Results for the year ended 31 March 2024
13/06/2024 07:00
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PayPoint Plc
Results for the year ended 31 March 2024
Further progress towards £100m EBITDA by end of FY26
Three-year share buyback programme commencing with at least £20m over the
next 12 months
GROUP FINANCIAL HIGHLIGHTS
* Underlying EBITDA(1) of £81.3 million (FY23: £61.3 million) increased by
£20.0 million (32.6%)
* Underlying profit before tax(2) of £61.7 million (FY23: £50.8 million)
increased by £10.9 million (21.5%)
* Net corporate debt(7) of £67.5 million reduced by £4.9 million from
opening position of £72.4 million
* Final dividend of 19.2 pence per share declared vs the final dividend for
the year ended 31 March 2023 of 18.6 pence per share
Year ended 31 March 2024 FY24 FY23 (3) Change
Revenue £306.4m £167.7m 82.7%
Net revenue (4) £181.0m £128.9m 40.4%
Underlying EBITDA (1) £81.3m £61.3m 32.6%
Underlying profit before tax (2) £61.7m £50.8m 21.5%
Adjusting items (5) £(13.5)m £(8.2)m 64.6%
Profit before tax £48.2m £42.6m 13.1%
Diluted underlying earnings per share (6) 62.6p 60.3p 3.8%
Diluted earnings per share 48.8p 49.6p (1.6)%
Net corporate debt (7) £(67.5)m £(72.4)m (6.8)%
Nick Wiles, Chief Executive of PayPoint Plc, said:
“This has been another year of progress for PayPoint where we have delivered
a robust financial performance and made further progress towards delivering
£100m EBITDA by the end of FY26. These results reflect both the resilience of
our businesses and the transformation delivered over the past three years as
we unlock further opportunities and growth across our four business divisions.
In the current year, consumer behaviour across a number of our businesses
remains subdued, reflecting continued tighter family budgets and a generally
flat economy. Our expectation is that the consumer outlook will improve during
the course of the year.
Against this background, our streamlined organisational structure and cost
base will support the delivery of our medium-term growth plans. Strong
earnings growth and cash flow generation, combined with a sustainable dividend
policy provide a robust platform for the Board to propose further steps to
enhance shareholder returns through a share buyback programme of at least £20
million over the next 12 months, all underpinned by the delivery of further
progress in the current year.”
SHARE BUYBACK PROGRAMME
Today the Group announces its intention to commence a 3-year share buyback
programme (the “Buyback Programme”). This Buyback Programme reflects the
strong cash generative nature of the Group, along with the Board’s
confidence in delivering on our growth targets for FY25-FY27 and in-line with
our commitment to enhance shareholder returns.
The Buyback Programme will return at least £20 million to shareholders over
the next 12 months, with the potential to increase in years 2 and 3 depending
on business performance, market conditions, cash generation and the overall
capital needs of the business.
Throughout this period, we will continue to increase dividends at a nominal
rate and grow our cover ratio from the current 1.5 to 2.0 times earnings range
to over 2.0 times earnings by FY27. Combined with the Buyback Programme, this
will enhance shareholder returns and ensure the business continues to maintain
an efficient capital structure, balancing an appropriate leverage ratio of
around 1.0 times net debt/EBITDA with the overall capital needs of the
business.
OPERATIONAL HIGHLIGHTS
The Group has delivered significant progress in the year in a number of key
growth areas:
* Parcels and Network Expansion – positive momentum on journey to achieving
a 250m+ parcel network. New strategic partnerships agreed with Royal Mail and
Yodel/Vinted; further network site growth to 11,786 sites and expansion into
new locations, including 15 student union sites now live
* Card processing and Lloyds Bank partnership – further estate growth
delivered in EVO and Lloyds Cardnet estates, underpinned by strengthened
proposition, pricing governance and focus on retention; major strategic
partnership with Lloyds Cardnet announced, launching in Autumn 2024
* Open Banking and Digital payments – 25 clients live for Open Banking
services, including the Department for Energy and Net Zero, Citizens Advice,
and AMEX for Confirmation of Payee, in addition to a record year of new
business wins (over 70 new client services) delivered in FY24 for MultiPay
platform, with a strengthened client base in Housing and Charities, including
POBL Housing and East Anglian Air Ambulance
* Love2shop and Park Christmas Savings – Love2shop Essentials added to key
government procurement frameworks and integrated into our PayPoint OpenPay
service; strengthened Love2shop Business sales team now in place; return to
billings growth for Park Christmas Savings for first time in six years
* Access to Cash and Local Banking – growth in ATM sites to 3,485 and active
Counter Cash sites to 2,150, providing cash withdrawals at the counter; over
£430 million of consumer deposits processed for neobanks in the year through
our extensive network
* Community services for retailer partners – launched next generation
device, PayPoint Mini; our FMCG consumer engagement solution, PayPoint Engage,
has delivered over £1m of net revenue, partnering with major brands; DVLA
International Driving Permit service launched on 1(st) April 2024; continued
growth in Business Finance, with over £19m lent to our SME and retailer
partners, partnering with YouLend
* Integration of Love2shop – successfully completed in the year, with
positive progress made in enhancing the core business performance and
launching new initiatives which leverage our enhanced capabilities across the
Group
* Streamlined organisational structure – steps taken in March 2024 to
simplify structure, enhance cross company collaboration and deliver
efficiencies to enable future reinvestment in the business and mitigate
inflationary cost pressures, representing a gross cost saving of circa £4
million for FY25.
DIVISIONAL HIGHLIGHTS
Shopping divisional net revenue increased by 3.9% to £64.4 million (FY23:
£62.0 million)
* Service fee net revenue increased by 10.1% to £19.7million, reflecting
growth in the number of revenue-generating PayPoint One/Mini sites to 19,297
(31 March 2023: 18,453 sites)
* Card payment net revenue increased by 2.8% to £32.7 million, with further
site growth in the EVO estate to 19,682 (31 March 2023: 18,397) and in the
Lloyds Cardnet estate to 10,064 (31 March 2023: 9,541)
* UK retail network increased to 29,149 sites (31 March 2023: 28,478), with
70.0% in independent retailer partners and 30.0% in multiple retail groups
E-commerce divisional net revenue increased strongly by 61.6% to £11.8
million (FY23: £7.3 million)
* Record year for Collect+ as parcel transactions grew strongly by 77.5% to
100.1 million (FY23: 56.4 million), including regularly achieving over 2
million parcels processed per week
* Collect+ network increased to 11,786 (31 March 2023: 10,514), with further
expansion to support volume growth
* Print in Store service now available in over 80% of network across circa
9,100 sites, enabled by the further rollout of Zebra label printers
Payments & Banking divisional net revenue decreased by 4.8% to £53.5 million
(FY23: £56.2 million)
* Continued growth through our MultiPay platform, with underlying net revenue
increasing by 29.3% to £5.3 million (FY23: £4.1 million). Total digital net
revenue decreased by 12.7% to £13.8 million (FY23: £15.8 million), with the
prior year including the one-off benefit of £3.5 million from the Energy
Bills Support Scheme
* Cash through to digital net revenue now stabilised to £6.8 million in the
year (FY23: £6.9 million), with a new baseline set for the category and
continued growth in banking with over £430 million of deposits processed for
neobanks
* Cash payments net revenue decreased by 2.5% to £32.8 million (FY23: £33.6
million). Legacy energy sector net revenue decreased by 10.6% for the full
year, the rate of decline moderating in H2 FY24 to -2.6% versus the sharp fall
of -19.2% in H1 FY24.
Love2shop divisional net revenue was £51.3 million (FY23 – one month only
post-acquisition: £3.4 million)
* Park Christmas Savings returned to growth, delivering £162.6 million of
billings for the Christmas 2023 season, an increase of 1.2% versus the prior
year (Christmas 2022(8): £160.7 million). The Christmas 2024 season has
started positively, with payment rates +5% versus the prior year and a
reduction in the number of ‘nil paid’ customers of 21%, driven by a
proactive plan to improve conversion and completion of savings targets
* Love2shop Business experienced a weaker billings performance than expected
in H2, as indicated in our Q3 trading update, with £162.8 million delivered
in FY24 (FY23(9): £170.3 million). This was seen particularly in employee
rewards, reflecting the broader caution from large businesses and the overall
challenging economic situation. New corporate APIs were launched in November
2023, with the first clients onboarded shortly after, and a restructured
corporate sales team now in place
* MBL, the leading gift card technology platform acquired by Love2shop in June
2022, processed £59.7 million of gift card value in the year (FY23: £43.6
million) for its extensive client base, including Greggs, B&M and Argos.
RECONCILIATION OF REPORTED NUMBERS
£m FY24 FY23
Reported profit before tax 48.2 42.6
Exceptional items (10) 5.2 5.6
Profit before tax excluding exceptional items 53.4 48.2
Net movement on convertible loan notes – OBConnect and Optus 0.2 -
Amortisation of intangible assets arising on acquisition – PayPoint (previous acquisitions) 2.1 2.1
Amortisation of intangible assets arising on acquisition – Love2shop 6.0 0.5
Underlying profit before tax (profit before tax excluding adjusting items) 61.7 50.8
Underlying EBITDA 81.3 61.3
BUSINESS DIVISION NET REVENUE AND MIX
Net revenue by business division (£m) FY24 FY23 FY22
Shopping E-commerce Payments & Banking 64.4 11.8 53.5 62.0 7.3 56.2 58.7 4.9 51.5
PayPoint Segment Total 129.7 125.5 115.1
Love2shop Segment Total 51.3 3.4 N/A
PayPoint Group Total 181.0 128.9 115.1
Business division mix FY24 FY23 FY22
Shopping 35.6% 48.1% 51.0%
E-commerce 6.5% 5.6% 4.3%
Payments & Banking 29.6% 43.6% 44.7%
Love2shop 28.3% 2.7% N/A
Enquiries
PayPoint plc FGS Global
Nick Wiles, Chief Executive (Mobile: 07442 968960) Rollo Head
Rob Harding, Chief Financial Officer (Mobile: 07525 707970) James Thompson
(Telephone: 0207 251 3801)
A presentation for analysts is being held at 9.30am today (13 June 2024) via
webcast. This announcement, along with details for the webcast, is available
on the PayPoint plc website: corporate.paypoint.com
CHIEF EXECUTIVE’S REVIEW
GROUP UPDATE
Robust financial performance with further progress towards delivering £100m
EBITDA by the end of FY26
This has been another year of progress for the PayPoint Group where we have
delivered a robust financial performance and made further progress towards
delivering £100m EBITDA by the end of FY26. These results reflect both the
resilience of our businesses and the transformation delivered over the past
three years as we unlock further opportunities and growth across our four
business divisions.
Partnership philosophy opening up new revenue opportunities
Our partnership philosophy across the Group, combined with an intensity and
focus on execution, is already unlocking new markets and revenue opportunities
for us. This includes the recently announced partnerships with Royal Mail,
Lloyds Bank and DVLA, our success in Open Banking working with Ovo and the
Department for Energy Security and Net Zero, and the continued focus on our
convenience retail sector relationships, working closely with our retailer
partners and the key retail trade associations. This approach underpins our
delivery across every business division, in addition to our growth building
blocks in digital payments, card payments, parcels, community cash access,
retailer services and our Love2shop business.
Streamlined organisational structure and cost base to deliver medium-term
growth
During H2 FY24, we announced that we had commenced a thorough review to ensure
we had the appropriate organisational structure and cost base to underpin our
growth ambitions and, in part, mitigate inflationary cost pressures. Like many
organisations in the UK, we are trading in a challenging economic climate and
facing significant inflationary cost pressures, and need to be proactive in
order to mitigate these pressures and maintain a strong business platform. The
review concluded in March 2024 and a number of changes were implemented in
April 2024 to simplify the structure, enhance cross company collaboration and
deliver efficiencies to enable future reinvestment in the business,
representing a gross cost saving of circa £4 million for FY25.
REVIEW BY DIVISION
SHOPPING DIVISION
In Retail Services, we have further enhanced our retailer propositions, with
positive feedback from our partners and additional value delivered to our
retailers through a 21.5% increase in commission paid year on year. In
November 2023, our next generation device, PayPoint Mini, was launched and our
integrated third-party EPoS solution, PayPoint Connect, is now rolling out
across our estate, working in partnership initially with the Retail Data
Partnership and iPosG. Our FMCG consumer engagement proposition, PayPoint
Engage, has delivered its first seven figure net revenue contribution,
delivering brand campaigns for major consumer brands, leveraging our PayPoint
One platform, advertising screens and vouchering capability. In addition, we
launched Love2shop physical gift cards for the first time in over 2,600
locations for the Christmas 2023 gifting season, partnering with key multiple
retailers, including One Stop, MFG, Henderson’s Retail and CJ Lang, with a
further rollout to independent retailers underway in the current year.
