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Results for the half year ended 30 September 2021

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·65-min read
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PayPoint Plc
Results for the half year ended 30 September 2021

A positive first half across the PayPoint Group in line with expectations, with early delivery from growth initiatives

FINANCIAL HIGHLIGHTS

  • Net revenue1 from continuing operations of £56.1 million (H1 FY21: £46.4 million from continuing operations) increased by £9.7 million (20.9%), driven by a proactive recovery from the prior year impacts of Covid-19, a positive contribution from Handepay/Merchant Rentals and supported by the acquisitions of i-movo and RSM 2000

  • Profit before tax from continuing operations excluding exceptional items of £21.9 million2 (H1 FY21: £16.8 million) increased by £5.1 million (30.0%)

  • Disposal of Romanian business completed on 8 April 2021, delivering a profit before tax from the discontinued operation of £30.0 million with final cash proceeds net of disposal costs of £47.6 million

  • Acquisition of RSM 2000 completed on 12 April 2021 for an initial cash consideration of £5.9 million, with £1.0 million deferred, enhancing our digital payments capability, adding innovative mobile payment products and enabling further reach into new and existing sectors, including charities, housing, not-for-profit organisations, events and SMEs in the UK

  • Investment in Snappy Group made on 7 July 2021 for cash consideration of £6.7 million, positioning us to take advantage of the rapid growth in consumer demand for local home delivery seen over the past 18 months

  • Total costs3 from continuing operations (which excludes exceptional items) of £34.2 million (H1 FY21: £29.6 million from continuing operations) increased by £4.6 million (15.5%) mainly due to the £7.1m additional cost base in relation to the newly acquired businesses partially offset by £1.5m reductions in operational costs and £1.0 million of one off acquisition costs in FY21

  • Net corporate debt4 of £36.5 million (H1 FY21: £6.1 million) reflects corporate cash balances of £7.2 million less borrowings of £43.7 million. Net corporate debt reduced by £31.7 million since the end of the prior year as the proceeds received on sale of the Romanian business were used to repay the majority of the revolving credit facility

  • Increased ordinary interim dividend of 17.0 pence per share declared, an increase of 2.4% vs the final dividend declared on 27 May 2021 of 16.6 pence per share and an increase of 9.0% vs. the same period last year (H1 FY21: 15.6p). The dividend will be paid in equal instalments of 8.5 pence per share on 30 December 2021 and 7 March 2022

Six months to

30 September
2021

Six months to

30 September
2020





Change

Revenue from continuing operations

£70.2m

£60.7m

15.6%

Net revenue from continuing operations1

£56.1m

£46.4m

20.9%

Operating margin before exceptional items5 from continuing operations

40.8%

37.7%

3.1ppts

Profit before tax from continuing operations excluding exceptional items2

£21.9m

£16.8m

30.0%

Exceptional items from continuing operations

£2.9m

-

n/m

Profit before tax from discontinued operation

£30.0m

£3.8m

n/m

Profit before tax

£54.8m

£20.6m

165.6%

Diluted earnings per share

72.4p

23.8p

204.2%

Diluted earnings per share from continuing operations

29.1p

19.1p

52.4%

Ordinary dividend paid per share

16.6p

15.6p

6.4%

Ordinary reported dividend per share

17.0p

15.6p

9.0%

Cash generation6 from continuing operations

£22.1m

£25.1m

(12.0%)

Net corporate debt

£(36.5)m

£(6.1)m

n/m

Nick Wiles, Chief Executive of PayPoint plc, said:

“The Group has continued to perform well in the first half of the year, with further progress made on the numerous growth opportunities across our expanded business. We have delivered this positive performance against the backdrop of continued uncertainty in our energy markets and its impact on our clients, as well as responding in a number of areas of the business to the impact of changing consumer behaviours as Covid-19 restrictions have eased.

Good progress has been made on our strategic priorities: we’ve continued to enhance our proposition to help our retailer partners respond to key consumer demand trends, such as local store to door delivery and FMCG rewards, backed up by increased engagement with them and key trade associations. We have also commenced the rollout of our Counter Cash solution, providing vital access to cash in communities across the UK; we’ve secured more client wins for our digital payments solutions and i-movo has launched a major new service with the Department for Work and Pensions replacing the Post Office Card Account; and we’ve diversified our e-commerce offering to launch more services with existing clients whilst building out our consumer Parcel Send service. Many of these new services have underlined the need to grow consumer awareness directly for our expanded proposition, with a further shift away from the B2B2C model of our legacy markets.

Strategically, in the half year, we have continued to build on the transformative changes we delivered last year to expand growth opportunities and leverage our strengthened capabilities by completing the acquisition of RSM 2000 for an initial cash consideration of £5.9 million, enhancing our digital payments capability, and making a strategic £6.7 million investment in Snappy Group, positioning us to support the convenience sector in response to consumer demand for local store to door delivery.

Across our expanded universe of over 60,000 SME and retailer partner locations, we continue to be well-placed to support our partners in response to the wider trends that have accelerated through the pandemic, including the continued shift from cash to digital payments, the growing demand for online shopping fulfilment and the increase in shopping local. Overall, the Board’s expectations for the full year remain unchanged.”

OFGEM UPDATE

  • On 23 November 2021, Ofgem published a ‘Notice of Decision to Accept Binding Commitments’, regarding voluntary commitments proposed by PayPoint to Ofgem to address the concerns raised in Ofgem’s Statement of Objections received on 29 September 2020

  • Ofgem, the energy regulator, has now accepted those commitments as a resolution of its concerns

  • PayPoint will now implement the commitments with all relevant stakeholders in a timetable agreed with Ofgem

DIVISIONAL HIGHLIGHTS

Positive performance across the Group with continued shift away from legacy bill payment markets

Shopping

Shopping divisional net revenue increased by 51.0% to £29.3 million, driven by the net revenue contribution from the Handepay/Merchant Rentals card payments businesses of £9.8m and from the roll out of PayPoint One to additional retailer sites.

  • Service fee net revenue increased by 15.3% to £8.2 million, with increases in sites from PayPoint One

  • Strong card payment volumes continued on the existing book – Handepay business growing to 72.1 million transactions in the half year (H1 FY21: 57 million), together with the PayPoint card business increasing slightly by 0.2% year on year to 112.6 million transactions, maintaining the strong volumes seen in H1 FY21 driven by increased consumer usage during the first Covid-19 lockdown

  • UK retail network increased to 28,135 sites (31 March 2021: 28,067), with 68.7% in independent retailer partners and 31.3% in multiple retail groups

E-commerce

E-commerce divisional net revenue increased by 39.0% to £2.1 million (H1 FY21: £1.5m) and transactions increased by 27.6% (H1 FY21: 11.2 million) through our e-commerce technology platform, Collect+, driven by the continued growth and recovery in transaction volumes vs. the Covid-19 impacted H1 FY21 performance.

Payments & Banking

Payments & Banking divisional net revenue decreased by 3.1% to £24.7 million, driven by fewer cash bill payments and top up transactions, and margin erosion from client contract renewals but offset by continued growth in digital transactions.

