Preliminary Results and update on the impact of Covid-19
Year ended
FINANCIAL HIGHLIGHTS
Year ended 31 March | 2020 | 2019 | Change |
Revenue | £213.3m | £211.6m | 0.8% |
Net revenue1 | £120.7m | £116.6m | 3.5% |
Operating margin2 | 47.2% | 46.3% | 0.9ppts |
Profit before tax excluding exceptional items | £56.8m | £53.8m | 5.6% |
Profit before tax | £56.8m | £54.7m | 3.8% |
Diluted earnings per share | 66.3p | 64.8p | 2.3% |
Cash generation3 | £66.4m | £62.8m | 5.7% |
Ordinary dividend paid per share | 47.2p | 46.2p | 2.2% |
Additional dividend paid per share | 36.8p | 36.7p | 0.3% |
Ordinary reported dividend per share | 39.2p | 39.2p | (0.0)% |
Net corporate (debt)/cash4 | £(12.0)m | £3.5m | (444.7)% |
Cash and cash equivalents | £93.8m | £37.5m | 150.1% |
Resilient performance delivered from a strong business platform
- Embed
PayPoint at the heart of convenience retail
- PayPoint One was live in 16,098 sites at
31 March 2020 , growth of 3,217 year-on-year, with 98.9% of PayPoint’s independent retailer partners now using the platform and the legacy T2 terminal successfully retired from our independent estate. The original target of 15,800 was exceeded and the revised target of 16,500 sites achieved on21 February 2020 although subsequently a number of sites became non-operational due to Covid-19. - PayPoint One average weekly service fee per site increased to £15.4 from £15.1 last year and total service fee net revenue increased 28.1% to £13.1 million.
- Card payments net revenue increased by 10.9% to £8.7 million. Card payments estate declined by 444 sites from
30 September 2019 to 9,435 sites at31 March 2020 , largely due to non-operational sites from Covid-19.
- Become the definitive parcel point solution
- Parcel volumes increased by 12.7%, primarily due to good growth from new parcel partners.
- On 6th
April 2020 ,PayPoint acquired the 50% of the joint operation that Yodel owned resulting in Collect+ becoming a fully owned brand within thePayPoint Group .
- Sustain leadership in ‘pay-as-you-go’ and grow digital bill payments
- In the
UK 19 new clients were contracted including Monese; 22 contracts were renewed includingEDF andMonzo Bank and 7 existing clients signed up for additional services, notably Shell taking our MultiPay service. - Continued strong growth in MultiPay, transactions increased by 20.4% and net revenue increased by 25.7%.
Romania performed well, maintaining its strong position with good growth in net revenue from margin improvement.
- Innovate for future growth and profits
- New self-service proposition trialled in
Romania with the development of an automatic vending machine (AVM) to offer a new and convenient channel to consumers. - Continued investment into our EPOS platform with number of improvements to benefit our retailer partners.
- Card net settlement fully operational and live in 399 sites.
- MultiPay PayByLink capability developed to extend functionality.
- Organisation and service delivery
- An internal reorganisation to deliver a more streamlined and accountable structure across all business lines including the appointment of a new Retail Services Director responsible for the end-to-end delivery of products and services to our retailer partners and the management of relationships within the network.
- Salesforce CRM rolled-out to Sales and Head Office teams, improving efficiencies and delivering an enhanced service for our retailer partners.
- Improved the onboarding service for new retailers by bringing PayPoint One terminal installation in-house, survey results5 show over 90% of retailers questioned rated the installation as good or very good.
Financial highlights
- Net revenue of £120.7 million (2019: £116.6 million) increased by 3.5% on a reported basis and increased by 4.1% on an underlying basis, which excludes the £0.7 million prior year impact from the Yodel renegotiation.
- Underlying net revenue growth, which excludes the Yodel renegotiation mentioned above, was driven by a 10.5% growth in
UK retail services, resilient performance inUK bill payments and top-ups which grew by 0.3% and growth of 5.5% inRomania . - Total costs of £63.9 million6 (2019: £62.8 million) increased by 1.8% on a reported basis and decreased by 2.0% on an underlying basis, which excludes the one-off benefit in the prior period of £2.4 million from improved VAT recovery. Total costs decreased primarily due to the £2.1 million variable pay benefit arising from the decision to cancel management bonuses due to Covid-19 and the release of share based payment accruals, although this was partly offset by increased costs for additional resources relating to the parcel partners integration, contact centre and client services team and amortisation of contract set up expenses.
- Underlying second half costs, excluding a one-off benefit in the prior period of £0.7 million from improved VAT recovery, decreased by £2.6 million from £33.3 million to £30.7 million due to the £2.1 million variable pay benefit and implementation of cost savings.
- Profit before tax excluding the variable pay benefit and exceptional items of £54.7m increased by 1.7%. This was in line with the expectations we set in our
23 January 2020 Trading Statement, before the escalation of the Covid-19 pandemic and subsequent actions and events and the decision to cancel management bonuses. - Profit before tax excluding exceptional items of £56.8 million (2019: £53.8 million) increased by 5.6%. Underlying profit before tax excluding exceptional items increased by 12.3%, which excludes the one-off VAT recovery benefit of £2.4 million and £0.7 million Yodel renegotiation impact in the prior year.
- Net corporate debt of £12.0 million (2019: net corporate cash £3.5 million) reflects cash balances of £58.0 million less borrowings of £70.0 million from the revolving credit facility, which was fully drawn down to ensure
PayPoint was in a strong position to withstand a sustained period of disruption to trading should it occur. - Final ordinary dividend of
15.6 pence per share (2019:23.6 pence per share) to be paid to shareholders in equal instalments of7.8 pence per share on27 July 2020 and28 September 2020 .
Covid-19 impact and current trading
A number of measures have been implemented to support the convenience retail community amid the Covid-19 outbreak. The initiatives include a campaign to celebrate Retail Heroes, a £25,000 contribution to the
PayPoint’s Retail Heroes is being launched in May with the aim of recognising retailer partners in the
Finally,
In response to the Covid-19 outbreak, and in line with the related public health guidance and legislation issued by the
Whilst it is still too early to have visibility on the longer-term consequences that will ensue following Covid-19, the impact of consumers avoiding cash and remaining at home has significantly reduced ATM transactions and parcel volumes. Parcels have also been impacted by some carriers suspending their redirect to local store services during this period. Card payments have benefitted as consumers tended to use their local convenience stores more and in replacement of going to restaurants and entertainment venues. Bill payment transactions have reduced as energy companies have provided pre-pay consumers with credit, services including transport have significantly reduced, clients have encouraged digital payments and consumers increased their average top-up amounts.
This table below compares the volume of transactions with the comparable periods in prior years. Whilst there are always additional factors that impact trading such as the impact of warmer temperatures seen on the energy business, it provides a helpful insight as to the impact of Covid-19 on consumer behaviour:
Service | Full year 19/20 vs 18/19 % increase/ (decrease) | 1 - 17 April FY20/21 vs FY19/20 % increase/ (decrease) | 18 April - 17 May FY20/21 vs FY19/20 % increase/ (decrease) |
Bill payment transactions7 | (0.9%) | (31.5)% | (24.8)% |
Top-up transactions | (11.2%) | (20.1)% | (19.0)% |
ATM transactions | (4.1%) | (39.9)% | (33.1)% |
Card payment transactions | 20.6% | 75.3% | 74.4% |
Parcels | 12.7% | (54.9)% | (22.8)% |
“The past year has been a resilient one for
The core characteristics of the business remain unchanged, with a strong balance sheet, clear business model, a broad and resilient earnings’ base with the opportunity to use technology to adapt our business model and strong cash generation which supports the payment of a dividend. We are also focused on ensuring that the business is flexible and able to rapidly respond to the dynamic marketplace and trends which will inevitably be accelerated by the Covid-19 crisis. Taking these factors into account the board is confident in the long-term resilience of the business and is recommending a final dividend of 15.6p.”
Enquiries
A presentation for analysts is being held at
CHAIRMAN’S STATEMENT
Following the announcement made on
Nick joined the Board in
Consequently, I have stepped down as Senior Independent Director and have taken over from Nick as Chairman of the Board and Chair of the Nomination Committee. I will continue to carry out my chairmanship duties of the Audit Committee until such time as a new Chair of the Audit Committee can be appointed.
We also say goodbye to
The Board wish Rachel all the best for the future and thank her for her significant contribution during her time in the business.
I would also like to welcome
We have also seen some changes in the members of our Leadership Team this year. We have said goodbye to Susan Court, Head of
Financially, the Board’s immediate priority is to continue to preserve PayPoint’s balance sheet strength to ensure
The Board’s approach to the setting of the ordinary dividend has not materially changed and follows the following capital allocation priorities:
- investment in the organic business; and
- progressive growth in ordinary dividends targeting a cover ratio of 1.2 to 1.5 times earnings8;
whilst ensuring that leverage is not substantially increased even in a scenario whereby the trading patterns seen in late April continue until the end of
Chairman
CHIEF EXECUTIVE’S STATEMENT
At the time of writing, the final outcome and achievements in the business over the past year have been overtaken by the immediate challenges we face in response to Covid-19 and its impact on our business.
Our priority through this crisis is to keep our people safe and well, while providing the necessary support to our clients and retailer partner network, as we continue to serve some of the most vulnerable in our communities. As we reported in
Ahead of this crisis, the Board had already commenced a strategic and organisational review of the business as it considered how best to adapt and invest to maximise the opportunities available in an increasingly competitive environment and one in which the relationships with our clients and our retailer partner network are central to our long-term future success. One of the inevitable consequences of this situation will be the need to respond more quickly to these challenges and some of the trends which we expect to accelerate following this crisis.
The work the Board has done continues to support our core strategic priorities for the business: embedding
Over the coming months the impact of Covid-19 will continue to create significant uncertainties in our business. However,
Finally, I am deeply grateful to both our incredible people who have been working so hard through this terrible situation and the strong leadership from the Leadership Team in response to the challenges we are facing.
Chief Executive
BUSINESS REVIEW
2019/20 performance
This financial year, revenue grew by £1.7 million (0.8%) to £213.3 million. Underlying9 net revenue grew by £4.8 million (4.1%) to £120.7 million with growth across the majority of business areas.
Pre-tax profits before reflecting the “variable pay benefit” of £2.1 million was £54.7 million and was in line with the expectations we set in our
On
For the year ended
Outlook and dividend
At this early stage in the year we are not in a position to predict the full nature, extent and duration of the financial impact of Covid-19 on the business and as a result there is a broad range of potential profit outcomes for both the current year and further into the future.
The core characteristics of the business remain unchanged, with a strong balance sheet, clear business model, a broad and resilient earnings’ base with the opportunity to use technology to adapt our business model and strong cash generation which supports the payment of a dividend.
Current trading has demonstrated good resilience in the bill payments and top-ups businesses. ATMs and parcels have been more severely affected although card payments have benefitted from increased sales in the convenience sector. For the current year, we have reviewed a number of scenarios. Our base case assumes that the trading patterns seen during the second half of April and into May will continue through until the end of June and thereafter the business will see a gradual recovery, with the rate of this recovery being impacted by overall economic conditions. Whilst there are many sensitivities that sit behind these base assumptions, at this stage we view this as a prudent basis from which to manage the business, maximise our resilience during this crisis and take opportunities as they emerge for the longer term.
