Payzone plc (PAYZ)

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Friday 16 January, 2009

Payzone plc

Final Results

RNS Number : 7482L

Payzone plc

16 January 2009

Payzone plc ('Payzone', the 'Group' or the 'Company')

Preliminary results for the year ended 30 September 2008

Payzone announces the Company's first preliminary results for the year ended 30 September 2008.

KEY POINTS

Revenues of €1,081 million
EBITDA (before special items) €41.6million
Basic and diluted loss per share of € 67c
€48.3 million raised by the issue of new equity and convertible preference shares
New banking arrangements in place
Disposal of French, Italian and Spanish businesses agreed
Synergies achieved through the consolidation of UK and German operations

Payzone CEO, Mike Maloney, said:

'Payzone has now found its feet, after what was a difficult period following the bringing together of the alphyra and Cardpoint businesses. The Company has successfully consolidated its operations in the UK and Germany and we have rectified the operational inefficiencies in our UK ATM business.

'The economic conditions are challenging and we anticipate that this will remain the case throughout the current financial period, limiting our visibility. However, I believe that our strategic focus of developing the markets we see as core to our growth, and exiting those that are not, will position us well for the future.'

Contacts

Payzone Tel: + 353 1 207 6000

Mike Maloney / Nigel Bell

Panmure Gordon (UK) Limited (NOMAD and Broker) Tel: +44 20 7459 3600

Hugh Morgan / Stuart Gledhill

Media Enquiries

Powerscourt Tel: +44 20 7250 1446

Paul Durman / Keith Brookbank

CHAIRMAN'S STATEMENT

Introduction

This is my first report on the full year results for Payzone plc and reflects the year ended 30 September 2008. The Payzone Group was formed on 5 December 2007 following the 'merger' of Cardpoint plc ('Cardpoint') and alphyra Holdings Limited ('alphyra').

Combining these two businesses has brought together two transaction-led operations, each amongst the leaders in their respective sub-sectors. Despite a difficult start with various supplier, integration and management issues, we believe that we are well advanced towards securing operational stability from which to take the Group forward.

Since the 'merger' we have restructured the Board and the operational management team, realised cost synergies through the consolidation of operational facilities in the UK and Germany, and continued the development of new products and services for distribution across the Group's network. The Group's financial position was enhanced by the issue of new ordinary and preference shares, along with an amended banking facility agreed in June 2008, to help underpin growth.

Since the 'merger' we have re-branded the services offered by the legacy alphyra business as 'Payzone' and the Cardpoint business as 'Cashzone'. The Payzone service involves the deployment and management across Europe of a terminal distribution network which processes a variety of electronic transaction services. The main products on the network include mobile phone top-up, utility top-up, bill payment solutions, electronic gift vouchers and Electronic Funds Transfer (EFT) processing. The Cashzone business deploys branded independent ATMs in the convenience sector in both the UK and Germany.

International Financial Reporting Standards

The results for the year to 30 September 2008 are presented under International Financial Reporting Standards ('IFRS') as required under the AIM Rules for Companies.

Under IFRS the 'merger' is accounted for as a reverse acquisition of the legacy alphyra Group by the Cardpoint Group. As Cardpoint has the power to govern the financial and operating policies of Payzone, it is deemed to be the 'acquirer' of alphyra and Payzone. Therefore the results reported reflect twelve months trading from the Cardpoint businesses and include results from the alphyra businesses since 5 December 2007. Payzone has elected to present its financial statements in euro.

The balance sheet presented is the consolidated position of Payzone, Cardpoint and alphyra as at 30 September 2008.

The comparative figures presented are those of Cardpoint on a stand-alone basis and where necessary relevant adjustments to IFRS have been made. These predominately relate to goodwill and financial instruments. Note 41 of the financial statements provide a reconciliation between the previously published Cardpoint plc UK GAAP figures and the IFRS comparatives. All comparative figures have been presented in euro.

Trading

Total revenue for the period, including revenue from the alphyra business from 5 December 2007, was €1,081 million. Revenue for the same period in 2007 was €131 million (which related to the Cardpoint ATM business only).

There have been a number of operational and market issues which have adversely affected our UK business in the year to 30 September 2008. The operational issues largely related to inefficiencies which led to a shortfall in available cash within some of the ATMs. These cash availability issues were largely resolved by June 2008. The ATM market also experienced new competition in the period because of an increase in the number of 'non-surcharging' ATMs in high footfall locations. Since mid 2007 changes in UK legislation meant that surcharging ATM's have also been required to advertise the fact that a fee will be charged for cash withdrawals and this has impacted transaction volumes within our surcharging units. There have been no material operational or market issues with our German ATM business.

Trading and profitability - continued

Since the 'merger' the 'Payzone' (legacy Alphyra) business has performed well despite increased competitive pressures in our key markets (Ireland and the UK). Our Northern European businesses demonstrated growth in the period, in particular in The Netherlands and Sweden where both mobile phone top-up and EFT revenues continue to grow. Revenues from our German business declined due to a number of one-off items recorded in 2007 which were not replicated in 2008. Our Southern European businesses (Romania and Greece) continue to grow as the markets expand and mature.

Group EBITDA before special items increased 21% to €41.6 million, including €28.1 million being generated by the Payzone (legacy Alphyra) businesses in the period from 5 December. Included within EBITDA is an IFRS 2 share option charge of €3.8 million all of which relates to the acceleration of the vesting period for certain Cardpoint employees as a result of the reverse acquisition of alphyra.

A goodwill impairment review as at 31 March 2008 indicated an impairment of €143 million, and a charge was made in the interim accounts to write down the carrying value of goodwill to its recoverable value. A further goodwill impairment review was carried out as at 30 September 2008. The carrying value of goodwill was calculated to exceed its recoverable amount by €6.1 million, and this amount was written off as an additional impairment charge in the financial year. The recoverable amount of goodwill was calculated based on its value-in-use which employs a discounted cashflow model.

Losses before tax for the year were €28.4 million before impairment charges of €149.2 million and other special administrative items of €30.5 million.

Finance costs include all debt interest costs for the year. Special finance costs include costs of €2.8 million in relation to the termination of Cardpoint's banking facilities (following the merger).

Since 5 December 2007 the Group's UK and German operations have benefited from significant consolidation in operations. The Cardpoint UK operation, previously based in Blackpool, has been combined with alphyra's UK operating base in Northwich, Manchester. Similarly, we have consolidated the German Cardpoint and Payzone businesses, formerly based in Frankfurt and Trier respectively and the combined German business is now all located in Trier. As part of this restructuring Paul Saxton the Chief Operating Officer, and Philip Lanigan the Finance Director of Cardpoint, departed from the business. Of the €179.7 million administrative expenses - special items, €30.5 million relates to restructuring costs which were incurred in the period in relation to these consolidation activities.

The Payzone Group has performed well in a challenging and changing market and continues to be underpinned by merchant and operator contracts. Our terminal estate, which includes electronic point of sale (EPOS) and ATMs, totalled 191,000 at the end of September. Our terminals are located at a variety of convenience locations throughout the UK and Europe. In Ireland and the UK we continue to expand our product offerings through new product launches such as EFT, motorway tolling and prepaid utilities. In Northern Europe we are increasing our market share through product enhancements and new merchant contracts. Southern European growth is still largely driven by market share growth through terminal estate expansion.

Disposals

On 8 October 2008 we announced the disposal of our French, Italian and Spanish businesses for a total gross consideration of €20 million. This sales price was split into two portions of which €13.2 million was payable in cash and €6.5 million by way of assignment of financial guarantees. Inter-company balances of €4.2 million owed to Payzone were also written off as part of the transaction. The purchaser was LCom, a 100% subsidiary of Proximania, which is a publicly quoted French company specialising in airtime product distribution. The funds were partially used to set against the Company's debt which was reduced by 6 %.

The disposal of these Payzone subsidiaries fits with our strategy of concentrating focus in markets where Payzone has strong market presence as well as offering growth potential for new services.

We continue to regularly examine all subsidiaries to determine their strategic fit within the Payzone Group and to ensure that we allocate resources to the markets where we anticipate the most optimal returns.

Growth

Our strategy for shareholder value continues to be that of growing transaction volumes organically through improving the quality of deployment and offering a broader range of products within our existing distribution network. We continue to invest in our core businesses such as mobile phone top-ups and electronic payments that have demonstrated robust profitability and which can drive growth, enabling us to command a strong market position. Where subsidiaries do not exhibit these core growth characteristics we will consider exiting, as has been the case with our Spanish, French and Italian businesses. The Group will also continue to explore opportunities to expand the network into territories that offer the right market attributes.