  • Good digital payments growth to 13.5 million transactions (H1 FY21: 13.1 million) and net revenue to £3.5 million (H1 FY21: £2.9 million), with a positive contribution from RSM 2000 and continued demand for cash out services, providing vital and immediate access to funds for vulnerable consumers driven by ongoing Government meal voucher schemes and Covid-19 related hardship funds

  • Continued cash through to digital payments growth, with eMoney transactions increasing by 15.5% and net revenue by 11.1% compared to H1 FY21. Overall, this now represents 7.7% of total Group net revenue at £4.3 million (H1 FY21: 8.3% of total Group net revenue at £3.9 million)

  • Cash payments net revenue decreased by 9.7%, primarily due to consumers continuing to make fewer, larger bill payments, margin erosion as client contracts have been renewed, and a continued reduction in consumers and absence of tourists topping up mobile phones in store

BUSINESS DIVISION NET REVENUE AND MIX

Net revenue from continuing operations by business division (£m)

H1 FY22

FY21

H1 FY21

Shopping

29.3

40.2

19.4

E-commerce

2.1

3.6

1.5

Payments & Banking

24.7

53.3

25.5

PayPoint Group Total

56.1

97.1

46.4

Business division mix

H1 FY22

FY21

H1 FY21

Shopping

52.4%

41.4%

42.0%

E-commerce

3.6%

3.7%

3.2%

Payments & Banking

44.0%

54.9%

54.8%

Enquiries
PayPoint plc Finsbury
Nick Wiles, Chief Executive (Mobile: 07442 968960) Rollo Head
Alan Dale, Finance Director (Mobile: 07778043962) James Thompson
(Telephone: 0207 251 3801)
(Email: Paypoint@finsbury.com)

A presentation for analysts is being held at 9.30am today (25 November 2021) via webcast. This announcement, along with details for the webcast, is available on the PayPoint plc website: corporate.paypoint.com

CHIEF EXECUTIVE’S REVIEW

The Group has had a positive first half, with further progress made on the numerous growth opportunities across our expanded business and a good performance delivered against the backdrop of continued uncertainty in our energy markets and the impact of these on our clients, as well as responding in a number of areas of the business to how consumer behaviours will continue to adjust longer-term as Covid-19 restrictions have eased. We continue to be well-placed to take advantage of the wider trends that have accelerated through the pandemic, including the continued shift from cash to digital payments, the growing demand for online shopping fulfilment and the increase in shopping local, with the 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.

As we indicated in our first quarter results, we continue to see a positive contribution from the Handepay/Merchant Rentals, i-movo and RSM 2000 acquisitions and overall trading has remained good with a continuation of the trends seen in the second half of the last financial year. Energy bill payment volumes have not recovered as we would have hoped, reflecting a combination of continued higher than average top up amounts and a shift to digital channels seen through Covid-19, while ATM volumes have remained similarly subdued. However, volumes in eMoney, digital payments and parcels have continued to grow year on year, and the expanded parcel Send service has now started to gather momentum but with volumes slower than originally anticipated.

Over the half year, given the number of new initiatives underway, there has been a greater demand for strong execution from the business, particularly in these new areas and growth opportunities where we are establishing operations for the first time. Like many businesses, we are navigating more challenges from a people perspective as labour markets and working habits continue to recover post-Covid restrictions, including adjusting to new working patterns, higher levels of Covid-related sickness in key areas such as field sales, higher levels of staff turnover and increased salary pressures to recruit and retain talent. We have taken positive actions to address these challenges, including our successful return to office programme in September 2021, with ongoing manager support and staff surveys; regular communication and support for teams on supporting Covid-affected individuals; and reviewing key role salaries and streamlining our recruitment process to remain competitive in the current market.

Strategically, in the half year, we have built on the transformative changes we delivered in the last financial year to expand our growth opportunities and leverage our strengthened capabilities by completing the acquisition of RSM 2000 and making a strategic £6.7m investment in Snappy Group, one of the UK’s leading local home delivery and click and collect operators. RSM 2000 enhances our digital payments capability, adding innovative mobile payment products and enabling reach into new and existing sectors, including charities, housing, not-for-profit organisations, events and SMEs in the UK. Our investment in Snappy Group builds on our previously announced commercial partnership, enabling the Group and its retailer partners to respond to consumer demand for rapid, local home delivery and remain at the forefront of retail and consumer trends. Furthermore, the performance of our expanded cards business continues to be strong, following the acquisition of Handepay/Merchant Rentals in February 2021, and we are continuing to innovate and enhance our merchant proposition to support SMEs as the economy continues to recover.

The Board has reconfirmed our core strategic priorities for the business: embedding PayPoint at the heart of SME and convenience retail businesses; becoming the definitive technology-based e-commerce delivery platform for first and last mile customer journeys; sustaining leadership in ‘pay-as-you-go’ and growing digital bill payments; building a delivery focused organisation and culture. Though the challenge of maintaining a consistent pace of delivery in new areas is key, we have seen some good early delivery in growth opportunities. Of particular note are two new initiatives supporting the Government in digitising benefit payments and providing vital access to cash in communities: we are now fully live with the Payment Exception Service, run for the Department for Work and Pensions via our i-movo business, to deliver payments to those without access to a standard bank account and replacing the Post Office Card Account, which is coming to an end. Furthermore, the PayPoint Counter Cash service, offering cashback without purchase and balance enquiries over the counter, has now gone live in over 900 stores and we expect to rollout to circa 5,000 stores by the end of the financial year. Both of these initiatives are significant additions to our retailer proposition and broaden the vital community services we offer.

Many of these new services have underlined the need to grow consumer awareness directly for our expanded proposition, with a further shift away from the B2B2C model of our legacy markets. We are developing better consumer data and insights to drive our marketing efforts through both digital and traditional channels to build awareness of the new products and services launching across our expanded universe of over 60,000 SME and convenience retail locations. Furthermore, in our E-commerce division, we are working closely with our carrier partners to grow further awareness of Pick Up and Drop Off (PUDO) services and the clear customer, community and climate benefits that they bring.

We have also taken significant steps to strengthen our engagement and relationships with our retailer partners, with increased direct communication, commitments and collaboration with key trade associations, including the Association of Convenience Stores (ACS), the Scottish Grocers’ Federation (SGF) and the National Federation of Retail Newsagents (NFRN). These organisations are all important partners for us as we continue to support our retailer partners in delivering vital community services for their customers and continue to champion the important role that local stores play across the UK. We are listening hard to the feedback given by the members of all of these organisations and their input is vital to our business as we continue to support the convenience sector in meeting changing consumer needs.

Finally, I am deeply grateful to our incredible people who have been working so tirelessly over the past six months, the senior team who have shown great leadership as we seek to deliver growth in challenging market conditions, and, most importantly, our retailer partners and clients who continue to work with us to deliver vital services and support consumers across the UK.

Nick Wiles
Chief Executive
24 November 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 20/21 financial year in the UK markets in which PayPoint operates include:

Convenience retail

  • The UK convenience market is set to total £43.2 billion7 in 2021 as the pandemic-induced boost to market value is retained. The market benefited from increased at-home consumption growing +6.3% in 2020 as restrictions plagued the hospitality market for 41 weeks of the year. Enduring restrictions have seen local shopping continue with consumers more aware of the range and value at their local convenience store.

  • PayPoint consumer research8 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

  • PayPoint One basket data shows overall convenience store average basket spend in the half year has reduced year on year to £8.92 (H1 FY21: £10.00) vs. the highs seen during the first Covid-19 lockdown. However, average basket spend has now grown by 14% over the past two years (H1 FY20: £7.80), reinforcing continuing consumer demand to shop local after government restrictions have been lifted9

  • Total UK convenience store numbers remained resilient, with marginal growth of 0.2% to 47,07910

  • Local home delivery and click and collect from convenience stores has grown rapidly over the past year, driven by the pandemic. Currently, circa 5% of total convenience missions are driven through these methods and they attract a younger, more affluent consumer, with basket spend being +128% higher than in-store shoppers11

Card payments

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

  • Forecast growth in UK debit card market by 2027 to 19.7 billion payments, with 36% contactless12

  • In the half year, the PayPoint Group has seen card payment volumes increase by 9% year on year across its PayPoint and Handepay/Merchant Rentals businesses, against strong volumes in FY21 due to Covid-19

  • During 2020, the number of contactless payments made in the UK increased by 12% to 9.6 billion payments, driven by changing consumer behaviour through Covid-19 as well as the contactless limit increase to £45 in April 202013. This limit has now been increased to £100 as of 15 October 2021

  • In our SME markets, businesses employing 0-49 people, account for 99.2% (5.5 million) of the total UK business population, with 75% (4.2 million) having no employees and a further 20% (1.1 million) classed as micro-businesses with 0-9 employees14. Retail, auto trade and hospitality businesses make up circa 14% of the SME sector15.

