adding new customers in Collect+ and PayByPhone.
We are increasingly benefiting from the synergy between our various business
streams, with more clients taking multi-channel services. We aim to push this
dynamic more strongly over time, as newer business areas bed in and system
platforms can be developed across the group. We are strengthening the management
in our UK retail network to ensure senior management attention is directed
proportionately to the developing business streams.
PayPoint is one of the best placed companies to make further gains in the fast
moving payment industry and has a market leading position in retail services, on
which we intend to build.
Dominic Taylor
26 May 2011
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 |KPI |Description | 2011| 2010|
|focus | | | | |
+-----------------+-----------------+-----------------+------------+-----------+
|Shareholder |Earnings per |Profit after tax| 35.2p| 32.9p|
|return |share (basic) |attributable to| | |
| | |equity holders of| | |
| | |the parent| | |
| | |divided by the| | |
| | |weighted average| | |
| | |number of| | |
| | |ordinary shares| | |
| | |in issue during| | |
| | |the year. | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | | | | |
+-----------------+-----------------+-----------------+------------+-----------+
| |Dividends per |Proposed final| 23.4p| 21.8p|
| |share |dividend and| | |
| | |interim dividend| | |
| | |divided by the| | |
| | |number of fully| | |
| | |paid shares at| | |
| | |the end of the| | |
| | |year. | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | | | | |
+-----------------+-----------------+-----------------+------------+-----------+
| |Economic profit |Operating profit| £17.4| £18.5|
| | |after tax and a| million| million|
| | |charge for| | |
| | |capital employed| | |
| | |based upon the| | |
| | |group's cost of| | |
| | |capital. | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | | | | |
+-----------------+-----------------+-----------------+------------+-----------+
|Growth |Retail networks |Number of| 517 million|507 million|
| |transactions |PayPoint | | |
| | |transactions | | |
| | |processed in the| | |
| | |year on our| | |
| | |terminals, ATMs| | |
| | |and on our| | |
| | |retailers' EPoS| | |
| | |systems. | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | | | | |
+-----------------+-----------------+-----------------+------------+-----------+
| |Internet |Number of| 59 million| 44 million|
| |transactions |transactions | | |
| | |processed in the| | |
| | |year by| | |
| | |PayPoint.net. | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | | | | |
+-----------------+-----------------+-----------------+------------+-----------+
| |PayByPhone |Number of| 14 million| 1 million|
| | |PayByPhone | | |
| | |transactions | | |
| | |processed in the| | |
| | |year (2010: since| | |
| | |acquisition). | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | | | | |
+-----------------+-----------------+-----------------+------------+-----------+
| |Transaction value|The value of| £10.6| £9.7|
| | |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 the| £83 million|£77 million|
| | |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. | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | | | | |
+-----------------+-----------------+-----------------+------------+-----------+
| |Operating margin |Operating profit| 42%| 42%|
| | |including our| | |
| | |share of joint| | |
| | |venture losses as| | |
| | |a percentage of| | |
| | |net revenue. | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | | | | |
+-----------------+-----------------+-----------------+------------+-----------+
|Asset |Return on capital|Total operating| 53%| 88%|
|optimisation |employed |profit for the| | |
| | |year divided by| | |
| | |monthly average| | |
| | |capital employed| | |
| | |excluding cash. | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | | | | |
+-----------------+-----------------+-----------------+------------+-----------+
|People |Labour turnover |Number of| | |
| | |permanent | | |
| | |employees who| | |
| | |left during the| | |
| | |year divided by| | |
| | |average total| | |
| | |permanent | | |
| | |employees. | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |UK & Ireland | 25%| 20%|
| | | | | |
| | |Rest of the world| 18%| 49%|
+-----------------+-----------------+-----------------+------------+-----------+
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 5.
