PayPoint plc Half Year Financial Report
PayPoint plc
Half year financial report
for the six months ended 25 September 2011
HIGHLIGHTS
| 6 months ended 25 September 2011 | 6 months ended 26 September 2010 | Increase | |
| Transaction value | £5,588m | £4,831m | 16 % |
| Revenue | £95.9m | £92.9m | 3% |
| Net revenue1 | £41.9m | £38.7m | 8% |
| Gross margin | 37.5% | 35.3% | 2 ppts |
| Operating profit | £16.7m | £15.3m | 9% |
| Profit before tax | £15.8m | £14.6m | 9% |
| Diluted earnings per share | 16.7p | 14.8p | 13% |
| Interim dividend per share | 8.7p | 7.8p | 12% |
292 million transactions processed in the period, up 9%
UK & Ireland transactions increased 5% with net revenue up 9%
Internet payment transactions have grown by 34% and net revenue by 4%
Romanian retail network moved into profit bill payment transactions increased to over 8 million in the period (2010: 5 million)
PayByPhone increased transactions to over 8 million, up 23% with net revenue up by 18%
Collect+ has processed over 1 million transactions, an increase of nearly five times and has won two national awards for its innovative parcel delivery and returns service
Earnings per share increase helped by lower UK tax charge
8.7p dividend per share, up 12%
David Newlands, Chairman of PayPoint plc said:
"Our retail network continues to perform well, processing 5% more transactions overall in the period, despite there being 5 million fewer mobile top-ups. Internet payments contributed to overall growth in transactions of 8% in the established business (the UK and Ireland retail networks and internet payments). Net revenue in the established business increased by 7%.
Our developing business, consisting of our Romanian retail network, Collect+ parcel service and PayByPhone, also made good progress. In Romania, we made a small profit following 69% growth in bill payments and since the period end, we have introduced Western Union money transfer. Collect+, our award-winning parcels joint venture, has won 44 new merchants and processed nearly five times as many parcels as in the same period last year. PayByPhone has been selected by 33 new clients in the period, with a substantial number of tender decisions still awaited.
For the current financial year, trading is in line with the company's expectations. Our established business is strong. We will pursue further opportunities to enhance our retail yield by introducing new technology and services, while enhanced transaction management and information services should help our internet sales in the next financial year. Continuing progress is expected in our developing business. Our Romanian retail network will focus on improving market share and further modest network growth to improve yield. PayByPhone will continue to pursue new clients and enhance its technology to grow revenue and improve customer satisfaction. Collect+ will continue its intensive marketing to new clients, to extend deliveries to its existing returns clients and to promote its consumer-to-consumer proposition. We expect PayByPhone and the Collect+ parcel service to turn to profit in the next financial year.
I am pleased to announce an interim dividend of 8.7pence per share."
The condensed financial statements cover the six months from 28 March 2011 to 25 September 2011, the last Sunday in the month (2010: 6 months covering the period 29 March 2010 to 26 September 2010).
Net revenue is revenue less the cost of mobile top-ups and SIM cards where PayPoint is principal and costs incurred by PayPoint, which are recharged to clients and merchants. These costs include retail agent commission, merchant service charges levied by card scheme sponsors and costs for the provision of call centres for PayByPhone clients. Net revenue is a measure, which the directors believe assists with a better understanding of the underlying performance of the group.
Management report
The management report has been prepared solely to provide additional information to shareholders as a body to assess PayPoint's half year performance and it should not be relied upon for any other purpose. It contains forward looking statements made by the directors in good faith, based on the information available at the time of approval of the half yearly financial report. Such statements should be treated with caution due to the inherent uncertainties underlying any such forecast, including both economic and business risk factors.
PayPoint is a payment service provider to retailers and consumer service companies and as such, has only one operating segment. However, reflection on various facets helps to explain the execution of our strategy as set out on page 3 of our annual report and accordingly, in addition to the analysis of the number and value of consumer transactions, revenue and net revenue, we have shown an analysis which separates our developing business (our retail network in Romania, Collect+ and PayByPhone), from our established business (the UK and Irish retail networks and internet payments).
The channel analysis is as follows:
Retail networks:
Bill and general (prepaid energy, bills, tickets and cash out payments)
Top-ups (mobile, prepaid cards and phone cards)
Retail services (ATM, debit/credit, parcels, money transfer, SIMs and receipt advertising)
Internet (transactions between consumers and merchants, pre-authorisations and FraudGuard, where separately charged)
PayByPhone (parking and bicycle rental transactions)
Other for revenue and net revenue only (software development and configuration)
Operational review
During the period, transactions have increased to 292 million (2010: 267 million) up 8% in the established business1 and 37% in the developing business2. Transaction value increased to £5.6 billion (2010: £4.8 billion), and is up 14% in the established business and up 78% in the developing business.
