21 November 2007
PayPoint plc
Interim results
For the 27 weeks ended 30 September 2007
HIGHLIGHTS
27 weeks 26 weeks
ended ended
30 September 24 September
2007 2006
£million £million Increase
Revenue 103.9 71.0 46%
Net revenue[1],[3] 34.2 25.8 32%
Operating profit 13.9 10.4 35%
Profit before tax 14.5 11.0 32%
Basic earnings per share 15.0p 11.3p 33%
Interim dividend 5.3p 4.6p 15%
* Transactions were up 33% at 236 million with strong growth in all
sectors.
* Operating margin[2],[3] increased to 41% from 40%.
* PayPoint UK and Irish terminal outlets have increased to over
19,000, up 16% on September 2006 and up 8% on March 2007.
* Acquired Pay Store SRL, a mobile top-up provider in Romania.
* Completion of the integration of Metacharge and SECPay is on
track for financial year end.
David Newlands, Chairman of PayPoint, said "Good growth in the first
half has been complemented by the BBC TV Licence contract, which
became exclusive from 1 August 2006, and an extra week of trading.
Our UK terminal estate has expanded ahead of plan and we have
strengthened our contractual relationships with multiple retailers.
Product innovation and implementation, improved terms from credit and
debit acquirers and winning back a major reseller for housing and
local authority clients have laid the foundations for continuing
growth. We have made good progress in driving the major change
programmes in our newly acquired internet and Romanian businesses,
which will set them on the path to growth next year. We are confident
in the group's continuing progress."
The financial statements cover the 27 week period from the 26 March
2007 to 30 September 2007, the last Sunday in the month (2006: 26
weeks).
A presentation for analysts will be held at 11.30am today at
Finsbury, Tenter House, 45 Moorfields, London EC2Y 9AE.
1 Net revenue is revenue less commissions paid to retail agents,
acquiring bank charges and the cost of mobile top-
ups where PayPoint is the principal.
2 Operating margin is operating profit as a percentage of net
revenue.
3 Net revenue and operating margin are measures which the
directors believe assist 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
ABOUT PAYPOINT
PayPoint is the leading cash and internet payments company in the UK
and Ireland, handling in excess of
£6 billion in over 470 million transactions annually for more than
5,000 clients and merchants. The company operates with several
payment networks:
* The PayPoint branded retail network numbers over 19,000 terminal
outlets located in local shops (including Co-op, Spar,
Costcutter, Sainsburys Local, One Stop, Londis and thousands of
independents) in all parts of the UK and Ireland. Terminals
handle gas and electricity meter prepayments, cash bill payments,
mobile phone top-ups, transport tickets, London Congestion
charges, BBC TV licences and a wide variety of other payment
types for all of the leading utilities, telecommunications
suppliers and many consumer service companies. This network is
used by consumers, free of charge, 8 million times a week. The
network has 97.3% population cover on a 1 mile urban or 5 miles
rural measure;
* Additional multiple retailer connections into the electronic till
systems of nearly 4,000 outlets in the UK including BP,
Somerfield and Superdrug for mobile top-ups and selected payments
from the PayPoint range;
* The PayPoint ATM network has over 1,950 'LINK' branded machines
across the UK, also typically in convenience stores;
* PayPoint Internet Payment Services (PPIPS), trading as Metacharge
and SECPay, provides secure credit and debit card payments for
over 4,500 web merchants linking into all the major UK acquiring
banks; and
* PayPoint International has recently acquired a Romanian mobile
top-up operator to which a bill payment service will be added,
emulating the UK branded retail network. PayPoint International
also operates Irish bill payment and top-up services.
PayPoint floated on the London Stock Exchange in September 2004 and
the company's market capitalisation at 30 September 2007 was £406
million. PayPoint current holds a Queen's Award for Enterprise and is
widely recognised for its leadership in prepayment systems, smart
technology and consumer service.
21 November 2007
Enquiries:
PayPoint plc 01707 600 300
Dominic Taylor, Chief Executive
George Earle, Finance Director
Finsbury 020 7251 3801
Rollo Head
Don Hunter
This announcement is available on the PayPoint plc website:
www.paypoint.co.uk.
BUSINESS REVIEW
The business review has been prepared solely to provide additional
information to shareholders as a body to assess PayPoint's strategies
and their potential to succeed, and it should not be relied upon for
any other purpose. It contains forward looking statements that have
been made by the directors in good faith based on the information
available at the time of approval of the interim results and such
statements should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors,
underlying any such forward looking information.