In Cards, the positive momentum has continued to grow, driven by further
improvements to our merchant proposition, including our recently launched
Handepay Rewards scheme, a strengthened pricing governance approach and a
continued focus on proactive churn management driven by AI and analytics. Our
recently announced major partnership expansion with Lloyds Bank will enhance
our proposition further, strengthening our market position, accelerating
growth across our merchant estates and delivering better tools, support and
experience for our SME and retailer partners. The expanded partnership,
starting with an initial phase in Q2 FY25, followed by a full launch expected
in Q3 FY25 (subject to regulatory approval), will offer merchants a
market-leading banking and card services proposition combining card payments,
a 12-month fee-free Lloyds bank business account and a connected competitive
commercial card offering. Lloyds Bank Cardnet will be investing significantly
into their business to enhance product development and data analytics for
merchants.
In our building Community Cash Access and Banking network, ATM performance has
been disappointing, with net revenue decreasing by 8.2% year on year.
Management in this area has been strengthened, with a new hire secured to
drive tighter operational management of the estate and to win new estate
growth opportunities. Our Counter Cash service, offering withdrawals and
balance enquiries over the counter, has grown to 2,150 locations, and, we have
processed over £430 million of consumer deposits for our neobank clients in
the year. We are now actively exploring how we support High Street Bank
customers with cash access for consumer and SME deposits and withdrawals
across our extensive network.
We have continued to strengthen our retailer partner relationships and
service, including a refreshed approach to the ‘early life’ support
provided to our retailer partners to drive adoption of new services, the
launch of a new chatbot and automated services for day-to-day queries, more
direct communications and our strengthened relationships with the key retail
trade associations. 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. 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.
EMERGING OPPORTUNITIES
* FMCG – further growth from our consumer engagement platform, PayPoint
Engage
* Foreign Currency – development of our partnership with eurochange in circa
500 stores
* Park Christmas Savings – optimisation of our network of Super Agents for
recruiting savers
E-COMMERCE DIVISION
In E-commerce, it has been a landmark year for Collect+, with net revenue of
£11.8 million delivered and parcel transactions exceeding 100 million for the
first time. This excellent performance has been delivered against the backdrop
of an increasingly challenged UK online retail market, with total market
parcel volumes down in each year since the recent peak of 2021 and a number of
major brands failing in the year. Our partnership with Yodel/Vinted has
delivered strong growth in our new Store to Store service, which has been
quickly adopted by consumers and our carrier partners. We have also expanded
our Amazon network to over 7,000 stores and a further rollout of Zebra printer
technology has also been completed in the year, underlining our continuing
commitment to invest in improving the consumer experience in store.
Importantly, we have announced new and expanded partnerships with Royal Mail
and Yodel, particularly via their relationship with Vinted, reinforcing the
quality and attractiveness of our leading Out of Home network and ensuring
that we continue to deliver positive volume growth over the current financial
year. We have also successfully expanded the Collect+ network into new
locations and demographics, including our growing student presence working
with 15 of the top universities and student unions.
EMERGING OPPORTUNITIES
* Expanded carrier relationships – broadening range of services offered to
each of our carrier partners, leveraging our superior in-store technology and
network to drive further volume growth
* Network expansion – expanding from extensive convenience retail network
into new sectors and locations, including student unions, transport hubs and
hospitals
* Print In Store – further rollout of circa 2,000 additional Zebra label
printers to widen access to service and support new partnerships, including
Royal Mail
PAYMENTS & BANKING DIVISION
In Payments & Banking, our integrated digital payments platform, MultiPay,
continues to establish itself as a comprehensive payment solution for clients
across card processing, Open Banking, direct debit and cash. We have secured
further wins in the Housing sector, with Rooftop and Sovereign Network Group,
and in the Charity sector with East Anglian Air Ambulance. We have processed
over £430 million of neobank consumer deposits through our retailer partner
network and are expanding our community cash banking solutions across the UK.
We were also pleased to have won the DVLA contract for International Driving
Permits, which went live on 1 April 2024, marking another key central
government service that will be fulfilled via our extensive retailer network.
Our Open Banking services continue to go from strength to strength, supported
by our partner, OB Connect, with 25 clients live for our services, including
Ovo and AMEX for Confirmation of Payee. In particular, our work with Citizens
Advice in Stevenage, and a growing number of Citizens Advice offices
nationally, utilising our FIS (Financial Information Service) support tool, is
having an important impact on the work they do supporting clients in financial
distress – debt caseworkers are now able to get an up to date, accurate and
holistic view of someone’s finances in minutes, when it used to take weeks
or even months. As a result, they can provide advice and information faster,
reducing the risk of debts becoming even greater or more serious throughout
the advice process. Open Banking payments in the UK grew 90% year on year to
130m payments in 2023 and PayPoint is now one of the leading Payment
Initiation Service Providers (PISP) in the UK. This is an important
demonstration of how our digital payments solutions are having a strong
community impact, which is underpinned by our continuing engagement with key
senior stakeholders across the sectors we operate in, including Ofgem, UK
Finance, Pay.UK and the Department of Energy Security and Net Zero.
In Cash, legacy energy bill payments net revenue decreased by 10.6% for the
full year, with the rate of decline year on year moderating in H2 FY24 to
-2.6% versus the sharp fall of -19.2% in H1 FY24. The decreased H1 FY24
performance was driven by several factors, including a shift in consumer
topping up behaviour due to the Cost of Living challenges, unseasonably warm
weather over the period and the impact of customers still using credit from
the Energy Bills Support Scheme (EBSS) up until the end of the half year. In
H2, energy sector performance recovered as the EBSS scheme ended, with the
rate of decline moderating versus the prior year. In addition, the energy
price cap, updated by Ofgem on a quarterly basis, was set at £1,928 for
pre-pay customers for January to March 2024, decreasing over the course of
FY24 from £4,358 in the same period last year. The impact of this reduction
in our consumer energy top up frequency and volumes is not yet clear in the
current financial year.
EMERGING OPPORTUNITIES
* New business growth – build a more systematic approach to growing our
client base in target sectors of Housing and Charities for our MultiPay
platform
* Strengthening PayPoint and Love2shop collaboration – develop closer
alignment between the corporate sales teams, driving revenue opportunities
across both client bases and leveraging the Group’s comprehensive payments
solutions
* Open Banking growth – further expansion of our Open Banking services to
new and existing sectors, leveraging CCS/DPS frameworks and working in
partnership with OBConnect and Aperidata, an innovative consumer and business
credit reporting and Open Banking platform
* Government services – expand range of services provided for central and
local government, building on the DVLA International Driving Permit service
win and the existing DWP Payment Exception Service
LOVE2SHOP DIVISION
In Park Christmas Savings, it was particularly pleasing to see a return to
growth in the Christmas 2023 season, with conversion to paid for new customers
up 5%, retention rates for direct customers the highest to date at 77%, and
agency size maintained at 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. The 2024 savings season has started
positively, with payment rates +5% versus the prior year, cash collected +1%
versus the prior year and a reduction in the number of ‘nil paid’
customers of 21%, driven by a proactive plan to improve conversion and
encouraging savers to stay on track with payments, leveraging PayPoint’s Pay
By Link service for when a payment has been missed. This again reinforces the
enduring appeal and vital role this service plays in helping consumers budget
for big occasions and avoid debt, with a Trustpilot rating of 4.6/5 and over
£2 million of value delivered to savers each year. In our first year, we have
established a Park Super Agent network of circa 1,700 PayPoint retailer
partners, with a modest number of savers recruited and with plans underway to
improve on this early success in the 2025 season.
In Love2shop Business, we experienced a more challenging H2, with billings
down year on year due to the broader caution from large businesses,
particularly with employee rewards. We have now taken steps in the year to
address this, investing in additional APIs to unlock further sales growth and
establishing a restructured corporate sales team to better manage our existing
relationships and drive new business, with some early success already evident
in Q4 FY24. There is now a strong pipeline of new business building into the
current financial year and much closer alignment with the business development
team in PayPoint, driving revenue opportunities within both client bases. On
highstreetvouchers.com, a key acquisition channel for B2B sales, we made
important changes in Q4 FY24 to the product mix and focus of the site,
prioritising corporate sales and digital products, which has resulted in
improved margin and profitability for billings generated via this channel and
where we will continue to optimise activity into the current financial year.
In addition, we are well-positioned to leverage the technology platform and
capabilities of MBL, which was acquired by Love2shop in 2022, to expand the
range of products that we offer to our corporate clients and grow gift card
management services with more retailers. This will build on the £59.7 million
of gift card value processed in FY24 and a strong client base including
Greggs, Argos and Pizza Express. A number of major brands were also added in
the year to Love2shop as redemption partners, including B&Q, Currys, Adidas,
WH Smith, Matalan & Blackwell’s and a successful refresh of the Love2shop
brand was delivered.
EMERGING OPPORTUNITIES
* Love2shop channel and partnership expansion - delivering further growth
through new partnerships, expanded provision of gift card management services
and acceleration of Love2shop Business
* Love2shop Gift Cards – grow sales within multiple retailer network of
circa 2,600 stores
* Park Christmas Savings – expand into delivering white label savings
schemes for partners and broaden prepaid savings occasions beyond Christmas
UPDATE ON CLAIMS AGAINST PAYPOINT
In FY24, a number of companies in the PayPoint Group, including PayPoint Plc,
received two claims relating to issues addressed by commitments accepted by
Ofgem in November 2021 as a resolution of Ofgem’s concerns raised in its
Statement of Objections received by the PayPoint Group in September 2020. The
Ofgem resolution did not include any infringement findings.
The first claim was served by Utilita Energy Limited and Utilita Services
Limited (subsequently renamed Luxion Sales Limited) (“Utilita”) on 16 June
2023. The second claim was served by Global-365 plc and Global Prepaid
Solution Limited (“Global 365”) on 18 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 these claims. The focus of the first
CMC was to agree disclosure and a timetable for proceedings. PayPoint can also
confirm that a second CMC was held on 26 April 2024 to agree further
disclosure and the appointment of expert witnesses for all parties. A
provisional date for a third CMC was set for 28 October 2024. Both claims have
been listed for a joint trial at the Competition Appeal Tribunal starting on
10 June 2025.
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.
Consequently, no accounting provision has been made for these claims.
The Group will continue to update the market on a quarterly basis as part of
its financial reporting cycle.
OUTLOOK AND DIVIDEND
The streamlining of our organisational structure and delivery of our FY24
financial performance are important building blocks to achieving our financial
targets, including the delivery of £100 million EBITDA by the end of FY26.
In the current year, consumer behaviour across a number of our businesses
remains subdued, reflecting continued tighter family budgets and a generally
flat economy. Our expectation is that this consumer outlook will improve
during the course of the year.
Against this background, our confidence in the prospects for the business is
underpinned by the actions we are taking in each of our divisions to
accelerate performance and identify new opportunities. In addition, our
commitment today to a three-year share buyback programme, commencing with at
least £20 million over the next twelve months, will enhance shareholder
returns and is reflective of our long-term confidence in the business and our
underlying cash flow. The Board has proposed an ordinary final dividend of
19.2p per share, an increase of 3.2% vs the prior year final dividend of 18.6p
per share, consistent with our dividend policy and target cover range of 1.5
to 2.0 times earnings excluding exceptional items.
We remain confident in delivering further progress in the current year and
achieving our medium-term financial goals.