Cashflow and borrowings

Payzone entered into a facility agreement on 5 December 2007 with the Royal Bank of Scotland for facilities totalling €332 million of which €290 million were drawn at 30 September 2008. This debt was used to refinance the existing debt within alphyra and Cardpoint.

Following the operational and market issues referred to above, the Company entered into discussions with its banking syndicate to increase the flexibility under its facility agreement through a resetting of covenants. The original facility agreement was amended to reflect the change to the Group's trading forecasts. These changes took place in June 2008 and have added margin to our term facilities.

On 21 February 2008 the Company completed a placement of 12,654,516 ordinary shares (approximately 4.2% of the issued share capital) at a price of 47.75 pence per share, raising €8 million before expenses. The shares were placed with existing shareholders, including Balderton Capital, and funds were used to fund short term working capital requirements and to promote support from key trading partners. The same shareholders that participated in the share placement also made available to the Company further funds in the form of a shareholder loan. This loan was partially drawn during April and May 2008.

On 16 June 2008 the Company completed the placing of 137,286,112 ordinary shares at a price of 20 pence per share, raising £27.5 million (€34.8 million). Payzone also raised €5.5 million from the issue of new Euro denominated Payzone Convertible Preference Shares at a price of €1.00 each. These funds were used to refinance the shareholder loan described above, meet working capital requirements and to fund restructuring activities.

Dividend

The directors do not recommend the payment of a dividend.

Management structure

Since 5 December 2007 the Board has reviewed the management structure of the Company and has made several changes to establish a more efficient and effective operational structure. These changes included the departure of John Nagle and John Williamson from their respective positions as Chief Executive Officer and Chief Finance Officer on 10 March 2008.

The former Chief Executive Officer and Chief Finance Officer made a legal claim against Payzone and the Board of Directors for wrongful dismissal. This claim was settled in the Employment Appeals Tribunal on 16 October 2008. The cost of this settlement had previously been provided for by the Company.

Bob Thian served as Chairman of Payzone until 14 April 2008 when he stepped down and was replaced by myself.

On 1 February 2008 Jerome Misso was appointed as a non-executive director to assist the Board with the various legal issues in relation to the departure of John Nagle and John Williamson. Jerome is a partner of Balderton Capital Limited, a significant shareholder in the Company. He retired from the Board on 14 April 2008.

Mike Maloney was appointed Chief Executive Officer on 11 April 2008 with Nigel Bell assuming the role of interim Chief Financial Officer on that date.

On 30 September 2008 Payzone's Chief Operating Officer, Tim Murphy, agreed to acquire the Group's Open Loop Gift business and he is expected to depart from the Group by 31 January 2009.

Outlook

We remain focused on maintaining the financial stability of the Company following a difficult start for the Payzone Group. The new management team has made a significant contribution to the stability of the Group through negotiating committed banking facilities and the introduction of new equity into the business. We acknowledge that, despite the improved trading and financial stability of the Group, there remain challenges in our key markets where the macro economic environment has continued to deteriorate. As yet we have limited visibility as to how the economic environment will affect our business in the coming year although some early indications show reductions in mobile phone top-up transaction volumes in Ireland and the UK. We have, consequently, initiated various activities including cost cutting, pricing changes and business rationalisation to mitigate potential downward pressures.

The financial statements presented have been prepared on a going concern basis which assumes the continued support of our banking syndicate as detailed in Note 1 to the Financial Statements, the directors are satisfied that the Group has in place the necessary conditions to allow the business to trade on a going concern basis.

We are grateful to our shareholders for supporting the Company during a difficult period and are especially grateful to our management and staff who have also shown great commitment and dedication throughout this year.

Peter Smyth

16 January 2009

Statement of directors' responsibilities

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Irish company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group and parent financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The financial statements are required by law to give a true and fair view of the state of affairs of the company and group and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:

select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state that the financial statements comply with IFRS as adopted by the European Union.
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business, in which case there should be supporting assumptions or qualifications as necessary.

The directors confirm that they have complied with the above requirements in preparing the financial statements.

The directors are responsible for keeping proper books of account that disclose with reasonable accuracy at any time the financial position of the company and group and to enable them to ensure that the financial statements comply with the Companies Acts, 1963 to 2006 and, as regards the group financial statements article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the group and the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the Company's website. Legislation in the Republic of Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Books and records

The directors believe that they have complied with the requirements of Section 202 of the Companies Act, 1990, with regard to books of account by employing accounting personnel with appropriate expertise and providing adequate resources to the financial function. The books of account of the Company are maintained at 4 Heather Road, Sandyford Industrial Estate, Dublin 18.

Auditors

The auditors, PricewaterhouseCoopers will continue in office in accordance with the provisions of Section 160(2) of the Companies Act, 1963.

On behalf of the Board

Peter Smyth

Mike Maloney

CONSOLIDATED INCOME STATEMENT

Year Ended 30 September 2008

	Notes	2008 €'000	2007 €'000

Continuing operations
Revenue	6	1,080,849	130,970
Cost of sales	7	(990,283)	(84,158)

Gross profit		90,566	46,812
Administrative expenses - excluding amortisation of intangible assets and special items		(73,378)	(33,177)
Administrative expenses - special items	9	(179,700)	(51,207)
Administrative expenses - amortisation of intangible assets		(15,227)	(966)
Administrative expenses		(268,305)	(85,350)

Operating loss	11	(177,739)	(38,538)

Finance income		1,384	396

Finance costs - excluding special items		(26,307)	(8,964)
Finance costs – special items		(4,286)	-
Finance costs	12	(30,593)	(8,964)

Share of losses of associate	18	(1,162)	-

Loss before taxation		(208,110)	(47,106)
Income tax credit/(expense)	13	2,186	(358)

Loss for the year from continuing operations		(205,924)	(47,464)

Profit attributable to minority interest	31	462	-
Attributable to equity holders of the parent		(206,386)	(47,464)
Basic and diluted loss per share (cent per share)	14	(67c)	(41c)

CONSOLIDATED BALANCE SHEET

As at 30 September 2008

Assets	Notes	2008 €'000	2007 €'000
Non-current assets
Property, plant and equipment	16	71,992	53,314
Goodwill and intangible assets	17	303,323	117,134
Derivative financial instrument and available for sale financial assets	19	697	304
Deferred tax asset	27	572	-
Total non-current assets		376,584	170,752

Current assets
Inventories	22	18,782	652
Trade and other receivables	21	91,636	7,822
Restricted cash	23	17,072	-
Cash and cash equivalents	32	43,348	12,440
Total current assets		170,838	20,914

Assets of disposal groups held for sale	29	30,044	-
Total assets		577,466	191,666

Current liabilities
Borrowings	25	(14,951)	(7,722)
Trade and other payables	24	(199,701)	(30,156)
Current tax liabilities		(1,267)	(353)
Provisions	28	(7,833)	-
Total current liabilities		(223,752)	(38,231)
Liabilities of disposal groups held for sale	29	(21,041)	-
		(244,793)	(38,231)
Non-current liabilities
Deferred tax liability	27	(16,914)	(1,143)
Borrowings	25	(278,462)	(109,768)
Provisions	28	(6,993)	(6,494)
Total non-current liabilities		(302,369)	(117,405)
Total liabilities		(547,162)	(155,636)
Net assets		30,304	36,030
Equity
Called up share capital	30	6,003	8,296
Share premium account	30	346,840	132,617
Other reserve	31	-	522
Reverse acquisition reserve	31	12,036	-
Hedging reserve	31	573	304
Translation reserve	31	(27,881)	(526)
Retained (losses)	31	(307,884)	(105,338)
		29,687	35,875
Minority interest	31	617	155
Total equity		30,304	36,030

COMPANY BALANCE SHEET

As at 30 September 2008

Assets	Notes	2008 €'000
Non-current assets
Investment in subsidiary undertakings	20	328,387
Derivative financial instrument	19	573
Total non-current assets		328,960

Current assets
Trade and other receivables	21	513
Cash and cash equivalents		17,039
Total current assets		17,552
Total assets		346,512

Current liabilities
Borrowings	25	(13,167)
Trade and other payables	24	(10,869)
Total current liabilities		(24,036)

Non-current liabilities
Borrowings	25	(276,784)
Total non-current liabilities		(276,784)
Total liabilities		(300,820)
Net assets		45,692

Equity
Called up share capital	30	6,003
Share premium account	30	346,840
Hedging reserve	31	573
Retained (losses)	31	(307,724)
Total equity		45,692

CONSOLIDATED CASH FLOW STATEMENT

Year Ended 30 September 2008

	Notes	2008 €'000	2007 €'000

Cash flow from operating activities
Cash generated from operations	33	9,937	17,985
Income tax paid		(738)	-
Interest paid		(26,315)	(9,124)
Net cash flow (used in)/from operating activities		(17,116)	8,861

Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired		10,982	(2,441)
Acquisition of property, plant and equipment		(16,771)	(15,554)
Acquisition of intangible assets		(4,320)	-
Funding of associate		(1,100)	-
Payments in relation to closure of business		-	(707)
Proceeds from sale of subsidiaries, net of cash disposed of		-	4,802
Proceeds from sale of property, plant and equipment		295	1,244
Interest received		1,384	396
Net cash flow (used in) investing activities		(9,530)	(12,260)

Cash flows from financing activities
Proceeds from issuance of ordinary shares		42,948	2,659
Proceeds from issuance of preference shares		5,323	-
Repayment of borrowings		(283,771)	(23,061)
Proceeds from borrowings		295,000	24,701
Net cash flow from financing activities		59,500	4,299

Net increase in cash and cash equivalents		32,854	900
Cash and cash equivalents at beginning of year		12,440	11,875
Exchange gains and losses on cash and cash equivalents		(1,042)	(335)

Cash and cash equivalents at end of year	32	44,252	12,440

COMPANY CASH FLOW STATEMENT

Period Ended 30 September 2008

	Notes	2008 €'000

Cash (outflow)/inflow from the operations	33	(14,441)
Income tax paid		(33)
Interest paid		(21,797)
Net cash flow from operating activities		(36,271)

Cash flows from investing activities
Payment of costs associated with acquisition of subsidiaries		(14,350)
Interest received		279
Net cash flow (used in) investing activities		(14,071)

Cash flows from financing activities
Proceeds from issuance of ordinary shares		42,948
Proceeds from issuance of preference shares		5,323
Provision of loans to subsidiaries		(264,409)
Repayment of borrowings		(11,481)
Proceeds from borrowings		295,000
Net cash flow from financing activities		67,381
Net increase in cash and cash equivalents		17,039
Cash and cash equivalents at beginning of period		-
Cash and cash equivalents at end of year		17,039

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

Year Ended 30 September 2008

	Note	2008 €'000	2007 €'000

Exchange differences on translating foreign operations		(27,355)	(526)
Cash flow hedges		269	(189)

Net (loss) recognised directly in equity		(27,086)	(715)
Loss for the year		(205,924)	(47,464)

Total recognised income and expense for the year		(233,010)	(48,179)

Attributable to:
Equity holders of the parent	31	(233,472)	(48,179)
Minority interest		462	-

Total recognised income and expense for the year		(233,010)	(48,179)

COMPANY STATEMENT OF RECOGNISED INCOME AND EXPENSE

Period Ended 30 September 2008

	Note	2008 €'000

Cash flow hedges	19	573
Net income recognised directly in equity		573
Loss for the period		(307,724)

Total recognised income and expense for the period attributable to equity shareholders		(307,151)

NOTES TO THE FINANCIAL STATEMENTS

1 Going concern

The financial statements have been prepared on a going concern basis. The validity of this assumption is dependent on achieving operating profitability by the Group for the years ended 30 September 2009 and 30 September 2010 and the continued support of the Group's bankers.

During the year ended 30 September 2008 the Group incurred a loss (after impairment charges) of €205,924,000 (2007: €47,464,000). At the year end the group has cash and cash equivalents of €43,348,000 (2007: €12,440,000) and has an unutilised revolving credit facility limit of €11 million.

The directors have reviewed the forecast trading results of the group for a period of three years from the date of approval of these financial statements. The directors recognise that there are significant external factors which could negatively impact on trading performance and cash flow generation during that period.

The business has seen and indeed anticipated in its planning, some softening in demand for prepaid mobile phone top ups in some of its markets. In the current economic climate this softening could accelerate. In addition the business has seen some tightening of credit from suppliers which it has been able to absorb. Further tightening of credit would put additional pressure on cash flow. The depreciation in the value of sterling has had an impact given that a large proportion of cash flow is generated in the UK.

However the directors believe that the Group operates robust business models across its divisions, which are strongly cash generative. Furthermore the directors are satisfied that management has already taken steps which they will continue to do to allow the group to achieve operating profitability notwithstanding the current economic climate. In addition the Group has further various mechanisms and opportunities to ensure that it can react to changes in the geographic territories in which it operates, these include:

Redeploying profit generating assets
Leveraging IT efficiencies across the Group
Further reducing variable costs

The directors are satisfied that in view of the Group's ongoing discussions and banking relationships, the expected trading and disposal program, along with the associated cash flow performance, that the Group should have the necessary resources to meet its current financial obligations. Accordingly, they believe it is appropriate for the financial statements to be prepared on a going concern basis.

2 General information

The Group's main activity is the deployment of a network of Payzone owned terminals and ATM machines.

The Company is a public limited liability company incorporated and domiciled in the Republic of Ireland. The address of its registered office is 4 Heather Road, Sandyford Industrial Estate, Dublin 18.

The Company has its primary listing on the AIM stock exchange in London.

Payzone plc was incorporated in September 2007. On 5 December 2007, it acquired the share capital of Cardpoint plc ('Cardpoint') and alphyra Holdings Limited ('alphyra'). Immediately prior to the acquisition Cardpoint plc had been listed on AIM in the United Kingdom and prepared its financial statements in accordance with accounting policies generally accepted in the United Kingdom (UK GAAP). alphyra was a privately owned company which prepared its financial statements in accordance with accounting policies generally accepted in Ireland (Irish GAAP).

The acquisition of the entire issued share capital of alphyra by Payzone plc represents a reorganisation of the alphyra group. The shareholders in alphyra exchanged their shares for 174,680,273 newly issued shares in Payzone. Payzone then became the ultimate legal parent in the group. The alphyra Group is deemed to control the financial and operating policies of Payzone plc and therefore this transaction represents a reverse acquisition of Payzone plc by the alphyra Group. This transaction was a 'common control' transaction and notwithstanding the new legal parent, this transaction has been accounted for using the principles of merger accounting and therefore did not result in the recognition of goodwill of fair value adjustments to the net identifiable assets of Payzone plc. Payzone was incorporated to effect this transaction and was a 'shell' company on 5 December 2007.

Immediately thereafter, in consideration for the issue to Cardpoint's shareholders of 115,867,928 ordinary shares, Payzone acquired the entire issued and to be issued share capital of Cardpoint. Payzone then became the ultimate legal parent of the combined Cardpoint and alphyra group. Notwithstanding the new legal parent, this transaction has been accounted for as a reverse acquisition. The financial statements are based on alphyra and Payzone having been acquired by Cardpoint, as Cardpoint controls alphyra and is deemed to have the power to govern the financial and operating policies of the entire group to obtain benefits from its activities.

The financial statements for the year ended 30 September 2008 include the separate financial statements of the legal parent, Payzone plc together with the consolidated financial statements of Payzone plc.

As Payzone plc was incorporated on 13 September 2007 the separate financial statements of Payzone plc cover the period from this date to 30 September 2008.

The consolidated financial statements are prepared on the basis of Cardpoint acquiring the revised alphyra group on the 5 December 2007. The comparatives for the purposes of the consolidated financial statements therefore represent the results and financial position of Cardpoint plc for the year ended 30 September 2007.

3 Basis of preparation

These financial statements of Payzone plc have been prepared in accordance with International Financial Reporting Standards (IFRSs) and their interpretations approved by the International Accounting Standards Board (IASB) as adopted by the European Union (EU) and those parts of the Companies Acts, 1963 to 2006 applicable to companies reporting under IFRS.

As described in note 41, the transition date for implementation of IFRS by the Group was 1 October 2006. Details of the adjustments recognised on transition to IFRS are provided in note 41.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, events or actions, actual results ultimately may differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 5.

The following provides a brief outline of the likely impact on future financial statements of relevant IFRS which are not yet effective and have not been early adopted in these financial statements:

IFRS 8 - Operating segments (effective for accounting periods beginning on or after 1 January 2009). IFRS 8 sets out the requirements for disclosure of financial and descriptive information about an entity's operating segments and also about the entity's products and services, the geographical areas in which it operates, and its major customers. The IFRS replaces IAS 14 Segment Reporting. The expected impact is still being assessed in detail by management, but it appears likely that the manner, in which the segments are reported, will change in a manner that is consistent with the internal reporting provided to the chief operating decision-maker. The Group will apply IFRS 8 from 1 October 2009.

IAS 23 - (Amendment), Borrowing Costs (effective for annual periods beginning on or after 1 January 2009). The Amendment to IAS 23 requires that an entity shall capitalise borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The previous version of IAS 23 allowed an option as to whether this expenditure was capitalised or directly expensed. The group will apply IAS 23 (Amendment) from 1 October 2009 but does not expect this amendment to have a major impact on the group.

