PayPoint Plc: Preliminary Results Year ended 31 March 2021

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PayPoint Plc
Preliminary Results
Year ended 31 March 2021

Transformative year for the PayPoint Group with significant step change in strategic delivery

Restated1

Year ended 31 March 2021

2021

2020

Change

Revenue from continuing operations

£127.7m

£144.3m

(11.5)%

Net revenue from continuing operations2

£97.1m

£106.8m

(9.1)%

Operating margin from continuing operations before exceptional items3

38.0%

47.2%

(9.2)ppts

Profit before tax from continuing operations4

£19.4m

£50.0m

(61.1)%

Profit before tax from discontinued operations

£7.6m

£6.8m

10.8%

Underlying profit before tax from continuing operations5

£35.5m

£44.1m

(19.3%)

Diluted earnings per share

31.3p

66.3p

(52.8)%

Diluted earnings per share from continuing operations4

21.9p

58.1p

(62.3)%

Ordinary dividend paid per share

31.2p

47.2p

(34.0)%

Additional dividend paid per share

-

36.8p

-

Ordinary reported dividend per share

32.2p

39.2p

(17.9)%

Final dividend

16.6p

15.6p

6.4%

Cash generation6

£52.2m

£66.4m

(21.4)%

Cash generation from continuing operations

£44.1m

£57.9m

(23.8)%

Net corporate debt7

£(68.2)m

£(12.0)m

(465.8)%

Cash and cash equivalents

£64.8m

£93.8m

(30.9)%

KEY HEADLINES

  • Transformative year for the Group with significant step change in strategic delivery and a solid financial performance against the backdrop of Covid-19

  • Strategic repositioning of the business for growth driven through acquisitions of Handepay/Merchant Rentals, i-movo, RSM 2000 and investments in our core UK market

  • Disposal of Romanian business completed on 8 April 2021, with proceeds of £48 million, including a full year trading performance of £7.6 million profit before tax

  • Enlarged PayPoint Group now delivering a broader range of innovative services and technology connecting millions of consumers with an expanded universe of over 60,000 retailer partner and SME locations across multiple sectors

  • Full ownership of Collect+ secured in April 2020, establishing a technology-based delivery platform to deliver best-in-class customer journeys for e-commerce brands and their customers and expand our consumer Send service

  • Major client relationships renewed and expanded to digital services with contract renewal programme now complete

  • Strengthened the proposition for clients and retailer partners, improved engagement and service to deliver better value and support to customers, and identified new areas of growth in our core UK market

  • Strong transaction growth in card payment, eMoney and parcels reflecting the PayPoint Group’s position to take advantage of the trends accelerated through Covid-19, including the continued shift from cash to digital payments, the growing demand for online shopping fulfilment and the increase in shopping local

  • Provision of £12.5 million made as current best estimate for a resolution of Ofgem’s Statement of Objections

  • Final dividend declared of 16.6p, an increase of 6.4%, reflecting our long-term confidence in the business

Nick Wiles, Chief Executive of PayPoint plc, said:

“This has been an exceptional year for PayPoint in which we have delivered a step change in our strategy while responding to the impact of Covid-19 on the business, our clients, retailer partners and their customers. This has required huge commitment and adaptability from everyone in the business to respond to these challenging circumstances and I would like to thank the team for their hard work throughout the year in supporting our clients, retailer partners and the communities they serve.

Against the background of delivering a solid financial performance for the year, we have been focused on delivering a step change in our strategic delivery through making the necessary business acquisitions and investments to strengthen our capabilities, broaden our retailer proposition, improve engagement and service quality for our clients and retailers and identify new areas of growth in our core UK market. We have made positive progress in this transformation of the business with more to achieve in the year ahead to strengthen our platform and maximise the opportunities available.

Further to our announcement on 30 September 2020, we continue to consider our response with respect to Ofgem’s provisional views set out in its Statement of Objections. In accordance with IFRS, the Board has made a provision of £12.5 million as a current best estimate for a resolution of this matter.

While early in the year, we are already seeing some encouraging signs of continuing renewed activity in a number of areas of our business, in particular in card processing and parcels. We are also encouraged by the early performance and rapid integration of i-movo and Handepay/Merchant Rentals into the PayPoint business and the new opportunities arising from the recently completed acquisition of RSM 2000. I am confident the steps we have taken during the financial year have strengthened the business and better positioned us for both recovery in our legacy businesses and growth in our developing markets. As a result, we are confident in the business delivering further progress in the year ahead as we take advantage of the accelerated growth opportunities across our key markets.”

FINANCIAL HIGHLIGHTS

  • Net revenue from continuing operations of £97.1 million (2020: £106.8 million) decreased by 9.1% on a reported basis, driven by the impact of Covid-19 on UK bill payments, ATM and parcels, and partially offset by growth in UK card payments, eMoney and service fees. The prior year included £3.8 million net revenue from the British Gas contract now ended; excluding this expected impact, net revenue from continuing operations decreased by £5.9 million. Revenue from continuing operations decreased by £16.6 million (11.5%) to £127.7 million (2020: £144.3 million) with the ending of the British Gas contract contributing £6.1 million of the decrease

  • Exceptional items of £16.1 million includes expenses relating to acquisitions and refinancing and a provision of £12.5 million made in relation to Ofgem’s Statement of Objections. The provision is our current best estimate for a resolution of this matter

  • Profit before tax from continuing operations of £19.4 million (2020: £50.0 million), decreased by £30.6 million. This reflects the decrease in net revenue from continuing operations and £16.1 million of exceptional items

  • Profit before tax from discontinued operations of £7.6 million (2020: £6.8 million) increased by £0.8m driven by margin improvement in bill payments and top-ups

  • Underlying profit before tax from continuing operations of £35.5 million, which excludes exceptional items (2020: £44.1 million) decreased by 19.3%. The prior year underlying profit has been adjusted to exclude the impact of the British Gas contract which ended in December 2019, the prior year variable pay benefit from the decision to cancel management bonuses and release of share based payment accruals

  • Underlying total costs from continuing operations8 of £61.6 million (2020: £58.9 million) increased by 4.6%. This includes £2.0 million of costs associated with Handepay/Merchant Rentals and i-movo since acquisition. Excluding these associated costs, underlying total costs from continuing operations have increased £0.7 million or 1.1%

  • Net corporate debt9 of £68.2 million (2020: £12.0 million) reflects the impact of the strategic acquisitions made in the year. This includes corporate cash balances of £18.3 million and borrowings of £86.6 million from the revolving credit facility, term loan and block loans as of 31 March 2021. This was also prior to the benefit of the £48m proceeds from the disposal of our Romanian business, completed shortly after year end. The Romanian business generated a full year trading performance of £7.6 million profit before tax

  • Final ordinary dividend of 16.6 pence per share (2020: 15.6 pence per share) declared, representing an increase of 6.4%. The dividend will be paid to shareholders in equal instalments of 8.3 pence per share on 29 July 2021 and 30 September 2021. The additional dividend programme ended in the prior year

OPERATIONAL HIGHLIGHTS

Strategic repositioning of the business for growth driven through acquisitions and investments in core UK market

  • Enlarged PayPoint Group now delivering broader range of innovative services and technology connecting millions of consumers with an expanded universe of over 60,000 retailer partner and SME locations across multiple sectors

  • Acquisition of Handepay and Merchant Rentals, completed in February 2021, creates national card payments business with over 30,000 SME customers and reach into food services, garages and hospitality sectors

  • Completion of i-movo acquisition in November 2020, enhances our EPoS proposition with its leading secure digital voucher platform, creating new opportunities with Newspaper, Government, FMCG, Utilities and banking clients

  • Full ownership of Collect+ secured in April 2020, establishing a technology-based delivery platform to deliver best-in-class customer journeys for e-commerce brands and their customers and a platform for Send service expansion

  • RSM 2000, acquired in early April 2021, enhances our digital payments capability, bringing strategic Direct Debit platform, adding innovative mobile payment products and enabling reach into new sectors, including charities, not-for-profit organisations, events and SMEs in the UK

  • Disposal of Romanian business to Innova Capital completed on 8 April 2021, underpinning UK-focused strategy

Strong progress against strategic priorities, delivering growth and unlocking incremental opportunities

1. Embed PayPoint at the heart of convenience retail

  • PayPoint One sites increased by 1,707 to 17,805 since 31 March 2020

  • PayPoint card payments transactions grew significantly by 53.8% to 210.4 million, benefiting from the increase in convenience store sales and the preference of consumers and stores for paying by card

  • Good progress on enhancing our retailer proposition to increase footfall, revenue opportunities, service and engagement with our retailer partners through a number of important initiatives ready to launch in 2021, including FMCG proposition that uses digital vouchering, digital screen advertising, sales data, and PayPoint’s retailer engagement channels, to drive in-store activity and execution

  • Home delivery proposition on target for launch in Summer 2021, in partnership with Snappy Shopper, fulfilling customer orders from partnered stores with home delivery and click and collect

  • Strengthened EPoS adoption and support to retailers through the Try Before You Buy initiative in Q2 2020

  • Driven significant improvements in retailer partner experience, including introduction of Retail Services Hub to align retailer-facing service resource, new phone system enabling improvement in calls answered to 97% and improved Trustpilot score of 4.8/5

  • Positive progress on our banking proposition with our pioneering LINK Counter Service ‘cashback without purchase’ solution – trial now extended till October 2021, with legislation now implemented enabling full rollout across the retail network in late 2021

2. PayPoint becomes the definitive parcel point solution

  • 10,509 live parcel sites as of 31 March 2021 – increase of 1,863 sites since 31 March 2020

  • Good growth in transaction volumes to 26.6 million, an increase of 8.3% year on year (2020: 24.5 million), in spite of the impact of lockdowns earlier in the year

  • Three new partnerships successfully launched with DPD, Hubbox and Parcels2Go, adding to comprehensive portfolio of leading e-commerce brands, including Amazon, eBay, DHL, Yodel and Fedex

  • Secured full ownership of Collect+ in April and new Collect+ website launched, giving control of consumer experience as well as a platform for Send service expansion

  • Investment in 3,600 Zebra thermal printers yielded improved customer experience and transaction growth – 32% of returns (351k transactions) were printed in store in March 2021 with 52% of those transactions using the new technology

