Paypoint Regulatory News (PAY)

15 Nov 2006 07:02

PayPoint PLC15 November 2006 PayPoint plc Interim results For the six months ended 30 September 2006 HIGHLIGHTS 6 months 6 months ended ended 30 September 30 September 2006 2005 £million £million IncreaseRevenue 71.0 54.1 31%Net revenue (1,3) 25.8 21.3 21%Operating profit 10.4 8.2 27%Profit before tax 11.0 8.4 31% 11.3p 10.5p 8% Basic earnings per shareInterim dividend 4.6p 3.0p 53% • Consumer transactions processed up 27% at 178 million with strong growth in all sectors • Operating margins (2,3) increased to 40% from 38% • PayPoint terminal outlets have increased to over 16,000 up 16% on September 2005 and up 7% on March 2006 • Exclusive TV licensing contract live since August 2006 • Prompted consumer awareness now 60% up from 36% in the previous year (4) David Newlands, Chairman of PayPoint, said "Transaction volumes have continuedto drive strong revenue growth and the operational gearing delivers strongprofit growth to the bottom line. PayPoint's investment in new signage and thepublicity surrounding the TV Licensing win have improved consumer-prompted brandawareness to 60%, which is driving an increase in market share in all sectors.PayPoint's retail network continues to expand, as do PayPoint's Eposrelationships, in which PayPoint connects to the retailers' till systems.Investment in new communication infrastructure and expansion of our operatingbase in Welwyn Garden City have given us a sound base for future growth. Our acquisition of Metacharge will enable PayPoint to offer an internet paymentsolution alongside our physical payment collection network, allowing our clientsa more comprehensive payment proposition. We are confident that this acquisitionwill provide us with further growth opportunities." 1 Net revenue is revenue less commissions paid to retail agents and the cost ofe-vouchers for mobile top-ups where PayPoint is the principal 2 Operating margins are operating profit as a percentage of net revenue 3 Net revenue and operating margins are measures which the directors believeassist with a better understanding of the underlying performance of the group.The reconciliation of net revenue to statutory amounts can be found in note 2 4 BMRB Omnibus survey October 2006 BUSINESS REVIEW We continue to grow in all sectors particularly bill and general payments withthe introduction of the exclusive TV licence contract. This growth has been achieved through the success of our strategy to: • broaden our customer service proposition and increase the range of payments through our network; and • grow and optimize our network coverage. Operational overview In the first six months of the financial year, PayPoint processed 178 milliontransactions, with a value of £2.3 billion (2005: 140 million transactions witha value of £1.6 billion), an increase of 27% in transactions and 41% in value.TV licence payments and an increase in the average transaction value for gas andelectricity, following rises in domestic prices, have contributed to an increasein the average transaction value to over £12. Commissions paid to retail agentswere £35.9 million, up 23%. There has been strong growth in transaction volumes across all sectors: 6 months 6 months Increase Year ended ended % ended 30 September 30 September 31 March 2006 2005 2006 million million million Bill and general 109.2 84.6 29 205.0payments*Mobile top-ups 63.2 51.7 22 108.2ATMs 6.1 4.0 53 8.9Total 178.5 140.3 27 322.1 *Includes debit/credit transactions Bill and general payments This sector has benefited from continued transaction volume growth, helped bywinning an exclusive contract with TV Licensing. Energy consumer price increaseshave also continued to have a beneficial effect on PayPoint's transactionvolume, mitigated by an increase in the average value of payments. Whilstcurrent volumes in transport ticketing are relatively modest, there is potentialfor long term growth. We have continued to sign contracts with regionaltransport companies. We are on track to have five hundred retail agents with theWestern Union service operational by the end of the current financial year. Mobile top-ups Overall market share is c.28% (March 2006: c.27%) as a result of extending theretail network and our agent re-branding programme through all our independentoutlets and over 1,200 of our multiple sites. The re-branding has contributed toan improvement in prompted brand awareness of 24ppts year on year to 60% (1). 