Preliminary Results
PayPoint plc
Preliminary results
Period ended 30 March 2008
52 weeks
53 weeks ended ended
30 March 25 March
2008 2007 Increase
£m £m %
Revenue 212 157 35
Net revenue[1],[2] 70 58 21
Operating profit 29 25 16
Profit before tax 30 27 14
Basic earnings per share 31.1p 27.7p 12
Proposed final dividend per share 10.4p 9.1p 14
* Strong growth in both revenues and operating profit driven by a
22% increase in transaction volumes
* Consumer satisfaction 98% [3]
* Like for like operating margin [2],[4] of 46% against 44% last
year
* Earnings per share 31.1p, up 12%
* Total dividend for the year 15.7p per share, up 15%
* UK and Ireland network expanded by 13% to 19,878 terminal sites
* First full year for our rapidly growing internet payment service
business
* International expansion through the acquisition of Pay Store in
Romania
David Newlands, Chairman of PayPoint, said "PayPoint has delivered
another set of strong results with increases in both revenues and
profits. We have expanded our UK terminal estate ahead of our targets
and started to roll out new terminals in Romania. We have
rationalised three data centres to one for our two internet service
payment providers, now trading as PayPoint.net, and the balance of
our integration work is approaching completion. The acquisition of
Pay Store in Romania is the first step of our international strategy
and the launch plans for our Romanian bill payment service are well
advanced. There remain further opportunities for future growth
through market share gains, new initiatives and new products."
The financial statements have been drawn up to the 30 March 2008,
which covers 53 weeks (2007: 52 weeks).
[1] Net revenue is revenue less commissions paid to retail agents,
the cost of mobile top-ups where PayPoint is the principal and
external processing costs.
[2] Net revenue and operating margin are measures which the directors
believe assist with a better understanding of the underlying
performance of the group. The reconciliation of net revenue to
revenue can be found in note 2.
[3] Source: Mori Ipsos
[4] Operating margin is operating profit expressed as a percentage of
net revenue. Like for like excludes the impact of acquisitions in the
last two years and the additional week of trading in the period under
review.
BUSINESS REVIEW
The business review is prepared solely to provide additional
information to shareholders as a body to assess PayPoint's strategies
and their potential to succeed, and it should not be relied upon for
any other purpose. It contains forward looking statements that have
been made by the directors in good faith based on the information
available at the time of approval of the 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 transaction volumes, numbers of
terminal and ATM sites, net revenue[1], operating margin[2] and
economic profit[3]. We have met or exceeded all of our targets except
for ATM site numbers.
Operational overview
We have continued to grow in all sectors and particularly in bill and
general payments with the introduction in the prior year of the
exclusive BBC TV Licensing contract. In addition, the year under
review includes 53 weeks of trading. 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 503 million
transactions (2007: 414 million), an increase of 22%, with a value of
£7.5 billion (2007: £5.2 billion) up 44%, driving revenue of £212
million (2007: £157 million). Commissions paid to agents of £83
million (2007: £77 million) were up 8%, reflecting a lower than
average increase in mobile top-ups which carry higher than average
agent commission.
There has been strong growth in transaction volumes across all
sectors:
53 weeks 52 weeks
2008 2007 Increase
Transactions by sector million million %
Bill and general payments(a) 311 267 16
Mobile top-ups 151 130 16
ATMs 15 13 14
Internet payments 26 4 550
Total (b) 503 414 22
(a) Including debit/credit transactions
(b) Included in the total are 19 million international bill
and general payments and mobile top-ups, for Ireland and Romania
(2007: 8 million)
[1] Net revenue is revenue less commissions paid to retail agents,
the cost of mobile top-ups where PayPoint is the principal and
external processing costs.
[2] Operating margin is calculated as operating profit as a
percentage of net revenue.
[3] Economic profit is operating profit after tax and a charge for
capital employed based upon the group's cost of capital.