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. In addition, the recent launch of the Payment Exception Service, run for the Department for Work and Pensions via our i-movo business, has further underlined the continuing importance of delivering cash payments to those without access to a standard bank account and replaces the Post Office Card Account, which is coming to an end

  • LINK’s ATM transactions remained flat16 year on year to circa 140 million transactions and the number of ATMs in the UK reduced by 1.3% year on year to 53,859 in the latest data from July 2021

  • 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 about by Covid-19

  • PayPoint continues to play an important role in the delivery of these vital community services, particularly with the rollout of the PayPoint Counter Cash service in November 2021, offering cashback without purchase and balance enquiries over the counter

Parcels

  • Online retail sales in 2020 were up by 37% year on year, according to IMRG and Capgemini’s Sales Index. Electricals and home & garden were the stand-out sectors, with sales leaping by 91% and 74% respectively compared to 201917

  • Latest data18 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%

  • IMRG data shows that click and collect share of the delivery market in April-June 2021 recovered marginally year on year to 19% (vs. 15% in the same period last year), but still lower than the high of 35% seen in 2019

  • 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 202519. Returns and send volumes are estimated at c.185 million and c.380 million parcels per year respectively20

Bill payments and top-ups

  • The dislocation of the energy market heightened in September 2021, with small operator insolvencies and pressure from rising wholesale prices. A well-established Ofgem process to support and transfer customers to new suppliers was invoked with minimal impact and risk to our business and client base. PayPoint’s focus through the period has been on increased client engagement and leveraging the strength and stability of our network to provide an uninterrupted service to consumers

  • The price cap for pre-pay customers increased to £1,13821 for the six months to September 2021, which was 6% higher than the cap of £1,070 in the six months from October 2020 to March 2021. From 1 October 2021, the price cap increased by a further 12% to £1,277 for the six months to March 2022. Ofgem launched a consultation on the energy price cap on 19 November 2021, with results due to be announced at the next review in February 2022

  • Non-Big Six energy providers combined market share increased to 31.3%22 at end of June 2021 (29% as of 31 March 2021)

  • The rollout of smart meters has slowed further with the impact of Covid-19 impacting installations with only 3.2m meters installed in 202023 versus 4.5m in 2019. However, there has been a marginal uptick in installations so far in this year, with 1.7m meters installed to end of June 2021. 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 £13.35 in September 2021, from £13.19 in the previous year, affecting frequency of visits and transaction volumes

  • The number of Pay As You Go mobile subscribers declined to 21.5 million subscribers24 in March 2021, from 23.3 million in March 2020

PROGRESS AGAINST OUR STRATEGIC PRIORITIES

SHOPPING BUSINESS DIVISION – H1 FY22 net revenue £29.3m (H1 FY21: £19.4m)

PRIORITY 1: EMBED PAYPOINT GROUP AT THE HEART OF SME AND CONVENIENCE RETAIL BUSINESSES

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

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 18,500 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 grow their businesses profitably, achieving higher footfall and increased spend. We also provide access to cash solutions via our network of circa 3,800 ATMs and our pioneering Counter Cash service, offering cashback without purchase and balance enquiries over the counter, has now gone live in over 900 stores and we expect to roll out to circa 5,000 stores by the end of the financial year.

Key to our progress here is the pace of delivery and execution as we establish new revenue streams and build a strong platform for success in future years.

  • PayPoint One sites increased by 711 to 18,516 since 31 March 2021, including 550 sites installed and set live in multiple retailers

  • Service fee net revenue increased by 15.3% to £8.2 million (H1 FY21: £7.1 million) driven by the roll out of PayPoint One to additional sites

  • The PayPoint One average weekly service fee per site increased by £1.10 to £16.80 since 30 September 2020 (£15.70), benefiting from the increase in sites overall and the annual RPI increase

  • Home delivery partnership with Snappy Shopper launched in July 2021, enabling local store to door delivery and click and collect for our retailer partners – over 100 stores now live and a strong pipeline in progress underlining retailer demand for the opportunity, with majority rapidly hitting £1k a week in sales and one retailer already achieving £6k a week

  • Investing to deliver further enhancements to our retailer proposition – retailer rewards app partnership live with McCurrach, a leading field marketing agency, with PayPoint’s retailer partners now able to access exclusive rewards as part of their package on the MyStore+ app – circa 800 retailers signed up to date with further work planned to integrate into PayPoint One; Love2Shop e-gift cards launched in June 2021 offering richer retailer commission; FMCG marketing and data – strong early interest from brands and retail groups, early campaigns now live for several FMCG brands

  • Restructure of sales teams initiated across PayPoint - new business managers are focused on bringing new retailer partners to the network and our retailer relationship managers are supporting new and existing retailer partners with installation, training and ensuring the value of PayPoint One is maximised in their store

  • Continued progress on retailer engagement, with regular quarterly meetings established with the leadership of key retail trade associations, a new partnership with the Scottish Grocer’s Federation announced and a series of open letters sent to all retailer partners reinforcing commitment to engage more regularly and strengthen the retailer proposition

  • ATM services were live in 3,812 sites at 30 September 2021, an increase of 186 sites since 31 March 2021, with Covid-19 suspended sites opening back up

  • ATM net revenue decreased slightly by 0.4% to £4.9 million (H1 FY21: £5.0 million) with a 0.2% increase in transactions (H1 FY21: 15.6 million), with recovery in consumer behaviour subdued as restrictions have been lifted

  • Following a successful trial, the PayPoint Counter Cash service, offering cashback without purchase and balance enquiries over the counter, has now gone live in over 900 stores and we expect to roll out to circa 5,000 stores by the end of the financial year

Card payments – we provide card payments services for over 30,000 SMEs and convenience retailers across the hospitality, convenience retail, auto trade, clothing and household goods sectors via our PayPoint, Handepay and Merchant Rentals brands.

  • PayPoint card payment transactions increased by 0.2% to 112.6 million (H1 FY21: 112.3 million) and net revenue decreased by £1.2 million to £5.7 million (H1 FY21: £6.9 million), maintaining strong transaction volumes seen in H1 FY21 but at a lower average transaction value

  • PayPoint card payment services were live in 9,900 sites at 30 September 2021, a slight decrease of 30 sites since 31 March 2021

  • Use of our card payments net settlement functionality continues to grow and is now active in 1,856 sites, an increase of 16% since 31 March 2021

  • Launched PayPoint Business Finance, in partnership with YouLend, in July 2021 with positive early demand

  • Launched new PayPoint switching proposition trial in June 2021 to make it easier for customers to switch card payment services from competitors

  • Plans in development for H2 to rollout standalone Handepay terminals to PayPoint retailer partners wanting additional card terminals in store

  • Handepay card payment and terminal lease net revenue of £9.8 million (Pre-acquisition H1 FY21: £7.2 million) and transaction volumes of 72.1 million in the half year (Pre-acquisition H1 FY21: 57 million) as SMEs across key sectors have reopened as government restrictions have eased

  • Handepay card payment services were live in 22,661 sites at 30 September 2021, an increase of 3,856 sites since 31 March 2021 as sectors have reopened and sales momentum growing after a slow start to the half year

  • Handepay – significant enhancement to proposition launched with one-month rolling contracts rolled out for customers switching from other providers in October 2021, with positive early demand

  • Handepay - faster settlement solution enabled for all existing and new EVO-acquired customers and successful pilot and roll out completed of new Castles range of terminals

  • Handepay – plans in progress for H2 to trial new touchscreen terminals with integrated EPoS app

  • The average transaction value for the half year in PayPoint sites decreased to £11.30 (H1 FY21: £12.50), driven by lower basket values than in the previous half year. The average transaction value for Handepay sites in the half year was £31.74, driven by SME sectors reopening as restrictions have eased

E-COMMERCE BUSINESS DIVISION – H1 FY22 net revenue £2.1m (H1 FY21: £1.5m)

PRIORITY 2: BECOME THE DEFINITIVE TECHNOLOGY-BASED E-COMMERCE DELIVERY PLATFORM FOR FIRST AND LAST MILE CUSTOMER JOURNEYS

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’, leveraging our proprietary software capability and expertise with continuous investment and innovation in the in-store experience.

E-commerce - we deliver all of this in circa 10,100 locations through our Collect+ brand, helping consumers pick up and drop off online shopping or send parcels across the UK. We work with a comprehensive range of partners, including Amazon, eBay, Yodel, Fedex, DPD, DHL, Hubbox, Parcels2Go and Randox. Our proprietary PUDO software solutions are built inhouse, 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.

