Preliminary Results
                                             PayPoint plc
                                        Preliminary results
                                 Year ended 28 March 2010
+-----------------------------------+----------+----------+------------+
| | Year | Year | |
| | ended | ended | Increase/ |
| | 28 March | 29 March | (decrease) |
| | 2010 | 2009 | |
+-----------------------------------+----------+----------+------------+
| Revenue | £196.6m | £224.4m | (12.4)% |
+-----------------------------------+----------+----------+------------+
| Net revenue(1) | £76.4m | £76.4m | - |
+-----------------------------------+----------+----------+------------+
| Gross margin | 32.3% | 28.5% | 3.8 ppts |
+-----------------------------------+----------+----------+------------+
| Operating profit | £34.1m | £33.7m | 1.2% |
+-----------------------------------+----------+----------+------------+
| Profit before tax | £32.6m | £34.6m | (5.7)% |
+-----------------------------------+----------+----------+------------+
| Basic earnings per share | 32.9p | 35.6p | (7.6)% |
+-----------------------------------+----------+----------+------------+
| Proposed final dividend per share | 14.4p | 11.6p | 24.1% |
+-----------------------------------+----------+----------+------------+
OPERATIONAL HIGHLIGHTS
* Continued leadership of the UK retail cash payment sector
* Bill payment network and transaction volume growth in Romania
* 22% transaction growth in internet payments and the successful introduction
of energy meter home vending solutions for major utility clients,
demonstrating the success of a multi-channel approach
* Successful launch of Collect+, a ground-breaking, new consumer parcel
collection and delivery service into 3,400 outlets, in a joint venture with
Home Delivery Network
* Acquisition of PayByPhone, worldwide leader in parking payments by mobile
phone
Enquiries
PayPoint plc
Dominic Taylor, Chief Executive 01707 600300
George Earle, Finance Director
Finsbury
Rollo Head                              0207 2513801
Don Hunter
A presentation for analysts is being held at 11.45 am today at Finsbury, Tenter
House, Moorfields, London, EC2.
This announcement is available on the PayPoint plc
website:http//www.paypoint.com
1. Net revenue is revenue less commissions paid to retail agents, the cost of
mobile top-ups and SIM cards where PayPoint is principal and acquiring bank
charges.
CHAIRMAN'S STATEMENT
PayPoint has continued to grow and invest in new business areas despite the
tough economic climate. Margins, operating profit and dividends have increased.
PayPoint's established business streams delivered to plan and provide a solid
base for ongoing development. We added over 650 net new retail outlets in the UK
and Ireland. PayPoint.net has continued to grow but margins for larger merchants
reduced as they reached volumes that justified lower pricing.
Our investment is focussed on developing new business streams: bill payment,
top-ups and retail services in Romania; developing and building our parcel
collection and delivery joint venture; and by extending our payment channels
using PayByPhone.
We have continued to transform PayPoint Romania into a full service network by
rolling out 900 more full service terminals, whilst removing mobile top-up only
sites. We plan to replace the remaining mobile top-up only sites with full
service sites. We accept bill payment for 22 clients and volumes have grown to
over 5.5 million transactions, an increase of nearly six times the number of
transactions in the prior year.
Collect+, our parcels joint venture with the Home Delivery Network, was
successfully launched in May 2009 and we are continuing the roll out of this
service across the network. Momentum is building, with considerable interest
among major internet retailers. We have over 3,400 sites able to take Collect+
transactions and thirteen clients live.
In March, we completed the acquisition of PayByPhone (Verrus Mobile Technologies
Inc. and Verrus UK Limited), adding mobile payments capability to our existing
retail and internet channels. This service has considerable potential beyond its
existing market leadership in mobile phone parking payments.
In the established business streams, our focus is on yield in our retail
networks, extending retail services and on growth in our internet channel.
We have provided the National Lottery Commission (NLC) with a robust response to
Camelot's application to provide bill payment and mobile top-ups. We argue that
the application should be rejected, primarily on competition grounds, for which
we have received strong independent legal advice, including counsel's opinion
and are reserving our position. Whatever the decision, we are well prepared and
our new developing business streams, which are unaffected by this threat,
provide opportunity for strong profitable growth. It is clear that the
uncertainty arising from this consultation process, with a decision still
pending, has had some adverse impact on our share price, which is disappointing.
We have core strength in the attractive UK cash payments sector to which our
skills are well suited. In addition, consumer behaviour, regulatory change and
technical innovation are leading to a proliferation of new payment media
utilising a variety of new channels. With our key skills in client and retail
management, transaction processing and financial settlement, we are well placed
to take advantage of the new markets opening up to us.
These opportunities are supported by strong cash generation and the stability of
the underlying industries in which our clients operate.
We are proposing a final dividend of 14.4 pence per share, which together with
the interim dividend of 7.4 pence makes a total for the year of 21.8 pence, an
increase of 24 percent.
For the current financial year, trading is in line with the company's
expectations.
Our established business is strong, with opportunities to enhance retail yield
and increase the number of online merchants we serve. In our developing
businesses, there is substantial growth potential as we roll out our services to
a wider base, to improve profitability. Together, these businesses provide a
solid foundation from which we aim to deliver long term value for shareholders.
David Newlands
Chairman
27 May 2010
CHIEF EXECUTIVE'S REVIEW
PayPoint has had a satisfactory year in which we delivered profit just ahead of
market expectations and reinforced our prospects for further growth. Our
established business streams (delivered through our retail networks in the UK
and Ireland and the internet) continue to be highly profitable and cash
generative. Our developing business streams (bill payment and mobile top-ups in
Romania, parcels through Collect+ and mobile payments through PayByPhone) are
important to our strategic development and longer term value creation, although
we recognise that the decline in mobile top-ups in Romania has resulted in a
delay to profitability. The developing business streams are currently loss
making but bill payment in Romania, parcels and PayByPhone are growing strongly
and we expect them to generate profits and cash next year.
The last year has been significant in the evolution of our strategy,
particularly through the acquisition of PayByPhone, as we broaden our position
as a leading specialist payments company. At the time of flotation, PayPoint's
capabilities centred on its UK and Irish based retail networks. PayPoint has now
also become a leading player in web and mobile phone payments through
PayPoint.net and PayByPhone, as well as operating a retail cash network in
Romania. We have expanded the sectors which we serve and moved into new
geographies. The profit yield of outlets in PayPoint's retail networks is also
being enhanced by additional services including ATMs, debit and credit card
payments, international money transfer and the ground-breaking new Collect+
service, allowing consumers to send and collect parcels from their local store.
The payments industry is changing. Technology advances are creating new channels
for secure and convenient payments, providing greater accessibility for
consumers to the internet through sophisticated computers and smartphones.
Client and retailer requirements are for multi-channel solutions. Consumers
value new technology's convenience and speed, and better access to information.
Developments such as Wave & Pay and growth in prepaid cards, e-money and other
payment media require underlying processing and financial settlement between
consumers and businesses. At the same time, regulatory changes such as the
Payment Services Directive and plans to phase out cheques, are opening up parts
of the payments industry which were previously the exclusive domain of banks.
Banks are having to focus on their core businesses and enhanced payment security
standards are leading other businesses to focus on efficiencies and their core
activities.
These developments lead us to believe that there will be new opportunities for
the outsourcing of payment and related transaction processing. Cash payments
markets also continue to deliver a high proportion of regular payments,
demonstrating entrenched preference for cash among many consumers.
PayPoint's strategy places the group in a strong position to benefit its
existing business streams and from changes in technology, regulation and
competitor focus which external influences are providing. Our strategy, which
aims to reinforce our position as a specialist payments provider, is built
around four key elements:
Payments capability
The acceptance of multiple payment media (cash, cheque, cards, e-money, etc.)
through different channels (retail based terminal networks, internet and mobile
phone);
Attractive vertical markets
Targeting high volume, recurring consumer payments;
Value added content / services
Providing additional content or services to the payment channel and chosen
vertical markets to create differentiation; and
Geographic reach
Identifying regions with attractive payment dynamics where we can create value
through importing know how.
PayPoint has succeeded in establishing broad payment capability in a number of
key vertical markets. We provide a vital payments hub to our clients in many
sectors (energy, telecoms, household bills, transport, e-commerce and parking),
with the ability to process consumer payments and related transactions across
the consumer's choice of payment media or channel. The delivery of the payment
from the consumer to our client touches various elements such as the payment
medium used (cheque, cash or credit/debit card); the channel through which the
payment is made (by post, in a shop, via the internet or mobile); the processing
company (for example PayPoint, banks and internet payment service providers);
and the financial intermediary (acquiring banks, card schemes and card issuers).
PayPoint either runs operations within each channel directly (such as our retail
proposition for cash collection, internet payment service provision and mobile
payment for parking) or works closely with partners (retailers, internet
merchants and acquiring banks) to drive a secure and efficient consumer payment
to the client, from whichever consumer source.
PayPoint also provides value added content and services within each channel,
which differentiates the PayPoint proposition from competitors. In the case of
our retail channel, this differentiation is achieved through providing retailers
with a broad range of retail services, including ATMs, parcels, SIM cards and
international money transfer. With respect to our internet channel,
differentiation to merchants will be driven through having a wider base of
acquiring bank relationships, combined with value adding products such as
Fraudguard and superior reporting to merchants. Our mobile channel, delivered
through PayByPhone, will similarly drive differentiation through its ability to
leverage our cash retail payment capability and internet payment services,
combined with improving the consumer experience with appropriate smartphone
applications.
The execution of the final element of our strategy to extend geographic reach
has commenced. We entered into the Romanian market to replicate our UK retail
success in cash payments, and we have recently acquired PayByPhone which has
contracts in the UK, Canada, USA and France.
Our objective is to increase shareholder value through accessing the range of
opportunities which build around the four key elements of our strategy. We aim
to:
 1. grow our established UK market position through incrementally adding new
payments to our existing portfolio; by focusing on optimising the retail network
to enhance our yield; by adding further payment schemes and online merchants to
our internet business; and by continually adding content and services to attract
consumers and clients.
2. accelerate growth in our developing businesses as we expand our PayByPhone
business in parking and into new markets and applications. We have opportunities
to add services from the UK to our Romanian business such as international money
transfer, to leverage our retail presence in Romania. Collect+ should benefit
from the continued roll-out to stores across the UK, greater take-up by online
merchants and through increased consumer adoption.