Bill and general payments
PayPoint has continued to perform well in this sector, with growth
stimulated by increased agent numbers, client payment options and
brand awareness. Migration of market share away from the Post Office
as a result of its branch closure programme, the launch of the BBC TV
licence payments which became exclusive to PayPoint from 1 August
2006 and the extra week of trading have contributed to growth in
transactions.
Prepaid energy volumes have increased over the prior year despite
reductions in domestic prices in the first half of the year. The
increase results from our network growth and from our increasing
sector share, particularly in the Midlands, where a competitor lost
exclusivity. The more recently announced increases in domestic
energy prices should have a beneficial effect on transaction volumes
going forward.
PayPoint has also continued to achieve strong growth in the rest of
the bill and general payments sector.
Mobile top-ups
Mobile top-up volumes have increased by 16% compared to last year (9%
excluding Pay Store which was acquired on 15 May 2007). During the
year, PayPoint processed £1.1 billion of mobile top-ups in the UK,
equating to 26% of the sector (2007: 24%). The two most popular
methods for topping up remain e-voucher and electronic top-up.
Automatic Teller Machines (ATMs)
New machines have been rolled out at an average rate of 39 per month
(2007: 49 per month). We have continued to be proactive in churning
poor performing sites for redeployment and this higher than expected
level of churn has reduced the net increase to 13 per month. The
estate has maintained a high number of transactions per site,
averaging over 620 transactions per month (2007: 630 per month),
split between cash withdrawals and balance enquiries, with the latter
representing slightly more than half of the transactions. Installed
ATMs have grown to 2,016 at the year end (2007: 1,860). We have
reorganised the ATM team under new management to focus on sales. At
22 May 2008, we have 2,076 ATMs.
PayPoint.net
PayPoint.net, combining Metacharge and SECPay, has traded profitably.
We have completed the first integration phase of these two businesses
which involved the co-location of their hardware platforms at a
hosted data centre (reducing the number of hosted data centres from
three to one) and the provision of full disaster recovery from our
Welwyn Garden City operations base. We have made good progress
towards completion of a single billing platform, the first part of
the second integration phase which will also encompass the
development of new products and focus attention on sales to increase
the merchant base. At the end of the current year, we will merge the
trading companies into a single company to complete the integration.
PayPoint in Romania
Pay Store SRL was acquired, from the RTC group, on 15 May 2007 for
£10.3 million. Pay Store is one of the largest independent mobile
top-up providers in Romania, selling both electronic top-ups and
paper scratch cards. The company has traded at a small loss as
expected. We have invested in strengthening the management team,
switched the processing from a local provider to our processing
centre in Welwyn Garden City, built a new sales team, started
branding of our agent outlets, upgraded systems to mirror the UK
infrastructure and developed our bill payment offering. Nearly all of
Romanians pay their bills in cash and are poorly served by existing
payment channels. Further investment is expected as we expand the
network in Romania beyond our original plans. Pay Store is well
placed to benefit from the migration of paper scratch cards to
electronic top-ups and following the launch of bill payments, to
capture a significant share of the bill payment market as privatised
utilities look to rationalise current inefficient and costly cash
collection channels.
Network growth
Terminal sites have increased to 23,895 (2007: 17,537).
The retail network in the UK and Ireland has grown to 19,878 terminal
sites against our target of 19,500, an increase of 13% on last year.
Terminals in Romania have increased by 756 since acquisition as we
start to build the infrastructure for a national bill payment
network.
A total of 2,833 sites (2007: 2,488) that are already equipped with
our terminals also have Epos connections to allow mobile top-up
transactions over the retailers' own till systems.
