Final Results
PayPoint PLC
25 May 2006
25 May 2006
PayPoint plc
Preliminary results
for the year ended 31 March 2006
FINANCIAL HIGHLIGHTS
Year ended Year ended
31 March 31 March
2006 2005 Increase
£m £m %
Revenue 120 89 35
Net revenue (1,4) 46 37 25
Operating profit before exceptional items (4) 19 12 60
Operating profit 19 7 159
Profit before tax 20 8 152
Basic earnings per share 25.0p 8.7p 186
Adjusted earnings per share (2,4) 25.0p 15.5p 61
Proposed final dividend per share 7.5p 5.2p 44
OPERATIONAL HIGHLIGHTS
• Transactions processed up 24% to 322 million with strong growth in all sectors
• Increased market share of utility and TV Licensing payments
• Prepaid energy transactions stimulated by cold weather and energy price increases
• Operating margins (3,4) increased from 33% to 42%
• PayPoint terminal outlets have increased to over 15,000, up 17% on March 2005
• New, faster, more reliable terminal rolled out to agents
David Newlands, Chairman of PayPoint, said 'We have had an excellent year. The
improvements in our range of products and services, brand awareness and the
increase in our network all stimulated revenue growth. Our operational gearing
has delivered most of the growth in net revenue to the bottom line. The BBC TV
Licence contract awarded to PayPoint in March, marks a major milestone in the
Company's development, reinforcing our credibility as a sole provider of a
national service. We are securing capacity for future profitable growth by
investing in infrastructure including new communications and polling hardware,
development of new peripheral information technology systems and the
refurbishment and extension of our operating base. We are confident of
continuing growth in the current year in which trading has started well.'
1 Net revenue is revenue less commissions payable to retail agents and the cost
of those mobile top-ups where PayPoint is the principal.
2 Adjusted earnings per share are based on profits before exceptional items
after taxation.
3 Operating margins are operating profit before exceptional items expressed as a
percentage of net revenue.
4 Net revenue, operating profit before exceptional items, adjusted earnings per
share and operating margins are measures which the directors believe assist with
a better understanding of the underlying performance of the group. The
reconciliation to statutory amounts can be found in notes 2 and 6 and on the
face of the consolidated income statement.
Enquiries:
PayPoint plc 01707 600 300
Dominic Taylor, Chief Executive
George Earle, Finance Director
Finsbury 020 7251 3801
Rollo Head
Don Hunter
This announcement is available on the PayPoint plc website: http://www.paypoint.com
About PayPoint
PayPoint is a leading branded payment collection network used, primarily, for
the cash payment of bills and services and prepayments for mobile telephones and
energy meters. There are over 15,000 retail outlets using PayPoint's payment
terminals.
Its clients include most of the UK and Ireland's major energy, cable, mobile and
fixed line telephony companies. Its blue chip client list also extends to
numerous water companies, local authorities, housing associations, credit unions
and a growing transport and travel base.
BUSINESS REVIEW
The business review has been prepared solely to provide additional information
to shareholders as a body to assess PayPoint's strategies and the potential for
those strategies to succeed, and it should not be relied upon for any other
purpose. It contains forward looking statements that have been made by the
directors in good faith based on the information available at the time of the
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.
Operational overview
We have continued to grow in all sectors. This growth has been achieved through
the success of our strategy to:
• broaden our customer service proposition and increase the range of payments
through our network; and
• grow and optimize our network coverage.
During the financial year, PayPoint processed 322 million consumer transactions
(2005: 260 million), an increase of 24%, with a value of £3.8 billion (2005:
£2.9 billion), up 29%. Commissions paid to agents of £64 million were up 26%,
reflecting increased volumes and the heavier mix of ATM transactions, which
carry higher agent commission values.
There has been strong growth in transaction volumes across all sectors:
2006 2005 Increase
Transactions by sector million million %
Bill and general payments* 205.0 167.3 23
Mobile top-ups 108.2 87.9 23
ATMs 8.9 4.6 93
Total 322.1 259.8 24
* including debit / credit transactions
Bill and general payments
PayPoint has performed well in this sector with growth stimulated by increased
agent numbers, client payment options and brand awareness. Performance has been
helped by a migration of market share away from the Post Office, following its
branch closure programme, in particular with respect to TV licence payments and
utility bill payments. A major new contract with TV Licensing will add to
transaction volumes.
