Results for the half year ended 30 September 2023
23/11/2023 07:00
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PayPoint Plc
Results for the half year ended 30 September 2023
Strong revenue growth across the Group and significant progress with ongoing
business transformation
FINANCIAL HIGHLIGHTS
* Group net revenue(1) of £79.8 million (H1 FY23: £59.5 million) increased
by £20.3 million (34.1%)
* Net revenue from PayPoint segment of £62.3 million (H1 FY23: £59.5
million) increased by £2.8 million (4.7%)
* Underlying EBITDA(2) of £31.1 million (H1 FY23: £28.3 million) increased
by £2.8 million (9.9%)
* Underlying profit before tax (profit before tax excluding adjusting
items)(3) of £21.8 million (H1 FY23: £23.6 million) decreased by £1.8
million (7.5%) reflecting our continued investment in the business for growth,
increased financing costs, the expected H1 loss from the Love2shop business,
and depreciation and amortisation from the core PayPoint business
* Underlying cash generation excluding exceptional items(4) of £15.6 million
(H1 FY23: £28.3 million), reflecting a seasonal increase in working capital
of £12.6 million following the Love2shop acquisition
* Net corporate debt(5) of £83.2 million (H1 FY23: £39.4 million) increased
by £43.8 million. This is due to increased financing costs related to the
acquisition of Love2shop and seasonal working capital movements, and is
expected to reduce below the starting position of £72.4m by the end of the
current financial year
* Increased ordinary interim dividend of 19.0 pence per share declared,
consistent with our progressive dividend policy, and representing an increase
of 2.2% vs the final dividend declared on 28 July 2023 of 18.6 pence per share
Half year ended 30 September 2023 H1 FY24 H1 FY23 Change
Revenue £126.5m £75.4m 67.8%
Net revenue (1) £79.8m £59.5m 34.1%
Underlying EBITDA (2) £31.1m £28.3m 9.9%
Underlying profit before tax (profit before tax excluding adjusting items) (3) £21.8m £23.6m (7.5)%
Adjusting items (6) £(4.6)m £(2.6)m n/m
Profit before tax £17.2m £21.0m (17.9)%
Diluted earnings per share excluding adjusting items 22.1p 27.8p (20.2)%
Diluted earnings per share 17.4p 24.4p (28.7)%
Ordinary paid dividend per share 18.6p 18.0p 3.3%
Cash generation excluding exceptional items (4) £15.6m £28.3m (44.5)%
Net corporate debt (5) £(83.2)m £(39.4)m 111.1%
Nick Wiles, Chief Executive of PayPoint Plc, said:
“This has been a positive half year for the PayPoint Group with a period of
significant activity supporting a number of key initiatives across the
business: the acceleration of our sales efforts delivering growth in each of
our product estates; a strong new business pipeline for our integrated
payments platform; and driving new opportunities which leverage our enhanced
capabilities, including the first initiatives live following the acquisition
of Love2shop. It is testimony to the transformation of the business that we
continue to deliver overall Group net revenue growth in a period where energy
sector net revenue has decreased by almost 20% and against the background of
uncertain consumer behaviour and weakening confidence due to the Cost of
Living challenges.
Our partnership philosophy across the Group, combined with an intensity and
focus on execution, is continuing to unlock new markets and revenue
opportunities for us, including successfully launching our Park Super Agent
network with The Fed to over 1,500 retailer partners; Love2shop physical gift
cards now live in over 2,600 major multiple retailers; an expanded partnership
with Yodel and Vinted leveraging our Collect+ Store to Store service; our
success in Open Banking working with Ovo and the Department for Energy
Security and Net Zero; our first significant win in the charity sector with
East Anglian Air Ambulance; and the continued momentum in our PayPoint Engage
proposition, helping major brands to connect with consumers in the convenience
sector.
Following the acquisition of Love2shop, the seasonal balance to profit and
cash generation in our business has now changed, resulting in a more H2
weighted performance and contribution to the financial year as a whole.
Encouragingly, our trading momentum in the business has remained strong into
the second half of the year. We continue to identify new opportunities to
innovate and leverage our platform and the unique strengths of our extensive
client base, accelerate the onboarding of new client business, while
delivering a strong performance in our important seasonal businesses in
parcels, Park Christmas Savings, Love2shop and energy. Our continued focus on
execution underpins our confidence in delivering a strong second half, further
progress for the year and the Group trading in line with expectations.”
OPERATIONAL HIGHLIGHTS
The Group has delivered significant progress in the half year in a number of
key business areas:
* Parcels – new multi-year partnership agreed with Yodel and Vinted,
delivering significant volume through our new Store to Store service, with
continued expansion of network and investment in consumer experience through
technology, in-store label printers and retailer partner support
* Card processing – estate growth delivered in both our EVO and Lloyds
Cardnet merchant books, driven by positive sales momentum, strengthened
governance on pricing and retention, leveraging analytics and AI tools, an
enhanced proposition and merchant engagement
* Open Banking – the Group is now one of the leading Open Banking
transaction processors in the UK, with further wins for our Confirmation of
Payee service with Lexis Nexis, Cardstream, Think Money and the Department for
Energy Security and Net Zero, and the expansion of our PayPoint OpenPay
service supporting a growing number of clients, including Ovo and the
Department for Energy and Net Zero
* Park Christmas Savings – a return to growth in billings delivered in core
business with key additional sales channel now launched in over 1,500 PayPoint
Park Super Agents, recruiting savers for the 2024 Christmas Savings season to
accelerate billings for FY25
* Love2shop – physical gift cards available for first time in over 2,600
locations ahead of Christmas 2023 gifting season, partnering with key multiple
retailers, including One Stop, MFG, Henderson’s Retail and CJ Lang.
Love2shop Essentials added to key government procurement frameworks and
integrated into our PayPoint OpenPay service as an important additional
channel to support vulnerable customers
* Integrated payments platform – key client wins in target sectors of
housing and charities, with POBL Housing, Network Homes and East Anglian Air
Ambulance, and a strong new business pipeline building in these key growth
sectors with detailed plans to accelerate the onboarding of these clients in
H2
* FMCG – positive growth in our consumer engagement proposition, PayPoint
Engage, delivering brand campaigns with Coca-Cola, Amazon, AG Barr and JTI,
driving additional footfall and sales for our retailer partners
* Business Finance – continued growth with over £9m lent to our SME and
retailer partners, partnering with YouLend, support businesses during the
current economic challenges
DIVISIONAL HIGHLIGHTS
Positive performance with increased Group net revenue
Shopping
Shopping divisional net revenue increased by 4.2% to £32.1 million (H1 FY23:
£30.8 million), driven by the growth of our PayPoint One estate, service fee
revenue and further enhancements to our retailer and SME propositions.
* Service fee net revenue increased by 8.8% to £9.7million, reflecting growth
in the number of revenue-generating PayPoint One sites to 18,786 (31 March
2023: 18,453 sites) and the impact of the annual RPI increase which was capped
to support our retailer partners through the current economic challenges
* Card payment net revenue increased by 3.5% to £16.4 million, with our
positive sales momentum and increased focus on customer retention delivering
site growth, driven by AI and data analytics
* Card payment sites in the Handepay EVO estate grew to 19,371 (31 March 2023:
18,397) and in the PayPoint Lloyds Cardnet estate to 9,772 (31 March 2023:
9,541), driven by the strength of our proposition, positive sales momentum and
optimisation of our retention programme
* UK retail network increased to 28,646 sites (31 March 2023: 28,478), with
70.0% in independent retailer partners and 30.0% in multiple retail groups
E-commerce
E-commerce divisional net revenue increased strongly by 71.8% to £5.1 million
(H1 FY23: £3.0 million) and transactions grew by 83.1% to 42.1 million (H1
FY23: 23.0 million) through our e-commerce technology platform, Collect+. This
is further evidence of the growing importance of our out-of-home PUDO (Pick Up
and Drop Off) network, reflecting changes in consumer habits and accelerating
channel shift away from delivery to home.
* Excellent transaction volumes, achieving a milestone of a 2 million parcels
week in August, driven by continued growth in Vinted, the launch of Consumer
Send for FedEx and an increase in Amazon sites to over 7,600 in time for Prime
Day 2023
* Store to store service launched for Yodel/Vinted, with strong consumer take
up of the service
* New partnership launched with OOHPod in Northern Ireland, enabling Yodel
Click & Collect customers to have their parcels delivered to secure lockers
when checking out online and returns launched at the end of the half
* Zebra printer expansion plans underway to rollout a further 2,000 devices
ahead of Christmas Peak 2023
* Number of initiatives underway to grow our network in support of our carrier
partners and growing in-store volumes
Payments & Banking
Payments & Banking divisional net revenue decreased by 2.3% to £25.1 million
(H1 FY23: £25.7 million), with further growth in digital transactions offset
by a reduction in cash bill payment volumes in the energy sector.
* Continued digital payments growth with net revenue increasing by 9.1% to
£6.4 million (H1 FY23: £5.9 million), driven by our MultiPay integrated
payments platform
* Cash through to digital net revenue decreased slightly by 1.2% to £3.3
million (H1 FY23: £3.4 million) and transactions decreased by 5.2% to 4.1
million (H1 FY23: 4.3 million), with volumes now returning to pre-Covid-19
levels and a new baseline set for the category. In addition to our existing
range of digital brands, we are launching new partnerships with a number of
neo-banks, including JPMorgan Chase and Revolut, enabling withdrawals and
deposits across our extensive network of retailer partners
* Cash payments net revenue decreased by 9.3% to £15.4 million (H1 FY23:
£16.4 million) and transactions decreasing by 17.3% to 68.6 million (H1 FY23:
83.0 million)
* Legacy energy sector net revenue decreased by 19.4%, driven by a shift in
consumer topping up behaviour due to the Cost of Living challenges and
unseasonably warm weather over the period
Love2shop
Love2shop divisional net revenue was £17.5 million in the period (H1 FY23:
N/A), with Park Christmas Savings returning to growth for the first time in
six years and a refocused and strengthened team in Love2shop Business building
momentum.
* Park Christmas Savings delivered £29.9 million of billings year to date, a
return to growth after 6 years of decline
* Rollout of over 1,500 Park Super Agents across the PayPoint retailer partner
network, helping more families budget for the newly launched Christmas 2024
season
* Love2shop Business – additional corporate APIs delivered to unlock further
sales growth, a restructured business development team established to open up
further opportunities and existing client account performance ahead of plan
* Brand refresh for Love2shop delivered to drive further awareness and
advocacy in key consumer and corporate sectors.
RECONCILIATION OF REPORTED NUMBERS
£m H1 FY24 H1 FY23
Reported profit before tax from continuing operations 17.2 21.0
Exceptional items 0.6 1.5
Profit before tax from continuing operations excluding exceptional items 17.8 22.5
Amortisation of intangible assets arising on acquisition – PayPoint (previous acquisitions) 1.0 1.1
Amortisation of intangible assets arising on acquisition – Love2shop 3.0 -
Underlying profit before tax (profit before tax excluding adjusting items) 21.8 23.6
Underlying EBITDA 31.1 28.3
BUSINESS DIVISION NET REVENUE AND MIX
Net revenue by business division (£m) H1 FY24 H1 FY23 H1 FY22
Shopping 32.1 30.8 29.8
E-commerce 5.1 3.0 2.1
Payments & Banking 25.1 25.7 24.2
PayPoint Segment Total 62.3 59.5 56.1
Love2shop Segment Total 17.5 - -
PayPoint Group Total 79.8 59.5 56.1
Business division mix H1 FY24 H1 FY23 H1 FY22
Shopping 40.2% 51.8% 53.2%
E-commerce 6.4% 5.0% 3.7%
Payments & Banking 31.5% 43.2% 43.1%
Love2shop 21.9% - -
Enquiries
PayPoint plc FGS Global
Nick Wiles, Chief Executive (Mobile: 07442 968960) Rollo Head (Telephone: 0207 251 3801)
Rob Harding, Chief Financial Officer (Mobile: 07525 707970) James Thompson (Email: PayPoint-LON@fgsglobal.com )
A presentation for analysts is being held at 9.30am today (23 November 2023)
via webcast. This announcement, along with details for the webcast, is
available on the PayPoint plc website: corporate.paypoint.com
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CHIEF EXECUTIVE’S REVIEW
Positive half year leveraging enhanced platform for growth
This has been another positive half year for the PayPoint Group with continued
net revenue growth across the business, excellent progress in parcels and
digital payments, and good momentum in our key growth areas of card
processing, Open Banking and integrated payments. Our integration of the
Love2shop and Park Christmas Savings businesses is largely complete and we
have now launched the first new business opportunities arising from the
acquisition of these businesses. Following the acquisition of Love2shop, the
seasonal balance to profit and cash generation in our business has also now
changed, resulting in a more H2 weighted performance and contribution to the
financial year as a whole, which is reflected in the results we are reporting
today.
First Appreciate Group initiatives live and continued Open Banking progress
The materially enhanced platform we have built over the past three years is
opening up a wealth of opportunities, leveraging our extensive capabilities
with new and existing clients in multiple sectors, and enabling the
enhancement of our services proposition for our SME and retailer partners.
Our new partnership, announced earlier in the year, with The Federation of
Independent Retailers (The Fed) to create a network of Park Christmas Savings
Super Agents has gained positive early momentum and is one of the first major
initiatives delivered since the acquisition of Love2shop in FY23. Working in
partnership, we have established a network of over 1,500 Super Agents ready
for the Christmas 2024 savings season, with retailers recruiting savers in
their area and creating an additional opportunity to earn over £1,000 per
annum from the service. Park Christmas Savings plays an important role in
helping families budget for Christmas and boosting their spending power
through regular offers and discounts, especially as families manage their
money through the current cost of living challenges. This additional savings
channel is expected to accelerate growth in billings for the Park Christmas
Savings business in FY25.
