REG-PayPoint plc - results for the 6 months ended 30 September 2017 <Origin Href="QuoteRef">PAYP.L</Origin>
30/11/2017 07:11
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PayPoint plc - results for the 6 months ended 30 September 2017
Good growth in retail services supported by continued progress in business
reshaping
Reported HIGHLIGHTS
6 months ended 30 September 2017 6 months ended 30 September 2016 Change
Revenue £97.6m £101.7m (4.1)%
Net revenue ( 1 ) £56.5m £58.4m (3.2)%
Gross margin ( 2 ) 48.5% 49.1% (0.6)ppts
Operating profit before impairments and business disposal £24.4m £24.2m 0.6%
Profit before tax £24.4m £24.7m (1.5)%
Earnings per share 29.1p 29.0p 0.1p
Ordinary interim dividend per share 15.3p 15.0p 0.3p
Additional interim dividend per share 12.2p 12.2p -
Total dividend per share 27.5p 27.2p 0.3p
Operating cash flows £29.5m £28.0m 5.3%
Cash at period end £27.6m £51.4m (46.3)%
PayByPhone, our mobile payment business, which was sold on 23 December 2016,
and Drop and Collect, before our renegotiation with Yodel which completed on
16 December 2016 are included in last year's reported numbers making this
year's interim performance not directly comparable. In order to more clearly
compare our financial performance we have included highlights of our ongoing
Retail networks business below.
RETAIL NetworkS( 3 ) HIGHLIGHTS
6 months ended 30 September 2017 6 months ended 30 September 2016 Change
Revenue £97.6m £95.4m 2.3%
Net revenue (1) £56.5m £53.8m 5.0%
Gross margin2 48.5% 48.5% -
Operating profit £24.4m £25.0m (2.7)%
Profit before tax £24.4m £25.1m (3.0)%
Earnings per share 29.1p 29.6p (0.5)p
Financial highlights
· Good revenue growth in our ongoing Retail networks
business;
o Gross revenue grew by 2.3% to £97.6 million,
o Net revenue(1) grew by 5.0% to £56.5 million,
o UK retail services net revenue grew 12.5% to £19.0 million.
· Announced ordinary interim dividend of 15.3 pence per
share, an increase of 2% year-on-year alongside the additional interim
dividend of 12.2 pence per share. Total dividends of £37.2 million paid to
shareholders during the period supported by strong operating cash flows( 4 )
of £29.5 million up on prior period by £1.5 million. Cash at period end was
£27.6 million.
Retail services
* Continued successful roll out of PayPoint One, reached 6,181 sites as at 30
September 2017, an increase of 2,580 sites since 31 March 2017, with further
growth in the average weekly PayPoint One fee per site. Remain on track to
deliver target of 8,000 PayPoint One installations by 31 March 2018.
* Strong growth in card payment net revenue of 22.4% driven by an increase in
transactions, improved margins and change in VAT treatment.
* Further progress in the parcel business with volumes up by 13.6% to 11.9
million and the network has now increased to over 7,200 outlets ahead of the
Christmas peak season. Collect+ remains the clear market leader in parcel shop
services.
Payments
* UK bill payments and top-up net revenue broadly flat at £32.4 million. The
positive growth from improvements to client mix, renegotiation of symbol
commissions, increased average top-up values and increased eMoney volumes
which have a higher margin per transaction, was offset by a 9.7% reduction in
transaction volumes.
* Good momentum in MultiPay with transactions doubling to 6.7 million
servicing 17 clients including SSE.
* Ongoing strong growth in Romania; * Net revenue increased 17.1% to £5.0
million,
* Good growth in transactions which have increased by 6.6% to 38.8 million,
* Payzone Romania acquisition completed in October 2017.
Service delivery
* Initiatives to improve company processes are taking effect. For example, the
PayPoint One prospecting to installation timeframe has reduced by 19% since
last year.
* Cost base grew by £3.3 million to £32.1( 5 ) million (September 2016: 28.8
million) reflecting continued investment in PayPoint One, MultiPay and
improving customer service. The increase is weighted to the first half of the
year and we expect minimal growth in the second half of the financial year.