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 streams (bill payment and top-ups in
Romania, Collect+ and PayByPhone), from our established business streams (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 tickets)
Top-ups (mobile, pre-paid cards and phone cards)
Retail services (ATM, debit/credit, parcels, money transfer, SIMs and receipt
advertising)
Internet (transactions between consumers and merchants,
pre-authorisations and Fraudguard, where separately charged)
PayByPhone (parking and bicycle rental transactions)
Other for revenue and net revenue only (software development, 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 590 million (2010: 552 million), up 4% in the
established business streams and 155% in the developing business streams.
Transaction value increased to £10.6 billion (2010: £9.7 billion), up 8% in the
established business streams and up 123% in the developing business streams,
including the impact of PayByPhone for a whole year and the reduction in mobile
top-ups in Romania.
Revenue in developing business streams was up 7% as a result of a full year
trading of PayByPhone, offset by a 19% decrease in mobile revenue in Romania.
Established business stream revenue was down 2% as a result of the reduction in
mobile top-ups and the change of card scheme sponsor, where merchant service
charges are no longer included in revenue as they are now charged direct to
merchants.
Net revenue in the developing business streams was up 119%, with strong growth
in Romanian bill payment and Collect+ and as a consequence of the inclusion of
PayByPhone. Established business stream net revenue was up 3%, held back by the
decline in mobile volumes.
Operating profit in the established business streams was £38.4 million (2010:
£36.2 million) and the operating loss, including our share of Collect+, in the
developing business streams was £3.9 million (2010: £3.8 million), an increase
of £0.1 million. The small increase in the loss in developing businesses is as a
result of a better performance in Romania offsetting the impact of the inclusion
of the PayByPhone business, which was loss making in the year, as expected.
Established Developing
business business Adjust
streams(1) streams(2) Total Collect+(3) As reported
--------------------------------------------------------------------------------
Transactions
million
2011 559 31 590 - 590
2010 540 12 552 - 552
--------------------------------------------------------------------------------
Transaction value
£million
2011 10,316 285 10,601 - 10,601
2010 9,560 128 9,688 - 9,688
--------------------------------------------------------------------------------
Revenue
£000
2011 167,700 26,535 194,235 (1,002) 193,233
2010 171,933 24,875 196,808 (205) 196,603
--------------------------------------------------------------------------------
Net revenue(4)
£000
2011 76,811 6,539 83,350 (627) 82,723
2010 74,589 2,981 77,570 (164) 77,406
--------------------------------------------------------------------------------
(1) Established business streams include the UK and Irish retail networks and
the internet payment channel
(2) Developing business streams includes Romania, PayByPhone and for
Collect+, revenue and net revenue only.
(3) Collect+ revenue and net revenue is included in developing
business stream's 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 most services, with the
exception of mobile top-ups where, in all territories, there has been a
decrease.. 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 thereby
migrating prepaid consumers to contracts.
Year Year
ended ended Increase /
27 March 28 March (decrease)
2011 2010 %
million million
-------------------------------------------------------
Retail networks
Bill and general 350,970 339,801 3.3
Top-ups 117,670 128,887 (8.7)
Retail services 48,425 38,901 24.5
Internet payments 58,544 43,536 34.5
PayByPhone 14,059 762 n/a
-------------------------------------------------------
Total 589,668 551,887 6.8
-------------------------------------------------------
Prepaid energy volumes (included in bill and general) in the UK have increased
by 4% on last year. The cold weather before Christmas and increases in domestic
energy tariffs have helped volumes in the second half of the year.
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 have
processed over 12 million bill payment transactions, an increase of 118% on the
previous year and our run rate, based on transactions in March 2011, is c.16
million transactions per annum.
Mobile top-ups in UK, Ireland and Romania were down 10% overall, against an 11%
decline this time last year. E-money volumes, which are included in top-ups,
were up 21% to 4 million.
Retail service transaction volumes have increased across all products, ATMs,
debit/credit, parcels, money transfer and SIMs. Debit/credit card transactions
are up more than 30% on last year. We have sold almost 700,000 SIMs in the year
(2010: 300,000). Parcel volumes continue to grow and have increased over four
times on last year to just over 1 million transactions.