In addition, we were delighted to have delivered an important first for
Love2shop through rolling out physical gift cards to over 2,600 multiple
retailer stores ahead of Christmas 2023, including One Stop, Motor Fuels
Group, Spar Scotland and Northern Ireland, and several regional Co-Ops. This
is a key part of our expansion plans for Love2shop, and will be followed next
year by a further rollout into our independent retailer partners. We have now
added Love2shop Essentials to key government procurement frameworks (Crown
Commercial Service and Fund Administration and Disbursement Services) and it
has also been integrated with the PayPoint OpenPay service, providing an
important additional channel to support vulnerable customers.
Our Open Banking partnership with OBConnect has enhanced our integrated
payments platform and already yielded positive results, with PayPoint now one
of the top 10 Open Banking transaction processors in the UK. Our Confirmation
of Payee service continues to grow, with several client wins including Lexis
Nexis, Cardstream, Think Money and the Department for Energy Security and Net
Zero. Additionally, the PayPoint OpenPay service continues to gain traction
and new clients, notably Ovo to support Alternative Fuel Payments, Sheffield
City Council to distribute Household Support Fund monies and the Department of
Energy Security and Net Zero for dispersing Cost of Living support to
continuous cruisers, with 97% of recipients opting to deposit into a bank
account through the PayPoint OpenPay service. We see Open Banking as a key
growth area where we can partner with organisations in the public and private
sector to enhance their payment offering, reduce costs and improve customer
support to those in need.
Accelerated momentum across all business divisions
Shopping
In Shopping, our retailer partner and SME service propositions have been
enhanced further, with a strong take up and positive feedback from our
partners. The overall PayPoint network and PayPoint One estate have grown
again this half year and our broader commitment to our retailer partners to
deliver further value and opportunities to earn has delivered an increase to a
positive NPS score for the first time in six years. New commission-generating
services and transaction volumes have driven this positive impact to retailer
partner revenues, including good growth in our FMCG consumer engagement
proposition, PayPoint Engage, delivering brand campaigns with Coca-Cola,
Amazon, AG Barr and JTI; our partnership with Eurochange, offering foreign
currency click and collect, which is now in pilot; and the early rollout of
our new technology solution, PayPoint Connect, which integrates with leading,
third party EPoS suppliers including PointFour and the Retail Data
Partnership.
In our card processing business, we have continued the momentum established at
the end of the last financial year, with a strong sales performance across
Handepay and PayPoint delivering further growth in the EVO merchant book,
ending the half year at 19,371 sites, and in the Lloyds Cardnet book, growing
to 9,772 sites. This positive progress has been driven by the increased
optimisation of our sales efforts, including a new team established in London
for Handepay to capture the regional market opportunity; a strengthening of
key areas of business governance to optimise pricing and retention; a new
senior hire recruited to lead our sales and retention efforts, supported by
better data, AI tools and analytics; and the leverage of our enhanced
proposition, including launching additional functionality like EPoS and
loyalty for SMEs. In addition, we are enhancing our pricing and governance
framework for our card processing across both Handepay and PayPoint to ensure
we optimise the value delivered from our growing estate. Our Business Finance
product continues to grow, delivered in partnership with YouLend across both
PayPoint and Handepay, with over £9m of funding approved to support our
retailer and SME partners during the current economic challenges.
We have continued our extensive efforts to strengthen our retailer partner
relationships, including a refreshed approach to the ‘early life’ support
provided to our retailer partners to drive adoption of new services, allied
with our core commitments to regular face to face store visits, more direct
communications and our strengthened relationships with the key trade
associations, including the Association of Convenience Stores (ACS), the
Scottish Grocers’ Federation (SGF) and the Federation of Independent
Retailers (the Fed). As more critical services continue to withdraw from
communities and high streets across the UK, we are more focused than ever on
working closely with our retailer and industry partners to evolve our service
provision and ensure we can leverage our extensive network to provide vital
infrastructure and accessibility to individuals close to where they live.
E-commerce
In E-commerce, our half year-on-year performance has been excellent, driven by
the continued growth in the second-hand clothing market via Vinted; our new
Store to Store service which is being quickly adopted by customers; and an
expansion of our Amazon network to over 7,600 stores. A further rollout of
Zebra printer technology is underway to an additional 2,000 sites, underlining
our continuing commitment to invest in improving the consumer experience in
store. Operationally, we are in our strongest position ever heading into the
peak trading period, with the business division on track to deliver a record
year of transaction growth.
Looking ahead, we are continuing to focus on our plans to strengthen our
carrier and retailer partnerships, as well as expanding the Collect+ network
into new locations and demographics, including transport locations, ‘Home
Hubs’ via the Park Christmas Savings agent network, and our growing student
presence working with the top universities and student unions to bring a range
of tailored Group services to the student population.
Payments & Banking
In Payments and Banking, we continue to diversify our digital payments client
base and strengthen our integrated payments platform as we expand the range of
digital solutions that we can deliver to support our clients across multiple
sectors, including government, local authorities and housing associations. We
continue to make good progress in the housing sector, with POBL Housing and
Network Homes adopting our MultiPay integrated payments platform to serve
their customers, and we have recently secured our first significant win in the
charity sector with East Anglian Air Ambulance. We are building a strong new
business pipeline in these key growth sectors and have detailed plans to
accelerate the onboarding of these clients in H2.
Our Open Banking solutions, delivered in partnership with OBConnect, continue
to go from strength to strength: Ovo is our first client live for PISP, 2
clients have signed for AIS services (Ovo and Citizens Advice) and 13 clients
signed for Confirmation of Payee. In addition, we successfully tendered for
the new government framework (DPS) through the Crown Commercial Service. The
PayPoint OpenPay service has also been enhanced, now giving customers the
option to deposit funds directly into a bank account, exchange for a Love2shop
Essentials card or redeem in cash via our extensive retailer partner network.
Several clients have already successfully deployed this service, including
Sheffield City Council, replacing cheques for the distribution of the
Household Support Fund, and the Department for Energy Security and Net Zero,
helping to disperse Cost of Living support for continuous cruisers with 97% of
recipients opting to deposit into a bank account via Open Banking. These
innovative solutions give us a highly differentiated proposition that is
opening up new sectors and growth.
Love2shop
In Love2shop, we have quickly integrated the business following the completion
of the acquisition at the end of FY23 and are making positive progress in
enhancing the core business performance. It’s particularly pleasing that
Park Christmas Savings has returned to growth for the first time in six years,
delivering £29.9m of billings in H1 FY24 (H1 FY23: £24.9m), and we have
taken important steps to strengthen our corporate offering in Love2shop
Business, with investment in additional APIs delivered to unlock further sales
growth and a restructured business development team established to better
manage our existing relationships and drive new business.
The enhanced capabilities that Love2shop has added to our platform is already
yielding positive results, including: the rollout of 1,500 Park Super Agents
across the PayPoint retailer partner network, helping more families budget for
the newly launched Christmas 2024 season; the launch of physical Love2shop
gift cards in over 2,600 multiple retailers ahead of Christmas 2023 peak
trading; and the addition of Love2shop Essentials cards to our PayPoint
OpenPay service as well as key government frameworks. Furthermore, there are
several new sector opportunities that are in development, combining
capabilities across the Group, including a new partnership with Card Factory
to combine Love2shop gift cards with their greetings card offer through
PayPoint’s extensive network.
Further progress on our ESG commitments
Our Environment, Social and Governance (ESG) strategy and action plan has
progressed well in the half year, as we consider our social responsibility and
impact as a business and reflect on the important role that the Group plays in
delivering vital services in communities across the UK. New hybrid cars were
introduced to our fleet in April 2023, replacing diesel company cars and
petrol hire cars and an electric car leasing scheme has now launched. We
continue to be mindful of the impact of the Cost of Living on our people, with
salaries reviewed again in July, ensuring that all of our colleagues are paid
in excess of the Real Living Wage. In addition, we launched ‘My Pay, My
Way’ with Wagestream to offer further financial wellbeing support to our
people. As part of our ‘Welcoming Everyone’ programme, we held a series of
events to mark Pride Month in June, and Love2shop was recognised as one of the
Best Workplaces for Women by Great Place to Work UK in June. The Group
recently participated in the Great Place to Work survey for the first time,
and we were delighted to achieve Great Place to Work certification which
recognises the work we have done to create a dynamic environment for our
people where we deliver for our customers by collaborating and being good
colleagues to each other, creating a positive and inclusive environment where
everyone can learn, grow and shine.
Update on claims against PayPoint
Further to the update provided on 28 July 2023, PayPoint can confirm that a
first Case Management Conference (CMC) was held on 31 October 2023 at the
Competition Appeal Tribunal relating to the claims served by Utilita Energy
Limited and Utilita Services Limited (“Utilita”) and Global 365 plc and
Global Prepaid Solution Limited (“Global 365”). The focus of the CMC was
to agree disclosure and a timetable for proceedings.
The Group’s position remains unchanged: it is confident that it will
successfully defend the claim by Utilita, which does not provide any clear
evidence to support the cause of action or the amount claimed, and also that
it will successfully defend the claim by Global 365, which fundamentally
misunderstands the energy market and the relationships between the relevant
Group companies and the major energy providers, whilst also over-estimating
the opportunity available, if any, for the products offered by Global 365. As
a result, no accounting provision has been made for these claims.
Given this position, the Group’s preference is for a swift and expedient
process, targeting a trial listing on the first available date to be agreed
with all parties.
The Group will continue to update the market on a quarterly basis as part of
its financial reporting cycle.
Outlook and dividend
We have delivered strong results in a growing number of key areas in the first
half. Our enhanced platform and expanded capabilities across the Group,
combined with our business-wide partnership philosophy and intensity of
execution, give the Board confidence in delivering a strong second half,
further progress for the year and the Group trading in line with expectations.
The opportunity to deliver enterprise level solutions, combining the extensive
capabilities across the Group, is significant and is enabling us to deepen our
relationships with existing clients as well as expanding into new verticals.
We have detailed execution plans in place to capitalise on the positive
momentum built up in our key growth areas of card processing, Open Banking,
parcels, integrated payments and the new Love2shop division, delivering
profitable growth in our retail and card estates, further enhancements to our
SME and retailer partner proposition and positive new business growth in key
target sectors. Following the acquisition of Love2shop, the seasonal balance
to profit and cash generation in our business has also now changed, resulting
in a more H2 weighted performance and contribution to the financial year as a
whole.
The trading momentum in the business has remained strong into the second half
of the year, as we continue to identify new opportunities to innovate and
leverage our platform and the unique strengths of our extensive client base,
accelerate the onboarding of new client business, all while delivering a
strong performance in our important seasonal businesses in parcels, Park
Christmas Savings, Love2shop and energy. The latter business is already
delivering a more resilient performance early in H2, in spite of the shifts in
consumer topping up behaviour due to the Cost of Living challenges and
unseasonably warm weather seen over H1.
Cash usage remains resilient in the UK, particularly for the millions of
consumers who rely on it on a daily basis, and we remain committed to
providing vital services that maintain access to cash, as well as developing
new services to support communities across the UK. We also remain alert to the
potential impact on consumers from the broader economic challenges, including
the changes we have seen to behaviours in the energy sector and the weakening
consumer confidence reported across the UK, all of which we monitor closely
across the business. It is testimony to the transformation of the business
that we have delivered overall Group net revenue growth in a period where
energy sector net revenue has decreased by almost 20%.
The Board has proposed an interim dividend of 19.0 pence per share, an
increase of 2.2% vs the final dividend declared on 28 July 2023 of 18.6 pence
per share, consistent with our progressive dividend policy of a target cover
range of 1.5 to 2.0 times earnings excluding exceptional items, reflecting our
long-term confidence in the business, the strength of our underlying cash
flow, and the enhanced growth prospects across the Group.
Our compelling characteristics of strong cash flow and resilient earnings
remain constant, and our materially enhanced platform is positioned to deliver
sustainable and profitable growth for our shareholders, and further progress
in the delivery of these objectives in the current year.
Nick Wiles
Chief Executive
22 November 2023
PROGRESS AGAINST OUR STRATEGIC PRIORITIES
SHOPPING BUSINESS DIVISION – H1 FY24 net revenue £32.1m (H1 FY23: £30.8m)
PRIORITY 1: EMBED PAYPOINT GROUP AT THE HEART OF SME AND CONVENIENCE RETAIL
BUSINESSES
H1 FY24 Progress
* Further enhancements delivered to our SME and retailer proposition,
including good growth in our FMCG consumer engagement proposition, PayPoint
Engage, delivering brand campaigns with Coca-Cola, Amazon, AG Barr and JTI;
our partnership with Eurochange, offering foreign currency click and collect,
is now in pilot; and the early rollout of our new technology solution,
PayPoint Connect, which integrates with leading, third party EPoS suppliers
including PointFour and the Retail Data Partnership.
* Strong sales performance in card processing business for Handepay and
PayPoint, delivering further growth in the EVO merchant book, ending the half
year at 19,371 sites, and in the Lloyds Cardnet book, growing to 9,772 sites.
This was driven by the increased optimisation of our sales efforts, including
a new team established in London to capture the regional market opportunity; a
strengthening of key areas of business governance to optimise pricing and
retention; a new senior hire recruited to lead our sales and retention
efforts, supported by better data, AI tool and analytics; and the leverage of
our enhanced proposition, including launching additional functionality like
EPoS and loyalty for SMEs
* Further expansion of Counter Cash, now enabled in 6,127 sites and with 2,098
sites transacting regularly, and over £32.1 million withdrawn in the half
year, offering vital access to cash over the counter and complementing the
existing ATM estate
* Continued under performance of ATMs, due to broader shifts in consumer cash
usage, with net revenue decreased by 9.1% and transaction volumes by 10.5%.