IFRIC 12 Service Concession Arrangements (effective for annual periods beginning on or after 1 January 2008). Service concessions are arrangements whereby a government or other public sector entity grants contracts for the supply of public services - such as roads, airports, prisons and energy and water supply and distribution facilities - to private sector operators. As the group is not a service concession operator IFRIC 12 is currently not relevant to the group's activities.

IFRIC 13 Accounting for Customer Loyalty Programmes - (effective for annual periods beginning on or after 1 July 2008). IFRIC 13 creates consistency in accounting for customer loyalty plans. The interpretation is applicable to all entities that grant awards as part of a sales transaction (including awards that can be redeemed for goods or services not supplied by the entity). IFRIC 13 is currently not relevant to the group's operations as it does not offer any customer loyalty programmes.

IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their interaction - IFRIC 14 provides some principles on the application of the asset ceiling under IAS 19 defined benefit accounting. The interpretation is effective for annual periods beginning on or after 1 January 2008, and is currently not expected to have an impact on the group's accounts, as the group does not operate any defined benefit pension plans.

IFRIC 16, Hedges of a Net Investment in a foreign operation (effective for annual periods beginning on/after 1 October 2008). IAS 39 and IAS 21 provide limited guidance on the application of their requirements for hedges of net investment in foreign operations. With this interpretation the IFRIC has provided practical guidance to help entities apply those standards consistently. The group will apply IFRIC 16 from 1 October 2009, and as the group does not use net investment hedging it is currently not applicable to the group.

IAS 1 (Revised) Presentation of Financial Statements - The main objective of the amendment to IAS 1 was to aggregate information in the financial statements on the basis of shared characteristics. The amendment also introduces a 'Statement of Comprehensive Income'. The amendment is effective for annual periods beginning on or after 1 January 2009, and will result in a revised layout of some aspects of the group's financial statements when adopted from its effective date. The group will apply IAS 1 (Revised) from 1 October 2009. It is likely that both the income statement and statement of comprehensive income will be presented as performance statements.

IFRS 2 'Vesting conditions and cancellations - Amendment to IFRS 2 Share-based Payment', (effective for annual periods beginning on or after 1 January 2009). The amendment addresses two matters. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. It also specifies that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The group will apply IFRS 2 (Amendment) from 1 October 2009, and is currently considering the likely impact.

IAS 32 (Amendment) and IAS 1 (Amendment) 'Puttable financial instruments and obligations arising on liquidation', (effective for annual periods beginning on or after 1 January 2009). The amendments require some puttable financial instruments and some financial instruments that impose on the entity an obligation to deliver to another party a pro rata share of net assets of the entity only on liquidation to be classified as equity. The group will apply the IAS 32 and IAS 1 (Amendment) from 1 October 2009, but it is not likely to have an impact on the group's accounts.

IFRS 3 (Revised), 'Business combinations', (effective for annual periods beginning on or after 1 July 2009). The standard continues to apply the acquisition method to business combinations, with some significant changes. These changes include a requirement that all payments to purchase a business are to be recorded at fair value at the acquisition date, with some contingent payments subsequently re-measured through income. Goodwill may be calculated based on the parent's share of net assets or it may include goodwill related to non - controlling interests. All transactions costs will be expensed. The group will apply IFRS 3 (Revised) prospectively to all business combinations from 1 October 2009.

IAS 27 (Revised), 'Consolidated and separate financial statements', (effective for annual periods beginning on or after 1 July 2009). IAS 27 (Revised) requires the effect of all transactions with non-controlling interests to be recorded in equity if there is no change in control. They will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value and a gain or loss is recognised in profit or loss. The group will apply IAS 27 (Revised) prospectively to transactions with non-controlling interests from 1 October 2009.

IFRIC 15 'Agreements for construction of real estates' (effective from 1 January 2009). The interpretation clarifies whether IAS 18, 'Revenue' or IAS 11, 'Construction contracts' should be applied to particular transactions. It is likely to result in IAS 18 being applied to a wider range of transactions. IFRIC 15 is not relevant to the group's operations as all revenue transactions are accounted for under IAS 18 and not IAS 11.

IFRIC 17 'Distributions of Non - cash assets to owners' (effective for annual periods beginning on / after 1 July 2009). This interpretation applies to transactions in which an entity distributes assets (other than cash) as dividends to its owners acting in their capacity as owners. The IFRIC addresses when an entity should recognise a dividend payable and how an entity should measure the dividend payable. The group will apply IFRIC 17 from its effective date. This is currently not relevant to the group's operations.

IFRS 1 (Revised), 'First-time Adoption of International Financial Reporting Standards', (effective from 1 January 2009). The current IFRS 1 has been amended many times to accommodate first time adoption requirements of new and amended IFRSs, resulting in a more complex and less clear standard. This revised version retains the substance of the original standard but with a changed structure. The revised IFRS 1 is not applicable to the group as it has already adopted IFRS, however it would be applicable to other entities in the group should they transition to IFRS at a future date.

Amendments to IFRS 1 'First-time adoption of IFRS' and IAS 27 'Consolidated and separate financial statements - cost of an investment in a subsidiary, jointly controlled entity or associate', (effective for annual periods beginning on or after 1 January 2009). First-time adopters are permitted to use a deemed cost of either fair value or the carrying amount under previous accounting practice to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in their separate financial statements. The amendment also removed the definition of the cost method from IAS 27 and replaced it with a requirement to present dividends - as income in the separate financial statements of the investor. The group will apply these amendments from 1 October 2009 but they are currently not applicable to the group.

Improvements to IFRS, (most of the amendments effective for annual periods beginning on or after 1 January 2009). The improvements to IFRS represent a number of 'non-urgent' amendments to IFRSs that involve accounting changes for presentation, recognition and measurement, and terminology or editorial changes with minimal effect of accounting. The Group will apply these improvements from their relative effective dates and is currently assessing the impact on the Group's financial statements.

4 Accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been applied consistently to all periods presented, unless stated otherwise.

Basis of consolidation

Payzone Plc is the legal parent and acts as a holding company. In respect of the business combination effected during the year, Cardpoint plc is the accounting acquirer. The group accounts consolidate the accounts of Payzone plc and entities controlled directly and indirectly by Payzone plc (its subsidiaries) drawn up to September each year. Control is achieved where the group has the power to govern the financial and operating policies of an entity in which it invests, so as to obtain benefits from its activities. This usually accompanies a shareholding of more than one half of the voting rights.

The results of subsidiaries acquired or sold are consolidated for the periods from or to the date on which control passed.

(a) Subsidiaries

The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquired identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition are recognised at their fair value at the acquisition date.

The excess of the cost of acquisition over the fair value of the group's share of the identifiable net assets acquired is recorded as goodwill. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated; unrealised losses are also eliminated unless cost cannot be recovered and are also considered to be an indicator of impairment of the transferred asset.

In cases of business combinations involving entities under common control, the assets and liabilities of the acquired subsidiaries are initially included in the consolidated financial statements at their book values at the date of acquisition, applying 'merger accounting' principles to the transaction.

(b) Associates

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for by the equity method of accounting and are initially recognised at cost, including any goodwill attributable to the interest acquired.

The Groups' share of its associates' post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post acquisition movements are adjusted against the carrying amount of the investment.

When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associates.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Groups interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting polices of the associates have been changed where necessary to ensure consistency with the accounting policies adopted by the Group.

The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the income statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary.

Property, plant and equipment

Property, plant and equipment are stated at historical cost being, expenditure directly attributable to the acquisition of the asset, less accumulated depreciation.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

The charge for depreciation is calculated to write down the cost of property, plant and equipment to their estimated residual values by equal annual installments over their expected useful lives, which are as follows:

Terminals and ATMs 15% - 20%

Fixtures and fittings and equipment rates between 15% and 33.3%

Computer equipment rates between 20% and 33.3%

Property and leasehold renovations 12.5%

Motor vehicles rates between 20% and 33.3%

Leased assets over the unexpired term of the lease or estimated useful life, if shorter

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

The assets' carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income statement.

Non current assets held for sale

Non current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amount or their fair value less costs to sell.

Non current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the plan to sell and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Investment in subsidiaries

Investments in subsidiaries held by the company are carried at cost less impairment.

Intangible assets

(a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of associates is included in 'investments in associates' and is tested for impairment as part of the overall balance. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the disposed of entity.

Goodwill is allocated to cash generating units for the purpose of impairment testing. The allocation is made to those cash generating units or groups of cash generating units that are expected to benefit from the business combination in which the goodwill arose.

(b) Trademarks, licences and brands

Acquired trademarks, licences and brands are shown at historical cost. Trademarks and licenses have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight line method to allocate the cost of trademarks and brands over their estimated useful lives (6 years).

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives (three to five years).