Bill and general payments have grown strongly across the board,
including the benefit of the BBC TV licensing contract, which reached
its first anniversary in August and an extra week of trading compared
to the first half of last year. Mobile volumes have grown as a result
of the enlarged terminal estate, the addition of Somerfield to our
EPoS based retailers and the acquisition of Pay Store. PayPoint is
the market leader in UK over-the-counter cash payments and is widely
recognised for service excellence. Pay Store will introduce
bill payments next year.
We aim to create increasing economic value for shareholders by
expanding:
* UK cash payments for bills, general payments, mobile top-ups,
ticketing, money transfer and ATM cash withdrawals building on
the strength of our brand;
* electronic and mobile - commerce payments and services building
on our internet payments subsidiaries, Metacharge and SECPay and
PayPoint service innovations; and
* international growth for cash payment networks and as an
e-commerce payment service provider.
Operational overview
In the first 27 weeks of the financial year, PayPoint processed 236
million transactions, with a value of
£3.5 billion (2006: 178 million transactions with a value of £2.3
billion), an increase of 33% in transactions and 51% in value. TV
licence payments and the additional week's trading have contributed
to the growth. Commissions paid to retail agents were £41.5 million,
up 16%. There has been strong growth in transaction volumes across
all sectors:
27 weeks 26 weeks Year
ended ended Ended
30 September 24 September 25 March
2007 2006 Increase 2007
millions millions % millions
Bill and general 141 109 29 267
payments(1)
Mobile top-ups 77 63 22 130
ATMs 7 6 23 13
Internet payments 11 - - 4
Total(2) 236 178 33 414
(1) Includes debit/credit transactions
(2) Included within the total is 9 million of international bill and
general payments and mobile top-ups.
Bill and general payments
PayPoint has performed well in this sector with growth stimulated by
increased agent numbers, client payment options and brand awareness.
Migration of market share away from the Post Office, as a result of
its branch closure programme, the launch of the BBC TV licence
contract which became exclusive to PayPoint from 1 August 2006 and
the additional week of trading, have contributed to growth in
transactions.
In prepaid energy, volumes have increased over the prior period
despite recent reductions in domestic prices. The increase is as a
result of our network growth and increasing our market share,
particularly in the Midlands, where a competitor lost exclusivity.
In transport, we have extended our geographical coverage by signing
new contracts with transport authorities, in addition to our existing
contracts with Arriva, National Express, Lothian, First and Greater
Manchester Travelcards. Whilst current volumes in transport ticketing
are relatively modest, there is potential for long-term growth if
transport authorities take steps to move ticket purchasing off buses.
We are also
discussing contracts with other operators and transport executives.
PayPoint has also achieved strong growth in the rest of the sector
(energy bill payments, communications, water, local authorities, and
others) in particular from the growth in BBC TV Licensing.
Mobile top-ups
Mobile top-up volumes have increased by 22% over the same period last
year (15% excluding Pay Store, which was acquired on 15 May 2007). In
the UK our overall market share of cash mobile top-ups is still
currently c.30% (March 2007: c.30%). The two most popular methods for
topping up are e-voucher and electronic top-up which account for
c.75% of all top-ups in the UK. The increase in other payment methods
which include ATMs, debit and credit cards and SMS has adversely
affected the growth through our channels.
Network growth
Terminal sites have increased to 22,624 (25 March 2007: 17,537). The
retail network in the UK and Ireland has grown to 19,017 terminal
sites against our target of 19,500 by the end of the year on the
strong continuing demand from retailers for the PayPoint terminal.
The acquisition of Pay Store brings a further 3,607 terminal sites.
2,525 sites (2006: 2,461) with our terminals also have EPoS
connections to allow mobile top-up transactions over the retailers'
own till systems. There are a further 3,672 EPoS only sites (2006:
3,740).
Analysis of sites At At At
30 September 24 September Increase 25 March
2007 2006 % 2007
PP terminal only 16,492 13,864 19 15,049
PP terminal and EPoS 2,525 2,461 3 2,488
PP terminal sites 19,017 16,325 16 17,537
Pay Store terminal sites 3,607 - - -
Total terminal sites 22,624 16,325 39 17,537
ATM sites 1,957 1,655 18 1,860
Internet merchants 4,545 - - 4,249
These figures exclude EPoS only sites in the UK and sites in Romania
that sell only scratch cards.