30 March 2008 25 March 2007 Increase
%
Analysis of sites
PP terminal only 17,045 15,049 13
PP terminal and Epos 2,833 2,488 14
PP terminal sites 19,878 17,537 13
Pay Store terminal sites 4,017 - -
Total terminal sites 23,895 17,537 36
ATM sites 2,016 1,860 8
Internet merchants 4,808 4,249 13
New service initiatives
PayPoint has continued to introduce a wide range of new services to
stimulate further transaction growth in both cash and new economy
payments. We are well placed to benefit from the expected
increases in transaction volumes in the electronic money sector from
services such as gift cards, prepay debit cards, saving schemes,
stored value cards and money transfer. We are established as a
premier convenience loading channel for cash onto both prepay and
stored value cards, which have developed into strong sectors in the
USA and are now being marketed with increasing success in the UK.
We have launched new digital voucher schemes allowing consumers to
redeem vouchers received on their mobile phone at participating
PayPoint retailers.
Financial overview
Revenue for the financial year was 35% higher at £212 million (2007:
£157 million), driven by a 22% increase in transaction volumes and
the increase in revenue from the sale of mobile top-ups[1] in Ireland
and Romania. Cost of sales was £156 million (2007: £111 million), an
increase of 40%. Cost of sales comprises commission paid to agents,
the cost of mobile top-ups in Ireland and Romania where PayPoint is
principal, depreciation and other items including telecommunications
costs. Agents' commission increased to £83 million (2007: £77
million), up 8%, lower than the growth in volume as a result of lower
than average growth of mobile top-ups which carry higher than average
agent commissions. The cost of mobile top-ups in Ireland and Romania
has risen to £55 million (2007: £21m), which drives the
disproportionate increase in cost of sales compared to revenue.
Depreciation has increased to £4.8 million (2007: £3.6 million) as a
result of new terminals, ATM deployments and acquisitions.
Amortisation of intangibles has increased to £0.9 million (2007: £0.2
million) as a result of the acquisition of Pay Store and a full
year's charge for the internet payments businesses.
[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.
Financial overview continued
Net revenue1 of £70 million (2007: £58 million) was up 21%, driven
primarily by volume growth. Operating margin2 was 42% (2007: 44%)
down 2 percentage points as a result of Pay Store's loss. Operating
margin2 on a like for like basis (excluding acquisitions in the last
two years and the additional week of trading in the year under
review) was 46% (2007: 44%).
Gross profit improved to £57 million (2007: £46 million), 23% ahead
of last year, with a gross margin of 27% (2007: 29%). The rate of
increase in mobile top-ups in Ireland and Romania3 is greater than
the rate of revenue increases from other sources, which reduces gross
margin, but this effect has been mitigated by lower rates of increase
in other costs. Gross margin, excluding the cost of Irish and
Romanian mobile top-ups3, improved to 36% (2007: 34%).
Operating costs (administrative expenses) have risen to £27 million
(2007: £21 million), an increase of 32%. The inclusion of
PayPoint.net for a full 12 months and Pay Store since acquisition
accounts for 23% out of the 32% increase. Operating profit was £29
million (2007: £25 million).
Profit before tax was £30 million (2007: £27 million), an increase of
14%. The tax charge of £9 million (2007: £8 million) represents an
effective rate of 31% (2007: 30%). The increase in the effective rate
of tax results from the disallowance of the charge for amortisation
of intangible assets.
Operating cash flow was £30 million (2007: £28 million), reflecting
strong conversion of profit to cash. Capital expenditure of £6
million (2007: £7 million) reflected spend on new terminals, ATMs and
infrastructure assets required to combine the two internet payment
providers and £2 million on the acquisition of the fixed assets in
Pay Store. The company purchased £3.5 million of its own shares
during the year to satisfy the first tranche of the Long Term
Incentive Plan. Net interest received was £1 million (2007: £1
million). Equity dividends paid were £10 million (2007: £8 million).
Cash and cash equivalents were £28 million (including client cash of
£8 million), up from £24 million (including client cash of £7
million) last year.
Economic profit
PayPoint's economic profit (operating profit less tax and capital
charge) was £17 million (2007: £16 million). Operating profits were
£29 million (2007: £25 million), up 16%, tax was £9 million (2007: £8
million), and the capital charge was £3 million (2007: £1 million),
which increased as a result of the acquisition of Pay Store, the
funding of working capital in Romania and the capital invested in new
terminal sites and ATMs.