Nick Wiles
Chief Executive
12 June 2024
KEY PERFORMANCE INDICATORS
PayPoint Group has identified the following KPIs to measure progress of
business performance:
KPI Description, purpose and reference FY24 FY23 (11) FY22
Overall performance Net revenue (£ million) Revenue from continuing operations less commissions paid to retailers and Park 181.0 128.9 115.1
Christmas Savings agents and costs where the Group is principal for SIM cards and
single retailer vouchers. This reflects the benefit attributable to the Group’s
performance eliminating pass-through costs and is an important measure of the overall
success of our strategy. (See Financial review – ‘Overview’ on page 9)
Underlying EBITDA (£ million) This measures our earnings before interest, tax, depreciation and amortisation, net 81.3 61.3 58.2
movements in convertible loan notes and exceptional items. This is an important
measure as it is widely used by investors, analysts and other interested parties to
evaluate profitability of companies. (See Financial review – ‘Overview’ on page 10)
Underlying profit before tax (profit before tax excluding adjusting items) (£ million) Underlying profit before tax (profit before tax excluding adjusting items), provides 61.7 50.8 48.0
a measure of the operational performance of the Group. This reflects the rebalancing
of the business towards growth opportunities, the shift away from our legacy cash
payments business and is an important measure of the overall success of our strategy.
(See Financial review – ‘Overview’ on page 9)
Net corporate debt (£ million) Net corporate debt represents cash and cash equivalents excluding cash recognised as 67.5 72.4 43.9
clients’ funds, retailer partners’ deposits, and card and voucher deposits, less
amounts borrowed under financing facilities (excluding IFRS 16 liabilities). This
shows how the Group is utilising its finance facilities to invest in growth and will
be an important measure of how the Group intends to maintain a target leverage ratio
of around 1.0 times net debt/EBITDA. (See Financial review – ‘Group statement of
financial position’ on page 14)
Shareholder returns Diluted underlying earnings per share (Pence) Diluted underlying earnings per share (earnings from continuing operations excluding 62.6 60.3 55.4
adjusting items) divided by the weighted average number of ordinary shares in issue
during the year (including potentially dilutive ordinary shares). Earnings per share
is a measure of the profit attributable to each share.
Non-financial Employee engagement (%) Measures the overall employee engagement, calculated by our survey provider. The 73 71 72
survey provides insight into the health of our organisation, enabling the
identification of what is important to our people so that appropriate action can be
taken.
ESG (Tonnes CO2e) Measures the greenhouse gas (GHG) emission for scope 1, 2 and 3 per employee. This is 9.4 10.0 14.3
recorded in accordance with the Companies Act 2006 (Strategic Report and Directors
Report Regulations 2013)
FINANCIAL REVIEW
OVERVIEW
£m Year ended 31 March 2024 Year ended 31 March 2023 Change %
PayPoint segment 169.8 160.1 6.0%
Love2shop segment 136.6 7.6 n/m
Total revenue 306.4 167.7 82.7%
PayPoint segment 129.7 125.5 3.3%
Love2shop segment 51.3 3.4 n/m
Total net revenue (12) 181.0 128.9 40.4%
PayPoint segment (79.2) (75.2) 5.3%
Love2shop segment (40.1) (2.9) n/m
Total costs (excluding adjusting items) (119.3) (78.1) 52.8%
PayPoint segment 50.5 50.3 0.4%
Love2shop segment 11.2 0.5 n/m
Underlying profit before tax (13) 61.7 50.8 21.5%
Adjusting items:
Amortisation of intangible assets arising on acquisition (8.1) (2.6) n/m
Net movement in convertible loan notes (0.2) - -
Exceptional items (5.2) (5.6) 7.1%
Profit before tax 48.2 42.6 13.1%
Underlying EBITDA (14) 81.3 61.3 32.6%
Net corporate debt (15) (67.5) (72.4) 6.8%
Total revenue increased by £138.7 million (82.7%) to £306.4 million (2023:
£167.7 million). Net revenue increased by £52.1 million (40.4%) to £181.0
million (2023: £128.9 million), with the Love2shop (L2s) segment contributing
an increase of £47.9 million with a full year of revenue compared to one
month in the previous year. Revenue from the PayPoint segment increased by
£9.7 million to £169.8 million (2023: £160.1 million) predominately driven
by the growth in e-commerce, with parcel transactions exceeding 100 million in
the year, partially offset by the cash payments decline in Payments & Banking.
Total costs increased by £41.2 million to £119.3 million (2023: £78.1
million). The increase in costs was driven by the £37.2 million additional
costs from a full year of L2s compared to one month in the previous year,
together with increases in transactional costs of revenue and depreciation of
terminals and devices used to drive revenue in the business. Exceptional costs
of £5.2 million, which are one-off, non-recurring and do not reflect current
operational performance, consisted of £2.0 million restructuring costs, £2.1
million in relation to legal fees incurred as a result of the Group’s
defence of claims served against it and £1.1m in relation to costs associated
with refinancing for the Group.
The underlying profit before tax for the Group increased by £10.9 million
(21.5%) to £61.7 million (2023: £50.8 million). This result includes 12
months of contribution from L2s leading to an increase of £10.7 million in
underlying profit before tax.
Profit before tax of £48.2 million (2023: £42.6 million) increased by £5.6
million (13.1%). The increase reflects a full year of profit contribution from
the L2s segment compared to the prior year which only included one month.
EBITDA / Underlying EBITDA (£m) Year ended 31 March 2024 Year ended 31 March 2023
Profit before tax 48.2 42.6
Add back:
Net interest expense 7.0 2.6
Depreciation & Amortisation - including amortisation of intangible assets arising on acquisition 20.7 10.5
EBITDA (£m) 75.9 55.7
Exceptional items and net movement in convertible loan notes 5.4 5.6
Underlying EBITDA (£m) 81.3 61.3
Underlying EBITDA increased by £20.0 million to £81.3 million (2023: £61.3
million), which comprises £17.8 million for the L2s segment and £63.5
million for the PayPoint segment.
Cash generation reduced by £2.5 million to £57.9 million (2023: £60.4
million), delivered from profit before tax of £48.2 million (2023: £42.6
million). There was a net working capital outflow of £11.8 million, of this
£3.2 million related to payment of costs accrued for the Appreciate
acquisition at the prior year end, £3.7 million for the extension of payment
terms with a key customer, £3.0 million following an exceptionally high year
of non-redemption income releases in L2s and £2.8 million resulting from the
timing of redemption and expiry of various types of L2s products.
Net corporate debt decreased by £4.9 million to £67.5 million (2022: £72.4
million) following cash generation of £57.9 million partially offset by tax,
capital expenditure and dividends. At 31 March 2024 loans and borrowings were
£93.9 million (2023: £94.4 million)
PAYPOINT SEGMENT
£m Year ended 31 March 2024 Year ended 31 March 2023 Change %
Revenue 169.7 160.1 6.0%
Shopping 64.4 62.0 3.9%
E-commerce 11.8 7.3 61.6%
Payments & Banking 53.5 56.2 (4.8)%
Net revenue 129.7 125.5 3.3%
Other costs of revenue (16.9) (17.6) (4.0)%
Depreciation and amortisation (costs of revenue) (9.7) (7.2) 34.7%
Depreciation and amortisation (administrative expenses) excluding amortisation of intangible assets arising on acquisition (0.4) (0.4) -
Other administrative costs – excluding exceptional items (49.3) (47.7) 3.4%
Net finance costs – excluding exceptional costs (2.9) (2.3) 26.1%
Total costs (79.2) (75.2) 5.3%
Underlying profit before tax (excluding adjusting items) 50.5 50.3 0.4%
Shopping net revenue increased by £2.4 million (3.9%) to £64.4 million
(2023: £62.0 million). Service fees net revenue increased by £1.8 million
(10.1%) driven by the implementation of the annual RPI increase and additional
PayPoint sites. Cards net revenue increased by £0.9 million (2.8%), with site
growth delivered in the Handepay EVO and PayPoint Lloyds Cardnet estates. ATM
and Counter Cash net revenue decreased by £0.6 million (6.4%) due to a
reduction in transactions driven by the continuing trend of reduced demand for
cash across the economy. FMCG voucher revenue increased by £0.5 million
(75.4%) to £1.1 million (2023: £0.6 million) following further campaigns run
in the year.
E-commerce net revenue increased by £4.5 million (61.6%) to £11.8 million
(2023: £7.3 million), driven by strong growth in total transactions which
increased by 77.5%. 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 £2.7 million (4.8%) to £53.5
million (2023: £56.2 million). Cash bill payments and top ups revenue
decreased by £2.2 million (7.3%) to £27.8 million (2023: £30.0 million)
driven by a 12.2% reduction in transactions following the reduced usage of
cash and the continued switch to digital payments. Digital net revenue
decreased by £2.0 million (12.7%) to £13.8 million (2023: £15.8 million) as
a result of the EBSS scheme which benefited the previous year by £3.0
million. This was partially offset by an increase in interest income received
on client balances resulting from the increase in interest rates.
The cost of commission to retailers increased by £7.4 million (21.5%) to
£41.8 million (2023: £34.4 million). This increase in payment to our
retailer partners reflects an increase in the number of transactions processed
as well as more with higher commission rates per transaction
Total costs (excluding adjusting items) increased by £4.0 million (5.3%) to
£79.2 million (2023: £75.2 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) Year ended 31 March 2024 Year ended 31 March 2023 Change %
Service fees 19.7 17.9 10.1%
Card payments 32.7 31.8 2.8%
ATMs and Counter Cash 8.8 9.4 (6.4)%
Other shopping 3.2 2.9 10.3%
Total net revenue (£m) 64.4 62.0 3.9%
Net revenue increased by £2.4 million (3.9%) to £64.4 million (2023: £62.0
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 Year ended 31 March 2024 Year ended 31 March 2023 Change %
Net Revenue (£m) 19.7 17.9 10.1%
PayPoint terminal sites (No.)
PayPoint One Terminals 18,428 18,453 (0.1)%
PayPoint Mini 869 - -
Total PayPoint One / Mini Legacy (T2) PPoS PayPoint One – non-revenue generating 19,297 17 9,164 671 18,453 142 9,174 709 4.6% (88.0)% (0.1)% (5.4)%
Total terminal sites in PayPoint network 29,149 28,478 2.4%
PayPoint One average weekly service fee per site (£) 19.1 17.8 7.3%
As at 31 March 2024, PayPoint had a live terminal in 29,149 UK sites, an
increase of 2.4% primarily as a result of new PayPoint mini sales.
Service fees: This is a core growth area and consists of service fees from
PayPoint One, PayPoint mini and our legacy terminals. Service fee net revenue
increased by £1.8 million (10.1%) to £19.7 million driven by the additional
revenue generating sites compared to the prior year.
The PayPoint One average weekly service fee per site increased by 7.3% to
£19.1, following an annual RPI increase.
Card Payments and leases Year ended 31 March 2024 Re-presented (16) Year ended 31 March 2023 Change %
Net Revenue (£m)
Card payments – Acquiring 23.3 23.5 (0.9)%
Card payments – Rentals 8.8 7.8 12.8%
Card payments – Lending and other 0.6 0.5 20.0%
Services in Live sites (No.)
Card payments – Handepay - EVO 19,682 18,397 7.0%
Card payments – Handepay - Worldpay 2,572 3,839 (33.0)%
Card payments – PayPoint 10,064 9,541 5.5%
Card terminals – Merchant Rentals 49,844 47,085 5.9%
Transaction value (£m)
Card payments – Handepay 4,612 4,421 4.3%
Card payments – PayPoint 2,561 2,457 4.2%
Card payments: Card payments acquiring services generated £23.3 million net
revenue in the year, a reduction of £0.2 million from the previous year
(2023: £23.5 million). Transaction values overall have increased by 4.3% to
£7,173 million (2023 £6,878 million) and Handepay new site sales increased
in the year supported by an improved proposition, but sites have been impacted
by higher churn, particularly in our Worldpay back book in this very
competitive market.
Card payment terminal rentals have increased by £1.0 million (2023: £7.8
million) mainly as a result of a change in the sales mix of operating leases
compared to finance leases. Operating leases also have associated costs
included in the profit and loss account.
ATMs and Counter Cash Year ended 31 March 2024 Year ended 31 March 2023 Change %
Net Revenue (£m) 8.8 9.4 (6.4)%
Services in Live sites (No.) 9,599 9,150 4.9%
Active sites (No.) 5,635 5,400 4.4%
Transactions (Millions) 28.5 30.1 (5.3)%
ATMs and Counter Cash: Net revenue reduced by £0.6 million (6.4%) to £8.8
million (2023: £9.4 million) as transactions reduced by 5.3% to 28.5 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 active sites increased 4.4% to 5,635 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.
Other: Other shopping services increased by £0.3 million (10.3%) to £3.2
million (2023: £2.9 million) this includes FMCG voucher campaigns which have
increased by 75.4%.