ATMs
New machines continued to be rolled out at an average of over 40 per
month. The removal for redeployment of ATMs from poorly performing
sites, including 40 non-transactors in September, reduced this to a
net increase of 17 per month. Average transactions at 600 per month
were affected by the higher level of non-transactors.
PayPoint Internet Payment Services
Metacharge and SECPay, which were acquired in the last financial year
and form PayPoint Internet Payment Services (PPIPs), are trading
profitably. The first phase of the integration of these two
businesses, which is nearing completion, is the co-location of their
hardware platforms at a hosted data centre, the provision of full
disaster recovery and a single billing platform. The second phase
which will allow each brand's products to be delivered by the other
will be completed early in the new financial year.
PayPoint in Romania
Pay Store SRL was acquired on 15 May 2007 for ¤16 million (£10.9
million) from the RTC group with potential for a further ¤1 million
payable or recoverable, on the performance of the business in the
first year after acquisition. The company is trading at a small loss,
as expected. Pay Store is one of the largest independent mobile
top-up providers in Romania, selling both electronic top-ups and
paper scratch cards. Nearly all Romanians pay bills in cash and are
poorly served by existing payment channels. Since acquisition, we now
have the ability to process mobile top-ups at our transaction
processing centre in Welwyn Garden City. We plan to launch a PayPoint
branded bill payment service next year.
Pay Store is well placed to benefit from the migration from scratch
cards to electronic top-ups, and following the introduction of bill
payments in the New Year, to capture a significant share of the bill
payment market as privatised utilities look to rationalise current
inefficient and costly cash collection channels.
New services
PayPoint continues to introduce a wide range of new services to
stimulate further transaction growth in both cash and new economy
payments. For example, we are well-placed to benefit from the
expected increases in transaction volumes in the electronic money
sector from services such as gift cards, prepay debit cards, saving
schemes, internet currencies, stored value cards and money transfers.
We have continued to attract through our clients the following
brands, The Sun, Daily Mirror, Virgin Money and Argos. We are
established as the premier convenience loading channel for cash on to
both prepay and stored value cards, which have developed into strong
sectors in the USA and are now being marketed with increasing success
in the UK.
Financial overview
Revenue for the first 27 weeks was £103.9 million (2006: £71.0
million), up 46% driven by a 33% increase in transaction volumes and
further growth in mobile volumes[1] where PayPoint acts as principal.
Cost of sales was £76.6 million (2006: £50.7 million), an increase of
51%, which is greater than the rate of increase in revenue because of
the increase in mobile top-ups where PayPoint is principal. Agents'
commission increased by 16% to £41.5 million (2006: £35.9 million),
which is at a lower rate than the increase in revenue mainly because
the growth in mobile was lower than the growth in other areas.
Depreciation and amortisation have increased to £2.6 million (2006:
£1.7 million) up 56% as a result of the terminal roll out,
refurbishment of our operations base in Welwyn Garden City and our
acquisitions.
Net revenue[2] of £34.2 million (2006: £25.8 million) was up 32%,
driven primarily by volume growth.
Gross profit improved to £27.3 million (2006: £20.3 million), 34%
ahead of the same period last year, with a gross margin of 26% (2006:
29%). The rate of increase in mobile top-ups in Ireland and
Romania[1] is greater than the rate of increase from other sources,
which depressed gross margin, mitigated by lower rates of increase in
other costs. Gross margin, excluding the cost of Irish and Romanian
mobile-top-ups[1] improved to 35% (2006: 33%).
[1] In Ireland and Romania, PayPoint is principal in the sale of
mobile top-ups and accordingly the face value of the top-up is
included in sales and the corresponding cost in cost of sales
[2] Net revenue is revenue less commissions paid to retail agents
and the cost of mobile top-ups where PayPoint is the principal
Operating costs (administrative expenses) have risen to £13.4 million
(2006: £10.0 million), an increase of 34%, the inclusion of
Metacharge, SECPay and Pay Store have accounted for 28% of the 34%
increase.
Operating profit was £13.9 million (2006: £10.4 million), up 35% with
an associated increase in operating margin[1] to 41% (2006: 40%).
Profit before tax was £14.5 million (2006: £11.0 million), up 32%.