In prepaid energy transactions, the combined effect of colder than average
temperatures compared to last year and substantial energy consumer price
increases, have also continued to have a beneficial effect on PayPoint's
transaction volume, as average transaction values have remained broadly the
same.
In transport, we have extended our geographical coverage by signing new
contracts with First and Greater Manchester Travelcards, in addition to our
existing contracts with Arriva, National Express and Lothian. Whilst current
volumes in transport ticketing are relatively modest, there is considerable
potential for long term growth if transport authorities take steps to move
ticket purchasing off buses. We are also discussing contracts with other
operators and transport executives.
A new contract with Western Union will allow PayPoint retail agents to process
money transfers to and from Western Union agents all over the world. We are
expecting to roll out this service this year to selected agents.
In the rest of the sector (other than prepaid and transport), growth has also
been strong.
Mobile top-ups
Overall market share is c.27% (last year c.23%) as a result of extending the
retail network and the agent re-branding programme through all our independent
outlets and over 1,200 of our multiple sites.
Two of our major multiple retailers were expected to transfer mobile top-ups
from our terminals to their own till systems during the year, producing lower
revenues for PayPoint. One retailer largely completed the transfer in the year.
The other retailer is now expected to complete the transfer in the current
financial year. The adverse impact on revenues is estimated at £0.5 million in
the year under review, rising to a full year impact of £1.5 million when the
transfer is completed.
Automatic Teller Machines (ATMs)
Installations have continued in excess of 50 per month, at a broadly similar
rate to the whole of last year. Decommissions have, however, increased over last
year because we have taken a more rigorous approach to the removal of poor
performers. As a result, the installed estate has performed better than
expected, with sites averaging 600 transactions per month, split evenly between
cash withdrawals and balance enquiries. Installed ATMs have grown to 1,451
(2005: 957).
Network growth
Strong demand for new PayPoint terminal outlets continues and the retail network
has grown to 15,296 sites at 31 March 2006, a net increase of nearly 2,200 up
17% on 2005. We have added over 3,200 sites and, in addition to normal churn, we
decommissioned poorly performing sites, which were not required to maintain
coverage and in which the investment in a new terminal was not worthwhile.
2,300 sites with our terminals also have EPoS connections (2005: 2,000), to
allow mobile top-up transactions over the retailers' own till systems and there
are a further 2,780 EPoS only sites (2005: 2,880).
New terminal
The second generation terminal is proving to be popular with retailers. The new
terminal offers much faster processing, better reliability and new functionality
through a touch screen and a contactless smartcard reader. These functions help
in the introduction of new products, including the new transport ticketing
schemes. The new terminal design is also chip and PIN compliant. The replacement
of the old terminals, which commenced in October 2004, is now complete.
Financial overview
Revenue for the financial year was up 35% at £120 million (2005: £89 million),
driven by a 24% increase in transaction volumes and the increase in revenue from
the sale of mobile top-ups in Ireland where PayPoint is the principal. Cost of
sales was £83 million (2005: £61 million) an increase of 36%. Cost of sales
comprises commission paid to agents, the cost of mobile top-ups where PayPoint
acts as principal, depreciation and other items including telecommunications
costs. Agents' commission increased to £64 million (2005: £50 million), up 26%,
slightly ahead of volume growth as a result of the heavier mix of ATM
transactions which carry higher than average agent commissions. The cost of
mobile top-ups where PayPoint acts as principal has risen to £10 million, as a
result of a more than a fivefold increase in the sale of mobile top-ups in
Ireland over the previous year. Depreciation has increased to £2.3 million
(2005: £1.8 million) as a result of the new terminal deployment.
Net revenue (1) of £46 million (2005: £37 million) was up 25%, driven primarily by
volume growth. Operating margins (2) were 42% (2005: 33%), benefiting from
operational gearing and also from a delay in the migration of mobile top-ups, in
two of our multiple retailers, from our terminals to those retailers' own till
systems.
Gross profit improved to £37 million (2005: £28 million), 33% ahead of last
year, with a gross margin of 30% (2005: 31%). Were it not for the inclusion of
the full face value of the Irish mobile top-ups in revenue and their costs
within cost of sales, the gross margin would have increased by 1.6 percentage
points.
Operating costs (administrative expenses) before exceptional items have risen to
£17 million (2005: £16 million), an increase of 10%, driven by the increase in
staff numbers, including the broadening of the senior management team in retail,
corporate finance and information technology during the year. Operating profit
before exceptional charges was £19 million (2005: £12 million) with a
corresponding increase in operating margins2 as noted above.