3. add content and services to our payment channels, which is fundamental to
maintaining our competitive differentiation. We have a number of developments
aimed at offering new content-rich services to our retailers and online
merchants and by extending our role in financial settlement where it is to our
clients' advantage. We also aim to enhance functionality around PayByPhone, the
terminal networks and PayPoint.net, notably where these functions build bridges
between the different payment channels by offering choice to consumers.
4. take the opportunity for improved and more rapid returns from new
geographies, which is substantially greater with the combination of PayByPhone,
the internet and a retail-based network, than through entering a new market with
a single proposition. PayByPhone already has a presence in Canada, USA, France
and the UK, with opportunities in other countries under investigation.
As we move to maximise these opportunities, we are strengthening the management
in our established business streams to ensure senior management attention is
directed proportionally to the developing business streams.
These are exciting times to be an innovator in the payments industry and we look
forward to the opportunities and challenges presented. At the same time, we
continue to maintain our status as the market leader in our more established
business streams.
Dominic Taylor
27 May 2010
BUSINESS REVIEW
The business review has been prepared solely to provide additional information
to shareholders as a body to assess PayPoint's strategies and their potential to
succeed. It should not be relied upon for any other purpose. It contains forward
looking statements that have been made by the directors in good faith, based on
the information available at the time of approval of the annual report and such
statements should be treated with caution due to the inherent uncertainties,
including both economic and business risk factors, underlying any such forward
looking information.
Our key performance indicators are shown on page 14.
PayPoint is a payment service provider for consumer payment transactions and, as
such, has only one operating segment. However, reflection on various facets
helps explanation of the execution of our strategy in developing the group and
accordingly, in addition to the analysis of the number and value of consumer
transactions (throughput), revenue and net revenue, we have shown an analysis
which separates our developing business streams (bill payment and top-ups in
Romania, Collect+ and PayByPhone), from our established business streams.
In addition, we have expanded and altered the channel analysis as follows:
Retail networks:
Bill and general (prepaid energy, bills and tickets)
Top-ups (mobile, pre-paid cards and phone cards)
Retail services (ATM, debit/credit, parcels, money transfer and SIMs)
Internet (transactions between consumers and merchants, pre-authorisations,
fraudguard where separately charged and failed transactions)
PayByPhone (parking transactions)
Other for revenue and net revenue only (software development, configuration and
customisation and settlement of claims)
Growth opportunities are centred around retail services in the UK retail network
including parcels; new merchants for internet payments; the expansion of the
retail network and new retail services in Romania; new parking contracts for
PayByPhone and building and developing Collect+.
Operational review
Transactions have increased to 552 million (2009: 545 million), up 1% in the
established business streams and 20% in the developing business streams.
Throughput increased to £9.7 billion (2009: £8.9 billion), an increase of 8% in
the established business streams and over a threefold increase in the developing
business streams despite the reduction in mobile top-ups in Romania.
Revenue in developing business streams and in the remainder of our business
(shown in the table below as established business streams) has fallen as a
result of fewer mobile top-up transactions, especially where PayPoint is
principal and accounts for the face value of the top-up as revenue. Net revenue
in the developing business streams was up 20% but was down slightly in the
established business streams.
Operating profit in the established business streams was flat and the operating
loss including our share of Collect+ in the developing business streams was £4
million (2009: £3 million), an increase of £1 million as a result of a full year
of losses in Collect+ (2009: two months)(1).
+--------------+--------------+-------------+---------+--------+-----------+
| |Established |Developing | |Adjust | |
| |business |business |Total |Collect+|As reported|
| |streams(2) |streams(3) | | | |
+--------------+--------------+-------------+---------+--------+-----------+
|Transactions | | | | | |
|(million) | | | | | |
+--------------+--------------+-------------+---------+--------+-----------+
| 2010| 540| 12| 552| -| 552|
+--------------+--------------+-------------+---------+--------+-----------+
| 2009| 535| 10| 545| -| 545|
+--------------+--------------+-------------+---------+--------+-----------+
|Throughput | | | | | |
|£000 | | | | | |
+--------------+--------------+-------------+---------+--------+-----------+
| 2010| 9,560,776| 127,647|9,688,423| -| 9,688,423|
+--------------+--------------+-------------+---------+--------+-----------+
| 2009| 8,845,846| 35,291|8,881,137| -| 8,881,137|
+--------------+--------------+-------------+---------+--------+-----------+
|Revenue | | | | | |
|£000 | | | | | |
+--------------+--------------+-------------+---------+--------+-----------+
| 2010| 171,933| 24,875| 196,808| (205)| 196,603|
+--------------+--------------+-------------+---------+--------+-----------+
| 2009| 188,870| 35,482| 224,352| (1)| 224,351|
+--------------+--------------+-------------+---------+--------+-----------+
|Net revenue(4)| | | | | |
|£000 | | | | | |
+--------------+--------------+-------------+---------+--------+-----------+
| 2010| 74,589| 2,981| 77,570| (164)| 77,406|
+--------------+--------------+-------------+---------+--------+-----------+
| 2009| 74,922| 2,477| 77,399| (1)| 77,398|
+--------------+--------------+-------------+---------+--------+-----------+
Collect+ is a joint venture and its profit after tax is therefore included in
our consolidated profit and loss account after operating profit. In the table
above, the developing business streams figures for revenue and net revenue
include our 50% share of Collect+ to render a like-for-like comparison. The
figures are reconciled to the relevant figures in the profit and loss account
and elsewhere in the operating and financial review.
1. The group's operating profit (which excludes Collect+) was £34,072k (2009:
£33,684k).
2. Established business streams include the whole of PayPoint less the
developing business streams.
3. Developing business streams include bill payment and mobile top-ups in
Romania, Collect+ and PayByPhone.
Net revenue is revenue less commissions paid to retail agents, the cost of
mobile top-ups and SIM cards where PayPoint is principal and acquiring bank
charges.Analysis of transactions
There has been growth in transaction volumes across most sectors with the
exception of top-ups where, for mobile top-ups, in all territories, there has
been a decrease in the market. Mobile operators are offering more value for the
same or lower cost per top-up to consumers, resulting in fewer transactions.
+------------------+----------+----------+------------+
| | Year | Year | |
| | ended | ended | Increase/ |
| Transactions | 28 March | 29 March | (decrease) |
| | 2010 | 2009 | % |
| | million | million | |
+------------------+----------+----------+------------+
| Retail networks | | | |
+------------------+----------+----------+------------+
| Bill and general | 339 | 334 | 1.5 |
+------------------+----------+----------+------------+
| Top-ups | 129 | 143 | (9.7) |
+------------------+----------+----------+------------+
| Retail services | 39 | 32 | 23.4 |
+------------------+----------+----------+------------+
| Internet | 44 | 36 | 22.1 |
+------------------+----------+----------+------------+
| PayByPhone | 1 | - | - |
+------------------+----------+----------+------------+
| Total | 552 | 545 | 1.3 |
+------------------+----------+----------+------------+
Prepaid energy volumes (included in bill and general) in the UK have increased
by 1% on last year despite reductions through the year in domestic gas and
electricity prices. The cold winter had a beneficial impact on volumes in the
second half of the year.
Bill payments in Romania have grown significantly and include a full year of
transaction volumes compared to last year (launched August 2008). Volumes
continue to grow as more terminal sites are rolled out and consumers become
aware of the service. In the year, we have processed over 5.5 million bill
payment transactions an increase of nearly six times on the previous year and
our current run rate is c.160,000 transactions per week.
Mobile top-ups in UK, Ireland and Romania have continued to decline. E-money
volumes are up 43% with the introduction during the year of the O(2) pre-pay
debit card and a full year of trading for PayPal's pre-pay debit card.
Retail services volumes have increased as a result of the growth in credit/debit
card transactions performed by the retailers on the PayPoint terminal.
Internet transactions of 44 million are up 22% on last year as we continue to
add new merchants and existing merchants grow organically. New merchants in the
last 12 months include Moneysupermarket.com, Severn Trent Water, Ann Summers and
British Gas Home Vend.
Throughput
There has been substantial growth in the value paid by consumers (throughput),
primarily in bill and general payments and internet payments.
+------------------+-----------+-----------+------------+
| | Year | Year | |
| | ended | ended | Increase/ |
| Throughput | 28 March | 29 March | (increase) |
| | 2010 | 2009 | % |
| | £000 | £000 | |
+------------------+-----------+-----------+------------+
| Retail networks | | | |
+------------------+-----------+-----------+------------+
| Bill and general | 5,925,249 | 5,549,152 | 6.8 |
+------------------+-----------+-----------+------------+
| Top-ups | 1,166,507 | 1,199,186 | (2.7) |
+------------------+-----------+-----------+------------+
| Retail services | 377,271 | 378,714 | (0.4) |
+------------------+-----------+-----------+------------+
| Internet | 2,216,319 | 1,754,285 | 26.3 |
+------------------+-----------+-----------+------------+
| PayByPhone | 3,077 | - | - |
+------------------+-----------+-----------+------------+
| Total | 9,688,423 | 8,881,337 | 9.1 |
+------------------+-----------+-----------+------------+
Bill and general throughput reflects the increase in transactions and in the
average transaction value. There has been strong growth in higher value
transactions for local authority and housing authority payments and a small rise
in the average value for gas prepayments.
The reduction in top-ups throughput reflects the reduction in the overall market
value of mobile top-ups as a consequence of mobile operators offering more
airtime for the same value or less to consumers and the migration of pre-paid
mobile top-up customers to contracts offset by the increase in e-money top-ups.
Retail services include ATMs where throughput is flat. Whilst credit/debit
transactions have grown, we report no related throughput as the merchant
acquirer settles direct with our retailer.
Internet throughput has increased at a greater rate than the transaction growth,
as the average consumer spend per transaction has increased.