Dominic Taylor, Chief Executive, said: "It has been an exciting and busy six
months for PayPoint as we have continued to reshape our business. PayPoint One
is already benefiting over 6,800 retailers and we have just launched EPoS Pro
and our EPoS mobile app, innovations which will further help our convenience
retailer customers drive significant additional efficiencies and value within
their businesses. We continue to see strong card payment growth while
MultiPay, our omni-channel payment solution, has now processed over 22.5
million transactions since launch. Collect+ continues to perform strongly and
has extended its lead in parcels, with a network now of over 7,200 sites.
Finally, our Romanian business remains the clear market leader, further
strengthened with the acquisition of Payzone Romania following the recent
clearance of the transaction by the competition authorities.
This continued progress underpins the Board's confidence in our strategy,
allowing us to confirm the full year outlook which remains in line with
previous guidance."
Enquiries
PayPoint plc Finsbury (Tel: 0207 2513 801)
Dominic Taylor, Chief Executive (Tel: 01707 600 317) Rollo Head
Rachel Kentleton, Finance Director (Tel: 07843 074 906) Andy Parnis
A presentation for analysts is being held at 11.45am today (30 November 2017)
at Canaccord Genuity Limited, 88 Wood Street, London, EC2V 7QR. A webcast of
the presentation can be accessed at
http://paypoint301117-live.audio-webcast.com. This announcement is available
on the PayPoint plc website: http://corporate.paypoint.com.
Chief Executives Review
The past six months represents the first set of interim results since the
completion of our restructuring programme and the good growth reflects the
progress being made reshaping the business towards future growth opportunities
in retail services. Our success is built around our deeply embedded scalable
network and low cost operating platform. We are in approximately 29,000 stores
in the UK and Ireland with a 43%( 6 ) share of retail outlets( 7 ) and also a
43% share of the independent retail sector outlets, whether affiliated to a
symbol operator or not. We also have 11,700 stores in Romania (with the
acquisition of Payzone this increases to over 21,000). By creating a
technology, settlement and operating platform to leverage a wide range of
payment, parcel and retail service products, we are able to deliver a strong
consumer proposition which delivers incremental revenue at a low marginal cost
driving attractive returns for our shareholders.
Net revenue for the past six months was £56.5 million (September 2016: £58.4
million), on revenues of £97.6 million (September 2016: £101.7 million).
Transactions of 295.2 million (September 2016: 337.2 million) were processed
over the six months representing a transaction value of £4.7 billion
(September 2016: £4.9 billion). Note that the results of the mobile payments
business (PayByPhone), which was sold on 23 December 2016, are included in the
2016 comparative.
Our Retail networks( 8 ) performed well with net revenue increasing by £2.7
million to £56.5 million, up 5.0% from the same period last year, driven
mostly by the increase in service revenue from PayPoint One. However, our cost
base( 9 ) increased by £3.3 million to £32.1 million as a result of our
continued investment in PayPoint One, MultiPay and improving customer service.
The increase is weighted to the first half of the year and we expect minimal
growth in the second half of the financial year as the investment required to
deliver PayPoint One to our retailers decreases.
Earnings per share increased to 29.1 pence (September 2016: 29.0 pence)
primarily as a result of the effective tax rate( 10 ) reducing to 18.8%
(September 2016: 20.2%). The higher effective tax rate in the prior period was
primarily due to the losses in the mobile payments business incurring no tax
relief.
With this set of results we have declared an interim ordinary dividend of
15.3p per share, an increase of 2% year-on-year alongside the additional
interim dividend of 12.2 pence per share, resulting in an incremental payment
of £18.7 million to our shareholders.
As outlined in our full year results the management team is focused on
reshaping the business to build on the strength of our Retail network, so as
to drive growth in retail services and to improve retailer experience through
our investment in customer service and position PayPoint at the heart of our
customers businesses. To execute our strategy, we set out five clear
priorities for this financial year on which we have made good progress over
the past six months, these are:
1. Drive profitable growth in UK retail services.
2. Deliver parcels volume growth in the UK.
3. Optimise profits in UK bill payments and top-ups.
4. Drive continued organic growth in Romania.
5. Business optimisation.
1. Drive profitable growth in UK retail services
Convenience retailing is a strong, resilient and growing sector which has
benefitted from a shift towards regular top-up shopping, complementing online
purchasing and taking share from big weekly shops. The total food and grocery
market in the UK in 2017 is estimated to be £184.5bn with the convenience
sector taking 21.7% of the market share. The convenience market is expected to
increase by 17.7% by 2022 driving its share to 22.1%( 11 ). PayPoint is well
placed through our strong convenience coverage of approximately 29,000 stores
in the UK and Ireland, to grow retail services by selling to retailers as our
customers and serving consumers through retailers as our distributors. This
dynamic has underpinned our continuing retail services growth which are on
track to exceed bill payment revenues in the coming years.