1 Net revenue is revenue less commissions payable to agents and the cost of
those mobile top-ups where PayPoint is the principal.
2 Operating margins are calculated as operating profit before exceptional items
as a percentage of net revenue.
Profit before tax was £20 million, up 152% on the previous year (2005: £8
million). The tax charge was £3.4 million, which mainly relates to current tax
following the utilisation of the remaining tax losses which arose in previous
years. The tax charge is expected to rise towards 30% in the current year.
Operating cash flow was £14 million (2005: £17 million), reflecting strong
conversion of profit to cash offset by the adverse impact of £5 million in
respect of the cash held over the Easter bank holiday weekend at the end of the
previous financial year for mobile operators. PayPoint has legal title to this
cash (client cash), but there is an equal amount included in liabilities. Net
capital expenditure of £7 million (2005: £5 million) reflected spend on the new
terminals, ATMs infrastructure assets and the start of the office refurbishment,
which will be completed in the current financial year. Net interest received of
£1 million (2005: £0.6 million) is as a result of increased cash balances during
the year. Equity dividends paid were £5.5 million (2005: £0.8 million). Cash and
cash equivalents were £29 million, including client cash of £5 million, up £3
million from £26 million, including client cash of £11 million, at 31 March 2005.
Dividend
We recommend a final dividend of 7.5p per share to shareholders, subject to
approval of the shareholders at the annual general meeting on 29 June 2006. The
dividend will be paid on 3 July to shareholders on the register on 2 June 2006,
which, together with the interim dividend of 3p per share paid on 2 January
2006, makes a total of 10.5p per share for the year under review.
Liquidity
The group has cash of £24 million excluding client cash and an unsecured 5 year
loan facility of £35 million.
Financing and treasury policy
The 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, cash interest cover and dividend cover.
International Financial Reporting Standards (IFRS)
Under European Union legislation all listed groups are required to report under
IFRS for accounting periods commencing on or after 1 January 2005. The interim
results for the six months ending 30 September 2005 were also prepared in
accordance with IFRS principles, with comparative figures being restated as
appropriate. There were no substantial changes to the reported results under UK
generally accepted accounting principles, other than the reversal of accruals
for dividends payable and the reclassification of an accrual for share based
payments from liabilities to equity.
Charitable donations
During the year PayPoint provided a scheme to allow the public to make donations
to the Disasters Emergency Committee (DEC) for the Asia earthquake appeal
through our network of agents at no cost to DEC. Our agents collected £27,000
for the Asia earthquake appeal (2005: £140,500 for the Tsunami) and we would
like to thank our agents for accepting these donations at no commission. For the
current financial year PayPoint has elected to sponsor a charity for the year
and we are pleased to be sponsoring MacMillan Cancer Relief.
Employees
We would like to take this opportunity to thank our staff for their commitment,
energy and enthusiasm in achieving their targets that underpin the delivery of
these results.
Outlook
There are many opportunities to grow the business in the UK and Ireland with
good prospects in all sectors, in particular through broadening the range of
payments across the PayPoint retail network. Retail network growth and
optimisation will remain priorities and whilst the current focus for
international expansion is on Eastern Europe, we will also review other
opportunities. Strong cash generation should continue, although capital
expenditure on the refurbishment and peripheral information technology systems
along with the increased dividends and tax payments will deplete cash balances
in the first half of the current year. We are confident of continuing growth in
the current year, in which trading has started well.
David Newlands Dominic Taylor
Chairman Chief Executive
25 May 2006
CONSOLIDATED INCOME STATEMENT
Year ended 31 March 2006
Note 2006 2005
£000 £000
Revenue 2 119,968 89,054
Cost of sales 2 (83,409) (61,332)
Gross profit 36,559 27,722
Administrative expenses (17,248) (20,257)
Add back exceptional items 3 - 4,572
Administrative expenses excluding (17,248) (15,685)
exceptional items
Operating profit before exceptional items 19,311 12,037
Exceptional item 3 - (4,572)
Operating profit 19,311 7,465
Investment income 1,051 937
Finance costs (15) (339)
Profit before tax 20,347 8,063
Tax 4 (3,440) (2,215)
Profit for the financial year 16,907 5,848
attributable to equity holders of the parent
Earnings per share
Basic 6 25.0p 8.7p
Diluted 6 24.7p 8.7p
The results are presented under IFRS and comparatives have been restated
accordingly (see note 1).