Internet transactions of 59 million were up 34% on last year as we continued to
add new merchants and existing merchants grew organically. New merchants in the
last 12 months include Stan James, 32Red, Sportingbet, Funky Pigeon and Links of
London.
PayByPhone transactions are for a full year compared to 19 days last year.
Towards the end of the year, PayByPhone saw the number of tenders issued by
councils and parking authorities increase as they looked for a more cost
effective method for collecting parking charges.
During the year, we produced 70 million receipts (2010: 10 million) containing
an advertising message. These are not counted as additional transactions.
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/
27 March 28 March (decrease)
2011 2010 %
£000 £000
----------------------------------------------------------
Retail networks
Bill and general 6,198,171 5,925,249 4.6
Top-ups 1,114,809 1,166,507 (4.4)
Retail services 394,727 377,271 4.6
Internet payments 2,838,147 2,216,319 28.1
PayByPhone 55,020 3,077 n/a
----------------------------------------------------------
Total 10,600,874 9,688,423 9.4
----------------------------------------------------------
Growth in bill and general transaction value reflected the increase in
transactions and in their average value. There continues to be strong growth in
higher value transactions for local authority and housing authority payments and
a small rise in the average value for energy prepayments.
The reduction in top-ups transaction value reflected the overall decline in the
pre-pay mobile market. An increase in e-money transaction value off-set the
overall reduction and average transaction values were up 5%.
Retail services transaction value is relatively small as SIM sales have low
value and debit/credit transactions (where the merchant acquirer settles direct
with our retailer), parcel transactions and terminal advertising have no
associated transaction value.
Internet transaction value has increased by 28% but transactions have a lower
average value of £48.47 (2010: £50.91). Part of the decline in average value was
due to over 1 million energy pre-payment gas and electricity transactions, where
consumers topped-up via the internet at home, at lower values. The signing of
three large gaming merchants during the year also reduced the average
transaction value as gaming tends to be at lower transaction value than other
sectors.
PayByPhone value reflects a full year of the value of consumers' parking
transactions and bicycle rentals against a period of 19 days from the
acquisition of the business in the prior period.
Revenue analysis
Year Year
ended ended
27 March 28 March Increase/
2011 2010 (decrease)
£000 £000 %
-------------------------------------------------------
Retail networks
Bill and general 57,889 58,564 (1.2)
Top-ups 98,843 108,508 (8.9)
Retail services 19,602 16,168 21.2
Internet payments 8,939 9,968 (10.3)
PayByPhone 4,501 283 n/a
Other 3,459 3,112 11.1
-------------------------------------------------------
Total 193,233 196,603 (1.7)
-------------------------------------------------------
Bill and general payments revenue was slightly lower than last year, as some
clients elected to work on a more exclusive basis to secure lower commission
rates for more volume.
In Romania and Ireland, PayPoint acts as principal for mobile phone top-ups and,
as a result, the sales value of the top-up is recorded as revenue, with the
purchase cost of the top-up recorded in cost of sales. In the UK, PayPoint acts
as an agent and only the commission income is recorded as revenue. The decline
in mobile volumes, therefore, affects revenue arising in Romania and Ireland
more than in the UK.
Retail services revenue increased strongly across several products as a result
of growth in the number of sites processing credit and debit transactions to
5,948 at the year end (2010: 4,998); growth in revenues from parcels; a full
year of SIM card sales; advertising on till receipts; and money transfer.
Retail services also include ATMs, where revenue is derived from cash
withdrawals, balance enquiries and rental income. Whilst ATM revenue has grown,
the average revenue per ATM decreased as a consequence of lower cash withdrawal
revenues 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 payment revenues were lower because merchant service charges, which
were formerly included in revenue and cost of sales, were £nil this period
(2010: £2.5 million), as a consequence of a change in card scheme sponsor.
PayByPhone revenues of £4.5 million were for the full year compared to only 19
days last year and included costs that are recharged to clients for the
provision of call centres.