  • Send service, enabling customers to send parcels from our network, successfully launched in March 2021, with supporting marketing trial in progress in Manchester – early interest and volumes promising in first few weeks

3. Sustain leadership in ‘pay-as-you-go’ and grow digital bill payments

  • Major relationships renewed and expanded to digital services with client contract renewal programme now complete – 36 renewals completed in the period, including EON, securing multiple year commitments and delivering a broader range of services from our MultiPay digital payments portfolio

  • Continued diversification from cash to digital solutions - 34 new clients signed, with 23 coming from non-energy sectors and 8 taking digital payments solutions, including Nursing and Midwifery Council, BBC TV Licensing and Curo Group

  • Continued strong growth in eMoney, with transactions increasing by 24.9% and a 25.8% increase in net revenue

  • Continued demand for our Cash Out service due to ongoing Government meal voucher schemes and Covid-19 related hardship funds, supporting local authorities and charities in the rapid disbursement of emergency funds

Several MultiPay product portfolio enhancements launched in year, including Direct Debit, PayByLink (reducing collections payment friction and debt management support via personalised SMS reminders containing a payment link) and Event Streamer (enabling view of live cash transactions in real-time in MultiPay platform, alongside other digital payments channels)

4. Building a delivery focused organisation and culture

  • Good progress on integration of Handepay, Merchant Rentals and i-movo acquisitions, with work well underway for RSM2000 acquisition completed on 12 April 2021

  • Executive Board strengthened to deliver growth and focus on UK market

  • Number of internal promotions within the business to strengthen our efforts on retailer partner product delivery and IT

  • Alan Dale was appointed to the Board as Finance Director on 20 November 2020, after acting as Interim Finance Director since July 2020

  • Rosie Shapland was appointed to the Board as an Independent Non-Executive Director and assumed chairmanship of the Audit Committee from 1 December 2020

  • Greater focus on systems resilience and service delivery to support our clients, retailer partners and consumers

  • Next phase of CRM now fully rolled out to Contact Centre, enabling ‘single customer view’ of retailer, enhanced retailer experience and Salesforce Maps functionality now being rolled out to optimise field team journeys and productivity

Responding to the structural changes in our legacy markets and the impact of Covid-19

Going into the 2020/21 financial year, management recognised the need to reposition the business in response to the impact of structural changes in our traditional legacy markets. In addition to the full year impact from the loss of the British Gas contract (£3.8m), the business faced the impact of declining bill payment transactions, rate reductions to a number of energy client contracts on renewal and the long-term decline of cash usage, with its effect on our ATM business and more broadly across bill payments, a trend accelerated during the early days of Covid-19. Our response has been to:

  • strengthen our relationships and broaden our digital payments solutions for our core energy clients

  • broaden our digital payment offer and capabilities into non-energy sectors, including housing and local authorities

  • expand our cash through to digital payment capabilities and proposition, including Direct Debit and card payments

  • revitalise and enhance our service and retailer proposition through a combination of targeted acquisition and investment

  • establish Collect+ as the pre-eminent technology-enabled e-commerce delivery platform

  • optimise our ATM estate and develop new innovative ‘access to cash’ solutions, such as the LINK Counter Service

  • broaden our retailer proposition to deliver increased value to our retailer partners, through initiatives such as launching new eMoney partnerships and developing home delivery and FMCG propositions

Our resilient service delivery and solid trading performance through Covid-19 was delivered through a proactive network and product recovery following the first lockdown, which was then sustained over later national lockdowns, and supported by our resilient, sustainable operating model, as evidenced by the tables below. Digital payments (eMoney) grew strongly and card payments have continued their strong performance with transactions in the fourth quarter 33.6% above the comparative period, benefitting from the broader consumer shift from cash to card and to more local shopping. After the first quarter, parcel volumes maintained year-on-year increases throughout the rest of the financial year. In the first month of the current financial year, we are seeing encouraging signs of continuing renewed activity in our card payment, parcel and ATM businesses.

Service

Q1 20/21 vs 19/20
% increase/ (decrease)

Q2 20/21 vs 19/20
% increase/ (decrease)

Q3 20/21 vs 19/20
% increase/ (decrease)

Q4 20/21 vs 19/20
% increase/ (decrease)

UK bill payment transactions10

(25.0%)

(18.7%)

(25.3%)

(23.7%)

UK mobile top-up transactions

(20.0%)

(19.0%)

(16.9%)

(16.6%)

UK eMoney transactions

12.4%

18.4%

25.8%

41.4%

ATM transactions

(30.3%)

(19.2%)

(23.1%)

(24.3%)

Card payment transactions11

80.3%

57.7%

46.2%

33.6%

Parcel transactions

(13.0%)

7.5%

6.6%

33.8%


Sites temporarily suspended
due to Covid-19

As at 31 March 2020

As at 30 June 2020

As at 30 September 2020

At 31 December 2020

As at 31 March 2021

UK PayPoint One

328

79

29

44

46

UK ATMs

283

212

26

108

124

UK Card payments2

293

47

15

23

26

UK Parcels

208

87

18

36

42

Well ahead of the first national lockdown, we had swiftly moved to a revised operating model combining remote working, some essential office-based activity and continued field-based support for our retailer partners. The safety of our people was paramount, along with actively minimising any disruption to services and the support provided to clients, consumers and retailer partners. PayPoint has not furloughed any of its employees or accessed any of the available government assistance, instead focusing on tight cost management and deployment of resources, as well as suspending annual salary reviews and cancelling management bonuses for the previous financial year. Following the completion of the acquisition of Handepay/Merchant Rentals, we brought back their employees from furlough in March 2021 to return to sales activity and customer support.

The resilient performance of the business through the pandemic was further underpinned by a series of proactive initiatives to support clients, retailer partners and consumers. These included launching a partnership with Deliveroo to give our retailer partners the capability to deliver goods to their local communities, the PayPoint Retailer Heroes awards recognising retailers who had gone above and beyond to support consumers through the pandemic, the waiving of service fees for stores closed due to Covid-19, the postponement of the annual RPI service fee increase and a £25,000 contribution to the NFRN Covid-19 Hardship Fund, helping retailers adversely affected by Covid-19.

We believe as a result of our recognition and response to the structural changes in our traditional legacy markets, the business is now positioned with stronger and more relevant capabilities to deliver growth and take advantage of the enduring trends that have accelerated through Covid-19, including the continued shift from cash to digital payments, the growing demand for e-commerce fulfilment and the increase in shopping local.

Enquiries

PayPoint plc

Finsbury (telephone: 0207 2513 801)

Nick Wiles, Chief Executive (Mobile 07768 636 801)

Rollo Head

Alan Dale, Finance Director (Mobile: 07778043962)

Nidaa Lone

(Email: Paypoint@finsbury.com)

A presentation for analysts is being held at 9.30am today, 27 May 2021, via webcast. This announcement is available on the PayPoint plc website: corporate.paypoint.com

CHAIRMAN’S STATEMENT

2020 was my first year as Chairman of the PayPoint Group and also one of the toughest years the business has ever faced. I am delighted with the way the management team led by Nick Wiles and all the employees of the Group have responded to the challenges of the global pandemic, to be reporting a solid performance despite the challenges and to have delivered great progress against our strategic objectives.

Governance

I am pleased to report that for the year under review, we have consistently applied the Principles of good governance contained in the 2018 UK Corporate Governance Code. The Board has this year begun to review the disclosures and management of climate related risks in readiness for the Task Force on Climate-Related Financial Disclosures. Full disclosure in accordance with those new regulations will be provided in our 2022 Annual Report.

Board succession

As announced earlier in the year, Nick became our Chief Executive in May, Alan Dale was appointed Finance Director in November, having acted as Interim Finance Director since July 2020 and Rakesh Sharma took over the role of Senior Independent Director from myself in May 2020. In addition, we welcomed Rosie Shapland, who joined the Board, in October 2020, as an Independent Non-Executive Director assuming the role of Chair of the Audit Committee in December 2020.

We have also seen some changes in the members of our Executive Board this year. We have welcomed Tanya Murphy, General Counsel and Head of Compliance; Ben Ford, Retail Services Director;; Mark Latham, Card Services Director, following our acquisition of Handepay/Merchant Rentals; and more recently Simon Coles, Chief Technology Officer

Board Evaluation

Our 2020 evaluation of the Board, its committees and individual Directors was externally facilitated by Oliver Zeihn of Lintstock Ltd. We are pleased to receive external confirmation that our Board and committees continue to operate effectively.

Annual General Meeting

The Company’s Annual General Meeting will be held at PayPoint’s registered office on 21 July 2021 where you will have the opportunity to meet the Board and members of the Executive Board. The matters to be approved by shareholders is set out in our Notice of Annual General Meeting which will be mailed to shareholders towards the end of June.

Ofgem Statement of Objections

On 30 September 2020, we announced that we had received a Statement of Objections from Ofgem setting out its provisional views that PayPoint infringed competition law through entering into certain contractual terms with certain energy suppliers and retailers for the provision of payment services to prepayment energy customers. We are considering Ofgem’s provisional views set out in the Statement of Objections. In accordance with IFRS, the Board has made a provision of £12.5 million as a current best estimate for a resolution of this matter.

If you wish to discuss any aspect of our governance arrangements, please contact me via our Company Secretary, Sarah Carne via email at sarahcarne@paypoint.com.

Giles Kerr
Chairman
26 May 2021

CHIEF EXECUTIVE’S REVIEW

This has been a transformative year for the PayPoint Group with a significant step change in strategic delivery and a resilient performance delivered across the business against the backdrop of Covid-19 government restrictions and structural changes to our traditional legacy cash business. Operationally, we have remained focused on managing our business by supporting our people, our clients and retailer partner network and the most vulnerable in the community. In addition, we have taken important steps to strengthen our operating model and organisational structure and to identify and support growth opportunities in our core UK business.

In spite of the challenges faced in the past year, the overall performance of the Group has been driven by our robust, agile response to Covid-19, focused on customer support, service development and enabling our people to work successfully and productively. After a challenging first quarter, this approach yielded a swift transaction and site recovery as government restrictions eased after the first lockdown and learnings were successfully applied to minimise the impact of further lockdowns in the year, which is testament to the focus and dedication of the whole business.