Ahead of this crisis we had anticipated the ending of the
As a measure of the confidence the Board has in the resilience of
MARKET OVERVIEW
PayPoint’s retailer partner network is the largest of its’ kind. Our superior network means 99.5% of the urban population live within one mile of a
The recent events surrounding the outbreak of Covid-19 and the measures taken by the government has, at the time of writing, had an impact in the markets that we operate in. Whilst it is too early to understand the longer term structural changes that will ensue following Covid-19, we have included current trends in the market overview.
In the
PayPoint’s (As at | |||||
Independent retailers | 18,500 | ||||
Symbol group independents | 14,400 | ||||
Specialist and confectionery, tobacconist & news sites | 6,000 | ||||
Symbol and independent retailers | 38,900 | 17,700 | |||
Multiple groups in convenience retail1 | 13,500 | ||||
Supermarkets and discounters | 10,200 | ||||
Managed groups | 23,700 | 9,100 | |||
Total | 62,600 | 26,800 | |||
Convenience retail
Before Covid-19
Convenience retail growth has been driven by consumers’ habits changing towards smaller but more frequent shopping trips at their local stores.
- Total convenience sector sales are estimated to have grown by 3% in 2019 to over £40bn15, compared to overall food retail growth of 1.7%. Convenience sales are expected to grow at an annual compound rate of 3.1% until 202416.
- Convenience retailer sites increased marginally to 46,400 sites across the
UK , driven by Multiple groups opening additional sites.
Current impact of Covid-19
Home bound consumers have driven the increase in local shopping for essential items, benefiting local convenience stores and specialist food and drink retailers, such as off licences and greengrocers.
°Convenience sales since the beginning of Covid-19 lockdown (24 March –
Our PayPoint One technology is well suited for symbol and independent convenience retailers. In conjunction with additional
Card payments
Before Covid-19
Card payments, particularly contactless, continued to displace cash as a payment method.
UK Convenience store card payments transactions increased by 10.5%18. Contactless payments increased 12.3%19.- Average transaction values declined by 9.0%20 to £15.48.
- Over 90% (2019: 88%) of convenience retailers offer debit and credit card facilities with 88% (2019: 80%) accepting contactless payments21.
Current impact of Covid-19
Card payments have benefited from the increase in convenience store’ sales and health concerns related to handling cash.
°Contactless payment limit increased to £45 from £30 from
Cash-Out
Before Covid-19
Cash remains a very popular payment method, and is the second most frequently used payment method in the
- Estimated 55 million over the counter branch withdrawals in 201822.
- 3,303 bank branch closures between
January 2015 andAugust 2019 , around 34% of the network23. - LINK’s ATM transactions declined by 11.3% to an average of 2,558 million transactions24, in the 12 months to
February 2020 . - LINK’s ATM network declined by 2,861 (4.5%) to 60,291 sites in
December 2019 25.
Current impact of Covid-19
ATM activity has reduced because of temporary retailer closures and health concerns related to handling of cash.
- Weekly transaction volumes have reduced to c21 million transactions26, c60% lower than similar weeks in 2019. LINK’s ATM network reduced to 53,874 (c10% from
December 2019 ) by17 April 2020 . - It is likely consumers’ cash usage habits will fundamentally change, however the need for cash access, as a contingency and for vulnerable consumers, will continue to be important. LINK has suggested a possible fundamental review and potential restructuring of the country’s ATM network and its business model27.
PayPoint’s ATM merchant replenishment model allows retailers to recycle cash received from bill payments into the ATM. This model is more cost effective for both
Parcels
Before Covid-19
- Interactive Media in
Retail Group (IMRG) forecastUK parcel volumes (inNovember 2019 ) to decline by 5.6% year-on-year in 201928 to 1.4bn parcels. - The pick-up and drop-off (PUDO) market comprises Click and Collect, returns and send propositions. The Click and Collect market is 11% of all volumes c.150 million parcels per year and is expected to double by 202529. Returns and send volumes are estimated at c.185 million and c.380 million parcels per year respectively30.
Current impact of Covid-19
- Online clothing sales, a large sector of the PUDO click and collect volumes, have reduced by c30% year on year for the four weeks following
15 March 2020 31. - Some Parcel carriers have suspended their redirect services decreasing volumes.
As
Bill payments and top-ups
Before Covid-19
- Cash payments in the
UK declined by 16% in 201832. - Energy:
- The price cap for pre-pay customers reduced to £1,200 per year in
April 2020 33, 3.4% lower than the cap set inApril 2019 . - Non-Big Six energy providers combined market share grew marginally to 26% (2018: 25%)34.
- OVO Group Ltd’s acquisition of
SSE Energy Services Group Ltd was cleared by the Competition and Markets Authority inDecember 2019 35. - In 2019, 4.4 million domestic smart meters were installed to reach 19.3 million of 51.8 million36 total meters.
- The price cap for pre-pay customers reduced to £1,200 per year in
- Number of pre-paid mobile subscriptions declined by 6.2% to 25.9 million subscribers37, with more customers topping up online.
Current impact of Covid-19
- The
Department for Business, Energy and Industrial Strategy and domestic energy supply companies agreed principles to support energy customers impacted by Covid-19 including extending discretionary/ friendly credit or sending out a pre-loaded top up card38. - Smart meter installations are slow; most suppliers have decided to carry out emergency metering work only39.
- Energy suppliers encouraging consumers to switch to digital payments.
There are c435 million bill payments per year40 with cash payments being the preferred payment method.
Before Covid-19
- Cash usage continued to grow as reflected by PSP ATM cash withdrawals increasing by 12% in 2019 to RON 221 billion in 201941.
- Card payments are growing in usage with PSP processing RON 72 billion in 2019, a 23.6% increase from 201814.
- Grocery and pharmacy footfall increased c15% year on year in first two weeks of
March 2020 42.
Current impact of Covid-19
°Grocery and pharmacy footfall fell by over 40% in the initial lock down and was still 21% lower by the second week of
PROGRESS AGAINST OUR STRATEGIC PRIORITIES
PayPoint’s strategy is to maximise its opportunity in the dynamic markets in which it operates by leveraging its leading retailer network, scalable technology and payments platform. The strategy is executed through the following priorities identified in the 2018/19 annual report:
- Embed
PayPoint at the heart of convenience retail. PayPoint becomes the definitive parcel point solution.- Sustain leadership in ‘pay-as-you-go’ and grow digital bill payments.
- Innovate future growth and profits.
Progress against these priorities is set out below.
PRIORITY 1: EMBED PAYPOINT AT THE HEART OF CONVENIENCE RETAIL
Progress in 2019/20
- PayPoint One was live in 16,098 sites at
31 March 2020 , representing growth of 3,217 since last year. The original target of 15,800 was exceeded and whilst the revised target of 16,500 live sites at the year end was not met due to non-operational sites due to Covid-19, this target was achieved on21 February 2020 :- Retirement of legacy T2 terminals from the
UK independent retailer estate completed by31 March 2020 , 98.9%43 of PayPoint’s independent retailer partners are now using PayPoint One. - Average weekly service fee revenue per site increased to £15.4 (2019: £15.1) benefitting from the annual price indexation. EPoS Pro was live in 838 sites, growth of 193 since last year.
- After a successful national trial, the Booker EPoS link is now available to PayPoint One Pro sites. Retailers will benefit from daily price updates, monthly consumer promotions, the ability to place orders through the PayPoint One mobile app and receive electronic delivery notes to update stock.
- Retirement of legacy T2 terminals from the
- Card payments was live in 9,435 sites at
31 March 2020 , a decline of 444 sites from30 September 2019 , largely due to non-operational sites from Covid-19:- Card payment transactions grew by 20.6% to 136.8 million.
- Net revenue increased 10.9% to £8.7 million. The effect of the increased number of transactions was partly offset by lower average transaction values arising from the growth in contactless payments. The average transaction value was £11.97, a reduction from £12.60 achieved in 2019.
- Operational improvements and new pricing structures have reduced the card payments churn rate, excluding Covid-19 suspended sites, by 2.2ppts to 14.4% (2019: 16.6%).
- Launched rollout of card payments net settlement functionality allowing the offset of bill payments cash due from retailer partners against funds due to retailer partners for card payments, this is now live in 399 sites.
- ATMs were live in 3,620 sites at
31 March 2020 , a decrease of 207 since31 March 2019 , largely due to non-operational sites from Covid -19:- Secured a new significant ATM client and rolled out 141 ATMs to its leisure centres.
PayPoint continued to focus on relocating machines from low performing sites to better locations.- The average monthly transactions per site per month grew by 2.7% to 1,809 transactions. ATM transactions declined by 4% to 40.4 million, less than the general market decline of 11.3%44 before Covid-19.
- Net revenue decreased 3.5% to £11.9 million, primarily due to the reduction in LINK interchange fees (5% in
July 2018 and 5% inJanuary 2019 ) and lower transactions. Paypoint have been actively converting surcharging ATMs to free ATMs, under LINK’s Financial Inclusion scheme. This activity has contributed to building an estate of over 160 free PayPoint ATMs, that facilitate free access to cash to the most vulnerable in society.
- Continued focus on service delivery improvement:
- Continued investment into our EPoS platform to facilitate further expansion of features and ensure continued delivery of benefits to our retailer partners. This has included improved processing speed for transactions and so reducing our server use, implementing new operational monitoring to better manage the platform, redesigned EPoS configuration of communication with the till and redesigning back end reporting to be faster and report over longer periods.
- Introduced ‘Early life project’ and “Retailer end to end management’ initiatives to support retailers.
- A Retail Services Director has been recruited and will start on
1 July 2020 , to take direct responsibility for the delivery of products and services to our retailer partner network and the management of our relationships in the network. The new structure will bring together our Field, Operations, Contact Centre and Product teams so all are focused on delivering improved value to retailers. - Extended our in-house terminal maintenance and repairs to include PayPoint One and PPoS terminals. Terminal swap rates reduced by 57% driven by stability of PayPoint One and improved quality of repairs from in-house maintenance which ultimately improved customer service and experience.
- Deployed the lead to sales feature of Salesforce CRM, a cornerstone to delivery of our strategy, enabling paperless sign up supported by a system-driven workflow which has improved data accuracy and has reduced timeframes from prospecting to installation. In addition to reducing manual paper based processes this investment has supported our move to remote working.
PRIORITY 2: PAYPOINT BECOMES THE DEFINITIVE PARCEL POINT SOLUTION
Online retail shopping will continue to grow as retailer partners enhance their offering with ongoing improvements in convenience and service delivery methods. However, deliveries in the “last mile” remain difficult for carriers who are operating in a competitive low-margin market. PayPoint’s extensive network, which comprises over 8,000 sites, provides a solution for carriers and retailer partners, improving service levels for their consumers.
Progress in 2019/20
- Rolled out new partners access to the
PayPoint network with minimal operational impact on Collect+ network sites. - Held over 9,000 training sessions with new and existing retailers on behalf of new parcel partners.