Dividend
We propose to pay, on 14 July 2008, a final dividend of 10.4p per
share to shareholders on the register on 27 June 2008, subject to the
approval by our shareholders at the annual general meeting. An
interim dividend of 5.3p per share was paid on 21 December 2007
making a total dividend for the year of 15.7p (2007:13.7p), up 15%.
Liquidity
The group has cash of £28 million and an unsecured loan facility of
£15 million with a remaining term of 3 years. Cash and borrowing
capacity is adequate to meet the foreseeable needs of the group.
[1] Net revenue is revenue less commissions paid to retail agents and
the cost of mobile top-ups where PayPoint is the principal.
[2] Operating margin is calculated as operating profit as a
percentage of net revenue.
[3] 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.
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 and dividend cover.
Charitable donations
During the year the group made charitable donations of £26,000 (2007:
£33,000) to charities serving the communities in which the group
operates.
Employees
We would like to take this opportunity to thank PayPoint's employees
for their commitment, energy and enthusiasm in achieving the targets
that underpin the delivery of these results.
Outlook
We expect further growth in revenues in the UK by increasing market
share in bill and general payments, mobile top-ups, ATMs and from
Post Office closures and we plan to add a further 1,500 terminals,
during the course of the current financial year, to continue to
capitalise on these opportunities.
In Romania, we plan to install 1,500 PayPoint terminals this year.
These will complement the existing terminal base and provide initial
coverage for a national bill payment network. This investment will
result in losses in Romania in the first half. In PayPoint.net,
which is currently trading profitably, growth should accelerate in
the latter part of the year, following the introduction of the new
single company branding, website and product set in the first half.
Trading since the period end is in line with the company's
expectations. In the first half, the growth in the core business
will be offset by the continuing losses in Pay Store and the shorter
trading period of 26 weeks (2007: 27 weeks).
The directors are confident of continuing growth for the year
overall, although the impact of the increase in revenue from the
introduction of the exclusive TV licence contract will not recur in
the current year.
David Newlands Dominic Taylor
Chairman Chief Executive
22 May 2008
CONSOLIDATED INCOME STATEMENT
53 weeks ended 52 weeks ended
30 March 25 March
2008 2007
Continuing operations Note £000 £000
Revenue 2 212,145 157,068
Cost of sales 2 (155,591) (111,068)
Gross profit 56,554 46,000
Administrative expenses (27,354) (20,798)
Operating profit 29,200 25,202
Investment income 1,262 1,470
Finance costs (58) (75)
Profit before tax 30,404 26,597
Tax 3 (9,424) (7,859)
Profit for the financial year
attributable
to equity holders of the parent 9 20,980 18,738
Earnings per share
Basic 5 31.1p 27.7p
Diluted 5 30.8p 27.3p
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
53 weeks ended 52 weeks ended
30 March 25 March
2008 2007
Note £000 £000
Exchange differences on
translation of foreign operations 9 318 -
Net income recognised directly in
equity 318 -
Profit for the period 20,980 18,738
Total recognised income and
expenses for the period 21,298 18,738
CONSOLIDATED BALANCE SHEET
As at
30 March 25 March
2008 2007
Note £000 £000
Non current assets
Goodwill 6 27,428 18,207
Other intangible assets 2,742 2,839
Property, plant and equipment 13,114 11,844
Deferred tax asset 1,571 1,572
Investment 11 375 -
45,230 34,462
Current assets
Inventories 1,250 1,651
Trade and other receivables 28,285 20,671
Cash and cash equivalents 8 27,727 24,324
57,262 46,646
Total assets 102,492 81,108
Current liabilities
Trade and other payables 45,275 36,228
Current tax liabilities 7,226 4,115
Obligations under finance leases 70 -
52,571 40,343
Non-current liabilities
Other liabilities 334 392
334 392
Total liabilities 52,905 40,735
Net assets 49,587 40,373
Equity
Share capital 9 226 226
Investment in own shares 9 (935) (1)
Share option and SIP reserve 9 2,281 1,712
Hedging and translation reserve 9 318 -
Retained earnings 9 47,697 38,436
Total equity attributable to equity holders of
the parent company 10 49,587 40,373
The financial information in this preliminary announcement was
approved by the board of directors on 22 May 2008.