Revenue has increased 3% overall, comprising 1% in the established business and 16% in the developing business. Net revenue3 increased by 8% overall. In the established business, net revenue increased by 7% and in the developing business (including Collect+), by 52%.
Operating profit in the established business was £17.8 million, up 9% on last year. The operating loss in the developing business, including our share of the losses of Collect+, was £2.0 million (2010: £1.5 million). The Romanian retail network made a small profit in the period (2010: loss of £0.3m).
| Established business1 | Developing business2 | Total | Adjust Collect+4 | As reported | ||
| Transactions (million) | ||||||
| 6 months 2011 | 273 | 19 | 292 | - | 292 | |
| 6 months 2010 | 253 | 14 | 267 | - | 267 | |
| Year ended 2011 | 559 | 31 | 590 | - | 590 | |
| Transaction value £million | ||||||
| 6 months 2011 | 5,395 | 193 | 5,588 | - | 5,588 | |
| 6 months 2010 | 4,723 | 108 | 4,831 | - | 4,831 | |
| Year ended 2011 | 10,316 | 285 | 10,601 | - | 10,601 | |
| Revenue £000 | ||||||
| 6 months 2011 | 81,365 | 15,939 | 97,304 | (1,381) | 95,923 | |
| 6 months 2010 | 80,337 | 12,835 | 93,172 | (274) | 92,898 | |
| Year ended 2011 | 167,700 | 26,535 | 194,235 | (1,002) | 193,233 | |
| Net revenue3 £000 | ||||||
| 6 months 2011 | 38,544 | 4,521 | 43,065 | (1,135) | 41,930 | |
| 6 months 2010 | 35,977 | 2,973 | 38,950 | (222) | 38,728 | |
| Year ended 2011 | 76,811 | 6,539 | 83,350 | (627) | 82,723 | |
In the established business, following our tender success announced in March 2011, the UK retail network duly signed a contract with Citibank to be the retail network for the DWP's replacement for giro-cheques. The service is expected to go live next financial year and is unlikely to affect the current financial year's profit to any material extent. The internet channel growth was constrained by the impact of one large merchant changing its business model. We have re-started processing for this merchant since the period end.
In the developing business, our Romanian retail network has turned from loss to a small profit in the first half of the year and will introduce money transfer with Western Union in the second half. PayByPhone has made substantial progress, winning 33 new clients, including London Borough of Lambeth, Ottawa in Canada and Coral Gables in Florida, USA. PayByPhone parking is due to go live in San Francisco across 22,000 spaces this year. Cash payments for parking have been introduced in Barnet and Islington. Collect+ has extended its consumer proposition by introducing two resellers, Parcel2Go and myParcelDelivery and has also won 44 new merchants for returns, including JD Sports, Monsoon and Accessorize, Asda Direct, Argos Outlet, Aurora (Karen Millen and Oasis) and Wiggle. Collect+ has been recognised with prestigious industry awards for logistics and innovation. Since the period end, Collect+ has started processing deliveries for on-line clothing retailer, M and M Direct.
The established business includes the UK and Irish retail networks and internet payments.
The developing business includes the Romanian retail network, Collect+ and PayByPhone.
Net revenue is revenue less the cost of mobile top-ups and SIM cards where PayPoint is principal and costs incurred by PayPoint, which are recharged to clients and merchants. These costs include retail agent commission, merchant service charges levied by card scheme sponsors and costs for the provision of call centres for PayByPhone clients. Net revenue is a measure, which the directors believe assists with a better understanding of the underlying performance of the group.
Collect+ revenue and net revenue is included in the developing business revenue and net revenue, but as Collect+ is reported in the Consolidated Income Statement on a profit after tax only basis, revenue and net revenue needs to be eliminated to reconcile to reported revenue and net revenue.
Analysis of transactions
There has been growth in transaction volumes across all payments types except UK and Ireland mobile top-ups, which have decreased as a result of market decline.
| 6 months ended 25 September 2011 thousands | 6 months ended 26 September 2010 thousands | Increase / (decrease) % | Year ended 27 March 2011 thousands | |
| Retail networks | ||||
| Bill and general payments | 165,419 | 152,286 | 9 | 350,970 |
| Top-ups | 55,496 | 60,597 | (8) | 117,670 |
| Retail services | 29,108 | 22,658 | 28 | 48,425 |
| Internet payments | 33,914 | 25,326 | 34 | 58,544 |
| PayByPhone | 8,068 | 6,557 | 23 | 14,059 |
| Total | 292,005 | 267,424 | 9 | 589,668 |
Bill and general payment transactions were ahead of the same period last year as a result of an 11% increase in prepaid energy volumes. There was strong growth in Romania, where we processed over 8 million transactions (2010: 5 million).
In the UK and Ireland, mobile top-up volumes were down 9%. In Romania, mobile top-up volumes increased 8% although the net revenue per transaction fell. E-currency volumes in the UK continue to grow and were up 9% on the same period last year, with over 3 million transactions processed.