We have made good progress against our strategic priorities: embedding PayPoint at the heart of convenience retail; becoming the definitive parcels solution; sustaining leadership in ‘pay as you go’ and growing digital bill payments and building a delivery-focused organisation and culture. During the year, we have made a number of important steps to underpin this strategy through the acquisition of i-movo, Handepay/Merchant Rentals and RSM 2000 and securing full ownership of Collect+. In addition, we announced the successful disposal of our Romanian business in early April for a total consideration (including the trading profit for the year) of £48 million.

These steps, together with our internal investment plans, reinforce the focus on our UK markets and our confidence in the accelerated growth opportunities we see for the business.

The Executive Board has also been strengthened in key areas to deliver growth and focus on the UK market: Ben Ford, joined as Retail Services Director in July 2020; Tanya Murphy joined as General Counsel and Head of Compliance in September 2020; Mark Latham, joined as Card Services Director in February 2021 following the completion of the Handepay/Merchant Rentals acquisition; and Simon Coles, our Chief Technology Officer since 2017, has now joined the Executive Board. Our Environment, Social and Governance (ESG) agenda has also gathered pace in the year, as we consider our social responsibility and impact as a management team and business towards each of these key areas. Already, we have done important work to deliver a refresh of our purpose, vision and values, reflecting the enlarged PayPoint Group and how we deliver innovative, sustainable services and value for all our stakeholders. There is more for us to do in the year ahead in developing our overall ESG strategy and to ensure its principles are embedded in our strategy and value creation.

On 30 September 2020, we announced that we had received a Statement of Objections from Ofgem setting out its provisional views that PayPoint infringed competition law through entering into certain contractual terms with certain energy suppliers that confer exclusivity to PayPoint for the provision of payment services to prepayment energy customers in combination with exclusivity in retailer arrangements. Ofgem’s findings in the Statement of Objections are provisional and Ofgem states that no conclusion should be drawn that there has been an infringement at this stage. We are considering Ofgem’s provisional views set out in the Statement of Objections and based on the range of potential outcomes in such proceedings, we believe there will likely be a future outflow of funds in the next financial year. Our current best estimate for a resolution of this matter is £12.5m and we have accordingly made a provision for this in the current year. This estimated provision is not an admission of liability in relation to Ofgem’s provisional views in the Statement of Objections.

We are now much better positioned for growth and to take advantage of the enduring structural trends that have accelerated through the Covid-19 pandemic, including the continued shift from cash to digital payments, the growing demand for online shopping fulfilment and the increase in shopping local.

Outlook and dividend

As we begin the new financial year, we are already seeing some encouraging signs of continuing renewed activity in a number of areas of our business, in particular in card processing and parcels. We are also encouraged by the early performance and rapid integration of i-movo and Handepay/Merchant Rentals into the PayPoint Group and the new opportunities arising from the recently completed acquisition of RSM 2000. I am confident the steps we have taken during the 20/21 financial year have strengthened the business and better positioned us for both recovery in our legacy businesses and growth in our developing markets. As a result, we are confident in the business delivering further progress in the year ahead in response to the accelerated growth opportunities across our key markets

The Board has proposed a final dividend of 16.6p per share, an increase of 6.4%, consistent with our dividend policy of a target cover range of 1.2 to 1.5 times earnings, which reflects our long-term confidence in the business, the strength of our underlying cash flow and the enhanced growth prospects from the steps we have taken in the past year. In determining the level of dividend, the Board has sought to ensure a prudent level of earnings coverage for the dividend and to ensure that leverage is not substantially increased even in a scenario whereby the trading patterns seen through the pandemic period continue until the end of December 2021.

Nick Wiles
Chief Executive
26 May 2021

MARKET OVERVIEW

Changing market dynamics are creating significant opportunities for PayPoint, with the business uniquely placed to take advantage of the continued shift from cash to digital payments, the growing demand for online shopping fulfilment and the increase in shopping local.

Key trends and changes since the end of the 19/20 financial year in the UK markets in which PayPoint operates include:

Convenience retail

  • The UK convenience sector has been one of the main beneficiaries of the increase in shopping local through Covid-19, with consumers choosing to stay closer to home, avoid busier stores and support businesses in their local community

  • PayPoint consumer research12 shows two in three people said their local convenience store has become more important to them over the past 12 months and 22% relied on their local convenience store to supply essentials unavailable elsewhere (e.g. supermarkets) during lockdown. 27% will continue to do more local shopping as restrictions ease

  • Total UK convenience sector is expected to have grown by £3.8bn in 2020, a 9.2% increase on 201913

  • PayPoint One basket data shows overall convenience store average basket spend has grown by 10% in 2020, with a peak of £8.43 in December 202014

  • Total UK convenience store numbers remained resilient, with marginal growth to 47,000 and numbers of independently-owned stores gaining 3% in the year15

Card payments

  • Growth in this sector has again been driven by the shift from cash to card payments accelerated by Covid-19

  • Forecast growth in UK debit card market by 2027 to 19.7bn payments, with 36% contactless16

  • In FY 20/21, PayPoint has seen card payment volume increase by 53.8% year on year

  • UK convenience store card payments transactions overall increased by 27.2%17

Cash Out

  • Despite the shift from cash usage during Covid-19, PayPoint’s Cash Out service has grown significantly year on year, driven by ongoing Government meal voucher schemes and Covid-19 related hardship funds

  • LINK’s ATM transactions declined by 46%18 year on year to c100 million transactions and the number of ATMs in the UK reduced by 12% year on year to 53,216 in the latest data from February 2021

  • Some sites with multiple ATMs have closed one or more ATMs to aid social distancing

  • Access to cash remains a key priority in the UK. The FCA (Financial Conduct Authority) and PSR (Payment Services Regulator) are taking a joint approach to maintaining services for the many people who continue to rely on cash as a vital way of making payments, despite the changes brought by Covid-19. In April 2021, an amendment to the Financial Services Bill was supported by the Government enabling the full rollout of the LINK Counter Service with PayPoint in late 2021, providing cashback without purchase for consumers. PayPoint will be playing an active role in the provision of this service through its extensive network

Parcels

  • Overall online sales increased during the first lockdown in 2020, with overall volumes up by 45% in April and May 202019, particularly in electronics, leisure equipment and grocery, as consumers were restricted at home. The full year growth rate for 2020 was up 35% year on year

  • Collect+ share of the pick-up and drop-off (PUDO) market grew in the year, experiencing a faster recovery than the broader PUDO/out of home market due to the non-fashion focus of new carrier partners like eBay and increase in convenience store footfall. Transactions were up 33.8% year on year in Q4 20/21

  • Latest data20 shows that 87% of UK consumers have shopped more online during the pandemic, with 71% having returned a product. Delivery preference is key in the e-commerce journey, with 56% considering it the most important factor when shopping online. Home delivery is still the preferred channel for 82% of consumers, with PUDO at 8% and lockers at 2%

  • The PUDO market comprises Click and Collect, returns and send propositions. The Click and Collect market is 11% of all volumes, c.150 million parcels per year and is expected to double by 202521. Returns and send volumes are estimated at c.185 million and c.380 million parcels per year respectively22

Bill payments and top-ups

  • The price cap for pre-pay customers reduced to £1,164 for the six months to September 2020. This is 6%23 lower than the cap set in September 2019. This reduced further to £1,070 in the six months from October 2020 to March 2021. From 1 April 2021, the price cap increased to £1,138 for the six months to September 2021

  • Non-Big Six energy providers combined market share increased marginally to c29%24

  • The rollout of smart meters has slowed further with the impact of Covid-19 impacting installations with only 3.2m meters installed in 202025 versus 4.5m in 2019. The deadline for completion of the rollout has now been extended to 30 June 2025

  • PayPoint data shows average transaction values for dual fuel had grown to £13.60 in December 2020, from £12.54 in the previous year, affecting frequency of visits and transaction volumes

  • The number of PAYG mobile subscribers declined by 7% to 23.1 million subscribers26 in September 2020, from 24.9 million in 2019

PROGRESS AGAINST OUR STRATEGIC PRIORITIES

PayPoint is well placed to take advantage of the trends that have accelerated over the past financial year due to Covid-19, including the continued shift from cash to digital payments, the growing demand for online shopping fulfilment and the increase in shopping local.

Our core strategic priorities for the business are:

1. Embed PayPoint at the heart of convenience retail
2. PayPoint becomes the definitive parcel point solution
3. Sustain leadership in ‘pay-as-you-go’ and grow digital bill payments
4. Building a delivery focused organisation and culture

During the past year, we have taken a number of important steps to underpin this strategy through the acquisition of i-movo, Handepay/Merchant Rentals and RSM 2000, gaining full ownership of the Collect+ brand and the disposal of our Romanian business. The enlarged PayPoint Group now delivers a broader range of innovative services and technology connecting millions of consumers with an expanded universe of over 60,000 retailer partner and SME locations across multiple sectors.

  • As the UK’s leading secure digital vouchering system, i-movo enhances our EPOS, terminal services and digital vouchering proposition and creates new opportunities with Newspaper, Government, FMCG, Utilities and banking clients

  • Our acquisition of Handepay/Merchant Rentals, completed in February 2021, creates a national card payments business with over 30,000 SME customers and reach into food services, garages and hospitality sectors. Merchant Rentals also brings terminal leasing opportunities within the sectors we serve

  • RSM 2000, acquired in early April 2021, enhances our digital payments capability, bringing strategic Direct Debit platform, adding innovative mobile payment products and enabling reach into new sectors, including charities, not-for-profit organisations, events and SMEs in the UK

  • Full ownership of Collect+ secured in April 2020, establishing a technology-based delivery platform to deliver best-in-class customer journeys for e-commerce brands and their customers, and enabling further partner and store expansion, direct ownership of consumer interactions and a platform for Send service expansion

  • We believe the sale of our Romanian business is well timed, delivering a strong profit on its disposal and ahead of the next stage of development and investment in this business

These steps, together with our internal investment plans, underpin the focus on our UK markets and our confidence in the accelerated growth opportunities we see for the business.

Progress against the core strategic priorities is set out below:

PRIORITY 1: EMBED PAYPOINT AT THE HEART OF CONVENIENCE RETAIL

PayPoint continues to provide digital solutions, technology, payment services, increased footfall and basket spend to our retailer partners. Our UK network of more than 28,000 stores is bigger than all banks, supermarkets and Post Offices together, putting us at the heart of communities nationwide and comprising the best multiple, symbol and independent retailers in the UK. Our superior network means 99.4% of the urban population live within one mile of a PayPoint retailer partner and 98.3% of the rural population live within five miles.