Signed on behalf of the board of directors
Dominic Taylor
Director
22 May 2008
CONSOLIDATED CASH FLOW STATEMENT
53 weeks ended 52 weeks ended
30 March 25 March
2008 2007
Note £000 £000
Net cash flow from operating 12
activities 29,618 28,181
Investing activities
Investment income 1,252 1,310
Purchases of property, plant and
equipment (5,519) (6,646)
Proceeds from disposal of
property, plant
and equipment 110 194
Acquisition of subsidiaries 7 (8,227) (19,754)
Investment 11 (375) -
Purchase of own shares 11 (3,467) -
Net cash used in investing
activities (16,226) (24,896)
Financing activities
Repayments of obligations under
finance leases (246) (67)
Dividends paid (9,738) (8,189)
Net cash used in financing
activities (9,984) (8,256)
Net increase / (decrease) in cash
and cash equivalents 3,408 (4,971)
Cash and cash equivalents at
beginning of year 24,324 29,295
Effect of foreign exchange rate
changes (5) -
Cash and cash equivalents at end
of year 27,727 24,324
NOTES TO THE FINANCIAL INFORMATION
1. Accounting policies
While 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 expects to publish full financial statements that comply with
IFRS in May 2008.
The financial information set out above does not constitute the
company's statutory accounts for the years ended March 2008 or 2007,
but is derived from those accounts. Statutory accounts for 2007 have
been delivered to the Registrar of Companies and those for 2008 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.
The financial information complies with the recognition and
measurement criteria of International Financial Reporting Standards
(IFRS), and with the accounting policies of the group which were set
out on pages 37 to 41 of the 2007 annual report and accounts. No
subsequent changes have been made to the group's accounting policies.
2. Segmental reporting, net revenue analysis, cost of sales
and gross throughput
(i) Segmental information
(a) Geographical segments
The group operates in the UK, the Republic of Ireland and Romania but
the group has only one reportable geographical segment as defined in
International Accounting Standard 14 Segment Reporting due to the
fact that principally all operations occur in the UK.
(b) Classes of business
The group has one class of business, being payment collection and
distribution services.
(ii) Analysis of net revenues by sector, cost of sales and
gross throughput
Revenue comprises the value of sales (excluding VAT) of services in
the normal course of business and includes amounts billed to
customers to be passed on to retail agents as commission payable, the
face value of mobile top-ups where PayPoint acts as principal and for
Metacharge, it includes acquiring bank charges which are amounts
billed to merchants that are passed onto the sponsoring bank. Cost of
sales includes the cost to the group of the sale, including
commission to retail agents 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 revenue 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.
Gross throughput represents payments made by consumers using the
PayPoint service, for bill and general payments, mobile top-ups, cash
withdrawals from ATMs and the value of transactions via the internet.
2. Segmental reporting, net revenue analysis, cost of sales
and gross throughput (continued)
53 weeks ended 52 weeks ended
30 March 2008 25 March 2007
£000 £000
Revenue - transaction processing 210,528 155,659
- lease rental of ATMs 1,617 1,409
212,145 157,068
less:
Commission payable to retail agents (83,439) (76,986)
Cost of mobile top-ups as principal (55,468) (21,050)
Acquiring bank charges (3,378) (1,333)
Net revenue 69,860 57,699
Net revenue by market sector
Bill and general payments 30,652 25,737
Mobile top-ups 25,153 22,633
ATMs 6,561 5,751
Internet payments 4,927 1,623
Other 2,567 1,955
Net revenue 69,860 57,699
UK 66,507 56,757
International [1] 3,353 942
Net revenue 69,860 57,699
[1] International consists of bill and general payment and mobile
top-up revenue from Ireland and Romania.