Retail services volumes have increased across most products. ATM transactions increased by 14%, credit and debit transactions by 29%, SIM card sales by 56% and parcels by five times over the same period last year.
Internet transactions were up 34% to 34 million as we continue to add large merchants and through organic growth in our existing merchants.
PayByPhone transactions have increased 23% as we have started to implement PayByPhone in new parking authorities and some existing authorities have removed other payment options.
Transaction value
There has been growth in the transaction value paid by consumers, primarily in bill and general, and internet payments.
| 6 months ended 25 September 2011 £000 | 6 months ended 26 September 2010 £000 | Increase / (decrease) % | Year ended 27 March 2011 £000 | |
| Retail networks | ||||
| Bill and general | 3,005,334 | 2,759,418 | 9 | 6,198,171 |
| Top-ups | 549,448 | 573,689 | (4) | 1,114,809 |
| Retail services | 211,005 | 194,174 | 9 | 394,727 |
| Internet payments | 1,790,612 | 1,277,867 | 40 | 2,838,147 |
| PayByPhone | 31,916 | 26,252 | 22 | 55,020 |
| Transaction value | 5,588,315 | 4,831,400 | 16 | 10,600,874 |
The increase in bill and general transaction value results from higher transaction volumes with broadly similar average values.
The reduction in top-up transaction value is primarily as a result of a decline in the prepay mobile market, partially offset by increases in the average transaction values in the UK and Ireland and an increase in e-currency transactions.
The increase in retail services is accounted for by ATM cash withdrawals. The transaction value in other retail services is relatively small as SIM sales are low value transactions and for credit and debit card transactions (where merchants are settled by the card sponsor, not PayPoint), receipt advertising and parcels, there is no transaction value.
Internet consumer spending has increased by 40% over the same period last year and the average transaction value has increased 5% to £52.80 (2010: £50.46).
PayByPhone transaction values have increased by 22%. The average value of a transaction has remained broadly the same.
Revenue
| 6 months ended 25 September 2011 £000 | 6 months ended 26 September 2010 £000 | Increase / (Decrease) % | Year ended 27 March 2011 £000 | |
| Retail networks | ||||
| Bill and general | 28,032 | 25,429 | 10 | 57,889 |
| Top-ups | 47,066 | 50,177 | (6) | 98,843 |
| Retail services | 11,693 | 9,437 | 24 | 19,602 |
| Internet payments | 4,372 | 4,190 | 4 | 8,939 |
| PayByPhone | 2,560 | 2,183 | 17 | 4,501 |
| Other | 2,200 | 1,482 | 48 | 3,459 |
| Revenue | 95,923 | 92,898 | 3 | 193,233 |
Bill and general payment revenue is higher than the same period last year mainly as a result of growth in prepaid energy and local authority housing transactions in the UK and 70% growth in Romanian bill payment transactions.
The reduction in mobile top-up revenue is driven by the migration of prepaid consumers to contract in the UK and greater value for money offered by mobile operators.
Retail services revenue has increased as a result of an increase in both the number of retailers taking the services and increased volumes of SIM, parcel, debit and credit card, and ATM transactions.
Internet payment revenue growth has been explained on page 3.
PayByPhone revenues are up 17% against the same period last year. Although PayByPhone has won a good share of tenders as a consequence of the increased resources we have put in, client delays in implementations have delayed revenue growth into the second half of the year.
Other revenue includes one-off set-up fees and the recharge of development costs, but is not expected to continue at the same rate for the second half of the current year.
Net revenue
Net revenue is revenue less the cost of mobile top-ups and SIM cards where PayPoint is principal and costs incurred by PayPoint which are recharged to clients and merchants. These costs include retail agent commission, merchant service charges levied by card scheme sponsors and for PayByPhone clients, costs for the provision of call centres. Net revenue is a measure which the directors believe assists with a better understanding of the underlying performance of the group and is shown in the table below:
| 6 months ended 25 September 2011 £000 | 6 months ended 26 September 2010 £000 | Increase / (decrease) % | Year ended 27 March 2011 £000 | |
| Retail networks | ||||
| Bill and general | 16,179 | 14,892 | 9 | 33,806 |
| Top-ups | 10,747 | 11,539 | (7) | 22,683 |
| Retail services | 6,671 | 5,137 | 30 | 10,827 |
| Internet payments | 4,372 | 4,190 | 4 | 8,939 |
| PayByPhone | 1,761 | 1,488 | 18 | 3,009 |
| Other | 2,200 | 1,482 | 48 | 3,459 |
| Net revenue | 41,930 | 38,728 | 8 | 82,723 |
Net revenue on bill and general payments has increased from volume growth in energy prepayment and local authority housing in the UK and bill payment in Romania, offset by some UK clients migrating bill payments to direct debit. Net revenue is in line with transaction growth.