Key to our success here is continuing to leverage our network scale and technology expertise whilst building a better view of ongoing consumer habits and data to guide our growth plans and navigate the post-Covid e-commerce landscape.

  • Parcel services were live in 10,186 sites at 30 September 2021, a decrease of 323 sites since 31 March 2021 due to stores being removed from our network

  • Parcels transactions increased by 27.6% (H1 FY21: 11.2 million) and net revenue grew by 39.0% year on year to £2.1 million (H1 FY21: £1.5 million) versus the same period last year, which was adversely impacted by Covid-19 restrictions

  • Investment in Zebra thermal printers continuing to yield improved customer experience and transaction growth – 41% of returns (5.9 million transactions) were printed in store during the half with 55% of those transactions using the new printer technology, highlighting growing popularity and consumer demand for the service

  • New partnership launched with Randox in several major shopping centres supporting their Covid-19 testing service

  • Expanding service proposition to existing partners progressing well, with DHL In Store Returns launched in May 2021 to 3,000 stores and Amazon Returns launched to 700 stores ahead of peak trading

  • Further carrier by carrier opportunities being explored to strengthen our proposition and expand our service provision, including returns, send, supplying our proprietary software solutions and working to promote greater awareness of PUDO with consumers

  • Enhancement of Send proposition continuing to build, supported by marketing activity launched in August 2021

  • New capacity planning tool launched on Store Scan app to help retailer partners manage peak demand and customer experience

PAYMENTS & BANKING BUSINESS DIVISION H1 FY22 net revenue £24.7m (H1 FY21: £25.5m)

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

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

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.

  • Continued diversification from cash to digital - 18 new client services now live, with 12 coming from non-energy sectors and 15 taking digital payments solutions

  • Major new Payment Exception Service launched via i-movo for Department for Work and Pensions digitising benefit payments to consumers and replacing the Post Office Card Account, which is coming to an end

  • Contract now signed to go live in 2022 with Studio Retail, the market leading digital value retailer, providing direct debit services

  • MultiPay net revenue decreased by 31.6% to £1.4 million (H1 FY21: £2.0 million) and transactions by 10.6%, driven by the expected volume reduction due to Utilita moving customers to their in-house solutions

  • Cash Out net revenue increased by 32.3%, driven by continued demand from local authorities seeking to digitise their payments offering and distribute funds for Covid-19 support schemes

  • Acquisition of RSM 2000 completed on 12 April 2021 – positive contribution of £1m net revenue with charity and housing sector action plan underway to expand digital payments services to new and existing clients

  • MultiPay new product development continues apace: next generation PayByLink service launched, offering more payment and message options; app balance enquiries and recurring payments now live; low balance notifications via text rolled out; PayByLink and card payments integration now complete with Northgate, one of the leading housing management platforms

  • Three pilot schemes in progress with major newspaper publishers via i-movo to digitise consumer subscription services and home news delivery in local convenience stores

  • Enhanced Direct Debit platform in development for launch in early 2022, improving our MultiPay digital payments platform and built around giving clients more flexibility in Direct Debit and customer payments management

Cash through 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 28,135 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.

  • Continued growth in eMoney, with transactions increasing year on year by 15.5% and a 11.1% increase in net revenue. Overall, this now represents 7.7% of total Group net revenue at £4.3 million (H1 FY21: 8.3% of total Group net revenue at £3.9 million)

  • Love2Shop e-gift cards launched across retail network in June 2021, enabling consumers to shop with some of the nation’s favourite high street and online brands, including Argos, Halfords, Marks & Spencer, ASOS, Costa and Uber Eats

  • Targeted B2C in-store marketing campaign for cash through to digital category launched in October 2021 to 1,000 stores to drive further awareness, featuring brands such as Amazon, Xbox and Playstation

Cash - we provide vital access to cash payment services across the UK by helping millions of people every week control their household finances, make essential payments and access in-store services. Our UK retail network of more than 28,100 stores is bigger than all banks, supermarkets and Post Offices together, putting us at the heart of communities nationwide

  • Bill payments net revenue decreased by 9.5% to £12.4 million (H1 FY21: £13.7 million) and transactions decreased by 6.1% to 72.8 million (H1 FY21: 77.5 million), primarily due to the continued shift in consumer behaviour for making fewer, larger payments seen through Covid-19, margin erosion from client contract renewals and structural changes in this market

  • UK top-ups net revenue decreased by 9.3%. Top-up transactions reduced by 10.4% due to further declines in the prepaid mobile sector and a continued reduction in consumers and absence of tourists topping up mobile phones in store

PRIORITY 4: BUILDING A DELIVERY FOCUSED ORGANISATION AND CULTURE

PAYPOINT GROUP

Underpinning the PayPoint Group’s future success is the continued development and investment in our people, systems and organisation. We aim to create a dynamic place to work for our people, enabling us to deliver for our customers by collaborating and being good colleagues to each other, creating a positive and inclusive environment where everyone can learn, grow and shine.

  • First phase of integration work now complete for acquisitions of Handepay/Merchant Rentals, RSM 2000 and i-movo

  • Return to office/hybrid working plans launched successfully in September 2021

  • Actively evolving our ongoing approach to labour markets and working habits as they recover post-Covid restrictions, including adjusting to new working patterns, higher levels of Covid-related sickness in key areas such as field sales, higher levels of staff turnover and increased salary pressures to recruit and retain talent.

  • Latest full employee engagement survey completed in May 2021 across PayPoint Group, with overall engagement score at 72%, an improvement from the last full survey conducted two years ago (2019: 68%) and down from two exceptional Covid-19 focused surveys run last year (2020: 77%)

  • Refreshed PayPoint Group purpose and values now embedded across business and further development underway of our ESG approach to deliver responsible and sustainable value for shareholders

  • Review of basic salaries completed for Handepay sales team to recruit and retain better talent and to reinforce position as an employer of choice in the sector

  • Key product development projects in-flight and on track to launch new capabilities and services from Q3 onwards, including MultiPay enhanced Direct Debit platform

  • Investing to build further resiliency into our service delivery, with improvement plans for key services agreed and planned for implementation throughout the current financial year. Heritage systems assessment underway and review of IT strategy to complete in Q3 FY22.

  • Integration of service and product development teams continues and has started delivering improvements in reactiveness of teams to service issues and new opportunities

OUTLOOK AND DIVIDEND

Our first half has been a particularly busy period for the business, with early delivery success in our growth opportunities against the backdrop of continued uncertainty in a number of our markets, including the dislocation in the energy sector and our need to respond in a number of areas of the business to how consumer behaviours will continue to adjust longer-term as Covid-19 restrictions have eased. Operationally, we have remained focused on supporting our people through the transition to new working patterns, executing with pace and precision in the numerous growth initiatives across the business and navigating the new challenges arising from the post-pandemic labour market.

Our core strategic priorities for the business remain unchanged: embedding PayPoint at the heart of SME and convenience retail businesses; becoming the definitive technology-based e-commerce delivery platform for first and last mile customer journeys; sustaining leadership in ‘pay-as-you-go’ and growing digital bill payments; building a delivery focused organisation and culture. During the half, we have continued to build on the transformative changes we delivered in the last financial year to expand our growth opportunities and leverage our strengthened capabilities by completing the acquisition of RSM 2000 and making a strategic £6.7 million investment in Snappy Group, one of the UK’s leading local home delivery and click and collect operators. These steps, along with our continued focus on the pace and precision of execution in our new initiatives, underpin our confidence in the accelerated growth opportunities we see for the business.

This year there is a higher level of uncertainty as to the outlook for the second half of the year. We expect the dislocation in energy markets and its impact on our energy clients to continue. The influence of parcel volumes during the important peak seasonal period, with the added uncertainty of customer behaviours post-pandemic, is an additional factor. As we continue to rollout our new growth initiatives that are less seasonally impacted, we expect a greater balance in the future between the two halves of our financial year.

Mindful of this market background, our confidence in the outlook for the second half is underpinned by the actions and discipline we have continued to apply in managing our costs, combined with a tight operational focus on the key delivery areas and our energy to deliver on our new business opportunities. We have declared a dividend of 17.0p per share, consistent with our dividend policy, 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 18 months. Overall expectations for the full year remain unchanged.