Costs associated maintaining computer software programmes and software are recognised as an expense as incurred. Costs that are directly associated with the development of identifiable and unique software products controlled by the group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Costs include employee costs incurred as a result of developing software and an appropriate portion of the relevant overheads.

An intangible asset arising from development (or from the development phase of an internal project) shall be recognised if, and only if, an entity can demonstrate all of the following:

(a) The technical feasibility of completing the intangible asset so that it will be available for use or sale.

(b) An intention to complete the intangible asset and use or sell it.

(d) How the intangible asset will generate probable future economic benefits.

(e) The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.

(f) Its ability to measure reliably the expenditure attributable to the intangible asset during its development.

Other development expenditure that do not meet these criteria are recognised as an expense as incurred.

Computer software development costs recognised as assets are amortised over their estimated useful lives (not exceeding 6 years).

(d) Customer related intangible assets

Customer related intangible assets recognised as part of a business combination are initially recognised at fair value and are subsequently carried at original cost less accumulated amortisation.

Acquired customer and merchant related intangible assets are amortised on a straight line basis over their estimated useful lives (not exceeding 6 years).

Impairment of non financial assets

Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assets carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

Derivative financial instruments and hedge activities

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The group designates certain derivatives as either:

(a) Hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge);

(b) Hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge); or

The group documents at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability

Derivative financial instruments and hedge activities

The group has only a cashflow hedge in place which is accounted for as follows:

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item affects profit or loss (for example, when the forecast interest payment that is hedged takes place). The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognised in the income statement within 'finance costs'. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory or property, plant and equipment) the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset. The deferred amounts are ultimately recognised in cost of sales in case of inventory or in depreciation in the case of property, plant and equipment.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on a first-in first-out (FIFO) basis. Cost in the case of goods for resale, is defined as the aggregate cost of acquiring such inventories from third parties. Net realisable value is based on normal selling price, less further costs expected to be incurred to disposal.

Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within administrative expenses. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against administrative expenses in the income statement.

Trade payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are shown within current liabilities on the balance sheet. For the purpose of the cash flow statement, cash and cash equivalents comprise cash at bank and in hand and short-term deposits maturing within 3 months which are subject to insignificant risk of changes in value; less bank overdrafts.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost: any difference between the proceeds (net of transaction cost) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate.

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in the income statement in the period in which they are incurred.

Convertible Preference shares are classified as financial liabilities when the group may be required to deliver cash or another financial asset in the event of the occurrence or non-occurrence of uncertain future events that are beyond the control of both the group and the preference shareholder, such as a change in control.

Provisions

A provision is a liability of an uncertain timing or amount. A provision is recognised when the group has a present obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the obligation can be made.

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable costs of meeting its obligations under the contract (onerous contracts). A provision for onerous contracts is recognised when for example, the group has entered a binding lease for rental of premises that is no longer used by the group or a binding agreement with a customer which is loss making and therefore a provision is recognised for the unavoidable costs associated with that contract (ie. lower of costs of fulfilling the contract and the costs of terminating the contract).

Provisions for restructuring costs and legal claims are recognised when: the group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation discounted to their present value using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Where any group company purchases the Company's equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the Company's equity holders until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received (net of any directly attributable incremental transaction costs and the related income tax effects) is included in equity attributable to the Company's equity holders.

Foreign currency

(a) Functional and presentation currency

Items included in the financial statements of each of the group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). Payzone plc's functional currency is Euro. Cardpoint plc's functional currency is Sterling. The presentation currency for these financial statements is Euro.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

The results and financial position of all the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
All resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to equity. When a foreign operation is partly disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Current and deferred income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company's subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Current and deferred income tax - continued

Deferred income tax is recognised in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future.

Leases

Assets held under finance leases, which confer rights and obligations similar to those attached to owned assets, are capitalised as property, plant and equipment or intangible assets and are depreciated over the shorter of the lease terms and their useful lives. The capital elements of future lease obligations are recorded as liabilities, while the interest elements are charged to the income statement over the period of the leases to produce a constant rate of charge on the remaining balance of liability.

All other leases are operating leases. Rentals under operating leases are charged on a straight-line basis over the lease term, even if the payments are not made on such a basis. Benefits received and receivable as an incentive to sign an operating lease are similarly spread on a straight line basis over the lease term, except where the period to the review date on which the rent is first expected to be adjusted to the prevailing market rate is shorter than the full lease term, in which case the shorter period is used.

Rentals received for terminals from retail agents under operating leases are credited to income on a straight line basis over the lease term.

Employee benefits

(a) Pension obligations

The pension entitlements of employees arise under defined contribution plans. Contributions to the group's defined contribution pension plans are charged to the income statement as incurred.

(b) Bonus plans

The group recognises a liability and an expense where contractually obliged or where there is a past practice that has created a constructive obligation of making bonus payments.

The group operates an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises it's estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement, with a corresponding adjustment to equity. The group accounts for the cancellation or settlement of a share based payment award as an acceleration of vesting, and recognises immediately the amount that otherwise would have been recognised for services received over the remainder of the vesting period.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

(d) Termination benefits

Termination benefits are payable when employment is terminated by the group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The group recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the balance sheet date are discounted to their present value.

Revenue

Revenue comprises the fair value of consideration receivable in respect of services and prepaid credits for cellular phones, utilities sold to third parties and ATM transactions exclusive of value added tax. Revenue of the group is earned from prepaid cellular top-up and prepaid utilities sold to third parties, installation and maintenance services, electronic payment services, debit and credit card processing and ATM transactions. Revenue is recognised in the period earned by rendering of services or sale of products.

Revenue from prepaid credits for cellular top up and utilities is recognised on a gross basis where the group acts as a principal in relation to these transactions, due to the fact that the group bears the majority of risk, principally inventory risk, in relation to such transactions.

Where such inventory risk is not borne by the group only commission earned is recorded as revenue. However in cases where the credit risk is maintained by the group the receivable and corresponding liability are recognised.

Revenue in respect of maintenance contracts is deferred and recognised ratably over the period of the contract.

Annual service charges consist of subscriber billings for service not yet rendered. These are deferred and taken into income as earned. The maximum period for which subscribers are billed in advance is generally one year.

Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those segments operating in other economic environments. Arising from the group's internal organisational structure and its system of internal financial reporting, segmentation by geographical location (geography) is regarded as being the predominant source and nature of the risks and returns facing the group and is thus the primary basis for segmentation under IAS 14 'Segment Reporting'. Business segmentation is the secondary segment reporting format.

Deferred revenues

Deferred revenue comprises service and maintenance charges billed in advance of provision of services.

Cost of sales

Cost of sales includes agents' commission, the cost of mobile top-ups where Payzone acts as principal in their purchase and sale, consumables, communications, maintenance, depreciation and external processing charges levied by banks. Other costs are allocated to administrative costs.

Finance income

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

Finance costs

Finance costs comprise interest on borrowings, interest component of finance leases, bank charges and amortised debt transaction costs.

Interest payable on borrowings and the interest expense component of finance lease payments is calculated using the effective interest rate method.

Special items

Special items are material non recurring items that derive from events or transactions that fall within the ordinary activities of the group and which individually or, if of a similar type, in aggregate, are separately disclosed by virtue of their size or incidence. Such items include non-current assets impairment, restructuring costs, gains/losses on business disposals and closures, costs incurred as a result of business combinations effected that do not qualify for recognition as assets, share option charges arising from the acceleration of vesting periods as a result of business combinations, borrowing costs incurred as a result of a business combination that do not qualify to be treated as a reduction of the liability.

Judgement is used by the group in assessing the particular items which should be disclosed in the income statement and related notes as special items.

5 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year together with critical judgements in respect of the financial year are outlined below:

(a) Going concern

The group has prepared its accounts on a going concern basis. Further details are described in note 1 supporting the adoption of this basis.

(b) Estimated impairment of goodwill

The group tests at least annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 4. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations, and these calculations require the use of estimates. Estimating a 'value in use' amount requires sufficient judgement to make an estimate of the expected future cash flows from the cash generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. Please see note 10 for further detail.

Costs incurred on development projects are recognised as intangible assets when the criteria in the development expenditure accounting policy in note 4 are achieved. A degree of judgement is involved in assessing the achievement of the criteria.

(d) Establishing useful lives for amortisation purposes of properly, plant and equipment and intangible assets

The group has intangible assets (other than goodwill) of €66.6 million and property, plant and equipment of €72 million as at 30 September 2008. The amortisation charges and depreciation charges are dependent on the estimated lives allocated to each type of intangible asset.

The directors regularly review these asset lives and change them as necessary to reflect current thinking on remaining lives and the expected pattern of consumption of the future economic benefits embodied in the asset. Changes in asset lives can have a significant impact on depreciation and amortisation charges for the period.