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 stock, 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
27 March 28 March Increase /
2011 2010 (decrease)
£000 £000 %
-------------------------------------------------------
Retail networks
Bill and general 33,806 33,586 0.6
Top-ups 22,683 24,272 (6.5)
Retail services 10,827 8,684 24.7
Internet payments 8,939 7,469 19.7
PayByPhone 3,009 283 n/a
Other 3,459 3,112 11.1
-------------------------------------------------------
Total 82,723 77,406 6.9
-------------------------------------------------------
Bill and general net revenue increased mainly as a result of the growth in
Romanian bill payment net revenue, which was up 94% on last year.
The decrease in top-ups net revenue was 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 as
there is no commission payable on some services, including debit and credit card
transactions.
Internet net revenue was up 20%, primarily as a result of the increase in
transaction volumes and value and the better margins from our new card scheme
sponsor. Net revenue is the same as revenue as a result of merchant service
charges now being charged directly to our bureau merchants by the card scheme
sponsor.
Collect+
During the year, we processed over 1 million transactions for 30 clients (2010:
0.2 million transactions for 13 clients). Transaction volumes continue to grow
and our annual run rate, based on March 2011, is now over 2 million
transactions. In the year, we added a store to home delivery service, where
customers can take a parcel to a Collect+ store and have it delivered to the
recipient's home address. More recently, we launched a packet delivery service
for parcels less than 2kg in weight.
Network growth
Terminal sites overall have increased by 7% to 29,508.
In the UK and Ireland, sites have increased by 870, an increase of 4%. During
the second half of the year, we introduced our new EPoS integrated solution to
multiple 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 multiple retailers, this frees
terminals for use in Romania. We expect to roll this out further.
In Romania, we installed over 1,100 net new full service terminals in the year
and have removed all the remaining old mobile top-up only terminals.
In our internet channel, we added over 1,400 new merchants during the year but
churn of low value merchants, in particular from the change of credit card
scheme sponsor at the start of the year, led to a net reduction of 405
merchants. Since the half year, the merchant estate has grown by a net 201
merchants. Despite the decrease in merchant numbers, transaction volume, value
and net revenue all increased.
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 27 March 28 March (decrease) %
2011 2010
------------------------------------------------------------------
UK & Ireland terminal sites 23,513 22,643 3.8
Romania terminal sites 5,995 4,816 24.5
------------------------------------------------------------------
Total terminal sites 29,508 27,459 7.5
Internet merchants 5,213 5,618 (7.2)
Collect+ sites 3,668 3,418 7.3
------------------------------------------------------------------
FINANCIAL REVIEW
Income statement
Revenue for the year was 1.7% lower at £193 million (2010: £197 million). The
reduction results from a decrease in mobile top-ups and from the impact of
merchant service charges on card transactions being charged direct to merchants
rather than through PayPoint.net. This revenue reduction is also reflected in
cost of sales which, at £122 million (2010: £133 million), was down 8.2%.
Agents' commission decreased to £71 million (2010: £73 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 £39 million (2010: £44
million).
Net revenue(2) of £83 million (2010: £77 million) was up 6.9%.
Operating costs (administrative expenses) were 17.7% higher at £35 million
(2010: £29 million) as a result of the inclusion of a whole year's worth of
trading of PayByPhone. Excluding PayByPhone, operating costs were up 5.4%.
The increase in operating costs resulted in part from the one-off costs
including the legal costs, of successfully defending against Camelot's bid to
provide services in bill and general payments, mobile top-ups and debit/credit
processing.
Operating margin(3) was flat at 42% as a consequence of the increase in
operating costs.
(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.
Our share of the loss in developing Collect+ was £1.5 million as expected (2010:
loss of £1.6 million).
Profit before tax was £34.5 million (2010: £32.6 million) an increase of 5.5%.
The tax charge of £10.6 million (2010: £10.5 million) represents an effective
rate of 30.8% (2010: 32.2%). The tax charge was higher than the UK nominal rate
of 28% because of unrelieved losses in Romania and Canada and the write off of
the deferred tax asset relating to tax relief for share based payments.