Revenue analysis
+------------------+----------+----------+------------+
| | Year | Year | |
| | ended | ended | Increase/ |
| Revenue | 28 March | 29 March | (decrease) |
| | 2010 | 2009 | % |
| | £000 | £000 | |
+------------------+----------+----------+------------+
| Retail networks | | | |
+------------------+----------+----------+------------+
| Bill and general | 58,564 | 60,566 | (3.3) |
+------------------+----------+----------+------------+
| Top-ups | 108,508 | 135,013 | (19.6) |
+------------------+----------+----------+------------+
| Retail services | 16,168 | 14,527 | 11.3 |
+------------------+----------+----------+------------+
| Internet | 9,968 | 11,798 | (15.5) |
+------------------+----------+----------+------------+
| PayByPhone | 283 | - | - |
+------------------+----------+----------+------------+
| Other | 3,112 | 2,447 | 27.2 |
+------------------+----------+----------+------------+
| Total | 196,603 | 224,351 | (12.4) |
+------------------+----------+----------+------------+
Bill and general payments revenue is lower than last year because the amount
billed to clients in respect of agent commission has reduced mainly as a result
of a new British Gas contract which includes a reduction in agent commission.
In Romania and Ireland, PayPoint is principal for mobile phone top-ups and, as a
result, the sales value of the top-up is recorded as revenue, with the cost of
the top-up recorded in cost of sales. In the UK, PayPoint is not principal and
only the commission income is recorded as revenue. The decline in mobile
volumes, as a result of mobile operators offering more airtime, affects revenue
from Romania and Ireland more than from the UK.
Retail services revenue has increased as a result of the growth in the number of
sites processing credit/debit transactions to 4,998 sites live at the year end
(2009: 3,930), and growth in revenues from parcels, SIM card sales, advertising
on till receipts and money transfer.
Retail services also includes ATM machine rental and revenue for ATM withdrawals
and balance enquiries. Average revenue per ATM has decreased as a consequence of
lower cash withdrawal volumes on more recently installed ATMs and lower rental
income, as five year term rental agreements expire and fully depreciated
machines are rolled over on lower rentals.
Internet revenues are lower, largely as a result of the migration of larger
merchants from our higher margin bureau service (where we take credit risk and
arrange settlement) to our lower margin gateway service (where we are not
exposed to merchant credit risk). We expect this to complete early in the next
financial year. In addition, the need to change our bureau sponsoring bank, when
Pago decided to exit the market, required the switching of all bureau internet
merchants to our new acquirer by March 2010. This was completed without loss,
but diverted considerable resources and delayed sales activity.
Other revenue includes rechargeable software development work, configuration and
customisation and settlement of claims.Net revenue analysis
Net revenue is revenue less commissions paid to retail agents, acquiring bank
charges, the cost of mobile top-ups and SIM cards where PayPoint is the
principal. Net revenue is a measure which the directors believe assists with a
better understanding of the underlying performance of the group and is shown in
the table below.
+------------------+----------+----------+------------+
| | Year | Year | |
| | ended | ended | Increase/ |
| Net revenue | 28 March | 29 March | (decrease) |
| | 2010 | 2009 | % |
| | £000 | £000 | |
+------------------+----------+----------+------------+
| Retail networks | | | |
+------------------+----------+----------+------------+
| Bill and general | 33,586 | 33,653 | (0.2) |
+------------------+----------+----------+------------+
| Top-ups | 24,272 | 25,692 | (5.5) |
+------------------+----------+----------+------------+
| Retail services | 8,684 | 7,553 | 15.0 |
+------------------+----------+----------+------------+
| Internet | 7,469 | 8,053 | (7.3) |
+------------------+----------+----------+------------+
| PayByPhone | 283 | - | - |
+------------------+----------+----------+------------+
| Other | 3,112 | 2,447 | 27.2 |
+------------------+----------+----------+------------+
| Total | 77,406 | 77,398 | - |
+------------------+----------+----------+------------+
Bill and general net revenue is flat because the benefit of the increase in
Romania bill payment and UK local authority housing payments has been offset by
margin reduction in respect of energy clients which have taken advantage of
developments in energy prepayment infrastructure which have enabled them to
negotiate agreements with better transaction pricing with individual payment
networks rather than working with all three networks.
The decrease in top-ups net revenue is lower than the decrease in revenue as a
result of the growth in e-money transactions which have higher than average net
revenue.
Retail services net revenue has a greater percentage increase than revenue
because debit/credit and advertising on till receipts attracts no retailer
commission.
Internet net revenue is down 7% for the reasons noted under revenue. The
reduction is proportionally lower because bureau revenue, which has reduced,
includes the charges from sponsoring banks.
Collect+
On 5 February 2009, PayPoint announced a 50:50 joint venture with Home Delivery
Network, a leading logistics and parcel network company, to provide consumers
with a more convenient solution for parcel delivery and collection, by
leveraging our retail network of agents as parcel drop-off and collection
points.
At the end of the year, we had 3,418 (2009: 1,250) convenience retailers
offering the parcel service within our existing retailer base.
During the year, we processed 247,000 transactions for thirteen clients. The
service is growing and major internet merchants are showing interest.
PayByPhone
On 9 March 2010, PayPoint acquired 100% of the share capital of Verrus Mobile
Technologies Inc. and Verrus UK Limited (together known as PayByPhone) for £29
million (including deferred consideration of £4 million) with a further
potential consideration of £4 million dependent on results to March 2013.
PayByPhone is a leading international provider of services to parking
authorities allowing consumers to use their mobile phones to pay for their
parking by credit or debit card. It has contracts in the UK, Canada the USA and
France.
Network growth
Terminal sites overall have decreased by 1% to 27,459.
In the UK and Ireland, sites have increased by 653, an increase of 3%, but
reflect the current economic climate, where two medium retailers, with over 500
terminal sites, went into administration.
In Romania, we installed over 900 new full service terminals in the year and
have removed over 1,700 of the old mobile top-up only terminals.
+----------------------+---------------+---------------+-----------------------+
| | 28 March 2010 | 29 March 2009 | Increase / (decrease) |
| Analysis of sites | | | % |
+----------------------+---------------+---------------+-----------------------+
| UK & Ireland | | | |
+----------------------+---------------+---------------+-----------------------+
| Terminal sites | 17,830 | 18,705 | (4.7) |
+----------------------+---------------+---------------+-----------------------+
| Terminal and EPoS | 4,813 | 3,285 | 46.5 |
+----------------------+---------------+---------------+-----------------------+
| | 22,643 | 21,990 | 2.9 |
+----------------------+---------------+---------------+-----------------------+
| Romania | | | |
+----------------------+---------------+---------------+-----------------------+
| Terminal sites | 4,816 | 5,702 | (15.5) |
+----------------------+---------------+---------------+-----------------------+
| Total terminal sites | 27,459 | 27,692 | (0.8) |
+----------------------+---------------+---------------+-----------------------+
| Internet merchants | 5,618 | 5,160 | 8.9 |
+----------------------+---------------+---------------+-----------------------+
Financial review
Revenue for the year was 12.4% lower at £197 million (2009: £224 million),
driven by the decrease in mobile top-ups. This revenue reduction is also
reflected in cost of sales which, at £133 million (2009: £160 million), was down
17.1%. Agents' commission decreased to £73 million (2009: £84 million) due to
fewer mobile top-up transactions, which pay a higher than average commission,
and reductions in the amount paid for commission by the mobile operators. The
cost of mobile top-ups in Ireland and Romania(1) has fallen to £43 million
(2009: £59 million).
Net revenue(2) of £77.4 million (2009: £77.4 million) was flat with operating
margin(3) of 44.0% (2009: 43.5%) as a result of reduced operating costs.
Operating costs (administrative expenses) were 2% lower at £29.4 million (2009:
£30.2 million) despite investment in parcels and the acquisition of PayByPhone.
1. In Ireland and Romania, PayPoint is principal in the sale of mobile top-ups
and, accordingly, the face value of the top-up is included in sales and the
corresponding costs in cost of sales.
2. Net revenue is revenue less commissions paid to retail agents, the cost of
mobile top-ups and SIM cards where PayPoint is principal and acquiring bank
charges.
3. Operating margin is calculated as operating profit as a percentage of net
revenue.
Our share of the loss in developing Collect+ was £1.6m as expected (2009: loss
of £0.3m). This reflects a full year of trading compared to two months in the
previous year.
Profit before tax was £32.6 million (2009: £34.6 million), a decrease of 6%, as
a result of the loss in Collect+ and lower interest rates impacting investment
income. The tax charge of £10.5 million (2009: £10.8 million) represents an
effective rate of 32.2% (2009: 31.3%). The tax charge is higher than the UK
nominal rate of 28% because of unrelieved losses in Romania and the write off of
a deferred tax asset relating to tax relief for share based payments which are
unlikely to be released in June 2010, on the third anniversary of their award.
Cash flow from operating activities was £25 million (2009: £33 million),
reflecting strong conversion of profit to cash offset by corporation tax paid of
£14 million (2009: £8 million), bringing the group's tax payments into line with
the charge for tax over the last two years. Capital expenditure of £3 million
(2009: £9 million) reflected spend on new terminals, ATMs and IT equipment. In
2009, the freehold of our Welwyn operations base was purchased for £6 million.
Net interest received was £0.2 million (2009: £1.2 million) as a result of low
interest rates.
Equity dividends paid were £12.9 million (2009: £11.1 million).
As part of the funding for the purchase of PayByPhone, the company has drawn
down £6 million (2009: £nil) from its £35 million loan facility.
Cash and cash equivalents were £20.8 million (including client cash of £6.8
million), down from £36.3 million (including client cash of £7.5 million) last
year due to the acquisition of PayByPhone, costing £29 million.
Economic profit
PayPoint's economic profit (operating profit less tax and capital charge) was
£18.5 million (2009: £19.5 million) reduced as a result of the losses in
Collect+.
Dividend
We propose to pay a final dividend of 14.4p per share on 16 July 2010 (2009:
11.6p) to shareholders on the register on 18 June 2010, subject to the approval
of the shareholders at the annual general meeting. An interim dividend of 7.4p
(2009: 6.0p) per share was paid on 15 December 2009 making a total dividend for
the year of 21.8p (2009: 17.6p).
Liquidity and going concern
The group has cash of £20.8 million and a loan of £6 million drawn down on its
unsecured loan facility of £35 million, with a remaining term of over one year.
Cash and borrowing capacity is adequate to meet the foreseeable needs of the
group taking account of any risks (see page 15). The financial statements have
therefore been prepared on a going concern basis.