There have been no gains or losses attributable to the shareholders other than
the profit for the current and preceding financial year, and accordingly no
Statement of Recognised Income and Expenses is presented.
CONSOLIDATED BALANCE SHEET
at 31 March 2006
Note 2006 2005
£000 £000
Non-current assets
Property, plant and equipment 7 8,894 4,617
Deferred tax asset 8 1,184 1,385
10,078 6,002
Current assets
Inventories 1,119 472
Trade and other receivables 12,112 7,752
Cash and cash equivalents 9 29,295 25,950
42,526 34,174
Total assets 52,604 40,176
Current liabilities
Trade and other payables 21,371 22,790
Current tax liabilities 1,972 -
Obligations under finance leases 67 158
23,410 22,948
Non-current liabilities
Obligations under finance leases - 67
Other liabilities 344 234
344 301
Total liabilities 23,754 23,249
Net assets 28,850 16,927
Equity
Share capital 10 226 226
Share premium account 10 23,976 23,976
Capital redemption reserve 10 14,193 14,193
Investment in own shares 10 (1) (1)
Share option and SIP reserve 10 738 219
Retained earnings 10 (10,282) (21,686)
Total equity attributable to equity 11 28,850 16,927
holders of the parent company
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 March 2006
Note 2006 2005
£000 £000
Net cash flow from operating activities 12 14,318 17,164
Investing activities
Investment income 1,051 937
Purchases of property, plant and equipment (6,504) (4,576)
Proceeds on disposal of property, plant 196 408
and equipment
Net cash used in investing activities (5,257) (3,231)
Financing activities
Repayments of obligations under finance leases (213) (1,032)
Dividends paid 5 (5,503) (783)
Net cash used in financing activities (5,716) (1,815)
Net increase in cash and cash equivalents 3,345 12,118
Cash and cash equivalents at beginning of year 25,950 13,832
Cash and cash equivalents at end of year 29,295 25,950
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
The financial information set out in this press release does not constitute the
Company's statutory accounts for the years ended 31 March 2006 or 2005, but is
derived from those accounts. Statutory accounts for 2005 have been delivered to
the Registrar of Companies and those for 2006 will be delivered following the
Company's annual general meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain statements under s. 237(2) or
(3) Companies Act 1985.
This financial information has been prepared on a historical cost basis and on
the policies set out below.
Basis of preparation
Whilst the financial information included in this preliminary announcement has
been computed in accordance with International Financial Reporting Standards
(IFRS), this announcement does not itself contain sufficient information to
comply with IFRS. The Company will publish full financial statements that comply
with IFRS in due course.
At the date of authorisation of this financial information, the following
Standards and Interpretations which have not been applied in this financial
information were in issue but not yet effective:
IFRS 6 Exploration for and Evaluation of Mineral Resources
IFRS 7 Financial Instruments: Disclosures; and the related amendment to IAS 1 on
capital disclosures
IFRIC 4 Determining whether an Arrangement contains a Lease
IFRIC 5 Right to Interests arising from Decommissioning, Restoration and
Environmental Rehabilitation Funds
The directors do not anticipate that the adoption of these Standards and
Interpretations will have a material impact on the financial statements of the
Group.
The financial information is presented in pounds sterling because it is the
currency of the primary economic environment in which the Group operates.
Management consider that there are no critical accounting judgements and key
sources of estimation uncertainty in applying the Group's accounting policies.
The principal accounting policies adopted are set out below.
Basis of consolidation
PayPoint plc (the Company) acts as a holding company. The group accounts
consolidate the accounts of the Company and entities controlled by the Company
(its subsidiaries) drawn up to March each year. Control is achieved where the
Company has the power to govern the financial and operating policies of an
entity in which it invests, so as to obtain benefits from its activities. The
results of subsidiaries acquired or sold are consolidated for the periods from
or to the date on which control passed. All intra-group transactions, balances,
income and expenses are eliminated on consolidation.
The acquisition of subsidiaries is accounted for using the purchase method.