Progress in the six months
* UK retail services net revenue grew 12.5% to £19.0 million driven by strong
growth from PayPoint One service fees.
* PayPoint One installed in 6,181 sites as at 30 September 2017, an increase
of 2,580 since 31 March 2017; * PayPoint One is already the largest EPoS
capable estate in the UK convenience sector,
* Average weekly revenue per site increased to £14.29 as a result of an
improving mix within our three price points of £10, £15 or £20 per week per
site,
* 57% (3,947 sites)( 12 ) of PayPoint One users now have EPoS Core with the
remainder taking our Base proposition,
* Over 80%( 13 ) of PayPoint One users would recommend PayPoint One,
* Retailers are increasingly using more functionality within PayPoint One
EPoS; 47% of goods are now being scanned vs 43% at January 2017.
* EPoS Pro and the EPoS mobile app were launched at the beginning of November
with enhanced features including stock management, news management and
wholesaler links. EPoS Pro will retail at £30 a week; * Roll out to commence
from January 2018,
* EPoS Pro integration with Nisa agreed providing a seamless link to their
in-house stock management systems with more symbol links in development,
* EPoS mobile app to provide PayPoint One customers with access to data on any
device, anywhere, whether they are using EPoS Base, Core or EPoS Pro.
* ATM transactions increased to 20.4 million (September 2016: 19.8 million) an
increase of 3.4%; * Replaced over 500 legacy ATMs with broadband connected
machines which are faster, more reliable, and improve the consumer experience.
* Card payment transactions increased 5.4% to 46.7 million with growth in card
payment net revenue of 22.4% driven by an increase in transactions, improved
margins and the change in VAT treatment in the second half of the last
financial year.
* Standardised service fees for legacy terminals introduced across 14,000
sites; experienced small churn in customer base of 1.9%, in line with
expectations.
Delivery to the end of the financial year
We remain on target to achieve 8,000 PayPoint One sites by March 2018. With
the launch of EPoS Pro and our focus on increasing our pricing mix, we expect
continued growth in the average weekly fee per site. We also plan to implement
an option for retailers to have net settlement for card payments. This will be
a unique differentiator for PayPoint, reducing our retailers' banking costs
and improving their working capital.
In ATMs we intend to grow our network in the second half of the year while
also reviewing the implications from LINK's recent proposals to reduce the
interchange rate for our ATM business. ATMs remain an important business for
us although we may adjust our network plans to remove sites that become
un-profitable should LINK's recent proposals to reduce interchange revenue go
ahead.
1. Deliver parcels volume growth in the UK
Collect+ is the biggest pick up and drop off network in the UK and provides
consumers with the ability to collect parcels or send returns from over 7,200
local convenience stores nationwide. The UK parcel market has continued to
grow strongly. Year to date the market has increased by 16.4%( 14 ) to an
estimated 2.4 billion per annum, driven by the growth in online orders. Within
the total parcels market, Click & Collect accounts for 120 million parcels and
returns have even higher volumes.
Progress in the six months
* Continued growth in parcel volumes, up 13.6% to 11.9 million.
* Collect+ sites increased by 627 to 6,794 on 30 September 2017, now at over
7,200 in advance of the Christmas peak.
* Collect+ remains the market leader; * Improvement in Trust Pilot score,
score up to 9.3 out of 10 (31 March 2017: 9.2),
* Ranked in the top three delivery services, with 89% neutral or positive
reviews( 15 ).
* Proposition remains highly attractive to retailers including a trial
participation from Tesco Express.
Delivery to end of the financial year
Underlying trends in parcels remain favourable with increasing outlets and
continued growth in UK online shopping. Following the successful restructure
of our Collect+ joint arrangement with Yodel last year, we now have the
opportunity to extend our network to other carriers, providing PayPoint with
an exciting opportunity to capture a greater share of the market. As a result,
we expect continued growth in parcel volumes with the addition of new
carriers.