Financing and treasury policy
The financing and treasury policy requires a prudent approach to the investment
of surplus funds, external financing, settlement, foreign exchange risk and
internal control structures. The policy prohibits the use of financial
derivatives and sets limits for gearing.
Employees
We would like to take this opportunity to thank PayPoint's employees for their
commitment, energy and enthusiasm in the delivery of these results.
Economic climate
The company's bill and general payments sector, which accounts for 43% (2009:
43%) of our net revenue, continues to be reasonably resilient in the recession
as consumers' discretion in expenditure was limited for essential services.
Utility providers continue to install new prepay gas and electricity meters,
which will have a beneficial impact on our transaction volumes. The internet
payment market continues to grow. There has been an adverse impact on our mobile
top-ups and in ATM cash withdrawal rates.
PayPoint's exposure to retailer bad debt is limited as most of the group's
clients in the UK, other than mobile operators, bear the risk of retailer bad
debt. Credit granted to retailers is restricted by daily direct debiting for all
UK and Irish transactions via a terminal and weekly for EPoS mobile top-ups. In
Romania, the risk of the bad debt lies with PayPoint Romania. In PayPoint.net,
exposure is limited to receivables from merchants for fees, except in the case
of bureau internet merchants, where PayPoint.net retains credit risk on merchant
default for charge backs. This risk is mitigated to some extent by withholding
settlement of funds to merchants.
National Lottery Commission
We have provided the National Lottery Commission (NLC) with a robust response to
Camelot's application to provide bill payment and mobile top-ups. We argue that
the application should be rejected, primarily on competition grounds, supported
by strong, independent legal advice, including counsel's opinion and are
reserving our position. Whatever the decision, we are well prepared and our new
developing business streams, which are unaffected by this threat, provide
opportunity for strong profitable growth. It is clear that the uncertainty
arising from this consultation process, with a decision still pending, has had
some adverse impact on our share price, which is disappointing.
Outlook
For the current financial year, trading is in line with the company's
expectations.
Our established business is strong, with opportunities to enhance retail yield
and increase the number of online merchants we serve. In our developing
businesses, there is substantial growth potential as we roll out our services to
a wider base, to improve profitability. Together, these businesses provide a
solid foundation from which aim to deliver long term value for shareholders.
KEY PERFORMANCE INDICATORS (KPIs)
In order to realise its strategic aims, PayPoint has identified areas of
strategic focus and has put in place a number of KPIs to measure progress
against them. Whilst these KPIs are helpful in measuring the group's
performance, they are not exhaustive and the group uses many other additional
measures to monitor progress.
Measuring our performance
+-----------------+-----------------+-----------------+------------+-----------+
|Strategic focus |KPI |Description | 2010| 2009|
+-----------------+-----------------+-----------------+------------+-----------+
| | |Profit after tax | | |
| | |attributable to | | |
| | |equity holders of| | |
| | |the parent | | |
|Shareholder |Earnings per |divided by the | 32.9p| 35.6p|
|return |share (basic) |weighted average | | |
| | |number of | | |
| | |ordinary shares | | |
| | |in issue during | | |
| | |the year | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Proposed final | | |
| | |dividend and | | |
| | |interim dividend | | |
| |Dividends per |divided by the | 21.8p| 17.6p|
| |share |number of fully | | |
| | |paid shares at | | |
| | |the end of the | | |
| | |year | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Operating profit | | |
| | |after tax and a | | |
| | |charge for | £18.5|£19.5 |
| |Economic profit |capital employed | million|million |
| | |based upon the | | |
| | |group's cost of | | |
| | |capital | | |
+-----------------+-----------------+-----------------+------------+-----------+
| |Terminal sites in|Number of live | | |
|Growth |the UK, Ireland |terminal sites at| 27,459|27,692 |
| |and Romania |the end of the | | |
| | |year | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Number of live | | |
| |Internet |internet | 5,618|5,160 |
| |merchants |merchants at the | | |
| | |end of the year | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Number of | | |
| | |PayPoint | | |
| | |transactions | | |
| |Retail networks |processed in the | | |
| |transactions |year on our | 507 million|509 million|
| | |terminals, ATMs | | |
| | |and on our | | |
| | |retailers' EPoS | | |
| | |systems | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Number of | | |
| |Internet |transactions | | |
| |transactions |processed in the | 44 million|36 million |
| | |year by | | |
| | |PayPoint.net | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Number of | | |
| | |PayByPhone | | |
| |PayByPhone |transactions | 1 million| n/a|
| | |processed in the | | |
| | |year since | | |
| | |acquisition | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |The value of | | |
| | |transactions | | |
| | |processed via our| | |
| | |terminals, | | |
| |Throughput |retailers' EPoS |£9.7 billion| £8.9|
| | |systems, internet| | billion|
| | |merchants, ATMs, | | |
| | |PayByPhone and | | |
| | |the sale of other| | |
| | |retail services | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Revenue less: | | |
| | |commissions paid | | |
| | |to retail agents;| | |
| | |the cost of | | |
| |Net revenue |mobile top-ups | £77 million|£77 million|
| | |and SIM cards | | |
| | |where PayPoint is| | |
| | |principal; and | | |
| | |acquiring bank | | |
| | |charges | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Operating profit | | |
| |Operating margin |as a percentage | 44.0%| 43.5%|
| | |of net revenue | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Total operating | | |
| | |profit for the | | |
|Asset |Return on capital|year divided by | 88%| 115%|
|optimisation |employed |monthly average | | |
| | |capital employed | | |
| | |excluding cash | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |Number of | | |
| | |permanent | | |
| | |employees who | | |
|People |Labour turnover |left during the | | |
| | |year divided by | | |
| | |average total | | |
| | |permanent | | |
| | |employees | | |
+-----------------+-----------------+-----------------+------------+-----------+
| | |UK & Ireland | 20%| 23%|
| | |Romania | 49%| 56%|
+-----------------+-----------------+-----------------+------------+-----------+
| | |% women | | |
| | |% women managers | 43%| 42%|
| |Gender diversity |employed by the | 7%| 7%|
| | |group at the year| | |
| | |end | | |
+-----------------+-----------------+-----------------+------------+-----------+
RISKS
PayPoint's business, financial condition or operations could be materially and
adversely affected by the risks summarised below. Although management takes
steps to mitigate risks where possible or where the cost of doing so is
reasonable in relation to the probability and seriousness of the risk, it may
not be possible to avoid the materialisation of some or all of such risks.
+---------------------------------------+--------------------------------------+
|Risk |Future prospects depend on our ability|
| |to: |
+---------------------------------------+--------------------------------------+
| |manage growth through the employment |
|Managing growth of the business |of adequate skilled resources, whilst |
| |maintaining financial controls |
+---------------------------------------+--------------------------------------+
|Major contract loss or renewal at |renew contracts at expiry on |
|unattractive margins |attractive terms |
+---------------------------------------+--------------------------------------+
| |retain and recruit key staff through a|
|Dependence on key executives |mixture of basic salary plus short and|
| |long-term incentive schemes |
+---------------------------------------+--------------------------------------+
| |maintain financial controls, defend |
|Failure of systems |against natural disasters, terrorist |
| |attacks, sabotage and hacking |
+---------------------------------------+--------------------------------------+
|Competition |hold and gain market share |
+---------------------------------------+--------------------------------------+
| |mitigate the consequences of |
|Insolvency of a major multiple retail |insolvency both in terms of the bad |
|agent |debt risk and the impact of such |
| |insolvency on our network coverage |
+---------------------------------------+--------------------------------------+
| |keep pace with technological changes |
|Technological changes |and introduce new developments to |
| |compete effectively |
+---------------------------------------+--------------------------------------+
| |stop third parties from using our |
|Reliance on intellectual property |products and defend the use of our |
| |products from any challenge |
+---------------------------------------+--------------------------------------+
| |access any future capital on |
| |sufficiently attractive terms, |
|The need to raise capital in future |particularly in view of prevailing |
| |economic conditions and the |
| |availability of credit |
+---------------------------------------+--------------------------------------+
|Economic, political, legislative, |deal with the impact of any changes |
|taxation or regulatory changes |without affecting the growth or |
| |profitability of the business |
+---------------------------------------+--------------------------------------+
| |ensure the impact of any adverse |
|Taxation |changes is mitigated by enhanced |
| |performance |
+---------------------------------------+--------------------------------------+
|Fraudulent or criminal activity |avoid loss of client money by the |
| |rigorous application of controls |
+---------------------------------------+--------------------------------------+
|Consumers reduce number or value of |establish new products and services |
|payments via the PayPoint network |and keep abreast of technological and |
| |market changes |
+---------------------------------------+--------------------------------------+
CONSOLIDATED INCOME STATEMENT
+-----------------------------------------------------+----+---------+---------+
| | | Year| Year|
| | | ended| ended|
| |Note| 28 March| 29 March|
| | | 2010| 2009|
| | | £000| £000|
+-----------------------------------------------------+----+---------+---------+
|Continuing operations | | | |
+-----------------------------------------------------+----+---------+---------+
|Revenue | 2 | 196,603| 224,351|
+-----------------------------------------------------+----+---------+---------+
|Cost of sales | |(133,110)|(160,496)|
+-----------------------------------------------------+----+---------+---------+
|Gross profit | | 63,493| 63,855|
+-----------------------------------------------------+----+---------+---------+
|Administrative expenses | | (29,421)| (30,171)|
+-----------------------------------------------------+----+---------+---------+
|Operating profit | | 34,072| 33,684|
+-----------------------------------------------------+----+---------+---------+
|Share of loss of joint venture | | (1,601)| (323)|
+-----------------------------------------------------+----+---------+---------+
|Investment income | | 224|1,275 |
+-----------------------------------------------------+----+---------+---------+
|Finance costs | | (50)| (34)|
+-----------------------------------------------------+----+---------+---------+
|Profit before tax | | 32,645| 34,602|
+-----------------------------------------------------+----+---------+---------+
|Tax | 3 | (10,513)|(10,818) |
+-----------------------------------------------------+----+---------+---------+
|Profit for the financial year attributable to equity | 12 | 22,132| 23,784|
|holders of the parent | | | |
+-----------------------------------------------------+----+---------+---------+