The tax charge was £4.4 million (2006: £3.3 million) and the
effective tax rate was 30%.
Operating cash flow was £10.9 million including an inflow of £0.5
million of client cash[2] (2006: £12.1 million after an inflow of
£0.8 million in respect of client cash), reflecting strong conversion
of profit to cash. Capital expenditure of £1.9 million (2006: £5.6
million including the £3.4 million refurbishment of our operations
base
£3.4 million) reflected spend on new terminals, ATMs, and the
international processing platform.
Net interest received was £0.6 million (2006: £0.7 million) and
equity dividends paid were £6.2 million
(2006: £5.1 million).
Related party transactions
Related party transactions are disclosed in note 6.
Risks
Risks to PayPoint's business, financial condition or operations are
disclosed on page 17.
Dividend
The board have declared an interim dividend payable on 21 December of
5.3p per share (2006: 4.6p) to shareholders on the register at 30
November 2007.
Outlook
There is opportunity to grow revenue in the UK by increasing market
share in bill and general payments, mobile top-ups and ATMs and from
Post Office closures within the next year. We will continue to roll
out terminals in the UK next year. PayPoint will also continue its
focus in developing new markets including transport to drive
transaction volumes in the longer term as well as launching bill
payments in Romania and offering PPIPs to existing PayPoint clients.
Trading in the second half of the current year has started well with
October's results in line with management's expectations.
The directors are confident of continuing growth although the benefit
of the exclusivity of the TV licence contract from 1 August 2006 and
the extra week of trading will not be repeated in the second half and
the impact of the reductions, in the latter half of last year, in
domestic gas prices on prepay transaction volumes will be greater
than in the first half.
David Newlands Dominic Taylor
Chairman Chief Executive
21 November 2007
[1] Operating margin is operating profit as a percentage of net
revenue
[2] Client cash is held on behalf of clients where PayPoint has
title to the funds. An equivalent balance is included within trade
payables.
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
27 weeks 26 weeks year
ended ended ended
30 September 24 September 25 March
2007 2006 2007
Continuing operations Note £000 £000 £000
Revenue 2 103,950 70,974 157,068
Cost of sales 2 (76,645) (50,661) (111,068)
Gross profit 2 27,305 20,313 46,000
Administrative expenses (13,359) (9,950) (20,798)
Operating profit 13,946 10,363 25,202
Investment income 586 691 1,470
Finance costs (43) (38) (75)
Profit before tax 14,489 11,016 26,597
Tax 3 (4,353) (3,341) (7,859)
Profit for the period 10,136 7,675 18,738
Earnings per share
Basic 5 15.0p 11.3p 27.7p
Diluted 5 14.7p 11.2p 27.3p
CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME & EXPENSE
Unaudited Unaudited Audited
27 weeks 26 weeks year
ended ended ended
30 September 24 September 25 March
2007 2006 2007
Note £000 £000 £000
Exchange differences on 9 34 - -
translation of foreign
operations
Net income recognised 34 - -
directly in
equity
Profit for the period 10,136 7,675 18,738
Total recognised income and 10,170 7,675 18,738
expenses for the period
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
30 September 24 September 25 March
2007 2006 2007
Note £000 £000 £000
Non-current assets
Goodwill 26,256 - 18,207
Other intangible assets 3,222 - 2,839
Property, plant and equipment 13,428 13,383 11,844
Deferred tax asset 1,552 1,174 1,572
44,458 14,557 34,462
Current assets
Inventories 1,088 908 1,651
Trade and other receivables 25,431 12,238 20,671
Cash and cash equivalents 7 15,981 31,456 24,324
42,500 44,602 46,646
Total assets 86,958 59,159 81,108
Current liabilities
Trade and other payables 40,125 23,581 36,228
Current tax liabilities 4,858 3,361 4,115
Obligations under finance 156 - -
leases
45,139 26,942 40,343
Non-current liabilities
Other liabilities 274 396 392
274 396 392
Total liabilities 45,413 27,338 40,735
Net assets 41,545 31,821 40,373
Equity
Share capital 8 226 226 226
Share premium account - 23,976 -
Capital redemption reserve - 14,193 -
Investment in own shares 8 (935) (1) (1)
Share option and SIP reserve 8 1,789 1,110 1,712
Reserve for exchange 8 34 - -
differences
on translation of foreign
operations
Retained earnings 8 40,431 (7,683) 38,436
Total equity 9 41,545 31,821 40,373
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
27 weeks 26 weeks year
ended ended ended
Note 30 September 24 September 25 March
2007 2006 2007
£000 £000 £000
Net cash from operating 11 10,920 12,109 28,181
activities
Investing activities
Interest received 549 739 1,310
Purchase of property, plant (1,854) (5,645) (6,646)
and
equipment
Proceeds from disposal of 53 101 194
property, plant
and equipment
Acquisition of subsidiary 10 (8,219) - (19,754)
Purchase of own shares 6 (3,489) - -
Net cash used in investing (12,960) (4,805) (24,896)
activities
Financing activities
Repayments of obligations (144) (67) (67)
under finance
leases
Dividends paid (6,159) (5,076) (8,189)
Net cash used in financing (6,303) (5,143) (8,256)
activities
Net (decrease)/increase in (8,343) 2,161 (4,971)
cash and
cash equivalents
Cash and cash equivalents at 24,324 29,295 29,295
beginning
of period
Cash and cash equivalents at 15,981 31,456 24,324
end of
period
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Accounting policies
These financial statements have been prepared on a historical cost
basis and on the policies set out below.