Investments are stated at cost less any required provision for impairment. The
cost of the acquisition is measured at the aggregate of the fair values, at the
date of exchange, of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquiree, plus
any costs directly attributable to the business combination. The acquired
identifiable assets, liabilities and contingent liabilities that meet the
conditions for recognition under IFRS 3 are recognised at their fair value at
the acquisition date, except for non-current assets that are classified as held
for resale in accordance with IFRS 5 Non Current Assets Held for Sale and
Discontinued Operations, which are recognised and measured at fair value less
costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially measured
at cost, being the excess of the cost of the business combination over the
Group's interest in the net fair value of the identifiable assets, liabilities
and contingent liabilities recognised. If, after reassessment, the Group's
interest in the net fair value of the acquiree's identifiable assets,
liabilities and contingent liabilities exceeds the cost of the business
combination, the excess is recognised immediately in profit or loss.
Revenue recognition
Group revenue is measured at the fair value of the consideration received or
receivable and comprises the value of sales (excluding VAT) of services in the
normal course of business. Revenue is wholly attributable to the operation of
the Group's payment collection system and ATM business and has arisen solely in
the United Kingdom and Republic of Ireland.
Revenue and cost of sales are recorded according to the actual transactions that
occur in a given period. In Ireland, PayPoint is principal in the supply chain
for prepaid mobile telephone top-ups (mobile top-ups). Accordingly, revenue
includes the sale price of the mobile top-ups and the cost of sales includes the
cost of the mobile top-ups to PayPoint.
Dividend income from investments is recognised when the shareholders' rights to
receive payment have been established.
Cost of sales
Cost of sales includes agents' commission, the cost of mobile top-ups where
PayPoint acts as principal in their purchase and sale, consumables,
communications, maintenance, depreciation and field service costs. All other
costs are allocated to administrative costs.
Pension costs
The group makes payments to a number of defined contribution pension schemes.
The amounts charged to the profit and loss account in respect of pension costs
represent contributions payable in the year. Differences between contributions
payable in the year and contributions actually paid are shown as either accruals
or prepayments in the balance sheet.
Share based payments
Equity-settled share-based payments are measured at fair value at the date of
grant. The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight line basis over the vesting
period, based upon management's estimate of shares that will eventually vest.
Fair value is measured by use of either a Monte Carlo simulation or Black
Scholes model depending upon the scheme. The expected life used in the model has
been adjusted, based on management's best estimate, for the effects of non
transferability, exercise restrictions and behavioural considerations.
Interest income
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount.
Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax. The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and items that are never taxable or deductible. The group's liability for
current tax is calculated using tax rates that have been enacted or
substantially enacted by the balance sheet date.
Deferred tax is provided in full on temporary differences between the tax bases
of assets and liabilities and their carrying amounts in the consolidated
financial statements. The provision is calculated using tax rates that have been
substantially enacted by the balance sheet date. Deferred tax assets are
recognised to the extent that it is probable that future taxable profit will be
available against which the tax will be realised.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and interests in joint ventures, except
where the Group is able to control the reversal of the temporary difference and
it is probable that the temporary difference will not reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered. Deferred tax is charged or credited in the income statement, except
when it relates to items charged or credited directly to equity, in which case
the deferred tax is also dealt with in equity.
Foreign currency
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of the transaction. At each balance
sheet date, monetary asset and liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing on the balance sheet date.
Non-monetary assets and liabilities carried at fair value that are denominated
in foreign currency are translated at the rates prevailing at the date when fair
value was determined. Gains and losses arising on retranslation are included in
net profit or loss for the year, except for exchange differences arising on
non-monetary assets and liabilities where the changes in fair value are
recognised directly in equity.
On consolidation, the assets and liabilities of the group's overseas operations
are translated at exchange rates prevailing on the balance sheet date. Income
and expense items are translated at the average exchange rates for the period
unless exchange rates fluctuate significantly. Exchange differences arising, if
any, are classified as equity and transferred to the Group's translation
reserve. Such translation differences are recognised as income or as expenses in
the year of disposal of the operation.
Software development expenditure
The Group develops computer software for internal use. Software development
expenditure on large projects is recognised as an intangible asset if it is
probable that the asset will generate future economic benefits. The costs that
are capitalised are the directly attributable costs necessary to create and
prepare the asset for operations. Other software costs are recognised in
administrative expenses when incurred. Software development costs recognised as
an intangible asset are amortised on a straight line basis over the useful life,
generally not more than three years.
Property, plant and equipment
Property, plant and equipment are stated at cost, net of depreciation.