|Earnings per share | | | |
+-----------------------------------------------------+----+---------+---------+
|Basic |5 | 32.9p| 35.6p|
+-----------------------------------------------------+----+---------+---------+
|Diluted | 5 | 32.7p|35.3p |
+-----------------------------------------------------+----+---------+---------+
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
+-------------------------------------------------------+----+--------+--------+
| | | Year| Year|
| | | ended| ended|
| |Note|28 March|29 March|
| | | 2010| 2009|
| | | £000| £000|
+-------------------------------------------------------+----+--------+--------+
|Exchange differences on translation of foreign | 12 | 35| 190|
|operations | | | |
+-------------------------------------------------------+----+--------+--------+
|Net income recognised directly in equity | | 35| 190|
+-------------------------------------------------------+----+--------+--------+
|Profit for the year | | 22,132| 23,784|
+-------------------------------------------------------+----+--------+--------+
|Total recognised income and expenses for the year | | 22,167| 23,974|
+-------------------------------------------------------+----+--------+--------+
CONSOLIDATED BALANCE SHEET
+-------------------------------------------------------+----+--------+--------+
| | |28 March|29 March|
| | | 2010| 2009|
| |Note| £000| £000|
+-------------------------------------------------------+----+--------+--------+
|Non current assets | | | |
+-------------------------------------------------------+----+--------+--------+
|Goodwill | 6 | 56,872| 27,628|
+-------------------------------------------------------+----+--------+--------+
|Other intangible assets | | 1,400| 1,973|
+-------------------------------------------------------+----+--------+--------+
|Property, plant and equipment | | 14,767|16,161 |
+-------------------------------------------------------+----+--------+--------+
|Investment in joint venture | 7 | 326|177 |
+-------------------------------------------------------+----+--------+--------+
|Deferred tax asset | 8 | 1,167|1,128 |
+-------------------------------------------------------+----+--------+--------+
|Investments | | 405| 375|
+-------------------------------------------------------+----+--------+--------+
| | | 74,937| 47,442|
+-------------------------------------------------------+----+--------+--------+
|Current assets | | | |
+-------------------------------------------------------+----+--------+--------+
|Inventories | | 1,567| 1,213|
+-------------------------------------------------------+----+--------+--------+
|Trade and other receivables | | 23,482| 26,260|
+-------------------------------------------------------+----+--------+--------+
|Cash and cash equivalents | 10 | 20,769| 36,345|
+-------------------------------------------------------+----+--------+--------+
| | | 45,818| 63,818|
+-------------------------------------------------------+----+--------+--------+
|Total assets | | 120,755| 111,260|
+-------------------------------------------------------+----+--------+--------+
|Current liabilities | | | |
+-------------------------------------------------------+----+--------+--------+
|Trade and other payables | | 37,926| 40,853|
+-------------------------------------------------------+----+--------+--------+
|Current tax liabilities | | 5,684| 9,153|
+-------------------------------------------------------+----+--------+--------+
|Short-term borrowings | 11 | 6,000|- |
+-------------------------------------------------------+----+--------+--------+
|Obligations under finance leases | | 22| 9|
+-------------------------------------------------------+----+--------+--------+
| | | 49,632| 50,015|
+-------------------------------------------------------+----+--------+--------+
|Non-current liabilities | | | |
+-------------------------------------------------------+----+--------+--------+
|Other liabilities | | 379| 278|
+-------------------------------------------------------+----+--------+--------+
| | | 379| 278|
+-------------------------------------------------------+----+--------+--------+
|Total liabilities | | 50,011| 50,293|
+-------------------------------------------------------+----+--------+--------+
|Net assets | | 70,744|60,967 |
+-------------------------------------------------------+----+--------+--------+
|Equity | | | |
+-------------------------------------------------------+----+--------+--------+
|Share capital | 12 | 226| 226|
+-------------------------------------------------------+----+--------+--------+
|Investment in own shares | 12 | (370)| (926)|
+-------------------------------------------------------+----+--------+--------+
|Share premium | 12 | 25|25 |
+-------------------------------------------------------+----+--------+--------+
|Share based payment reserve | 12 | 2,684|2,489 |
+-------------------------------------------------------+----+--------+--------+
|Translation reserve | 12 | 543|508 |
+-------------------------------------------------------+----+--------+--------+
|Retained earnings | 12 | 67,636| 58,645|
+-------------------------------------------------------+----+--------+--------+
|Total equity attributable to equity holders of the | | 70,744| 60,967|
|parent company | | | |
+-------------------------------------------------------+----+--------+--------+
These financial statements were approved by the board of directors on 27 May
2010.
Signed on behalf of the board of directors.
Dominic Taylor
Director,
27 May 2010
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
+-------------------------------------------------------+----+--------+--------+
| | | Year| Year|
| | | ended| ended|
| | |28 March|29 March|
| | | 2010| 2009|
| |Note| £000| £000|
+-------------------------------------------------------+----+--------+--------+
|Opening equity | | 60,967| 49,587|
+-------------------------------------------------------+----+--------+--------+
|Profit for the year | | 22,132| 23,784|
+-------------------------------------------------------+----+--------+--------+
|Dividends paid | 4 |(12,856)|(11,077)|
+-------------------------------------------------------+----+--------+--------+
|Movement in investment in own shares | 12 | 556| 9|
+-------------------------------------------------------+----+--------+--------+
|Exchange differences on translation of foreign | 12 | 35|190 |
|operations | | | |
+-------------------------------------------------------+----+--------+--------+
|Movement in share based payment reserve | 12 | 195| 208|
+-------------------------------------------------------+----+--------+--------+
|Adjustment in share scheme vesting | 12 | (285)|(1,759) |
+-------------------------------------------------------+----+--------+--------+
|New shares issued | | -| 25|
+-------------------------------------------------------+----+--------+--------+
|Closing equity | | 70,744| 60,967|
+-------------------------------------------------------+----+--------+--------+
CONSOLIDATED CASH FLOW STATEMENT
+-----------------------------------------------------+------+--------+--------+
| | | Year| Year|
| | | ended| ended|
| | |28 March|29 March|
| | | 2010| 2009|
| | Note | £000| £000|
+-----------------------------------------------------+------+--------+--------+
|Net cash flow from operating activities | 14 | 24,986| 32,619|
+-----------------------------------------------------+------+--------+--------+
|Investing activities | | | |
+-----------------------------------------------------+------+--------+--------+
|Investment income | | 224| 1,192|
+-----------------------------------------------------+------+--------+--------+
|Purchases of property, plant and equipment | | (2,700)|(9,158) |
+-----------------------------------------------------+------+--------+--------+
|Proceeds from disposal of property, plant and | | 93|40 |
|equipment | | | |
+-----------------------------------------------------+------+--------+--------+
|Acquisition of subsidiaries | 9 |(28,942)| (2,108)|
+-----------------------------------------------------+------+--------+--------+
|Investment | | (30)| (500)|
+-----------------------------------------------------+------+--------+--------+
|Purchase of own shares | 13 | (490)| (2,489)|
+-----------------------------------------------------+------+--------+--------+
|Loan to joint venture | 7 | (1,750)| -|
+-----------------------------------------------------+------+--------+--------+
|Net cash used in investing activities | |(33,595)|(13,023)|
+-----------------------------------------------------+------+--------+--------+
|Financing activities | | |
+------------------------------------------------------------+--------+--------+
|Repayments of obligations under finance leases | (8)| (61)|
+-----------------------------------------------------+------+--------+--------+
|Dividends paid | 4 |(12,856)|(11,077)|
+-----------------------------------------------------+------+--------+--------+
|Receipt of short-term borrowings | 11 | 6,000| -|
+-----------------------------------------------------++-----+--------+--------+
|Net cash used in financing activities | | (6,864)|(11,138)|
+------------------------------------------------------+-----+--------+--------+
|Net (decrease)/increase in cash and cash equivalents |(15,473)| 8,458|
+------------------------------------------------------------+--------+--------+
|Cash and cash equivalents at beginning of year | 36,345| 27,727|
+------------------------------------------------------------+--------+--------+
|Effect of foreign exchange rate changes | (103)| 160|
+------------------------------------------------------------+--------+--------+
|Cash and cash equivalents at end of year | 20,769| 36,345|
+------------------------------------------------------------+--------+--------+
NOTES TO THE FINANCIAL INFORMATION
1. Accounting policies
These financial statements have been prepared on an historical cost basis and on
the basis of the policies set out below.
Basis of preparation
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 due course.
The financial information set out above does not constitute the company's
statutory accounts for the years ended 28 March 2010 or 29 March 2009, but is
derived from those accounts. Statutory accounts for 2009 have been delivered to
the Registrar of Companies and those for 2010 will be delivered following the
company's annual general meeting. The auditors have reported on those accounts;
their reports were unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain statements under
s498(2) or (3) Companies Act 2006 or equivalent preceding legislation.
The financial information complies with the recognition and measurement criteria
of IFRS, and with the accounting policies of the group which were set out on
pages 32 to 34 of the 2009 annual report and accounts. No subsequent material
changes have been made to the group's accounting policies.
The directors are satisfied that the group has adequate resources to continue in
operational existence for the foreseeable future, a period of not less than 12
months from the date of this report.
The adoption of IFRS 8 Operating Segments has resulted in the segmental
disclosures previously required by IAS 14 Segment Reporting being replaced by
those required under IFRS 8. The segments identified in accordance with IFRS 8
have not been changed from those previously identified as business segments
under IAS 14.
The adoption of the revision to IAS 1 Presentation of Financial Statements has
resulted in the consolidated statement of changes in equity being presented as a
primary statement (previously disclosed as a note titled Reconciliation of
changes in equity) and disclosure of the tax impact of individual items in the
consolidated statement of comprehensive income. In addition, the group has
elected to continue to present a separate income statement and statement of
comprehensive income.
2. Segmental reporting, net revenue analysis and cost of sales
(i) Segmental information
PayPoint is a service provider for consumer payment transactions (payments and
receipts) through various distribution channels, involving the processing of
high volume transactions, the management of retailers and clients, the
settlement of funds (collection and transmission) and transmission of data in a
secure environment, by the application of technology.