Top-up net revenue has decreased slightly more than revenue because margins in Romania and Ireland have reduced, offset by the positive impact of mix in the UK where the reduction in top-ups in independents is less severe than in multiple retailers. Retail services net revenue has a larger percentage increase than revenue, as credit and debit card transactions and receipt advertising do not attract retail agent commission.
Growth in net revenue from internet transactions has been explained on page 3.
PayByPhone net revenue was up 18%, lower than the growth in transactions as margin in the UK has reduced.
Network growth
Outlets have increased to 30,545 (March 2011: 29,508), an increase of 1,037. In the UK and Ireland, outlets increased by 649, more than expected, as a consequence of unfulfilled orders at last year end and lower churn. Our new virtual terminal, a software variant which can be loaded onto retailers' till systems, has been rolled out to 1,400 outlets. Our focus in the UK since the year end remains on increasing retail agent yield. In Romania, we have installed 388 outlets.
In our internet payments channel, we have added over 250 new merchants during the period, focussing on winning higher volume merchants, rather than start-ups that process little volume.
We introduced Collect+ to 584 of our retail outlets, bringing the total to 4,252.
| At 25 September 2011 | At 26 September 2010 | Increase / (decrease)1 % | At 27 March 2011 | |
| UK and Ireland | 24,162 | 23,021 | 3 | 23,513 |
| Romania | 6,383 | 5,012 | 6 | 5,995 |
| Total | 30,545 | 28,033 | 4 | 29,508 |
| Internet merchants | 5,464 | 5,522 | 5 | 5,213 |
| Collect+ outlets | 4,252 | 3,350 | 16 | 3,668 |
(1) Increase/(decrease) measured against position at 27 March 2011
Financial review
Movement in revenue and net revenue have been addressed in the operational review above.
Gross profit was £36.0 million (2010: £32.8 million), up 9.7% and the gross profit margin improved to 37.5% (2010: 35.3%) as a result of the reduction in agent commission, due to lower mobile top-ups.
Operating costs (administrative expenses) were £19.3 million (2010: £17.5 million), up 10.3%, due to some initial costs relating our new benefits contract, signage for Collect+ sites and our continuing investment in increased resources for PayByPhone.
Operating profit was £16.7 million (2010: £15.3 million), up 9.0%, excluding PayPoint's share of losses in Collect+. The operating margin1 increased slightly to 39.8% (2010: 39.5%), mainly as result of improved performance in the UK retail network.
Our share, in the period, of the loss in our parcels joint venture, Collect+, increased to £0.9 million (2010: £0.7 million) as it continues to invest in resources to grow the business.
Profit before tax was £15.8 million (2010: £14.6 million), up 8.7% on the same period last year. The tax charge was £4.5 million (2010: £4.5 million) and the estimated effective tax rate for the current financial year is 28.5% (year ended 27 March 2011: 30.9%). The reduction in tax rates reflects the decrease in the UK corporate tax rate.
Operating cash flow was £8.1 million (2010: £9.4 million) after corporation tax payments of £5.3 million (2010: £5.9 million). Capital expenditure of £1.7 million (2010: £1.1 million) comprised expenditure on new terminals, software development and ATMs. Collect+ funding was £0.8m (2010: £0.4 million). Equity dividends paid were £10.6 million (2010: £9.8 million). Net cash and cash equivalents at the period end were £21.5 million (27 March 2011 £26.5 million), including client cash of £3.0 million, down from £6.1 million at 27 March 2011. The reduction in client cash results from a change in practice in respect of ATM monies, which LINK recommended be held in trust for the benefit of retailers, which at the period end were £3.1 million (27 March 2011 £3.3 million).
(1) Operating margin is operating profit (which excludes Collect+) as a percentage of net revenue.
Related party transactions
Related party transactions are disclosed in note 5.
Risks
Risks to PayPoint's business, financial condition and operations are disclosed on pages 22 and 23.
Dividend
We have declared an interim dividend of 8.7p per share (2010: 7.8p) which will be paid on 21 December 2011 to shareholders on the register at 2 December 2011.
Liquidity and going concern
The group is profitable, cash generative, had cash of £21.5 million at the period end and an undrawn £35 million revolving term credit facility with an unexpired term of over four years. Cash and borrowing capacity is adequate to meet the foreseeable needs of the group, taking account of any risks (pages 22 and 23). The financial statements have therefore been prepared on a going concern basis.