Management in this area has been recently strengthened, with a new hire
secured to drive tighter operational management of the estate and reduce churn
* Good progress on retailer engagement and service, with our Net Promoter
Score moving from negative to positive, a new in-life management programme
launched to drive retailer service adoption, and several service improvements
launched, including a new Chatbot launched to support retailer partners
achieving a 75% first time resolution rate in its first weeks
* Positive year on year growth of Business Finance via YouLend with over £9
million lent in the half year, supporting our retailer and SME partners during
the current economic challenges
E-COMMERCE BUSINESS DIVISION – H1 FY24 net revenue £5.1m (H1 FY23: £3.0m)
PRIORITY 2: BECOME THE DEFINITIVE TECHNOLOGY-BASED E-COMMERCE DELIVERY
PLATFORM FOR FIRST AND LAST MILE CUSTOMER JOURNEYS
H1 FY24 Progress
* Excellent transaction volumes, achieving milestone of a 2 million parcels
week in August, driven by continued growth in Vinted, the launch of Consumer
Send for FedEx and an increase in Amazon sites to 7,698 in time for Prime Day
2023
* Further network expansion to 11,263 sites, including Fed retailer partners
as part of Park Christmas Savings Super Agent rollout and additional multiple
retailers onboarded, including One Stop
* DPD partnership expanded to over 2,000 sites, with API integration into our
parcels app and additional Print In Store capability launched
* Store to store service launched for Yodel/Vinted, with strong consumer take
up of the service
* New partnership launched with OOHPod in Northern Ireland, enabling Yodel
Click & Collect customers to have their parcels delivered to secure lockers in
12 sites when checking out online and returns launched at the end of the half
* Zebra printer expansion plans underway to rollout a further 2,000 devices
ahead of Christmas Peak 2023
PAYMENTS & BANKING BUSINESS DIVISION – H1 FY24 net revenue £25.1m (H1 FY23:
£25.7m)
PRIORITY 3: SUSTAIN LEADERSHIP IN ‘PAY-AS-YOU-GO’ AND GROW DIGITAL BILL
PAYMENTS
H1 FY24 Progress
* Continued progress in digital net revenue, with growth of +9.1% versus H1
FY23
* Further expansion of our client relationships with our enhanced integrated
payments platform, including launching with POBL Housing and Network Homes,
rolling out our PayPoint OpenPay service to more clients (Sheffield City
Council, Ovo, Department for Energy Security and Net Zero), expanding our
Confirmation of Payee services with Lexis Nexis, Cardstream, Think Money and
the Department for Energy Security and Net Zero and being established as sole
provider of cash disbursement services on Crown Commercial Service, displacing
Post Office
* Won award for Best Open Banking Partnership – Consumer at the 2023 Open
Banking Awards, in conjunction with obconnect, for our work delivering the
Energy Bills Support Scheme
* Strong pipeline of client wins secured, for mobilisation over H2 FY24,
including Guinness Housing and East Anglia Air Ambulance for our full suite of
integrated payments solutions
* Cash through to digital – strong growth in the banking segment, providing
cash deposits and withdrawals to a number of neobanks, with over £210 million
deposited in the half year. Further progress in expanding client base and
services provided in gifting (Netflix and Google Play) and additional neo
banks (Revolut and JP Morgan Chase) being onboarded in H2 FY24, to complement
existing gaming portfolio
* Legacy energy sector net revenue decreased by 19.4%, driven by a shift in
consumer topping up behaviour due to the Cost of Living challenges and
unseasonably warm weather over the period
LOVE2SHOP BUSINESS DIVISION - H1 FY24 net revenue £17.5m (H1 FY23: N/A)
PRIORITY 4: REINFORCE LEADERSHIP POSITION IN GIFTING, REWARDS AND PREPAID
SOLUTIONS
* Park Christmas Savings - a return to growth in billings for the first time
since 2018, with the best retention rate for direct customers delivered to
date of 77.9% and a growth in the agency size to an average of 4.49 savers per
agent. In addition, a new closed-loop Mastercard (Purple Card) was launched
with 140+ brands, exclusively for Park customers
* Love2shop Business – positive half year with 13 new client wins delivered,
including Five Guys, existing managed client accounts ahead of plan, and a
restructured business development team now in place, including a new Head of
Business Development joining us from Edenred
* First new initiatives launched into the PayPoint retailer partner network
following acquisition – over 1,500 Park Super Agents now live to help
recruit savers for the Christmas 2024 season and physical Love2shop gift cards
now rolled out to over 2,600 multiple retailer sites, including One Stop,
Motor Fuels Group and several regional Co-ops
* New redemption partners added ahead of the Christmas peak, including
significant brands, such as B&Q, WH Smith, Rymans, Matalan & Blackwell’s.
Additionally, a successful refresh of the Love2shop brand was delivered, with
brand awareness now at a high of 44.8%
PRIORITY 5: BUILDING A DELIVERY FOCUSED ORGANISATION AND CULTURE
PAYPOINT GROUP
H1 FY24 Progress
* Good progress against our ESG programme, with new hybrid cars introduced to
our fleet in April 2023, replacing diesel company cars and petrol hire cars,
and an electric car leasing scheme now launched
* A number of actions taken to mitigate the impact of the Cost of Living on
our people, with salaries reviewed again in July, ensuring that all our
colleagues are paid a minimum of the Real Living Wage. In addition, we
launched ‘My Pay, My Way’ with Wagestream to offer further financial
wellbeing support to our people
* As part of our ‘Welcoming Everyone’ programme, we held a series of
events to mark Pride Month in June, and Love2shop was recognised as one of the
Best Workplaces for Women by Great Place to Work UK in June
* The Group recently participated in the Great Place to Work survey for the
first time, and we were delighted to achieve Great Place to Work certification
which recognises the work we have done to create a dynamic environment for our
people where we deliver for our customers by collaborating and being good
colleagues to each other, creating a positive and inclusive environment where
everyone can learn, grow and shine
* Integration of Love2shop largely complete, with first business initiatives
launched, a new Northern Hub established in Liverpool, investment agreed and
delivered in further APIs to open up additional revenue opportunities in the
Corporate business, and first phase of organisational changes completed
* Continued focus on improving our IT service delivery through the
transformation into cross-functional product engineering teams with full
responsibility for service delivery and product development of each service, a
continued focus on cybersecurity, and Love2shop IT employees now fully
integrated
FINANCIAL REVIEW
2
£m Six months to 30 September 2023 Six months to 30 September 2022 Change %
PayPoint segment 81.2 75.4 7.8%
Love2shop segment 45.3 - -
Total revenue 126.5 75.4 67.8%
PayPoint segment 62.3 59.5 4.7%
Love2shop segment 17.5 - -
Total net revenue 79.8 59.5 34.1%
PayPoint segment (38.7) (35.9) 7.8%
Love2shop segment (19.3) - -
Total costs continuing operations (58.0) (35.9) 61.4%
PayPoint segment 23.6 23.6 -
Love2shop segment (1.8) - -
Underlying profit before tax 21.8 23.6 (7.5)%
Adjusting items: Amortisation of intangible assets arising on acquisition (4.0) (1.1) 277.4%
Exceptional items (0.6) (1.5) 64.1%
Profit before tax 17.2 21.0 (17.9)%
Underlying EBITDA (7) 31.1 28.3 9.9%
Cash generation from continuing operations excluding exceptional items 15.6 28.3 (44.5)%
Net corporate debt (8) (83.2) (39.4) 111.1%
Total revenue increased by £51.1 million (67.8%) to £126.5 million
(September 2022: £75.4 million). Net revenue increased by £20.3 million
(34.1%) to £79.8 million (September 2022: £59.5 million) with this being the
first period including the L2S segment contributing £17.5 million.
Total costs increased by £22.1 million to £58.0 million (September 2022:
£35.9 million). The increase in costs was driven by the £19.3 million
additional cost base from L2S segment together with increases in borrowing
costs following the acquisition of Appreciate Group and investments in our
field sales teams. Exceptional costs of £0.6 million, which are one-off,
non-recurring and do not reflect current operational performance relate to
legal fees incurred as as result of the Group’s defence of claims served
against it. The prior year exceptional costs of £1.5 million include a write
down in relation to the disposal of Snappy Ltd in October 2022 and fee
associated with the acquisition of Appreciate Group.
The underlying profit before tax decreased by £1.8 million (7.5%) to £21.8
million (September 2022: £23.6 million). This result includes £1.8 million
loss on the Love2shop segment which includes an interest cost allocation. This
is due to the seasonal nature of the business where profit is primarily
generated in the second half of the financial year. In comparison, the
previous year before PayPoint acquired Love2Shop, Appreciate Group PLC made a
loss before tax of £1.2 million in the six month period to September 2022.
The historic PayPoint segment underlying profit before tax was in line with
the prior year.
Profit before tax of £17.2 million (September 2022: £21.0 million) decreased
by £3.8 million (17.9%). The decrease reflects current year adjusting items
totalling of £4.6 million which includes six months amortisation of
intangible assets arising on the Appreciate acquisition following the
acquisition in February 2023.
3
EBITDA / Underlying EBITDA (£m) Six months to 30 September 2023 Six months to 30 September 2022
Profit before tax 17.2 21.0
Add back:
Net interest expense 3.6 1.0
Depreciation & Amortisation - including amortisation of intangible assets arising on acquisition 9.7 4.8
EBITDA (£m) 30.5 26.8
Exceptional items 0.6 1.5
Underlying EBITDA (£m) 31.1 28.3
Underlying EBITDA increased by £2.8 million to £31.1 million (September
2022: £28.3 million), which is made up of £2.2 million for the Love2Shop
segment and £28.9 million for the PayPoint segment.
Cash generation reduced to £15.6 million (September 2022: £28.3 million),
delivered from underlying profit before tax of £21.8 million (September 2022:
£23.6 million). There was a net working capital outflow of £12.6 million, of
this £2.0 million related to payment of costs accrued for the Appreciate
acquisition at the year end, £2.7 million relating to extending payment terms
with a key customer and the remaining amount related to seasonal timing which
is expected to unwind in the second half of the year.
Net corporate debt increased by £43.8 million from September 2022 to £83.2
million (March 2023: £72.4 million) following working capital requirements in
the first six months of the year. At 30 September 2023 loans and borrowings
were £101.8 million (September 2022: £43.2 million).
PAYPOINT SEGMENT
£m Six months to 30 September 2023 Six months to 30 September 2022 Change %
Total Revenue 81.2 75.4 7.8%
Shopping 32.1 30.8 4.2%
E-commerce 5.1 3.0 71.8%
Payments & Banking 25.1 25.7 (2.3)%
Net revenue 62.3 59.5 4.7%
Other costs of revenue 8.1 7.1 14.1%
Depreciation and amortisation (costs of revenue) 4.3 3.4 26.5%
Depreciation and amortisation (administrative expenses) excluding amortisation of intangible assets arising on acquisition 0.2 0.2 -
Other administrative costs – excluding exceptional items 24.7 24.2 2.1%
Net finance costs – excluding exceptional costs 1.4 1.0 40.0%
Total costs 38.7 35.9 7.8%
Underlying profit before tax (excluding adjusting items) 23.6 23.6 -
Shopping net revenue increased by £1.3 million (4.2%) to £32.1 million
(September 2022: £30.8 million). Service fees net revenue increased by £0.8
million (8.8%) driven by additional PayPoint One sites and implementing the
annual RPI increase. Cards net revenue increased by £0.5 million (3.5%) from
Handepay/Merchant Rentals performance, partially offset by PayPoint cards. ATM
and Counter Cash net revenue decreased by £0.3 million (6.5%) due to a
reduction in transactions driven by the continuing trend of reduced demand for
cash across the economy. FMCG revenue increased by £0.3 million (416.0%) to
£0.4 million (September 2022: £0.1 million) following further campaigns run
in the year.
E-commerce net revenue increased by £2.1 million (71.8%) to £5.1 million
(September 2022: £3.0 million), driven by strong growth in total transactions
which increased by 83.1%. This was due to our strength in clothing/fashion
categories, the investment in the in-store experience with Zebra label
printers over the past 18 months and the continued expansion from new services
and carrier partners.
Payments & Banking net revenue decreased by £0.6 million (2.3%) to £25.1
million (September 2022: £25.7 million). Cash bill payments net revenue
decreased by £2.0 million (16.4%) as a result of a decrease in bill payment
transactions from the increase in energy prices and the continued switch to
digital payments. Cash top-ups net revenue decreased by £0.1 million (1.6%)
with volumes down 5.0% driven by the continuing structural declines in the
prepaid mobile sector. Digital net revenue increased by £0.5 million (9.1%)
driven by our Cash Out services. Cash through to digital, eMoney, net revenue
decreased by £0.1 million (1.2%) as a result of a 5.2% decrease in volumes.
Total costs (excluding adjusting items) increased by £2.8 million (7.8%) to
£38.7 million, primarily as a result of further investment in our people and
field sales team to support growth in sales.
SECTOR ANALYSIS
SHOPPING
Shopping consists of services PayPoint provides to retailer partners, which
form part of PayPoint’s network, and SME partners. Services include
providing the PayPoint One platform (which has a basic till application),
EPoS, card payments, terminal leasing, ATMs, Counter Cash and FMCG vouchering.
Net revenue (£m) Six months to 30 September 2023 Six months to 30 September 2022 Change %
Service fees 9.7 8.9 8.8%
Card payments 16.4 15.9 3.5%
ATMs and Counter Cash 4.5 4.8 (6.5)%
Other shopping 1.5 1.2 20.8%
Total net revenue (£m) 32.1 30.8 4.2%
Net revenue increased by £1.3 million (4.2%) to £32.1 million (September
2022: £30.8 million) primarily due to the growth in service fees and
Handepay/Merchant Rentals card payments. The net revenue of each of our key
products is separately addressed below.
Service fees from terminals Six months to 30 September 2023 Six months to 30 September 2022 Change %
Net Revenue (£m) 9.7 8.9 8.8%
PayPoint terminal sites (No.)
PayPoint One Base 6,533 7,090 (7.9)%
PayPoint One EPoS Core 11,509 10,223 12.6%
PayPoint One EPoS Pro 744 992 (25.0)%
Total PayPoint One – revenue generating 18,786 18,305 2.6%
PayPoint One Base non-revenue generating 667 691 (3.5)%
Total PayPoint One Legacy (T2) .PPoS 19,453 19 9,174 18,996 140 9,259 2.4% (86.4)% (0.9)%
Total terminal sites in PayPoint network 28,646 28,395 0.9%
PayPoint One average weekly service fee per site (£) 19.1 17.7 7.3%
As at 30 September 2023, PayPoint had a live terminal in 28,646 UK sites, an
increase of 0.9% primarily as a result of new PayPoint One sites which
increased by 2.4% to 19,453 sites.