1. Optimise profits in UK bill payments and top-ups
Cash prepay energy payments is a sector where PayPoint continues to be the
market leader. The prepay energy sector has however, been impacted by a number
of factors including the Big Six energy providers losing market share, reduced
levels of consumer energy debt, higher temperatures and the continued
uncertainty around the impact of smart meters and the delays to their national
roll out. We believe our MultiPay service, which complements our existing
business by enabling consumer choice of digital channels, is well placed to
capture digital payments from smart meters through its integrated platform as
well as enabling PayPoint to service new non-energy clients.
Progress in the six months
* Net revenue of £32.4 million (September 2016: £32.6 million) was broadly
flat compared to prior period as improvements to client mix, renegotiation of
symbol commissions, increased average top-up values and increased eMoney
volumes which have a higher margin per transaction, were offset by the decline
in bill payments and top-up transactions.
* UK bill payments and top-up transactions reduced by 9.7% to 174.7 million, a
large part of which was caused by the ongoing decline in the UK mobile top-ups
and energy prepay markets.
* Launched Amazon Cash as Amazon's first partner in the UK.
* 18 new clients secured in the six month period of which nine are challenger
energy providers.
* MultiPay transactions doubled to 6.7 million, with 17 clients, including
SSE, now live on the service.
* A new contract was secured for the replacement of the Department of Work and
Pensions simple payment service, albeit at a lower value than the previous
contract.
* Renewed and extended contracts with six clients, including the BBC.
Delivery to end of the financial year
There is a strong residual demand for cash payment that we will continue to
serve successfully and expand where possible. In addition, we will continue to
add more clients to our MultiPay service and extend it to other sectors. There
is however uncertainty relating to the roll out of smart meters and the
general long-term decline of cash and top-ups which will continue to impact
our payments business, but we expect to continue to renew key contracts with
an improvement in revenue per transactions rates.
1. Drive continued organic growth in Romania
In Romania, there are an estimated 418 million bill payments per year and cash
is expected to be the dominant settlement method for the foreseeable future.
PayPoint is a well-known market leading brand which has relationships with
clients from all sectors. We estimate our current share of the bill payments
issued by our clients is 23.6%.
Progress in the six months
* Good transaction growth of 6.6% to 38.8 million.
* Strong growth in net revenue, up 17.1% to £5.0 million; underlying net
revenue growth excluding exchange rate movements was 11.1%.
* Network sites increased to 11,771, up by 469 since 31 March 2017.
* Successfully added a further 14 clients; total clients now in excess of 140.
* Parcels trial continues with over 200 sites in Bucharest and five online
merchants.
* Completed Payzone acquisition in October 2017; consideration paid totalled
£1.4 million with a contingent £0.4 million deferred.
Delivery to end of the financial year
The Payzone acquisition presents a step change for our Romanian business
increasing our stores in Romania to over 21,000. Our focus for the next six
months will be to start network optimisation, integrating the businesses to
increase revenue and services portfolio and to drive cost efficiencies. We
will also look to maximise market share with existing clients, extend our
presence in multiples and add new clients from other sectors.
1. Business optimisation
We intend to invest in tools and capabilities to enable our client and field
teams to more effectively sell a portfolio of products. In addition, we have
also publicly pledged to our UK retailers that we intend to deliver first
class service through the entire lifecycle of on-boarding, operational support
and status changes. This will require us to invest in an efficient workflow
and in billing systems with accurate and timely supporting information so we
can serve them effectively.
Progress in the six months
We have made good progress in improving our processes so as to meet our pledge
of delivering first class service to our UK retailers. Our end to end process
for on-boarding retailers has significantly improved over the last six months
with average days from prospecting to installation across all products
reducing by over 10% and for PayPoint One by 19%. We have also improved our
calls answered ratio by 3.3ppts compared to last year.
Delivery to end of the financial year
The first phase of our new customer relationship management and billing
systems will go live in the first half of 2018. These systems will allow us to
further improve our service to retailers, our sales capability and our ability
to generate operational efficiencies.
Outlook
This continued progress underpins the Board's confidence in our strategy,
allowing us to confirm the full year outlook which remains in line with
previous guidance.