Economic climate
Bill and general payments which account for 39% (2010: 38%) of our net revenue, have continued to be resilient, as consumers' discretion in expenditure is limited for essential services and our service continues to be popular. Utility providers in the UK continue to install new prepay gas and electricity meters, which will have a beneficial impact on our transaction volumes. There has been adverse impact on our top-up volumes as a consequence of migration from prepaid to contract and more value for money being offered to consumers. Mobile top-ups account for 23% of our net revenue (2010: 27%). The internet payment market continues to grow substantially. PayByPhone is able to offer parking authorities a more cost effective collection system for parking compared to pay and display machines, which should continue to make PayByPhone's services attractive. The convenient service for users of the fast growing online market provided by Collect+ offers opportunity for substantial growth in parcel volumes.
Outlook
For the current financial year, trading is in line with the company's expectations. Our established business is strong. We will pursue further opportunities to enhance UK retail yield by introducing new technology and services, while enhanced transaction management and information services should help our internet sales in the next financial year. Continuing progress is expected in our developing business. Our Romanian retail network will focus on improving market share with modest network growth to improve yield. PayByPhone will continue to pursue new clients and the development of technology to grow revenue and improve customer satisfaction. Collect+ will continue its intensive marketing to new clients, to extend deliveries to its existing returns clients and promote its consumer to consumer proposition. We expect PayByPhone and the Collect+ parcel service to turn to profit next financial year.
| David Newlands Chairman 24 November 2011 | Dominic Taylor Chief Executive |
CONDENSED CONSOLIDATED INCOME STATEMENT
| Continuing operations | Note | Unaudited 6 months ended 25 September 2011 £000 | Unaudited 6 months ended 26 September 2010 £000 | Audited Year ended 27 March 2011 £000 |
| Revenue | 2 | 95,923 | 92,898 | 193,233 |
| Cost of sales | 2 | (59,913) | (60,079) | (122,567) |
| Gross profit | 36,010 | 32,819 | 70,666 | |
| Administrative expenses | (19,316) | (17,510) | (34,614) | |
| Operating profit | 16,694 | 15,309 | 36,502 | |
| Share of loss of joint venture | (935) | (726) | (1,541) | |
| Investment income | 87 | 38 | 88 | |
| Finance costs | (23) | (64) | (143) | |
| Profit before tax | 15,823 | 14,557 | 34,456 | |
| Tax | 3 | (4,510) | (4,496) | (10,614) |
| Profit for the period | 11,313 | 10,061 | 23,842 | |
| Attributable to: | ||||
| Equity holders of the parent | 11,329 | 10,061 | 23,883 | |
| Non-controlling interest | (16) | - | (41) | |
| 11,313 | 10,061 | 23,842 | ||
| Earnings per share | ||||
| Basic | 4 | 16.7p | 14.9p | 35.2p |
| Diluted | 4 | 16.7p | 14.8p | 35.1p |
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| Note | Unaudited 6 months ended 25 September 2011 £000 | Unaudited 6 months ended 26 September 2010 £000 | Audited Year ended 27 March 2011 £000 | |
| Exchange differences on translation of foreign operations | 8 | 655 |
| (72) |
| Other comprehensive income / (loss) for the period | 655 | (837) | (72) | |
| Profit for the period | 11,313 | 10,061 | 23,842 | |
| Total comprehensive income for the period | 11,968 | 9,224 | 23,770 | |
| Attributable to: | ||||
| Equity holders of the parent | 11,984 | 9,224 | 23,811 | |
| Non-controlling interest | (16) | - | (41) | |
| 11,968 | 9,224 | 23,770 |
CONDENSED CONSOLIDATED BALANCE SHEET
| Note | Unaudited 25 September 2011 £000 | Unaudited 26 September 2010 £000 | Audited 27 March 2011 £000 | |
| Non-current assets | ||||
| Goodwill | 56,744 | 56,058 | 57,133 | |
| Other intangible assets | 1,344 | 1,277 | 1,329 | |
| Property, plant and equipment | 14,566 | 13,851 | 14,520 | |
| Investment in joint venture | - | - | 135 | |
| Deferred tax asset | 1,079 | 904 | 1,116 | |
| Investment | 435 | 405 | 435 | |
| 2 | 74,168 | 72,495 | 74,668 | |
| Current assets | ||||
| Inventories | 1,412 | 1,582 | 915 | |
| Trade and other receivables | 19,006 | 18,470 | 17,103 | |
| Cash and cash equivalents | 7 | 21,511 | 22,928 | 26,464 |
| 41,929 | 42,980 | 44,482 | ||
| Total assets | 116,097 | 115,475 | 119,150 | |
| Current liabilities | ||||
| Trade and other payables | 28,834 | 30,563 | 32,996 | |
| Current tax liabilities | 4,491 | 3,930 | 5,287 | |
| Short-term borrowings | - | 10,000 | - | |
| Obligations under finance leases | 9 | 11 | 32 | |
| 33,334 | 44,504 | 38,315 | ||
| Non-current liabilities | ||||
| Other liabilities | 225 | 175 | 240 | |
| 225 | 175 | 240 | ||
| Total liabilities | 33,559 | 44,679 | 38,555 | |
| Net assets | 82,538 | 70,796 | 80,595 | |
| Equity | ||||
| Share capital | 8 | 226 | 226 | 226 |
| Investment in own shares | 8 | (216) | (216) | (216) |
| Share premium | 8 | 25 | 25 | 25 |
| Share based payment reserve | 8 | 2,566 | 2,476 | 3,005 |