Service fees is a core growth area and consists of service fees from PayPoint
One and our legacy terminals. Service fee net revenue increased by £0.8
million (8.8%) to £9.7 million driven by the additional 481 PayPoint One
revenue generating sites compared to the prior period. The higher price point
EPoS Core sites increased by 1,286 due to new sales and upselling whilst EPOS
Pro sites decreased by due to normal churn and no longer being actively
marketed.
The PayPoint One average weekly service fee per site increased by 7.3% to
£19.1, benefiting from the increase in EPoS Core sites which are charged at a
higher rate and the annual RPI increase.
Card payments and leases Six months to 30 September 2023 Six months to 30 September 2022 Change %
Net Revenue (£m)
Card payments and leases – Handepay and Merchant Rentals 10.6 9.8 8.8%
Card payments – PayPoint and RSM 2000 5.8 6.1 (5.1)%
Services in Live sites (No.)
Card payments – Handepay 22,615 22,065 2.5%
Card terminal lessees – Merchant Rentals 35,386 34,648 2.1%
Card payments – PayPoint 9,772 9,514 2.7%
Card payments – RSM 2000 129 145 (11.3)%
Transactions (Millions)
Card payments – Handepay 84.7 78.0 8.5%
Card payments – PayPoint 126.4 118.5 6.6%
Card payments – RSM 2000 3.6 3.6 -
Handepay and Merchant Rentals generated £10.6 million net revenue in the
period. Handepay card payments transactions increased by 8.5% to 84.7 million,
maintaining strong transaction volumes seen in the previous year but at a
lower average transaction value of £28.01 (September 2022: £29.20). There
were 22,625 Handepay card payments sites, an increase of 550 sites (2.5%)
since September 2022. Handepay EVO sales increased in the year supported by
the one-month operating lease proposition, but sites overall have been
impacted by higher churn, particularly in our Worldpay back book in this very
competitive market. The sales momentum increased due to the sales team being
fully staffed and the launch of the new Android device.
PayPoint card payments transactions increased by 6.6% to 126.4 million while
net revenue decreased by 5.6% to £5.2 million, maintaining strong transaction
volumes seen in the previous year but at a lower average transaction value
£10.40 (September 2022: £10.60). Across our network there were 9,772
PayPoint card payments sites, an increase of 258 sites (2.7%) since 30
September 2022.
ATMs and Counter Cash Six months to 30 September 2023 Six months to 30 September 2022 Change %
Net Revenue (£m) 4.5 4.8 (6.6)%
Services in Live sites (No.) 9,639 8,060 19.6%
Transactions (Millions) 14.7 15.5 (5.6)%
Net revenue reduced by £0.3m (6.6%) to £4.5 million (September 2022: £4.8
million) as transactions reduced by 5.6% to 14.7 million. This is attributable
to the continued reduced demand for cash across the economy although our new
product, Counter Cash, continues to grow. ATM and Counter Cash sites increased
19.6% to 9,639 mainly as a result of the continued roll out of Counter Cash
sites and PayPoint continued to optimise its ATM network by relocating
existing machines to better performing locations. Counter Cash contributed
10.4% of transactions (September 2022: 5.5%).
Other: Other shopping services increased by £0.3 million (20.3%) to £1.5
million (September 2022: £1.2 million) this includes the partnership with
Snappy Shopper and FMCG campaigns.
E-COMMERCE
Parcels Six months to 30 September 2023 Six months to 30 September 2022 Change %
Net Revenue (£m) 5.1 3.0 71.8%
Services in Live sites (No.) 11,263 9,891 13.9%
Transactions (Millions) 42.1 23.0 83.1%
E-commerce net revenue increased by £2.1 million (71.8%) to £5.1 million due
to the increase in total parcels transactions by 83.1% to 42.1 million. This
was driven by our strength in clothing/fashion categories and the investment
in the in-store experience with Zebra label printers over the past 18 months.
There has been continued expansion from new services, Yodel store to store and
Amazon returns, and new carrier partnerships with Wish.com and InPost. Parcel
sites increased by 13.9% to 11,263 sites.
PAYMENTS & BANKING
Six months to 30 September 2023 Six months to 30 September 2022 Change %
Net revenue (£m)
Cash – bill payments 10.3 12.3 (16.4)%
Cash – top-ups 3.6 3.7 (1.6)%
Digital 6.4 5.9 9.1%
Cash through to digital 3.3 3.4 (1.2)%
Other payments and banking 1.5 0.4 229.9%
Total net revenue (£m) 25.1 25.7 (2.3)%
Payments & Banking divisional net revenue decreased by 2.3% to £25.1 million
as a result of fewer cash bill payments and top up transactions and margin
erosion from prior year client contract renewals partially offset by continued
growth in digital transactions, particularly within the cash-out sector.
Cash – bill payments Six months to 30 September 2023 Six months to 30 September 2022 Change %
Net revenue (£m) 10.3 12.3 (16.4)%
Transactions (millions) 59.4 73.3 (18.9)%
Transaction value (£m) 1,828.2 1,963.8 (6.9)%
Average transaction value (£) 30.8 26.8 14.8%
Net revenue per transaction (pence) 17.3 16.8 3.2%
Cash – bill payments net revenue decreased by £2.0 million (16.4%) to
£10.3 million. Cash – bill payments transactions decreased by 13.9 million
(18.9%) to 59.4 million as a result of changing consumer behaviour leading to
lower top ups following the support in FY23 from the Governments Energy Bills
Support Scheme (EBSS).
Cash – top-ups Six months to 30 September 2023 Six months to 30 September 2022 Change %
Net revenue (£m) 3.6 3.7 (1.6)%
Transactions (millions) 9.2 9.7 (5.0)%
Transaction value (£m) 115.2 120.0 (4.1)%
Average transaction value (£) 12.5 12.4 1.0%
Net revenue per transaction (pence) 39.1 38.1 2.6%
Cash – top-ups net revenue decreased by £0.1 million (1.6%) to £3.6
million. Cash top-ups transactions decreased by 0.5 million (5.0%) to 9.2
million due to further market declines in the prepaid mobile sector whereby UK
direct debit pay-monthly options displace UK prepay mobile.
Digital Six months to 30 September 2023 Six months to 30 September 2022 Change %
Net revenue (£m) 6.4 5.9 9.1%
Transactions (millions) 23.5 23.5 -
Transaction value (£m) 534.1 482.9 10.6%
Average transaction value (£) 22.7 20.5 10.9%
Net revenue per transaction (pence) 27.2 25.1 8.5%
Digital (MultiPay, Cash Out and Direct Debits) net revenue increased by £0.5
million (9.1%) to £6.4 million and digital transactions remained in line with
the prior period. MultiPay net revenue increased by £0.4 million to £2.2
million (September 2022: £1.8 million) with transactions growing by 0.1
million to 16.3 million. The DWP Payment Exception Service contributed £2.0
million net revenue in the period (September 2022: £2.4 million) following
the expected decline of customers. Cashout revenue increased by £0.5 million
(45.6%) to £1.5 million (September 2022: £1.0 million) driven by a higher
number of councils using the service to provide cash out vouchers.
Cash through to digital Six months to 30 September 2023 Six months to 30 September 2022 Change %
Net revenue (£m) 3.3 3.4 (1.2)%
Transactions (millions) 4.1 4.3 (5.2)%
Transaction value (£m) 265.0 244.1 8.6%
Average transaction value (£) 64.6 56.4 14.5%
Net revenue per transaction (pence) 80.5 79.1 1.8%
Cash through to digital (eMoney) net revenue decreased by £0.1 million (1.2%)
to £3.3 million (September 2022: £3.4 million) and transactions decreased by
0.2 million (5.2%) to 4.1 million (September 2022: 4.3 million) with volumes
returning to pre-Covid-19 levels and a new baseline set for the category.
EMoney transactions derive a substantially higher fee per transaction than
traditional top-up transactions as they are more complex to process.
Other Payments & Banking net revenue includes SIM sales, interest generated by
investing cash received on client funds and other ad-hoc items which
contributed £1.4 million (September 2022: £0.4 million) net revenue.
LOVE2SHOP SEGMENT
£m Six months to 30 September 2023
Billings 105.1
Revenue 45.3
Net revenue 17.5
Other costs of revenue (5.7)
Depreciation and amortisation (administrative expenses) excluding amortisation on intangible assets arising on acquisition (1.2)
Other administrative costs (10.2)
Net finance costs (2.2)
Total costs (19.3)
Underlying profit before tax (excluding adjusting items) (1.8)
Love2shop (L2s) has generated £105.1 million of total billings in the period
– a measure of total value of balance sold on cards and vouchers. The
primary focus of the business is the sale of multi-retailer redemption
products. Revenue from these products is largely service fee received from
retail partners when the products are spent, non-redemption income when the
product expires, and interest income earned on prepaid funds. L2s also sells
cards and vouchers that can only be redeemed at a single retailer, effectively
acting as a reseller. For these products, L2s acts as the principal, and
revenue is recognised at the full value of billings at the time of dispatch.
Net revenue however is stated after deducting the costs for the single
retailer product, reflecting the actual income generated from the sale. Net
revenue for the HY was £17.5 million.
The business is seasonal in nature, and profit is primarily generated In H2 of
the financial year, which represents the peak trading period for L2s corporate
business and of the dispatch of Park Christmas savings prepaid products around
Christmas.
PROFIT BEFORE TAX AND TAXATION
The income tax charge of £4.4 million (September 2022: £3.9 million) on
profit before tax of £17.2 million (September 2022: £21.0 million)
represents an effective tax rate of 25.5% (September 2022: 18.7%). This is
higher than the UK statutory rate of 25% due to adjustments in respect of
share based payments.
GROUP STATEMENT OF FINANCIAL POSITION
Net assets of £110.8 million (September 2022: £88.4 million) increased by
£22.4 million reflecting the shares issued as part of the acquisition of
Appreciate and the growth in retained earnings. Current assets increased by
£226.4 million to £335.7 million (September 2022: £109.3 million) due to
the monies held in trust and voucher deposits acquired with the Appreciate
acquisition. Non-current assets of £224.2 million (September 2022: £123.1
million) increased by £101.1 million due to the Appreciate acquisition
goodwill and intangible assets and the investment in terminals. Current
liabilities increased by £260.8 million due to the liabilities matching the
cash held on behalf of clients and monies held in trust and an increase in
borrowings from the RCF drawdown, required for the acquisition. Non-current
liabilities of £53.9 million (September 2022: £9.5 million) increased by
£44.4 million due to the new £36.0 million amortising term loan taken out to
fund the acquisition and deferred tax liabilities arising from the
acquisition.
Net debt At 30 September At 31 March At 30 September
2023 2023 2022
Cash and cash equivalents - net corporate cash 18.6 22.0 3.8
Less:
Loans and borrowings (101.8) (94.4) (43.2)
Net debt (83.2) (72.4) (39.4)
At 30 September 2023, net corporate debt was £83.2 million (September 2022:
£39.4 million) and has increased by £10.8 million from the year end
position. This is as a result of positive cash generation offset by working
capital requirements in the first six months along with tax, capex and
dividend requirements. Total loans and borrowings of £101.8 million, which
have increased by £7.4 million from 31 March 2023, consisted of a £41.4
million amortising term loans, £59.5 million drawdown of the £75.0 million
revolving credit facility and £0.9 million of asset financing balances and
accrued interest (September 2022: £26.0 million drawdown from the revolving
credit facility, £16.3 million amortising term loan and £0.9 million of
asset financing balances).
GROUP CASH FLOW AND LIQUIDITY
The following table summarises the cash flow movements during the period.
Six months to 30 September 2023 Six months to 30 September 2022 Change %
Profit before tax 17.2 21.0 (18.2)%
Exceptional items 0.6 1.5 (60.0)%
Depreciation and amortisation 9.7 4.7 106.4%
Share-based payments and other items 0.7 0.3 133.3%
Working capital changes (corporate) (12.6) 0.8 n/m
Cash generation 15.6 28.3 (44.9)%
Taxation payments (5.1) (1.3) 292.3%
Capital expenditure (7.1) (6.0) 18.3%
Contingent consideration cash paid - (1.0) -
Purchase of convertible loan note and other investment - (3.0) -
Lease payments (0.7) (0.1) 600.0%
Dividends paid (13.5) (12.4) 8.9%
Net (increase)/decrease in net debt (10.8) 4.5 -
Net corporate debt at the beginning of the period (72.4) (43.9)
Net (increase)/decrease in net debt (10.8) 4.5
Net corporate debt at the end of the period (83.2) (39.4) 111.2%
Cash generation reduced to £15.6 million (September 2022: £28.3 million)
delivered from profit before tax of £17.2 million (September 2022: £21.0
million). There was a net working capital outflow of £12.6 million, of this
£2.0 million related to payment of costs accrued for the Appreciate
acquisition at the year end, £2.7m relating to extending payment terms with a
key customer and the remaining amount related to seasonal timing which is
expected to unwind in the second half of the year.
Taxation payments on account of £5.1 million (September 2022: £1.3 million)
are higher compared to the prior period which included a tax refund of £3.3
million following the closure of March 2021 tax filings which do not impact
the prior year tax charge. The Corporation tax rate in the year has increased
from 19% to 25%. Dividend payments were higher compared to the prior period
due to the increase in the final ordinary dividend paid per share for the
prior year ended 31 March 2023.
Capital expenditure of £7.1 million (September 2022: £6.0 million) was £1.1
million higher than the prior year. Capital expenditure primarily consists of
PayPoint One and card terminals, terminal development, the enhancement to the
Direct Debit platform and IT hardware. The increase in capital expenditure is
primarily the result of the inclusion of Love2shop, which accounts for £0.8
million of the £1.1 million.
DIVIDENDS
In the six months to 30 September 2023, total dividend payments of £13.5
million or 18.6 pence per share (September 2022: £12.4 million or 18.0 pence
per share) were made, representing the final ordinary dividend for the year
ended 31 March 2023. This is a 3.3% increase in the final dividend since last
year.