1 BMRB Omnibus survey October 2006 ATMs New machines continue to be rolled out, albeit at a slower than planned rate(average net increase of 34 per month). The quality of the installed estate hasbeen maintained and average transaction volume and revenue are better thanexpected, with sites averaging 640 transactions per month split between cashwithdrawals and balance enquiries, with the latter representing slightly morethan half the transactions. Installed ATMs have grown to 1,655, an increase of204 since the last year end. Network growth Strong demand continues for the new PayPoint terminal and the retail network hasgrown to 16,325 sites, a net increase of 1,029 on the year end. 2,461 sites (2005: 2,000) with our terminals also have Epos connections, toallow mobile top-up transactions over the retailers' own till systems and thereare a further 3,740 Epos only sites (2005: 2,880). Financial overview Revenue for the first six months was £71.0 million (2005: £54.1 million), up 31%driven by a 27% increase in transaction volumes, and the increase in Irishmobile volumes (1) the revenue from which has risen to £9.4 million (2005: £3.8million). Cost of sales was £50.7 million (2005: £37.4 million), an increase of36%. Cost of sales comprises commission paid to agents, the cost of mobiletop-ups where PayPoint is principal, depreciation and other items includingtelecommunications. Agents' commission increased by 23% to £35.9 million (2005:£29.1 million). Depreciation has increased to £1.7 million (2005: £1.0 million) now that the newterminal has been rolled out. Gross profit improved to £20.3 million (2005:£16.7 million), 21% ahead of the same period last year, with a gross margin of29% (2005: 31%). Eliminating the impact of acting as principal in Irish top-upsales would have resulted in the gross margin reducing marginally from 33.2% inthe first six months of last year to 32.9% this year. Net revenue (2) of £25.8 million (2005: £21.3 million) was up 21%, driven primarily by volume growth. Operating margins3 were 40% (2005: 38%), benefiting from operational gearing and also from a delay in the migration of mobile top-ups, in one of our multiple retailers, from our terminals to the retailer's own till systems. 1 In Ireland, PayPoint is principal in the sale of mobile top-ups andaccordingly the face value of the top-up is included in sales and the corresponding costs in cost of sales 2 Net revenue is revenue less commissions paid to retail agents and the cost ofe-vouchers for mobile top-ups where PayPoint is the principal 3 Operating margins are operating profit as a percentage of net revenue2 Financial overview (continued) Operating costs (administrative expenses) have risen to £10.0 million asexpected (2005: £8.5 million), an increase of 16%, driven largely by theincrease in leased space at our operations base in Welwyn Garden City, mergerand acquisition activity and the expansion of the senior management team. Operating profit was £10.4 million (2005: £8.2 million), up 27% with acorresponding increase in operating margins (1). Profit before tax was £11.0 million (2005: £8.4 million), up 31%. The tax chargewas £3.3 million (2005: £1.3 million) and the effective tax rate was 30% (2005:16%). Operating cash flow was £12.1 million including £0.8 million of client cash (3)(2005: £3.2 million after an outflow of £6.9 million in respect of clientcash (3)), reflecting strong conversion of profit to cash. Capital expenditure of£5.6 million (2005: £3.2 million) reflected spend on new terminals, ATMs andinfrastructure assets including the refurbishment of our operations base atWelwyn Garden City. Net interest received was £0.7 million (2005: £0.3 million)and equity dividends paid were £5.1 million (2005: £3.5 million). Dividend We propose to pay an interim dividend on 21 December of 4.6p per share (2005:3.0p) to shareholders on the register at 24 November. Outlook There remains ample opportunity to grow revenue organically in the UK andIreland by increasing our market share in bill and general payments, mobiletop-ups and ATMs. We will also continue our focus in developing our new markets,transport and money transfer (via Western Union), to drive transaction volumesin the longer term. We are on track to exceed our target of 17,000 terminallocations by the end of this financial year. The acquisition of Metacharge offers substantial prospects for future