Depreciation is provided at rates calculated to write off the cost, less
estimated residual value, of each asset on a straight line basis over its
expected useful life. The estimated useful lives are as follows:
• leasehold improvements - over the life of the lease
• terminals - 5 years
• automatic teller machines - 4 years
• other classes of assets - 3 years
The gain or loss arising on the disposal or retirement of an asset
is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised as income.
Inventories
Inventories are valued at the lower of cost or net realisable value.
Leases
Assets held under finance leases, which confer rights and obligations similar to
those attached to owned assets, are capitalised as property, plant and equipment
and are depreciated over the shorter of the lease terms and their useful lives.
The capital elements of future lease obligations are recorded as liabilities,
while the interest elements are charged to the profit and loss account over the
period of the leases to produce a constant rate of charge on the remaining
balance of liability.
Rentals under operating leases are charged on a straight-line basis over the
lease term, even if the payments are not made on such a basis. Benefits received
and receivable as an incentive to sign an operating lease are similarly spread
on a straight line basis over the lease term, except where the period to the
review date on which the rent is first expected to be adjusted to the prevailing
market rate is shorter than the full lease term, in which case the shorter
period is used.
Rentals received for ATMs from retail agents under operating leases are credited
to income on a straight line basis over the lease term.
Dividends
Final dividends on ordinary shares are recognised in equity in the period in
which they are approved by the Company's shareholders. Interim dividends are
recognised when declared.
Treasury shares
PayPoint purchases own shares for the purpose of employee share option schemes.
Such shares are deducted from equity and no profit or loss is recognised on the
transactions.
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise
cash at bank and in hand and short-term deposits maturing within 3 months and
are subject to insignificant risk of changes in value.
2. Segmental reporting, net revenue analysis and gross throughput
(i) Segmental information
(a) Geographical segments
The Group operates in both the UK and Republic of Ireland but the Group has only
one reportable geographical segment as defined in IAS 14 Segment Reporting due
to the fact that principally all operations occur in the UK.
(b) Classes of business
The Group has one class of business, being cash payment collection and distribution
services.
(ii) Analysis of revenues by market
Group revenue comprises the value of sales (excluding VAT) of services in the
normal course of business and includes amounts billed to customers to be passed
on to retail agents as commission payable. Cost of sales includes the cost to
the Group of the sale, including commission to retail agents and the cost of
mobile top-ups where PayPoint is the principal in the supply chain.
Revenue performance of the business is measured by net revenue which is
calculated as the total turnover from clients less commission payable to retail
agents and the cost of mobile top-ups where PayPoint is the principal in the
supply chain.
Although there is only one class of business, since the risks and returns are
similar across markets in which the Group operates, the Group monitors net
revenue (see below) with reference to each sector.
2006 2005
£000 £000
Revenue - transaction processing 118,909 88,518
- lease rental of ATMs 1,059 536
119,968 89,054
less:
Commission payable to retail agents (63,558) (50,348)
Cost of mobile top-ups as principal (10,297) (1,810)
Net revenue 46,113 36,896
Net revenue by market
Bill payments 21,428 18,861
Mobile top-ups 18,966 15,286
ATMs 4,124 1,947
Other 1,595 802
Net revenue 46,113 36,896
Commission payable is included within cost of sales as shown below
2006 2005
£000 £000
Revenue 119,968 89,054
Cost of sales
Commission payable to retail agents (63,558) (50,348)
Cost of mobile top-ups as principal (10,297) (1,810)
Other (9,554) (9,174)
Total cost of sales (83,409) (61,332)
Gross profit 36,559 27,722
(iii) Gross throughput
2006 2005
£000 £000
Gross throughput 3,784,824 2,931,423
Gross throughput represents payments made by consumers using the PayPoint
service and cash withdrawals from ATMs. Included within gross throughput is
£203,630,000 (2005: £103,924,000) relating to the ATM business
3. Exceptional items
There were no exceptional items in the year. Exceptional charges in 2005 of £4.6
million related to the listing of the Company's shares on the London Stock
Exchange (£4.2 million) and bid defence costs (£0.4 million).