Our network is enabled with technology designed to create a platform for growth and provide retailer partners with everything a modern convenience store needs. Core to this priority is PayPoint One, which includes EPoS and bill payment functionality, and other products such as card payments and ATMs. More broadly, we also provide card payments services to thousands of growing SMEs across the hospitality, auto trade, clothing and households goods sectors.

FY 20/21 Progress

PayPoint One

  • PayPoint One sites increased by 1,707 to 17,805 since 31 March 2020, including 282 fewer Covid-19 suspended sites

  • Service fee net revenue increased by 11.5% to £14.6 million (2020: £13.1 million) driven by the roll out of PayPoint One to additional sites, an increase in Core and Pro sites and despite no Retail Price Index increase in the year

  • The PayPoint One average weekly service fee per site increased by 5.8% to £16.3 since 31 March 2020, benefiting from the increase in Core and Pro sites which are charged at a higher rate. EPoS Pro and Core sites increased by 402 and 1,351 respectively since 31 March 2020, mainly due to new sales, the EPoS Try Before You Buy initiative and Covid-19 suspended sites returning

  • Good progress on enhancing our retailer proposition to increase footfall, revenue opportunities, service and engagement with our retailer partners through a number of important initiatives now ready to launch in 2021, including FMCG proposition that uses digital vouchering, digital screen advertising, sales data, and PayPoint’s retailer engagement channels, to drive in-store activity and execution; delivering better retailer and consumer engagement for brands, and commercial rewards and incentives for retailers

  • Driven significant improvements in retailer partner experience through several initiatives over the year that have contributed positively to our retailer partner NPS – introduction of Retail Services Hub to align retailer-facing service resource; new CRM functionality giving single customer view; new phone system enabling improvement in call answered to 97%; same day resolution targets introduced for retailer queries and first event driven surveys tracking satisfaction at key moments of truth e.g. installation of technology

  • Strengthened EPoS adoption and support to retailers through the Try Before You Buy initiative in Q2 2020

  • Home delivery and click and collect proposition developed and ready for launch in Summer 2021, in partnership with Snappy Shopper, fulfilling customer orders from partnered stores with home delivery

ATM

  • ATM services were live in 3,626 sites at 31 March 2021, an increase of 6 sites since 31 March 2020, with Covid-19 suspended sites decreasing by 159. However, 124 sites continued to remain suspended as at 31 March 2021, particularly in non-convenience store locations unable to re-open due to ongoing government restrictions

  • ATM net revenue decreased by 17.9% to £9.7 million (2020: £11.9 million) due to a 24.3% reduction in transactions, mainly due to the continuing trend of reduced demand for cash across the economy and the impact of Covid-19

  • Positive progress on our banking proposition with our pioneering LINK Counter Service ‘cashback without purchase’ solution The trial was launched in October 2020 and has now been extended to October 2021, with legislation now implemented enabling full rollout in late 2021. The trial, partnering with LINK, provides cash withdrawals over the counter without a purchase in communities with limited access to cash and has been well received by industry, Government bodies and consumers. Since launch across 12 locations, c.11,000 withdrawals have been made with £750k dispensed

Card Services:

  • PayPoint card payments transactions grew significantly by 53.8% to 210.4 million and PayPoint card payments net revenue increased by 39.1% to £12.1 million, benefiting from the increase in convenience store sales and the preference of stores to take payment by card. Handepay/Merchant Rentals contributed a further £2.5m card payments net revenue for the two months since acquisition

  • PayPoint card payment services were live in 9,930 sites at 31 March 2021, an increase of 495 sites since 31 March 2020, mainly due to new sales and Covid-19 suspended sites returning. The average transaction value for the year increased to £12.40 (2020: £11.96), driven by the increase in contactless limit to £45 in 2020 along with the increasing average basket size in the convenience sector. Handepay card payment services were live in 18,805 sites at 31 March 2021

  • Use of PayPoint’s card payments net settlement functionality continues to grow and is now active in 1,602 sites, an increase of 1,245 sites since 31 March 2020

PRIORITY 2: PAYPOINT BECOMES THE DEFINITIVE PARCEL POINT SOLUTION

Collect+ is our technology-based platform to deliver best-in-class customer journeys for e-commerce brands and their customers over the ‘first and last mile’, supported by an extensive parcel pick-up and drop-off network, which comprises over 10,500 sites. We provide a footfall driver for retailer partners and a solution for carriers, including Amazon, eBay, DHL, DPD, Fedex, Hubbox, Parcels2Go and Yodel. Delivering high levels of consumer satisfaction with a Trustpilot rating of 4.5/5, our offering enables our carrier partners to improve service levels for their consumers in the crucial ‘last mile’ of deliveries, balancing the continued growth in online retail shopping with the realities of operating in a competitive low-margin market.

FY 20/21 Progress

  • 10,509 live parcel sites as of 31 March 2021 – increase of 1,863 sites since 31 March 2020 driven by new carrier partners and Covid-19 affected sites re-opening

  • Good growth in transaction volumes to 26.6 million, an increase of 8.3% year on year (2020: 24.5 million), in spite of the impact of lockdowns earlier in the year

  • Net revenue declined by 10.1% year on year, with overall transaction increases diluted by lower margin from our print in store service

  • Three new partnerships successfully launched with DPD, Hubbox and Parcels2Go, adding to the comprehensive portfolio of e-commerce brands serviced by our first and last mile technology-enabled delivery platform – Amazon, eBay, DHL, Yodel and Fedex

  • Secured full ownership of Collect+ in April 2020, maintaining Yodel as key carrier partner and enabling further partner and store expansion

  • New Collect+ website launched – secures control and ownership of store locator, consumer experience and online parcel tracking, as well as a platform for our Send service and further integrations with our carrier partners

  • Investment in 3,600 Zebra thermal printers yielded improved customer experience and transaction growth – 32% of returns (351k transactions) were printed in store in March 2021 (March 2020: 6%) with 52% of those transactions using the new printer technology, highlighting growing popularity and consumer demand for the service

  • Send service successfully launched in March 2021, with supporting marketing trial in progress in Manchester – early interest and volumes have been promising

  • Parcels Operational Support Team now fully integrated into the wider Retail Services function, with retailer and carrier partners seeing improved response times

PRIORITY 3: SUSTAIN LEADERSHIP IN ‘PAY-AS-YOU-GO’ AND GROW DIGITAL BILL PAYMENTS

PayPoint is pioneering new ways of using digital payments so organisations can seamlessly and effectively serve their customers. Our market-leading omnichannel solution – MultiPay – is an integrated solution offering a full suite of digital payments. It enables transactions online and through smartphone apps and text messages, as well as over the counter, over the phone and via interactive voice response (IVR) systems. It also supports a full range of Direct Debit options, including scheduling collections, as well as new product developments such as PayByLink, recurring payments and Event Streamer.

Over-the-counter payments remain an important part of the UK economy, particularly for the 8 million UK consumers who rely on using cash for payments27. We will continue to retain our leadership in this area, through our superior retail network, coverage and service proposition. This business remains highly cash generative and enables us to invest in future growth and innovation

FY 20/21 Progress

Major relationships renewal programme complete and expanding to digital services:

  • Major client contract renewal programme now complete – 36 renewals completed in the period, including EON, securing multiple year commitments and delivering a broader range of services from our MultiPay digital payments portfolio

  • Continued diversification from cash to digital - 34 new clients signed, with 23 coming from non-energy sectors and 8 taking digital payments solutions, including Nursing and Midwifery Council, BBC TV Licensing, Curo Group

  • Key multiple retailer contracts renewed - McColl’s, Sainsburys, EG Group, CJ Lang (Spar) and several regional Co-ops (Southern, Mid-Counties, East of England, Lincolnshire) contract renewals signed, reflecting the strength of our proposition and the ongoing quality and prominence of our network

Digital payments growth and expanding portfolio:

  • Continued strong growth in eMoney, with transactions increasing by 24.9% and a 25.8% increase in net revenue

  • BBC TV Licensing app was launched, generating strong volumes since launch

  • Continued demand for our Cash Out service, with transactions increasing 80.4% year on year, due to ongoing Government meal voucher schemes and Covid-19 related hardship funds

  • Several MultiPay product portfolio enhancements launched in year, including Direct Debit, PayByLink (reducing collections payment friction via personalised SMS reminders containing a payment link) and Event Streamer (enabling view of live cash transactions in real-time in MultiPay platform, alongside other digital payments channels)

Overall performance:

  • UK top-up transactions reduced by 18.2% due to further declines in the prepaid mobile sector, Covid-19 impacts and higher average transaction values

  • Bill payments net revenue decreased by 29.3% on a reported basis, or by 23.4% excluding the £3.8 million prior year net revenue from British Gas. Excluding British Gas, transactions decreased by 23.4%. This was primarily due to the impacts of Covid-19, where consumers are making fewer and larger payments, structural changes in this market and the reduced energy price cap which came into effect on 1 October 2020

  • As expected, MultiPay net revenue decreased by 5.0%, driven by the anticipated lower volumes from Utilita as they move customers to their in-house solutions

PRIORITY 4: BUILDING A DELIVERY FOCUSED ORGANISATION AND CULTURE

Underpinning PayPoint’s future success is the continued development and investment in our people, systems and organisation with the aim to create an efficient and high performance based culture with a focus on empowerment, engagement and customer service.