E-COMMERCE
Parcels Year ended 31 March 2024 Year ended 31 March 2023 Change %
Net Revenue (£m) 11.8 7.3 61.6%
Services in Live sites (No.) 11,786 10,514 12.1%
Transactions (Millions) 100.1 56.4 77.5%
E-commerce net revenue increased by £4.5 million (61.6%) to £11.8 million
following a record year for Collect+ as parcel transactions grew strongly by
77.5% to 100.1 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 Royal Mail. Parcel sites increased by 12.1% to 11,786 sites.
PAYMENTS & BANKING
Year ended 31 March 2024 Re-presented (17) Year ended 31 March 2023 Change %
Net revenue (£m)
Cash – bill payments & top ups 27.8 30.0 (7.3)%
Digital 13.8 15.8 (12.7)%
Cash through to digital 6.8 6.9 (1.4)%
Other payments and banking 5.1 3.5 45.7%
Total net revenue (£m) 53.5 56.2 (4.8)%
Payments & Banking divisional net revenue decreased by 4.8% to £53.5 million
mainly as a result of the Energy Bills Support Scheme impacting the previous
year, fewer cash bill payments and top up transactions and margin erosion,
this has been partially offset by continued growth in digital transactions and
higher interest received on customer balances.
Cash – bill payments & top ups Year ended 31 March 2024 Re-presented (1) Year ended 31 March 2023 Change %
Net revenue (£m) 27.8 30.0 (7.3)%
Transactions (millions) 145.2 165.4 (12.2)%
Transaction value (£m) 4,062 4,483 (9.4)%
Average transaction value (£) 28.0 27.1 3.3%
Net revenue per transaction (pence) 19.1 18.1 5.5%
Cash - bill payments & top ups net revenue decreased by £2.2 million (7.3%)
to £27.8 million. The year on year decrease in energy transactions was 6.8%
however, the Government’s EBSS reduced the number of top ups in H2 FY23, and
without this impact in the prior year, the rate of decrease in energy
transactions and net revenue year on year would have been greater.
Digital Year ended 31 March 2024 Re-presented (1)Year ended 31 March 2023 Change %
Net revenue (£m) 13.8 15.8 (12.7)%
Transactions (millions) 46.9 52.3 (10.3)%
Transaction value (£m) 962.7 1,307.6 (26.3)%
Average transaction value (£) 20.5 25.0 (18.0)%
Net revenue per transaction (pence) 29.4 30.4 (3.3)%
Digital (MultiPay, Cash Out, COP and Direct Debits) net revenue decreased by
£2.0 million (12.7%) to £13.8 million and digital transactions decreased by
5.4 million (10.3%) to 46.9 million. MultiPay net revenue increased by £1.2
million to £5.3 million (2023: £4.1 million) with transactions growing by
2.5 million to 36.1 million. The DWP Payment Exception Service contributed
£3.9 million net revenue in the year (2023: £4.4 million) following the
expected decrease in customers. Cashout revenue decreased by £2.9 million
(49.1%) to £3.0 million (2023: £5.9 million) with prior year including the
one off benefit of £3.5 million from the Energy Bills Support Scheme.
Cash through to digital Year ended 31 March 2024 Year ended 31 March 2023 Change %
Net revenue (£m) 6.8 6.9 (1.4)%
Transactions (millions) 8.2 8.5 (3.5)%
Transaction value (£m) 545.0 496.3 9.8%
Average transaction value (£) 66.3 58.1 14.1%
Net revenue per transaction (pence) 82.7 81.2 1.8%
Cash through to digital (eMoney) net revenue decreased by £0.1 million (1.4%)
to £6.8 million (2023: £6.9 million) and transactions decreased by 0.3
million (3.5%) to 8.2 million (2023: 8.5 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 interest income from client
balances, SIM sales and other ad-hoc items which contributed £5.1 million
(2023: £3.5 million) net revenue. The year on year increase is driven by the
impact of increased interest rates on our client cash balances.
LOVE2SHOP SEGMENT
£m Year ended 31 March 2024 One month in the Year ended 31 March 2023
Billings 359.3 14.8
Revenue 136.6 7.6
Net revenue 51.3 3.4
Other costs of revenue (7.0) (0.6)
Depreciation and amortisation (administrative expenses) excluding amortisation on intangible assets arising on acquisition (2.5) (0.2)
Other administrative costs (26.5) (1.8)
Net finance costs (4.1) (0.3)
Total costs (40.1) (2.9)
Underlying profit before tax (excluding adjusting items) 11.2 0.5
L2s has generated £359.3 million of total billings in the year. 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 year
was £51.3 million with the previous period only including one month of
contribution following the acquisition.
The business is seasonal in nature, and profit is primarily generated in the
second half of the financial year, which represents the peak trading period
for L2s corporate business and the dispatch of Park Christmas Savings prepaid
products around Christmas.
PROFIT BEFORE TAX AND TAXATION
The income tax charge of £12.5 million (2023: £7.9 million) on profit before
tax of £48.2 million (2023: £42.6 million) represents an effective tax rate
of 25.9% (2023: 18.5%). This is higher than the UK statutory rate of 25%
mainly due to adjustments in respect of share based payments. The effective
tax rate is higher than the prior year primarily as a result of the UK
statutory rate of tax increasing from 19% to 25%.
GROUP STATEMENT OF FINANCIAL POSITION
Net assets of £121.2 million (2023: £111.7 million) increased by £9.5
million reflecting the growth in retained earnings. Current assets increased
by £44.7 million to £296.6 million (2023: £251.9 million) due to an
increase in the balance for items in the course of collection, an equal but
opposite increase in the settlement payables is included in current
liabilities. Non-current assets of £222.5 million (2023: £228.1 million)
decreased by £5.6 million due amortisation of intangible assets partially
offset by additional investment in terminals.
Total liabilities increased by £29.7 million to £398.0 million (2023:
£368.3 million) due to an increase in settlement payables, as noted above.
Net corporate debt was £67.5 million (2023: £72.4 million) and has decreased
by £4.9 million from the previous year. Positive cash generation from trading
has been offset by working capital requirements in the year along with tax
payments, capital expenditure and dividend requirements. Total loans and
borrowings were £93.9 million at the year end, reducing by £0.5 million from
31 March 2023. These consisted of a £36.0 million amortising term loan,
£57.5 million drawdown of the £90.0 million revolving credit facility and
£0.4 million of accrued interest (2023: £46.5 million drawdown from the
revolving credit facility, £46.8 million of amortising term loans and £1.1
million of asset financing balances and accrued interest).
GROUP CASH FLOW AND LIQUIDITY
The following table summarises the cash flow and net debt movements during the
year.
£m Year ended 31 March 2024 Year ended 31 March 2023 Change %
Profit before tax 48.2 42.6 13.1%
Non cash other exceptional items 0.2 1.3 (84.6)%
Depreciation and amortisation 20.7 10.5 97.1%
Share-based payments and other items 0.6 2.4 (75.0)%
Working capital changes (corporate) (11.8) 3.6 n/m
Cash generation 57.9 60.4 (4.1)%
Taxation payments (8.4) (6.2) 35.5%
Capital expenditure (16.2) (13.0) 24.6%
Acquisitions & disposals of strategic investments and acquisitions (0.1) (44.4) n/m
Payment of leases (1.0) (0.2) n/m
Dividends paid (27.3) (25.1) 8.8%
Net increase/(decrease) in net corporate 4.9 (28.5) n/m
Net corporate debt at the beginning of the year (72.4) (43.9) 64.9%
Net corporate debt at the end of year (67.5) (72.4) (6.8)%
Comprising:
Corporate cash less overdraft 26.4 22.0
Loans and borrowings (93.9) (94.4)
Cash generation reduced £2.5 million to £57.9 million (2023: £60.4 million)
delivered from profit before tax of £48.2 million (2023: £42.6 million).
There was a net working capital outflow of £11.8 million, of this £3.2
million related to payment of costs accrued for the Appreciate acquisition at
the prior year end, £3.7m for the extension of payment terms with a key
customer, £3.0 million following an exceptionally high year of non redemption
income releases in L2s and £2.8 million resulting from the timing of
redemption and expiry of various types of L2s products.
Taxation payments on account of £8.4 million (2023: £6.2 million) were
higher compared to the prior period, with the increase in the rate in
corporation tax rate from 19% to 25%. Dividend payments were higher compared
to the prior period following an increased interim and final ordinary dividend
per share from the prior year ended 31 March 2023.
Capital expenditure of £16.2 million (2023: £13.0 million) was £3.2 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 L2s, which accounts for £2.2 million
of the £3.2 million.
DIVIDENDS
We have declared an increase of 3.2% in the final dividend to 19.2 pence per
share (2023: 18.6 pence per share) payable in equal instalments of 9.6 pence
per share (2023: 9.3 pence per share) on 6 August 2024 and 27 September 2024
to shareholders on the register on 5 July 2024 and 30 August 2024
respectively. The final dividend is subject to the approval of shareholders at
the annual general meeting on 1 August 2024.
The final dividend will result in £14.0 million (2023: £13.5 million) being
paid to shareholders from the standalone statement of financial position of
the Company which, as at 31 March 2024, had approximately £102.2 million
(2023: £44.2 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 returns to shareholders and cash for investments. The Group’s capital
allocation priorities have been updated as follows:
* Investment in the business through small investments and capital expenditure
in innovation to drive future revenue streams and improve the resilience and
efficiency of our operations;
* Progressive ordinary dividends targeting a growth of our earnings cover
ratio from the current 1.5 to 2.0 times range to over 2.0 times by FY27
* A 3-year share buyback programme, returning at least £20 million over the
next 12 months, with the potential to increase in years 2 and 3 depending on
business performance, market conditions, cash generation and the overall
capital needs of the business.
* Targeting an appropriate leverage ratio of around 1.0 times net debt/EBITDA
GOING CONCERN
The financial statements have been prepared on a going concern basis having
regard to the identified principal risks and uncertainties and the viability
statement on page 21. Our cash and borrowing capacity provides sufficient
funds to meet the foreseeable needs of the Group including dividends.
Rob Harding
Chief Financial Officer
12 June 2024
PRINCIPAL RISKS AND UNCERTAINTIES
Continuous development and review, whilst maintaining a dynamic and effective
risk management process, is vital to support the business in achievement of
its strategy and business objectives. Risk management continues to be an
essential part of PayPoint’s Corporate Governance.
Changes to principal risks
New risks and disclosures
The integration of Love2shop into the wider PayPoint Group has continued over
the financial year, including the roll-out of PayPoint’s risk management
framework into Love2shop. Our risk appetite remains the same as last year.
It is defined as:
Risk appetite Impact on profit before tax
Low Under £2 million
Medium Under £5 million
High Over £5 million
Changing risks
Competition & Markets – Recognising the increased importance of consumer
behaviours and their impact on our business model, this risk has been
relabelled as “Consumer Behaviours and Markets” to reflect the composition
of this risk more fully. The appetite for this risk has been assigned as
“high” to reflect the relationship between this risk and value creation /
reward.
Operating Model– This risk has now been renamed as “Client Services” to
reflect clients becoming increasingly demanding in terms of need and service
expectations, along with the compliance requirements accompanying those
services.
Emerging Risks
ESG and Climate Risk remains an emerging risk. Whilst we recognise the impact
climate change is having globally, we continue to be a low-carbon producing
company and, as such, these risks do not pose an immediate risk to our
operations. We have embedded a strategy of reducing our carbon emissions, with
a goal of becoming fully net-zero by 2040 (2030 for our own operations).
Details of how we plan to achieve are set out in our annual report.
In 2022 we implemented The Task Force on Climate-related Financial Disclosures
(TCFD) which provides companies with a framework to improve reporting on
climate-related risks and opportunities. Risks caused by climate change have
been embedded into our enterprise risk management framework including our
financial planning processes, business case development and our overall risk
identification and management processes are set out in our annual report.
The table on pages 17 to 20 sets out our principal and emerging risks and
includes: details of the potential impact; mitigation strategies; status of
each risk; risk appetite; and exposure trend. They do not comprise all risks
faced by the Group and are not set out in order of priority.