FINANCIAL REVIEW

OVERVIEW OF CONTINUING OPERATIONS





£m

Six months to
30 September
2021

Six months to
30 September
2020

Change
%

Year ended
31 March
2021

Revenue

Revenue from continuing operations

70.2

60.7

15.6%

127.7

Net revenue25

Continuing operations

Shopping

29.3

19.4

51.0%

40.2

e-commerce

2.1

1.5

39.0%

3.6

Payments & banking

24.7

25.5

(3.1%)

53.3

Total net revenue

56.1

46.4

20.9%

97.1

Total costs26 from continuing operations (excluding exceptional items)

(34.2)

(29.6)

15.5%

(61.5)

Exceptional costs

-

-

-

(16.1)

Exceptional income

2.9

-

-

-

Profit before tax from continuing operations

24.8

16.8

47.1%

19.4

Profit before tax from continuing operations excluding exceptional items27

21.9

16.8

30.0%

35.5

Cash generation28 from continuing operations

22.1

25.1

(12.0%)

44.1

Net corporate debt29

(36.5)

(6.1)

n/m

(68.2)

In the same period last year, we saw the impact of the Covid-19 pandemic affect a number of our business lines which drove significant variances in that period. In the current period, a number of those business lines and sectors have partially recovered but the economy is still not back to pre Covid-19 levels. Given the disposal of the Romanian business on 8 April 2021 the focus of this review is predominately on the continuing operations of the Group.

Profit before tax from continuing operations excluding exceptional items of £21.9 million (September 2020: £16.8 million) increased by £5.1 million due to the contribution from our recent acquisitions.

Revenue from continuing operations increased by £9.5 million to £70.2 million (September 2020: £60.7 million). Net revenue from continuing operations increased by £9.7 million (20.9%) to £56.1 million (September 2020: £46.4 million). This was driven by net revenues generated by Handepay and Merchant Rentals card payments and leasing revenue which contributed £9.8m in the first six months of the year. There was also continued growth across service fees, parcels and cash through to digital (e-money), partially offset by decreases in cash bill payments and top-ups primarily due to the continued shift in consumer behaviour through Covid-19 and ongoing structural decline of the prepaid mobile sector.

Shopping net revenue increased by £9.9 million (51.0%) to £29.3 million (September 2020: £19.4 million). PayPoint card payments net revenue decreased by £1.2 million (17.6%) (September 2020: £6.9 million) maintaining strong transaction volumes seen in H1 FY21 but at a lower average transaction value. Handepay and Merchant Rentals contributed £9.8 million card payments and terminal leasing net revenue in the first half of the year. Service fee net revenue increased by £1.1 million (15.3%) to £8.2 million (September 2020: £7.1 million) driven by the roll out of PayPoint One to additional sites and the impact of the annual RPI increase. ATM net revenue decreased by £0.1 million (0.4%) to £4.9 million (September 2020: £5.0 million).

E-commerce net revenue increased by £0.6 million (39.0%) to £2.1 million (September 2020: £1.5 million), driven by strong growth in total transactions which increased by 27.6% with the easing of Covid-19 restrictions in the current period. This facilitated increased Pick Up/Drop Off activity combined with growth in volumes following our investment in thermal instore printers.

Payments & Banking net revenue decreased by £0.8 million (3.1%) to £24.7 million (September 2020: £25.5 million). Cash bill payments net revenue decreased by £1.3 million (9.5%) to £12.4 million (September 2020: £13.7 million), driven by a decrease in bill payment transactions primarily as a result of the continued switch to digital payment methods along with the impacts of Covid-19 where consumers are continuing to make larger payments, less frequently. Cash top-ups net revenue decreased by £0.4 million (9.3%) to £3.9 million (September 2020: £4.3 million) with volumes down 10.4% driven by the continuing structural declines in the prepaid mobile sector. Digital net revenue increased by £0.6 million (20.7%) to £3.5 million (September 2020: £2.9 million) driven by the £1.0 million net revenue contribution from RSM 2000 in the period. Multipay transactions decreased 10.6% due to Utilita moving customers to their own in-house app. Non-Utilita MultiPay business net revenue increased by £0.2 million (10.8%) as a result of more clients taking the digital services and contribution from the new functionalities of Direct Debit and PayByLink although at a lower net revenue per transaction. This has been partially offset by growth in Cash Out benefiting from the i-movo acquisition. eMoney net revenue increased by £0.4 million (11.1%) to £4.3 million (September 2020: £3.9 million), driven by a 15.5% increase in transactions.

Total costs from continuing operations of £34.2 million (September 2020: £29.6 million) increased by £4.6 million. The prior period includes £1.0 million one-off, non-recurring acquisition and disposal costs. Excluding this, the increase in costs from continuing operations was driven by the £7.1m additional cost base in relation to the newly acquired businesses partially offset by £1.5m reduction in operational costs.

Exceptional income of £2.9 million reflects the change in fair value of the deferred contingent consideration relating to the i-movo acquisition.

Cash generation reduced by £3.0 million to £22.1 million (September 2020: £25.1 million) delivered from profit before tax excluding exceptional items of £21.9 million from continuing operations (September 2020: £16.8 million from continuing operations). There was a working capital outflow of £5.7 million, of which £1.8 million relates to payment of the prior year HMRC VAT deferral and £3.0 million relating to timing impacts on working capital expected to unwind in the second half of this financial year.

The current period benefited from the £48.6 million cash proceeds received on sale of the Romanian business. Tax payments were £0.3 million lower than the prior period following the super deduction on capital allowances and dividend payments were £0.7 million higher compared to the prior period due to the increase in the final ordinary dividend per share. The current period includes net cash outflows of £4.5 million for the acquisition of RSM2000 and £6.7 million for the investment in Snappy Shopper Limited

Net corporate debt increased by £30.4 million to £36.5 million (September 2020: £6.1 million) although decreased by £31.7 million from the year end position. £37.5 million of the revolving credit facility was repaid since the year end using the proceeds received from the sale of the Romanian business. At 30 September 2021, £12.0 million (September 2020: £21.0 million) was drawn down from the revolving credit facility.

BUSINESS DIVISION ANALYSIS

SHOPPING

Six months to
30 September
2021

Six months to
30 September
2020

Change

%

Year ended
31 March
2021

PayPoint terminal sites (No.)

PayPoint One30

18,516

16,900

9.6%

17,805

Legacy terminal

482

2,360

(79.6%)

1,441

PPoS31

9,137

8,293

10.2%

8,821

Total terminal sites in PayPoint network

28,135

27,553

2.1%

28,067

Services in live sites (No.)

PayPoint One Base

7,691

8,119

(5.3%)

7,915

PayPoint One EPoS Core

9,084

7,411

22.6%

8,307

PayPoint One EPoS Pro

1,191

1,336

(10.9%)

1,240

Total PayPoint One – revenue generating

17,966

16,866

6.5%

17,462

PayPoint One Base non-revenue generating

550

34

n/m

343

Total PayPoint One

18,516

16,900

9.6%

17,805

Services in live sites (No.) (continued)

Six months to
30 September
2021

Six months to
30 September
2020

Change

%

Year ended
31 March
2021

Card payments – Handepay

22,661

-

-

18,805

Card terminal leases – Merchant Rentals

35,447

-

-

26,017

Card payments – PayPoint

9,900

9,885

0.2%

9,930

ATMs

3,812

3,782

0.8%

3,626

Transactions (Millions)

Card payments – Handepay

72.1

-

-

14.6

Card payments – PayPoint

112.6

112.3

0.2%

210.4

ATMs

15.6

15.6

0.2%

30.6

PayPoint One average weekly service fee per site (£)

16.8

15.7

7.0%

16.3

Net revenue (£m)

Service fees

8.2

7.1

15.3%

14.6

Card payments – Handepay

6.5

-

-

1.5

Card terminal leases – Merchant Rentals

3.3

-

-

1.0

Card payments – PayPoint

5.7

6.9

(17.6%)

12.1

ATMs

4.9

5.0

(0.4%)

9.7

Other shopping

0.7

0.4

54.3%

1.3

Total net revenue (£m)

29.3

19.4

51.0%

40.2

As at 30 September 2021, PayPoint had a live terminal in 28,135 sites (31 March 2021: 28,067), a slight increase of 68 sites since 31 March 2021. PayPoint One revenue generating sites increased by 504 (2.9%) to 17,966 sites (31 March 2021: 17,462) since 31 March 2021 due to new sales and fewer Covid-19 suspended sites.