FY 20/21 Progress

  • Good progress on integration of Handepay/Merchant Rentals and i-movo acquisitions, with work well underway for RSM 2000 acquisition completed on 12 April 2021

  • Executive Board strengthened to deliver growth and focus on UK market:

    • Ben Ford, joined as Retail Services Director in July 2020 to lead our retail proposition, servicing and engagement strategy;

    • Tanya Murphy, joined as General Counsel and Head of Compliance in September 2020 to lead on legal and regulatory matters across the group;

    • Mark Latham, joined as Card Services Director in February 2021, following the completion of the Handepay/Merchant Rentals acquisition, to lead our card services business and strategy;

    • Simon Coles, our Chief Technology Officer since 2017, has now joined the Executive Board, to lead our systems and technology strategy

  • Alan Dale was appointed to the Board as Finance Director on 20 November 2020, after acting as Interim Finance Director since July 2020

  • Rosie Shapland was appointed to the Board as an Independent Non-Executive Director and became Chair of the Audit Committee from 1 December 2020

  • Greater focus on systems resilience and service delivery to support our clients, retailer partners and consumers

  • Next phase of CRM now fully rolled out to Contact Centre, enabling ‘single customer view’ of retailer, enhanced retailer experience and Salesforce Maps functionality now being rolled out to optimise field team journeys and productivity

  • In-house warehouse operations extended to products and consumables, giving complete control of experience and key moments of retailer lifecycle

STRATEGY, BUSINESS DIVISIONS AND PRIORITIES FOR 2021/22

After a transformational year for the PayPoint Group, we are now much better positioned for growth in the UK with significant opportunities to deliver shareholder value as we maximise the opportunities available to the business. The enlarged PayPoint Group delivers a broader range of innovative services and technology connecting millions of consumers with an expanded universe of over 60,000 retailer partner and SME locations across multiple sectors.

What is now clear is that we are developing a strong portfolio of brands and businesses within the PayPoint Group, supporting our clients and retailer partners with innovative solutions and product offerings. As the business develops further in the year ahead, the intention is to develop these brands and businesses into different sizes of network within this expanded universe.

As we look to the future, and given the expansion and enhancement of the PayPoint Group’s capabilities, we will be updating how we describe and report on the business to reflect more accurately the market opportunities and service innovation driving growth in the UK. An outline of the reshaped business is provided below and this will be expanded on in greater detail at a Capital Markets Day later in the year:

PayPoint Group – what we do

We deliver innovative services and technology connecting millions of consumers with over 60,000 retailer partner and SME locations

Our three business divisions driving growth:

1. Payments & Banking

What we do:

We help consumers conveniently make and receive payments online and in-store for the biggest service brands in the UK

How we do it:

  • Digital - we are developing new ways of using digital payments so organisations can seamlessly and effectively serve their customers. Our market-leading omnichannel solution – MultiPay – is an integrated solution offering a full suite of digital payments. It enables transactions online and through smartphone apps and text messages, as well as event payments, over the counter, over the phone and via interactive voice response (IVR) systems. It also supports a full range of Direct Debit options, including scheduling collections, as well as new product developments such as PayByLink, recurring payments and Event Streamer. MultiPay customers benefit from real-time visibility of all payments received, through one easy-to-use portal that is fully PCI compliant, and allows visibility of all payment channels - including cash. The platform is used by a growing number of organisations across the UK, including many housing associations, local government authorities and utility providers. Our Cash Out service also enables the rapid dispersal of funds through secure digital channels and is actively used by local authorities and charities to distribute emergency funds

  • Cash to digital – we enable consumers to access digital brands and services through a comprehensive portfolio of banking, e-Commerce, gaming and loyalty card partners, including Amazon, Xbox, Playstation, Paysafe, Monzo and the Appreciate Group. Consumers simply pay for a ‘pin on receipt’ code in cash in any of our 28,000 retail locations and then can use that value online with the digital brand or service chosen. For our digital banking partners, consumers can deposit cash into their accounts across our extensive retail network

  • Cash - we provide vital access to cash across the UK by helping millions of people every week control their household finances, make essential payments and access in-store services. Our UK network of more than 28,000 stores is bigger than all banks, supermarkets and Post Offices together, putting us at the heart of communities nationwide

2. Shopping

What we do:

We enhance the retailer proposition and consumer experience, driving footfall, new commission opportunities and better store management tools for thousands of SMEs and retailers across the UK

How we do it:

  • Retail services

    • We provide digital solutions to help our retailer and SME partners keep pace with changing shopper needs, service expectations and demographics. Our retail services platform, PayPoint One, is live in over 17,800 stores across the UK and offers everything a modern convenience store needs, including EPoS, parcel services, card and bill payments, home delivery and digital vouchering. This empowers our retailer partners to achieve higher footfall and increased spend so they can grow their businesses profitably.

    • We also provide access to cash solutions via our network of circa 3,600 ATMs and our pioneering ‘cashback without purchase’ solution, partnering with LINK and due to launch in late 2021

  • Card payments – we provide card payments services for over 30,000 retailer partners and SMEs across the hospitality, convenience retail, garages, clothing and households goods sectors via our PayPoint, Handepay and Merchant Rentals brands.

3. E-Commerce

What we do:

We provide a technology-based platform to deliver best-in-class customer journeys for e-commerce brands and their customers over the ‘first and last mile’

How we do it:

  • E-Commerce – we enable the delivery of best-in-class customer journeys for e-commerce brands over the first and last mile in circa 10,000 locations through our Collect+ brand, helping consumers pick up and drop off online shopping or send parcels across the UK. We work with the most comprehensive range of partners, including Amazon, eBay, Yodel, Fedex, DPD, DHL, Hubbox and Parcels2Go. Our proprietary software solutions are built in-house, with a singular focus on the delivery of great consumer experiences and confidence in the crucial first and last mile of parcel journeys. These solutions are easily deployable in thousands of diverse locations across multiple sectors through the PayPoint Group. Our unique blend of in-depth parcel operations experience, consumer interaction and agile IT development capability has been built over years of delivering best-in-class customer experiences.

PRIORITIES FOR 2021/22

To further reflect this positioning of the PayPoint Group, we are also making some adjustments to how we describe our strategic priorities to more accurately reflect the opportunities we see across the markets we serve. The priorities are as follows:

  1. Embed PayPoint Group at the heart of SME and convenience retail businesses (Shopping business division)

  2. Become the definitive technology-based e-commerce delivery platform for first and last mile customer journeys (E-commerce business division)

  3. Sustain leadership in ‘pay as you go’ and grow digital payments (Payments & Banking business division)

  4. Building a delivery focused organisation and culture (PayPoint Group)

Priority 1: Embed PayPoint Group at the heart of SME and convenience retail businesses (Shopping business division)

FY 21/22 Priorities

  • Embed the combined and restructured sales teams across PayPoint, focused on new business and retailer relationship development

  • Invest to deliver further enhancements to our retailer proposition, including: launch FMCG proposition (combining digital vouchering, digital screen advertising, sales data, and PayPoint’s retailer engagement channels); develop commercial rewards and incentives for retailers; launch new eMoney clients offering richer retailer commission, including Love2Shop

  • Continue to strengthen EPoS adoption and support to retailers

  • Develop next generation terminal strategy to deliver an easy-to-use platform built for future service and product developments

  • Home delivery and click and collect rollout in Summer 2021, in partnership with Snappy Shopper

  • Card Services:

    • Bring all new business across PayPoint retail and Handepay under a single acquiring service provider, delivering commercial, operational and proposition enhancements

    • In PayPoint retail, launch a switching proposition in Q2 to assist customers switching to us from other providers. Deliver additional value enhancing services such as a faster settlement option

    • Drive additional value from existing introducer relationships in Merchant Rentals and sign new introducer partnerships. Extend supplier agreements to cover other key service providers

  • LINK Counter Service – support extended trial to 31 October 2021 and commence deployment of a scaled solution from November 2021, working with LINK and their member base, providing access to cash and supporting Government initiatives

  • Retailer Experience – launch of our Retailer Services Hub as a central resource to service our retailer partners, with a view to opening new channels to serve our retailers in 21/22. Continue to deliver transformation programme on how we partner, communicate and support our retailers, continually improving the retailer experience when connecting with any team within PayPoint and leveraging investment in technology and Salesforce CRM

Priority 2: Become the definitive technology-based e-commerce delivery platform for first and last mile customer journeys (E-commerce business division)

FY 21/22 Priorities

  • Scale our Send service in H1 21/22, supported by significant marketing investment plan

  • Add further partners in 2021 in time to ensure BAU for Peak trading volumes

  • Expand service proposition to existing partners, including staged send and in-store printing leveraging Zebra printer investment in 20/21, for example, DHL will be able to offer Print in Store returns from May 2021 across 3,000 sites

  • Deliver further improvements to in-store consumer and retailer partner experience, including enhanced StoreScan app to replicate all terminal functionality and proactive inventory management ahead of Peak 2021

Priority 3: Sustain leadership in ‘pay as you go’ and grow digital payments (Payments & Banking business division)

FY 21/22 Priorities

  • Leverage the RSM 2000 acquisition with enhanced digital payments capability and new sector reach, including investment to enhance Direct Debit platform capability

  • Invest in new verticals and deliver new business wins, particularly within housing, events, charities and not-for-profit sectors:

    • Clear plan to be finalised by June 2021 to grow Events proposition beyond current base into larger opportunities, such as sporting events

    • Develop plan to leverage PayPoint’s digital payments capability in charity and not-for-profit sector

  • Creation of a bid management team focussing on larger and more complex tenders centred around digital payments

  • Launch comprehensive digital payments offering by the end of the calendar year to develop further our MultiPay product, including Open Banking capability, and grow a strong order book of customers

  • Continue to diversify and secure broader opportunities beyond ‘pay as you go’ with existing clients, including the RSM 2000 portfolio

Priority 4: Building a delivery focused organisation and culture (PayPoint Group)

FY 21/22 Priorities

  • Deliver synergies and growth opportunities through integrating acquisitions of Handepay, Merchant Rentals, i-movo and RSM 2000

  • Embed new PayPoint Group purpose and values across business and further develop ESG approach to deliver responsible and sustainable value for shareholders

  • Implement a smooth and effective return to office for our people, that blends the benefits of face to face interaction with working flexibly

  • Continue pace of change and investment required to reposition our business in response to changes in our markets and the needs of our clients, retailer partners and consumers

  • Invest to build further resilience into our service delivery, including improving quality and speed of agile delivery, reviewing ‘heritage’ systems and settlement infrastructure, enhancing customer support, accelerating cloud data centre strategy and maintaining Salesforce CRM now fully adopted across the business

KEY PERFORMANCE INDICATORS

PayPoint Group has identified the following KPIs to measure progress of business performance:

KPI

Description, purpose and reference

2020/21

2019/2028

2018/191

Overall performance





Net revenue from continuing operations
(£ million)
(UK)

Revenue from continuing operations less commissions paid to retailers and the cost of top-ups and SIM cards where PayPoint is principal. This reflects the benefit attributable to PayPoint’s performance eliminating pass-through costs and is an important measure of the overall success of our strategy.