- Volumes grew by 12.7% to 24.5 million, primarily from new partner volumes.
- Parcel mobile app functional enhancements with parcel inventory management, character recognition and predictive text features.
- On
6 April 2020 ,PayPoint acquired the 50% of the joint operation that Yodel owned resulting in Collect+ becoming a fully owned brand within thePayPoint Group . It also reaffirmed the long-term partnership with Yodel with commitment to a multi-year contract.PayPoint also acquired the ownership of the Collect+ website domain which will now be developed to further the brand.
PRIORITY 3: SUSTAIN LEADERSHIP IN ‘PAY-AS-YOU-GO’ AND GROW DIGITAL BILL PAYMENTS
Over-the-counter payments will remain an important part of the
Progress in 2019/20
- 19 new clients were contracted including Monese; 22 contracts were renewed including
EDF andMonzo Bank and 7 existing clients signed up for additional services, notably Shell taking our MultiPay service. Renewals represented 23.7% of our bill payments and top-ups annual net revenue. UK bill payment and top-ups net revenue increased 0.3% to £65.1 million, the impact from the ending of theBritish Gas contract partially offset by the current year benefit from client contracts entered into in prior years (IFRS 15). Transaction volume decreased by 7.0%, primarily due to the end of theBritish Gas contract and decline in top-ups. Client revenue mix continued to improve, with the average net revenue per transaction increasing to19.4 pence , up 7.8%.- Strong growth continued with MultiPay, transactions increased by 20.4% to 32.9 million transactions, net revenue increased 25.7%.
- Implemented new direct debit and PayByLink functionality for MultiPay.
- Strong growth in eMoney, transactions increased by 17.3% to 9.1 million, net revenue increased 19.9%.
- Executed detailed transition plans for
British Gas account.
Progress in 2019/20
- Maintained leadership in the bill payment market with a 32% share of clients’ cash bill payments, driven by 74% consumer awareness.
- 24 new clients secured in the year.
- Transactions increased by 2.0% to 114.6 million despite challenging market conditions, net revenue increased 5.5% to £14.6 million.
- Extended network into large multiple retailers;
PayPoint was in 19,257 sites at31 March 2020 , an increase of 791 since31 March 2019 due to continued sales efforts. - Card payment sites increased by 244 to 1,548.
PRIORITY 4: INNOVATE FUTURE GROWTH AND PROFITS
Innovation has been a key to our success since
Progress in 2019/20
- Trialled a new self-service proposition in
Romania with development of an automatic vending machine (AVM) to offer a new, convenient channel to consumers. - MultiPay PayByLink capability developed to extend functionality.
- Deployed the lead to sales feature of Salesforce CRM.
- Parcel mobile app functional enhancements.
- Continued investment into our EPOS platform.
ORGANISATION AND SERVICE DELIVERY
Underpinning PayPoint’s future success is the continued development and investment in our people, systems and organisation with the aim to create an efficient and high performance based culture with a focus on empowerment, engagement and customer service.
Progress in 2019/20
- Deployed the lead to sales feature of Salesforce CRM, enabling paperless sign up supported by a system driven workflow which has improved data accuracy and has reduced timeframes from prospecting to installation. In addition to reducing manual paper based processes this investment has supported our move to remote working.
- Implemented a new ERP system, Microsoft NAV, enabling streamlined processes and improved efficiency together with more analysis.
STRATEGY AND AMBITIONS FOR 2020/21
We are still assessing the impact of Covid-19 on our business and the longer term trends in our key markets. For the short term our focus is on necessary tactical actions to support the business but the core strategic priorities for the business remain unchanged;
- Embed
PayPoint at the heart of convenience retail, - Become the definitive parcel point solution,
- Sustain leadership in ‘pay-as-you-go’ and grow digital bill payments.
To develop a strategy which both underpins these core strategic priorities and creates meaningful new opportunities for growth we need an organisational structure and renewed culture which delivers a step change in operational performance and accountability throughout the organisation. A new sense of energy and purpose in the business is required as we take the necessary actions to improve our engagement with clients and partnership with our retailer partner network.
With the benefit of external support the board has identified a number of actions necessary to strengthen and invest in our business to deliver a stronger platform for long term growth.
PRIORITY 1: EMBED PAYPOINT AT THE HEART OF CONVENIENCE RETAIL
Ambition for 2020/21
Our assessment of the market remains that the changing dynamics in the convenience retail sector are creating significant opportunities for
- A reorganisation of our retailer partner network facing resource, to deliver a more closely aligned Field Operations and Contact Centre, leveraging the benefits of our newly rolled out CRM system, to deliver a better service to our retailer partners. Combined with investment in our retailer portal, this will give our retailer partners a greater range of channels from which to interact with
PayPoint and our support teams the real-time information needed to resolve issues quicker. - To improve the overall quality of our interactions with retailers we will work with retailers to design a new multi-platform self-service portal. This will replace several existing separate portals. Ultimately, this will improve our retailer partners experience and reduce their need to call the Contact Centre.
- Undertake a detailed retailer network review, to understand better our retailer partners, the products and services they need to succeed in their businesses and the retailer proposition we can provide which delivers the best value. The outcome of this process will be increasing engagement and value for our retailer partners and a more efficient and service orientated retailer facing resource.
- Better use of the data we have within the business today to pro-actively manage our retailer partner network and monitor its performance. To achieve this the business is establishing a small number of key KPIs to speed up management response times to issues and opportunities in the network.
- Deliver more ambitious plans to grow our Card and ATM estate and support these plans with investment.
PayPoint has strong offerings in both of these products, with a number of unique features which should be adding significantly more value to our existing retailer partner network. These products also offer opportunities to provide growth opportunities beyond our existing network. - In offering support for access to banking services in the community, we need to provide withdrawal and deposit services to credit institutions and other authorised organisations and build on existing offerings we have already developed with a number of challenger banks and eMoney issuers.
PRIORITY 2: PAYPOINT BECOMES THE DEFINITIVE PARCEL POINT SOLUTION
Ambition for 2020/21
The Collect+ transition to a multi-carrier parcel proposition is now complete and there is a strong recognition from carriers, our retailer partners and consumer of the value our service brings to convenience and service delivery in parcels. For our retailer partners, Collect+ offers a combination of benefits, including a broadening of the footfall demographic and meaningful commission payment. Our next phase of volume growth in this business will be delivered through a maturing and optimisation of the network, underlying growth in consumer adoption of the pick up proposition and an increased focus on operational performance and improved / consistent consumer experience. To achieve this our objectives are;
- Integrate our Parcels Contact Centre into our overall retailer facing activities and deliver an improved level of retailer support (again benefiting from the rollout of our CRM system).
- A retailer parcel network assessment to ensure we have the appropriate network capacity and skills / training levels in the network to support our next phase of growth.
- Continue to scale partners’ access into the network, with a carrier by carrier plan to capture optimal network size, and identify new carrier prospects appropriate to the Collect+ network.
- Renew our focus and measurement of operational performance, consumer service and experience, including additional retailer training and support, refreshing our key KPIs to ensure there is full alignment with our carrier partners.
- Establish a market attractive send proposition and ensure this is operational ahead of the peak parcel volume season in 2020/21.
PRIORITY 3: SUSTAIN LEADERSHIP IN ‘PAY-AS-YOU-GO’ AND GROW DIGITAL BILL PAYMENTS
Our focus is to maintain our leadership in bill payments and to grow our presence in omnichannel payments through the continued development of our MultiPay platform and extending this capability into new market segments.
As part of our strategic review we have undertaken a detailed assessment of our current market positioning in the bill payments market and the key underlying trends in our markets, to identify the specific actions required to both maintain our current market leading position and maximise the growth opportunities across a number of additional bill payment segments, such that we can offer a wider range of services, covering both cash and other payment channels. These actions include;
- Work with our major energy supply clients to develop a better understanding of the evolving needs of each one and identify how we can broaden out the services we can provide to meet their goals. Our approach will reflect our new organisational design and culture and comprehensive engagement from across the business, to deliver a more institutional management of each relationship, a better understanding of how we can help and work with each client as we broaden out the services we can provide, in response to the evolving needs of these clients.
- Continue to strengthen our relationships with our challenger energy suppliers, as they evolve their own business models in response to changes in the energy market. This includes winning new energy clients as the challenger energy suppliers continue to grow market share in this sector.
- Continue to identify and win new bill payment clients beyond the energy sector seeking access to the strength of the
PayPoint retailer network and our strong technology platform. - In MultiPay, building on the strong technology platform we have invested in, including the new PayByLink functionality, to accelerate our expansion into new sector verticals, including a greater penetration of the Housing Authority and Local Authority sectors, in addition to other new verticals.
- Extend the PayPoint Cash-out voucher service, particularly in light of the Covid-19 environment.
Romania Ambition for 2020/21
- Consolidate PayPoint’s share of client bill payments, and continue to secure new clients and offerings.
- Start replacing the legacy terminal with a modern lightweight and hand held terminal, which can also be card-enabled, to enhance the bill payment experience.
- Continue to deploy self-service machines (AVMs).
- Launch our Consumer App embedding the most important features of the
PayPoint services portfolio and introducing mobile card payments for utilities and top-ups.
NEW PRIORITY 4: BUILDING A DELIVERY FOCUSED ORGANISATION AND CULTURE
Innovating for future growth and profits is now embedded in each of the strategic priorities. This provides us with the opportunity to leverage our investment in PayPoint One and CRM to use the technology to deliver future growth, and whilst we will continue to invest, we need to ensure we can benefit from this and therefore have the above new priority for the coming year.
Ambition for 2020/21
One of the consequences of the current Covid-19 crisis will be a review of the number of aspects of the way our business and its resources are best utilised to support our clients and retailer network. Already we can see good examples as to how we can work smarter and more efficiently in the business which we must build upon.
- A strategic and organisational review was undertaken by the Board. A key conclusion was the recognition of the need for a more streamlined and operationally focused organisational structure to support our strategy with clear accountability for the client and retail service businesses and the alignment of resources to deliver better execution and engagement with our client and retailer network. To achieve this we have made some fundamental changes to the future organisational structure;
- The importance of client focus has been underlined by adding a Client Services Director to the Executive Board. We are delighted that we have been able to internally promote
Danny Vant to the role. He will focus on and assume responsibility for maintaining our leadership in bill payments and growing our presence in omni-channel payments through the continued development of our MultiPay platform and the extension of these capabilities into new market segments. - The Board has created a new role, Retail Services Director as a member of the Executive Board. This role will lead a newly established Retail Services function, incorporating all retail supporting teams, responsible for the end-to-end delivery of products and services to our retailer partner network and the management of relationships within the network, leveraging the benefits of our newly rolled out CRM system. An external appointment has been made who will join the business on
1 July 2020 . Nick Williams has been promoted to the role of Head ofStrategic Partners and Product – Parcels, to lead the Parcels business and our focus on a multi-carrier parcel proposition. In doing so, he will drive the next phase of parcel growth and a greater focus on improvements to customer service and experience.
- The importance of client focus has been underlined by adding a Client Services Director to the Executive Board. We are delighted that we have been able to internally promote
These changes will lead to a more efficient organisational structure with greater accountability and focus on client and retailer network relationships.