Details of the useful lives of the various classes of property, plant and machinery and intangible assets are included in note 4.

If the allocated lives allocated to each type of amortised intangible asset were increased/decreased by one year, the amortisation charges for the year would have decreased/increased by €2.8m/(€4.2m).

(e) Fair value of business combinations

Goodwill only arises in business combinations. The amount of goodwill initially recognised is the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition.

The determination of the fair value of the assets and liabilities is based, to a considerable extent, on management's judgement and estimates.

Allocation of the purchase price affects the results of the Group as finite lived intangible assets are amortised, whereas indefinite lived intangible assets, including goodwill, are not amortised and could result in differing amortisation charges based on the allocation to indefinite lived and finite lived intangible assets.

On acquisition, the identifiable intangible assets may include customer bases and brands. The fair value of these assets is determined by discounting estimated future net cash flows generated by the asset, assuming no active market for the assets exist. The use of different assumptions for the expectations of future cash flows and the discount rate would change the valuation of the intangible assets, and consequently the level of recognised goodwill. Please see note 15 for further detail.

(f) Cardpoint as acquirer

As described in note 2 the acquisition of the entire share capital of Cardpoint and alphyra by Payzone plc has been accounted for as a reverse acquisition of the combined Payzone and alphyra group by Cardpoint plc. The determination of the acquirer in this transaction is seen as a critical judgement as any change in this judgement can have a significant impact on the accounting for the business combination. Management gave detailed consideration to the terms, conditions, facts and circumstances surrounding the transaction together with the guidance in IFRS 3 in relation to identifying the acquirer in a business combination. Ultimately Cardpoint plc was seen as the acquirer as it was judged to control alphyra due to its:

power to govern the financial and operating policies of alphyra;
power to appoint or remove the majority of the members of the board of directors or equivalent governing body of the other entity; and
power to cast the majority of votes at meetings of the board of directors.

(g)Determination of special items

Significant judgement is exercised in making such an assessment.

(h) Determination of functional currency

The group is headquartered in Ireland and has significant operations in the UK and Europe and accordingly principally operates in two different currencies. Reflecting its economic operating environment the group has determined that the Euro is Payzone plc's functional currency for the preparation of the consolidated financial statements however, the functional currency of the accounting acquirer Cardpoint plc, is sterling. The group's presentation currency is Euro.

6 Segmental reporting

(i) Segmental information

Segment information is presented in respect of the Group's business and geographical segments. The primary basis for segmental reporting is geographic segments being the dominant sources of the group's risk and rewards and being the basis for the group's internal organisational and management structure and its system of internal financial reporting. The secondary format for reporting segmental information is business segments.

Segments results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period other than through business combinations.

Geographical segments

The group operates in three principal geographical regions being the UK and Ireland, Northern Europe, Southern and Central Europe. In presenting information on the basis of geographic segments, segment revenue is based on the geographical location of the Group's subsidiaries. Segment assets are based on the geographical location of the assets.

As a result of the business combination, discussed in note 15, the number of primary segments increased from 2 to 3 in the year ended 30 September 2008.

	UK and Ireland 2008 €'000	Northern Europe 2008 €'000	Southern and Central Europe 2008 €'000	Total 2008 €'000

Revenue	380,947	523,160	176,742	1,080,849
Operating (loss)	(77,456)	(83,019)	(17,264)	(177,739)

	UK and Ireland 2007 €'000	Northern Europe 2007 €'000	Total 2007 €'000

Revenue	114,058	16,912	130,970
Operating profit/(loss)	(38,753)	215	(38,538)

Other segment items included in the income statement are as follows:

	UK and Ireland 2008 €'000	Northern Europe 2008 €'000	Southern and Central Europe 2008 €'000	Total 2008 €'000

Depreciation (note 16)	15,659	7,120	1,620	24,399
Amortisation (note 17)	8,620	5,184	1,423	15,227
Impairment of goodwill (note 10)	49,341	83,079	16,753	149,173
Administrative expenses (excluding goodwill impairment and special items)	27,705	1,869	953	30,527
Share of losses of associate	(1,162)	-	-	(1,162)


6 Segmental reporting - continued (i) Segmental information - continued		UK and Ireland 2007 €'000	Northern Europe 2007 €'000	Total 2007 €'000

Depreciation (note 16)		9,256	2,087	11,343
Amortisation (note 17)		966	-	966
Impairment of goodwill (note 10)		49,140	-	49,140
Administrative expenses (excluding goodwill impairment and special items)		2,067	-	2,067

	UK and Ireland 2008 €'000	Northern Europe 2008 €'000	Southern and Central Europe 2008 €'000	Total 2008 €'000

Segment assets	375,246	133,646	67,305	576,197

Unallocated assets	-	-	-	1,269

Total assets				577,466

Segments liabilities	147,048	50,065	38,705	235,818

Unallocated liabilities	-	-	-	311,344

Total liabilities				547,162

Capital expenditure
Property, plant and equipment (note 16)	29,271	15,079	6,896	51,246
Intangible assets (note 17)	224,407	117,967	48,320	390,694

	UK and Ireland 2007 €'000	Northern Europe 2007 €'000	Total 2007 €'000

Segment assets	132,346	59,016	191,362
Unallocated assets	-	-	304
Total assets			191,666

Segment liabilities	25,347	11,303	36,650
Unallocated liabilities	-	-	118,986
Total liabilities			155,636

Capital expenditure
Property, plant and equipment (note 16)	21,420	4,071	25,491
Intangible assets (note 17)	22,237	-	22,237

Unallocated liabilities comprise of interest bearing loans and borrowings, corporation tax payable and deferred tax liabilities. Unallocated assets comprise deferred tax assets, derivative financial instruments and available for sale financial assets.

6 Segmental reporting - continued

(i) Segmental information - continued

The group analyses its business into the following business segments:

	Prepaid credit 2008 €000	Utility 2008 €000	Financial services 2008 €000	ATM 2008 €000	Unallocated 2008 €000	Total 2008 €000

Group revenue	920,934	10,716	46,128	101,936	1,135	1,080,849

Total assets	-	-	-	-	577,466	577,466

Capital expenditure
Property, plant and equipment (note 16)	-	-	-	-	51,246	51,246
Intangible assets (note 17)	-	-	-	-	390,694	390,694


	Prepaid credit 2007 €000	Utility 2007 €000	Financial services 2007 €000	ATM 2007 €000	Unallocated 2007 €000	Total 2007 €000

Group revenue	-	-	-	130,970	-	130,970

Total assets	-	-	-	191,666	-	191,666

Capital expenditure
Property, plant and equipment (note 16)	-	-	-	25,491	-	25,491
Intangible assets (note 17)	-	-	-	22,237	-	22,237

The group's assets mainly consist of terminals, ATMs and software and are geographically dispersed across all segments. Following the 'merger' of alphyra and Cardpoint, the assets generate revenue across all business segments and provide a mix of products and are therefore not distinguishable between the business segments.

7 Cost of sales	2008 €'000	2007 €'000

Commission payable to retail agents	106,778	28,429
Cost of mobile top ups where the group acts as principal	788,577	1,283
Other	94,928	54,446
Total cost of sales	990,283	84,158

8 Employee information	Group
	2008	2007

Average number of persons employed
Sales and marketing	218	36
Operations and administration	603	121
	821	157

	2008 €'000	2007 €'000

Staff costs during the year (including directors)
Wages and salaries	26,130	7,753
Social security costs	3,827	737
Pension costs (note 26)	695	146
Share based payment cost	3,840	2,406
	34,492	11,042

		2008 €'000

Directors' remuneration
Salaries		403
Pension		33
Directors' fees		434
Compensation for loss of offices		1,625
		2,495

Directors' remuneration disclosed for 2008 relates to remuneration paid to directors of Payzone plc for the period from date of incorporation, being 13 September 2007 to 30 September 2008.

9 Administrative expenses - special items	2008 €'000	2007 €'000

Restructuring (a)	20,774	-
Legal action with former directors (b)	4,092	-
Share option charge (c)	2,015	-
Goodwill impairment (see note 10)	149,173	49,140
Loss on disposal of subsidiaries (d)	3,646	2,067
	179,700	51,207

(a) Restructuring costs

Restructuring costs relate to the costs incurred in the closure of Cardpoint offices in Blackpool and Frankfurt. Costs also include rebranding, consultancy, and redundancy costs in relation to the integration of both businesses since 5 December.

The costs include the write down of certain assets which did not meet the criteria of fair value adjustments on the reverse acquisition of alphyra by Cardpoint.

(b) Legal action with former directors

On the 16 October 2008 the company settled with the two former directors who had taken legal action against the company in relation to a legal unfair dismissal and removal from office. Costs of €4.1 million were incurred in respect of settlements, legal and related costs.