growth byextending our payment universe from cash into the internet and using this as aplatform to broaden our payment capability further. David Newlands Dominic Taylor Chairman Chief Executive 15 November 2006 1 Operating margins are operating profit as a percentage of net revenue2 2 Net revenue is revenue less commissions paid to retail agents and the cost ofe-vouchers for mobile top-ups where PayPoint is the principal 3 Client cash is cash held on behalf of clients where PayPoint has title to thefunds. An equivalent balance is included within trade payables CONSOLIDATED INCOME STATEMENT Continuing operations Note Unaudited Unaudited Audited 6 months 6 months year ended ended ended 31 March 30 September 30 September 2006 2006 2005 £000 £000 £000 Revenue 2 70,974 54,113 119,968Cost of sales 2 (50,661) (37,374) (83,409)Gross profit 2 20,313 16,739 36,559Administrative expenses (9,950) (8,552) (17,248)Operating profit 10,363 8,187 19,311Investment income 691 288 1,051Finance costs (38) (34) (15)Profit before tax 11,016 8,441 20,347Tax 3 (3,341) (1,315) (3,440)Profit for the period 7,675 7,126 16,907 Earnings per shareBasic 5 11.3p 10.5p 25.0pDiluted 5 11.2p 10.4p 24.7p There have been no gains or losses for the current or comparative periods otherthan those reported in the income statement CONSOLIDATED BALANCE SHEET Note Unaudited Unaudited Audited 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000 Non-currentassetsProperty, 13,383 6,685 8,894plant andequipmentDeferred tax 1,174 1,331 1,184asset 14,557 8,016 10,078 CurrentassetsInventories 908 673 1,119Trade and 12,238 7,427 12,112otherreceivablesCash and cash 6 31,456 22,760 29,295equivalents 44,602 30,860 42,526Total assets 59,159 38,876 52,604 CurrentliabilitiesTrade and 23,581 16,659 21,371otherpayablesCurrent tax 3,361 1,261 1,972liabilitiesObligations - 138 67under financeleases 26,942 18,058 23,410 Non-currentliabilitiesOther 396 - 344liabilities 396 - 344 Total 27,338 18,058 23,754liabilities Net assets 31,821 20,818 28,850 EquityShare capital 7 226 226 226Share premium 23,976 23,976 23,976accountCapital 14,193 14,193 14,193redemptionreserveInvestment in (1) (1) (1)own sharesShare option 7 1,110 457 738and SIPreserveRetained 7 (7,683) (18,033) (10,282)earningsTotal equity 8 31,821 20,818 28,850attributableto equityholders ofthe parent CONSOLIDATED CASH FLOW STATEMENT Note Unaudited Unaudited Audited 6 months 6 months ended ended Year ended 31 March 30 September 30 September 2006 2005 £000 2006 £000 £000Net cash from 9 12,109 3,195 14,318operating activities Investing activities Interest received 739 288 1,051Purchase of property, plant and (5,645) (3,224) (6,504)equipmentProceeds from disposal of 101 111 196property, plant and equipmentNet cash used in investing (4,805) (2,825) (5,257)activities Financing activities Repayments of obligations under (67) (87) (213)finance leasesDividends paid (5,076) (3,473) (5,503) Net cash used in financing (5,143) (3,560) (5,716)activitiesNet increase/(decrease) 2,161 (3,190) 3,345in cash and cash equivalentsCash and cash equivalents 29,295 25,950 25,950at beginning of periodCash and cash equivalents 31,456 22,760 29,295at end of period NOTES TO ACCOUNTS 1. Accounting policies These financial statements have been prepared on a historical cost basis and onthe policies set out below. Basis of preparation The financial information contained in this report is unaudited, but has beenformally reviewed by the auditors and their report to the Company is set out onpage 13. The information shown for the year ended 31 March 2006, which isprepared under IFRS, does not constitute statutory accounts within the meaningof section 240 of the Companies Act 1985. The report of the auditors on thestatutory accounts for the year ended 31 March 2006, prepared under IFRS, wasunqualified and did not contain a statement under section 237 of the CompaniesAct 1985 and has been filed with the Registrar of Companies. The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS). The financial statements have also beenprepared in accordance with IFRS adopted for use in the European Union andtherefore comply with Article 4 of the EU IAS Regulation. At the date of authorisation of these financial statements, the followingStandards and Interpretations which have not been applied in these financialstatements were in issue but not yet effective: IFRS 7 Financial Instruments: Disclosures; and the related amendment toIAS 1 on capital disclosures IFRIC 8 Scope of IFRS 2 IFRIC 9 Reassessment of Embedded Derivatives IFRIC 10 Interim Financial Reporting and Impairment The directors do not anticipate that the adoption of these Standards andInterpretations will have a material impact on the financial statements of theGroup. The financial statements are presented in pounds sterling because it isthe currency of the primary economic environment in which the Group operates.The directors consider that there are no critical accounting judgements and keysources of estimation uncertainty in applying the Group's accounting policies. 