KEY PERFORMANCE INDICATORS45
KPI | Description, purpose and reference | 2019/20 | 2018/19 | 2017/18 | |
Overall performance | Net revenue (£ million) (Group) | Revenue less commissions paid to retailers and the cost of mobile top-ups and SIM cards where (See Finance review – ‘Overview’ on page 17) | 120.7 | 116.6 | 119.6 |
Operating margin (%) (Group) | Operating profit before exceptional items as a percentage of net revenue. Operating margin provides a broad overview of the efficient and effective management of the cost base enabling shareholder returns and investment in the business. (See Finance review – ‘Operating margin’ on page 20) | 47.2 | 46.3 | 44.7 | |
Cash generation (£ million) (Group) | Earnings before exceptional items, tax, depreciation and amortisation adjusted for corporate working capital movements (excludes movement in clients’ funds and retailers’ deposits). This represents the cash generated by operations which is available for capex, taxation and dividend payments. (See Finance review – ‘Cash flow and liquidity’ on page 21) | 66.4 | 62.8 | 67.9 | |
Embed | PayPoint One sites (Number) ( | The number, at the reporting date, of retailer sites in which at least one PayPoint One terminal was operational. A site may have more than one terminal (multiple lanes). This provides a measure of the extent of our network into which services and features can be sold driving future growth. (See Strategic priorities on page 10) | 16,098 | 12,881 | 8,550 |
PayPoint One average weekly fee per site (£) ( | The average weekly service fee across all PayPoint One sites based on the PayPoint One devices in store at the reporting date. This provides a measure of the weekly value derived from PayPoint One and EPoS services from each PayPoint One site. (See Strategic priorities on page 10) | 15.4 | 15.1 | 14.9 | |
Card payment net revenue (£ million) ( | Card payment net revenue represents the rebate earned from card transactions processed by retailers through PayPoint’s card payment service. This is an important measure of the overall success of our card payment solution. (See Finance review – ‘Sector analysis’ on page 18) | 8.7 | 7.9 | 7.5 | |
ATM net revenue (£ million) ( | ATM net revenue represents the fees earned less the commissions paid to retailers from consumers using PayPoint’s ATMs located inside a retailer’s store. This is an important measure of the overall success of our ATM product. Fees are earned from either interchange fees (from free-to-use ATMs) or surcharge fees (from pay-to-use ATMs) from cash withdrawals and balance enquiries. (See Finance review – ‘Sector analysis’ on page 18) | 11.9 | 12.3 | 12.8 | |
Become the definitive parcel point solution | Parcel sites (Number) ( | The number, at the reporting date, of sites where the parcel proposition was enabled on (See Strategic priorities on page 11) | 8,646 | 7,134 | 7,436 |
Parcels processed (Millions) ( | The number of parcels processed and registered through a (See Finance review – ‘Sector analysis’ on page 18) | 24.5 | 21.8 | 23.7 |
KPI | Description, purpose and reference | 2019/20 | 2018/19 | 2017/18 | ||
Sustain leadership in ‘pay-as-you-go’ and grow digital bill payments | Transaction value (£ million) (Group) | The value of bill payment (including MultiPay), top-up and eMoney transactions processed via our terminals or MultiPay platform where | 9,015 | 9,237 | 9,201 | |
Transactions processed (Millions) (Group) | The number of bill payment (including MultiPay), top-up and eMoney transactions processed in the year on our terminals or MultiPay platform. Transactions processed provides a measure of the source of revenue which is earned on a per transaction basis. (See Finance review – ‘Sector analysis’ on page 18) | 448.8 | 472.7 | 482.1 | ||
Net revenue per transaction (Pence) (Group) | The net revenue earned from bill payments (including MultiPay, excluding SPS), top-ups and eMoney divided by the annual number of transactions processed on our terminals and MultiPay platform. This provides an indication of profitability per transaction. (See Finance review – ‘Sector analysis’ on page 18) | 17.5 | 16.4 | 15.9 | ||
Shareholder returns | Diluted earnings per share (Pence) (Group) | Diluted earnings divided by the weighted average number of ordinary shares in issue during the year (including potentially dilutive ordinary shares). Earnings per share is a measure of the profit attributable to each share. (See note 10 to the financial statements on page 110) | 66.3 | 64.8 | 62.7 | |
Dividends paid per share (Pence) (Group) | Dividends (ordinary and additional) paid during the financial year divided by number of ordinary shares in issue at reporting date. Dividends paid per share provides a measure of the return to shareholders. (See Finance review – ‘Dividends’ on page 22) | 84.0 | 82.9 | 82.0 | ||
Non-financial | Network stability one-mile urban population cover (%) | Total urban population covered within a one-mile radius of a | 99.5 | 99.5 | 99.5 | |
Network stability five-mile rural population cover (%) ( | Total rural population covered within a five-mile radius of a | 98.3 | 98.5 | 98.5 | ||
Retailer partner site churn (%) ( | The % of the retailer partner network, that on an annual basis, exits 1. Included in retailer partners that left | 8.446 | 5.2 | 7.2 | ||
Employee engagement (%) ( | Measures the overall employee engagement of our | 68.0 | 69.0 | N/A |
FINANCIAL REVIEW
OVERVIEW
Year ended 31 March (£m) | 2020 | 2019 | Change % |
Net revenue | |||
| 41.0 | 37.8 | 8.5% |
| 65.1 | 64.9 | 0.3% |
| 14.6 | 13.9 | 5.5% |
Total net revenue | 120.7 | 116.6 | 3.5% |
Total costs | 63.9 | 62.8 | 1.8% |
Profit before exceptional items and tax | 56.8 | 53.8 | 5.6% |
Profit before tax | 56.8 | 54.7 | 3.8% |
Cash generation | 66.4 | 62.8 | 5.7% |
Net corporate (debt)/cash | (12.0) | 3.5 | (444.7%) |
Profit before tax of £56.8 million (2019: £54.7 million) increased by £2.1 million, reflecting increased net revenue and the £2.1 million “variable pay benefit” effect of the decision to cancel management bonuses due to Covid-19 and release of share based payment accruals. The prior year includes the impact from the Yodel renegotiation of £0.7 million and a one-off benefit from improved VAT recovery of £2.4 million as well as an exceptional item of £0.9 million relating to a subsidiary disposal provision release. Underlying profit before exceptional items and tax of £56.8 million (2019: £50.6 million) grew by 12.3% (2019: 11.3%).
Revenue grew by £1.7 million (0.8%) to £213.3 million (2019: £211.6 million). Net revenue increased by £4.1 million to £120.7 million (2019: £116.6 million). Underlying net revenue, which excludes the prior year impact from the Yodel renegotiation of £0.7 million, increased by £4.8 million (4.1%) driven by growth in
In
Total costs increased by £1.1 million to £63.9 million (2019: £62.8 million). Underlying costs, which excludes the prior period VAT benefit of £2.4 million, decreased by £1.3 million (2.0%) due to a £2.1 million “variable pay benefit” reduction in management bonuses and share based payment expenses due to the decision to cancel management bonuses due to Covid-19 and release of share based payment accruals. This was partly offset by increased costs for additional resources relating to the parcel partners integration, contact centre and client services team and amortisation of prior year contract set up expenses.
Cash generation remained strong with £66.4 million (2019: £62.8 million) delivered from profit before tax of £56.8 million (2019: £54.7 million).
Net corporate debt increased by £15.4 million to £12.0 million (2019: £3.5 million net corporate cash). Tax payments were higher than the prior year due to HMRC bringing payments on account forward by six months. At
SECTOR ANALYSIS
As at | Year ended | Year ended | Change % | |
Number of retailers | 17,161 | 16,663 | 17,608 | (5.4%) |
PayPoint One47 | 16,514 | 16,098 | 12,881 | 25.0% |
Legacy (T2) | 2,624 | 2,496 | 7,000 | (64.3%) |
PPoS48 | 8,317 | 8,235 | 8,554 | (3.7%) |
Total sites | 27,455 | 26,829 | 28,435 | (5.6%) |
Services in sites (No.) | ||||
PayPoint One Base | 8,547 | 8,304 | 6,337 | 31.0% |
EPoS Core | 7,113 | 6,956 | 5,899 | 17.9% |
EPoS Pro | 854 | 838 | 645 | 29.9% |
Card payments | 9,776 | 9,435 | 9,796 | (3.7%) |
ATMs | 3,923 | 3,620 | 3,827 | (5.4%) |
Parcels | 8,575 | 8,646 | 7,134 | 21.2% |
Transactions (Millions) | ||||
Card payments | 136.8 | 113.5 | 20.6% | |
ATMs | 40.4 | 42.1 | (4.1%) | |
Parcels | 24.5 | 21.8 | 12.7% | |
PayPoint One average weekly service fee per site (£) | 15.4 | 15.1 | 1.9% | |
Net revenue (£m) | ||||
Service fees | 13.1 | 10.3 | 28.1% | |
Card payments | 8.7 | 7.9 | 10.9% | |
ATM | 11.9 | 12.3 | (3.5%) | |
Parcels and other | 7.3 | 7.3 | (1.0%) | |
Total net revenue (£m) | 41.0 | 37.8 | 8.5% |
As at
Service fees: This is a core growth area and consists of service fees from PayPoint One and our legacy terminal. Service fee revenue increased by £2.8 million (28.1%) to £13.1 million (2019: £10.3 million) driven by the additional 3,217 PayPoint One sites compared to
ATMs: ATM net revenue declined by £0.4 million (3.5%) due to the prior year reductions of LINK’s interchange fee and a 4.1% reduction in transactions to 40.4 million (2019: 42.1 million). ATM sites decreased by 207 sites to 3,620 sites (2019: 3,827 sites), with 283 sites temporarily suspended due to Covid-19 at
Card payments: Card payment transaction volumes grew by 20.6% to 136.8 million (2019: 113.5 million) benefiting from the market trend of growing card payments, in particular contactless payments. Across our network 9,435 retailer partners (2019: 9,796) were using the card payment solution, 361 sites lower than the prior year driven by competitor activity in the convenience market and 293 sites were temporarily suspended at
Parcels & other: Parcel volumes increased by 12.7% to 24.5 million (2019: 21.8 million) benefiting from growth in our new partnerships in this market. Parcel sites increased by 1,512 from the prior year to 8,646 sites (2019: 7,134) which includes 1,608 standalone Amazon sites. Parcels and other net revenue remained stable from the prior year, however underlying net revenue, excluding the prior year £0.7 million Yodel impact, increased by 10.6%. Other services provided include SIM sales and other ad hoc items.
Bill payments is our most established category and consists of prepaid energy, bill payments (including MultiPay) and CashOut services.