Risk Trend & Appetite Potential Impact Mitigation Strategies Status
Principal Risks
1 Consumer Behaviours and Markets Trend = Increasing Appetite = High PayPoint’s markets and competitors continue to evolve. The decline in legacy business cash usage is expected to continue prompting the need for further business diversification. The current economic climate, of continually rising prices and lower spend levels by consumers, has continued from the previous financial year. The impact in particular markets, such as the Cards market, has been noticeable with transaction process volumes remaining subdued. The Executive Board closely monitors consumer trends and spending behaviour, regularly re-assessing Risk is increasing as cost of living pressures have continued in the year, causing changes in consumer activities, particularly in spending behaviours. This, along with the continued decline in cash legacy business has impacted income streams for certain parts of the business.
our markets, competitor activity, along with any opportunities to further de-risk its legacy business.
We continue to develop our service offerings and to adapt to changes in consumer needs and behaviours,
including strategic acquisitions or investments, where appropriate.
2 Emerging Technology Trend = Stable Appetite = Medium As our markets continue to evolve, so does the technology supporting the service provision. Pressures to deliver new and innovative products remain and failure to keep pace with this technological change is a risk for the Group. We continually review technological developments (including the evolution of AI) to understand how new Risk is stable as Group acquisitions, investments and partnerships have helped to mitigate risks associated with emerging technologies. The ongoing programme of re-platforming our digital proposition will facilitate the further expansion of our presence in digital payment markets. We continue to roll out the new, updated version of our retailer terminal – the PayPoint Mini.
technologies can be used to support and enhance our service offerings. The Executive Board closely
monitors emerging technologies and the impact they may have on the Group. We also develop and
implement our own innovative technology, where appropriate.
3 IT Transformation Trend = Increasing Appetite = Medium Several significant IT projects are in our 3-year plan and the delivery of these projects will be key to delivering our business strategy and growth aspirations, along with platform resilience. The Executive Board is accountable for the management and delivery of these projects, with oversight Risk is increasing as several of these projects have been mobilised after the FY24 year end and will be delivered over the course of the next 2 – 3 years.
from the Group Board.
4 Client Services Trend = Increasing Appetite = Medium Clients’ expectations in terms of service level standards and compliance are increasing as the business diversifies into new products/ channels (such as community banking). Client retention and the exposure to clients developing in house solutions as an alternative to our services remains an ongoing risk, along with customer concentration risk, such as in Parcels. PayPoint builds and carefully manages strategic relationships with key clients, retailers, redemption Risk is increasing. We continue to renew contracts and onboard new retailers, clients, merchants and redemption partners in line with expectations. We have built on our services and continue to encourage our clients to diversify and utilise more than one of our service provisions. Working with our clients to continue to understand their requirements and how best we can meet our clients needs remains a priority for the Group.
partners and suppliers. We continually seek to improve and diversify services through new initiatives,
products and technology and our involvement in new and innovative markets.
5 Legal and Regulatory Trend = Stable 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. Increased levels of regulatory supervision, the implementation of consumer duty and the addition of new service offerings, such as open banking and PISP, have all increased the complexity of the regulatory environment in which we operate. Our Legal and Compliance teams work closely with the business on all legal and regulatory matters and Risk is stable. We continue to manage new legal and regulatory exposures through our risk management framework and this framework has been rolled out across our Love2shop business following its acquisition in 2023. As referenced in Note 11, the two claims 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 are still ongoing. The Group's position remains unchanged and we are confident that we will successfully defend these claims.
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.
6 People Trend = Increasing Appetite = Low Failure to retain and attract key talent impacts many areas of our business. A key element of the 3 year plan is revenue growth, and we need to be confident we can attract/ retain those individuals who are instrumental in driving top line growth, along with individuals who will support the operational transformation of our business. Key person dependencies, at both executive and senior management levels, have been noted as a key risk. The Executive Board continues to monitor this risk, with oversight from the Remuneration Committee. We Risk is increasing. The delivery of £100m EBITDA requires significant revenue growth over FY25 and FY26 and a key element of this is retaining and attracting key talent to support delivery of this growth. Employee engagement surveys remain positive and key actions around cost-of-living support, better employee interaction and flexible working have been implemented.
continue to invest in our people, with a clear focus on retaining talent and key person dependency.
PayPoint’s purpose, vision and values, are defined and embedded within the business, our expected
behaviours and our review and monitoring processes. An employee forum comprising employees from across
the business engages directly with the Executive Board on employee matters.
7 Cyber Security Trend = Increasing Appetite = Low Cyber security risk continues to grow due to the growing volume and ever-increasing sophistication of the nature of these attacks and our expanding digital footprint. Such attacks may significantly impact service delivery and data protection causing harm to PayPoint, our customers and stakeholders. As the geographical instability has continued and increased over the last year, cyber-crime and its potential impact on our Group continues to increase as do our efforts to mitigate the likelihood of such an attack and in monitoring activities for potential instances of attack. Recognising the importance and potential impact this risk poses to our business, the Executive Board Risk is increasing because of the growing volume and sophistication of cyber-attacks, coupled with our expanding digital footprint. 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 and have implemented strong monitoring capability across the Group.
regularly assesses PayPoint’s cyber security and data protection framework, and the Cyber Security and
IT Sub-Committee of the Audit Committee maintains 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 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 Failure to provide a stable infrastructure environment or to promptly recover failed services following an incident can lead to loss of service provision and financial and reputational loss. Interruptions may be caused by system failures, cyber-attack, failure by a third party or failure of an internal process. Recovery of the service can be hampered by lack of appropriate resilience levels. PayPoint has developed a comprehensive and robust business continuity framework. This is reviewed by Risk is increasing. System disruption is an inherent business risk. However, we recognise that the acquisition of Love2shop, our IT transformation projects and our expansion into different products contribute to an increasing complexity of our operations. Better staff training and retention has enhanced our ability to detect and recover from service issues.
the Executive Board and the Cyber Security and IT Sub-Committee of the Audit Committee maintains
oversight of the framework and its implementation. 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 The Group has significant exposures to large clients/retailers, redemption partners and other counterparties. We process high volumes of payments which are dependent upon effective operational controls. The Group also operates a number of debt/banking covenants and interest expenses which must be carefully managed. Cash flow management plays an increasingly important role in the Group’s operations. PayPoint has effective credit and operational processes and controls. Retailers and counterparties are Risk is stable. Cost of living pressures may impact our client and retail estate. 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 Love2shop and our cash generation remains robust. We also successfully refinanced our facility in June 2024. Liquidity targets as planned for the year have been met.
subject to ongoing credit reviews, and effective debt management processes are implemented. Settlement
systems and controls are continually assessed and enhanced with new 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. Residual risk associated with potential default of gift card providers is mitigated through
insurance.
10 Operational Delivery Trend = Stable Appetite = Low Delivery of key initiatives and strategic objectives, including sales and service delivery growth, is key to achieving the desired success levels anticipated for the group. Successful planning, forecasting and successful execution of all business function areas are key to ensuring operational delivery. Supply chain management is also a key factor in delivering our operational targets. Failure to manage this risk would hamper our business performance, impact our stakeholders, and may lead to regulatory or legal sanctions. The Executive Board has overall responsibility for delivering key initiatives implementing a robust Risk is stable. We continue to focus on effective integration of Love2shop into our business. We continue to develop new services and enhance existing capabilities.
control framework. The Executive Board has implemented a robust and effective reporting suite to
ensure management of BAU activity is supported by timely and accurate business analysis. We continue
to develop our Business Intelligence and Management information reporting capabilities to enhance,
support and develop our management functions. 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 Risk
1 ESG and Climate Trend = Stable Appetite = Medium We continue to focus on environmental, social and governance matters and recognise that our business needs to be environmentally responsible to create shared value for all stakeholders. PayPoint continues to seek ways to reduce carbon emissions and its environmental impact. We continue 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. The roll out of the PayPoint Mini, our new terminal, supports reduction of our carbon footprint through production of lower emissions. We continue the move toward electric cars for our company fleet 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.
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.
VIABILITY STATEMENT
In accordance with the 2018 UK Corporate Governance Code, The Directors have
assessed the viability of the Group over a three-year period, taking account
of the Group’s current financial and trading position, the principal risks
and uncertainties (as set out on pages 17 to 20) and the strategic plans that
are reviewed at least annually by the Board.
Assessment period
The Directors have determined that the Group’s strategic planning period of
three years remains an appropriate timeframe over which to assess viability.
This broadly aligns to average client renewal terms, new client prospecting
and onboarding cycles and the development-through-to-maturity evolution of new
products and service lines. The current financing facilities are in place
until June 2028, broadly in line with this period.
Assessment of prospects
The Directors assess the Group’s prospects through the annual strategy day,
held this year in November 2023, and review of the Group’s three-year Plan,
which was most recently in March 2024. The planning process forecasts the
Group’s financial performance that include cash flows, allowing the
Directors to assess both the Group’s liquidity and adequacy of funding. In
its assessment of the Group’s prospects, the Directors have considered the
following: —
The Group’s strategy and how it addresses changing economic environments in
the context of our clients, parcel partnerships, merchants, prepay savers and
retailer requirements.
In each of our business divisions we evolve our proposition to specifically
address the requirements of our clients and merchants. In our Shopping
division, our partnership with Lloyds Bank will provide a market-leading
banking and card services proposition. In the e-Commerce division, the new
partnerships with Royal Mail and Yodel/Vinted, together with new locations in
Student unions creates additional convenience for online shoppers. In Payments
and Banking, we are expanding our community cash banking solutions across the
UK providing much needed access to cash for consumers. In Love2shop, we have
added the ‘Essentials’ product to key government procurement frameworks
and integrated this product into our PayPoint OpenPay service enabling
consumers choice of cash or vouchers.
The Group’s inherent resilience to risk.
The Group has an inherent resilience to risk from its diversified proposition
across many sectors. This means there are substantial opportunities to
continue to provide more key services across all our customers (Retailers,
SMEs, Clients, prepay savers and Parcel partnerships). This will ensure we are
more integral to all of our customers. The business remains highly cash
generative, enabling continued investment in key areas of growth to support
the Group’s longer-term viability.
Expectations of the future economic environment.
The economic environment remains uncertain. Higher inflation and cost of
borrowing have and continue to impact consumer behaviours and confidence. The
diversity and necessity of our proposition ensures the business can adapt to
ongoing and unexpected changes. A good example of this is the Yodel/Vinted
partnership which supports many value seeking consumers with purchases in the
previously loved clothing market.
The Group’s financial position.
As at 31 May 2024 the Group had £66.2 million of net debt, split £11.6
million cash and £77.8 million utilised facilities. Compared to the total
committed facilities of £135m means the group has substantial headroom of
£68.8 million. This level of liquidity is sufficient for all viability
scenarios.
Assessment of viability
To assess our viability, we modelled different scenarios by considering the
potential impact of the principal risks (as shown in the table on pages 17 to
20). Risks are broadly unchanged, the additional investments required to
realise our integration and plan targets are included in the plan financial
projections. We have reassessed the group’s scenarios to reflect the
progress made in delivering our strategy. All ten principal risks were used in
our modelling. They were chosen because they combine to represent plausible
scenarios covering a range of different operational and financial impacts on
the business.
In total, three severe but plausible individual scenarios have been modelled,
with a fourth reverse stress test scenario. These scenarios and the
assumptions within are detailed in the table below. Theoretically all these
scenarios, with differing causes could occur together, with varying levels of
impact. However, we have not included a combined scenario of scenarios A to C.
None of the separate scenarios modelled was found to impact the long-term
viability of the Group over the assessment period. In assessing each of the
scenarios, we have taken account of the mitigating actions available to us,
including, but not limited to reducing discretionary operating spend, reducing
non-committed capital expenditure, repricing our products and services,
freezing recruitment, reducing variable incentives and temporary suspension of
dividend payments.
Conclusion
Having assessed the Group’s current position, potential impacts of principal
risks, managing adverse conditions in the past, potential mitigating actions
and prospects of the Group, the Directors confirm they have a reasonable
expectation that the Group will be able to continue in operation, remain
solvent and meet its liabilities as they fall due over the three-year
assessment period.
Scenario modelled Linked to principal risks Assumptions
Scenario A A sharp economic decline in the economy and our markets causes material divergence on planned product growth rates or accelerated declines Risk (1) Competition and markets, Risk (2) Emerging technology, Risk (4) Operating model Risk (10) Operational delivery Transactions/merchants/estate Areas of growth have been reduced or held flat and in areas of decline have been assumed to continue or accelerate those declines. Margins,
revenue rates per transaction/merchants or estate Margins and rates have been held in line with planned levels Costs No cost savings assumed however bonus would not be
paid. All of the above are assumed to impact for FY24/25 with a slow recovery in FY25/26 back to planned levels in FY26/27. Dividends and Share Buy-Back Dividends are
unchanged as per the dividend policy. Share buy-back is maintained.