2. Revenue by sector, net revenue analysis and gross throughput (i) Analysis of revenues by sector Group revenue comprises the value of sales (excluding VAT) of services in thenormal course of business and includes amounts billed to customers to be passedonto retail agents as commission payable. Cost of sales includes the cost to theGroup of the sale, including commission to retail agents and the cost of mobiletop-ups where PayPoint is the principal in the supply chain. Revenue performance of the business is measured by net revenue which iscalculated as the total turnover from clients less commission payable to retailagents and the cost of mobile top-ups where PayPoint is the principal in thesupply chain. Although there is only one class of business, since the risks and returns aresimilar across sectors in which the Group operates, the Group monitors netrevenue (see below) with reference to each sector. 6 months 6 months Year ended ended ended 31 March 30 September 30 September 2006 2006 2005 £000 £000 £000 Revenue - transaction processing 70,304 53,564 118,909- lease rental of ATMs 670 549 1,059 70,974 54,113 119,968less:Commission payable to retail agents (35,886) (29,073) (63,558)Cost of mobile top-ups as principal (9,255) (3,709) (10,297)Net revenue 25,833 21,331 46,113Net revenue by sectorBill payments 11,399 9,248 21,428Mobile top-ups 10,741 9,413 18,966ATMs 2,730 1,850 4,124Other 963 820 1,595Net revenue 25,833 21,331 46,113 Commission payable is included within cost of sales as shown below. 6 months 6 months Year ended ended ended 31 March 30 September 30 September 2006 2006 2005 £000 £000 £000 Revenue 70,974 54,113 119,968Cost of salesCommission payable to retail agents (35,886) (29,073) (63,558)Cost of mobile top-ups as principal (9,255) (3,709) (10,297)Other (5,520) (4,592) (9,554)Total cost of sales (50,661) (37,374) (83,409)Gross profit 20,313 16,739 36,559(ii) Gross throughput 6 months Year ended 6 months ended 31 March ended 30 September 2006 30 September 2005 2006 £000 £000 £000Gross throughput 2,303,610 1,635,102 3,784,824 Gross throughput represents payments made by consumers using the PayPointservice and cash withdrawals from ATMs. Included within gross throughput is £144million to 30 September 2006 (2005: £92.5 million) relating to the ATM business. 3. Tax on profit of ordinary activities 6 months 6 months Year ended ended ended 31 March 30 September 30 September 2006 2006 2005 £000 £000 £000Current tax 3,331 1,261 3,239Deferred tax 10 54 201Total 3,341 1,315 3,440 4. Dividend The declared interim dividend is 4.6p (2005: 3.0p). The total dividends inrespect of the year ended 31 March 2006 were £7.1 million (10.5p per share). The interim dividend was declared on 15 November 2006 and accordingly has notbeen recorded as a liability as at 30 September 2006. 5. Earnings per share (a) Basic and diluted earnings per share The basic and diluted earnings per share are calculated on the following profitsand number of shares. 6 months 6 months Year ended ended ended 31 March 30 September 30 September 2006 2006 2005 £000 £000 £000 Profit for the purposes of basic 7,675 7,126 16,907earningsper share being net profitattributableto equity holders of the parentEarnings for the purposes of diluted 7,675 7,126 16,907earnings per share Number of Number of Number of shares shares sharesWeighted average number of shares 67,678,074 67,665,908 67,671,307(for basic earnings per share)Potential dilutive ordinary shares:Deferred share bonus 65,397 - 51,518Long term incentive plan 887,737 624,118 733,347Diluted basis 68,631,208 68,290,026 68,456,172 6. Cash and cash equivalents Included within cash and cash equivalents is £6.4 million (September 2005: £4.6million, March 2006: £5.6 million) relating to monies collected on behalf ofPayPoint clients where PayPoint has title to the funds (client cash). Anequivalent balance is included within trade payables. 