We have declared an increased interim dividend of 19.0 pence per share
(September 2022: 18.4 pence) payable in equal instalments of 9.5 pence per
share on 29 December 2023 and 5 March 2024 (to shareholders on the register on
1 December 2023 and 2 February 2024 respectively). This is an increase of 2.2%
compared to the final dividend declared of 18.6 pence per share, and an
increase of 3.3% compared to the same period last year (September 2022: 18.4
pence).
The interim dividends will result in £13.8 million (September 2022: £12.7
million) being paid to shareholders from the standalone statement of financial
position of the Company which, as at 30 September 2023, had approximately
£36.0 million (September 2022: £62.7 million) of distributable reserves.
CAPITAL ALLOCATION
The Board’s immediate priority is to continue to preserve PayPoint’s
balance sheet strength. The Group maintains a capital structure appropriate
for current and prospective trading over the medium term that allows a healthy
mix of dividends and cash for investment through capital expenditure and
acquisitions. The Board’s approach to the setting of the ordinary dividend
has been updated since the prior year in relation to cover ratio to strengthen
the capital position 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 acquisition of Appreciate in
February 2023 and investment in OBConnect convertible loan;
* Progressive ordinary dividends targeting a cover ratio of 1.5 to 2.0.(9)
times earnings from continuing operations excluding exceptional items.
GOING CONCERN
The financial statements have been prepared on a going concern basis having
regard to the identified principal risks and uncertainties. Our cash and
borrowing capacity provides sufficient funds to meet the foreseeable needs of
the Group including dividends.
Rob Harding
Chief Financial Officer
22 November 2023
PayPoint Plc
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Note 6 months ended 30 September 2023 £000 Re-presented (1) 6 months ended 30 September 2022 £000 Year ended 31 March 2023 £000
Revenue 3 113,988 75,385 165,220
Other revenue 3 12,513 - 2,503
Total revenue 126,501 75,385 167,723
Cost of revenue (64,554) (26,602) (64,257)
Gross profit 61,947 48,783 103,466
Administrative expenses – excluding adjusting items (36,566) (24,168) (50,083)
Operating profit before adjusting items 25,381 24,615 53,383
Adjusting items:
Exceptional items - administrative expenses 5 (558) (1,553) (5,317)
Amortisation of intangible assets arising on acquisition – administrative expenses (4,038) (1,069) (2,574)
Operating profit 20,785 21,993 45,492
Finance income 463 71 87
Finance costs (4,066) (1,088) (2,718)
Exceptional item – finance costs 5 - - (287)
Profit before tax 17,182 20,976 42,574
Tax 6 (4,376) (3,931) (7,864)
Profit for the period 12,806 17,045 34,710
Earnings per share (pence)
Basic 17.6 24.7 50.1
Diluted 17.4 24.4 49.6
Underlying earnings per share – before adjusting items (pence)
Basic 22.4 28.1 61.0
Diluted 22.1 27.8 60.3
(1)Amortisation of intangible assets arising on acquisition was not identified
as an adjusting item in the September 2022 financial statements (see note 1).
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months ended 30 September 2023 £000 6 months ended 30 September 2022 £000 Year ended 31 March 2023 £000
Items that will not be reclassified to the consolidated statement of profit or loss:
Remeasurement of defined benefit pension scheme (845) - 353
Deferred tax on defined benefit pension scheme 211 - (86)
Foreign exchange 7
Other comprehensive (loss) / income for the period (627) - 267
Profit for the period 12,806 17,045 34,710
Total comprehensive income for the period attributable to equity holders of the parent 12,179 17,045 34,977
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note 30 September 2023 £000 30 September 2022 £000 31 March 2023 £000
Non-current assets
Goodwill 117,427 57,668 117,427
Other intangible assets 71,157 35,886 75,293
Convertible loan notes 3,750 3,750 3,750
Other investment 251 - 251
Property, plant and equipment 30,729 22,551 29,257
Net investment in finance lease receivables 915 3,233 1,711
Retirement benefit asset - - 411
Total non-current assets 224,229 123,088 228,100
Current assets
Inventories 8,417 66 3,152
Trade and other receivables 97,887 81,830 82,055
Current tax asset 7,691 1,562 6,231
Cash and cash equivalents – clients’ funds, retailer partners’ deposits and card and voucher deposits 118,410 16,636 55,905
Cash and cash equivalents – corporate cash 20,325 3,752 22,546
Monies held in trust 83,000 - 82,000
335,730 103,846 251,889
Asset held for sale - 5,502 -
Total current assets 335,730 109,348 251,889
Total assets 559,959 232,436 479,989
Current liabilities
Trade and other payables 327,222 96,990 255,526
Lease liabilities 728 157 862
Loans and borrowings 65,585 37,336 58,245
Bank overdraft 1,757 - 525
Total current liabilities 395,292 134,483 315,158
Non-current liabilities
Trade and other payables 106 - 115
Lease liabilities 4,522 - 4,617
Loans and borrowings 36,165 5,818 36,170
Retirement benefit liability 355 - -
Deferred tax liability 12,763 3,687 12,215
Total non-current liabilities 53,911 9,505 53,117
Total liabilities 449,203 143,988 368,275
Net assets 110,756 88,448 111,714
Equity
Share capital 8 242 230 242
Share premium 8 1,000 1,000 1,000
Merger reserve 8 18,243 999 18,243
Share-based payment reserve 2,042 1,560 2,286
Retained earnings 89,229 84,659 89,943
Total equity attributable to equity holders of the parent 110,756 88,448 111,714
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Note Share capital £000 Share premium £000 Merger reserve £000 Share- based payment reserve £000 Retained earnings £000 Total equity £000
Opening equity 1 April 2022 230 1,000 999 1,570 79,459 83,258
Profit for the period - - - - 17,045 17,045
Comprehensive income for the period - - - - 17,045 17,045
Equity-settled share-based payment expense - - - 556 - 556
Vesting of share scheme - - - (566) 566 -
Dividends - - - - (12,411) (12,411)
Closing equity 30 September 2022 230 1,000 999 1,560 84,659 88,448
Profit for the period - - - - 17,665 17,665
Total other comprehensive income - - - - 267 267
Comprehensive income for the period - - - - 17,932 17,932
Issue of shares 12 - 17,244 - - 17,256
Equity-settled share-based payment expense - - - 774 - 774
Vesting of share scheme - - - (48) 48 -
Dividends - - - - (12,696) (12,696)
Closing equity 31 March 2023 242 1,000 18,243 2,286 89,943 111,714
Profit for the period - - - - 12,806 12,806
Total other comprehensive income - - - - (627) (627)
Comprehensive income for the period - - - - 12,179 12,179
Equity-settled share-based payment expense - - - 690 - 690
Vesting of share scheme - - - (934) 623 (311)
Dividends - - - - (13,516) (13,516)
Closing equity September 2023 242 1,000 18,243 2,042 89,229 110,756
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Note 6 months ended 30 September 2023 £000 Re-presented (1) 6 months ended 30 September 2022 £000 Year ended 31 March 2023 £000
Net cash generated by operations 9 81,545 29,391 102,182
Corporation tax paid (5,095) (1,321) (6,204)
Interest received 46 71 609
Interest paid (3,527) (1,126) (2,973)
Net cash inflow from operating activities 72,969 27,015 93,614
Investing activities
Purchases of property, plant and equipment (4,827) (3,075) (7,802)
Purchases of intangible assets (2,233) (2,950) (4,900)
Acquisitions of subsidiaries net of cash acquired - - (45,580)
Contingent consideration cash paid - (1,000) (1,000)
Disposal of investment in associate - - 5,487
Purchase of convertible loan note - (3,000) (3,000)
Purchase of other investment - - (251)
Net cash used in investing activities (7,060) (10,025) (57,046)
Financing activities
Dividends paid (13,516) (12,411) (25,107)
Proceeds from issue of share capital - - 1
Payment of lease liabilities (677) (110) (261)
Repayment of loans and borrowings (7,664) (8,380) (22,074)
Proceeds from loans and borrowings 15,000 - 64,500
Net cash (used in) / generated from financing activities (6,857) (20,901) 17,059
Net increase / (decrease) in cash and cash equivalents 59,052 (3,911) 53,627
Cash and cash equivalents at beginning of year 77,926 24,299 24,299
Cash and cash equivalents at period end 136,978 20,388 77,926
(1)Interest received was presented within the heading “Investing activities” in the prior period.
Reconciliation of cash and cash equivalents
Corporate cash 20,325 3,752 22,546
Clients’ funds, retailer partners’ deposits and card and voucher deposits 118,410 16,636 55,905
Bank overdraft (1,757) - (525)
Cash and cash equivalents on the condensed consolidated statement of financial position 136,978 20,388 77,926
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Accounting policies
Reporting entity
PayPoint plc (‘PayPoint’ or the ‘Company’) is a public limited
company, incorporated and registered in the UK under the Companies Act 2006.
Its registered office is at Unit 1, The Boulevard, Welwyn Garden City,
Hertfordshire, AL7 1EL. Its shares are listed on the London Stock Exchange.
These condensed consolidated interim financial statements (‘interim
financial statements’) as at and for the six months ended 30 September 2023
are made up of the Company and its subsidiaries (together referred to as the
‘Group’). They were approved for issue on 22 November 2023.
These interim financial statements do not comprise statutory accounts within
the meaning of section 434 of the Companies Act 2006. Statutory accounts for
the year ended 31 March 2023 were approved by the board of directors on 27
July 2023 and delivered to the Registrar of Companies. The report of the
auditor on those accounts was unqualified, did not contain an emphasis of
matter paragraph and did not contain any statements under section 498 of the
Companies Act 2006.
The financial statements have been reviewed, not audited.
Basis of preparation
The interim financial statements for the half-year reporting period ended 30
September 2023 have been prepared in accordance with the UK-adopted
International Accounting Standard 34 Interim Financial Reporting and the
Disclosure Guidance and Transparency Rules sourcebook of the UK’s Financial
Conduct Authority.
Adoption of standards and policies
The accounting policies applied by the Group in the interim financial
statements for the period ended 30 September 2023 are consistent with those
set out in the Group’s Annual Report for the year ended 31 March 2023.
Going concern
The interim financial statements have been prepared on a going concern basis.
The Group manages its capital to ensure that entities in the Group will be
able to continue as a going concern while maximising the return to
shareholders through the optimisation of the debt-to-equity balance. The
capital structure of the Group consists of debt, cash and cash equivalents and
equity attributable to equity holders of the parent comprising capital,
reserves and retained earnings.
The Group’s policy is to borrow centrally to meet anticipated funding
requirements. Our cash and borrowing capacity provides sufficient funds to
meet the foreseeable needs of the Group. At 30 September 2023, the Group had
cash and cash equivalents of £136.9 million, consisting of £20.3 million
corporate cash, £118.4 million clients’ fund, retailer partners’ deposits
and card and voucher deposits and £1.8 million bank overdraft. The Group’s
borrowing facilities consist of:
* £5.4 million amortising term loan which is due to be repaid in quarterly
instalments, completing in February 2024.
* £36.0 million amortising term loan repayable from May 2024 to February 2026
in equal, quarterly instalments until the final, double payment.
* £75.0 million unsecured revolving credit facility with an additional £30.0
million accordion facility (uncommitted) expiring in February 2026.
* £0.3 million block loan balances, to be repaid within 6 months of the
period-end.
At 30 September 2023, £59.5 million (31 March 2023: £46.5 million) was drawn
down from the revolving credit facility and the Group also had £0.3 million
block loan balances.
The Group has a strengthened statement of financial position, with net assets
of £110.8 million as at 30 September 2023 (30 September 2022: £88.4
million), having made a profit for the period of £12.8 million (30 September
2022: £17.0 million) and delivered net cash flows from operating activities
of £72.7 million for the period then ended (30 September 2022: £27.0
million). Net debt increased from £72.4m to £83.2m in the period, the
£10.8m increase comprising a net, pre-dividend inflow of £2.7m and dividend
payments of £13.5m. In the prior period, net debt decreased by £4.5m,
comprising a net, pre-dividend inflow of £16.9m and dividend payments of
£12.4m. The Group has net current liabilities of £59.6 million at 30
September 2023 (30 September 2022: £25.1 million), which includes the drawn
down revolving credit facility balance of £59.5 million (31 March 2023:
£46.5 million). This balance is classified as a current liability at 31 March
2023 and at each of the comparative dates, reflecting the fact that each
individual borrowing tranche drawn down from the revolving credit facility is
for a period of less than 12 months. The net current liability position does
not affect the Group’s ability to continue as a going concern as the
facility is not required to be repaid until February 2026
The Directors have prepared cash flow forecast scenarios for a period of at
least 12 months from the date of this announcement, taking into account the
Group’s current financial and trading position, the impact of current
economic conditions, the principal risks and uncertainties and the strategic
plans that are reviewed at least annually by the Board. In this ‘base
case’ scenario, the cash flow forecasts show considerable liquidity headroom
and debt covenants will be met throughout the period. The Directors have also
considered the matters described in note 10 and concluded that it is not
appropriate to extend the going concern assessment beyond the 12 months on the
basis that the timing of conclusion of legal proceedings is so uncertain.
In addition to the ‘base case’ scenarios, the Directors have also prepared
a ‘downside’ scenario which includes the following assumptions:
Shopping
* No growth in the PayPoint One estate
* Double the decline in cards merchant count which was experienced in the
year-ended 31 March 2023
* Double the decline in the ATM estate which was experienced in the year-ended
31 March 2023
* No growth or management challenge achieved in other areas
E-commerce
* No growth or management challenge achieved
Payments and banking
* Double the transaction decline which was experienced in the year-ended 31
March 2023
* Management challenge not achieved
Love2Shop
* 10% decline in billings across all channels
Even with the above assumptions, the forecasts indicated that there was
sufficient headroom and liquidity for the Group to continue with the existing
facilities outlined above.
Based on these assessments, 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 approval of these interim financial statements and therefore have
prepared the interim 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 which have remained consistent with the alternative
performance measures disclosed in the Annual Report for the year ended 31
March 2023. These measures are included in these interim 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.