Balance sheet
The short-term borrowing of £6 million was repaid in full in March.
Cash flow
Cash generated by operations was £42.2 million (2010: £38.7 million), reflecting
strong conversion of profit to cash. Corporation tax of £11.0 million (2010:
£13.7 million) was paid. Capital expenditure of £3.2 million (2010: £2.7
million) reflected spend on new terminals, ATMs and IT equipment. Net interest
paid was £0.1 million (2010: £0.2 million receipt) as a result of the loan that
was drawn down at the end of last year. Equity dividends paid were £15.0 million
(2010: £12.9 million). During the year the company repaid the £6 million loan.
Cash and cash equivalents were £26.5 million (including client cash of £6.1
million) up from £20.8 million (including client cash of £6.8 million but
excluding the bank loan of £6 million).
Economic profit
PayPoint's economic profit (operating profit less tax and capital charge) was
£17.4 million (2010: £18.5 million), lower than last year because of the
acquisition of PayByPhone, which is loss making as expected.
Dividend
We propose to pay a final dividend of 15.6p per share on 22 July 2011 (2010:
14.4p) to shareholders on the register on 24 June 2011, subject to the approval
of the shareholders at the annual general meeting. An interim dividend of 7.8p
(2010: 7.4p) per share was paid on 21 December 2010, making a total dividend for
the year of 23.4p (2010: 21.8p) up 7.3%, broadly in line with earnings.
Liquidity and going concern
The group has cash of £26.5 million (including client cash of £6.1 million) and
had, at the year end, an unsecured loan facility of £35 million, which was due
to expire in August 2011. A new replacement £35 million, five year facility has
been agreed with our bankers since the year end. Cash and borrowing capacity is
adequate to meet the foreseeable needs of the group, taking account of any risks
(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.
Charitable donations
During the year, the group made charitable donations of £19,400 (2010: £15,000)
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, we collected money for the Disasters Emergency Committee (DEC)
for the Pakistan flood appeal and 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 is included in the Chief Executive's review on
page 3. The company's analysis of risks facing the company is set out in
separate statements on pages 15 and 16.
Economic climate
The company's bill and general payments sector, which accounts for 41% (2010:
43%) 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 mobile operators, 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, mitigated by cash retention. In
PayByPhone, exposure is limited to receivables from parking authorities.
National Lottery Commission
On the 2 March 2011, following a lengthy process, the National Lottery
Commission refused consent for Camelot's application to provide ancillary
services, including bill payment and mobile top-ups, on competition law grounds.
Outlook
For the current financial year, trading is in line with the company's
expectations. Our established business streams (UK and Irish retail networks and
internet payments) are 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 streams (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.
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 policies,|
| |consumer and other|standards, procedures, and|
| |sensitive information.|recruitment and training|
| |Mobile telephone and|schemes, which are|
| |internet-based electronic|embedded throughout its|
| |commerce requires the|business operations. The|
| |secure transmission of|group also screens new|
| |confidential information|employees carefully.|
| |over public networks, and|Continued investments are|
| |several of our products|made in IT security|
| |are accessed through the|infrastructure, including|
| |internet. 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 with|
|and certain operational |third parties to provide|strategic suppliers based|
|services |operational services, the|on criteria such as|
| |loss of which could|delivery assurance and|
| |significantly impact the|reliability. Single|
| |quality of our services.|points of failure are|
| |Similarly, if one of our|avoided, where practicable|
| |outsource providers,|and economically feasible.|
| |including third parties| |
| |with whom we have| |
| |strategic relationships,| |
| |were to experience| |
| |financial or operational| |
| |difficulties, their| |
| |services to us would| |
| |suffer or they may no|
Unternehmensinformation / Kurzprofil:
Datum: 26.05.2011 - 08:00 Uhr
Sprache: Deutsch
News-ID 55014
Anzahl Zeichen: 65548
contact information:
Town:
Welwyn Garden City, Hertfordshire
Kategorie:
Business News
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"Preliminary Results Year Ended 27 March 2011"
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