4. Tax
Analysis of tax charge:
2006 2005
£000 £000
Current 3,239 -
Deferred tax 201 2,215
3,440 2,215
The charge for the year can be reconciled to
the profit before tax as set out in the
consolidated income statement
Profit before tax 20,347 8,063
Tax at the UK Corporation tax rate of 30% 6,104 2,419
Tax effects of:
Expenses not deductible in determining taxable profit 181 1,046
Capital allowances in excess of depreciation (55) 1,762
Utilisation of tax losses not previously recognised (2,392) (3,012)
Timing differences (237) -
Other (161) -
Actual amount of tax charge 3,440 2,215
5. Dividends on equity shares
2006 2005
£000 £000
Equity dividends on ordinary shares
Interim dividend paid of 3.0p per share (2005:nil) 2,030 -
Recommended final dividend of 7.5p per share 5,076 3,473
(2005: paid 5.2p per share)
Total dividends paid and recommended 10.5p per share
(2005: 5.2p per share) 7,106 3,473
Amounts recognised as distributed to equity
holders in the year
Final dividend for the prior year 3,473 783
Interim dividend for the current year 2,030 -
5,503 783
6. Earnings per share
(a) Basic earnings per share
Basic and diluted earnings per share are calculated on the following profits and
number of shares.
2006 2005
£000 £000
Profit for the purposes of basic earnings per
share being net profit attributable to equity
holders of the parent (used for basic earnings per share) 16,907 5,848
Potential dilutive impact of interest saved on
the conversion of debt (net of tax) - 4
Earnings for the purposes of diluted earnings
per share 16,907 5,852
2006 2005
Number of Number of
shares shares
Weighted average number of ordinary shares in issue 67,671,307 67,054,583
(for basic earnings per share)
Potential dilutive ordinary shares:
Conversion of convertible debt - 30,550
Long term incentive plan 733,347 171,366
Deferred share bonus 51,518 -
Diluted basis 68,456,172 67,256,499
(b) Adjusted earnings per share
The adjusted earnings per share are calculated on the profit after tax but
before exceptional items (see note 3). This adjusted measure has been presented
in order to demonstrate the growth in earnings in the underlying business.
2006 2005
£000 £000
Earnings used for unadjusted basic earnings per share 16,907 5,848
add: exceptional item - 4,572
Adjusted basis 16,907 10,420
7. Property, plant and equipment
Group Terminals Fixtures, Total
and ATMs fittings and £000
£000 equipment
£000
Cost
At 1 April 2005 14,254 822 15,076
Additions 6,748 46 6,794
Disposals (385) - (385)
At 31 March 2006 20,617 868 21,485
Accumulated depreciation
At 1 April 2005 9,747 712 10,459
Charge for the year 2,256 64 2,320
Disposals (188) - (188)
At 31 March 2006 11,815 776 12,591
Net book value
At 31 March 2006 8,802 92 8,894
At 31 March 2005 4,507 110 4,617
8. Deferred tax asset
2006 2005
£000 £000
Movement on deferred tax asset balance
Opening balance 1,385 3,600
Charge to income statement (201) (2,215)
Deferred tax asset 1,184 1,385
Analysis of deferred tax asset
Capital allowances in excess of depreciation 947 1,385
Share based payment 237 -
1,184 1,385
At the balance sheet date:
(i) the Group has unused tax losses of £1,792,000 (2005: £9,765,000) available
for offset against future profits. No deferred tax assets have been recognised
in respect of these losses due to the unpredictability of future profit streams.
All losses may be carried forward indefinitely.
(ii) there were timing differences associated with undistributed earnings of
subsidiaries for which a deferred tax liability has not been recognised. No
liability has been recognised in respect of these differences because the Group
is in a position to control their reversal and it is probable that such
differences will not reverse in the foreseeable future. In any case the timing
differences are not material.
9. Cash and cash equivalents
Included within cash and cash equivalents is £5,575,000 (2005: £11,099,000)
relating to monies collected on behalf of clients where the Group has title to
the funds (client cash). An equivalent balance is included within trade
payables.