Net revenue increased by £9.9 million (51.0%) to £29.3 million (September 2020: £19.4 million) primarily due to the inclusion of Handepay and Merchant Rentals revenues in the period. 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 terminals. Service fee net revenue increased by £1.1 million (15.3%) to £8.2 million (September 2020: £7.1 million) driven by the additional 1,100 PayPoint One revenue generating sites compared to 30 September 2020. The higher price point EPoS Core sites increased by 1,673 due to new sales and upselling whilst EPoS Pro sites reduced by 145 since 30 September 2020, with the ending of our 3 month try before you buy EPoS Pro offering. The PayPoint One average weekly service fee per site increased by 7.0% to £16.8 (September 2020: £15.7), benefiting from the increase in EPoS Core sites which are charged at a higher rate and the annual RPI increase. Retailers taking the Core version of the product represent 49.1% (September 2020: 43.9%) of all PayPoint One sites and the Pro version represent 6.4% (September 2020: 7.9%). Legacy terminals now just remain in our multiple retailer partners but are being replaced.

Card payments: Handepay and Merchant Rentals generated £9.8 million net revenue in the half year. Handepay contributed £6.5 million card payments net revenue and 72.1 million transactions, benefiting from the reopening of SMEs across key sectors with the easing of government restrictions. Handepay card payment services were live in 22,661 sites at 30 September 2021, an increase of 3,856 sites since 31 March 2021. Merchant Rentals contributed £3.3 million terminal leasing net revenue.

PayPoint card payments transactions increased by 0.2% to 112.6 million (September 2020: 112.3 million) and net revenue decreased by 17.6% to £5.7 million (September 2020: £6.9 million) maintaining strong transaction volumes seen in H1 FY21 but at a lower average transaction value £11.30 (H1 FY21: £12.50). Across our network there were 9,900 PayPoint card payments sites (31 March 2021: 9,930), a decrease of 30 sites since 31 March 2021.

ATMs: ATM net revenue decreased marginally by £0.1 million (0.4%) to £4.9 million (September 2020: £5.0 million). ATM transactions continue to be impacted by the reduced demand for cash across the economy, accentuated by the Covid-19 preference for card use. PayPoint continued to optimise its ATM network by relocating existing machines to better performing locations. ATM sites increased by 186 to 3,812 sites (31 March 2021: 3,626) since 31 March 2021 with fewer Covid-19 suspended sites.

Other Shopping net revenue includes the new PayPoint Counter Cash Service, for which a full rollout commences in November 2021.

E-COMMERCE

E-commerce net revenue increased by £0.6 million (39.0%) to £2.1 million (September 2020: £1.5 million), due to the increase in total parcels transactions by 27.6% to 14.3 million (September 2020: 11.2 million) with the easing of Covid-19 restrictions in the current period facilitating increased Pick Up/Drop Off activity. The prior period transactions were impacted by Covid-19 restrictions with consumers staying at home. Parcel sites decreased by 323 since 31 March 2021 to 10,186 sites (31 March 2021: 10,509 sites), due to stores being removed from our network.

PAYMENTS & BANKING

Six months to
30 September
2021

Six months to
30 September
2020

Change
%

Year ended
31 March
2021

Cash bill payments net revenue (£m)

12.4

13.7

(9.5%)

29.0

Cash bill payments transactions (millions)

72.8

77.5

(6.1%)

168.3

Cash bill payments transaction value (£m)

1,864.3

2,001.6

(6.9%)

4,210.1

Cash bill payments average transaction value (£)

25.6

25.8

(0.9%)

25.0

Cash bill payments net revenue per transaction (pence)

17.0

17.7

(3.6%)

17.2

Cash top-ups net revenue (£m)

3.9

4.3

(9.3%)

8.3

Cash top-ups transactions (millions)

11.2

12.5

(10.4%)

24.3

Cash top-ups transaction value (£m)

134.3

148.7

(9.7%)

289.1

Cash top-ups average transaction value (£)

12.0

11.9

1.2%

11.9

Cash top-ups net revenue per transaction (pence)

34.8

34.4

1.2%

34.2

Digital net revenue (£m)

3.5

2.9

20.7%

6.1

Digital transactions (millions)

13.5

13.1

3.1%

27.2

Digital transaction value (£m)

292.8

206.1

42.1%

545.7

Digital average transaction value (£)

21.7

15.7

38.2%

20.1

Digital net revenue per transaction (pence)

25.9

22.1

17.2%

22.4

Cash through to digital net revenue (£m)

4.3

3.9

11.1%

8.7

Cash through to digital transactions (millions)

5.8

5.0

15.5%

11.4

Cash through to digital transaction value (£m)

254.2

209.5

21.3%

475.0

Cash through to digital average transaction value (£)

43.8

41.7

5.0%

41.6

Cash through to digital net revenue per transaction (pence)

74.1

78.0

(5.0%)

76.3

Other payments & banking net revenue

0.6

0.7

(14.3%)

1.2

Payments & Banking divisional net revenue decreased by 3.1% to £24.7 million, driven by fewer cash bill payments and top up transactions, and margin erosion from client contract renewals but offset by continued growth in digital transactions

Cash bill payments net revenue decreased by £1.3 million (9.5%) to £12.4 million (September 2020: £13.7 million), primarily as a result of the impacts of Covid-19 where consumers are continuing to make larger payments, less frequently and the continued switch to digital payment methods. Cash bill payments transactions decreased by 4.7 million (6.1%) to 72.8 million (September 2020: 77.5 million). Cash bill payments net revenue per transaction decreased by 0.7 pence (3.6%) due to margin erosion from client contract renewals.

Cash top-ups net revenue decreased by £0.4 million (9.3%) to £3.9 million (September 2020: £4.3 million). Cash top-ups transactions decreased by 1.3 million (10.4%) to 11.2 million (September 2020: 12.5 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.

Digital (MultiPay, Cash Out and RSM 2000) net revenue increased by £0.6 million (20.7%) to £3.5 million (September 2020: £2.9 million) and digital transactions increased by 0.4 million (3.1%) to 13.5 million (September 2020: 13.1 million), driven by the £1.0 million contribution of RSM 2000 to this sector. MultiPay net revenue decreased by £0.7 million to £1.4 million (September 2020: £2.1 million), this was due to the expected volume reduction from Utilita moving customers to their in-house solutions. This was partially offset by Cash Out net revenue which increased by £0.3 million (32.3%), driven by continued demand from local authorities seeking to digitise their payments offering and despite Covid-19 meal voucher schemes winding down.

Cash through to digital (eMoney) net revenue increased by £0.4 million (11.1%) to £4.3 million (September 2020: £3.9 million) and transactions increased by 0.8 million (15.5%) to 5.8 million (September 2020: 5.0 million). eMoney transactions derive a substantially higher fee per transaction than traditional top-up transactions.

Other payments & banking net revenue includes SIM sales and other ad-hoc items which contributed £0.6 million (September 2020: £0.7 million) net revenue. The decrease reflects the continuing decline in SIM sales, accentuated by the impact of Covid-19 on tourism.
TOTAL COSTS





£m

Six months to
30 September
2021

Six months to
30 September
2020

Change
%

Year ended
31 March
2021

Continuing operations excluding exceptional items

Other costs of revenue

5.3

3.2

65.6%

7.0

Depreciation and amortisation (costs of revenue)

4.1

4.4

6.3%

9.6

Depreciation and amortisation (administrative expenses)

1.5

0.2

n/m

0.9

Other administrative costs

22.3

21.1

5.7%

42.7

Finance costs

1.0

0.7

42.9%

1.3

Total costs from continuing operations excluding exceptional items

34.2

29.6

15.5%

61.5

Total costs from continuing operations increased by £4.6 million (15.5%) to £34.2 million (September 2020: £29.6 million). The prior period includes £1.0 million one-off, non-recurring acquisition and disposal costs. Excluding this, the increase in costs from continuing operations was driven by the cost base in relation to the newly acquired businesses of £7.1 million, included within this balance is £1.2 million for amortisation on acquired intangibles shown in administrative expenses. This was partially offset by operational cost reductions made in the group of £1.5 million. This included lower people costs of £0.5 million as a result of higher vacancies this year compared to last year, lower depreciation and amortisation with some legacy assets coming to the end of their life and a reduction in cost of revenue following the acquisition of i-movo and eliminating this transaction cost from our cost base.