Underlying performance measures (non-IFRS measures)
Underlying performance measures allow shareholders to understand the
operational performance in the year, to facilitate comparison with prior years
and to assess trends in financial performance. They usually exclude the impact
of one-off, non-recurring and exceptional items and the amortisation of
intangible assets arising on acquisition, such as brands and customer
relationships.
Love2Shop billings (non-IFRS measures relating solely to the Love2Shop
segment)
Billings represents the value of goods and services shipped and invoiced to
customers during the year and is recorded net of VAT, rebates and discounts.
Billings is an alternative performance measure, which the directors believe
provides an additional measure of the level of activity other than revenue.
This is due to billings being recognised at a different time to revenue from
multi-retailer products and revenue from multi-retailer redemption products
being reported on a ‘net’ basis, whilst revenue from single-retailer
redemption products and other goods are reported on a ‘gross’ basis.
Net revenue (non-IFRS measure)
Net revenue is revenue less commissions paid (to retailer partners and Park
Christmas agents) and the cost of revenue for items where the Group acts in
the capacity as principal (including single-retailer vouchers and SIM cards).
This reflects the benefit attributable to the Group’s performance,
eliminating pass-through costs which creates comparability of performance
under both the agent and principal revenue models. It is a key consistent
measure of the overall success of the Group’s strategy. A reconciliation
from revenue to net revenue is included in note 4.
Adjusting items (non-IFRS measure)
Adjusting items consist of exceptional items and amortisation of intangible
assets arising on acquisition. These items are presented as adjusting items in
the consolidated statement of profit or loss, as they do not reflect the
operational performance of the Group. Further details of the exceptional items
are provided in note 5.
30 September 2023 £000 Re-presented (1) 30 September 2022 £000 31 March 2023 £000
Exceptional item – professional fees 558 - -
Exceptional item – acquisition costs expensed - 300 4,065
Exceptional item – impairment loss on reclassification of investment in associate to asset held for sale - 1,253 1,252
Exceptional item – finance costs - - 287
Amortisation of intangible assets arising on acquisition 4,038 1,069 2,574
Total adjusting items 4,596 2,622 8,178
(1)Amortisation of intangible assets arising on acquisition were not
identified as adjusting items in the September 2022 financial statements (see
note 1).
See note 5 for explanations of the above exceptional items.
Effective tax rate (non-IFRS measure)
Effective tax rate (note 6) is the tax charge as a percentage of the net
profit before tax.
Reported dividends (non-IFRS measure)
Reported dividends for an interim reporting period are based on that
period’s results from which the dividend is declared and consist of the
interim dividend declared. This is different to statutory dividends where the
final dividend on ordinary shares is recognised in the following interim
period when it is approved by the Company’s shareholders.
Cash generation (non-IFRS measure)
Cash generation reflects earnings before tax, depreciation, amortisation and
non-cash exceptional items adjusted for working capital (excluding movement in
clients’ funds, retailers partners’ deposits and card and voucher
deposits) as detailed in the financial review. This measures the cash
generated which can be used for tax payments, new investments, payment of
dividends and financing activities.
Total costs (non-IFRS measure)
Total costs comprise other cost of revenue, administrative expenses, financing
income and financing costs. Total costs exclude adjusting items, being
exceptional costs and amortisation of intangible assets arising on
acquisition.
Earnings before interest, tax, depreciation and amortisation (EBITDA)
(non-IFRS measure)
The Group now presents EBITDA, as it is widely used by investors, analysts and
other interested parties to evaluate profitability of companies. This measures
earnings from continuing operations before interest, tax, depreciation and
amortisation.
Underlying earnings before interest, tax, depreciation and amortisation
(Underlying EBITDA) (non-IFRS measure)
The Group also now presents underlying EBITDA, which comprises EBITDA, as
defined above, excluding exceptional items.
Underlying earnings per share (non-IFRS measure)
Underlying earnings per share is calculated by dividing the net profit from
continuing operations before exceptional items and amortisation of intangible
assets arising on acquisition attributable to equity holders of the parent by
the basic or diluted weighted average number of ordinary shares in issue.
Underlying profit before tax (non-IFRS measure)
The calculation of underlying profit before tax is as follows:
30 September 2023 £000 30 September 2022 £000 31 March 2023 £000
Profit before tax 17,182 20,976 42,574
Total adjusting items 4,596 2,622 8,178
Underlying profit before tax 21,778 23,598 50,752
Underlying profit after tax (non-IFRS measure)
The calculation of underlying profit after tax is as follows:
30 September 2023 £000 30 September 2022 £000 31 March 2023 £000
Profit after tax 12,806 17,045 34,710
Total adjusting items 4,596 2,622 8,178
Tax on adjusting items (1,149) (267) (644)
Underlying profit after tax 16,253 19,400 42,244
Net corporate debt (non-IFRS measure)
Net corporate debt represents cash and cash equivalents excluding cash
recognised as clients’ funds and retailer partners’ deposits, less bank
overdraft and amounts borrowed under financing facilities (excluding IFRS 16
liabilities).
The reconciliation of cash and cash equivalents to net corporate debt is as
follows:
30 September 2023 £000 30 September 2022 £000 31 March 2023 £000
Cash and cash equivalents - corporate cash 20,325 3,752 22,546
Less:
Bank overdraft (1,757) - (525)
Loans and borrowings (101,750) (43,154) (94,415)
Net corporate debt (83,182) (39,402) (72,394)
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 payments and banking services means that PayPoint collects and
holds funds on behalf of clients as those funds pass through the settlement
process and retains retailer partners’ deposits as security for those
collections. Following the Appreciate acquisition, it also holds card and
voucher deposits on behalf of agents, cardholders and redeemers, some of which
is held in trust.
A critical judgement in this area is whether clients’ funds, retailer
partners’ deposits and monies held in trust are recognised in the statement
of financial position, and whether they are included in cash and cash
equivalents for the purpose of the statement of consolidated cash flows. This
includes evaluating:
(a) the existence of a binding agreement, such as a legal trust,
clearly identifying the beneficiary of the funds
(b) the identification of funds, ability to allocate and
separability of funds
(c) the identification of the holder of those funds at any
point in time
(d) whether the Group bears the credit risk
Where there is a binding agreement specifying that PayPoint holds funds on
behalf of the client (i.e. acting in the capacity of a trustee) and those
funds have been separately identified as belonging to that beneficiary, the
cash and the related liability are not included in the statement of financial
position.
Where funds are held in trusts set up for the purpose of ring-fencing monies
belonging to agents, cardholders and redeemers, they are recognised as monies
held in trust on the statement of financial position, as the Group has access
to the interest on such monies and can, having met certain conditions,
withdraw the funds. However, given the restrictions over these monies, the
amounts held in trust and ring-fenced are not included in cash and cash
equivalents.
In all other situations the cash and corresponding liability are recognised on
the statement of financial position. Corporate cash and clients’ funds,
retailer partners’ deposits and card and voucher deposits are presented as
separate line items within cash and cash equivalents on the statement of
financial position.
The amounts recognised on the Statement of financial position as at 30
September 2023 are as follows:
* Cash and cash equivalents - clients’ funds £15.8 million (31 March 2023:
£12.0 million)
* Cash and cash equivalents - retailers’ deposits £0.5 million (31 March
2023: £6.2 million
* Cash and cash equivalents – card and voucher deposits £102.1 million (31
March 2023: £37.7 million)
* Cash and cash equivalents - corporate cash £20.3 million (31 March 2023:
£22.5 million
* Monies held in trust £83.0 million (31 March 2023: £82.0 million)
The increase in the card and voucher deposits balance since 31 March 2023
reflects the seasonality of Love2Shop’s business. Its clients purchase
redemption products most heavily in the peak September to December period,
resulting in a higher balance at September than in March each year.
Clients’ funds held in trust off the statement of financial position as at
30 September 2023 are £49.2 million (31 March 2023: £124.3 million). The 31
March 2023 amount included total one-off balances of £50m arising from the
Group’s participation in the Government’s Energy Bills Support Scheme.
Critical estimate: Valuation of the goodwill relating to the Handepay cash
generating unit
Handepay’s principal activity is that of an independent sales organisation
in the merchant acquiring industry. It is a growth business that has strong
cash generation and limited capital expenditure requirements. The market in
which it operates is highly competitive and facing several regulatory changes.
Handepay has a relatively small market share, however it continues to develop
its proposition, sales force, and operations with an ambition to accelerate
the growth of its market share. Handepay is a CGU for the purposes of
impairment testing.
The Handepay CGU generated a value in use (VIU) in excess of its carrying
value, therefore, the CGU and its assets continue to be measured at their
carrying value. Sensitivity analysis was applied to determine the impacts of
reasonably possible changes in the assumptions used for the VIU calculation. A
reasonable change in these assumptions could give rise to an impairment as was
the case at the 31 March 2023 year-end.
The key assumptions underpinning the recoverable amounts that are most
sensitive to a reasonable change, as was the case in March 2023, continue to
be:
1. The average revenue growth assumption
2. Pre-tax discount rate
2. Segmental reporting
The Group provides a number of different services and products. However, prior
to the acquisition of Appreciate Group PLC on 28 February 2023, the different
services and products provided by the Group did not meet the definition of
different operating segments under IFRS 8, as the chief operating decision
maker (CODM), the Executive Board, did not review them separately to make
decisions about resource allocation and performance. Therefore, the Group had
only one operating segment.
The Group considers the Appreciate business, now known as Love2Shop, to be a
separate segment from its pre-acquisition PayPoint business, since discrete
financial information is prepared and it offers different products and
services. Furthermore, the CODM reviews separate monthly internal management
reports (including financial information) for both PayPoint and Love2Shop to
allocate resources and assess performance.
The material products and services offered by each segment are as follows:
PayPoint
* Card payment services to retailers, including leased payment devices
* ATM cash machines
* Bill payment services and cash top-ups to individual consumers, through a
network of retailers
* Parcel delivery and collection
* Retailer service fees
* Digital payments
Love2Shop
* Shopping vouchers, cards and e-codes which customers may redeem with
participating retailers. These are either ‘single-retailer’ or
‘multi-retailer’. The former may only be used at the specified retailer,
whilst the latter may be redeemed at one or more of over 200 retailers.
* Christmas savings club, to which customers make regular payments throughout
the year to help spread the cost of Christmas, before converting to a voucher.
Information related to each reportable segment, for the period ended 30
September 2023 and as at that date, is set out below. Segment profit / (loss)
before tax, exceptional items and amortisation of intangible assets arising on
acquisition is used to measure performance because management believes that
this information is the most relevant in evaluating the results of the
respective segments relative to other entities that operate in the same
industries.
The Group operates exclusively in the UK.
6 months ended 30 September 2023 and as at 30 September 2023 PayPoint £000 Love2Shop £000 Total £000
Revenue 80,232 33,756 113,988
Other revenue 1,010 11,503 12,513
Segment revenue 81,242 45,259 126,501
Segment profit / (loss) before tax and adjusting items 23,564 (1,786) 21,778
Exceptional items (558) - (558)
Amortisation of intangible assets arising on acquisition (1,069) (2,969) (4,038)
Segment profit / (loss) before tax 21,937 (4,755) 17,182
Interest income 46 417 463
Interest expense 1,439 2,617 4,066
Depreciation and amortisation 5,519 4,204 9,723
Capital expenditure 6,240 820 7,060
Segment assets 241,231 318,728 559,959
Segment liabilities 138,570 310,633 449,203
Segment equity 102,661 8,095 110,756
Year ended 31 March 2023 and as at 31 March 2023 PayPoint £000 Love2Shop £000 Total £000
Revenue 159,531 5,689 165,220
Other revenue 575 1,928 2,503
Segment revenue 160,106 7,617 167,723
Segment profit before tax and adjusting items 50,296 456 50,752
Exceptional items (5,604) - (5,604)
Amortisation of intangible assets arising on acquisition (2,139) (435) (2,574)
Segment profit before tax 42,553 21 42,574
Interest income 29 58 87
Interest expense 2,303 415 2,718
Depreciation and amortisation 9,819 658 10,477
Capital expenditure 12,349 354 12,703
Segment assets 219,649 260,340 479,989
Segment liabilities 125,113 243,162 368,275
Segment equity 94,536 17,178 111,714
3. Revenue
Disaggregation of revenue
6 months ended 30 September 2023 £000 6 months ended 30 September 2022 £000 Year ended 31 March 2023 £000
(Shopping)
Card payments 12,360 12,390 24,293
Terminal lease income 4,026 3,467 7,542
Service fees 9,695 8,910 17,947
ATMs 6,093 6,727 12,920
Other shopping 1,895 1,424 3,355
(Shopping total) 34,069 32,918 66,057
(e-commerce total) 14,141 8,143 20,183
(Payments and banking)
(Cash – bill payments) 13,381 16,928 34,135
(Cash – top-ups ) 5,811 6,046 11,959
(Digital) 8,442 6,842 18,081
(Cash through to digital) 3,776 3,844 7,769
(Other payments and banking) 612 664 1,347
(Payments and banking total) 32,022 34,324 73,291
Love2Shop – card and voucher service fee 33,756 - 5,689
Total 113,988 75,385 165,220
Management fees, set-up fees and up-front lump sum payments of £0.5 million
(September 2022: £0.3 million) are recognised on a straight-line basis over
the period of the contract. Service fee revenue is recognised on a
straight-line basis over the period of the contract. Card terminal leasing
revenue is recognised over the expected lease term using the sum of digits
method for finance leases and on a straight-line basis for operating leases.
Multi-retailer voucher, card and e-code service fee revenue is recognised on
redemption by the customer. The remainder of revenue is recognised at the
point in time when each transaction is processed. The usual timing of payment
by PayPoint customers is on fourteen-day terms. The usual timing of
Love2Shop’s corporate customers is fifteen-day terms; its consumer customers
pay on ordering.
Revenue subject to variable consideration of £6.7 million (September 2022:
£7.0 million) exists where the consideration which PayPoint is entitled to
varies according to transaction volumes processed and rate per transaction.
Management estimates the total transaction price using the expected value
method at contract inception, which is reassessed at the end of each reporting
period, by applying a blended rate per transaction to estimated transaction
volumes. Any required adjustment is made against the transaction prices in the
period to which it relates. The revenue is recognised at the constrained
amount to the extent that it is highly probable that the inclusion will not
result in a significant revenue reversal in the future, with the estimates
based on projected transaction volumes and historical experience. The
potential range in outcomes for revenue subject to variable consideration
resulting from changes in these estimates is not material.