10. Equity
2006 2005
£000 £000
Authorised share capital
4,365,352,200 ordinary shares of 1/3p each
(2005: 4,365,352,200 ordinary shares of 1/3p each) 14,551 14,551
14,551 14,551
Called up, allotted and fully paid share capital
67,678,000 ordinary shares of 1/3p each
(2005: 67,653,358 ordinary shares of 1/3p each) 226 226
226 226
Called up share capital
At start of year 226 14,418
Shares issued under Share Incentive Plan - 1
Deferred shares purchased and cancelled - (14,193)
At end of year 226 226
Share premium
At start of year 23,976 23,894
Loan stock converted - 82
At end of year 23,976 23,976
Capital redemption reserve
At start of year 14,193 -
Deferred shares purchased and cancelled - 14,193
At end of year 14,193 14,193
Investment in own shares
At start of year (1) (25)
Share incentive plan issue - 24
At end of year (1) (1)
Share option and SIP reserve
At start of year 219 -
Movement 519 219
At end of year 738 219
Retained earnings
At start of year (21,686) (26,751)
Profit for the year 16,907 5,848
Dividends paid (5,503) (783)
At end of year (10,282) (21,686)
11. Statement of changes in equity
2006 2005
£000 £000
Opening equity 16,927 11,536
Profit for the year 16,907 5,848
Dividends paid (5,503) (783)
Investment in own shares - (1)
Share option and SIP reserve 519 219
Conversion of loan stock/options - 108
Closing equity 28,850 16,927
12. Notes to the cash flow statement
2006 2005
£000 £000
Operating profit before exceptional items 19,311 12,037
Exceptional items (see note 4) - (4,572)
Operating Profit 19,311 7,465
Adjustments for depreciation on property,
plant and equipment 2,320 1,801
Operating cash flows before movements in
working capital 21,631 9,266
Increase in inventories (647) (440)
Increase in receivables (4,238) (731)
(Decrease)/increase in payables
- client cash (5,524) 6,371
- other payables 4,008 2,686
Increase in share option and SIP reserve 519 219
Cash generated by operations 15,749 17,371
Corporation tax paid (1,416) -
Interest paid (15) (207)
Net cash from operating activities 14,318 17,164
Appendix 1. Explanation of transition to IFRS
Reconciliation of equity at 1 April 2004
UK GAAP Effect of IFRS
IFRS format transition to £000
£000 IFRS
£000
Non-current assets
Property, plant and equipment 2,217 - 2,217
Deferred tax asset 3,600 - 3,600
5,817 - 5,817
Current assets
Trade and other receivables 7,021 - 7,021
Inventories 32 - 32
Cash at bank and in hand 13,832 - 13,832
20,885 - 20,885
Total assets 26,702 - 26,702
Current liabilities
Trade and other payables 14,742 783 13,959
Obligations under finance leases 903 - 903
15,645 783 14,862
Non-current liabilities
Obligations under finance leases 222 - 222
Other liabilities 82 - 82
304 - 304
Total liabilities 15,949 783 15,166
Net assets 10,753 783 11,536
Capital and reserves
Called up share capital 14,418 - 14,418
Share premium account 23,894 - 23,894
Capital redemption reserve - - -
Investment in own shares (25) - (25)
Profit and loss account (27,534) 783 (26,751)
Total shareholders' funds 10,753 783 11,536
The movement between UK GAAP and IFRS relates to the reversal of proposed dividends.
Appendix 2. Reconciliation of equity at 31 March 2005
UK GAAP Effect of IFRS
IFRS format transition to £000
£000 IFRS
£000
Non-current assets
Property, plant and equipment 4,617 - 4,617
Deferred tax asset 1,385 - 1,385
6,002 - 6,002
Current assets
Trade and other receivables 7,752 - 7,752
Inventories 472 - 472
Cash at bank and in hand 25,950 - 25,950
34,174 - 34,174
Total assets 40,176 - 40,176
Non-current liabilities
Obligations under finance leases 67 - 67
Other liabilities 234 - 234
301 - 301
Current liabilities
Trade and other payables 26,482 3,692 22,790
Obligations under finance leases 158 - 158
26,640 3,692 22,948
Total liabilities 26,941 3,692 23,249
Net assets 13,235 3,692 16,927
Capital and reserves
Called up share capital 226 - 226
Share premium account 23,976 - 23,976
Capital redemption reserve 14,193 - 14,193
Investment in own shares (1) - (1)
Share option and SIP reserve - 219 219
Profit and loss account (25,159) 3,473 (21,686)
Total shareholders' funds 13,235 3,692 16,927
The movement between UK GAAP and IFRS relates to the reversal of proposed
dividends and the reversal of the UK GAAP accrual for equity settled share based
payments and its replacement with the share option and SIP reserve in accordance
with IFRS.
There was no effect on the UK GAAP profit for the year ended 31 March 2005
except that dividends payable were shown on the face of the profit and loss
account under UK GAAP and therefore no IFRS reconciliations have been prepared.
There were no material differences to the cash flow statement on transition to
IFRS.
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