Scenario B Our transformation and integration projects do not deliver the planned growth Risk (3) Transformation Risk (6) People Revenue Growth Planned transformational revenue growth rates are assumed to halve over the life of the plan. Costs Costs, linked to transformational revenue growth are
assumed to increase by 5% p.a. above planned levels to achieve transformational execution and cover retention issues or unforeseen skills gaps. Dividends and Share Buy
-Back Dividends are unchanged as per the dividend policy. Share buy-back is maintained.
Scenario C A one-off event, such as a legal, regulatory, cyber security or a significant credit loss event Risk (5) Regulatory and legal (grouping all the one-off hits together) Risk (7) Cyber security, Risk (8) Business interruption Risk (9) Credit and liquidity/Treasury Management Revenue No impact is assumed as PayPoint would adjust to change or correct any breach so that level of business could continue Costs It is assumed that an average of all
possible maximum fines, £26.9m, is incurred in FY24/25 but no other associated costs together with a credit risk of £12.1m totalling £39m. Dividends and Share Buy-Back No
interim dividend would be paid in FY26, the year impacted. Otherwise, dividends are unchanged as per the dividend policy. Share buy-back is maintained.
Scenario D Two reverse stress tests scenario were undertaken The first: adopting the principles of Scenarios A and B where a continuously monthly impact has been modelled to understand when our funding limits would be breached. The second: adopting the principles of Scenario C to determine the quantum of a one-off impact to breach covenants or exceed funding availability. Risk (1) Competition and markets, Risk (2) Emerging technology, Risk (3) Transformation Risk (4) Operating model Risk (6) People Risk (10) Operational delivery For the first scenario, no dividends paid across the three years, other than the final dividend in respect of FY24. The share-buyback is assumed to continue. For the
second scenario, In this reverse stress test, it is assumed no dividends are paid in the year of the event and therefore from a cash perspective, we save c£13m in FY26
and FY27. For both tests, the share buyback is assumed and therefore remains a management ‘lever’.
Consolidated statement of profit or loss
Note Year ended 31 March 2024 £’000 Year ended 31 March 2023 £’000
Revenue 2,3 277,816 165,220
Other revenue 2,3 28,551 2,503
Total revenue 306,367 167,723
Cost of revenue (158,964) (64,257)
Gross profit 147,403 103,466
Administrative expenses - excluding adjusting items (78,722) (50,083)
Operating profit before adjusting items 68,681 53,383
Adjusting items:
Exceptional items - administrative expenses 5 (4,120) (5,317)
Amortisation of acquired intangible assets (8,076) (2,574)
Movement on convertible loan notes (186) -
Operating profit after adjusting items 56,299 45,492
Finance income 1,390 87
Finance costs (8,408) (2,718)
Exceptional item – finance costs 5 (1,099) (287)
Profit before tax 48,182 42,574
Tax 6 (12,495) (7,864)
Profit after tax 35,687 34,710
Earnings per share (pence) Year ended 31 March 2024 Year ended 31 March 2023
Basic 49.1 50.1
Diluted 48.8 49.6
Underlying earnings per share – before adjusting items (pence) Year ended 31 March 2024 Year ended 31 March 2023
Basic 63.0 61.0
Diluted 62.6 60.3
Consolidated statement of comprehensive income
Year ended 31 March 2024 £’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 asset (328) 353
Deferred tax on remeasurement of defined benefit pension scheme asset 6 82 (86)
Other comprehensive (expense) / income for the year (246) 267
Profit for the year 35,687 34,710
Total comprehensive income for the year attributable to equity holders of the parent 35,441 34,977
Consolidated statement of financial position
Note 31 March 2024 £’000 Re-presented (1) 31 March 2023 £’000
Non-current assets
Goodwill 117,427 117,427
Other intangible assets 67,052 75,293
Convertible loan notes 3,689 3,750
Other investment 251 251
Property, plant and equipment 33,292 29,257
Net investment in finance lease receivables 512 1,711
Retirement benefit asset 286 411
Total non-current assets 222,509 228,100
Current assets
Inventories 3,260 3,152
Trade and other receivables 122,950 82,055
Current tax asset 5,423 6,231
Cash and cash equivalents – corporate 26,392 22,546
Cash and cash equivalents – non-corporate 60,378 55,905
Restricted funds held on deposit (non-corporate) 78,198 82,000
Total current assets 296,601 251,889
Total assets 519,110 479,989
Current liabilities
Trade and other payables 281,864 255,526
Lease liabilities 879 862
Provisions 7 1,850 -
Loans and borrowings 16,435 11,745
Bank overdraft - 525
Total current liabilities 301,028 268,658
Non-current liabilities
Trade and other payables - 115
Lease liabilities 3,956 4,617
Loans and borrowings 77,500 82,670
Deferred tax liability 15,466 12,215
Total non-current liabilities 96,922 99,617
Total liabilities 397,950 368,275
Net assets 121,160 111,714
Equity
Share capital 8 242 242
Share premium 8 1,000 1,000
Merger reserve 8 18,243 18,243
Share-based payment reserve 2,992 2,286
Retained earnings 98,683 89,943
Total equity attributable to equity holders of the parent 121,160 111,714
(1)See note 1 for an explanation of the re-presentation.
These financial statements were approved by the Board of Directors and
authorised for issue on 12 June 2024 and were signed on behalf of the Board of
Directors.
Nick Wiles
Chief Executive
12 June 2024
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 at 1 April 2022 230 1,000 999 1,570 79,459 83,258
Profit for the year - - - - 34,710 34,710
Total other comprehensive income - - - - 267 267
Comprehensive income for the year - - - - 34,977 34,977
Issue of shares 8 12 - 17,244 - - 17,256
Equity-settled share-based payment expense - - - 1,330 - 1,330
Vesting of share scheme - - - (614) 614 -
Dividends - - - - (25,107) (25,107)
Closing equity at 31 March 2023 242 1,000 18,243 2,286 89,943 111,714
Profit for the year - - - - 35,687 35,687
Total other comprehensive expense - - - - (246) (246)
Comprehensive income for the year - - - - 35,441 35,441
Equity-settled share-based payment expense - - - 1,669 (339) 1,330
Vesting of share scheme - - - (963) 963 -
Dividends - - - - (27,325) (27,325)
Closing equity at 31 March 2024 242 1,000 18,243 2,992 98,683 121,160
Consolidated statement of cash flows
Note Year ended 31 March 2024 £’000 Restated and re-presented (1) Year ended 31 March 2023 £’000
Cash flows from operating activities
Cash generated from operations 9 65,706 62,923
Corporation tax paid (8,354) (6,204)
Interest received 534 609
Interest paid (7,609) (2,973)
Movement in restricted funds held on deposit (non-corporate) 3,802 (35,000)
Movement in payables – non-corporate (91) 9,299
Net cash inflow from operating activities 53,988 28,654
Investing activities
Purchases of property, plant and equipment (11,100) (7,802)
Purchases of intangible assets (5,106) (4,900)
Acquisitions of subsidiaries net of cash and cash equivalents acquired - 19,380
Contingent consideration cash paid - (1,000)
Disposal of investment in associate - 5,487
Purchase of convertible loan note (125) (3,000)
Purchase of other investment - (251)
Net cash (used in) / generated from investing activities (16,331) 7,914
Financing activities
Dividends paid (27,325) (25,107)
Proceeds from issue of share capital - 1
Payment of lease liabilities (1,008) (261)
Repayments of loans and borrowings (44,980) (22,074)
Proceeds from loans and borrowings 44,500 64,500
Net cash (used in) / generated from financing activities (28,813) 17,059
Net increase in cash and cash equivalents 8,844 53,627
Cash and cash equivalents at beginning of year 77,926 24,299
Cash and cash equivalents at end of year 86,770 77,926
(1)See note 1 for explanations of the restatement and re-presentation.
Note to the consolidated statement of cash flows - reconciliation of cash and
cash equivalents
31 March 2024 £’000 31 March 2023 £’000
Corporate cash 26,392 22,546
Non-corporate cash 60,378 55,905
Bank overdraft - (525)
Cash and cash equivalents 86,770 77,926
Notes to the consolidated financial statements
1. Significant Accounting policies
Basis of preparation
PayPoint Plc (‘PayPoint’ or the ‘Company’) is a public limited company
and is incorporated and registered in England in the UK under the Companies
Act 2006. The Company’s ordinary shares are traded on the London Stock
Exchange. The Group and Company financial statements have been prepared in
accordance with UK-adopted International Accounting Standards (“UK-adopted
IFRS”) and with the requirements of the Companies Act 2006 as applicable to
companies reporting under those standards.
The financial information for the year ended 31 March 2024 set out in this
document does not constitute the Group’s financial statements for that
financial year but is derived from those financial statements. Those financial
statements have been reported on by the Group’s auditor,
PricewaterhouseCoopers LLP, and will be delivered to the Registrar of
Companies in due course. The report of the auditor (i) was unqualified, (ii)
did not include a reference to any matters to which the auditor drew attention
by way of emphasis without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
These financial statements are presented in Pounds Sterling rounded to
thousands (£’000). The Pound Sterling is the currency of the primary
economic environment in which the Group operates.
Adoption of standards and policies
The accounting policies adopted by the Group in the financial statements for
the year ended 31 March 2024 have been applied consistently to all periods set
out in these group financial statements.
Restatement of comparative figures in the Consolidated statement of cash
flows, and the related note, for the recognition of acquired cash and cash
equivalents in Appreciate Group PLC
On 28 February 2023 the Group acquired Appreciate Group PLC for consideration
of £79,181,000, comprising cash of £61,925,000 plus equity of £17,256,000.
In its Consolidated statement of cash flows for the year ended 31 March 2023,
the Group reported a net cash and cash equivalent outflow of £(45,580,000)
for Acquisitions of subsidiaries net of cash acquired. This figure was the net
of the cash outflow of the £61,925,000 referred to above less £16,345,000
corporate cash and bank overdraft acquired from Appreciate.
The acquired cash and cash equivalents should also have included £64,960,000
of Appreciate’s non-corporate cash and cash equivalents, comprising Gift
card voucher cash and Prepay savers’ cash. The total cash and cash
equivalents acquired should therefore have been £81,305,000, and the
Acquisitions of subsidiaries net of cash acquired a net inflow of
£19,380,000, rather than a net outflow of £(45,580,000). The Movement in
clients’ funds, retailer partners’ deposits and card and voucher deposits
in the prior year note to the Consolidated statement of cash flows should have
excluded the £64,960,000 of acquired non-corporate cash and cash equivalents
and should therefore have been reported as an outflow of £(25,701,000) rather
than an inflow of £39,259,000.
The restatement of the comparative figures in the Group’s Consolidated
statement of cash flows and the related note reduces Cash generated from
operations by £64,960,000. It has no impact on the Group’s opening cash and
cash equivalents, net assets or retained earnings.
The re-presentation of the comparative figures in the Group Consolidated
statement of cash flows and the related note, arising from the changes
explained below to the treatment of the movements in Restricted funds held on
deposit (non-corporate) and in Payables – non-corporate, increases Cash
generated from operations by £25,701,000. The net impact of the restatement
and the re-presentation is therefore a reduction of £39,259,000, from the
inflow of £102,182,000 reported in the prior year financial statements, to
the inflow of £62,923,000 reported as the comparative figure in the current
year financial statements.
Re-presentation of comparative figures
Consolidated statement of financial position
In its financial statements for the year ended 31 March 2023, the Group
classified its revolving credit facility as a current liability. The Group
reclassified the liability to non-current as at 31 March 2024, having adopted
early the International Accounting Standard Board’s Non-current Liabilities
with Covenants, which amended IAS 1 Presentation of Financial Statements.
Consolidated statement of cash flows and Note to consolidated statement of
cash flows
In its financial statements for the year ended 31 March 2023, the Group did
not show separately Movement in Restricted funds held on deposit
(non-corporate) and in Movement in payables – non-corporate. Their inclusion
in the current year improves the year-on-year comparability of Cash generated
from operations by excluding movements in Cash and cash equivalents –
non-corporate and in Restricted funds held on deposit (non-corporate).