Seasonality of operations
Following the Group’s acquisition of Love2Shop on 28 February 2023, its
performance is now considered “highly seasonal” under IAS 34 Interim
Financial Reporting. The Love2Shop business is heavily weighted towards the
second half of the current financial year, in particular the peak September to
December pre-Christmas period when revenues from card, voucher and e-code
redemptions are at their highest.
The PayPoint business is far less seasonal, although its e-commerce division
also generates its highest revenues in the pre-Christmas months. Bill payments
transactions, which were historically higher during the winter months (H2),
continue to be impacted by the shift in consumer behaviour towards making
fewer, larger payments and structural changes in this market. Card payments
typically generates higher value processed and revenue in the summer months
(H1). Card terminal leasing revenue is relatively unaffected by seasonality.
Other revenue
6 months ended 30 September 2023 £000 6 months ended 30 September 2022 £000 Year ended 31 March 2023 £000
PayPoint
Interest revenue 1,010 - 575
Love2Shop
Interest revenue 3,374 - 325
Non-redemption revenue 8,129 - 1,603
(Love2Shop total) 11,503 - 1,928
Total 12,513 - 2,503
Other revenue comprises:
Payments and banking
* Interest earned on clients’ funds and retailer partners’ deposits.
Love2Shop
* Multi-retailer non-redemption revenue (where the end-user has the right of
refund), recognised when the product has expired and the right of refund
lapsed.
* Multi-retailer non-redemption revenue (where the end-user has no right of
refund), recognised on expiry.
* Interest generated by investing cash received from customers. This applies
both to cash received for the Park Christmas Saver business where customers
save with the Group throughout the year, and to all other pre-paid products.
Funds associated with customers are included in both monies held in trust and
cash and cash equivalents.
4. Alternative performance measures
Net revenue
The reconciliation between total revenue and net revenue is as follows:
6 months ended 30 September 2023 £000 6 months ended 30 September 2022 £000 Year ended 31 March 2023 £000
Service revenue – Shopping 34,069 31,286 66,057
Service revenue – e-commerce 13,609 8,143 16,085
Service revenue – Payments and banking 31,425 33,687 71,994
Service revenue – multi-retailer redemption products 2,938 - 1,217
Service revenue – other 2,040 - 128
Sale of goods – single-retailer redemption products 28,776 - 4,325
Sale of goods – other 599 637 1,316
Royalties – e-commerce 532 1,632 4,098
Other revenue – multi-retailer non-redemption income 8,129 - 1,603
Other revenue – interest on clients’ funds, retailer partners’ deposits and card and voucher deposits 4,384 - 900
Total revenue 126,501 75,385 167,723
less:
Retailer partners’ commissions (18,960) (15,818) (34,369)
Cost of single-retailer cards and vouchers (27,657) - (4,208)
Cost of SIM cards and e-money sales as principal (83) (95) (199)
Net revenue from continuing operations 79,801 59,472 128,947
Total costs
Total costs, excluding adjusting items, comprises:
6 months ended 30 September 2023 £000 Re-presented (1) 6 months ended 30 September 2022 £000 Year ended 31 March 2023 £000
Other costs of revenue 17,854 10,689 25,481
Administrative expenses – excluding adjusting items 36,566 24,168 50,083
Finance income (463) (71) (87)
Finance costs 4,066 1,088 2,718
Total costs 58,023 35,874 78,195
(1)Amortisation of intangible assets arising on acquisition were not
identified as adjusting items in the September 2022 financial statements (see
note 1).
Love2Shop billings
Billings relates solely to Love2Shop and represents the value of goods and
services dispatched and invoiced to customers during the year. The
reconciliation between Love2Shop’s billings and total revenue is as follows,
with the 31 March 2023 comparative figures representing only one month’s
trading after Love2Shop’s acquisition by PayPoint on 28 February 2023:
6 months ended 30 September 2023 £000 6 months ended 30 September 2022 £000 Year ended 31 March 2023 £000
Love2Shop billings 105,064 - 14,807
Multi-retailer redemption products – gross to net revenue recognition (63,179) - (7,515)
Other revenue – interest on card and voucher deposits 3,374 - 325
Love2Shop total revenue 45,259 - 7,617
5. Exceptional items
6 months ended 30 September 2023 £000 Re-presented (1) 6 months ended 30 September 2022 £000 Year ended 31 March 2023 £000
Legal fees - administrative expenses 558 - -
Acquisition costs expensed - administrative expenses - 300 4,065
Impairment loss on reclassification of investment in associate to asset held for sale - 1,253 1,252
Total exceptional items included in operating profit 558 1,553 5,317
Refinancing costs expensed – finance costs - - 287
Total exceptional items included in profit or loss 558 1,553 5,604
The tax impact of the exceptional items is £0.14 million (September 2022:
£nil).
Exceptional items are those which are considered significant by virtue of
their nature, size or incidence. These items are presented as exceptional
within their relevant income statement categories to assist in the
understanding of the performance and financial results of the Group, as they
do not form part of the underlying business.
The current period legal fees relate to the Group’s defence of 2 claims
served on a number of its companies in connection with issues addressed by
commitments accepted by Ofgem as a resolution of its concerns raised in
Ofgem’s Statement of Objections received by the Group in September 2020. The
Group remains confident that it will successfully defend both claims.
The prior period acquisition costs related to the acquisition of Appreciate
Group PLC on 28 February 2023.
The prior period impairment loss arose on the reclassification of the
Group’s interest in Snappy Shopper Ltd from an investment in associate to an
asset held for sale. The Group subsequently disposed of its interest in Snappy
Shopper on 14 October 2022.
The prior period refinancing costs related to the acquisition of Appreciate
Group PLC.
6. Tax
6 months ended 30 September 2023 £000 6 months ended 30 September 2022 £000 Year ended 31 March 2023 £000
Current tax 3,617 3,949 7,023
Deferred tax 759 (18) 841
Total 4,376 3,931 7,864
Effective tax rate 25.5% 18.7% 18.5%
Tax charged directly to other comprehensive income
Deferred tax (credit) / charge on actuarial (losses) / gains on defined benefit pension plans (211) - 86
The tax charge was £4.4 million (September 2022: £3.9 million) resulting in
an effective tax rate of 25.5% (September 2022: 18.7%). This is higher than
the UK statutory rate of 25% due to adjustments relating to share-based
payments.
An increase in the main rate of UK corporation tax from 19% to 25% was enacted
in June 2021 with effect from 1 April 2023. Deferred tax has been calculated
based on the rate applicable at the date timing differences are expected to
reverse.
7. Earnings per share
Basic and diluted earnings per share are calculated on the net profit
attributable to equity holders of the parent and the weighted average number
of ordinary shares in issue as follows:
6 months ended 30 September 2023 £000 6 months ended 30 September 2022 £000 Year ended 31 March 2023 £000
Net profit attributable to equity holders of the parent
Profit after tax 12,806 17,045 34,710
Underlying profit after tax 16,253 19,400 42,244
30 September 2023 30 September 2022 31 March 2023
Number of Shares Thousands Number of Shares Thousands Number of Shares Thousands
Weighted average number of ordinary shares in issue (for basic earnings per share) 72,603 69,051 69,281
Potential dilutive ordinary shares :
Long-term incentive plan - 59 -
Restricted share awards 772 605 588
Deferred annual bonus scheme 185 120 104
SIP and other 60 36 60
Weighted average number of ordinary shares in issue (for diluted earnings per share) 73,620 69,871 70,033
8. Share capital, share premium and merger reserve
30 September 2023 £000 30 September 2022 £000 31 March 2023 £000
Called up, allotted and fully paid share capital
72,672,845 (September 2022: 68,978,647) ordinary shares of 1/3p each 242 230 242
Total 242 230 242
In the current period 90,222 shares were issued (of 1/3p each) for share
awards which vested in the period and 19,389 matching shares were issued (of
1/3p each) under the Employee Share Incentive Plan.
The share premium of £1.0 million (September 2022: £1.0 million) represents
the payment of deferred, contingent share consideration in excess of the
nominal value of shares issued in relation to the i-movo acquisition.
The merger reserve of £18.2 million (September 2022: £1.0 million) comprises
£1.0 million initial share consideration in excess of the nominal value of
shares issued on the initial acquisition of i-movo and £17.2 million share
consideration in excess of the nominal value of shares issued in relation to
the Appreciate acquisition.
9. Notes to the condensed consolidated statement of cash flows
6 months ended 30 September 2023 £000 6 months ended 30 September 2022 £000 Year ended 31 March 2023 £000
Profit before tax from continuing operations 17,182 20,976 42,574
Adjustments for:
Depreciation of property, plant and equipment 3,354 2,375 4,922
Amortisation of intangible assets 6,369 2,341 5,555
Exceptional item – non-cash impairment loss on reclassification of investment in associate to asset held for sale - 1,538 1,252
Loss on disposal of fixed assets - 40 1,090
Finance income (463) (71) (987)
Finance costs 4,066 1,088 2,718
Share-based payment charge 713 556 1,330
Operating cash flows before movements in corporate working capital 31,221 28,843 58,454
Movement in inventories (5,264) 267 737
Movement in trade and other receivables (6,140) 125 (1,301)
Movement in finance lease receivables 511 1,495 2,366
Movement in contract assets (409) (474) (853)
Movement in contract liabilities (116) 67 (78)
Movement in payables (1,024) (787) 3,688
Movement in lease liabilities 261 1 (90)
Cash generated by operations 19,040 29,537 62,923
Movement in clients’ funds, retailer partners’ deposits and card and voucher deposits 62,505 (146) 39,259
Net cash generated by operations 81,545 29,391 102,182
10. Contingent liability
Further to the update provided on 28 July 2023, PayPoint can confirm that a
first Case Management Conference (CMC) was held on 31 October 2023 at the
Competition Appeal Tribunal relating to the claims served by Utilita Energy
Limited and Utilita Services Limited (“Utilita”) and Global 365 plc and
Global Prepaid Solution Limited (“Global 365”). The focus of the CMC was
to agree disclosure and a timetable for proceedings.
The Group’s position remains unchanged: it is confident that it will
successfully defend the claim by Utilita, which does not provide any clear
evidence to support the cause of action or the amount claimed, and also that
it will successfully defend the claim by Global 365, which fundamentally
misunderstands the energy market and the relationships between the relevant
Group companies and the major energy providers, whilst also over-estimating
the opportunity available, if any, for the products offered by Global 365. As
a result, no accounting provision has been made for these claims.
Given this position, the Group’s preference is for a swift and expedient
process, targeting a trial listing on the first available date to be agreed
with all parties.
The Group will continue to update the market on a quarterly basis as part of
its financial reporting cycle.
PRINCIPAL RISKS AND UNCERTAINTIES
Like all businesses, we face a number of risks and uncertainties and
successful management of existing and emerging risks is critical to the
achievement of strategic objectives and to the long-term success of any
business. Therefore, risk management is an integral part of PayPoint’s
Corporate Governance. The Group’s principal risks and uncertainties remain
the same as those disclosed in the Strategic Report section of its Annual
Report for the year ended 31 March 2023, which are as follows:
Risk Trend & Appetite Potential Impact Mitigation Strategies Status
Principal Risks
Market Risks
1 Competition and Markets Trend = Increasing Appetite = Medium PayPoint’s markets and competitors continue to evolve; failure to anticipate and respond to these will reduce market share, revenue and profits. The decline in cash usage is expected to continue, which will reduce revenue from those affected business areas. Inflationary and cost of living pressures may impact fee margins and discretionary spend, which will in turn affect growth opportunities in parts of the business. Keen pricing by competitors may further serve to narrow profit margins, as would excessive reliance on key clients or market segments The Executive Board regularly reviews markets, competitor activity, trading opportunities and Risk is increasing as competition has intensified, and cost of living pressures are causing a downward push on margins. Also, the use of cash continues to decrease, which reduces our income from certain parts of the business. However, we continue to strengthen our card and digital payment businesses. Levels of global investment in our Fintech competitors slowed in the last year, which presents opportunities for PayPoint in the digital space. Finally, the recent acquisition has further diversified the Group into the gifting and rewards business.
potential acquisitions and so oversees and challenges strategic direction. It also closely monitors
consumer and technological trends and engages with clients, retailers and other stakeholders to
improve our proposition. PayPoint continually develops products, services and systems to adapt to
changes in consumer trends and technology and make strategic acquisitions where appropriate.
2 Emerging Technology Trend = Stable Appetite = Medium There is risk to our business if our offering fails to keep pace and we do not exploit new technologies and markets to evolve our proposition. New and emerging technologies are changing the way consumers pay for goods and services; failure to keep up with alternative payment solutions will reduce our market share and profitability PayPoint continually develops products with the latest technology and evolves them to take advantage Risk is stable as recent acquisitions have accelerated our ability to mitigate the impact of emerging technologies, and the re-platforming of our digital proposition will better enable us to expand our presence in digital payment markets. We are engaged in various government schemes involving new technology, for example, the Department for Work and Pensions Payment Exception Service. We are rolling out a new, updated version of our retailer terminal – the PayPoint mini, and have developed solutions in our open banking and open pay propositions. We are also tracking the fast evolution of generative AI, as this has potential to be highly transformative.
of new and expanding markets. The Executive Board closely monitors emerging technologies and the
impact they may have on PayPoint. We also develop and implement our own innovative technology where
possible. Emerging technology from recent acquisitions has been developed further and used to deepen
and widen our customer relationships.
Strategic Risks
3 Trans-formation Trend = Increasing Appetite = Medium Our business relies on implementation of continued innovation to keep pace with emerging technology and changing markets. Furthermore, we need to remain agile to continually improve our processes and controls, as failure to do so would reduce efficiency, increase costs, and increase the likelihood of poor customer service. Failure to invest and improve would also reduce our capacity to capitalise on opportunities for growth. The Executive Board drives, challenges and assesses our response to change as part of the strategic Risk is increasing; the acquisition of Appreciate is now complete and work has started to integrate their operations where appropriate, and to add their system improvements into the Group roadmap. Other major projects include Payment Facilitation and the roll out of the PayPoint mini terminal, a project that started in 2021.These require considerable investment in technology and systems as well as infrastructure channels and in developing people.
planning process. PayPoint is committed to diversifying its product offering and client base by
delivering innovative, efficient and robust processes in a range of sectors, and by continuous
improvement in existing systems and processes.