(See Financial review – ‘Overview’ on page 17)

97.1

106.8

103.6

Operating margin from continuing operations before exceptional items
(%)
(UK)

Operating profit from continuing operations before exceptional items as a percentage of net revenue. Operating margin provides a broad overview of the efficient and effective management of the cost base enabling shareholder returns and investment in the business.

(See Financial review – ‘Operating margin’ on page 22)

38.0

47.2

46.5

Cash generation
(£ million)
(UK)

Earnings from continuing operations before exceptional items, tax, depreciation and amortisation adjusted for corporate working capital movements (excludes movement in clients’ funds and retailers’ deposits). This represents the cash generated by operations which is available for investments, capex, taxation and dividend payments.

(See Financial review – ‘Cash flow and liquidity’ on page 22)

52.2

66.4

62.8

Shareholder returns

Diluted earnings per share from continuing operations
(Pence)
(UK)

Diluted earnings from continuing operations 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.

(See note 8 to the financial information on page 42)

21.9

58.1

57.5

Dividends paid per share
(Pence)
(Group)

Dividends (ordinary and additional) paid during the financial year divided by number of ordinary shares in issue at reporting date. Dividends paid per share provides a measure of the return to shareholders.

(See Financial review – ‘Dividends’ on page 23)

31.2

84.0

82.9

Non-financial





Network stability
one-mile urban population cover
(%)

Total urban population covered within a one-mile radius of a PayPoint site. This is monitored to ensure PayPoint are above our minimum SLA of 95%.

99.4

99.5

99.5

Network stability
five-mile rural population cover
(%)
(UK)

Total rural population covered within a five-mile radius of a PayPoint site. This is monitored to ensure PayPoint are above our minimum SLA of 95%.

98.3

98.3

98.5

Retailer partner site churn
(%)
(UK)

The % of the retailer partner network, that on an annual basis, exits PayPoint. This is calculated by taking the number of retailers who exited PayPoint in the period (excluding suspended sites), divided by the average number of total UK retailer partner sites for the period. This tracks the movement in total UK retailer partner sites.

3.6

8.4

5.2

Employee engagement
(%)
(UK)

Measures the overall employee engagement of our UK population, calculated by our survey provider. The 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.

77.0



68.0

69.0

FINANCIAL REVIEW

OVERVIEW

Restated29





£m

Year ended
31 March
2021

Year ended
31 March
2020

Change
%

Net revenue30

Continuing operations

UK retail services

45.0

41.0

9.8%

UK bill payments and top-ups

52.1

65.8

(20.8%)

97.1

106.8

(9.1%)

Discontinued operation

Romania

15.3

14.6

4.8%

Total net revenue

112.4

121.4

(7.4%)

Total costs from continuing operations (excluding exceptional costs)31

61.5

56.8

8.3%

Total costs from discontinued operation

7.8

7.8

(1.3%)

Exceptional costs

16.1

-

Profit before tax

27.0

56.8

(52.5%)

Profit before tax from continuing operations

19.4

50.0

(61.1%)

Profit before tax from discontinued operation

7.6

6.8

10.8%

Underlying profit before tax from continuing operations32

35.5

44.1

(19.3%)

Cash generation33

52.2

66.4

(21.4%)

Cash generation from continuing operations

44.1

57.9

(23.8%)

Net corporate debt34

(68.2)

(12.0)

(465.8%)

In addition to the impacts from a number of headwinds and Covid-19, the above results reflect a number of corporate changes within the Group and some exceptional costs. The Romanian business has been sold and has been classified as a discontinued operation whilst the results of i-movo have been included from December 2020 and Handepay/Merchant Rentals from February 2021. A reconciliation of profit before tax from continuing operations to underlying profit before tax from continuing operations is provided on page 18 to aid clarity on performance.

Profit before tax from continuing operations of £19.4 million (2020: £50.0 million) decreased by £30.6 million (61.1%). This reflects the one-off expected prior year £3.8 million impact of the British Gas contract which ended in December 2019, the £2.1 million prior year variable pay benefit and £16.1 million current year exceptional costs which includes £3.6 million of expenses relating to the acquisitions and refinancing and a £12.5 million provision made in relation to the Ofgem Statement of Objections. Adjusting for these items, underlying profit before tax from continuing operations of £35.5 million (2020: £44.1 million) decreased by £8.5 million (19.3%).

Revenue from continuing operations decreased by £16.6 million (11.5%) to £127.7 million (2020: £144.3 million) with the ending of the British Gas contract contributing £6.1 million of the decrease. Net revenue from continuing operations decreased by £9.7 million (9.1%) to £97.1 million (2020: £106.8 million) including the £3.8 million British Gas impact. Underlying net revenue from continuing operations, which excludes the £3.8m British Gas impact, decreased by £5.9 million (5.7%) to £97.1 million (2020: £103.0 million). This was driven by headwinds of structural changes and margin pressure on UK bill payments and impacts of Covid-19 on UK bill payments, ATM and parcels. These were partially offset by growth in UK card payments, eMoney and service fees and acquisitions.

UK retail services net revenue increased by £4.0 million (10.6%) but was impacted by Covid-19 with a number of sites temporarily closed and consumer behaviour affecting volumes. PayPoint card payments net revenue increased by £3.4 million (39.1%) due to a significant increase in transactions (53.8%) with consumers using cards rather than cash due to Covid-19. Handepay/Merchant Rentals contributed a further £2.5m card payments and terminal leasing net revenue for the two months since acquisition. Service fees net revenue increased by £1.5 million (11.5%) driven by additional sales of PayPoint One and despite PayPoint not implementing the annual RPI increase to help retailer partners. ATM net revenue decreased by £2.2 million (17.9%) due to a reduction in transactions driven by the continuing trend of reduced demand for cash across the economy, accentuated by Covid-19, and the temporary closure of some sites due to Covid-19. Parcels and other net revenue decreased by £1.2 million (16.3%), impacted by Covid-19 reducing demand with consumers at home and, although overall transactions increased, these were diluted by lower margin from our print in store service transactions.

UK bill payments and top-ups net revenue of £52.1 million decreased by £13.7 million (20.8%) which included the £3.8 million impact of the British Gas contract which ended in December 2019. UK bill payments (including Mulitpay) net revenue decreased by £14.3 million (31.5%), or £10.5 million (25.4%) on an underlying basis (excludes the £3.8 million prior period net revenue from British Gas), due to the headwinds of structural changes and margin pressure and impacts of Covid-19, where consumers made less frequent and larger payments. MultiPay net revenue decreased by £0.3 million (6.8%) driven by a decrease in transactions due to Utilita moving customers to their own in-house app. UK top-ups and eMoney net revenue increased by £0.8 million (5.0%) with £1.8 million (25.8%) growth in e-money partially offset by £1.0 million (10.4%) decline in top-ups from Covid-19 and the continuing structural declines in the prepaid mobile sector.

Net revenue from the discontinued operation (Romania) increased by £0.7m (4.8%) to £15.3 million (2020: £14.6 million) through margin improvement in bill payments and top-ups.

Total costs from continuing operations of £61.5 million increased by £4.7 million (2020: £56.8 million). Underlying total costs, which exclude the £2.1 million prior year variable pay benefit, increased by £2.6 million (2020: £58.9 million) which was mainly driven by the additional cost base in relation to the newly acquired businesses, higher depreciation and amortisation (arising from investment in our back-office systems and the Collect+ brand asset) and higher finance costs due to use of the finance facility in case of Covid-19 impacts, partially offset by lower other costs of revenue associated with transaction volumes.

Total costs from the discontinued operation remained stable at £7.8 million, with higher administrative costs offset by lower depreciation and amortisation in the current year on assets classified as held for sale.

Exceptional costs of £16.1 million, which are one-off, non-recurring and do not reflect current operational performance, consisted of £2.8 million acquisition costs, £0.8 million refinancing costs on renewing and increasing our financing facilities to £107.5 million and the £12.5 million provision made in relation to the Ofgem Statement of Objections.

Reconciliation from profit before tax from continuing operations to underlying profit before tax from continuing operations





£m

Year ended
31 March
2021

Year ended
31 March
2020

Profit before tax from continuing operations

£19.4m

£50.0m

Adjusted for:

Current year exceptional costs – administrative expenses

£3.1m

-

Current year exceptional costs – finance costs

£0.5m

-

Current year provision in relation to the Ofgem Statement of Objections

£12.5m

-

Prior year variable pay benefit

-

(£2.1m)

Prior year net revenue from British Gas contract

-

(£3.8m)

Underlying profit before tax from continuing operations

£35.5m

£44.1m

Underlying performance measures allow shareholders to better understand the underlying operational performance in the year. Prior year underlying profit before tax has been restated to exclude the variable pay benefit, as last year it was disclosed as a one-off benefit, and exclude the profit from the British Gas contract ending, as it was the largest contract in the business and this impact makes it more difficult to assess trends in financial performance.

Cash generation remained strong with £52.2 million (2020: £66.4 million) delivered from profit before tax of £27.0 million (2020: £56.8 million). There was a net working capital inflow of £0.8 million primarily benefiting from the VAT deferral offered by HMRC. Tax payments were lower than the prior year due to HMRC having brought payments on account forward by six months in the prior year. Dividend payments were lower compared to the prior year due to the end of the additional dividend programme.

Net corporate debt increased by £56.2 million to £68.2 million (2020: £12.0 million) due to the acquisitions made in the current year. At 31 March 2021 loans and borrowings were £86.6 million (2020: £70.0 million) which included £4.6 million of asset financing from the Merchant Rentals acquisition. New increased financing facilities were put in place in February 2021 to support the acquisition programme whilst the disposal of the Romanian business completed on 8 April 2021 and so the £48.3 million proceeds are not reflected in the year end numbers. The proceeds were used to reduce net debt.

SECTOR ANALYSIS

UK retail services

UK retail services are 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, ATMs, parcels, terminal leasing and SIMs.

Year ended
31 March 2021

Year ended
31 March 2020

Change %

PayPoint terminal sites (No.)