Going concern
The 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, restricted funds
held on deposit and equity attributable to equity holders of the parent
company 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 31 March 2024, the Group had
corporate cash of £26.4 million.
The Group carried out a refinancing, completed on 6 June 2024, following which
its borrowing facilities consist of:
* a £45.0 million non-amortising term loan expiring in June 2028
* a £90.0 million unsecured revolving credit facility expiring in June 2028;
and
* a £30.0 million accordion facility (uncommitted) expiring in June 2028 with
an option, subject to lender approval, to extend by a further year.
At 31 March 2024, £57.5 million (2023: £46.5 million) was drawn down from
the previous £90.0 million revolving credit facility and the outstanding
balance of the previous amortising term loan was £36.0 million.
The Group has a strengthened statement of financial position, with net assets
of £121.2 million as at 31 March 2024 (£111.7 million as at 31 March 2023),
having made a profit for the year of £35.7 million (2023: £34.7 million) and
generated cash from operations of £65.7 million for the year then ended
(2023: £62.9 million). The Group had net current liabilities of £4.4 million
(2023: £16.8 million).
The Directors have prepared cash flow forecast scenarios for a period of 3
years from the date of approval of these financial statements, which take into
account the Group’s current financial and trading position, the principal
risks and uncertainties and the strategic plans that are reviewed at least
annually by the Board. In this ‘base case’ scenario, the cash flow
forecasts show considerable liquidity headroom and debt covenants will be met
throughout the period.
Additionally, the Directors have carried out an assessment of the principal
risks and uncertainties and applied severe but plausible scenarios to test
further the Group going concern assumption. These scenarios included a
reduction in the volume of transactions caused by a severe economic downturn,
transformation and growth plans not delivering intended benefits and material
one-off impacts of regulatory, IT or credit loss events. As mitigating
actions, we have assumed achievable reductions in expenditure and a reduction
in the level of future dividends following the payment of the final dividend
of 19.2 pence per share declared in respect of the financial year ended 31
March 2024. The cash flow forecasts included an analysis and stress test for
the above scenarios to ensure working capital movements within a reporting
period do not trigger a covenant breach.
Based on this assessment, the Directors confirm that they have a reasonable
expectation that the Group will be able to continue in operation and meet its
liabilities as they fall due over the period of not less than 12 months from
the date of approval of these financial statements and therefore have prepared
the financial statements on a going concern basis.
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 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 and restricted
funds held on deposit
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, in trust,
gift card voucher deposits on behalf of agents, cardholders and redeemers and
prepay savers’ cash on behalf of savers.
A critical judgement in this area is whether each of the above categories of
funds, and restricted funds held on deposit, are recognised on the
consolidated 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 (referred to as ‘Clients’ own funds’) and the related liability are
not included on the consolidated statement of financial position.
In all other cases, the Group has access to the interest on such monies and
can, having met certain conditions, withdraw the funds. The cash and
corresponding liability are therefore recognised on the consolidated statement
of financial position. Corporate cash and cash equivalents consists of cash
freely available to the Group for use in its daily operations and is presented
as a separate line item on the consolidated statement of financial position
from non-corporate cash and cash equivalents, which is not freely available to
the Group, either because of self-regulation and segregation or due to
contractual or regulatory requirements. Non-corporate cash and cash
equivalents comprises:
* Clients’ cash – cash collected on behalf of clients from retailer
partners but not yet transferred to clients. Clients’ cash is held in
PayPoint’s bank accounts
* Gift card voucher cash – cash collected on the issue of gift card vouchers
which have not yet expired or been redeemed
* Prepay savers’ cash - cash received from customers under a prepayment
scheme accumulating towards their selected savings target. It is converted to
gift card vouchers once the target is reached
* Retailer partners’ deposits – cash received from retailers held as
security against their default
Both corporate cash and non-corporate cash are included within cash and cash
equivalents on the Consolidated statement of cash flows.
Restricted funds held on deposit (non-corporate), comprises gift card voucher
cash and prepay savers’ cash. However, unlike the gift card voucher cash and
prepay savers’ cash included in non-corporate cash and cash equivalents,
restricted funds held on deposit (non-corporate) may only be accessed after a
minimum of three months. Consequently, they are excluded from cash and cash
equivalents on the Consolidated statement of financial position and the
Consolidated statement of cash flows.
The amounts recognised on the Consolidated statement of financial position as
at 31 March 2024 are as follows:
Year ended 31 March 2024 £’000 Year ended 31 March 2023 £’000
Corporate cash 26,392 22,546
Bank overdraft - (525)
Clients’ cash 17,276 12,041
Gift card voucher cash 9,779 29,527
Prepay savers’ cash 27,368 8,181
Retailer partners’ deposits 5,955 6,156
Sub-total: non-corporate cash 60,378 55,905
Total cash and cash equivalents 86,770 77,926
Restricted funds held on deposit (non-corporate) 78,198 82,000
Clients’ own funds
Clients’ cash held in trust off the Consolidated statement of financial
position as at 31 March 2024 is £60.5 million (2023: £124.3 million).
Critical judgement: reassessment of the Group’s Cards division cash
generating units (CGUs)
Management reassessed its CGUs during the current period, prompted by the
signing of a new partnership with Lloyds Banking Group’s “Cardnet”
division in March 2024. This resulted in the creation of a new Cards CGU,
comprising the former Handepay CGU and Merchant Rentals CGU plus the
pre-existing PayPoint cards business.
Consequently, at 31 March 2024, the Group tested for impairment the aggregate
goodwill of £45.2 million which arose on the acquisitions of Handepay and
Merchant Rentals, by comparing the new, enlarged Cards CGU’s recoverable
amount to its carrying value. That impairment test gave significant headroom,
with no reasonably possible changes in any of the discounted cash flow
assumptions causing the Cards CGU’s carrying value to exceed its recoverable
amount.
At 31 March 2023, prior to this CGU reassessment, the Group performed separate
impairment tests on the goodwill which arose on the Handepay and Merchant
Rentals acquisitions (£35.6 million and £9.6 million respectively) by
comparing the recoverable amounts to the carrying values for each of the
Handepay and Merchant Rentals CGUs. The valuation of the goodwill relating to
the Handepay CGU was a critical estimate in the financial year ended 31 March
2023, given that reasonably possible changes in the key assumptions used to
calculate the Handepay CGU’s recoverable amount could have resulted in
goodwill impairment.
Critical estimate: valuation of defined benefit pension scheme obligations
The Group has an obligation to pay pension benefits to members of the defined
benefit pension scheme in its Love2shop segment. The present value of the
obligations associated with these future benefits depends on the assumptions
selected for several factors, including the following:
* Discount rate
* Rate of inflation
* Life expectancy
At each reporting period, management selects appropriate actuarial assumptions
for each factor, based on historical and current trends and with input from a
qualified actuary. Using the set of assumptions selected by management at 31
March 2024, the net defined benefit pension scheme asset is £286,000 (31
March 2023: £411,000). This comprises scheme assets with a fair value of
£16,224,000 less obligations of £15,938,000 (31 March 2023: assets of
£17,752,000 less obligations of £17,341,000).
Relatively small changes to one or more of the above assumptions could result
in significant changes to the fair value of the scheme obligations and hence
the net scheme asset or liability, as follows:
PF scheme Change in assumption Change in liabilities
Discount rate decrease of 0.50% p.a. increase by £1,068,000
Discount rate increase of 0.50% p.a. decrease by £972,000
Rate of inflation decrease by 0.25% p.a. decrease by £319,000
Rate of inflation increase by 0.25% p.a. increase by £367,000
Rate of mortality decrease in life expectancy of 1 year increase by £414,000
Rate of mortality increase in life expectancy of 1 year decrease by £383,000
Prior year critical judgements and estimates
As explained above, the impact of the Group’s reassessment of its Cards CGUs
is that the valuation of the goodwill relating to the Handepay CGU, which was
a critical estimate in the financial year ended 31 March 2023, is no longer
considered a critical estimate at 31 March 2024.
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. They have remained consistent with the prior year.
These measures are included in these financial statements to provide
additional useful information on performance and trends to shareholders.
These measures are not defined terms under IFRS and therefore they may not be
comparable with similarly titled measures reported by other companies. They
are not intended to be a substitute for 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 measure 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 total
revenue. This is due to 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 total 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 to create 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 total
revenue to net revenue is included in note 4.
Adjusting items (non-IFRS measure)
Adjusting items consist of exceptional items, amortisation of intangible
assets arising on acquisition and movements on convertible loan notes. 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.
Year ended 31 March 2024 £’000 Year ended 31 March 2023 £’000
Exceptional items – legal fees 2,143 -
Exceptional items – restructuring costs 1,977 -
Exceptional items – acquisition costs expensed - 4,065
Exceptional items – impairment loss on reclassification of investment in associate to asset held for sale - 1,252
Sub-total: exceptional items – administrative expenses 4,120 5,317
Exceptional items – finance costs 1,099 287
Amortisation of intangible assets arising on acquisition 8,076 2,574
Net movement on convertible loan notes 186 -
Total adjusting items 13,481 8,178
Total costs (non-IFRS measure)
Total costs comprise other costs of revenue, administrative expenses, finance
income and finance 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 before interest, tax, depreciation and amortisation. See page 10 for
a reconciliation from profit before tax to EBITDA.
Adjusted earnings before interest, tax, depreciation and amortisation
(Adjusted EBITDA) (non-IFRS measure)
The Group also now presents adjusted EBITDA, which comprises EBITDA, as
defined above, excluding exceptional items. See page 10 for a reconciliation
from profit before tax to adjusted EBITDA.
Underlying earnings per share (non-IFRS measure)
Underlying earnings per share is calculated by dividing the net profit before
exceptional items, amortisation of intangible assets arising on acquisition
and movement on convertible loan notes 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)
Year ended 31 March 2024 £’000 Year ended 31 March 2023 £’000
Profit before tax 48,182 42,574
Total adjusting items 13,481 8,178
Underlying profit before tax 61,663 50,752
The calculation of underlying profit before tax is as follows:
Underlying profit after tax (non-IFRS measure)
The calculation of underlying profit after tax is as follows:
Year ended 31 March 2024 £’000 Year ended 31 March 2023 £’000
Profit after tax 35,687 34,710
Total adjusting items 13,481 8,178
Tax on adjusting items (3,370) (644)
Underlying profit after tax 45,798 42,244
Net corporate debt (non-IFRS measure)
Net corporate debt represents corporate cash and cash equivalents 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:
31 March 2024 £’000 31 March 2023 £’000
Cash and cash equivalents – corporate 26,392 22,546
Less:
Bank overdraft - (525)
Loans and borrowings (93,935) (94,415)
Net corporate debt (67,543) (72,394)
2. Segmental reporting
Segmental information
The Group considers its Love2shop business to be a separate segment from its
legacy PayPoint business, since discrete financial information is prepared for
Love2shop and it offers different products and services. Furthermore, the
chief operating decision maker (CODM) reviews separate monthly internal
management reports (including financial information) for both Love2shop and
PayPoint 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 is set out below. Segment
profit / (loss) before tax and adjusting items 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.
Year-ended 31 March 2024 PayPoint £’000 Love2shop £’000 Total £’000
Revenue 167,717 110,099 277,816
Other revenue 2,013 26,538 28,551
Segment revenue 169,730 136,637 306,367
Segment profit before tax and adjusting items 50,487 11,176 61,663
Exceptional items (4,369) (850) (5,219)
Amortisation of intangible assets arising on acquisition (2,137) (5,939) (8,076)
Net movement in convertible loan notes (186) - (186)
Segment profit before tax 43,795 4,387 48,182
Interest income 163 1,227 1,390
Interest expense 3,065 5,343 8,408
Depreciation and amortisation 12,206 8,459 20,665
Capital expenditure 13,628 2,578 16,206
Segment assets 271,068 248,042 519,110
Segment liabilities 173,280 224,670 397,950
Segment equity 97,788 23,372 121,160
A business division analysis of revenue has been provided in note 3.
The £306.4 million (2023: £167.7 million) total revenue and £222.5 million
(2023: £228.1 million) non-current assets at 31 March 2024 are geographically
located within the UK.