DISCONTINUED OPERATION - ROMANIA





£m

Six months to
30 September
2021

Six months to
30 September
2020

Change
%

Year ended
31 March
2021

Revenue from discontinued operation

1.3

34.5

n/m

67.7

Net profit from discontinued operation

0.1

3.8

n/m

7.5

Profit on disposal of discontinued operation

29.9

-

-

-

Total profit from discontinued operation

30.0

3.8

n/m

7.5

The revenues and net profit from the discontinued operation in the current period represents the revenue and costs from Romania between 1 and 8 April 2021 prior to disposal completion.

OPERATING MARGIN BEFORE EXCEPTIONAL ITEMS32

Operating margin before exceptional items of 40.8% (September 2020: 37.7% from continuing operations) increased by 3.1ppts following the increases in net revenue of 20.9% and operational costs being tightly managed increasing by 14.9%. Operating margin in the prior interim reporting period ended 30 September 2020 excluding the £1.0 million of acquisition and disposal costs was 39.9%.

PROFIT BEFORE TAX AND TAXATION

The tax charge of £4.6 million (September 2020: £3.7 million for continuing operations) on profit before tax from continuing operations £24.8 million (September 2020: £16.8 million from continuing operations) represents an effective tax rate33 for continuing operations of 18.4% (September 2020: 21.8%). The effective tax rate was 3.4ppts lower than the prior period due to the non-taxable exceptional item in the period and a decrease in disallowable expenses, with the prior year impacted by the one-off disallowable acquisition and disposal costs partially offset by the impact of the enacted new tax rate on our deferred tax liabilities.

STATEMENT OF FINANCIAL POSITION

Net assets of £80.3 million (September 2020: £45.0 million) increased by £35.3 million and increased by £40.8 million since the year end position, primarily as a result of the Romania disposal. Current assets decreased by £68.0 million to £95.3 million (September 2020: £163.3 million) mainly due to the disposal of the Romania assets. Non-current assets increased by £87.3 million to £132.3 million (September 2020: 45.0 million), mainly due to the businesses acquired in the second half of the financial year. Non-current liabilities of £21.7 million (September 2020: £nil) increased due to the refinancing in the second half of the prior financial year which included taking out a new three-year term loan.

CASH FLOW AND LIQUIDITY

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





£m

Six months to
30 September
2021

Six months to
30 September
2020

Change
%

Year ended
31 March
2021

Profit before tax from continuing and discontinued operations

54.8

20.6

165.6%

27.0

Provision in relation to the Ofgem Statement of Objections

-

-

-

12.5

Exceptional items

(2.9)

-

-

-

Depreciation and amortisation

5.6

4.9

14.3%

10.9

Profit from discontinued operation

(30.0)

-

-

-

Discount unwind of deferred consideration liability

0.1

-

-

0.1

Share based payments and other items

0.6

0.6

33.3%

0.9

Working capital changes (corporate)

(5.7)

3.4

273.5%

0.8

Cash generation34

22.1

29.5

25.1%

52.2

Taxation payments

(3.9)

(4.2)

7.1%

(8.4)

Capital expenditure

(4.0)

(3.8)

5.3%

(6.0)

Acquisition of Collect+ brand

-

(6.0)

-

(6.0)

Acquisitions of subsidiaries net of cash acquired

(4.5)

0.9

n/m

(60.8)

Purchase of associate

(6.7)

-

-

-

Disposal of Romania business net of cash acquired

20.2

-

-

-

Movement in loans and borrowings

(42.9)

(49.0)

12.4%

11.3

Lease payments

(0.1)

(0.1)

-

(0.2)

Dividends paid

(11.4)

(10.7)

6.5%

(21.4)

Net decrease in corporate cash and cash equivalents

(31.2)

(43.4)

28.1%

(39.3)

Net change in clients’ funds and retailer partners’ deposits

(10.2)

7.7

232.5%

11.9

Net decrease in cash and cash equivalents

(41.4)

(35.7)

16.0%

(27.4)

Cash and cash equivalents at the beginning of year

64.8

93.8

30.9%

93.8

Effect of foreign exchange rate changes

-

0.4

n/m

(1.6)

Cash and cash equivalents at period end

23.4

58.5

60.0%

64.8

Comprising:

Corporate cash

7.2

14.9

51.7%

18.3

Clients’ funds and retailer partners’ deposits

16.2

43.6

63.1%

46.5


Six months to
30 September
2021

Six months to
30 September
2020

Change
%

Year ended
31 March
2021

Profit before tax from continuing operations

24.8

16.8

47.1%

19.4

Provision in relation to the Ofgem Statement of Objections

-

-

-

12.5

Exceptional items

(2.9)

-

-

-

Depreciation and amortisation

5.6

4.6

21.7%

10.5

Discount unwind of deferred consideration liability

0.1

-

-

0.1

Share-based payments and other items

0.6

0.6

33.3%

0.9

Working capital changes (corporate)

(5.7)

3.1

290.3%

0.7

Cash generation from continuing operations

22.1

25.1

12.0%

44.1

Cash generation reduced to £22.1 million (September 2020: £29.5 million) delivered from profit before tax from continuing operations excluding exceptional items of £21.9 million (September 2020: £20.6 million). There was a working capital outflow of £5.7 million, of which £1.8 million relates to the repayment of the prior year HMRC VAT deferral and £3.0 million relating to timing impacts on working capital expected to unwind in the second half of this financial year.

The current period benefited from the £47.6 million cash proceeds received on sale of the Romanian business, net of transaction costs. Taxation payments on account of £3.9 million (September 2020: £4.2 million) are lower compared to the prior period due to the expected benefit from the super deduction on capital allowances offered by the government. Dividend payments were higher compared to the prior period due to the increase in the final ordinary dividend paid per share for the prior year ended 31 March 2021.

Capital expenditure of £4.0 million (September 2020: £3.8 million, of which £3.1m related to continuing operations) was £0.2 million higher than the prior year. Capital expenditure primarily consists of IT hardware, PayPoint One terminals, EPoS development and the enhancement to the Direct Debit platform. The increase in capital expenditure is primarily driven by the enhancement to the Direct Debit platform.

At 30 September 2021 net corporate debt was £36.5 million (September 2020: £6.1 million) although decreased by £31.7 million from the year end position. Total loans and borrowings of £43.7 million consisted of a £27.1 million amortising term loan, £12.0 million drawdown of the £75.0 million revolving credit facility and £4.6 million of asset financing balances (September 2020: £21.0 million drawdown from the old revolving credit facility). The cash proceeds received on sale of the Romanian business in April 2021 were used to repay the majority of the revolving credit facility at year end of £37.5 million and so reduced net corporate debt since the prior year end.

DIVIDENDS

Six months to
30 September
2021

Six months to
30 September
2020



Change
%

Ordinary dividends per share (pence)

Interim (proposed)

17.0

15.6

9.0%

Final (paid)

16.6

15.6

6.4%

Total dividend per share (pence)

33.6

31.2

7.7%

Total dividends paid in period (£m)

11.4

10.7

6.5%

In the six months to 30 September 2021, total dividend payments of £11.4 million or 16.6 pence per share (September 2020: £10.7 million or 15.6 pence per share) were made, representing the final ordinary dividend for the year ended 31 March 2021. This is a 6.4% increase in the final dividend since last year.