PayPoint One35

17,805

16,098

10.6%

Legacy (T2)

1,441

2,496

(42.3%)

PPoS36

8,821

8,235

7.1%

Total sites in PayPoint Network

28,067

26,829

4.6%

Services in live sites (No.)

PayPoint One Base

8,258

8,304

(0.6%)

EPoS Core

8,307

6,956

19.4%

EPoS Pro

1,240

838

48.0%

Card payments - PayPoint

9,930

9,435

5.2%

Card payments – Handepay

18,805

-

-

Card terminal lessees – Merchant Rentals

26,017

-

-

ATMs

3,626

3,620

(0.2%)

Parcels

10,509

8,646

21.5%

Transactions (Millions)

Card payments – PayPoint

210.4

136.8

53.8%

Card payments – Handepay (two months)

14.6

-

-

ATMs

30.6

40.4

(24.3%)

Parcels

26.6

24.5

8.3%

PayPoint One average weekly service fee per site (£)

16.3

15.4

5.8%

Net revenue (£m)

Service fees

14.6

13.1

11.5%

Card payments – PayPoint

12.1

8.7

39.1%

Card payments – Handepay (two months)

1.5

-

-

Card terminal lessees – Merchant Rentals (two months)

1.0

-

-

ATMs

9.7

11.9

(17.9%)

Parcels

3.6

4.0

(10.1%)

Other

2.5

3.3

(24.1%)

Total net revenue (£m)

45.0

41.0

10.6%

As at 31 March 2021, PayPoint had a live terminal in 28,067 UK sites (2020: 26,829 sites), an increase of 4.6% from 31 March 2020, primarily as a result of new sales and temporarily suspended sites due to Covid-19 returning to the network. PayPoint One sites increased by 10.6% to 17,805 sites (2020: 16,098 sites) since 31 March 2020 due to installs and 282 fewer Covid-19 suspended sites.

The following table shows the impact of Covid-19 on services provided in sites:

Sites temporarily suspended
due to Covid-19

As at 31 March 2020

As at 30 June 2020

As at 30 September 2020

At 31 December 2020

As at 31 March 2021

UK PayPoint One

328

79

29

44

46

UK ATMs

283

212

26

108

124

UK Card payments37

293

47

15

23

26

UK Parcels

208

87

18

36

42

Net revenue increased by £4.0 million (10.6%) to £45.0 million (2020: £41.0 million). The net revenue of each of our key products is separately addressed below.

Service fees: This is a core growth area and consists of service fees from PayPoint One and our legacy terminal. Service fee revenue increased by £1.5 million (11.5%) to £14.6 million (2020: £13.1 million) driven by 1,707 additional PayPoint One sites since 31 March 2020, with increases in the higher price point EPoS Core and Pro sites. EPoS Core and Pro sites increased by 1,351 and 402 respectively since 31 March 2020, due to new sales, the EPoS Try Before You Buy trial and Covid-19 suspended sites returning. The PayPoint One average weekly fee per site increased by 5.8% to £16.3 (2020: £15.4), benefiting from the increase in EPoS Core and Pro sites which are charged at a higher rate and despite PayPoint not implementing the annual RPI increase to help retailer partners in the Covid-19 pandemic. Retailers taking the Core version of the product represent 46.7% (2020: 43.2%) of all PayPoint One sites and the Pro version represent 7.0% (2020: 5.2%). Legacy terminals now just remain in our multiple retailer partners.

Card payments: PayPoint card payments transaction volumes increased significantly by 53.8% to 210.4 million (2020: 136.8 million) benefiting from consumers using cards rather than cash due to Covid-19, with the preference of stores to take payment by card, and the increase in the contactless payment limit. Across our network there were 9,930 (2020: 9,435) PayPoint card payments sites, 495 sites more than the prior year due to new sales and Covid-19 suspended sites returning. PayPoint card payments net revenue increased by 39.1% to £12.1 million (2020: £8.7 million), this includes the £0.4 million impact of a goodwill gesture to retailer partners following a card services outage.

The new acquisitions of Handepay and Merchant Rentals generated £2.5m net revenue for the two months since acquisition. Handepay contributed £1.5 million from card payments and still had 10.4% of its SME partners not transacting at year end due to Covid-19. Merchant Rentals contributed £1.0 million from its terminal leasing business.

ATMs: ATM net revenue decreased by £2.2 million (17.9%) to £9.7 million (2020: £11.9 million) due to a 24.3% reduction in transactions to 30.6 million (2020: 40.4 million). This is attributable to a combination of the continued reduced demand for cash across the economy, accentuated by the Covid-19 preference for card use, and suspended sites from Covid-19. ATM sites remained stable at 3,626 sites (2020: 3,620 sites) with 159 fewer Covid-19 suspended sites. PayPoint continued to optimise its ATM network by relocating existing machines to better performing locations.

Parcels: Parcels net revenue decreased by 10.1% to £3.6 million (2020: £4.0 million), due to the impact of overall parcel transaction increases being diluted by lower margins for our print in store service. Parcel transactions increased by 8.3% to 26.6 million (2020: 24.5 million). Parcel sites increased by 1,863 from 31 March 2020 to 10,509 sites (31 March 2020: 8,646 sites), due to additional sites for the newer parcel partners and Covid-19 suspended sites returning.

Other: Other services provided include SIM sales and other ad hoc items which contributed £2.5 million net revenue. The decrease reflects the continuing decline in SIM sales, accentuated by the impact of Covid-19 on tourism.

UK bill payments

Bill payments is our most established category and consists of prepaid energy, bill payments and CashOut services. This sector also includes MultiPay which is our digital proposition, the seamlessly integrated omnichannel solution is a one-stop shop for digital and other customer payments, via any channel and on any device.

Restated38

Year ended 31 March

2021

2020

Change %

Bill payments transactions (millions)

170.2

264.1

(35.6%)

Bill payments average transaction value (£)

25.4

21.1

20.5%

Bill payments net revenue (£m)

30.9

45.1

(31.5%)

Bill payments net revenue per transaction (pence)

18.2

17.1

6.3%

MultiPay transactions (millions)

25.3

32.9

(23.1%)

MultiPay average transaction value (£)

17.0

16.4

4.1%

MultiPay net revenue (£m)

4.2

4.5

(6.8%)

MultiPay net revenue per transaction (pence)

16.6

13.7

21.1%

UK bill payments net revenue decreased by 35.6% to £30.9 million (2020: £45.1 million). Excluding the £3.8 million prior year net revenue from British Gas, net revenue decreased by £10.4 million (25.1%). Net revenue per transaction continued to increase and was up by 1.1 pence (6.3%) due to a 14.1% increase in the average transaction value for prepay energy and the ongoing improvement in mix to higher yielding clients. Transactions decreased by 93.9 million (35.6%), excluding British Gas transactions decreased by 23.5%. The decrease in bill payments transactions was primarily as a result of the continued switch to digital payment methods along with the impacts of Covid-19, where consumers are making larger payments and less frequently. UK bill payments revenue was restated to include the intercompany revenue recharge for transactional services with the discontinued operation.

MultiPay net revenue decreased by 6.8% to £4.2 million (2020: £4.5 million) and MultiPay transactions decreased by 7.6 million (23.1%) to 25.3 million (2020: 32.9 million) due to the planned Utilita switch to their in-house app. The non-Utilita MultiPay business net revenue increased by £0.4 million (14.1%) as a result of more clients taking the digital services and contribution from the new functionalities of Direct Debit and PayByLink.

UK top-ups & eMoney

Top-ups include transactions where consumers can top up their mobiles, prepaid debit cards and lottery tickets. This category also includes eMoney transactions where PayPoint provides the physical network for consumers to convert cash into electronic funds with online organisations.

Year ended 31 March

2021

2020

Change %

Top-ups transactions (millions)

24.3

30.4

(20.0%)

Top-ups average transaction value (£)

11.9

11.1

7.6%

Top-ups net revenue (£m)

8.3

9.3

(10.4%)

Top-ups net revenue per transaction (pence)

34.2

30.5

11.9%

eMoney transactions (millions)

11.4

9.1

24.9%

eMoney average transaction value (£)

41.6

38.1

9.1%

eMoney net revenue (£m)

8.7

6.9

25.8%

eMoney net revenue per transaction (pence)

76.1

75.6

0.7%

Top-ups net revenue decreased by £1.0 million (10.4%). Top-ups transactions decreased by 6.1 million (20.0%) to 24.3 million (2020: 30.4 million) due to further market declines in the prepaid mobile sector whereby UK direct debit pay monthly options displace UK prepay mobile and Covid-19 impacts where consumers are making larger payments and less frequently.

eMoney net revenue increased by £1.8 million (25.8%) and transactions increased by 2.3 million (24.9%) to 11.4 million (2020: 9.1 million). eMoney transactions derive a substantially higher fee per transaction than traditional top-up transactions.

Romania (discontinued operation)

The sale of the Romanian business completed after the end of the financial year on 8 April 2021. The Romanian business comprised mainly of bill payments and top-ups operating on a similar basis to our UK business.

Year ended 31 March

2021

2020

Change %

PayPoint terminal sites (No.)

18,849

19,257

(2.1%)

Transaction value (£m)

2,542

2,296

10.7%

Transactions (millions)

Bill payments

98.1

100.0

(1.9%)

Top-ups

12.5

12.4

1.3%

Other

3.6

2.2

65.1%

Total transactions

114.2

114.6

(0.3%)

Net revenue (£m)

15.3

14.6

4.8%

Net revenue per transaction (pence)

13.4

12.8

5.0%

The number of sites decreased by 408 to 18,849 (2020: 19,257) due to an exercise to close non-performing sites. Bill payments transactions decreased by 1.9% to 98.1 million (2020: 100.0 million) and top-ups transactions increased by 1.3% to 12.5 million (2020: 12.4 million). The growth in other transactions was driven by card payments transactions. Net revenue increased by 4.8% which was driven by margin improvement in bill payments and top-ups.