Year ended 31 March | 2020 | 2019 | Change % |
Total transactions (millions) | 296.9 | 317.2 | (6.4%) |
Of which: MultiPay transactions (millions) | 32.9 | 27.3 | 20.4% |
Transaction value (£m) | 6,106.3 | 6,390.2 | (4.4%) |
Net revenue (£m) | 48.9 | 47.8 | 2.2% |
Net revenue per transaction (pence) | 16.5 | 15.1 | 9.3% |
Top-ups include transactions where consumers can top up their mobiles, prepaid debit cards and lottery tickets. This sector also includes eMoney transactions where
Year ended 31 March | 2020 | 2019 | Change % |
Transactions (millions) | 39.5 | 44.5 | (11.2%) |
Of which: eMoney transactions (millions) | 9.1 | 7.8 | 17.3% |
Transaction value (£m) | 684.1 | 607.0 | 12.7% |
Net revenue (£m) | 16.2 | 17.1 | (5.6%) |
Net revenue per transaction (pence) | 41.0 | 38.7 | 5.9% |
The Romanian business comprises mainly of bill payments and top-ups operating on a similar basis to our
Year ended 31 March | 2020 | 2019 | Change % |
19,257 | 18,466 | 4.3% | |
Transaction value (£m) | 2,296 | 2,312 | (0.7%) |
Transactions (millions) | |||
Bill payments | 100.0 | 99.1 | 0.9% |
Top-ups | 12.4 | 11.9 | 3.6% |
Other | 2.2 | 1.2 | 76.3% |
Total transactions | 114.6 | 112.2 | 2.0% |
Net revenue (£m) | 14.6 | 13.9 | 5.5% |
Net revenue per transaction (pence) | 12.8 | 12.3 | 4.1% |
The number of sites returned to growth and increased by 791 sites to 19,257 (2019: 18,466) following completion of the
TOTAL COSTS
Year ended 31 March (£m) | 2020 | 2019 | Change % |
Other costs of revenue | 8.0 | 9.0 | (11.1%) |
Depreciation and amortisation | 9.5 | 9.8 | (3.1%) |
Administrative costs | 46.2 | 43.8 | 5.5% |
Finance costs | 0.2 | 0.2 | 0.0% |
Total costs | 63.9 | 62.8 | 1.8% |
Add back VAT recovery benefit related to prior years | - | 2.4 | (100.0%) |
Underlying costs | 63.9 | 65.2 | (2.0%) |
Total costs increased by £1.1 million to £63.9 million (2019: £62.8 million). Underlying costs, which excludes the prior period VAT benefit of £2.4 million, decreased by £1.3 million (2.0%) primarily due to a £2.1 million “variable pay benefit” effect of reduction in staff bonuses and share based payment expenses, following the decision to cancel management bonuses due to Covid-19 and the release of accruals due to the fall in value of the share-based payments. This was partly offset by increased costs for additional resources relating to the parcel partners integration, contact centre and client services team and the £1.4 million swing relating to client contract costs incurred in prior years (due to IFRS 15). In the current year £0.8 million net deferred expense was recognised whereas in the prior year a net £0.6 million was deferred.
OPERATING MARGIN50
Operating margin of 47.2% (2019: 46.3%) increased by 0.9ppts due to 3.5% increase in net revenue which was offset by a 1.8% increase in total costs as mentioned above.
PROFIT BEFORE TAX AND TAXATION
The tax charge of £11.1 million (2019: £10.3 million) on profit before tax of £56.8 million (2019: £54.7 million) represents an effective tax rate51 of 19.6% (2019: 18.8%), 0.8ppts higher than prior year due to higher adjustments in respect of prior year.
STATEMENT OF FINANCIAL POSITION
Net assets of £38.3 million (2019: £50.2 million) declined by £11.8 million as a result of the additional dividend programme. Current assets increased by £26.8 million to £203.5 million (2019: £176.6 million) due to increased cash as a result of the £70 million draw down of the revolving credit facility. There is a corresponding increase in current liabilities with an additional £0.2 million increase for the recognition of bringing the lease liability on-balance sheet in the year. Non-current assets of £54.5 million (2019: £54.9 million) decreased by £0.4 million, with a right-of-use asset of £0.9 million introduced for bringing the leases on-balance sheet in the year, capital expenditure of £8.4 million offset by depreciation and amortisation of £9.5 million.
In light of the recent Covid-19 pandemic the Group performed an impairment review on assets and no impairment was deemed necessary.
CASH FLOW AND LIQUIDITY
The following table summarises the cash flow movements during the year.
Year ended 31 March (£m) | 2020 | 2019 | Change % |
Profit before tax | 56.8 | 54.7 | 3.8% |
Exceptional items | - | (0.9) | (100.0%) |
Depreciation and amortisation | 9.5 | 9.8 | (3.1%) |
VAT and other non-cash items | 0.4 | (2.3) | (117.4%) |
Share-based payments and other items | (0.4) | 1.1 | (136.4%) |
Working capital changes (corporate) | 0.1 | 0.4 | (75.0%) |
Cash generation | 66.4 | 62.8 | 5.7% |
Taxation payments | (15.8) | (10.0) | 58.0% |
Capital expenditure | (8.4) | (11.0) | (23.6%) |
Loans and borrowings | 70.0 | - | 0.0% |
Lease payments | (0.3) | - | 0.0% |
Dividends paid | (57.4) | (56.6) | 1.4% |
Net increase/(decrease) in corporate cash and cash equivalents | 54.5 | (14.8) | (468.2%) |
Net change in clients’ funds and retailers’ deposits | 1.4 | 7.3 | (80.8%) |
Net increase/(decrease) in cash and cash equivalents | 55.9 | (7.5) | (845.3%) |
Cash and cash equivalents at the beginning of year | 37.5 | 46.0 | (18.5%) |
Effect of foreign exchange rate changes | 0.4 | (1.0) | (140.0%) |
Cash and cash equivalents at the end of year | 93.8 | 37.5 | 150.1% |
Comprising: | |||
Corporate cash | 58.0 | 3.5 | 1557.1% |
Clients’ funds and retailers’ deposits | 35.7 | 34.0 | 5.0% |
Cash generation remained strong with £66.4 million (2019: £62.8 million) delivered from profit before tax of £56.8 million (2019: £54.7 million).
Taxation payments on account of £15.8 million (2019: £10.0 million) are higher compared to the same period in the prior year due to HMRC bringing payments on account forward by six months.
Capital expenditure primarily consists of PayPoint One terminals and EPoS and CRM development. Capital expenditure of £8.4 million (2019: £11.0 million) was lower than the prior year; fewer PayPoint One terminals were purchased and less new sites were added this year, CRM development reduced as we deployed the lead to sales feature and there were delays in the delivery of the T4 terminals in
As anticipated
DIVIDENDS
Year ended 31 March | 2020 | 2019 | Change % |
Ordinary dividends per share (pence) | |||
Interim (paid) | 23.6 | 15.6 | 51.3% |
Final (proposed) | 15.6 | 23.6 | (33.9%) |
Additional dividend per share (pence) | |||
Interim (paid) | 18.4 | 12.2 | 50.8% |
Final | - | 18.4 | (100.0%) |
Total dividend per share (pence) | 57.6 | 69.8 | (17.5%) |
Total dividends paid in year (£m) | 57.4 | 56.6 | 1.5% |
From
We have declared a final dividend of
The final dividends will result in £10.7 million (2019: £28.8 million) being paid to shareholders from the standalone statement of financial position of the Company which, as at
An interim ordinary dividend of 23.6p (2019: 15.6p) and an additional interim ordinary dividend of 18.4p (2019: 12.2p) were paid in equal instalments of 21.0p on
CAPITAL ALLOCATION
The Board’s immediate priority is to continue to preserve PayPoint’s balance sheet strength to ensure
The Board’s approach to the setting of the ordinary dividend has not materially changed and follows the following capital allocation priorities:
- Investment in the business through capital expenditure in innovation to drive future revenue streams and improve the resilience and efficiency of our operations;
- Investment in opportunities such as the PayZone Romania acquisition in
September 2018 and the purchase of the 50% of the Collect+ brand not previously owned byPayPoint inApril 2020 ; - Progressive ordinary dividends targeting a cover ratio of 1.2 to 1.552 times earnings;
GOING CONCERN
The financial statements have been prepared on a going concern basis having regard to the identified principal risks and uncertainties and viability statement on pages 23 to 26. Specific consideration has been given to the impact of Covid-19 together with our cash and borrowing capacity in the going concern and viability assessment. Our cash and borrowing capacity provides sufficient funds to meet the foreseeable needs of the Group including dividends.
Finance Director
PRINCIPAL RISKS AND UNCERTAINTIES
The Board considers these to be the most significant risks and uncertainties faced by the Group.
Strategy
Risks are assessed through PayPoint’s risk management and internal control framework which is a defined process for
identifying and managing risk. The process applies throughout the Group and principal risks are reviewed in line with our strategic priorities. The Board is responsible for overseeing the risk management process and approves the level of risk acceptable under each principal risk category. It is also responsible for maintaining an appropriate control environment to
manage risk effectively and the Board has delegated responsibility for reviewing the effectiveness of risk management and internal controls to the Audit Committee. The risk management and internal control framework aims to provide assurance and confidence to stakeholders about PayPoint’s ability to deliver its objectives and manage principal risks.
Risk appetite
The risk appetite represents the level of risk considered appropriate to achieving our business objectives and is determined by the Board.
Risk identification and management
The risk management process assesses risks on both strategically and granular functional level. The process involves assessing the impact of risks on the Group, the probability of risks occurring and developing and monitoring appropriate internal controls.
Functional risk registers are maintained which form an important component of our governance framework. Functional risk registers detail key risks, the materiality and likelihood of risks, and controls in place to mitigate the impact of risks. The risk framework is designed to identify emerging risks by conducting horizon scanning to identify emerging trends and technologies as well as identifying and preparing for new legislation and regulation. The content of risk registers is discussed and agreed with senior management and reviewed and considered by the Executive Board. The Audit Committee receives and reviews information on the risk framework, principal risks and mitigating controls at each meeting, and advises the Board on risks. Further details are set out on pages 58 to 63 of the financial statements.
Principal risks remain similar to last year however there are some key changes. Brexit is no longer considered a principal
risk but Covid-19 has evolved as a principal risk and uncertainty for the Group. The table below sets out our principal risks, their movement during the year, and key mitigating controls. They do not comprise all risks faced by the Group and are not set out in order of priority.