Basis of preparation
The financial information contained in this report is unaudited, but
has been formally reviewed by the auditors and their report to the
Company is set out on page 18. The information shown for the 52 weeks
ended 25 March 2007, which is prepared under IFRS, does not
constitute statutory accounts within the meaning of section 240 of
the Companies Act 1985. The report of the auditors on the statutory
accounts for the year ended 25 March 2007, prepared under
International Financial Reporting Standards (IFRS), was unqualified
and did not contain a statement under section 237 of the Companies
Act 1985 and has been filed with the Registrar of Companies.
At the date of authorisation of these condensed financial statements,
the following standards and interpretations which have not been
applied in these condensed financial statements were in issue but not
yet effective:
IFRS 7: Financial Instruments: Disclosures
IFRS 8: Operating Segments
IFRIC 12: Service Concession Arrangements.
IFRIC 13: Customer Loyalty Programs
IFRIC 14: IAS 19 - The Limit on a Defined Benefit Asset, Minimum
Funding requirements and their Interaction
The directors do not anticipate that the adoption of these standards
and interpretations will have a material impact on the condensed
financial statements of the group. The condensed financial statements
are presented in pounds sterling because it is the currency of the
primary economic environment in which the group operates. The
directors consider that there are no critical accounting judgements
and key sources of estimation uncertainty in applying the group's
accounting policies.
2. Segmental reporting, net revenue analysis and gross throughput
(i) Segmental information
(a) Geographical segments. The group operates in the UK,
Republic of Ireland and Romania but the group has only one reportable
geographical segment as defined in International Accounting Standard
14 Segment Reporting due to the fact that principally all operations
occur in the UK.
(b) Classes of business. The group has one class of business,
being payment collection and distribution services.
(ii) Analysis of net revenues by sector, cost of sales and gross
throughput
Group revenue comprises the value of sales (excluding VAT) of
services in the normal course of business and includes amounts billed
to customers to be passed on to retail agents as commission payable,
the face value of mobile top-ups where PayPoint acts as principal and
for Metacharge, it includes external processing charges which are
amounts billed to merchants that are passed onto the acquiring bank.
Cost of sales includes the cost to the group of the sale, including
commission to retail agents and the cost of mobile top-ups where
PayPoint is the principal in the supply chain and acquiring bank
charges.
Revenue performance of the business is measured by net revenue which
is calculated as the total revenue from clients less commission
payable to retail agents, acquiring bank charges and the cost of
mobile top-ups where PayPoint is the principal in the supply chain.
Although there is only one class of business, since the risks and
returns are similar across markets in which the group operates, the
group monitors net revenue (see below) with reference to each sector.
Gross throughput represents payments made by consumers using the
PayPoint service, for bill and general payments, mobile top-ups
(including scratch cards), cash withdrawals from ATMs and the value
of transactions via the internet.