OPERATING REVIEW
PayPoint is a multi-channel service provider for consumer transactions,
processing high transaction volumes, managing retailers and clients, settling
funds (collection and transmission) and transmitting data in a secure
environment, by the application of technology.
The application of technology is directed by the group's Executive Board to
develop products across the business, prioritised on an economic value basis,
generally by product, rather than on a subsidiary basis and, therefore, the
group has only one operating segment.
Retail networks( 16 )
The group has established Retail networks in the UK, Ireland and Romania which
grew by 2.2% (September 2016: 3.2%) to 40,512 sites.
Analysis of sites/internet merchants At 30 September 2017 At 30 September 2016 Change % At 31 March 2017
UK and Ireland terminal sites 28,741 28,973 (0.8) 29,176
Romania terminal sites 11,771 10,662 10.4 11,302
Total terminal sites 40,512 39,635 2.2 40,478
In the UK, we introduced standardised service fees for legacy terminals across
14,000 sites and, as expected, experienced small churn in customer base of
1.9%. Overall the UK network reduced by a net 435 sites to 28,741 in the first
half of the year. Our main priority is to deploy PayPoint One across our
existing site base in the UK.
PPoS, our solution for symbol groups and Multiples who want to integrate
through their own EPoS, grew to 8,561 sites (September 2016: 8,178 sites).
In Romania, we increased the number of terminal sites by 469 in the period, an
increase of 4.1% since year end.
Transactions in our Retail networks declined by 11.9 million (5.3%) to 295.2
million (September 2016: 307.1 million), with the UK declining by 5.3% offset
by growth in Romania of 6.6%. Transaction value of £4.7 billion (September
2016: £4.8 billion) was 2.0% lower than prior period. Net revenue of £56.5
million was 5.0% up on last year driven by increased service revenue from
PayPoint One. The impact of declining transactions on net revenue was
mitigated by improvements to client mix, renegotiation of symbol commissions,
increased average top-up values and increased eMoney volumes which have a
higher margin per transaction.
At 30 September 2017 At 30 September 2016 Change % At 31 March 2017
UK transactions (million) 256.4 270.7 (5.3) 579.8
Romania transactions (million) 38.8 36.4 6.6 75.0
Total transactions (million) 295.2 307.1 (3.9) 654.8
Transaction value (£m) 4,721.9 4,819.0 (2.0) 10,409.6
Revenue (£m) 97.6 95.4 2.3 203.4
Net revenue ( 17 )(£m) 56.5 53.8 5.0 117.5
We distinguish between three business categories within our Retail networks,
namely bill and general, top-ups and retail services and each is reviewed
separately below.
Bill and general
Bill and general is our most established category and consists of prepaid
energy, bill payments and cash-out services.
6 months ended 30 September 2017 6 months ended 30 September 2016 Change % Year ended 31 March 2017
Transactions (million) 182.9 195.0 (6.2) 430.5
Transaction value (£m) 3,750.0 3,860.3 (2.9) 8,489.9
Revenue (£m) 36.8 37.8 (2.8) 82.5
Net revenue ( 18 )(£m) 26.7 26.9 (1.0) 58.5
Bill and general transactions decreased to 182.9 million, down 6.2% (September
2016: 4.0%) compared to the same period last year. As anticipated, UK energy
transactions declined 9.0% (September 2016: 7.1%) due to a number of factors
including the Big Six energy providers losing market share, reduced levels of
consumer energy debt, higher temperatures and the continued uncertainty around
the impact of smart meters and the delays to their national roll out. However
our MultiPay service, which complements our existing business by enabling
consumer choice of digital channels, performed well doubling transactions to
6.7 million in the period. Continued strong growth in Romania resulted in a
market share( 19 ) improvement to 23.6% (September 2016: 23.1%) and the
addition of 14 new clients. Romania had good transaction volume growth of 6.2%
(September 2016: 11.7%) to 34.6 million transactions (September 2016: 32.6
million).
Net revenue of £26.7 million decreased 1.0% (September 2016: increased 2.8%).
The decline in transactions was mitigated by improvements to client mix.
Top-ups
Top-ups include transactions where consumers can top up their mobiles and
prepaid debit cards. They can also purchase eMoney vouchers and lottery
tickets. In Ireland and Romania, PayPoint is principal in the sale of mobile
top-ups and, accordingly, the face value of the top-up is included in revenue
and the corresponding costs deducted when deriving net revenue.