53 weeks ended 52 weeks ended
30 March 2008 25 March 2007
£000 £000
Cost of sales
Commission payable to retail agents (83,439) (76,986)
Cost of mobile top-ups as principal (55,468) (21,050)
Acquiring bank charges (3,378) (1,333)
Depreciation and amortisation (5,719) (3,815)
Other (7,587) (7,884)
Total cost of sales (155,591) (111,068)
2. Segmental reporting, net revenue analysis and gross
throughput (continued)
Gross throughput
53 weeks ended 52 weeks ended
30 March 2008 25 March 2007
£000 £000
Transactions via PayPoint terminals,
retailer Epos systems and sale of 5,931,224 4,826,632
scratch cards
ATM transactions 328,237 293,287
Internet transactions 1,286,887 117,180
Gross throughput 7,546,348 5,237,099
3. Tax
The charge for the year can be reconciled to the profit per the
income statement as follows:
53 weeks ended 52 weeks ended
30 March 2008 25 March 2007
£000 £000
Current tax 9,423 7,935
Deferred tax 1 (76)
9,424 7,859
The charge for the year can be
reconciled to the profit before tax as
set out in the consolidated income
statement
Profit before tax 30,404 26,597
Tax at the UK Corporation tax rate of
30% (2007: 30%) 9,121 7,979
Tax effects of:
Profits / (losses) in countries where 47 (40)
the rate is different to the UK
Disallowable expenses 359 52
Utilisation of tax losses not (103)
previously recognised -
Losses in companies where deferred tax 116 -
asset not recognised
Adjustments in respect of prior (88)
years (132)
Revaluation of the deferred tax (28)
balance from 30% to 28% -
Actual amount of tax charge 9,424 7,859
4. Dividends on equity shares
53 weeks ended 52 weeks ended
30 March 2008 25 March 2007
£000 £000
Equity dividends on ordinary shares
Interim dividend paid of 5.3p per share
(2007: 4.6p) 3,579 3,113
Proposed final dividend of 10.4p per
share
(2007: paid 9.1p per share) 7,040 6,159
Total dividends paid and recommended
15.7p per share
(2007: 13.7p per share) 10,619 9,272
Amounts distributed to equity holders
in the period
Final dividend for the prior period 6,159 5,076
Interim dividend for the current period 3,579 3,113
9,738 8,189
5. Earnings per share
Basic earnings per share
Basic and diluted earnings per share are calculated on the following
profits and number of shares.
53 weeks ended 52 weeks ended
30 March 2008 25 March 2007
£000 £000
Profit for the purposes of basic
earnings per share
being net profit attributable to
equity holders of
the parent and for diluted earnings
per share 20,980 18,738
2008 2007
Number of Number of
shares shares
Weighted average number of ordinary
shares
in issue (for basic earnings per
share) 67,369,600 67,678,187
Potential dilutive ordinary shares:
Long-term incentive plan 669,449 974,116
Deferred share bonus 119,903 80,336
Diluted basis 68,158,952 68,732,639
6. Goodwill
£000
Cost
At 26 March 2007 18,207
Recognised on acquisition of subsidiaries 9,085
Exchange difference 136
At 30 March 2008 27,428
Accumulated impairment losses
At 26 March 2007 -
Impairment losses for the year -
At 30 March 2008 -
Carrying amount
At 30 March 2008 27,428
At 25 March 2007 18,207
£000
Cost
At 1 April 2006 -
Recognised on acquisition of subsidiaries 18,207
At 25 March 2007 18,207
Accumulated impairment losses
At 1 April 2006 -
Impairment losses for the year -
At 25 March 2007 -
Carrying amount
At 25 March 2007 18,207
At 31 March 2006 -
The group tests goodwill annually for impairment or more frequently
if there are indications that goodwill might be impaired. The
recoverable amounts of the cash generating units (CGUs) are
determined from value in use calculations. The key assumptions for
the value in use calculations are those regarding the discount rates,
growth rates and expected changes to selling prices and direct costs
during the period. Management estimates discount rates using pre-tax
rates that reflect current market assessments of the time value of
money and the risks specific to the CGUs. The growth rates are based
on industry growth forecasts. Changes in selling prices and direct
costs are based on past practices and expectations of future changes
in the market. The group prepares cash flow forecasts derived from
the most recent financial budgets approved by management for the next
four years and extends cash flows for the following eight years based
on an estimated growth rates. Terminal values are based on growth
rates that do not exceed three per cent.