27 weeks 26 weeks Year ended
ended ended 25 March
30 September 24 September 2007
2007 2006 £000
£000 £000
Revenue - transaction processing 103,030 70,304 155,659
- lease rental of ATMs 920 670 1,409
Revenue 103,950 70,974 157,068
less:
Commission payable to retail (41,463) (35,886) (76,986)
agents
Cost of mobile top-ups as (26,688) (9,255) (21,050)
principal
Acquiring bank charges (1,618) - (1,333)
Net revenue 34,181 25,833 57,699
Net revenue by sector
Bill payments 13,644 11,399 25,737
Mobile top-ups 12,834 10,741 22,633
ATMs 3,275 2,730 5,751
Internet payments 3,124 - 1,623
Other 1,304 963 1,955
Net revenue 34,181 25,833 57,699
UK 32,709 25,455 56,757
International(1) 1,472 378 942
Net revenue 34,181 25,833 57,699
Profit and loss
Revenue 103,950 70,974 157,068
Cost of sales
Commission payable to retail (41,463) (35,886) (76,986)
agents
Cost o f mobile top-ups as (26,688) (9,255) (21,050)
principal
Acquiring bank charges (1,618) - (1,333)
Other (6,876) (5,520) (11,699)
Total cost of sales (76,645) (50,661) (111,068)
Gross profit 27,305 20,313 46,000
Gross throughput
Transactions via PayPoint 2,774,365 2,159,212 4,826,632
terminals, retailer
EPoS systems and sale of scratch
cards
Withdrawals via ATMs 167,961 144,398 293,287
Internet transactions 545,619 - 117,180
Gross throughput 3,487,945 2,303,610 5,237,099
(1) International consists of Ireland and Romania
3. Tax on profit of ordinary activities
27 weeks 26 weeks Year ended
ended ended 25 March
30 September 24 September 2007
2007 2006 £000
£000 £000
Current tax 4,373 3,331 7,935
Deferred tax (20) 10 (76)
Total 4,353 3,341 7,859
4. Dividend
The declared interim dividend is 5.3p (2006: 4.6p). The total
dividends in respect of the year ended 25 March 2007 were £9.3
million (13.7p per share).
The interim dividend was declared on 21 November 2007 and accordingly
has not been recorded as a liability as at 30 September 2007.
5. Earnings per share
(a) Basic and diluted earnings per share
The basic and diluted earnings per share are calculated on the
following profit and number of shares.
27 weeks 26 weeks Year ended
ended ended 25 March
30 September 24 September 2007
2007 2006 £000
£000 £000
Profit for the purposes of basic 10,136 7,675 18,738
earnings per
share being net profit
attributable to equity
holders of the parent and for
diluted earnings
Number of Number of Number of
shares shares shares
Weighted average number of 67,688,522 67,678,074 67,678,187
shares
(for basic earnings per share)
Potential dilutive ordinary 100,878 65,397 80,336
shares:
Deferred share bonus
Long term incentive plan 1,036,849 887,737 974,116
Diluted basis 68,826,249 68,631,208 68,732,639
6. Related party transactions
On 24 September the company released the first tranche of its Long
Term Incentive Plan awards to the three executive directors and six
senior managers. In order to satisfy the company's obligations,
Paypoint Network Limited Employee Investment Trust (The Trust)
acquired 424,052 ordinary shares at the mid market closing price of
597.5 pence per share, in aggregate £2,533,000, from RIT Capital
Partners and the Weinstock Estate (both of which are connected to
David Morrison, a non-executive director of the company). 156,348
shares were sold at 597.5 pence per share, in aggregate £934,000, by
participating directors and managers to the Trust. Accordingly, the
company has funded £3,467,000 (excluding £22,000 deal costs) for the
purchase of its own shares. The excess of the market value of the
shares acquired over their fair value at the date of grant of
£1,982,000 has been charged to reserves.
7. Cash and cash equivalents
Included within cash and cash equivalents is £7.8 million (September
2006: £6.4 million, March 2007: £7.3 million) relating to monies
collected on behalf of PayPoint clients where PayPoint has title to
the funds (client cash). An equivalent balance is included within
trade payables.