| Translation reserve | 8 | 1,126 | (294) | 471 |
| Retained earnings | 8 | 78,868 | 68,579 | 77,125 |
| Total equity attributable to equity holders of the parent company | 82,595 | 70,796 | 80,636 | |
| Non-controlling interest | (57) | - | (41) | |
| Total equity | 82,538 | 70,796 | 80,595 |
Condensed Consolidated statement of changes in equity
| Note | Unaudited 6 months ended 25 September 2011 £000 | Unaudited 6 months ended 26 September 2010 £000 | Audited Year ended 27 March 2011 £000 | |
| Opening equity | 80,595 | 70,744 | 70,744 | |
| Profit for the period | 11,313 | 10,061 | 23,842 | |
| Dividends paid | (10,565) | (9,765) | (15,041) | |
| Movement in own shares | 5 | - | 154 | 154 |
| Exchange differences on translation of foreign operations | 655 | (837) | (72) | |
| Movement in share based payment reserve | (439) | (208) | 321 | |
| Adjustment on share schemes vesting | 979 | 647 | 647 | |
| Closing equity | 82,538 | 70,796 | 80,595 |
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
| Note | Unaudited 6 months ended 25 September 2011 £000 | Unaudited 6 months ended 26 September 2010 £000 | Audited Year ended 27 March 2011 £000 | |
| Net cash flow from operating activities | 9 | 8,098 | 9,444 | 31,137 |
| Investing activities | ||||
| Investment income | 69 | 30 | 70 | |
| Purchase of property, plant and equipment | (1,670) | (1,051) | (3,160) | |
| Proceeds from disposal of property, plant and equipment | 23 | - | 61 | |
| Investment | - | - | (30) | |
| Loan to joint venture | 5 | (800) | (400) | (1,350) |
| Net cash used in investing activities | (2,378) | (1,421) | (4,409) | |
| Financing activities | ||||
| Repayments of obligations under finance leases | (23) | (3) | (22) | |
| Receipt / (repayment) of short-term borrowings | - | 4,000 | (6,000) | |
| Dividends paid | (10,565) | (9,765) | (15,041) | |
| Net cash used in financing activities | (10,588) | (5,768) | (21,063) | |
| Net (decrease)/increase in cash and cash equivalents | (4,868) | 2,255 | 5,665 | |
| Cash and cash equivalents at beginning of period | 26,464 | 20,769 | 20,769 | |
| Effect of foreign exchange rate changes | (85) | (96) | 30 | |
| Cash and cash equivalents at end of period | 21,511 | 22,928 | 26,464 |
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Accounting policies
These condensed financial statements have been prepared in accordance with IAS 34 as adopted by the European Union on an historical cost basis and the same accounting policies, presentation methods and methods of computation are followed in this condensed set of financial statements as applied in the group's latest annual audited financial statements.
Basis of preparation
The condensed financial statements contained in this report are unaudited, but have been formally reviewed by the auditors and their report to the company is set out on page 24. The information shown for the year ended 27 March 2011, which is prepared under International Financial Reporting Standards (IFRS), does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The report of the auditors on the statutory accounts for the year ended 27 March 2011, prepared under IFRS, was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under sections 498 (2) or (3) of the Companies Act 2006 and has been filed with the Registrar of Companies.
The directors are satisfied that the group has adequate resources to continue in operational existence for the foreseeable future, a period of not less than 12 months from the date of this report. The group's liquidity and going concern review can be found in the Management Report on page 9.
2. Segmental reporting, net revenue analysis and cost of sales
(i) Segmental information
PayPoint is a service provider for consumer payment transactions (payments and receipts) through various distribution channels, involving the processing of high volume transactions, the management of retail agents, clients and online merchants, the settlement of funds (collection and transmission) and transmission of data in secure environments, by the application of technology.
The application of technology is directed on a group basis from the group's executive team (consisting of the Chief Executive Officer, Finance Director, Business Development Director and Chief Information Officer) to develop products across the business, prioritised on an economic value basis (generally by product), rather than on a subsidiary by subsidiary basis. As the business has high fixed operating costs, the company regards the analysis of net revenue as the most reliable indication of contribution on a product by product basis and analysis of net revenue is shown in the Management Report.
Whilst the group has a number of different products, these do not meet the definition of different segments under IFRS 8 and, therefore, the group has only one reportable class of business, being a payment service provider for consumer payment transactions.
(ii) Reconciliation of revenue to net revenue, analysis of cost of sales
Revenue comprises the value of sales (excluding VAT and sales taxes) of products and services in the normal course of business.