TOTAL COSTS

Restated39

Year ended 31 March (£m)

2021

2020

Change %

Continuing operations

Other costs of revenue

7.0

7.3

(4.1%)

Depreciation and amortisation (included within costs of revenue)

9.6

8.3

16.9%

Depreciation and amortisation (included within administrative expenses)

0.9

0.4

125.0%

Administrative costs (included within administrative expenses)

42.7

40.3

6.0%

Net finance costs

1.3

0.5

160.0%

61.5

56.8

8.5%

Add: prior year variable pay benefit

-

2.1

Underlying costs from continuing operations

61.5

58.9

4.4%

Discontinued operation

Romania

7.8

7.8

(1.3%)

Total costs (excluding exceptional items)

69.3

64.7

7.1%

Underlying total costs

69.3

66.8

3.7%

Underlying costs from continuing operations, which exclude the current year exceptional costs and adjust for the £2.1m prior year variable pay benefit, increased by £2.6 million (4.4%). Excluding the cost base in relation to the newly acquired businesses of £2.0 million, underlying costs have increased by £0.7 million (1.1%). The anticipated cost increases in depreciation and amortisation relate to the investment in our back-office systems, together with the amortisation on the Collect+ brand asset. Finance costs increased due to the refinancing in the year to support acquisitions made and to ensure that in the longer term, PayPoint remains in a strong position to withstand a sustained period of disruption to trading should it occur as a result of Covid-19.

OPERATING MARGIN40

Operating margin from continuing operations before exceptional items of 38.0% (2020: 47.2%) declined by 9.2ppts due to a 9.1% decrease in net revenue from continuing operations.

PROFIT BEFORE TAX AND TAXATION

The tax charge for continuing operations of £4.3 million (2020: £10.0 million) on profit before tax from continuing operations of £19.4 million (2020: £50.0 million) represents an effective tax rate41 of 22.3% (2020: 19.9%), 2.4ppts higher than prior year due to an increase in disallowable expenses associated with the one-off acquisition and disposal costs.

STATEMENT OF FINANCIAL POSITION

Net assets of £39.5 million (2020: £38.3 million) increased by £1.2 million. Current assets decreased by £33.6 million to £169.9 million (2020: £203.5 million) with a lower cash balance due to consideration paid for acquisitions made in the year. Non-current assets of £121.1 million (2020: £54.5 million) increased by £66.6 million mainly due to the acquired businesses. Non-current liabilities of £30.5 million (2020: £0.8 million) increased mainly by the non-current portion of the 3 year term loan.

CASH FLOW AND LIQUIDITY

The following table summarises the cash flow movements during the year.

Year ended 31 March (£m)

2021

2020

Change %

Profit before tax from continuing and discontinued operations

27.0

56.8

(52.5%)

Provision in relation to the Ofgem Statement of Objections

12.5

-

-

Depreciation and amortisation

10.9

9.5

14.7%

VAT and other non-cash items

0.1

0.4

(75.0%)

Share-based payments and other items

0.9

(0.4)

(325.0%)

Working capital changes (corporate)

0.8

0.1

700.0%

Cash generation

52.2

66.4

(21.4%)

Taxation payments

(8.4)

(15.8)

(46.8%)

Capital expenditure
Acquisition of Collect+ brand

(6.0)
(6.0)

(8.4)
-

(28.6%)

-

Acquisitions of subsidiaries net of cash acquired

(60.8)

-

-

Movement in loans and borrowings

11.3

70.0

83.9%

Lease payments

(0.2)

(0.3)

(33.3%)

Dividends paid

(21.4)

(57.4)

(62.8%)

Net (decrease)/increase in corporate cash and cash equivalents

(39.3)

54.5

(172.1%)

Net change in clients’ funds and retailers’ deposits

11.9

1.4

750.0%

Net (decrease)/increase in cash and cash equivalents

(27.4)

55.9

(149.0%)

Cash and cash equivalents at the beginning of year

93.8

37.5

150.1%

Effect of foreign exchange rate changes

(1.6)

0.4

(500.0%)

Cash and cash equivalents at the end of year

64.8

93.8

(30.9%)

Comprising:

Corporate cash

18.3

58.0

(68.4)%

Clients’ funds and retailers’ deposits

46.5

35.7

30.3%


Year ended 31 March (£m)

2021

2020

Change %

Profit before tax from continuing operations

19.4

50.0

(61.1)%

Provision in relation to the Ofgem Statement of Objections

12.5

-

-

Depreciation and amortisation

10.5

8.7

20.7%

VAT and other non-cash items

0.1

0.4

(75.0)%

Share-based payments and other items

0.9

(0.4)

(325.0)%

Working capital changes (corporate)

0.7

(0.8)

(187.5)%

Cash generation from continuing operations

44.1

57.9

(23.8)%

Cash generation remained strong with £52.2 million (2020: £66.4 million) delivered from profit before tax from continuing and discontinued operations of £39.5 million (2020: £56.8 million). There was a net working capital inflow of £0.8 million benefiting primarily from the VAT deferral offered by HMRC.

Taxation payments on account of £8.4 million (2019: £15.8 million) were lower than prior year due to HMRC bringing payments on account forward by six months in the prior year and a further £1.5 million corporation tax refund is expected early in the next financial year.

Capital expenditure of £6.0 million (2020: £8.4 million) was £2.4 million lower than the prior year. Capital expenditure primarily consists of IT hardware, PayPoint One terminals, EPoS and CRM development and T4 terminals in Romania. The reduction in capital expenditure was due to reduced CRM development as the core platform is now live partially offset by the purchase of T4 terminals in Romania. There was also an acquisition of the remaining 50% Collect+ brand asset that Yodel owned for £6.0 million.

At 31 March 2021 net corporate debt was £68.2 million (2020: £12.0 million). Total loans and borrowings of £86.6 million consisted of a £32.5 million term loan, £49.5 million drawdown of the £75.0 million revolving credit facility and £4.6 million of asset financing balances (2020: £70.0 million drawdown from the old revolving credit facility). A refinancing took place to support the acquisitions made during the year whilst the disposal of the Romanian business completed on 8 April 2021 and so the £48.3 million proceeds are not reflected in the year end numbers. The proceeds were used to reduce net debt.

DIVIDENDS

Year ended 31 March

2021

2020

Change %

Ordinary dividends per share (pence)

Interim (paid)

15.6

23.6

(33.9%)

Final (proposed)

16.6

15.6

6.4%

Additional dividend per share (pence)

Interim (paid)

-

18.4

(100.0%)

Final

-

-

0.0%

Total dividend per share (pence)

32.2

57.6

(45.8%)

Total dividends paid in year (£m)

21.4

57.4

(62.8%)

Due to the need to preserve cash at a time of uncertainty as a result of Covid-19, the additional dividend programme announced in May 2016 was suspended in March 2020 and we confirmed in the prior year financial statements that it will not be reinstated.

We have declared an increase of 6.4% in the final dividend of 16.6 pence per share (2020: 15.6 pence per share) payable in equal instalments of 8.3 pence per share (2020: 7.8 pence per share) on 29 July 2021 and 30 September 2021 to shareholders on the register on 24 June 2021 and 26 August 2021 respectively. The final dividend is subject to the approval of the shareholders at the annual general meeting on 20 July 2021. No additional dividend has been declared (2020: no final additional dividend was declared).

The final dividends will result in £11.4 million (2020: £10.7 million) being paid to shareholders from the standalone statement of financial position of the Company which, as at 31 March 2021, had approximately £56.9 million (2020: £58.5 million) of distributable reserves.

An interim ordinary dividend of 15.6 pence (2020: 15.6 pence) and no additional interim ordinary dividend (2020: 18.4 pence) was paid in equal instalments of 7.8 pence on 29 December 2020 and 8 March 2021.

CAPITAL ALLOCATION

The Board’s immediate priority is to continue to preserve PayPoint’s balance sheet strength to ensure PayPoint emerges in a strong position following the Covid-19 crisis. The Group maintains a capital structure appropriate for current and prospective trading over the medium term that allows a healthy mix of dividends and cash for investment through capital expenditure and acquisitions. The Board’s approach to the setting of the ordinary dividend has not materially changed since the prior year end and follows the following capital allocation priorities:

  • Investment in the business through capital expenditure in innovation to drive future revenue streams and improve the resilience and efficiency of our operations;

  • Investment in opportunities such as the purchase of the 50% of the Collect+ brand not previously owned by PayPoint in April 2020 and the acquisitions of i-movo, Handepay/Merchant Rentals and RSM 2000 in November 2020, February 2021 and April 2021 respectively;

  • Progressive ordinary dividends targeting a cover ratio of 1.2 to 1.542 times earnings.

GOING CONCERN

The financial statements have been prepared on a going concern basis having regard to the identified principal risks and uncertainties and viability statement on pages 25 to 29. Our cash and borrowing capacity provides sufficient funds to meet the foreseeable needs of the Group including dividends.

Alan Dale
Finance Director

26 May 2021

PRINCIPAL RISKS AND UNCERTAINTIES

The Board considers these to be the most significant risks and uncertainties faced by the Group.

Strategy
Risks are assessed through PayPoint’s risk management and internal control framework which are designed to identify and manage risk.

Processes apply throughout the Group and are designed to manage rather than eliminate risk. The Board is responsible for overseeing the risk management process and approves levels of acceptable risk. The Board is also responsible for maintaining an appropriate control environment to manage risk effectively. The Audit Committee supports the Board in reviewing the effectiveness of risk management and internal controls to the Audit Committee. The risk management and internal control frameworks aim to provide assurance and confidence to stakeholders about PayPoint’s ability to deliver its objectives and manage risks.

Risk appetite
PayPoint’s risk appetite is set by the Board with the goal of aligning the level of risk considered appropriate to achieving strategic objectives, increasing financial returns and adhering with statutory requirements. The Board and the Chief Executive have key roles in implementing the risk appetite through PayPoint’s policies and procedures, delegated authorities and internal controls. Risk appetite is embedded in all core processes across the Group.

Risk identification and management
The risk management process assesses strategic and operational risk across all areas of the business and functional risk registers are maintained which form an important component of our governance framework. Risks are identified by senior management and Executive Board members for each functional area and discussed with The Head of Risk and Internal Audit. Risks identified are documented in functional risk registers which contain a risk description, assessment of materiality, probability, mitigating controls, residual risk and risk owners. In addition to bottom-up functional risk identification. The risk framework also encompasses top-down assessment processes and horizon scanning to identify emerging risks trends and technologies as well as identifying and preparing for new legislation and regulation. At least annually, risks are assessed and agreed with Executive Board members and form the basis of principal and emerging risks. The Aud