8. Share capital, share option and SIP reserve and retained earnings
27 weeks 26 weeks Year ended
ended ended 25 March
30 September 24 September 2007
2007 2006 £000
£000 £000
Authorised share capital
4,365,352,200 ordinary shares of 14,551 14,551 14,551
1/3 p each
Called up, allotted and fully
paid share
67,693,368 ordinary shares of 226 226 226
1/3 p each
Share option and SIP reserve
At start of period 1,712 738 738
Additions in period 628 372 974
Options exercised in period (551) - -
At end of period 1,789 1,110 1,712
Investment in own shares
At start of period (1) (1) (1)
Acquired in period (see note 6) (2,533) - -
Used on share scheme vesting 1,599 - -
At end of period (935) (1) (1)
Retained earnings
At start of period 38,436 (10,282) (10,282)
Profit for the period 10,136 7,675 18,738
Capital reduction - - 38,046
Undistributable reserves - - 123
Dividends paid (6,159) (5,076) (8,189)
Adjustment on share scheme (1,982) - -
vesting (see
At end of period 40,431 (7,683) 38,436
9. Statement of changes in equity
27 weeks 26 weeks Year ended
ended ended 25 March
30 September 24 September 2007
2007 2006 £000
£000 £000
Opening equity 40,373 28,850 28,850
Profit for the period 10,136 7,675 18,738
Dividends paid (6,159) (5,076) (8,189)
Investment in own shares (see (934) - -
note 6)
Adjustment on share scheme (2,533) - -
vesting (see
note 6)
Exchange differences on 34 - -
translation of
foreign operations
Additions to share option and 628 372 974
SIP reserve
Closing equity 41,545 31,821 40,373
10. Acquisition of subsidiary (Pay Store)
Book Fair
Value value
£000 £000
Net assets acquired
Property, plant and equipment 2,046 2,046
Trade and other receivables 2,309 2,309
Cash and cash equivalents 1,584 1,584
Trade and other payables (3,846) (3,846)
Intangible assets - 781
2,093 2,874
Goodwill 8,049
Total consideration 10,923
Satisfied by:
Cash 9,803
Deferred consideration 1,120
10,923
Net cash outflow arising on acquisition
Cash consideration 9,803
Cash and cash equivalents acquired (1,584)
8,219
On 15 May 2007, the company acquired 100% of the issued share capital
of Pay Store for cash consideration of £10.9 million (of which £1.1
million is payable 12 months after acquisition). A further ¤1 million
is either payable or recoverable 12 months after acquisition
dependent on the performance of the business.
The goodwill arising on the acquisition of Pay Store is attributable
to the expected profitability of the company.
Pay Store contributed £13.6 million revenue and a loss of £55,000 to
the group's profit before tax for the period between the date of
acquisition and the balance sheet date. If the acquisition of Pay
Store had been completed on the first day of the financial year, it
would have contributed £18.1 million to revenue and £104,000 to
profit attributable to equity holders of the parent.
11. Notes to the cash flow statement
27 weeks 26 weeks Year ended
ended ended 25 March
30 September 24 September 2007
2007 2006 £000
£000 £000
Operating profit 13,946 10,363 25,202
Adjustments for:
Depreciation on property, plant 2,244 1,691 3,603
and
equipment
Amortisation of intangibles 399 - 212
Increase in share option and SIP 77 372 974
reserve
Loss on disposal of property, - 67 -
plant and
equipment
Operating cash flows before 16,666 12,493 29,991
movements in working capital
Decrease/(increase) in 872 211 (532)
inventories
(Increase)/decrease in (2,300) (126) 788
receivables
Increase/(decrease) in payables
- client cash 451 780 1,105
- other payables (1,037) 611 2,866
Cash generated by operations 14,652 13,969 34,218
Corporation tax paid (3,732) (1,822) (6,007)
Interest and commitment fees - (38) (30)
paid
Net cash from operating 10,920 12,109 28,181
activities
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
a) the condensed set of financial statements has been prepared in
accordance with IAS 34;
b) the business review includes a fair review of the information
required by Disclosure and Transparency Rules (DTR) 4.2.7R
(indication of important events during the first six months and
description of principal risks and uncertainties for the remaining
six months of the year) ; and
c) the business review includes a fair review of the information
required by DTR 4.2.8R (disclosure of related party transactions and
changes therein).