7. Share capital, share option and SIP reserve and retained earnings 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000 Authorised share capital4,365,352,200 ordinary shares of 1/3 p 14,551 14,551 14,551each Called up, allotted and fully paidshare capital67,678,283 ordinary shares of 1/3 p 226 226 226each Share option and SIP reserveAt start of period 738 219 219Additions 372 238 519At end of period 1,110 457 738 Retained earningsAt start of period (10,282) (21,686) (21,686)Profit for the period 7,675 7,126 16,907Dividends paid (5,076) (3,473) (5,503)At end of period (7,683) (18,033) (10,282) 8. Statement of changes in equity 6 months 6 months Year ended ended ended 31 March 30 September 30 September 2006 2006 2005 £000 £000 £000Opening equity 28,850 16,927 16,927Profit for the period 7,675 7,126 16,907Dividends paid (5,076) (3,473) (5,503)Share option and SIP reserve 372 238 519Closing equity 31,821 20,818 28,850 9. Notes to the cash flow statement 6 months 6 months Year ended ended ended 31 March 30 September 30 September 2006 2006 2005 £000 £000 £000Operating profit 10,363 8,187 19,311Adjustments for:Depreciation 1,691 1,047 2,320Loss on disposal of property, 67 - -plant and equipmentOperating cash flows before 12,121 9,234 21,631movements in working capital Decrease/(increase) in inventories 211 (201) (647)Increase in receivables (126) (1,072) (4,238)Increase/(decrease) in payables- client cash 780 (6,942) (5,524)- other payables 611 1,947 4,008Increase in share option and SIP 372 238 519reserveCash generated by operations 13,969 3,204 15,749 Corporation tax paid (1,822) - (1,416)Interest and commitment fees paid (38) (9) (15)Net cash from operating activities 12,109 3,195 14,318 INDEPENDENT REVIEW REPORT TO PayPoint plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 September 2006 which comprises the consolidated incomestatement, the consolidated balance sheet, the consolidated cash flow statementand related notes 1 to 9. We have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (United Kingdomand Ireland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six months ended 30 September 2006. Deloitte & Touche LLP Chartered Accountants London 15 November 2006 Notes: A review does not provide assurance on the maintenance and integrity ofthe website, including controls used to achieve this, and in particular onwhether any changes may have occurred to the financial information since firstpublished. These matters are the responsibility of the directors but no controlprocedures can provide absolute assurance in this area. Legislation in theUnited Kingdom governing the preparation and dissemination of financialinformation differs from legislation in other jurisdictions. DIRECTORS & KEY CONTACTS Directors George Earle (Finance Director) Kenneth Minton* David Morrison* David Newlands* (Chairman) Andrew Robb* Dominic Taylor (Chief Executive) Tim Watkin-Rees (Business Development Director) Roger Wood* * non-executive directors Registrars Capita Registrars Registration Services Northern House Fenay Bridge Huddersfield West Yorkshire BR3 4TU Telephone 0870 162 3100 Press and investor Finsbury Grouprelations enquiries Tenter House 45 Moorfields London EC2Y 9AE Telephone 020 7251 3801 Enquiries: PayPoint plc 01707 600 300Dominic Taylor, Chief ExecutiveGeorge Earle, Finance Director Finsbury 020 7251 3801Rollo HeadDon Hunter This announcement is available on the PayPoint plc website: www.paypoint.co.uk. About PayPoint PayPoint is a leading branded payment collection network used, primarily, forthe cash payment of bills and services and prepayments for mobile telephones andenergy meters. There are over 16,000 retail outlets using PayPoint's paymentterminals. PayPoint began trading in 1996 and initially collected payments through itsnetwork of retail agents for its founder client investors, who included BritishGas, BT, BBC TV Licensing, London Electricity (now part of EDF Energy) and fourwater companies. Clients include many of the UK and Ireland's major energy, cable, mobile andfixed line telephony companies. PayPoint's blue chip client list also extends tonumerous water companies, local authorities and housing associations and agrowing transport and travel base. This information is provided by RNS The company news service from the London Stock Exchange