6 months ended 30 September 2017 6 months ended 30 September 2016 Change % Year ended 31 March 2017
Transactions (million) 31.3 35.8 (12.4) 68.9
Transaction value (£m) 349.5 370.0 (5.5) 731.6
Revenue (£m) 32.6 31.9 2.4 63.6
Net revenue1 (£m) 10.3 9.6 7.6 19.1
As expected, top-up transactions reduced by 12.4% (September 2016: 14.1%) as a
result of the continued decline in the UK mobile top-up volumes which was
partly offset by an increase in UK eMoney top-ups and Romanian top-ups.
Net revenue increased 7.6% to £10.3 million, despite transactions declining
as a result of renegotiation of symbol commissions, increased average top-up
values and increased eMoney volumes which have a higher margin per
transaction.
Retail services
Retail services are services we sell to retailers in our networks. Services
include the provision of the PayPoint One platform (which includes our Base,
Core and Pro EPoS solutions), ATMs, card payment, parcels, money transfer and
SIMs.
6 months ended 30 September 2017 6 months ended 30 September 2016 Change % Year ended 31 March 2017
Transactions (million) 81.0 76.3 6.1 155.4
Transaction value (£m) 622.4 588.7 5.7 1,188.1
Revenue (£m) 28.2 25.7 9.9 57.3
Net revenue ( 20 )(£m) 19.5 17.3 13.0 39.9
Overall retail services transaction volumes increased 6.1% (September 2016:
11.8%) over the same period last year. Parcels volumes increased by 13.6%
(September 2016: 5.7%), card payment transactions increased by 5.5% (September
2016: 14.7%) and ATM transactions by 3.4% (September 2016: 9.3%).
Net revenue growth of 13.0% (September 2016: 14.7%) was greater than
transaction growth, mainly as a result of strong growth from PayPoint One
service fees, standardised service fees for legacy terminals, improved card
payment margins and the change in VAT treatment in the second half of the last
financial year for card payments resulting in benefit of £0.5 million. An
associated increase in irrecoverable VAT costs of £0.3 million is included in
administrative costs. These benefits were partially offset by the revised
commercial terms with Yodel for parcels with an impact of £1.4 million on a
like for like volume basis.
The number of sites in the UK with various retail services is as follows:
Service 6 months ended 30 September 2017 6 months ended 30 September 2016 Change % Year ended 31 March 2017
PayPoint One 6,181 (2) 1,142 >100 3,601
Collect+ 6,794 (2) 5,960 14.0 6,167
Card payment 9,684 10,076 (3.9) 10,024
ATM 4,153 4,120 0.8 4,165
Mobile
The group disposed of its mobile payments business on 23 December 2016. The
results below show the trading of this business for the comparative interim
period.
6 months ended 30 September 2017 6 months ended 30 September 2016 Decrease % Year ended 31 March 2017
Transactions (million) - 30.1 (100.0) 40.3
Transaction value (£m) - 100.6 (100.0) 136.0
Revenue (£m) - 6.3 (100.0) 8.5
Net revenue1 (£m) - 4.6 (100.0) 6.4
FINANCIAL REVIEW
Movements in revenue and net revenue have been addressed in the operational
review above.
Gross profit was down by 5.3% to £47.3 million (September 2016: £50.0
million). Excluding the mobile payments business from the prior period, Retail
networks'( 22 ) gross profit was up 2.3% reflecting gross profit margin of
48.5%, the same as September 2016.
Administrative expenses of £23.0 million were 8.3% higher than the prior
period of £21.2 million after excluding £4.5 million from the comparative
figure related to the mobile payments business. The higher costs relate to
PayPoint One roll out, IT investment costs in relation to CRM, PayPoint One
and data centre migration, people costs and irrecoverable VAT. Irrecoverable
VAT increased by £0.3 million due to the change in the VAT treatment of card
payments, however included in revenue is a corresponding benefit of £0.5
million.
The changes in revenue and costs described above have led to a decrease in our
Retail networks operating margin( 23 ) to 43.1% (September 2016: 46.5%).
Profit before tax was £24.4 million (September 2016: £24.7 million). The
conversion of Romania's results into sterling benefited profit before tax by
£0.1 million compared to the prior year.