The post tax rate used to discount the forecast cash flows is 10 per
cent.
7. Acquisition of subsidiary
On 15 May 2007, the company acquired 100% of the issued share capital
of Pay Store for cash consideration of £10.3 million of which £2.2
million was payable 12 months after acquisition.
This has been accounted for by the purchase method of accounting.
Pay Store
Book Fair
value value
£000 £000
Net assets acquired
Property, plant and equipment 2,046 2,046
Trade and other receivables 2,310 2,310
Overdraft (93) (93)
Trade and other payables (3,866) (3,866)
Intangible assets - 801
397 1,198
Goodwill 9,085
Total consideration 10,283
Satisfied by:
Cash 8,134
Deferred consideration 2,149
10,283
Net cash outflow arising on acquisition
Cash consideration 8,134
Overdraft 93
8,227
The goodwill arising on the acquisition of Pay Store is attributable
to the anticipated profitability of the distribution of the group's
products in the new markets.
Pay Store contributed £30.8 million revenue and £1.0 million loss
(including amortisation of intangible assets of £0.3 million) to the
group's profit before tax for the period between the date of
acquisition and the balance sheet date.
If the acquisition of Pay Store had been completed on the first day
of the financial year, the group's results would have been revenue of
£216 million and £21 million profit attributable to equity holders of
the parent.
8. Cash and cash equivalents
Included within group cash and cash equivalents is £8,001,000 (2007:
£7,290,000) 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.
The group operates cash pooling amongst its various bank accounts and
therefore individual accounts can be overdrawn without penalties
being incurred so long as the overall gross position is in credit. At
the 30 March 2008 the group's overall cash position was £27,727,000
(2007: £24,324,000) in credit.
9. Equity
2008 2007
£000 £000
Authorised share capital
4,365,352,200 ordinary shares of 1/3 p each
(2007 4,365,352,200: ordinary shares of 1/3 p each) 14,551 14,551
14,551 14,551
Called up, allotted and fully paid share capital
67,697,228 ordinary shares of 1/3p each
(2007: 67,678,702 ordinary shares of 1/3p each) 226 226
226 226
Called up share capital
At start of period 226 226
At end of period 226 226
Investment in own shares
At start of the period (1) (1)
Acquired in period (2,533) -
Used on share scheme vesting 1,599 -
At end of period (935) (1)
Hedging and translation reserve
At start of the period - -
Movement during the period 318 -
At end of period 318 -
Share option and SIP reserve
At start of period 1,712 738
Additions in period 1,121 974
Options exercised in period (552) -
At end of period 2,281 1,712
Retained earnings
At start of period 38,436 (10,282)
Profit for the period 20,980 18,738
Capital reduction - 38,046
Undistributable reserves - 123
Dividends paid (9,738) (8,189)
Adjustment on share scheme vesting (1,981) -
At end of period 47,697 38,436
10. Statement of changes in equity
2008 2007
£000 £000
Opening equity 40,373 28,850
Profit for the period 20,980 18,738
Dividends paid (9,738) (8,189)
Investment in own shares (2,533) -
Adjustment on share scheme vesting (934) -
Increase in hedging and translation reserve 318 -
Increase in share option and SIP reserve 1,121 974
Closing equity 49,587 40,373
11. Related party transactions
During the year the company invested £375,000 for 1.05% of the
ordinary share capital of OB10 Limited, a company that specialises in
electronic invoicing. David Newlands, Chairman of PayPoint plc, is
also Chairman of OB10 and a shareholder with direct and indirect
holdings of 4.10% of the issued share capital and both Dominic Taylor
and George Earle are directly or indirectly interested in 0.42% each.