The share option charges result from the acceleration of the vesting period of Cardpoint share options as a result of the reverse acquisition of alphyra by Cardpoint.

(d) Loss on disposal of subsidiaries

The group will dispose of its businesses in Spain, France and Italy. The group has provided for a loss on disposal of €3.6 million, including disposal costs, to write the carrying value of the disposal groups to their recoverable amount. The assets and liabilities of these businesses were treated as held for resale under IFRS 5 at year end.

During, the group disposed of its interest in G2 Integrated Solutions Limited ('G2IS'), generating a profit on disposal of €0.7 million. Additionally, the group disposed of its interest in Cardpoint Merchant Services Limited CMS, generating a loss on disposal of €0.6 million. The company was sold for a consideration of €1.03 million. A decision was taken in January 2007, to close the loss making Netherlands business, generating a loss on closure of €2.16 million.

10 Goodwill impairment

The Group tests for impairment annually and also if there is an indication that assets might be impaired. The Group identified the falling share price, difficult trading conditions in each segment (as discussed below in more detail below) and the weakening of Sterling against the Euro, as indicators of impairment and performed an impairment review across all Cash Generating Units (CGUs).

The recoverable amount of the CGUs is determined based on a value in use computation. Where the value in use exceeds the carrying value of the CGU the asset is not impaired; where the carrying amount exceeds the value in use an impairment loss is recognised. Estimates used in this process are key judgmental estimates in the financial statements.

The CGUs represent the lowest level within the group at which goodwill is monitored for internal management purposes and are not larger than the primary and secondary segments determined in accordance with IAS 14'Segment Reporting'.

The goodwill impairment losses recognised in the income statement as a special item are as follows:

	2008 €'000	2007 €'000

Reportable segment
UK and Ireland	49,341	49,140
Northern Europe	83,079	-
Southern and Central Europe	16,753	-
	149,173	49,140

UK and Ireland

During the year ended 30 September 2008, the goodwill in relation to the group's operations in the UK and Ireland was impaired by €49.3 million following a test for impairment triggered by the weakening in the value of sterling against the euro and competitive pressures on prepaid cellular top up transactions.

The impairment loss for the year ended 30 September 2007 of €49.1 million in the UK was made following a test from impairment triggered by a revision of budgeted performance of some of the group's estates of ATMs.

Northern Europe

During the year ended 30 September 2008 the goodwill in relation to the group's operations in Northern Europe were impaired by €83.1 million, following a test for impairment triggered by tougher market conditions in the German operations.

Southern Europe

During the year ended 30 September 2008 the goodwill in relation to the group's operations in Southern and Eastern Europe was impaired by €16.8 million, following a test for impairment triggered by deterioration in revenues in Spain.

Cash generating units

The following cash generating units being the lowest level of asset for which there are separately identifiable cash flows, have carrying amounts of goodwill that are, considered significant in comparison with the group's total goodwill balance:

	2008 €'000	2007 €'000

UK	156,329	77,989
Ireland	24,051	-
Northern Europe:
- Germany	24,127	35,039
- Other CGUs	16,087	-
Southern and Eastern Europe CGUs	24,910	-
	245,504	113,028

Key assumptions used in the value in use calculations

The group prepares and internally approves formal three year management plans for its businesses. For the year ended 30 September 2008, the group used these plans for its value in use calculations. The plans included cash flow projections for the trading entities which are expected to have growth rates in excess of the long term average growth rates, beyond an initial three year period for the markets in which they operate.

The key assumptions used in determining the value in use are:

Assumption	How determined

Cashflows	Managements' estimates of future profitability and working capital investment is based on historical performance, together with management's expectation of future trends affecting the industry and other developments and initiatives in the business and management's plans for the future.

Budgeted capital expenditure	The cash flow forecast for capital expenditure is based on past experience and includes the ongoing capital expenditure required to provide distribution service. Capital expenditure includes cash outflows for the purchase of terminals, ATMs, computer software and computer equipment in the ordinary course of business.

Long term growth rate	For the year ended 30 September 2008, these calculations are based on financial projections approved by management for a period of 3 years and assuming growth rates of 5% for a further 2 years and between 2% and 3% for the remaining period.

Pre-tax discount rate	The discount rate applied to the cash flows of each of the group's CGUs is based on the weighted average cost of capital. Such rates ranged from 11.8% - 12.3%.

Applying the above techniques, an impairment of goodwill of €149.2 million (2007: €49.1 million) has been recognised.

Sensitivity to changes in assumptions

Key assumptions include management's estimates of future profitability, discount rate, capital expenditure requirements and working capital investment. Forecasts are generally based on historical performance together with management's expectation of future trends affecting the industry and other developments and initiatives in the business and management's plans for the future.

If the pre tax discount rates increased by 100 basis points (ie. 12.8% - 13.3%) and long term growth rates decreased by 100 basis points (ie. 1% - 2%) the goodwill impairment charge would increase by €60 million.

11 Operating loss	Group
	2008 €'000	2007 €'000
Operating loss is after charging/(crediting):

Depreciation on property, plant and equipment	24,399	11,343
(Gain)/loss on disposal of property, plant and equipment	(86)	410
Amortisation of intangible assets	15,227	966
Goodwill impairment	149,173	49,140
Rentals under operating leases:
- land and buildings	1,016	433
- plant and machinery	787	583
Auditors remuneration	730	144
Research and development	-	-
Foreign exchange gain	(3,600)	-
Charges in respect of equity settled share based payments	3,840	2,406

12 Finance costs	2008 €'000	2007 €'000

Excluding special items:
Interest on bank loans, overdrafts and preference shares	25,624	8,964
Bank charges	683	-
	26,307	8,964
Special items:
Bank arrangement fees	3,853	-
Early termination of derivative financial instrument	433	-
	4,286	-

Special items include fees in relation to the early termination of Cardpoint's banking arrangements, which include penalties on the early termination of derivative financial instruments. The costs also include fees incurred in relation to the renegotiation of the group's facility agreement including related, consultancy and legal fees.

13 Income tax credit/(expense)	2008 €'000	2007 €'000

Current tax	943	358
Deferred tax liability (note 27 (i))	(3,226)	-
Decrease in deferred tax asset (note 27 (ii))	97	-
Income tax (credit)/expense	(2,186)	358

Notwithstanding that Payzone Plc is Irish tax resident, the majority of the group's operations are in the United Kingdom. The tax charge on the group's (loss) before tax differs from the theoretical amount that would arise using the United Kingdom domestic tax rate applicable to results of the consolidated companies as follows:

	2008 €'000	2007 €'000

(Loss) before income tax	(208,110)	(47,106)
(Loss) multiplied by the standard corporation tax rate of 29% in the United Kingdom (2007: UK corporation tax of 30%)	(60,352)	(14,132)

Effects of:
Expenses not deductible for tax purposes	52,550	9,356
Utilisation of previously unrecognised tax losses	(182)	-
Differences in effective tax- rates on overseas earnings	(187)	(1,668)
Tax losses for which no deferred income tax asset was recognised	5,985	6,802
	(2,186)	358

14 Earnings per share

Basic and diluted

Basic earnings per share are calculated by dividing the loss attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the year.

	2008	2007

Loss attributable to equity holders of the company (€'000)	(206,386)	(47,464)
Weighted average number of ordinary shares in issue (’000)	306,798	115,868
Basic and diluted loss per share (cent per share) *	(67c)	(41c)

* None of the group's contingently issuable shares were dilutive as they would have decreased the loss per share in all periods.

The group has followed the guidance in Appendix B to IFRS 3 in calculating the weighted average number of ordinary shares outstanding (the denominator) during the period in which the reverse acquisition occurs. As a result for the purposes of the calculation of the weighted average number of ordinary shares outstanding during the period;

the number of ordinary shares outstanding from 1 October 2007 to 5 December 2007 is 115,867,928. i.e. the number of ordinary shares issued by Payzone plc on 5 December 2007 to the former owners of Cardpoint plc; and

the number of ordinary shares outstanding from 5 December 2007 to 30 September 2008 is the actual number of ordinary shares of Payzone plc that were outstanding during that period.

For the purposes of the comparative EPS calculation the weighted average number of ordinary shares outstanding for during the year ended 30 September 2007 has been deemed to be 115,867,928 i.e. the number of ordinary shares issued by Payzone plc to the former owners of Cardpoint plc on 5 December 2007.