The tax charge was £4.6 million (September 2016: £5.0 million) resulting in
an effective tax rate( 24 ) of 18.8% (March 2017: 20.2%). The reduction in the
effective tax rate was primarily caused by the removal of the losses incurred
by the mobile payments business in North America for which there was no tax
relief.
Cash flow and liquidity
Operating cash flows, before movements in working capital, continue our strong
conversion of profit to cash. We generated £29.5 million in the period, an
increase of £1.5 million when compared to prior period.
Working capital absorbed £5.0 million in the period of which £2.0 million
relates to a decrease in client funds. The balance mainly relates to our
Salesforce CRM implementation and data centre migration. We expect full year
working capital to be broadly flat excluding movements for client funds.
Corporation tax payments of £5.0 million (September 2016: £3.1 million) are
for payments on account. Included in the net £3.1 million tax paid last
period were tax refunds of £1.7 million for the 2014 and 2015 financial
years. Capital expenditure of £8.1 million (September 2016: £9.1 million)
relates to the purchase of PayPoint One terminals and continued development of
EPoS, MultiPay and Salesforce CRM.
Settlement of the 2014 DSB share incentive schemes absorbed £0.3 million
(September 2016: £0.4 million). Equity dividends paid in the period were
£37.2 million (September 2016: £33.5 million).
The group had cash of £27.6 million at the period end (September 2016: £49.6
million, March 2017: £53.1 million) and a £45.0 million revolving term
credit facility. Cash includes amounts held to settle short-term client
settlement obligations, which at the period end, amounted to £18.1 million
(September 2016: £15.4 million, March 2017: £20.2 million).
The balance sheet remains strong with group net assets of £56.6 million. This
is a reduction of £16.5 million from 31 March 2017 and reflects the reduction
in cash balances as a result of the additional dividend returning surplus cash
to shareholders.
Risks and going concern
Risks to PayPoint's business, financial condition and operations have not
changed significantly since 31 March 2017 and are disclosed on pages 22 and
23. Taking account of these key risks, PayPoint's profitability, cash balances
and borrowing capacity which are adequate to meet the foreseeable needs of the
group, the interim financial statements have been prepared on a going concern
basis.
Dividend
An interim dividend of 15.3p per share (September 2016: 15.0p) and an
additional dividend of 12.2p (September 2016: 12.2p) per share have been
declared. Both dividends will be paid on 21 December 2017 to shareholders on
the register at 8 December 2017. Total dividends of £37.2 million (54.5p per
share) were paid during the period and comprised of the final ordinary
dividend for the year ended 31 March 2017 totalling £20.5 million (30.0p per
share) and the final additional dividend of £16.7 million (24.5p per share).
CONDENSED CONSOLIDATED INCOME STATEMENT
Continuing operations Note Unaudited 6 months ended 30 September 2017 £000 Unaudited 6 months ended 30 September 2016 £000 Audited year ended 31 March 2017 £000
Revenue 2 97,593 101,713 211,924
Cost of revenue 4 (50,244) (51,730) (106,008)
Gross profit 47,349 49,983 105,916
Administrative expenses (22,978) (25,769) (53,640)
Operating profit before impairments and disposal 24,371 24,214 52,276
Profit on disposal of businesses - - 15,660
Operating profit after impairments and disposal 24,371 24,214 67,936
Share of profit of joint venture - 443 1,193
Finance income 47 93 132
Finance costs (48) (19) (120)
Profit before tax 24,370 24,731 69,141
Tax 5 (4,570) (4,987) (9,508)
Profit for the period 19,800 19,744 59,633
Attributable to:
Equity holders of the parent 19,800 19,743 59,622
Non-controlling interest - 1 11
19,800 19,744 59,633
Earnings per share
Basic 6 29.1p 29.0p 87.5p
Diluted 6 28.9p 28.7p 87.2p
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited 6 months ended 30 September 2017 £000 Unaudited 6 months ended 30 September 2016 £000 Audited year ended 31 March 2017 £000