On 24 September 2007, the company released in full the first tranche
of its Long Term Incentive Plan awards to the three executive
directors and six senior managers. In order to satisfy the company's
obligations, Paypoint Network Limited Employee Investment Trust (The
Trust) acquired 424,052 ordinary shares at the mid market closing
price of 597.5 pence per share, in aggregate £2,533,000, from RIT
Capital Partners and the Weinstock Estate (both of which are
connected to David Morrison, a non-executive director of the
company). 156,348 shares were sold at 597.5 pence per share, in
aggregate £934,000, by participating directors and managers to the
Trust. Accordingly, the company has funded £3,467,000 (excluding
£22,000 deal costs) for the purchase of its own shares. The excess
of the market value of the shares acquired over their fair value at
the date of grant of £1,981,000 has been charged to reserves.
12. Notes to the cash flow statement
53 weeks ended 52 weeks ended
30 March 2008 25 March 2007
£000 £000
Operating Profit 29,200 25,202
Adjustments for:
Depreciation of property,
plant and equipment 4,812 3,603
Amortisation of intangible assets 907 212
Increase in share option and SIP
reserve 1,121 974
Operating cash flows before movements
in working capital 36,040 29,991
Decrease / (increase) in inventories 580 (532)
(Increase) / decrease in receivables (10,528) 788
Increase in payables
- client cash 711 1,105
- other payables 9,196 2,866
Cash generated by operations 35,999 34,218
Corporation tax paid (6,362) (6,007)
Interest and bank charges paid (19) (30)
Net cash from operating activities 29,618 28,181
ABOUT PAYPOINT
PayPoint is the leading cash and internet payments company in the UK
also with operations in Ireland and Romania. We handle in excess of
£7 billion from over 503 million transactions annually for more than
5,000 clients and merchants. The company operates several payment
networks:
* The PayPoint branded retail network numbers over 19,800 terminals
located in local shops (including Co-op, Spar, Costcutter,
Sainsburys Local, One Stop, Londis and thousands of independents)
in all parts of the UK and Ireland. Terminals handle gas and
electricity meter prepayments, cash bill payments, mobile phone
top-ups, transport tickets, London Congestion Charges, BBC TV
licences and a wide variety of other payment types for most leading
utilities, telecommunications suppliers and many consumer service
companies. This network is used by consumers, free of charge, over
8 million times a week. The network has 99% population cover on a 1
mile urban or 5 miles rural measure;
* Multiple retailer connections into the electronic till systems of
over 4,300 outlets in addition to the branded terminal outlets,
including BP, Somerfield and Superdrug for mobile top-ups and
selected payments from the PayPoint range;
* An ATM network which has 2,016 'LINK' branded machines across the
UK, also typically in convenience stores;
* PayPoint.net, an internet payment service provider, provides secure
online credit and debit card payments for over 4,800 web merchants
linking into all the major UK acquiring banks; and
* Pay Store, a Romanian mobile top-up operator with over 4,000
outlets equipped with electronic terminals and 2,000 other retail
outlets. A bill payment service has been added to increase the
breadth of PayPoint's offering in Romania, in line with the UK
branded retail network.
PayPoint floated on the London Stock Exchange in September 2004 and
the company's market capitalisation at 30 March 2008 was £380
million. PayPoint is widely recognised for its leadership in
prepayment systems, smart technology and consumer service.
22 May 2008
Enquiries
PayPoint plc
Dominic Taylor, Chief Executive 01707 600300
George Earle, Finance Director
Finsbury
Rollo Head
0207 251 3801
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
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