The application of technology is directed on a group basis from the group's
executive team (consisting of the Chief Executive Officer, Finance Director,
Business Development Director and Chief Information Officer) to develop products
across the business, prioritised on an economic value basis (generally by
product), rather than on a subsidiary by subsidiary basis. As the business has
high fixed operating costs, the company regards the analysis of net revenue as
the most reliable indication of contribution on a product by product basis and
net revenue analysis is shown in the operating and financial review.
Whilst the group has a number of different products, these do not meet the
definition of different segments under IFRS 8 and, therefore, the group has only
one reportable class of business, being a payment service provider for consumer
payment transactions.
(ii) Reconciliation of revenue to net revenue,
analysis of cost of sales
Revenue comprises the value of sales (excluding VAT) of services in the normal
course of business and includes amounts billed to clients to be passed on to
retail agents as commission payable, the sales value to retailers of mobile
top-ups and SIM cards where PayPoint acts as principal and, for the bureau sales
of PayPoint.net, it includes external processing charges which are amounts
billed to merchants that are passed on to the sponsoring bank.
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; the cost of mobile top-ups where PayPoint is the principal in the supply
chain; and acquiring bank charges.
Net revenue
+---------------------------------------------------+----------+----------+
| | Year | Year |
| | ended | ended |
| | 28 March | 29 March |
| | 2010 | 2009 |
| | £000 | £000 |
+---------------------------------------------------+----------+----------+
| Revenue - transaction processing | 195,008 | 222,693 |
+---------------------------------------------------+----------+----------+
| - rental income from ATMs | 1,595 | 1,658 |
+---------------------------------------------------+----------+----------+
| | 196,603 | 224,351 |
+---------------------------------------------------+----------+----------+
| less: | | |
+---------------------------------------------------+----------+----------+
| Commission payable to retail agents | (73,178) | (83,891) |
+---------------------------------------------------+----------+----------+
| Cost of mobile top-ups and SIM cards as principal | (43,520) | (59,317) |
+---------------------------------------------------+----------+----------+
| Acquiring bank charges | (2,499) | (3,745) |
+---------------------------------------------------+----------+----------+
| Net revenue | 77,406 | 77,398 |
+---------------------------------------------------+----------+----------+
2. Segmental reporting, net revenue analysis and cost of sales continued
Cost of sales
+---------------------------------------------------+----------+----------+
| | Year | Year |
| | ended | ended |
| | 28 March | 29 March |
| | 2010 | 2009 |
| | £000 | £000 |
+---------------------------------------------------+----------+----------+
| Cost of sales | | |
+---------------------------------------------------+----------+----------+
| Commission payable to retail agents | 73,178 | 83,891 |
+---------------------------------------------------+----------+----------+
| Cost of mobile top-ups and SIM cards as principal | 43,520 | 59,317 |
+---------------------------------------------------+----------+----------+
| Acquiring bank charges | 2,499 | 3,745 |
+---------------------------------------------------+----------+----------+
| Depreciation and amortisation | 4,820 | 5,698 |
+---------------------------------------------------+----------+----------+
| Other | 9,093 | 7,845 |
+---------------------------------------------------+----------+----------+
| Total cost of sales | 133,110 | 160,496 |
+---------------------------------------------------+----------+----------+
Geographical information
+---------------+----------+----------+
| | Year | Year |
| | ended | ended |
| | 28 March | 29 March |
| | 2010 | 2009 |
| | £000 | £000 |
+---------------+----------+----------+
| Revenue | | |
+---------------+----------+----------+
| UK | 147,658 | 159,290 |
+---------------+----------+----------+
| Ireland | 24,476 | 29,579 |
+---------------+----------+----------+
| Romania | 24,386 | 35,482 |
+---------------+----------+----------+
| North America | 83 | - |
+---------------+----------+----------+
| Total | 196,603 | 224,351 |
+---------------+----------+----------+
+--------------------+----------+----------+
| | Year | Year |
| | ended | ended |
| | 28 March | 29 March |
| | 2010 | 2009 |
| | £000 | £000 |
+--------------------+----------+----------+
| Non-current assets | | |
+--------------------+----------+----------+
| UK | 73,290 | 45,423 |
+--------------------+----------+----------+
| Ireland | 14 | 61 |
+--------------------+----------+----------+
| Romania | 1,422 | 1,958 |
+--------------------+----------+----------+
| North America | 211 | - |
+--------------------+----------+----------+
| Total | 74,937 | 47,442 |
+--------------------+----------+----------+
3. Tax
+------------------------------------------------------------+--------+--------+
| | Year| Year|
| | ended| ended|
| |28 March|29 March|
| | 2010| 2009|
| | £000| £000|
+------------------------------------------------------------+--------+--------+
|Current tax | | |
+------------------------------------------------------------+--------+--------+
|Charge for current year | 10,178| 10,503|
+------------------------------------------------------------+--------+--------+
|Adjustment in respect of prior years | 394| (148)|
+------------------------------------------------------------+--------+--------+
|Current tax charge | 10,572| 10,355|
+------------------------------------------------------------+--------+--------+
|Deferred tax | | |
+------------------------------------------------------------+--------+--------+
|Credit for current year | (110)| (94)|
+------------------------------------------------------------+--------+--------+
|Adjustment in respect of prior years | 51| 557|
+------------------------------------------------------------+--------+--------+
|Deferred tax (credit)/charge | (59)| 463|
+------------------------------------------------------------+--------+--------+
|Total income tax | | |
+------------------------------------------------------------+--------+--------+
|Income tax charge | 10,513| 10,818|
+------------------------------------------------------------+--------+--------+
|The income tax charge is based on the United Kingdom | | |
|statutory rate of corporation tax for the year of 28% (2009:| | |
|28%). | | |
+------------------------------------------------------------+--------+--------+
|The charge for the year can be reconciled to the profit | | |
|before tax as set out in the consolidated income statement | | |
+------------------------------------------------------------+--------+--------+
|Profit before tax | 32,645| 34,602|
+------------------------------------------------------------+--------+--------+
|Tax at the UK Corporation tax rate of 28% (2009: 28%) | 9,141| |
| | | 9,689|
+------------------------------------------------------------+--------+--------+
|Tax effects of: | | |
+------------------------------------------------------------+--------+--------+
|Losses in countries where the tax rate is different to the | 304| Â |
|UK | |313 |
+------------------------------------------------------------+--------+--------+
|(Non-taxable income) / disallowable expenses | (6)| 54|
+------------------------------------------------------------+--------+--------+
|Utilisation of tax losses not previously recognised | -|(379) |
+------------------------------------------------------------+--------+--------+
|Losses in companies where a deferred tax asset is not | 408|339 |
|recognised | | |
+------------------------------------------------------------+--------+--------+
|Adjustments in respect of prior years | 445|409 |
+------------------------------------------------------------+--------+--------+
|Deferred tax impact of share based payments | 221| 393|
+------------------------------------------------------------+--------+--------+
|Actual amount of tax charge | 10,513| 10,818|
+------------------------------------------------------------+--------+--------+
4. Dividends on equity shares
+------------------------------------------------------------+--------+--------+
| | Year| Year|
| | ended| ended|
| |28 March|29 March|
| | 2010| 2009|
| | £000| £000|
+------------------------------------------------------------+--------+--------+
|Equity dividends on ordinary shares: | | |
+------------------------------------------------------------+--------+--------+
|Interim dividend paid of 7.4p per share (2009: 6.0p) | 5,008| 4,054|
+------------------------------------------------------------+--------+--------+
|Proposed final dividend of 14.4p per share (2009: paid | 9,756| 7,840|
|11.6p per share) | | |
+------------------------------------------------------------+--------+--------+
|Total dividends paid and recommended 21.8p per share (2009: | 14,764| 11,894|
|17.6p per share) | | |
+------------------------------------------------------------+--------+--------+
|Amounts distributed to equity holders in the year: | | |
+------------------------------------------------------------+--------+--------+
|Final dividend for the prior year | 7,848| 7,023|
+------------------------------------------------------------+--------+--------+
|Interim dividend for the current year | 5,008| 4,054|
+------------------------------------------------------------+--------+--------+
| | 12,856| 11,077|
+------------------------------------------------------------+--------+--------+
The proposed final dividend is subject to approval by shareholders at the annual
general meeting and has not been included as a liability in these financial
statements
5. Earnings per share
Basic earnings per share
Basic and diluted earnings per share are calculated on the following profits and
number of shares.
+------------------------------------------------------------+--------+--------+
| | Year| Year|
| | ended| ended|
| |28 March|29 March|
| | 2010| 2009|
| | £000| £000|
+------------------------------------------------------------+--------+--------+
|Profit for basic and diluted earnings per share is the net | 22,132| 23,784|
|profit attributable to equity holders of the parent | | |
+------------------------------------------------------------+--------+--------+
+--------------------------------------------------+----------------+----------+
| | 28 March| 29 March|
| | 2010| 2009|
| |Number of shares| Number of|
| | | shares|
+--------------------------------------------------+----------------+----------+
|Weighted average number of ordinary shares in | 67,170,830|66,754,486|
|issue (for basic earnings per share) | | |
+--------------------------------------------------+----------------+----------+
|Potential dilutive ordinary shares: | | |
+--------------------------------------------------+----------------+----------+
|Long-term incentive plan | 427,415|515,410 |
+--------------------------------------------------+----------------+----------+
|Deferred share bonus | 133,313| 111,828|
+--------------------------------------------------+----------------+----------+
|Diluted basis | 67,731,558|67,381,724|
+--------------------------------------------------+----------------+----------+
6. Goodwill
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 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 cash generating units. The growth rates are
based on industry growth forecasts. Changes in selling prices and direct costs
are based on past experience and expectation 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 to
perpetuity. 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.