By order of the board
David Newlands Dominic Taylor
Chairman Chief Executive
21 November 2007
RISKS
PayPoint's business, financial condition or operations could be
materially and adversely affected over the remaining six months by
the risks summarised below. Although management takes steps to
mitigate risks where possible or where the cost of doing so is
reasonable in relation to the probability and seriousness of the
risk, it may not be possible to avoid crystallisation of some or all
of such risks:
+-------------------------------------------------------------------+
| Risk | Future prospects depend on our |
| | ability to: |
| | |
|---------------------------+---------------------------------------|
| Managing growth of the | manage growth through the employment |
| business | of adequate skilled resources, whilst |
| | maintaining financial controls |
| | |
|---------------------------+---------------------------------------|
| The loss of a major | renew contracts at expiry (over the |
| contract | next six years) on attractive terms |
| | |
|---------------------------+---------------------------------------|
| Dependence on key | retain and recruit key staff through |
| executives | a mixture of basic salary, short and |
| | long-term incentive schemes |
| | |
|---------------------------+---------------------------------------|
| Failure of systems | maintain financial controls, defend |
| | against natural disasters, terrorist |
| | attacks, sabotage and hacking |
| | |
|---------------------------+---------------------------------------|
| Competition | hold and gain market share, |
| | particularly in commodity services |
| | such as mobile top-ups |
| | |
|---------------------------+---------------------------------------|
| Insolvency of a major | avoid the consequences of insolvency |
| multiple retail agent | both in terms of bad debt risk (where |
| | we bear it) and the impact of such |
| | insolvency on our network coverage |
| | |
|---------------------------+---------------------------------------|
| Technological changes | keep pace with technological changes |
| | and introduce new developments to |
| | maintain competitive advantage |
| | |
|---------------------------+---------------------------------------|
| Reliance on intellectual | stop third parties from using our |
| property | products and defend the use of our |
| | products from any challenge |
| | |
|---------------------------+---------------------------------------|
| The need to raise capital | access future capital needs on |
| in future | sufficiently attractive terms to grow |
| | the business profitably |
| | |
|---------------------------+---------------------------------------|
| Economic, political, | to deal with the impact of such |
| legislative, taxation or | changes without adversely affecting |
| regulatory changes | the growth or profitability of the |
| | business |
| | |
|---------------------------+---------------------------------------|
| Taxation | ensure the impact of any adverse |
| | changes is mitigated by enhanced |
| | performance |
| | |
|---------------------------+---------------------------------------|
| Fraudulent or criminal | avoid loss of client monies by the |
| activity | rigorous application of controls |
| | |
+-------------------------------------------------------------------+
INDEPENDENT REVIEW REPORT TO PAYPOINT PLC
We have been engaged by the company to review the condensed set of
financial statements in the half-yearly financial report for the
period ended 30 September 2007 which comprises the income statement,
the balance sheet, the statement of recognised income and expense,
the cash flow statement and related notes 1 to 11. We have read the
other information contained in the half-yearly financial report and
considered whether it contains any apparent mis-statements or
material inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements 2410 issued by the
Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to
them in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review work,
for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has
been approved by, the directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the
Disclosure and Transparency Rules of the United Kingdoms' Financial
Services Authority.
As disclosed in note 1, the annual financial statements of the group
are prepared in accordance with IFRS as adopted by the European
Union. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with
International Accounting Standard 34, Interim Financial Reporting, as
adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the
condensed set of financial statements in the half-yearly financial
report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on
Review Engagements (UK and Ireland) 2410, Review of Interim Financial
Information Performed by the Independent Auditor of the Entity issued
by the Auditing Practices Board for use in the United Kingdom. A
review of interim financial information consists of making inquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland)
and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Review conclusion
Based on our review, nothing has come to our attention that causes us
to believe that the accompanying interim financial information is not
prepared, in all material respects, in accordance with International
Accounting Standard 34 as adopted by the European Union and the
Disclosure and Transparency Rules of the United Kingdom's Financial
Services Authority.
Deloitte & Touche LLP
Chartered Accountants
21 November 2007
London, UK
Notes: A review does not provide assurance on the maintenance and
integrity of the website, including controls used to achieve this,
and in particular on whether any changes may have occurred to the
financial information since first published. These matters are the
responsibility of the directors but no control procedures can provide
absolute assurance in this area. Legislation in the United Kingdom
governing the preparation and dissemination of financial information
differs from legislation in other jurisdictions.
PayPoint plc
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
Registered office 1 The Boulevard
Shire Park
Welwyn Garden City
Hertfordshire
AL7 1EL
United Kingdom
Registered in England and Wales number
3581541
Registrars Capita Registrars
Registration Services
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
West Yorkshire
HD8 0LA
Telephone
0870 162 3100
Press and investor Finsbury
relations enquiries Tenter House
45 Moorfields
London
EC2Y 9AE
Telephone No. 020 7251 3801
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