PayPoint was started in 1996 as a branded retail network for the payment of household bills. It was intended as an alternative to the Post Office – and it's grabbed market share ever since then, adding mobile top-ups and private ATMs to its repertory.
Flotation in 2004 saw the company expanding fast – it was a top tip for growth investors. By 2006 it was growing at 30% a year. Now, it has businesses in the UK, Ireland, and Romania – the latter business having been acquired for £10.5m in 2007.
Is the growth still there? Results for the year to March 2009 show an 8% rise in transaction volumes, with pretax profit up 19% and an increase in the final dividend. But the interim management statement issued in August 2009 makes less impressive reading [1] . Transactions rose only 2% in the period – and revenues declined 11% as the mobile top-ups business declined. That's partly due to the economic downturn, and partly to the fact that mobile operators have been offering more airtime for less money. Fortunately, since mobile is the lowest margin product, net revenues (that is, after paying the cost of airtime and agents' fees) actually increased by 3%. None the less, it has to be said that 3% revenue growth is not the sign of a go-go stock.
PayPoint aims to grow by expanding the terminal estate. This year it said it would add 1500 terminals in the UK and 900 in Romania [2] – that should enable the company to migrate further market share away from the Post Office. It's been particularly successful in signing up multiple retailers like Costcutter and Londis – though a large part of the estate is still represented by small independent convenience stores.
PayPoint claims over 24,000 terminals in the UK and Ireland, with more than 6,000 clients and merchants. That compares with 14,500 Post Offices – a good market positioning. In ATMs, where PayPoint has 2,300 machines, it's a smaller player – Payzone has about 6,000.
Although it's the terminals network that gives the company its market reach, though, its long term growth is more affected by the deals it can strike with major utilities. For instance, in 2006 it managed to convince the BBC to switch the TV licence payments contract from the Post Office, which had handled these payments for…