Business Risks
4 Operating Model Trend = Stable Appetite = Medium It is important we have a diversified and varied operating model, so we are not overly exposed to any particular markets, clients, suppliers or SMEs. Our core business relies on an appropriate mix of clients operating in diverse industry sectors, retailers and redemption partners, supported by a robust supply chain and operating processes. Failure to maintain attractive propositions for clients retailers and redemption partners may result in losses of key clients, or a reduction in fees and margins. PayPoint builds and carefully manages strategic relationships with key clients, retailers, redemption Risk is stable; recent acquisitions have diversified our operations into the gifting ad rewards business. We continue to renew contracts and onboard new retailers, clients merchants and redemption partners in line with expectations. We have built on the counter cash, FMCG and newspaper propositions with campaigns and onboarding new SMEs, with more in the pipeline. We have however noted that retailers and SMEs are under increasing financial pressure, which may lead to an increase in defaults. We are monitoring this situation carefully.
partners and suppliers. We continually seek to improve and diversify services through new initiatives,
products and technology. We have further diversified our business this year through the acquisition of
Appreciate Group which gives us access to new markets, SMEs, retailers, clients and technology. We
maintain strong relationships with suppliers to reduce concentration risk in this area.
5 Legal and Regulatory Trend = Increasing Appetite = Low PayPoint is required to comply with numerous contractual, legal, and continuously evolving regulatory requirements. Failure to anticipate and meet obligations may result in fines, penalties, prosecution and reputational damage. Recent acquisitions have increased the number of regulated entities, which further increases the regulatory risk. Commitments made to Ofgem in 2021 regarding its Competition law concerns have been implemented Our Legal and Compliance teams work closely with management on all legal and regulatory matters and Risk is increasing due to two key factors. Firstly, following completion of the Appreciate acquisition, additional support has been required to ensure a coherent group approach to compliance is implemented. Secondly, as referenced in Note 34, two claims have now been served on a number of companies in the Group in relation to the matters addressed by commitments made to Ofgem in 2021 in resolution of Ofgem’s competition concerns. Key new regulations this year have been the PSR and Consumer Duty, which we are addressing in line with regulatory deadlines.
adopt strategies to ensure PayPoint is appropriately protected and complies with regulatory
requirements. The teams advise on all key contracts and legal matters and oversee regulatory
compliance, monitoring and reporting. Emerging regulations are incorporated into strategic planning,
and we engage with regulators to ensure our frameworks are appropriate to support new products and
initiatives. The compliance team has been expanded and developed to meet the ever-changing
requirements of both existing and new legislation, and external counsel is engaged where required. We
respond promptly and comprehensively to all legal and regulatory enquiries.
6 People Trend = Increasing Appetite = Low Failure to attract and retain key talent impacts many areas of our business including service delivery and achieving strategic objectives. Maintaining a strong culture of ethical behaviours and employee wellbeing is also vital in ensuring our business, people, customers and other stakeholders are safeguarded, and our operations remain efficient and profitable. Maintaining competitive remuneration levels ensures we retain our talent pool. The Executive Board defines and advocates PayPoint’s purpose, vision and values, and an employee forum Risk is increasing. Following completion of the Appreciate Group acquisition, we announced a rationalisation of our Northern offices, which has caused some staff turnover. Inflationary pressures mean salaries remain high and, hybrid working serves to exacerbate this trend. Therefore, there remain a number of vacancies, especially in specialist fields. However, we have recruited some extra staff in accordance with our planned headcount increase for the year. Recruitment and retention have eased somewhat from earlier in the year due to redundancies and recruitment freezes elsewhere. Employee engagement surveys remain positive and key actions around cost-of-living support, better employee interaction and flexible working have been implemented..
comprising employees from across the business engages directly with the Executive Board on employee
matters. We continue to invest in, and support our people. We have well established processes for
recruiting and retaining key talent and developing our people, and there is continued focus on
culture, ethics and diversity.
Operational Risks
7 Cyber Security Trend = Increasing Appetite = Low Cyber-attacks may significantly impact service delivery and data protection causing harm to PayPoint, our customers and other stakeholders. Recent acquisitions have increased the number of IT environments, products and systems we need to protect. PayPoint has multiple cyber security systems, capabilities and controls however cyber-attacks are constantly evolving and remain a persistent threat. The Executive Board assesses PayPoint’s cyber security and data protection framework, and the Cyber Risk is increasing because of the growing volume and sophistication of cyber-attacks, coupled with our expanding digital footprint. Due to the current geopolitical instability, the NCSC has issued a warning regarding targeted threats to organisations supporting critical services in the UK. Group security standards and systems are being applied to our acquired IT environments and we continue to enhance our architecture, systems, processes and cyber monitoring and response capabilities. We regularly engage third parties to assess and assist on our cyber defences and strengthen our controls..
Security and IT Sub-Committee of the Audit Committee maintain oversight. Our IT security framework is
comprehensive, with multiple security systems and controls deployed across the Group. We are ISO27001
and PCI DSS Level 1 certified, and systems are constantly monitored for attacks with response plans
implemented and tested. Employees receive regular cyber security training, and awareness is promoted
through phishing simulations and other initiatives. We have implemented simple reporting tools to
assist in quick identification of potential threats. We operate a robust incident response framework
to address potential and actual breaches in our estate or within our supply chain. We engage with
stakeholders, including suppliers on cyber-crime and proactively manage adherence with data protection
requirements.
8 Business Interruption Trend = Increasing Appetite = Low Our clients and stakeholders rely on our systems, products and services being resilient to maintain continuous service delivery. Failure to maintain stable infrastructure or processes, or to promptly recover services following an incident may result in financial loss, reputational harm and potential regulatory scrutiny. Interruptions may be caused by system failure, cyberattack, failure by a third party, or failure of an internal process. Recovery may be hampered by a lack of resilience planning and testing. The Executive Board reviews PayPoint’s business continuity framework and the Cyber Security and IT Risk is increasing. The acquisition of Appreciate and our expansion into different products contribute to an increasing complexity of our operations. We have not suffered any significant outages during the year, however system disruption is an inherent business risk. Therefore, we have upgraded the processing environments for our core switch and some core services that are hosted in the data centres. This has resulted in a reduction in critical incidents, and availability of the core processing switch has improved. Better staff training and retention has enhanced our ability to detect and recover from service issues.
SubCommittee of the Audit Committee maintains oversight. Business continuity, disaster recovery and
major incident response plans are maintained and tested with failover capabilities across third party
data centres and the cloud. Systems are routinely upgraded with numerous change management processes
deployed and resilience embedded where possible. Risk from supplier failure is managed through
contractual arrangements, alternative supplier arrangements and business continuity plans.
9 Credit and Liquidity/ Treasury Management Trend = Stable Appetite = Low PayPoint has material credit exposures with large retailers, redemption partners, and other counterparties; in the event of a default, significant financial loss may result, as demonstrated with the McColl’s collapse. We process large volumes of payments daily, therefore effective operational controls are essential to ensure funds are settled accurately, securely and promptly. We have a number of debt / banking covenants and interest expenses which must be managed carefully. Absent or ineffective controls in these processes could result in fraud, liquidity risk, reputational damage or other financial loss. PayPoint has effective credit and operational processes and controls. Retailers and counterparties are Risk is stable. Credit losses remain low. Cost of living pressures may impact our retailers, which may increase the default rate. However, we have robust monitoring and an increase in support payment processing in place to reduce default rates and impacts. The risk profile of our business operations remains stable. We continue to review and enhance our operational processes and controls, and relationships with our funding partners. We successfully refinanced to support the acquisition of Appreciate and our cash generation remains robust.
subject to ongoing credit reviews, and effective debt management processes are implemented. Residual
risk associated with potential default of gift card providers is mitigated through insurance.
Settlement systems and controls are continually assessed and enhanced with new systems and technology.
We have effective governance with oversight committees, delegated authorities and policies for key
processes. Segregation of duties and approvals are implemented for all areas where fraud or material
error may occur.
10 Operational Delivery Trend = Stable Appetite = Low Successful delivery of key initiatives and strategic objectives is central to achieving our day-to-day and transformation aims. Successful operational delivery depends on effective forecasting, planning and well controlled execution both within the Group and in its supplier chain. Failure to manage this risk would hamper our business performance, impact our stakeholders, and lead to regulatory or legal sanctions. The Executive Board has overall responsibility for delivering key initiatives implementing a robust Risk is stable. The Appreciate acquisition will require considerable management time and effort to integrate. The combined group is now large enough to qualify for the SAO regime, which means the risk and control documentation must be reviewed and brought in line with HMRC requirements. There have been a number of new products in the year, e.g. EBSS and Open Banking, which have been challenging and demanded prioritisation of resources.
control framework over BAU activities. Our project management methodology ensures projects are
prioritised and governed effectively. Our existing processes are continuously reviewed to make sure
they are efficient and well controlled.
Emerging Risks
11 ESG and Climate Trend = Stable Appetite = Medium Focus on environmental, social and governance matters continues to increase, and our business needs to be environmentally responsible to create shared value for all stakeholders. Climate risk is a key priority for governments and organisations globally, and PayPoint needs to play its part in reducing carbon emissions and its environmental impact. Approximately 17% of our revenue is derived from energy and fuel markets and as the UK transitions to Net-zero carbon emission economy by 2050, we need to closely monitor the impacts on our business to ensure our revenue streams remain sustainable. The CEO and the Executive Board have overall accountability for PayPoint’s climate and social Our ESG working group has implemented various measures as we embed low carbon strategies into our working practices and business strategy. We will be rolling out our new PayPoint terminal, which generates lower emissions than previous models. We are moving toward electric cars for our company fleet and helping our field team to travel in more environmentally friendly ways. We run an employee forum and have implemented various measures as a result, such as cost of living support. Love2shop was named one of the UK’s best places to work in April 2023.
responsibility agendas, and they recommend strategy to the Board. PayPoint aligns its business with
reducing carbon emissions, and continually assesses its approach to environmental risk and social
responsibility, which are embedded in our decision-making processes. We have multiple policies and
processes governing our social responsibility strategy and we continually assess and evolve our
strategy and working practices to ensure the best outcomes for stakeholders and the environment.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge this set of interim financial
statements has been prepared in accordance with IAS 34 Interim Financial
Reporting as contained in UK-adopted IFRS and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom’s Financial Conduct
Authority and that the interim management report includes a fair review of the
information required by DTR 4.2.7 (indication of important events during the
first half and description of principal risks and uncertainties for the
remaining half of the year) and DTR 4.2.8 (disclosure of related parties’
transactions and changes therein).
Nick Wiles Chief Executive Rob Harding Finance Director
INDEPENDENT REVIEW REPORT TO PAYPOINT PLC
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed PayPoint PLC’s condensed consolidated interim financial
statements (the “interim financial statements”) in the Results for the
half year ended 30 September 2023 of PayPoint PLC for the period from
1 April 2023 to 30 September 2023 (the “period”).
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom’s Financial Conduct
Authority.
The interim financial statements comprise:
* the Condensed Consolidated Statement of Financial Position as at
30 September 2023;
* the Condensed Consolidated Statement of Profit or Loss and Condensed
Consolidated Statement of Comprehensive Income for the period then ended;
* the Condensed Consolidated Statement of Changes in Equity for the period
then ended;
* the Condensed Consolidated Statement of Cash Flows for the period then
ended; and
* the explanatory notes to the interim financial statements.
The interim financial statements included in the Results for the half year
ended 30 September 2023 of Paypoint PLC have been prepared in accordance with
UK adopted International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom’s Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, ‘Review of Interim Financial Information Performed by
the Independent Auditor of the Entity’ issued by the Financial Reporting
Council for use in the United Kingdom (“ISRE (UK) 2410”). A review of
interim financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and applying
analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Results for the half year
ended 30 September 2023 and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the interim
financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Results for the half year ended 30 September 2023, including the interim
financial statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the Results for the
half year ended 30 September 2023 in accordance with the Disclosure Guidance
and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct
Authority. In preparing the Results for the half year ended 30 September 2023,
including the interim financial statements, the directors are responsible for
assessing the group’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Results for the half year ended 30 September 2023 based on
our review. Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit procedures,
as described in the Basis for conclusion paragraph of this report. This
report, including the conclusion, has been prepared for and only for the
company for the purpose of complying with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom’s Financial Conduct
Authority and for no other purpose. We do not, in giving this conclusion,
accept or assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Watford
22 November 2023
(1) Net revenue is an alternative performance measure. Refer to note 4 to the
financial information for a reconciliation to revenue.
(2) Underlying EBITDA (EBITDA excluding adjusting items) is an alternative
performance measure. Refer to note 1 to the financial information for the
definition and the Financial review for a reconciliation to profit before tax.
(3) Underlying profit before tax (profit before tax excluding adjusting items)
is an alternative performance measure. Refer to note 1 to the financial
information for a reconciliation.
(4) Cash generation is an alternative performance measure. Refer to the
Financial review – cash flow and liquidity for a reconciliation to profit
before tax
(5) Net corporate debt (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
(6) Adjusting items comprises exceptional items and amortisation of intangible
assets arising on acquisition. Refer to note 1 for a reconciliation.
7 Adjusted EBITDA is an alternative performance measure. Refer the finance
review for a reconciliation.
(8) Net corporate debt (excluding IFRS 16 liabilities) is an alternative
performance measure. Refer to note 1 to the financial information for a
reconciliation to cash and cash equivalents.
(9) Dividend cover represents profit after tax divided by reported dividends.
Attachment
* H1 FY24 RNS - Final (004)
(https://ml-eu.globenewswire.com/Resource/Download/ad59579f-7a69-4fca-992f-b85cad90726e)