+--------------------------------------------------------+--------+
| | Total |
| | £000 |
+--------------------------------------------------------+--------+
| Cost | |
+--------------------------------------------------------+--------+
| At 29 March 2009 | 27,628 |
+--------------------------------------------------------+--------+
| Recognised on acquisition of subsidiaries (see note 9) | 29,168 |
+--------------------------------------------------------+--------+
| Exchange rate adjustment | 76 |
+--------------------------------------------------------+--------+
| At 28 March 2010 | 56,872 |
+--------------------------------------------------------+--------+
| Accumulated impairment losses | |
| Accumulated impairment losses | |
+--------------------------------------------------------+--------+
| At 29 March 2009 | - |
+--------------------------------------------------------+--------+
| Impairment losses for the year | - |
| Impairment losses for the year | |
+--------------------------------------------------------+--------+
| At 28 March 2010 | - |
+--------------------------------------------------------+--------+
| Carrying amount | |
| Carrying amount | |
+--------------------------------------------------------+--------+
| At 28 March 2010 | 56,872 |
+--------------------------------------------------------+--------+
| At 29 March 2009 | 27,628 |
+--------------------------------------------------------+--------+
+--------------------------------+--------+
| | Total |
| | £000 |
+--------------------------------+--------+
| Cost | |
+--------------------------------+--------+
| At 31 March 2008 | 27,428 |
+--------------------------------+--------+
| Exchange rate adjustment | 200 |
+--------------------------------+--------+
| At 29 March 2009 | 27,628 |
+--------------------------------+--------+
| Accumulated impairment losses | |
| | |
| Accumulated impairment losses | |
+--------------------------------+--------+
| At 31 March 2008 | - |
+--------------------------------+--------+
| Impairment losses for the year | |
| | - |
| Impairment losses for the year | |
+--------------------------------+--------+
| At 29 March 2009 | - |
+--------------------------------+--------+
| Carrying amount | |
| | |
| Carrying amount | |
+--------------------------------+--------+
| At 29 March 2009 | 27,628 |
+--------------------------------+--------+
| At 30 March 2008 | 27,428 |
+--------------------------------+--------+
6. Goodwill continued
Goodwill arising on acquisition:
+------------------+----------+----------+
| | 28 March | 29 March |
| | 2010 | 2009 |
| | £000 | £000 |
+------------------+----------+----------+
| PayPoint.net | 18,207 | 18,207 |
+------------------+----------+----------+
| PayPoint Romania | 9,497 | 9,421 |
+------------------+----------+----------+
| PayByPhone | 29,168 | - |
+------------------+----------+----------+
| Total | 56,872 | 27,628 |
+------------------+----------+----------+
7. Investment in joint venture
On 5 February 2009, PayPoint entered a 50:50 joint venture with Home Delivery
Network. The joint venture company, Drop and Collect Limited, trades as
Collect+. PayPoint subscribed to £500,000 of ordinary shares in the company. The
joint venture company has the same accounting reference date as PayPoint plc.
+------------------------------------------------------------+--------+--------+
|PayPoint's share of aggregated amounts relating to joint |28 March|29 March|
|ventures | 2010| 2009|
| | £000| £000|
+------------------------------------------------------------+--------+--------+
|Total assets | 545| 406|
+------------------------------------------------------------+--------+--------+
|Total liabilities | (1,969)| (229)|
+------------------------------------------------------------+--------+--------+
|Share of net assets | (1,424)| 177|
+------------------------------------------------------------+--------+--------+
|Loan to joint venture | 1,750| -|
+------------------------------------------------------------+--------+--------+
|Investment in joint venture | 326| 177|
+------------------------------------------------------------+--------+--------+
+---------------+---------------+---------------+
| | Year | Year ended |
| | ended | 29 March 2009 |
| | 28 March 2010 | £000 |
| | £000 | |
+---------------+---------------+---------------+
| Revenues | 205 | 1 |
+---------------+---------------+---------------+
| Loss for year | (1,601) | (323) |
+---------------+---------------+---------------+
8. Deferred tax asset
+-----------------------+--------+--------------------+---------------+--------+
| | | | | |
| | | | | |
| |29 March|Credit / (charge) to| |28 March|
| | 2009| income statement|Debit to equity| 2010|
| | £000| £000| £000| £000|
+-----------------------+--------+--------------------+---------------+--------+
|Tax depreciation | 1,137| 183| -| 1,320|
+-----------------------+--------+--------------------+---------------+--------+
|Share based payments | 421| (162)| (20)| 239|
+-----------------------+--------+--------------------+---------------+--------+
|Tax losses | 36| (36)| -| -|
+-----------------------+--------+--------------------+---------------+--------+
|Intangibles | (517)| 125| -|(392) |
+-----------------------+--------+--------------------+---------------+--------+
|Short term temporary | 51| (51)| -| -|
|differences | | | | |
+-----------------------+--------+--------------------+---------------+--------+
|Total | 1,128| 59| (20)| 1,167|
+-----------------------+--------+--------------------+---------------+--------+
+-----------------------+--------+-------------------+----------------+--------+
| | | | | |
| | | | | |
| |31 March| Credit / (charge)| |29 March|
| | 2008|to income statement|Credit to equity| 2009|
| | £000| £000| £000| £000|
+-----------------------+--------+-------------------+----------------+--------+
|Tax depreciation | 620| 517| -| 1,137|
+-----------------------+--------+-------------------+----------------+--------+
|Share based payments | 795| (394)| 20| 421|
+-----------------------+--------+-------------------+----------------+--------+
|Tax losses | 129| (93)| -| 36|
+-----------------------+--------+-------------------+----------------+--------+
|Intangibles | -| (517)| -|(517) |
+-----------------------+--------+-------------------+----------------+--------+
|Short term temporary | 27| 24| -| 51|
|differences | | | | |
+-----------------------+--------+-------------------+----------------+--------+
|Total | 1,571| (463)| 20| 1,128|
+-----------------------+--------+-------------------+----------------+--------+
At the balance sheet date:
A deferred tax asset of £1.2 million (2009: £1.1 million) is recognised on the
basis that there will be sufficient future taxable profits against which the
deferred tax asset can be recovered, based on management forecasts.
At the balance sheet date, the group has unused tax losses of £5.1 million
(2009: £2.5 million) available for offset against future profits for which no
deferred tax asset is recognised. Included in unrecognised tax losses are losses
of £2.0 million that will expire within three to four years and £2.6 million
that will expire within four to seven years. Other losses may be carried forward
indefinitely.
No deferred tax liability has been recognised in respect of temporary
differences associated with investments in subsidiaries because the group is in
a position to control the timing of the reversal of the temporary differences
and it is probable that such differences will not reverse in the foreseeable
future. The aggregate amount of these differences is not material at the balance
sheet date.
9. Acquisition of subsidiary
On 9th March, 2010 the group acquired 100 per cent of the issued share capital
of Verrus Mobile Technologies Inc and Verrus UK Limited (together PayByPhone)
for cash consideration of £29 million with the potential for a further £4
million dependent on financial results until March 2013.
These transactions have been accounted for by the purchase method of accounting.
+--------------------------------------------------------+----------+----------+
| |Book value|Fair value|
| | £000| £000|
+--------------------------------------------------------+----------+----------+
|Net assets acquired | | |
+--------------------------------------------------------+----------+----------+
|Property plant and equipment | 322| 319|
+--------------------------------------------------------+----------+----------+
|Trade and other receivables | 1,170|1,170 |
+--------------------------------------------------------+----------+----------+
|Cash and cash equivalents | 596|596 |
+--------------------------------------------------------+----------+----------+
|Trade and other payables | (1,127)|(1,127) |
+--------------------------------------------------------+----------+----------+
|Non-current liabilities | (128)| (128)|
+--------------------------------------------------------+----------+----------+
| | 833| 830|
+--------------------------------------------------------+----------+----------+
|Goodwill | | 29,168|
+--------------------------------------------------------+----------+----------+
|Total consideration | | 29,998|
+--------------------------------------------------------+----------+----------+
|Satisfied by: | | |
+--------------------------------------------------------+----------+----------+
|Cash | | 28,577|
+--------------------------------------------------------+----------+----------+
|Liability (to Verrus UK Limited) assumed for share | | 460|
|option exercise | | |
+--------------------------------------------------------+----------+----------+
|Directly attributable costs | | 961|
+--------------------------------------------------------+----------+----------+
| | | 29,998|
+--------------------------------------------------------+----------+----------+
|Net cash outflow arising on acquisition | | |
+--------------------------------------------------------+----------+----------+
|Cash consideration | | 29,538|
+--------------------------------------------------------+----------+----------+
|Cash and cash equivalents acquired | | (596)|
+--------------------------------------------------------+----------+----------+
| | | 28,942|
+--------------------------------------------------------+----------+----------+
The goodwill of £29.2 million has arisen primarily from the international
opportunity to compete successfully for substantial new parking contracts, based
on the demonstrable success of the business in offering such services to
existing clients in the UK, North America and France.
PayByPhone contributed £283,000 to revenue and a loss of £20,000 to profit
before tax for the period between the date of acquisition and the balance sheet
date.
If the acquisition of PayByPhone had been completed on the first day of the
financial year, it would have contributed £4.7 million to revenue and a loss of
£0.3 million attributable to equity holders of the parent.
In May 2008, the company paid £2,108,000, the deferred consideration due for the
acquisition of PayStore SRL, which it had acquired on 15 May 2007. The total
consideration paid was £10,242,000, of which £8,143,000 was paid in 2007.
10. Cash and cash equivalents
Included within group cash and cash equivalents is £6,818,000 (2009: £7,547,000)
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 in the UK and
therefore individual accounts can be overdrawn without penalties being incurred
so long as the overall position is in credit. At 28 March 2010, the group's cash
was £20,769,000 (2009: £36,345,000) in credit.
11. Short-term borrowings
+-----------+---------------------+
+-----------+----------+----------+
| | 28 March | 29 March |
| | 2010 | 2009 |
| | £000 | £000 |
+-----------+----------+----------+
| Bank loan | 6,000 | - |
+-----------+----------+----------+
During the year £6 million of the £35 million loan facility was drawn down to
part fund the purchase of PayByPhone.