Risk area | Potential impact | Mitigation strategies | Change | ||
Credit and operational risk | > | ||||
People and culture | Failure to attract and develop key talent and continue evolving our culture may impact service levels and delivery of strategic initiatives. If we do not develop our employees and maintain an appropriate culture our business performance and reputation may be damaged resulting in reduced revenue and growth. | The Executive Board define and advocate PayPoint’s values, and employee development and culture are key strategic priorities. Talent management and people development are well established, and employment guidelines and ethical principles are implemented to assist maintaining a strong culture. Values and ethical principles are aligned with employee objectives and employee and retailer engagement surveys are regularly conducted to assess how we deliver on our values. | > | ||
Losing key clients and retailers | > | ||||
Competition and markets | The markets in which | ^ | |||
Innovation and implementation | Failure to innovate and implement new products, services and technology would impede business performance and our ability to achieve strategic goals. Our business relies on continued product enhancements and failing to improve products due to poor design, build or rollout would ultimately reduce revenue. Continued system infrastructure improvements are essential in maintaining resilient and effective services, and ineffective infrastructure upgrades may impact future performance. | > | |||
Key partners and suppliers | ^ | ||||
Business interruption | Service delivery interruption caused by system failure, loss of premises, or other disruption may impede performance and harm our reputation. Clients, retailers and consumers rely on resilient systems and continued service delivery, and failure to promptly recover services may result in revenue loss, contractual breaches, penalties and increased costs. Uncertainties around the Covid-19 pandemic and the significantly changes in working practices may impact PayPoint’s service delivery, increasing the trend of risk. | Comprehensive continuity plans have been implemented to mitigate risk of disruption from Covid-19. Systems are continually upgraded and resilience built into systems and processes. Effective change management processes are deployed minimising risk of disruption, and systems are regularly tested and continually monitored for outages. | ^ | ||
Legal and regulatory | PayPoint’s Legal team work closely with management to advise on regulatory matters and adopt strategies to ensure regulatory adherence. Legal teams are engaged on key contracts and legal matters, and Compliance teams oversee compliance programmes, monitoring and reporting. Emerging regulations are incorporated into strategic planning, and we engage with regulators to ensure we have appropriate frameworks to support new products and markets. External counsel is engaged where required. | > | |||
Cybersecurity and data protection | Cyberattacks on PayPoint’s systems and networks may significantly impact service delivery and data protection causing harm to | ^ |
Covid-19
The global Covid-19 pandemic continues to significantly impact individuals, businesses, markets and economies, and the unprecedented period of uncertainty presents significant risk to
Potential impact | Mitigation strategies |
Strategic risk Cash usage has significantly declined during the Covid-19 lockdown reducing PayPoint’s revenue for ATMs and other cash-based products. It is anticipated Covid-19 will accelerate a structural decline in cash usage which will impact our business model and revenue. Covid-19 may also result in other market changes which could potentially impact | lockdown. Our online MultiPay platform continues to grow in significance, with the recent introduction of innovative new features including PayByLink. The acquisition in |
Financial risk During the Covid-19 lockdown | To maintain liquidity through a sustained period of disruption, the £70 million revolving credit facility was fully drawn down and additional dividend payments and employee bonuses cancelled. Government Covid-19 support schemes are closely monitored, and a review of short-term cost reduction and deferment measures is being conducted across the business. There is also increased focus on settlement process to ensure heightened credit risk is appropriately mitigated. |
Operational risk Covid-19 has heightened the risk of supplier failure, potentially impacting PayPoint’s service delivery. The sales pipeline and new initiatives have also been impacted with prospects delaying new ventures and other sales initiatives also temporarily postponed. Additionally, increased working from home has impacted the robustness of settlement processes and employee welfare remains a heightened risk. | IT and operational processes have been enhanced to ensure effective service delivery and robust control. assessed for areas at risk. Most employees are working from home and safety measures have been implemented to ensure the safety of employees working in the office. |
Cybersecurity risk Covid-19 has increased cyber threats from cybercriminals and other malicious groups who are targeting individuals, businesses and organisations by deploying Covid-19 related scams and phishing emails. Significant working from home has also heightened cybersecurity risks. |
VIABILITY STATEMENT
In accordance with the 2018 UK Corporate Governance Code, the Directors have assessed the viability of the Group over a three-year period, taking account of the Group’s current financial and trading position, the principal risks and uncertainties (as set out on pages 23 to 25) and the strategic plans that are reviewed at least annually by the Board.
The Directors believe that a three-year period is an appropriate period over which a reasonable expectation of the Group’s longer-term viability can be evaluated and is aligned with the Group’s most recent strategic and financial planning time horizon, which was reviewed by the Board in
PayPoint’s strategic and financial planning process reflects the Director’s best estimate of the future prospects for the Group including assumptions around key client renewals and the development of our key product and service lines. In light of Covid-19 normal trading patterns have been significantly impacted as can be seen in the table below:
Service | Full year 19/20 vs 18/19 % increase/ (decrease) | 1 - 17 April FY20/21 vs FY19/20 % increase/ (decrease) | 18 April - 17 May FY20/21 vs FY19/20 % increase/ (decrease) |
Bill payment transactions53 | (0.9%) | (31.5)% | (24.8)% |
Top-up transactions | (11.2%) | (20.1)% | (19.0)% |
ATM transactions | (4.1%) | (39.9)% | (33.1)% |
Card payment transactions | 20.6% | 75.3% | 74.4% |
Parcels | 12.7% | (54.9)% | (22.8)% |
Consequently, the Directors have a prepared a scenario that assumes that the trading trends seen since
Additionally, the Directors have carried out an assessment of the principal risks and uncertainties and applied several different but plausible scenarios to further test the Group viability. These viability scenarios include:
- Failure to renew significant client contracts
- Significantly higher than historically seen churn in the retail partner network as retailer partners becoming out of contract choose not to renew their contract with
PayPoint - The financial impact of technical failure from cyber attacks
- Collapse of significant Romanian banks causing a loss of client settlement funds
- Multiple retailer groups going into receivership
As mitigating actions to offset the impact of what would be a significant and unusual set of circumstances to happen together, we have assumed achievable reductions in expenditure and a reduction in the level of future dividends following the payment of the final dividend of
As at
Based on this assessment, the Directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period from the date of this announcement to
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Year ended 31 March (£000) | Note | 2020 | 2019 |
Continuing operations | |||
Revenue | 3 | 213,257 | 211,576 |
Cost of revenue | 4 | (109,621) | (113,303) |
Gross profit | 103,636 | 98,273 | |
Administrative expenses | (46,648) | (44,319) | |
Operating profit | 56,988 | 53,954 | |
Finance income | 531 | 427 | |
Finance costs | (720) | (586) | |
Profit before tax before exceptional items | 56,799 | 53,795 | |
Exceptional items – prior year business disposals | - | 922 | |
Profit before tax | 56,799 | 54,717 | |
Tax | 5 | (11,131) | (10,285) |
Profit for the year attributable to equity holders of the parent | 45,668 | 44,432 | |
Earnings per share | |||
Basic | 7 | 66.9p | 65.2p |
Diluted | 7 | 66.3p | 64.8p |
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
Year ended 31 March (£000) | 2020 | 2019 | |
Items that may subsequently be reclassified to the consolidated statement of profit or loss: | |||
Exchange differences on translation of foreign operations | 256 | (740) | |
Other comprehensive income for the year | 256 | (740) | |
Profit for the year | 45,668 | 44,432 | |
Total comprehensive income for the year attributable to equity holders of the parent | 45,924 | 43,692 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March (£000) | Note | 2020 | 2019 |
Non-current assets | |||
11,853 | 11,618 | ||
Other intangible assets | 17,274 | 15,875 | |
Property, plant and equipment | 24,840 | 26,665 | |
Deferred tax asset | 565 | 781 | |
54,532 | 54,939 | ||
Current assets | |||
Inventories | 214 | 124 | |
Trade and other receivables | 8 | 108,368 | 139,010 |
Current tax asset | 1,099 | - | |
Cash and cash equivalents | 9 | 93,774 | 37,485 |
203,455 | 176,619 | ||
Total assets | 257,987 | 231,558 | |
Current liabilities | |||
Trade and other payables | 10 | 148,621 | 176,720 |
Current tax liabilities | - | 4,455 | |
Lease liabilities | 197 | - | |
Loans and borrowings | 70,000 | - | |
218,818 | 181,175 | ||
Non-current liabilities | |||
Trade and other payables | 10 | 95 | 233 |
Lease liabilities | 744 | - | |
839 | 233 | ||
Total liabilities | 219,657 | 181,408 | |
Net assets | 38,330 | 50,150 | |
Equity | |||
Share capital | 11 | 228 | 227 |
Share premium | 4,485 | 3,352 | |
Share-based payment reserve | 12 | 1,875 | 2,684 |
Translation reserve | (733) | (989) | |
Retained earnings | 32,475 | 44,876 | |
Total equity attributable to equity holders of the parent | 38,330 | 50,150 |
These financial statements were approved by the Board of Directors and authorised for issue on
Chief Executive
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Note | Share capital £000 | Share premium £000 | Share-based payment reserve £000 | Translation reserve £000 | Retained earnings £000 | Total equity £000 | |
Opening equity | 227 | 2,907 | 2,771 | (249) | 55,637 | 61,293 | |
Profit for the year | - | - | - | - | 44,432 | 44,432 | |
Exchange differences on translation of foreign operations | - | - | - | (740) | - | (740) | |
Comprehensive income for the year | - | - | - | (740) | 44,432 | 43,692 | |
Adoption of IFRS 15 | - | - | - | - | 975 | 975 | |
Equity-settled share-based payment expense | - | - | 1,466 | - | - | 1,466 | |
Vesting of share scheme | 12 | - | 445 | (1,563) | - | 393 | (725) |
Deferred tax on share-based payments | - | - | 10 | - | - | 10 | |
Dividends | - | - | - | - | (56,561) | (56,561) | |
Closing equity | 227 | 3,352 | 2,684 | (989) | 44,876 | 50,150 | |
Profit for the year | - | - | - | - | 45,668 | 45,668 | |
Exchange differences on translation of foreign operations | - | - | - | 256 | - | 256 | |
Comprehensive income for the year | - | - | - | 256 | 45,668 | 45,924 | |
Adoption of IFRS 16 | - | - | - | - | (73) | (73) | |
Issue of shares | 1 | - | - | - | - | 1 | |
Equity-settled share-based payment expense | - | - | 631 | - | - | 631 | |
Vesting of share scheme | 12 | - | 1,133 | (1,416) | - | (746) | (1,029) |
Deferred tax on share-based payments | - | - | (24) | - | 169 | 145 | |
Dividends | - | - | - | - | (57,419) | (57,419) | |
Closing equity | 228 | 4,485 | 1,875 | (733) | 32,475 | 38,330 |
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 31 March (£000) | Note | 2020 | 2019 |
Net cash inflow from operating activities | 13 | 51,481 | 59,563 |
Investing activities | |||
Investment income | 531 | 427 | |
Purchases of property, plant and equipment | (2,963) | (5,087) | |
Purchases of intangible assets | (5,445) | (5,894) | |
Net proceeds from disposal of property, plant and equipment | - | 12 | |
Net cash used in investing activities | (7,877) | (10,542) | |
Financing activities | |||
Dividends paid | 6 | (57,419) | (56,561) |
Proceeds from issue of share capital | 1 | - | |
Movement in financing facility | 70,000 | - | |
Payment of lease liabilities | (271) | - | |
Net cash from/(used in) financing activities | 12,311 | (56,561) | |
Net increase/(decrease) in cash and cash equivalents | 55,915 | (7,540) | |
Cash and cash equivalents at beginning of year | 37,485 | 46,040 | |
Effect of foreign exchange rate changes | 374 | (1,015) | |
Cash and cash equivalents at end of year | 93,774 | 37,485 |
Reconciliation of cash and cash equivalents
As at 31 March (£000) | 2020 | 2019 |
Corporate cash | 58,035 | 3,471 |
Clients’ funds and retailers’ deposits | 35,739 | 34,014 |
Cash and cash equivalents on the statement of financial position 9 | 93,774 | 37,485 |
NOTES TO THE FINANCIAL STATEMENTS
1. Significant accounting policies
Basis of preparation
This preliminary announcement does not constitute the Company's statutory accounts for the years ended
Statutory accounts for 2019 have been delivered to the Registrar of Companies and those for 2020 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts and the report was unqualified, did not draw attention to any emphasis of matters and did not contain statements under s498(2) or (3) of the Companies Act 2006.