Items that may subsequently be reclassified to the consolidated income statement:
Exchange differences on translation of foreign operations 314 1,324 675
Accumulated foreign exchange translation recycled to the income statement (net of nil tax) - - 2,047
Other comprehensive profit for the period 314 1,324 2,722
Profit for the period 19,800 19,744 59,633
Total comprehensive income for the period 20,114 21,068 62,355
Attributable to:
Equity holders of the parent 20,114 21,067 62,344
Non-controlling interest - 1 11
20,114 21,068 62,355
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note Unaudited 30 September 2017 £000 Unaudited 30 September 2016 £000 Audited 31 March 2017 £000
Non-current assets
Goodwill 8,406 8,507 8,236
Other intangible assets 13,769 9,778 11,867
Property, plant and equipment 28,868 25,048 27,168
Investment in joint venture - 2,072 -
Deferred tax assets 438 - 354
51,481 45,405 47,625
Current assets
Inventories 327 669 357
Trade and other receivables 119,358 100,393 98,771
Cash and cash equivalents 8 27,574 49,647 53,080
Assets held for sale - 5,166 -
147,259 155,875 152,208
Total assets 198,740 201,280 199,833
Current liabilities
Trade and other payables 137,407 117,211 121,603
Current tax liabilities 4,249 5,391 4,548
Liabilities directly associated with assets classified as held for sale - 2,925 -
141,656 125,527 126,151
Non-current liabilities
Other Liabilities 471 - 537
Deferred tax liability - 64 -
471 64 537
Total liabilities 142,127 125,591 126,688
Net assets 56,613 75,689 73,145
Equity
Share capital 9 227 227 227
Share premium 2,907 2,633 2,633
Share-based payment reserve 2,305 3,174 4,404
Translation reserve (2) (1,714) (316)
Retained earnings 51,176 71,482 66,197
Total equity attributable to equity holders of the parent company 56,613 75,802 73,145
Non-controlling interest - (113) -
Total equity 56,613 75,689 73,145
CONDENSED 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 attributable to equity holders of the parent company £000 Non- controlling interest £000 Total equity £000
Audited equity 31 March 2016 227 2,365 3,956 (3,038) 84,467 87,977 (114) 87,863
Profit for the period - - - - 19,743 19,743 1 19,744
Dividends paid - - - - (33,515) (33,515) - (33,515)
Exchange differences on translation of foreign operations - - - 1,324 - 1,324 - 1,324
Equity-settled share-based payment expense - - 547 - - 547 - 547
Vesting of share scheme 10 - 268 (1,329) - 653 (408) - (408)
Deferred tax on share-based payments - - - - 134 134 - 134
Unaudited equity 30 September 2016 227 2,633 3,174 (1,714) 71,482 75,802 (113) 75,689
Profit for the period - - - - 39,879 39,879 10 39,889
Dividends paid - - - - (45,028) (45,028) - (45,028)
Exchange differences on translation of foreign operations - - - (649) - (649) - (649)
Sale of Mobile - - 2,047 - 2,047 103 2,150
Equity-settled share-based payment expense - - 1,005 - (2) 1,003 - 1,003
Deferred tax on share based payments - - 225 - (134) 91 - 91
Audited equity 31 March 2017 227 2,633 4,404 (316) 66,197 73,145 - 73,145
Profit for the period - - - - 19,800 19,800 - 19,800
Dividends paid - - - - (37,150) (37,150) - (37,150)
Exchange differences on translation of foreign operations - - - 314 - 314 - 314
Equity-settled share-based payment expense - - 848 - - 848 - 848
Vesting of share scheme 10 - 274 (2,925) - 2,329 (322) - (322)
Deferred tax on share-based payments - - (22) - - (22) - (22)
Unaudited equity 30 September 2017 227 2,907 2,305 (2) 51,176 56,613 - 56,613
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Note Unaudited 6 months ended 30 September 2017 £000 Unaudited 6 months ended 30 September 2016 £000 Audited year ended 31 March 2017 £000
Net cash flow from operating activities ( 25 ) 12 19,457 8,734 41,807
Investing activities
Investment income 47 93 132
Purchase of property, plant and equipment (4,136) (6,383) (12,116)
Intangible asset development (3,922) (2,741) (5,335)
Net proceeds from disposal of property, plant and equipment 3 (11) -
Net proceeds on disposal of subsidiary - - 22,674
Net cash (used)/ generated in investing activities (8,008) (9,042) 5,355Recent news on PayPoint
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