3. Revenue
Disaggregation of revenue
Revenue Year ended 31 March 2024 £’000 Year ended 31 March 2023 £’000
Shopping
Service fees 19,653 17,947
Card payments 23,998 24,293
Card terminal leases 8,708 7,542
ATMs 11,805 12,920
Other shopping 4,071 3,355
Shopping total 68,235 66,057
e-commerce total 31,754 20,183
Payments and banking
Cash – bill payments 31,264 34,135
Cash – top-ups 11,434 11,959
Digital 16,197 18,081
Cash through to digital 7,658 7,769
Other payments and banking 1,175 1,347
Payments and banking total 67,728 73,291
Love2shop total – voucher and card service fee 110,099 5,689
Revenue 277,816 165,220
Service fee revenue of £19.7 million (2023: £17.9 million) and management
fees, set-up fees and upfront lump sum payments of £1.3 million (2023: £0.7
million) are recognised on a straight-line basis over the period of the
contract. Card terminal leasing revenue of £8.7 million (2023: £7.5 million)
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 14-day terms. The usual timing of Love2shop’s
corporate customers is 15-day terms; its consumer customers pay on ordering.
Revenue subject to variable consideration of £13.6 million (2023: £13.5
million) exists where the consideration to which the Group is entitled 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 price 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.
Other Revenue Year ended 31 March 2024 £’000 Year ended 31 March 2023 £’000
Payments and banking
Interest revenue 2,013 575
Love2shop
Interest revenue 6,453 325
Non-redemption revenue 20,085 1,603
Love2shop total 26,538 1,928
Total other revenue 28,551 2,503
Other revenue comprises:
* Multi-retailer voucher and card non-redemption revenue is recognised on
expiry (where the customer has no right of refund) or on expiry and lapse of
the refund period (where the customer has a right of refund).
* Interest revenue generated by investing clients’ funds, retailer
partners’ deposits, gift card cash, prepay savers’ cash and restricted
funds held on deposit.
4. Alternative performance measures
Net Revenue
The reconciliation between total revenue and net revenue is as follows:
Year ended 31 March 2024 £’000 Year ended 31 March 2023 £’000
Service revenue - Shopping 68,235 66,057
Service revenue – e-commerce 24,946 16,085
Service revenue – Payments and banking 66,579 71,994
Service revenue – multi-retailer redemption products 18,145 1,217
Service revenue - other 4,281 128
Sale of goods – single-retailer redemption products 87,554 4,325
Sale of goods - other 1,268 1,316
Royalties - e-commerce 6,808 4,098
Other revenue – multi-retailer non-redemption income 20,085 1,603
Other revenue – interest on clients’ funds, retailer partners’ deposits, gift card cash, prepay savers’ cash and restricted funds held on deposit 8,466 900
Total revenue 306,367 167,723
less:
Retailer partners’ commissions (41,829) (34,369)
Cost of single-retailer cards and vouchers (83,403) (4,208)
Cost of SIM card and e-money sales as principal (163) (199)
Total net revenue 180,972 128,947
Total Costs
Total costs, excluding adjusting items, comprises:
Year ended 31 March 2024 £’000 Year ended 31 March 2023 £’000
Other costs of revenue 33,569 25,481
Administrative expenses – excluding adjusting items 78,722 50,083
Finance income (1,390) (87)
Finance costs 8,408 2,718
Total costs 119,309 78,195
5. Exceptional items
Year ended 31 March 2024 £’000 Year ended 31 March 2023 £’000
Legal fees - administrative expenses 2,143 -
Restructuring costs - administrative expenses 1,977 -
Acquisition costs expensed - administrative expenses - 4,065
Impairment loss on reclassification of investment in associate to asset held for sale - 1,252
Total exceptional items included in operating profit 4,120 5,317
Refinancing costs expensed – finance costs 1,099 287
Total exceptional items included in profit or loss 5,219 5,604
The tax impact of the exceptional items is £1,305,000 (2023: £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 two 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. See note
10.
The current period restructuring costs relate to the organisational design of
the Group communicated by management to all staff on 6 March 2024. See note 7.
The current period refinancing costs comprise legal and professional fees
incurred by the Group in respect of its new borrowing facilities referred to
in note 1, and the write-off of the unamortised balance of capitalised costs
arising on the previous refinancing exercise.
6. Tax
Year ended 31 March 2024 £’000 Year ended 31 March 2023 £’000
Current tax
Charge for current year 9,293 7,829
Adjustment in respect of prior years (131) (806)
Current tax charge 9,162 7,023
Deferred tax
Charge for current year 3,083 1,144
Adjustment in respect of prior years 250 (303)
Deferred tax charge 3,333 841
Total income tax charge 12,495 7,864
Year ended 31 March 2024 £’000 Year ended 31 March 2023 £’000
Tax charged directly to other comprehensive income
Deferred tax on movement on defined benefit pension scheme asset (82) 86
The income tax charge is based on the UK statutory rate of corporation tax for
the year of 25% (2023: 19%). Deferred tax has been calculated using the
enacted tax rates that are expected to apply when the liability is settled, or
the asset realised. During the prior financial year, an increase in the main
rate of UK corporation tax from 19% to 25% with effect from 1 April 2023 was
enacted. Deferred tax has been calculated based on the rate applicable at the
date timing differences are expected to reverse.
The income tax charge of £12.5 million (2023: £7.9 million) on profit before
tax of £48.2 million (2023: £42.6 million) represents an effective tax rate1
of 25.9% (2023: 18.5%). This is higher than the UK statutory rate of 25% due
to adjustments in respect of share-based payments, disallowable expenses and
prior year adjustments.
The tax charge for the year is reconciled to profit before tax, as set out in
the consolidated statement of profit or loss, as follows:
Year ended 31 March 2024 £’000 Year ended 31 March 2023 £’000
Profit before tax 48,182 42,574
Tax at the UK corporation tax rate of 25% (2023: 19%) 12,046 8,089
Tax effects of:
Disallowable expense - exceptional items - 1,119
Disallowable expense – other 138 1
Adjustments in respect of prior years 119 (1,109)
Capital allowance super deduction - (390)
Tax impact of share-based payments 192 (121)
Revaluation of deferred tax liability - 275
Actual amount of tax charge 12,495 7,864
(1)Effective tax rate is the tax cost as a percentage of profit before tax.
7. Provisions
31 March 2024 £’000
Balance at the beginning of the year -
Provision recognised in relation to the group restructuring 1,850
Balance at the end of the year 1,850
During the year PayPoint conducted a group-wide review of its organisational
structure to identify efficiencies which will enable future reinvestment in
the business. The review resulted in the redundancy of 75 roles across both
segments, announced to employees on 8 March 2024. Following this, the Group
initiated, on 15 March, a 1-month consultation period for employees impacted
by the restructuring. All related payments are to be made to those employees
between April and October 2024.
8. Share capital, share premium and merger reserve
31 March 2024 £’000 31 March 2023 £’000
Called up, allotted and fully paid share capital
72,693,673 (2023: 72,563,234) ordinary shares of 1/3p each 242 242
The increase in share capital in the current year resulted from 95,854 shares
issued (of 1/3p each) for share awards which vested in the year and 34,585
matching shares issued (of 1/3p each) under the Employee Share Incentive Plan.
The share premium of £1.0 million (2023: £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 (2023: £18.2 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. Note to the Consolidated statement of cash flows
Note Year ended 31 March 2024 £’000 Restated (1) Year ended 31 March 2023 £’000
Profit before tax 48,182 42,574
Adjustments for:
Depreciation of property, plant and equipment 7,318 4,922
Amortisation of intangible assets 13,347 5,555
Exceptional item – non-cash movement on convertible loan note 186 -
Exceptional item – non-cash impairment loss on reclassification of investment in associate to asset held for sale 5 - 1,252
Loss on disposal of fixed assets 111 1,090
Finance income (1,390) (987)
Finance costs 8,408 2,718
Share-based payment charge 1,669 1,330
Cash-settled share-based remuneration (339) -
Operating cash flows before movements in working capital 77,492 58,454
Movement in inventories (108) 737
Movement in trade and other receivables (4,638) (1,301)
Movement in finance lease receivables 2,018 2,366
Movement in contract assets (536) (853)
Movement in contract liabilities (443) (78)
Movement in provisions 1,850 -
Movement in trade and other payables - corporate (9,929) 3,688
Movement in lease liabilities - (90)
Movement in working capital - corporate (11,786) 4,469
Cash generated from operations 65,706 62,923
(1)See note 1 for an explanation of the restatement.
10. Contingent liability
Ofgem’s Statement of Objections
In FY24, a number of companies in the PayPoint Group, including PayPoint Plc,
received two claims relating to issues addressed by commitments accepted by
Ofgem in November 2021 as a resolution of Ofgem’s concerns raised in its
Statement of Objections received by the PayPoint Group in September 2020. The
Ofgem resolution did not include any infringement findings.
The first claim was served by Utilita Energy Limited and Utilita Services
Limited (subsequently renamed Luxion Sales Limited) (“Utilita”) on 16 June
2023. The second claim was served by Global-365 plc and Global Prepaid
Solution Limited (“Global 365”) on 18 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 these claims. The focus of the first
CMC was to agree disclosure and a timetable for proceedings. PayPoint can also
confirm that a second CMC was held on 26 April 2024 to agree further
disclosure and the appointment of expert witnesses for all parties. A
provisional date for a third CMC was set for 28 October 2024. Both claims have
been listed for a joint trial at the Competition Appeal Tribunal starting on
10 June 2025.
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.
The Group will continue to update the market on a quarterly basis as part of
its financial reporting cycle.
HMRC assessment
In February 2024, HMRC raised an assessment on the Group’s tax position for
the accounting period ended 31 March 2021. The Group has appealed the
assessment on the grounds that it is not valid from a tax technical and
administrative perspective and no provision has therefore been recognised.
11. Events after the reporting date
Share buy-back
On 12 June 2024 the Group approved a share buy-back programme of up to £20
million over the next 12 months. See page 1 for details of the programme. This
is a non-adjusting event, having no impact on the current period financial
statements.
Investment in Aperidata Limited
On 20 May 2024, the Group acquired, for consideration of £0.2 million, a
19.9% equity stake in the ordinary shares of Aperidata Limited, which provides
its customers with credit rating and open banking services. On 23 May 2024 the
Group purchased a convertible loan note of nominal amount £1.0 million from
Aperidata Limited. The loan note has the option to convert into ordinary
shares on 23 May 2027, increasing the Group’s stake to 42.8%. The May 2024
transactions referred to above are non-adjusting events, having no impact on
the current period financial statements.
Refinancing
On 6 June 2024 the Group completed a refinancing, which provides total
financing facilities of £135 million. Details of the facility are set out in
note 1.
(1) 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.
(2) 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.
(3) FY23 comparatives contain only one month contribution from Love2shop
business post-acquisition
(4) Net revenue is an alternative performance measure. Refer to note 4 to the
financial information for a reconciliation to revenue.
(5) Adjusting items comprises exceptional items (£2.1 million for legal costs
related to claims against PayPoint, £1.1 million of refinancing fees and
£2.0 million of restructure costs), £0.2 million for the net fair value
adjustment to the convertible loan note (OBConnect and Optus), and
amortisation of intangible assets arising on acquisition (£6.0m for Love2shop
and £2.1 million for PayPoint’s previous acquisitions). Refer to note 1 for
a reconciliation.
(6) Diluted underlying earnings per share is an alternative performance
measure, Refer to note 1 to the financial information.
(7) 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
(8) NB. Full year number is shown for comparison. Only 1 month of contribution
in FY23 from Love2shop following completion of acquisition
(9) NB. Full year number is shown for comparison. Only 1 month of contribution
in FY23 from Love2shop following completion of acquisition
(10) Exceptional items comprises £2.1 million for legal costs related to
claims against PayPoint, £1.1 million of refinancing fees and £2.0 million
of restructure costs
(11) FY23 contained only one month contribution from Love2shop business
post-acquisition
(12) Net revenue is an alternative performance measure. Refer to note 4 to the
financial information for a reconciliation to revenue.
(13) Underlying profit before tax is an alternative performance measure. Refer
to note 1 to the financial information for a reconciliation
(14) Underlying EBITDA is an alternative performance measure. Refer to note 1
to the financial information for a reconciliation.
(15) 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.
(16) Card payment and leases analysis has been re-presented to better
aggregate revenue streams and key KPIs
(17) Payments & Banking analysis has been re-presented to better aggregate
revenue streams and key KPIs
Attachment
* PPRNS FY24 - Final
(https://ml-eu.globenewswire.com/Resource/Download/95185bf2-fcb2-4666-8006-166d901c34f9)