This preliminary announcement complies with the recognition and measurement criteria of IFRS, and with the accounting policies of the Group which were set out on pages 99 to 106 of the 2020 annual report and accounts. No subsequent material changes have been made to the Group’s accounting policies with selected accounting policies included below.
At
As referred to in the Business Review, the business continuity plans actioned by the Group to date have resulted in operations continuing unaffected on a remote working basis but with the possibility of a reduction in revenues in the 2020/21 financial year as a result of the uncertain macro-economic environment caused by the Covid-19 pandemic. An analysis of post year end transaction volumes is included in the Business Review.
The Directors have prepared cash flow forecast scenarios over a three-year period, taking into account the Group’s current financial and trading position, the principal risks and uncertainties and the strategic plans that are reviewed at least annually by the Board. A downside scenario was prepared which assumed that the trading trends seen since
A monthly analysis of cashflow has been prepared for the above scenarios to ensure working capital movements within a reporting period do not trigger a covenant breach. Based on this assessment, the Directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of not less than 12 months from the date of this announcement and therefore have prepared the financial statements on a going concern basis.
Alternative performance measures
Non-IFRS measures or alternative performance measures are used by the Directors and management for performance analysis, planning, reporting and incentive-setting purposes and have remained consistent with the prior year. These measures are included in these financial statements to provide additional useful information on performance and trends to shareholders.
These measures are not defined terms under IFRS and therefore they may not be comparable with similarly titled measures reported by other companies. They are not intended to be a substitute for, or superior to, IFRS measures. These measures include net revenue, operating margin, effective tax rate (note 5), reported dividends (note 6) and cash generation.
Net revenue
Net revenue is revenue less commissions paid to retailer partners and the cost of mobile top-ups and SIM cards where
The reconciliation of revenue to net revenue is as follows:
Year ended 31 March (£000) | 2020 | 2019 |
Service revenue | 156,730 | 147,988 |
Sale of goods | 55,312 | 62,557 |
Royalties | 1,215 | 1,031 |
Total revenue | 213,257 | 211,576 |
less: | ||
Retailer partners’ commissions | (42,219) | (46,434) |
Cost of mobile top-ups and SIM cards as principal | (50,307) | (48,507) |
Net revenue | 120,731 | 116,635 |
Yodel contract renegotiation | - | (706) |
Underlying net revenue | 120,731 | 115,929 |
Effective tax rate
Effective tax rate is the ongoing tax cost as a percentage of the net profit before tax.
Reported dividends (non-IFRS measure)
Reported dividends are based on a financial year’s results from which the dividend is declared and consist of an interim and final dividend. This is different to statutory dividends as the final dividend on ordinary shares is recognised in the following year when they are approved by the Company’s shareholders.
Cash generation (non-IFRS measure)
Cash generation reflects earnings before tax, depreciation, amortisation and exceptional items adjusted for working capital (excluding movement in clients’ funds and retailers’ deposits) as detailed in note 13. This measures the cash generated which can be used for tax payments, new investments and financing activities.
Total Costs (non-IFRS measure)
Total costs comprise of other cost of revenue (note 4), admin expenses, financing income and financing costs.
Operating margin (non-IFRS measure)
Operating margin is calculated by dividing operating profit by net revenue. This measure reflects the efficiency of converting revenue into profits.
Net corporate (debt)/cash (non-IFRS measure)
Net corporate (debt)/cash represents cash and cash equivalents excluding cash recognised as clients’ funds and retailers’ deposits, less amounts borrowed under financing facilities (excluding IFRS 16 liabilities).
The reconciliation of cash and cash equivalents to net corporate (debt)/cash is as follows:
As at 31 March (£000) | 2020 | 2019 |
Cash and cash equivalents | 93,774 | 37,485 |
less: | - | |
Clients’ funds and retailers’ deposits | (35,739) | (34,014) |
Loans and borrowings | (70,000) | - |
Net corporate (debt)/cash | (11,965) | 3,471 |
Revenue accounting policy
Revenue represents the value of services and goods delivered or sold to clients and retailers which is measured using the fair value of the consideration received or receivable, net of value added tax. Performance obligations are identified at contract inception and the revenue is recognised once the performance obligations are satisfied.
Revenue from bill payments comprises fees from clients for providing over-the-counter payments, digital bill payments and CashOut services. Over-the-counter and digital payments services are products where customers of PayPoint’s clients can pay their bills (due to the client) at any of PayPoint’s retailer partners or online.
Top-ups and eMoney revenue comprises revenue from top-ups for mobile phones, eVouchers, prepaid debit cards and lottery tickets. Revenue is recognised at the point in time each top-up is sold. Other than as described below,
Retail services revenue comprises:
• service fees from retailers that use our technology to facilitate card payments, PayPoint One and legacy terminals and EPoS, all of which are charged for on a weekly or monthly basis, and recognised on a straight-line basis over the period of the contract
• commissions, rebates and fees from card payment, ATM transaction fees and money transfer transactions are recognised when each transaction is processed
• fees earned for processing parcels is recognised when each parcel has been delivered or returned through the
• commissions from sale of SIM cards is primarily earned from the mobile operators based on the value of top-ups after the initial activation. This revenue is contingent on the customer actions and is recognised as the consumer tops up the SIM card
• fees for receipt advertising and failed direct debits are recognised at the time the transaction occurs
• the Group’s share of royalty income is from the Collect+ joint operation and is recognised as the parcels are processed
Use of judgements and estimates
In the application of the Group’s accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from
these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Critical judgement: recognition of cash and cash equivalents
The nature of bill payments services means that
A critical judgement in this area is whether clients’ funds and retailers’ deposits are recognised in the statement of financial position. This includes evaluating:
(a) existence of a binding agreement clearly identifying the beneficiary of the funds
(b) the identification, ability to allocate and separability of funds
(c) identification of the holder of those funds at any point in time
(d) whether
The judgement is where there is a binding agreement specifying that
Critical judgement: agent vs principal
A critical judgement for revenue recognition is PayPoint’s assessment of whether it is acting as a principal or agent. This includes evaluating:
(a) which party was responsible for fulfilling the promise to provide the service
(b) inventory risk before the service is transferred to a customer
(c) discretion in establishing the price for the service
In most cases it is clear that
The cost of mobile top-ups and SIM cards as principal was £50.3 million (2019: £48.5 million).
Critical estimate: Useful economic lives of intangible assets
A critical estimate for the amount of amortisation that is recognised in the profit or loss account and the carrying value of the asset in the statement of financial position. The useful life used to amortise intangible assets relates to the expected future performance of the assets and management’s judgement of the period over which economic benefit will be derived from the asset. For development costs, the Group has determined the useful life based on historical experience with similar products and platforms controlled by the Group as well as anticipation of future events which may impact their life such as changes in technology.
Development costs recognised as an intangible asset could be amortised on a straight-line basis over a period of three to ten years which could impact the annual amortisation charge by an increase of £3.2 million to a decrease of £2.8 million.
Critical estimate: capitalised development expenditure
A critical estimate at the statement of financial position date that has a risk of causing an adjustment to the carrying amount of assets and liabilities through estimation uncertainty is the evaluation of capitalised development expenditure shown in intangible assets. An estimate is required of how additions to intangible assets will generate probable future economic benefits whilst judgement is required in determining the technical feasibility of completing the intangible asset.
Additions in the year amounted to £5.4million whilst £5.1 million development costs were expensed. Depending on the assumptions applied relating to the probable future economic benefits, the range of possible outcomes over what has been capitalised is nil to £5.4 million.
2. Segment reporting
Segment information
The Group provides a number of different services and products, however these do not meet the definition of different segments under IFRS 8, as the chief operating decision maker does not review those separately for resource allocations purposes, therefore the Group has only one operating segment. A sector analysis has been provided in the finance review on pages 17 to 20.
Geographical information
Year ended 31 March (£000) | 2020 | 2019 |
Revenue | ||
143,545 | 143,294 | |
- | 1,381 | |
69,712 | 66,901 | |
Total | 213,257 | 211,576 |
Non-current assets
As at 31 March (£000) | 2020 | 2019 |
40,493 | 41,759 | |
14,039 | 13,180 | |
Total | 54,532 | 54,939 |
3. Revenue
Disaggregation of revenue
Year ended 31 March (£000) | 2020 | 2019 |
Bill payments | 78,122 | 78,095 |
Top-ups and eMoney | 78,653 | 79,076 |
Retail services | 56,482 | 54,405 |
Total | 213,257 | 211,576 |
Seasonality of operations
Contract balances
As at 31 March (£000) | 2020 | 2019 | |
Trade receivables | 12,346 | 15,271 | |
Accrued income | 2,518 | 2,047 | |
Contract assets – deferral of setup and development fees | 2,862 | 3,636 | |
Contract liabilities | (1,965) | (2,696) | |
Deferred income | (328) | (599) | |
Total | 15,433 | 17,659 |
4. Cost of revenue
Year ended 31 March (£000) | 2020 | 2019 |
Retailers’ commissions | 42,219 | 46,434 |
Cost of mobile top-ups and SIM cards as principal | 50,307 | 48,507 |
Cost of revenue deducted for net revenue | 92,526 | 94,941 |
Depreciation and amortisation | 9,093 | 9,365 |
Other | 8,002 | 8,997 |
Other costs of revenue | 17,095 | 18,362 |
Total cost of revenue | 109,621 | 113,303 |
5. Tax
Year ended 31 March (£000) | 2020 | 2019 |
Current tax | ||
Charge for current year | 10,672 | 10,475 |
Adjustment in respect of prior years | 267 | 233 |
Current tax charge | 10,939 | 10,708 |
Deferred tax | ||
Charge for current year | 163 | (195) |
Adjustment in respect of prior years | 29 | (228) |
Deferred tax charge/(credit) | 192 | (423) |
Total income tax | ||
Income tax charge | 11,131 | 10,285 |
The income tax charge is based primarily on the
Year ended 31 March (£000) | 2020 | 2019 |
Profit before tax | 56,799 | 54,717 |
Tax at the | 10,792 | 10,396 |
Tax effects of: | ||
Effect of tax rates in other countries where the rate is different to the | (205) | (182) |
Disallowable expenses | 238 | 103 |
Adjustments in respect of prior years | 296 | 5 |
Tax impact of share-based payments | 130 | 102 |
Revaluation of deferred tax asset | (120) | 36 |
Non-taxable exceptional items | - | (175) |
Actual amount of tax charge | 11,131 | 10,285 |
Profit before tax for purposes of calculating the effective tax rate is as follows:
Year ended 31 March (£000) | 2020 | 2019 |
Profit before tax | 56,799 | 54,717 |
Exceptional items | - | (922) |
Total for calculating the effective tax rate excluding exceptional items | 56,799 | 53,796 |
Year ended 31 March (£000) | 2020 | 2019 |
Effective tax rate | 19.6% | 18.8% |
Effective tax rate excluding exceptional items | 19.6% | 19.1% |
6. Dividends on equity shares
Year ended 31 March | 2020 | 2019 | ||
£000 | pence per share | £000 | pence per share | |
Reported dividends on ordinary shares: | ||||
Interim ordinary dividend | 16,133 | 23.6 | 10,643 | 15.6 |
Proposed final ordinary dividend | 10,667 | 15.6 | 16,105 | 23.6 |
Total ordinary dividends | 26,800 | 39.2 | 26,748 | 39.2 |
Interim additional dividend | 12,577 | 18.4 | 8,326 | 12.2 |
Proposed additional final dividend | - | - | 12,557 | 18.4 |
Total additional dividend | 12,577 | 18.4 | 20,883 | 30.6 |
Total reported dividends (Non-IFRS measure) | 39,377 | 57.6 | 47,631 | 69.8 |
Dividends paid on ordinary shares: | ||||
Final ordinary dividend for the prior year | 16,133 | 23.6 | 20,867 | 30.6 |
Interim dividend for the current year | 16,133 | 23.6 | 10,643 | 15.6 |
Total ordinary dividend paid | 32,266 | 47.2 | 31,510 | 46.2 |
Final additional dividend for the prior year | 12,576 | 18.4 | 16,725 | 24.5 |
Additional interim dividend for the current year | 12,577 | 18.4 | 8,326 | 12.2 |
Total additional dividend paid | 25,153 | 36.8 | 25,051 | 36.7 |
Total dividends paid | 57,419 | 84.0 | 56,561 | 82.9 |
Number of shares in issue used for purposes of dividends per share calculations | 68,376,750 | 68,243,406 |
The proposed final ordinary dividend is subject to approval by shareholders at the annual general meeting and has not been included as a liability in these financial statements.