Net revenue is revenue less the cost of mobile top-ups and SIM cards where PayPoint is principal and costs incurred by PayPoint which are recharged to clients and merchants. These costs include retail agent commission, merchant service charges levied by card scheme sponsors and cost for the provision of call centres to PayByPhone clients.
Net revenue
| 6 months ended 25 September 2011 £000 | 6 months ended 26 September 2010 £000 | Year ended 27 March 2011 £000 | |
| Revenue - transaction processing | 95,240 | 92,135 | 191,742 |
| - rental income of ATMs | 683 | 763 | 1,491 |
| Revenue | 95,923 | 92,898 | 193,233 |
| less: | |||
| Commission payable to retail agents | (33,120) | (34,579) | (71,322) |
| Cost of mobile top-ups and SIM cards as principal | (20,076) | (18,896) | (37,696) |
| Card scheme sponsors' charges and call centre charges | (797) | (695) | (1,492) |
| Net revenue | 41,930 | 38,728 | 82,723 |
| Cost of sales | |||
| 6 months ended 25 September 2011 £000 | 6 months ended 26 September 2010 £000 | Year ended 27 March 2011 £000 | |
| Cost of sales | |||
| Commission payable to retail agents | 33,120 | 34,579 | 71,322 |
| Cost of mobile top-ups and SIM cards as principal | 20,076 | 18,896 | 37,696 |
| Card scheme sponsors' charges and call centre charges | 797 | 695 | 1,492 |
| Depreciation and amortisation | 1,652 | 1,912 | 3,612 |
| Other | 4,268 | 3,997 | 8,445 |
| Total cost of sales | 59,913 | 60,079 | 122,567 |
Geographical information:
| 6 months ended 25 September 2011 £000 | 6 months ended 26 September 2010 £000 | Year ended 27 March 2011 £000 | |
| Revenue | |||
| UK | 72,136 | 71,675 | 148,737 |
| Ireland | 11,006 | 11,204 | 22,475 |
| Romania | 11,998 | 9,559 | 21,036 |
| North America | 783 | 460 | 985 |
| Total | 95,923 | 92,898 | 193,233 |
| Non-current assets | |||
| UK | 71,642 | 70,486 | 71,850 |
| Ireland | - | 44 | - |
| Romania | 2,108 | 1,711 | 2,329 |
| North America | 418 | 254 | 489 |
| Total | 74,168 | 72,495 | 74,668 |
3. Tax on profit of ordinary activities
| 6 months ended 25 September 2011 £000 | 6 months ended 26 September 2010 £000 | Year ended 27 March 2011 £000 | |
| Current tax | 4,473 | 4,233 | 10,565 |
| Deferred tax | 37 | 263 | 49 |
| Total | 4,510 | 4,496 | 10,614 |
4. Earnings per share
The basic and diluted earnings per share are calculated on the following profit and number of shares.
| 6 months ended 25 September 2011 £000 | 6 months ended 26 September 2010 £000 | Year ended 27 March 2011 £000 | |
| Profit for the period attributable to equity holders of the parent | 11,329 | 10,061 | 23,883 |
| Number of shares | Number of shares | Number of shares | |
| Weighted average number of shares (for basic earnings per share) | 67,772,332 | 67,675,017 | 67,721,190 |
| Potential dilutive ordinary shares: | |||
| Deferred share bonus | 157,996 | 117,565 | 157,914 |
| Diluted basis | 67,930,328 | 67,792,582 | 67,879,104 |
| Earnings per share | |||
| Basic | 16.7p | 14.9p | 35.2p |
| Diluted | 16.7p | 14.8p | 35.1p |
5. Related party transactions
PayByPhone
During the period, the company subscribed for additional share capital in Verrus Mobile Technology Inc for £1,756,000 and Verrus UK Limited has subscribed for additional share capital in Mobile Payment Services SAS for £133,000.
Collect+
During the period, PayPoint has lent Drop and Collect Limited (its 50/50 joint venture with Yodel, which trades as Collect+) £800,000, bringing the total amount of the loan outstanding to £3,900,000 (27 March 2011: £3,100,000). This has been treated as part of the investment in the joint venture.
At 25 September 2011, there were £28,000 of unrecognised losses in Collect+ (27 March 2011: £Nil).
Investment in OB10
OB10 specialises in electronic invoicing. PayPoint's shareholding at 25 September 2011 represented 1.02% of the issued capital of OB10 (27 March 2011: 1.02%).
| 6 months ended 25 September 2011 £000 | 6 months ended 26 September 2010 £000 | Year ended 27 March 2011 £000 | |
| Investment at cost | 435 | 405 | 435 |
In the view of the directors, the aggregate cost of £435,000 represents the fair value of the investment in the shares.