15 Business combinations

On 5 December 2007, Payzone plc acquired 100% of the share capital of alphyra holdings Limited and 100% of Cardpoint plc. As described in note 2 the acquisition of 100% of the share capital of alphyra represents a 'common' control transaction that is outside of the scope of IFRS 3 and has not resulted in the recognition of fair value adjustments or goodwill in the consolidated balance sheet of Payzone plc. The acquisition of 100% of Cardpoint was accounted for as a reverse acquisition of the combined Payzone and alphyra group by Cardpoint plc based on the guidance in IFRS 3. alphyra is engaged in the deployment of a network of terminals which process a variety of electronic transaction services, such as mobile phone top-up, utility top-up and EFT processing, operating in a number of countries across Europe. The acquired business contributed revenues of €978 million and net loss of €7.9 million to the group for the period from 5 December 2007 to 30 September 2008. If the acquisition had occurred on 1 October 2007, group revenue would have been €1.119 billion and net loss after tax for the group would have been €209.4 million. These amounts have been calculated using the group's accounting policies and by adjusting the results of the subsidiary to reflect the additional depreciation and amortisation that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had applied from 1 October 2007, together with the consequential tax effects.

Details of net liabilities acquired and goodwill are as follows:

		€'000

Purchase consideration:

Fair values of shares issued to acquire the alphyra group		186,982
Directs costs relating to the acquisition		17,165
Total purchase consideration		204,147
Fair value of net liabilities acquired		105,431
Goodwill		309,578

The goodwill is attributable to the workforce of the acquired business, non contractual customer relationships that did not qualify for separate recognition as intangible assets, geographical spread and market presence of alphyra and the significant synergies that were expected to arise after the acquisition of alphyra.

15 Business combinations - continued

The fair value of the shares issued was based on the quoted market price on 5 December 2007.

Provisional fair values were reported in the Payzone's Interim Report. These have been finalised following a detailed review in the intervening period.

The assets and liabilities as of 5 December 2007 arising from the acquisition are as follows:

	Carrying amount €'000	Fair value adjustment €'000	Fair value €'000

Cash and cash equivalents	10,982	-	10,982
Property, plant and equipment	35,329	(854)	34,475
Customer relationships (included in intangibles)	-	30,625	30,625
Brand (included in intangibles)	-	3,119	3,119
Software (included in intangibles)	7,601	35,451	43,052
Deferred tax assets	1,457	-	1,457
Available for sale financial asset	124	-	124
Investment in associate company	62	-	62
Inventories	28,338	(1,008)	27,330
Trade and other receivables	83,854		83,854
Borrowings	(159,405)	-	(159,405)
Trade and other payables	(150,083)		(150,083)
Provision	(9,603)	(2,306)	(11,909)
Deferred tax liabilities	(599)	(18,515)	(19,114)
Net liabilities	(151,943)	46,512	(105,431)

Purchase consideration settled in cash			-
Cash and cash equivalent in subsidiary acquired			10,982
Cash flow on acquisition			10,982

16 Property, plant and equipment	Terminals and ATMs €'000	Furniture, fittings and equipment €'000	Computer equipment €'000	Property and leasehold renovations €'000	Motor vehicles €'000	Total €'000
Group

Cost
At 1 October 2007	77,579	1,230	2,105	407	236	81,557
Acquired on acquisition of subsidiary (note 15)	22,910	3,778	4,995	2,379	413	34,475
Additions	10,864	238	5,289	5	375	16,771
Transfer to assets held for sale	(7,507)	(460)	(1,195)	(364)	-	(9,526)
Exchange difference	195	(6)	(210)	(97)	(24)	(142)
Disposals	(1,021)	(16)	(3,055)	(12)	(104)	(4,208)
At 30 September 2008	103,020	4,764	7,929	2,318	896	118,927

Accumulated depreciation
At 1 October 2007	(25,095)	(1,072)	(1,769)	(130)	(177)	(28,243)
Charge for the year	(19,129)	(463)	(4,488)	(178)	(141)	(24,399)
Disposals	827	4	3,052	12	104	3,999
Transfer to assets held for sale	6,395	227	1,049	263	-	7,934
Exchange difference	(6,162)	(20)	8	(43)	(9)	(6,226)
At 30 September 2008	(43,164)	(1,324)	(2,148)	(76)	(223)	(46,935)

Net book value
At 30 September 2008	59,856	3,440	5,781	2,242	673	71,992

The net book value of assets held under finance leases is €3,442 (2007: €Nil). The cost from ATMs that are rented out under operating leases is €Nil (2007: €Nil) and the accumulated depreciation €Nil (2007: €Nil).

16 Property, plant and equipment - continued	Terminals and ATMs €'000	Furniture, fittings and equipment €'000	Computer equipment €'000	Property and leasehold renovations €'000	Motor vehicles €'000	Total €'000
Group

Cost
At 1 October 2006	63,893	1,108	2,426	158	275	67,860
Acquired on acquisition of subsidiary	10,533				33	10,566
Additions	13,987	225	459	254		14,925
Disposals of subsidiaries	(5,896)	(71)	(712)	-	-	(6,679)
Disposals	(4,021)	-	-	-	(63)	(4,084)
Exchange difference	(1,832)	(32)	(70)	(5)	(7)	(1,946)
At 30 September 2007	76,664	1,230	2,103	407	238	80,642

Accumulated depreciation
At 1 October 2006	(20,029)	(733)	(2,007)	(44)	(91)	(22,904)
Charge for the year	(10,303)	(339)	(466)	(86)	(149)	(11,343)
Disposals	1,851	-	-	-	63	1,914
Disposal of subsidiaries	3,386	-	704	-	-	4,090
Exchange difference	819	32	55	4	5	915
At 30 September 2007	(24,276)	(1,040)	(1,714)	(126)	(171)	(27,328)

Net book value
At 30 September 2007	52,388	190	389	281	66	53,314

17 Goodwill and intangible assets	Goodwill €'000	Software €'000	Customers relationship/ contracts with merchants €'000	Brand €'000	Total €'000

Cost
At 1 October 2007	113,028	-	5,042	-	118,070
Arising on acquisition of subsidiaries	309,578	43,052	30,625	3,119	386,374
Additions	-	4,320	-	-	4,320
Exchange difference	(27,929)	(101)	(491)	-	(28,521)
Transfer to assets held for sale	(8,815)	(2,240)	(1,194)	(122)	(12,371)
At 30 September 2008	385,862	45,031	33,982	2,997	467,872

Amortisation and impairment
At 1 October 2007	-	-	(936)	-	(936)
Impairment loss for the year (note 10)	(149,173)	-	-		(149,173)
Charge for the year	-	(8,005)	(6,789)	(433)	(15,227)
Exchange difference	-	29	67	-	96
Transfer to assets held for sale	-	509	166	16	691
At 30 September 2008	(149,173)	(7,467)	(7,492)	(417)	(164,549)

Carrying amount
At 30 September 2008	236,689	37,564	26,490	2,580	303,323
At 30 September 2007	113,028	-	4,106	-	117,134

17 Goodwill and intangible assets - continued	Goodwill €'000	Contracts with merchants €'000	Total €'000

Cost
At 1 October 2006	223,609	-	223,609
Arising on business combination	17,033	5,204	22,237
Disposals	(2,780)	-	(2,780)
Exchange difference	(6,850)	(162)	(7,012)
At 30 September 2007	231,012	5,042	236,054

Amortisation and impairment
At 1 October 2006	(74,473)	-	(74,473)
Impairment	(49,140)	-	(49,140)
Amortisation	-	(966)	(966)
Disposals	2,043	-	2,043
Exchange difference	3,586	30	3,616
At 30 September 2007	(117,984)	(936)	(118,920)

Carrying amount
At 30 September 2007	113,028	4,106	117,134

18 Investment in associate

(i) Investment in associate undertakings

Name

Percentage Shareholding

Principal Activities

Registered Office and

Country of Incorporation

alphyra Rietumu Payment Services Limited

49.1%

Money Transfer

Ireland

On the 1 July 2008, the company was called upon to reinvest further sums into Rietumu by the shareholders. Both Payzone and Invik Banque SA invested €1.1m, bringing their respective ownerships to 49.1%.

Rietumu was acquired as part of the acquisition of alphyra and has been accounted for as an associate. The investment does not meet the requirement to be accounted for as a joint venture under IAS 31 'Interest in Joint Ventures'.

Payzone only has one board member with equal voting right to the other three board members
Payzone has no input or participation into the operating or financial decisions of the company other than attendance monthly board meetings
Payzone voting rights are in direct proportion to shareholding percentages. It has no additional rights and none are proposed for the future
There are no contractual agreements between Payzone and the other shareholders in relation to operations, strategy or finance of Rietumu.

The accounting year end for alphyra Rietumu Payment Services is to the year end 31 December 2008. Payzone have accounted for alphyra Rietumu Payment Services Limited for the 12 months to 30 September 2008 in these financial statements.

The movement in investment in associate undertakings is set out below:

	2008 €'000	2007 €'000

At 1 October 2007	-	-
Acquired on acquisition of subsidiaries	62</