7. Earnings per share
Basic and diluted earnings per share are calculated on the following profit and number of shares:
Year ended 31 March (£000) | 2020 | 2019 |
Profit for basic and diluted earnings per share is the net profit attributable to equity holders of the parent | 45,668 | 44,432 |
As at 31 March (Number of shares) | 2020 | 2019 |
Weighted average number of ordinary shares in issue (for basic earnings per share) | 68,264 | 68,160 |
Potential dilutive ordinary shares: | ||
Long-term incentive plan | 417 | 361 |
Deferred annual bonus scheme | 73 | 39 |
SIP and other | 80 | 38 |
Weighted average number of ordinary shares in issue (for diluted earnings per share) | 68,834 | 68,598 |
Earnings per share (pence) | 2020 | 2019 |
Basic | 66.9 | 65.2 |
Diluted | 66.3 | 64.8 |
8. Trade and other receivables
As at 31 March (£000) | 2020 | 2019 |
Trade receivables | 12,346 | 15,271 |
Items in the course of collection1 | 88,692 | 117,263 |
Revenue allowance | (1,379) | (2,957) |
99,659 | 129,577 | |
Other receivables | 594 | 1,032 |
Contract assets | 2,862 | 3,636 |
Accrued income | 2,518 | 2,047 |
Prepayments | 2,735 | 2,718 |
108,368 | 139,010 |
1. Items in the course of collection represent amounts collected for clients by retail partners. An equivalent balance is included within trade and other payables.
9. Cash and cash equivalents
The Group operates cash pooling amongst its various bank accounts in the
Included within Group cash and cash equivalents of £93.8 million (2019: £37.5 million) are balances of £35.7 million (2019: £34.0 million) relating to funds collected on behalf of clients where
10. Trade and other payables
As at 31 March (£000) | 2020 | 2019 |
Amounts owed in respect of clients’ funds and retailer partners’ deposits1 | 35,739 | 34,014 |
Settlement payables2 | 88,692 | 117,263 |
Client payables | 124,431 | 151,277 |
Trade payables | 8,318 | 7,536 |
Other taxes and social security | 4,006 | 1,985 |
Other payables | 3,886 | 5,939 |
Accruals | 5,782 | 6,921 |
Deferred income | 328 | 599 |
Contract liabilities | 1,965 | 2,696 |
148,716 | 176,953 |
Disclosed as:
Current | 148,621 | 176,720 |
Non-current | 95 | 233 |
Total | 148,716 | 176,953 |
1 Relates to monies collected on behalf of clients where the Group has title to the funds (clients’ funds and retailer partners’ deposits). An equivalent balance is included within cash and cash equivalents.
2 Payable in respect of amounts collected for clients by retailer partners. An equivalent balance is included within trade and other receivables.
11. Share capital
As at 31 March (£000) | 2020 | 2019 |
Called up, allotted and fully paid share capital | ||
68,376,750 (2019: 68,243,406) ordinary shares of 1/3p each | 228 | 227 |
12. Share based payments
During the year, 192,675 (2019: 209,694) shares under the LTIP scheme were granted with 50% of the vesting based on Total Shareholder Return (TSR) and 50% on earnings per share (EPS) growth. The performance condition for the TSR element is the same as the vesting period. The performance period for the EPS element is for the three financial years up to
Other share-based payments include restricted shares issued to eligible employees which do not contain any performance criteria. No restricted shares were issued in the year (2019: 62,196).
The amount charged to the statement of profit or loss in the year was £0.6 million (2019: £1.4 million). A total charge of £1.4 million (2019: £1.6 million) previously recognised directly to equity for schemes which have now lapsed or vested was transferred from the share-based payments reserve to retained earnings during the period.
13. Notes to the consolidated statement of cash flows
Year ended 31 March (£000) | 2020 | 2019 |
Profit before tax | 56,799 | 54,717 |
Adjustments for: | ||
Depreciation of property, plant and equipment | 5,631 | 6,318 |
Amortisation of intangible assets | 3,886 | 3,466 |
VAT credits54 | - | (2,427) |
Exceptional items | - | (922) |
Loss on disposal of fixed assets | 387 | 110 |
Net finance costs | 189 | 159 |
Share-based payment charge | 631 | 1,730 |
Cash-settled share-based remuneration | (1,028) | (725) |
Operating cash flows before movements in corporate working capital | 66,495 | 62,426 |
Movement in inventories | (89) | 152 |
Movement in receivables | 1,172 | 3,715 |
Movement in contract assets | 775 | (614) |
Movement in contract liabilities | (731) | 649 |
Movement in payables | (1,160) | (3,482) |
Movement in lease liabilities | 96 | - |
Cash generated by operations | 66,558 | 62,846 |
Corporation tax paid | (15,770) | (9,952) |
Finance charges paid | (720) | (586) |
Net cash from operating activities (Corporate) | 50,068 | 52,308 |
Movement in clients’ funds and retailers’ deposits | 1,413 | 7,255 |
Net cash from operating activities55 | 51,481 | 59,563 |
14. Subsequent events
Collect+ was originally set up as a joint venture between
On 6th
1 Net revenue is an alternative performance measure. Refer to note 1 to the financial statements for a reconciliation to revenue.
2 Operating margin % is an alternative performance measure and is calculated by dividing operating profit by net revenue.
3 Cash generation is an alternative performance measure. Refer to the financial review – cash flow and liquidity for a reconciliation from profit
before tax.
4 Net corporate (debt)/cash (excluding IFRS 16 liabilities) is an alternative performance measure. Refer to note 1 to the financial statements for a reconciliation to cash and cash equivalents.
5 Survey results as at
6 Total costs is an alternative performance measure as explained in note 1 to the financial statements, a reconciliation to costs is included in the Financial Review on page 20.
7 Excludes the impact of
8 Profit after tax divided by dividends.
9 Excludes the prior year impact from the Yodel renegotiation of £0.7 million.
10 The reduction of c400 sites from
11 As indicated in our Half-year results for 6 months ended
12 Profit after tax divided by dividends..
13
14 As at
15 ACS local shop report 2019. Sales figures are for the 12 months to
16 https://www.igd.com/articles/article-viewer/t/uk-food-sales-to-grow-by-24bn-by-2024/i/21868.
17 Based on sites using PayPoint One's scanning functionality only.
18 For the 12 months to
19
20 Derived from data in ‘Total Market Data - Credit Card Statistics - January 2019’ available at https://www.ukfinance.org.uk/data-and-research/data/cards/card-spending, comparing seasonally adjusted figures from six months to
21 ACS local shop report 2019.
22 https://www.ukfinance.org.uk/sites/default/files/uploads/pdf/UK%20Cash%20and%20Cash%20Machines%202019%20SUMMARY.pdf.
23 https://www.moneyobserver.com/news/numbers-uk-bank-branch-closures-reach-alarming-level.
24https://www.link.co.uk/about/statistics-and-trends/ : For the 12 months to
25 https://www.link.co.uk/about/statistics-and-trends/ : At
26 https://www.link.co.uk/about/statistics-and-trends/ : For the three weeks ending
27 https://www.link.co.uk/about/news/Covid19-and-cash-link-update/.
28https://www.imrg.org/data-and-reports/imrg-metapack-delivery-indexes/imrg-metapack-uk-delivery-index-november-2019/.
29https://www.imrg.org/uploads/media/default/0001/08/2477f50ad2fee946cdf5ed23ebb8df21f2489d09.pdf?st.
30 OC&C analysis.
31 IMRG Capgemini Online Retail Sales Index.
32
33 https://www.ofgem.gov.uk/data-portal/retail-market-indicators.
34 https://www.ofgem.gov.uk/data-portal/retail-market-indicators - as at 31 December.
35 https://www.gov.uk/cma-cases/ovo-sse-retail-merger-inquiry.
36 https://www.gov.uk/government/statistics/statistical-release-and-data-smart-meters-great-britain-quarter-4-2019.
37 https://www.statista.com/statistics/273608/number-of-prepaid-mobile-subscriber-in-the-united-kingdom-uk/.
38 https://www.gov.uk/government/news/government-agrees-measures-with-energy-industry-to-support-vulnerable-people-through-Covid-19.
39 https://www.ofgem.gov.uk/coronavirus-Covid-19/coronavirus-Covid-19-and-your-energy-supply.
40 Internal estimates.
41https://www.bnr.ro/Payments-Statistics-5312.aspx# Includes resident and non-resident Payment Service Providers (PSP).
42 https://www.gstatic.com/Covid19/mobility/2020-04-30_RO_Mobility_Report_en.pdf
43 Excludes retailer partners using the PPoS terminal and Multiple retailer partners using the legacy terminal.
44https://www.link.co.uk/about/statistics-and-trends/ : For the 12 months to
1 All these KPIs are non-IFRS measures or Alternative Performance Measures (‘APMs’).
47 PayPoint One has replaced the legacy terminal in independent retailer partners.
48 PPoS is a plug-in device and a virtual
49
50 Operating margin % is an alternative performance measure and is calculated by dividing operating profit by net revenue.
51 Effective tax rate is the tax cost as a percentage of profit before tax.
52 Profit after tax divided by dividends.
53 Excludes the impact of
54 In the prior year the improved VAT recovery was offset against the net payment to HMRC which has been shown as a non-cash item.
55 Items in the course of collection and settlement payables are included in this reconciliation on a net basis through the client cash line. The Directors have included these items on a net basis to best reflect the operating cash flows of the business.
Attachment
- PayPointA1. RNS
31 March 20 Final (003)
© OMX, source