David Newlands, who is also Chairman of OB10, Dominic Taylor, George Earle, Eric Anstee and Nick Wiles hold shareholdings in OB10 as follows:
| Directors' shareholding in OB10 | 6 months ended 25 September 2011 % | 6 months ended 26 September 2010 % | Year ended 27 March 2011 % |
| David Newlands | 2.87 | 4.73 | 2.87 |
| Dominic Taylor | 1.44 | 1.42 | 1.44 |
| George Earle | 0.40 | 0.42 | 0.4 |
| Nick Wiles | 1.02 | 1.04 | 1.02 |
| Eric Anstee | 0.08 | 0.08 | 0.08 |
Share based payments
During the period, the Deferred Share Bonus plan (DSB) and long term incentive plan (LTIP) did not vest and, as a result, no treasury shares were released to the relevant executive directors and senior managers.
6. Dividend
The interim dividend of 8.7p (2010: 7.8p) was declared on 24 November 2011 and, accordingly, has not been recorded as a liability as at 25 September 2011. The total dividend in respect of the year ended 27 March 2011 was 23.4p per share.
7. Cash and cash equivalents
Included within cash and cash equivalents is £3.0 million (25 September 2010: £6.7 million, 27 March 2011: £6.1 million) relating to monies collected on behalf of PayPoint clients where PayPoint has title to the funds (client cash). An equivalent balance is included within trade payables. The decrease in client cash results from of a change in the practice in respect of ATM monies, where LINK recommended that monies owed to retailers be held in trust accounts. Accordingly, the balance held in trade creditors has decreased by the same amount. At 25 September, amounts held in trust, owed to retailers in respect of ATM monies amounted to £3.1 million (held by PayPoint, not in trust at 27 March 2011: £3.3 million).
The group operates cash pooling amongst its various bank accounts in the UK and, therefore, individual accounts can be overdrawn without penalties being incurred so long as the overall position is in credit. At 25 September 2011, the group's cash was £21.5 million (27 March 2011: £26.5 million).
8. Share capital and reserves
| 6 months ended 25 September 2011 £000 | 6 months ended 26 September 2010 £000 | Year ended 27 March 2011 £000 | |
| Authorised share capital | |||
| 4,365,352,200 ordinary shares of 1/3p each | 14,551 | 14,551 | 14,551 |
| Called up, allotted and fully paid share capital | |||
| 67,806,973 ordinary shares of 1/3p each | 226 | 226 | 226 |
| Investment in own shares | |||
| At start of period | (216) | (370) | (370) |
| Used on share scheme vesting | - | 154 | 154 |
| At end of period | (216) | (216) | (216) |
| Share premium | |||
| At start of period | 25 | 25 | 25 |
| At end of period | 25 | 25 | 25 |
| Share based payment reserve | |||
| At start of period | 3,005 | 2,684 | 2,684 |
| Additions in period | 540 | 558 | 1,088 |
| Released in period | (979) | (801) | (801) |
| Other adjustments | - | 35 | 34 |
| At end of period | 2,566 | 2,476 | 3,005 |
| Translation reserve | |||
| At start of period | 471 | 543 | 543 |
| Movement in the period | 655 | (837) | (72) |
| At end of period | 1,126 | (294) | 471 |
| Retained earnings | |||
| At start of period | 77,125 | 67,636 | 67,636 |
| Profit for the period | 11,313 | 10,061 | 23,842 |
| Non-controlling interest in loss for year included in above | 16 | - | 41 |
| Dividends paid | (10,565) | (9,765) | (15,041) |
| Adjustment on share scheme vesting | 979 | 647 | 647 |
| At end of period | 78,868 | 68,579 | 77,125 |
9. Notes to the cash flow statement
| 6 months ended 25 September 2011 £000 | 6 months ended 26 September 2010 £000 | Year ended 27 March 2011 £000 | |
| Profit before tax | 15,823 | 14,557 | 34,456 |
| Adjustments for items that do not affect cash: | |||
| Depreciation on property, plant and equipment | 1,494 | 1,753 | 3,295 |
| Amortisation of intangible assets | 158 | 159 | 317 |
| Share of losses in joint venture | 935 | 726 | 1,541 |
| Net interest (income) / expense | (64) | 26 | 55 |
| Share based payment expense | 540 | 593 | 1,088 |
| Operating cash flows before movements in working capital | 18,886 | 17,814 | 40,752 |
| Increase in inventories | (497) | (15) | 209 |
| (Increase) / decrease in receivables | (1,706) | 4,732 | 6,337 |
| (Decrease) / increase in payables | |||
| - client cash | (3,128) | 224 | (686) |
| - other payables | (152) | (7,389) | (4,476) |
| Cash generated by operations | 13,403 | 15,366 | 42,136 |
| Corporation tax paid | (5,289) | (5,886) | (10,950) |
| Interest and bank charges paid | (16) | (36) | (49) |