12. Equity
+------------------------------------------------------------+--------+--------+
| | 2010| 2009|
| | £000| £000|
+------------------------------------------------------------+--------+--------+
|Authorised share capital | |
+------------------------------------------------------------+--------+--------+
|4,365,352,200 ordinary shares of 1/3p each (2009 | 14,551| 14,551|
|4,365,352,200: ordinary shares of 1/3p each) | | |
+------------------------------------------------------------+--------+--------+
| | 14,551| 14,551|
+------------------------------------------------------------+--------+--------+
|Called up, allotted and fully | |
|paid share capital | |
+------------------------------------------------------------+--------+--------+
|67,754,202 ordinary shares of 1/3p each (2009: 67,723,820 | 226| 226|
|ordinary shares of 1/3p each) | | |
+------------------------------------------------------------+--------+--------+
| | 226| 226|
+------------------------------------------------------------+--------+--------+
|Called up share capital | |
+------------------------------------------------------------+--------+--------+
|At start of year | 226| 226|
+------------------------------------------------------------+--------+--------+
|At end of year | 226| 226|
+------------------------------------------------------------+--------+--------+
|Investment in own shares | |
+------------------------------------------------------------+--------+--------+
|At start of year | (926)| (935)|
+------------------------------------------------------------+--------+--------+
|Acquired in year (note 13) | (490)| (2,489)|
+------------------------------------------------------------+--------+--------+
|Used on share scheme vesting (note 13) | 1,046| 2,498|
+------------------------------------------------------------+--------+--------+
|At end of year | (370)| (926)|
+------------------------------------------------------------+--------+--------+
|Share premium | | |
+------------------------------------------------------------+--------+--------+
|At start of year | 25| -|
+------------------------------------------------------------+--------+--------+
|Arising on issue of shares | -| 25|
+------------------------------------------------------------+--------+--------+
|At end of year | 25| 25|
+------------------------------------------------------------+--------+--------+
|Share based payment reserve | |
+------------------------------------------------------------+--------+--------+
|At start of year | 2,489| 2,281|
+------------------------------------------------------------+--------+--------+
|Additions in year | 942|759 |
+------------------------------------------------------------+--------+--------+
|Released in year | (761)| (764)|
+------------------------------------------------------------+--------+--------+
|Current tax on awards | 34| 515|
+------------------------------------------------------------+--------+--------+
|Other adjustments | (20)| (302)|
+------------------------------------------------------------+--------+--------+
|At end of year | 2,684| 2,489|
+------------------------------------------------------------+--------+--------+
|Translation reserve | |
+------------------------------------------------------------+--------+--------+
|At start of year | 508| 318|
+------------------------------------------------------------+--------+--------+
|Movement during year | 35| 190|
+------------------------------------------------------------+--------+--------+
|At end of year | 543| 508|
+------------------------------------------------------------+--------+--------+
|Retained earnings | | |
+------------------------------------------------------------+--------+--------+
|At start of year | 58,645| 47,697|
+------------------------------------------------------------+--------+--------+
|Profit for year | 22,132|23,784 |
+------------------------------------------------------------+--------+--------+
|Dividends paid |(12,856)|(11,077)|
+------------------------------------------------------------+--------+--------+
|Dividends received | -|- |
+------------------------------------------------------------+--------+--------+
|Adjustment on share scheme vesting (note 13) | (285)| (1,759)|
+------------------------------------------------------------+--------+--------+
|At end of year | 67,636| 58,645|
+------------------------------------------------------------+--------+--------+
13. Related party transactions
PayPoint has entered into a loan agreement with its 50:50 joint venture Drop and
Collect Limited (trading as Collect +) and during the year it has lent Drop and
Collect Limited £1,750,000.
The terms of the loan are:
* Interest payable annually at a rate of 3 months LIBOR.
* Repayable upon termination of the joint venture or upon demand by the
lender.
The company and its subsidiaries, in the ordinary course of business, enter into
various sales, purchase and service transactions with joint ventures and
associates and others in which the group has a material interest. These
transactions are under terms that are no less favourable than those arranged
with third parties. These transactions are not considered to be significant.
On 5 June 2009, PayPoint released the second tranche of its long term incentive
plan awards to the three executive directors and seven senior managers. PayPoint
Network Limited Employee Investment Trust (the Trust) acquired 23,701 ordinary
shares at 532.4 pence per share in the open market. 68,273 shares were then sold
by participating directors and managers to the Trust at 532.4 pence per share.
Accordingly, PayPoint has funded £490,000 (excluding deal costs) for the
purchase of its own shares. The difference of the cost of the shares used in
share scheme vesting over their fair value determined at the date of grant in
accordance with IFRS 2 of £285,000 has been charged to retained earnings.
In March 2008, PayPoint purchased shares in OB10, a company that specialises in
electronic invoicing. During the year, PayPoint subscribed for a further £30,000
of shares under a rights issue, resulting in a shareholding at 28 March 2010 of
1.04% (29 March 2009: 1.05%).
In the view of the directors, the aggregate cost of £405,000 represents the fair
value of the investment in the shares.
David Newlands, who is also Chairman of OB10, Dominic Taylor, George Earle, Eric
Anstee and Nick Wiles all hold shareholdings in OB10 as follows:
+------------------------------------------+----------+----------+
| Directors' shareholding in OB10 | Year | Year |
| | ended | ended |
| | 28 March | 29 March |
| | 2010 | 2009 |
| | £000 | £000 |
+------------------------------------------+----------+----------+
| | % | % |
+------------------------------------------+----------+----------+
| David Newlands | 4.73 | 4.73 |
+------------------------------------------+----------+----------+
| Dominic Taylor | 1.42 | 1.42 |
+------------------------------------------+----------+----------+
| George Earle | 0.42 | 0.42 |
+------------------------------------------+----------+----------+
| Nick Wiles (appointed 22nd October 2009) | 1.04 | 1.04 |
+------------------------------------------+----------+----------+
| Eric Anstee | 0.08 | 0.08 |
+------------------------------------------+----------+----------+
14. Notes to the cash flow statement
+--------------------------------------------------------+-----------------+
+--------------------------------------------------------+--------+--------+
| | Year| Year|
| | ended| ended|
| |28 March|29 March|
| | 2010| 2009|
| | £000| £000|
+--------------------------------------------------------+--------+--------+
|Operating profit | 34,072| 33,684|
+--------------------------------------------------------+--------+--------+
|Adjustments for: | | |
+--------------------------------------------------------+--------+--------+
|Depreciation of property, plant and equipment | 4,286| 4,907|
+--------------------------------------------------------+--------+--------+
|Amortisation of intangible assets | 534| 791|
+--------------------------------------------------------+--------+--------+
|Share based payment charges | 942| 759|
+--------------------------------------------------------+--------+--------+
|Operating cash flows before movements in working capital| 39,834| 40,141|
+--------------------------------------------------------+--------+--------+
|(Increase)/decrease in inventories | (373)| 155|
+--------------------------------------------------------+--------+--------+
|Decrease in receivables | 2,385| 6,178|
+--------------------------------------------------------+--------+--------+
|Decrease in payables | | |
+--------------------------------------------------------+--------+--------+
|- client cash | (729)| (454)|
+--------------------------------------------------------+--------+--------+
|- other | (2,386)| (5,433)|
|payables | | |
+--------------------------------------------------------+--------+--------+
|Cash generated by operations | 38,731| 40,587|
+--------------------------------------------------------+--------+--------+
|Corporation tax paid |(13,702)| (7,940)|
+--------------------------------------------------------+--------+--------+
|Interest and bank charges paid | (43)| (28)|
+--------------------------------------------------------+--------+--------+
|Net cash from operating activities | 24,986| 32,619|
+--------------------------------------------------------+--------+--------+
ABOUT PAYPOINT
PayPoint is a leading specialist payments company with operations in the UK,
Ireland, Romania, France, USA and Canada. We handle over £9.5 billion from over
550 million transactions annually for more than 6,000 clients and merchants.
PayPoint processes consumer payments across a wide variety of markets (energy
pre and post-payment, telecoms, housing, water, transport, e-commerce, parking
and gaming) through its retail networks, internet and mobile phone channels:
Retail networks
The PayPoint branded retail network in the UK numbers over 22,000 terminals
located in local shops (including Co-op, Spar, McColls, Costcutter, Sainsburys
Local, One Stop, Londis and thousands of independents) in all parts of the UK
and Ireland. Our terminals process energy meter prepayments, cash bill payments,
mobile phone top-ups, transport tickets, BBC TV licences and a wide variety of
other payment types for most leading utilities and many telecoms and consumer
service companies.
We also supply added value services to our retailers to improve the yield from
our network. We have recently successfully launched a consumer parcel drop off
and collection service using PayPoint's retail network through Collect+ a joint
venture with Home Delivery Network. This service is already available in 3,400
of our convenience retailers. Clients include Littlewoods, Woolworths, Very and
Great Universal. In addition, in the UK we have over 2,300 LINK branded ATMs,
mainly in the same sites as our terminals.
In Romania, the branded retail network numbers over 4,800 terminals located in
local shops across Romania and is expanding. Our terminals process cash bill
payments for utilities and mobile phone top-ups. In addition, we have a number
of mobile top-up only, unbranded sites. In Ireland, we have over 500 outlets in
shops and Credit Unions processing mobile top-ups and bill payments.
Internet
PayPoint.net is an internet payment service provider linking into all major UK
acquiring banks to deliver secure online credit and debit card payments for over
5,600 web merchants, including PKR, Bettson, Moneysupermarket.com, Severn Trent
Water, Ann Summers and British Gas Home Vend. We offer a comprehensive set of
products ranging from a transaction gateway through to a bureau service, in
which we take the merchant credit risk and manage settlement for the merchants.
We offer real time reporting for merchant transactions and Fraudguard, an
advanced service to mitigate the risk of fraud for card not present
transactions.
PayByPhone
We recently acquired PayByPhone (Verrus Mobile Technologies Inc and Verrus UK
Limited). PayByPhone is a leading international provider of services to parking
authorities allowing consumers to use their mobile phones to pay for their
parking by credit or debit card. It has contracts in the UK, France, Canada and
the USA.
PayPoint is widely recognised for its leadership in prepayment systems, smart
technology and consumer service. Our high quality services are backed by a 24/7
operations centre with dual site processing for business continuity.
To give competitive differentiation, we aim to meet our clients' payment needs
not just through a wide spectrum of payments but also with products that span
payment channels. For example, PayCash enables cash payment for internet
transactions at PayPoint retailers and our new home vending solutions allow
customers to pay across the internet as well as through our retail network.
27 May 2010
[HUG#1419048]
Preliminary Results :
http://hugin.info/137093/R/1419048/369240.pdf
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