We have declared an increased interim dividend of 17.0 pence per share (September 2020: 15.6 pence) payable in equal instalments of 8.5 pence per share on 30 December 2021 (to shareholders on the register on 3 December 2021) and 7 March 2022 (to shareholders on the register on 4 February 2022). This is an increase of 2.4% compared to the final dividend declared on 27 May 2021 of 16.6 pence per share, and an increase of 9.0% compared to the same period last year (September 2020: 15.6 pence).

Alan Dale
Finance Director
24 November 2021

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS









Note

6 months
ended
30 September
2021
£000

6 months
ended
30 September
2020
£000

Year
ended
31 March
2021
£000

Continuing operations

Revenue

2,3

70,199

60,711

127,747

Cost of revenue

4

(23,468)

(21,875)

(47,280)

Gross profit

46,731

38,836

80,467

Administrative expenses – excluding exceptional items

(23,834)

(21,327)

(43,578)

Exceptional items – revaluation of deferred, contingent consideration liability

5

2,880

-

-

Exceptional items – administrative expenses

5

-

-

(15,600)

Operating profit

25,777

17,509

21,289

Finance income

12

14

22

Finance costs – excluding exceptional items

(951)

(696)

(1,352)

Discount unwind of deferred consideration liability

17

(87)

-

(57)

Exceptional items – finance costs

5

-

-

(459)

Profit before tax from continuing operations

24,751

16,827

19,443

Tax on continuing operations

6

(4,555)

(3,667)

(4,335)

Profit from continuing operations

20,196

13,160

15,108

Discontinued operation

Profit from discontinued operation, net of tax

11

148

3,232

6,423

Exceptional items – gain on disposal of discontinued operation, net of tax

11

29,863

-

-

Profit for the period attributable to equity holders of the parent

50,207

16,392

21,531

Earnings per share

Basic

7

73.2p

24.0p

31.5p

Diluted

7

72.4p

23.8p

31.3p

Earnings per share - continuing operations

Basic

7

29.4p

19.3p

22.1p

Diluted

7

29.1p

19.1p

21.9p


CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

6 months
ended
30 September
2021
£000

6 months
ended
30 September
2020
£000

Year
ended
31 March
2021
£000

Items that may subsequently be reclassified to the consolidated statement of profit or loss:

Exchange differences on translation of foreign operation

-

267

(912)

Exchange differences on disposal of discontinued operation reclassified to profit or loss

11

1,645

-

-

Other comprehensive income/(loss) for the period

1,645

267

(912)

Profit for the period

50,207

16,392

21,531

Total comprehensive income for the period attributable to equity holders of the parent

51,852

16,659

20,619

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION





Note

30 September
2021
£000

30 September
2020
£000

31 March
2021
£000

Non-current assets

Goodwill

9

57,134

-

51,551

Other intangible assets

41,115

22,322

41,698

Investment in associate

10

6,739

-

-

Property, plant and equipment

20,863

22,119

21,379

Net investment in finance lease receivables

6,402

-

6,511

Deferred tax asset

-

605

-

Total non-current assets

2

132,253

45,046

121,139

Current assets

Inventories

1,166

44

1,059

Trade and other receivables

12

68,155

69,643

69,576

Current tax asset

2,592

1,084

3,021

Cash and cash equivalents

13

23,371

42,028

38,940

95,284

112,799

112,596

Assets held for sale

11

-

50,529

57,353

Total current assets

95,284

163,328

169,949

Total assets

227,537

208,374

291,088

Current liabilities

Trade and other payables

14

95,942

100,875

102,504

Provision

18

-

-

12,500

Deferred consideration liability

17

3,954

-

1,462

Lease liabilities

200

18

194

Loans and borrowings

25,461

21,000

63,627

125,557

121,893

180,287

Liabilities directly associated with assets held for sale

11

-

41,514

40,866

Total current liabilities

125,557

163,407

221,153

Non-current liabilities

Deferred consideration liability

17

-

-

4,285

Lease liabilities

172

12

253

Loans and borrowings

18,237

-

22,956

Deferred tax liability

3,300

-

2,971

Total non-current liabilities

21,709

12

30,465

Total liabilities

147,266

163,419

251,618

Net assets

80,271

44,955

39,470

Equity

Share capital

15

229

228

229

Share premium

-

4,974

4,975

Merger reserve

999

-

999

Share-based payment reserve

1,178

1,556

2,005

Translation reserve

-

(466)

(1,645)

Retained earnings

77,865

38,663

32,907

Total equity attributable to equity holders of the parent

80,271

44,955

39,470

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Note

Share
capital
£000

Share
premium
£000

Merger reserve
£000

Share- based payment reserve
£000

Translation reserve
£000

Retained earnings
£000

Total equity
£000

Opening equity
1 April 2020

228

4,485

-

1,875

(733)

32,475

38,330

Profit for the period

-

-

-

-

-

16,392

16,392

Exchange differences on translation of foreign operation

-

-

-

-

267

-

267

Comprehensive income for the period

-

-

-

-

267

16,392

16,659

Equity-settled share-based payment expense

-

-

-

610

-

-

610

Vesting of share scheme

-

489

-

(925)

-

452

16

Tax on share-based payments

-

-

-

(4)

-

20

16

Dividends

-

-

-

-

-

(10,676)

(10,676)

Closing equity
30 September 2020

228

4,974

-

1,556

(466)

38,663

44,955

Profit for the period

-

-

-

-

-

5,139

5,139

Exchange differences on translation of foreign operation

-

-

-

-

(1,179)

-

(1,179)

Comprehensive income for the period

-

-

-

-

(1,179)

5,139

3,960

Issue of shares

1

-

999

-

-

-

1,000

Equity-settled share-based payment expense

-

-

-

456

-

-

456

Vesting of share scheme

-

1

-

(1)

-

(185)

(185)

Deferred tax on share-based payments

-

-

-

(6)

-

-

(6)

Dividends

-

-

-

-

-

(10,710)

(10,710)

Closing equity
31 March 2021

229

4,975

999

2,005

(1,645)

32,907

39,470

Profit for the period

-

-

-

-

-

50,207

50,207

Exchange differences on disposal of discontinued operation reclassified to profit or loss

11

-

-

-

-

1,645

-

1,645

Comprehensive income for the period

-

-

-

-

1,645

50,207

51,852

Equity-settled share-based payment expense

-

-

-

358

-

-

358

Vesting of share scheme

16

-

-

-

(1,185)

-

1,185

-

Reclassification of share premium into retained earnings

1

-

(4,975)

-

-

-

4,975

-

Dividends

8

-

-

-

-

-

(11,409)

(11,409)

Closing equity
September 2021

229

-

999

1,178

-

77,865

80,271


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS









Note

6 months
ended
30 September
2021
£000

6 months
ended
30 September
2020
£000

Year
ended
31 March
2021
£000

Net cash flow from operating activities

20

8,076

32,793

55,438

Investing activities

Investment income

12

197

332

Purchases of property, plant and equipment

(1,719)

(1,928)

(3,287)

Purchases of intangible assets

(2,257)

(7,813)

(8,745)

Acquisitions of subsidiaries net of cash acquired

9

(4,543)

923

(60,800)

Purchase of investment in associate

10

(6,739)

-

-

Proceeds from disposal of discontinued operation net of cash disposed

11

20,159

-

21

Net cash from/(used in) investing activities

4,913

(8,621)

(72,479)

Financing activities

Dividends paid

8

(11,409)

(10,676)

(21,385)

Proceeds from issue of share capital

-

-

1

Repayment of loans and borrowings

(54,306)

(49,000)

(70,000)

Proceeds from loans and borrowings

11,421

-

81,259

Payment of lease liabilities

(130)

(111)

(211)

Net cash used in financing activities

(54,424)

(59,787)

(10,336)

Net decrease in cash and cash equivalents

(41,435)

(35,615)

(27,377)

Cash and cash equivalents at beginning of year

64,806

93,774

93,774

Effect of foreign exchange rate changes

-

383

(1,591)

Cash and cash equivalents at period end

23,371

58,542

64,806

Reconciliation of cash and cash equivalents

Continuing operations

Corporate cash

7,224

14,868

10,535

Clients’ funds and retailer partners’ deposits

16,147

27,160

28,405

Cash and cash equivalents on the condensed consolidated statement ...

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