PayPoint plc Preliminary results presentation 24 May 2012
Agenda • Results summary • Strategy and execution • Financial review • Operational review • Summary 2
Results summary Years ended March • Strong results with good progress in all parts of the Net revenue £m business in line with our strategy • Record transaction volumes of 659m up 12%, and operating profit up 8% to £38.9m 77.4 77.4 82.7 90.4 • Good performance in our established businesses with 2009 2010 2011 2012 transactions up 11% – UK and Ireland (UK & I) retail network Operating profit £m transactions up 9% (net revenue up 9%) – Improved retail yield underpinned by 25% transaction growth in retail services – Internet payment transactions up by 24% 33.7 34.1 36.1 38.9 • Strong growth in our developing businesses with 2009 2010 2011 2012 transactions up 34%, net revenue up 44% Dividends per share pence – Romanian retail network turns to profit, with 19m bill payment transactions (up 56%) – PayByPhone transaction growth of 23% – Collect+ starting to scale with transactions up 3.5x 17.6 21.8 23.4 26.5 • Dividend of 26.5p per share, up 13% 2009 2010 2011 2012 3
Strategy and execution 4 4
Four key elements of our strategy PayPoint links clients to consumers providing them with convenient services and ways to pay Payments Selected Geographic Value added capability vertical reach services / markets content Differentiation to Ability to export know High volume Multiple payment channel through how and replicate media recurring payments products & services UK strategy Multiple payment Ability to add value Deeper role in channels payments Single platform energy/utilities value chain telecoms & media financial transport/parking public sector/ social housing retail (incl eCommerce) gaming/leisure 5
Execution of strategy • Our established businesses have shown strong growth, leveraging their assets and driving new revenue streams • On track to deliver scale cash-out capability for the Department for Work and Pensions (DWP) this year • Our developing businesses are developing well in fast growing markets, with net revenue up 44% • We are creating an integrated technology platform to provide best in class capability, efficiency and scalability – Infrastructure developments focus on a single group architecture (with planned capital spend of £6m in the coming financial year) – Integration of PayByPhone and PayPoint.net – Consolidate datacentres on two sites • Our multi-channel payment approach in key vertical markets is gaining traction – We processed 2.9m energy prepayment transactions online, 128% up on last year – We are contracted to provide full multi channel payment capability to a number of smart metering programmes and the Northern Ireland Housing Executive – PayByPhone has a multi-channel offer across retail, mobile web and phone 6
Financial review 7 7
Strong business momentum Years end March 2010 2011 2012 £m £m £m £m 90.4 Transactions 551.9 589.7 659.1 82.7 77.4 77.4 Net revenue 1 77.4 82.7 90.4 69.9 Operating profit 34.1 36.1 38.9 Profit before taxation 32.6 34.5 37.2 Operating cash flow 39.8 40.7 43.2 38.9 36.1 34.1 33.7 Dividends 2 12.9 15.0 16.5 29.2 Cash at end of year 20.8 26.5 35.5 2008 2009 2010 2011 2012 Net revenue Operating profit 1 Net revenue is revenue less commissions paid to retail agents, the cost of mobile top-ups and SIMs where PayPoint is principal, card scheme sponsors’ charges and out sourced call centres. 2 Cash amounts distributed to equity holders in the year 8
Profit and loss Years ended March 2010 2011 2012 £000 £000 £000 Revenue 196,603 193,233 200,029 Cost of sales (119,197) (110,510) (109,587) Net revenue 77,406 82,723 90,442 Depreciation and amortisation (4,820) (3,612) (3,333) Other cost of sales (9,093) (8,445) (8,858) Gross profit 63,493 70,666 78,251 Administrative expenses (29,421) (34,614) (39,385) Operating profit 34,072 36,052 38,866 Share of loss of joint venture (1,601) (1,541) (1,828) Investment income and finance cost 174 (55) 163 Profit before tax 32,645 34,456 37,201 • Net revenue growth ahead of revenue as mobile decline affects retail agents more than PayPoint • Increase in administrative expense for IT operations and development ahead of Simple Payment service for DWP and major infrastructure spend • Collect+ loss increased marginally but parcel service should turn to profit this year 9
Net revenue 1 bridge 2011 to 2012 Established business Developing business £000 Operating profit £41.2m (2011 £38.4m) Operating loss including Collect+ £4.2m (2011 £3.9m) 92,000 90,000 88,000 86,000 84,000 82,000 80,000 2011 Bill and general Top-ups Retail Services Other Internet Bill and general Top-ups PayByPhone Collect+ 2012 • Established business growth, Romania profitable, PayByPhone and Collect+ progress but increased losses 1 Net revenue including PayPoint’s 50% share of Collect+ 10
Cash generation and use Years ended March 2010 2011 2012 £m £m £m Operating profit 34.1 36.0 38.9 Depreciation/amortisation 4.8 3.6 3.3 Share based payments 0.9 1.1 1.1 • High and consistent Operating cash flows 39.8 40.7 43.3 conversion of profit to cash Working capital (1.1) 1.5 - with low working capital Cash generated by operations 38.7 42.2 43.3 Tax paid (13.7) (11.0) (10.4) Interest - (0.1) - • Tax rate > UK rate Net cash inflow from operating activities 25.0 31.2 32.8 - no tax credit on losses; - no relief on share based awards; but Investment income 0.2 - - - 2 years research & development relief Capital expenditure (2.6) (3.2) (5.3) Acquisitions and investment in joint venture (30.7) (1.4) (1.8) Purchase of own shares (0.5) - - • Capex starting to rise from Net cash used in investing activites (33.6) (4.6) (7.0) low base Financing - - - Bank loan 6.0 (6.0) - • Dividend growth in line with Equity dividends (12.9) (15.0) (16.5) earnings , 1.5 times covered Net cash used in financing activities (6.9) (21.0) (16.5) Net increase/(decrease) in cash (15.4) 5.6 9.4 Cash at beginning of year 36.2 20.8 26.5 Effects of foreign exchange rate changes - - (0.4) Cash at end of year 20.8 26.5 35.5 11
Capital Expenditure Plan Years ended March 2011 2012 2013 £m £m £m Terminals, ATMs, PPos 2.6 1.8 2.7 Other computer hardware 0.5 1.5 1.5 Development (incl. software 0.2 1.5 4.5 intangible) Other 0.2 0.5 0.8 Total 3.5 5.3 9.5 • Opportunity to improve IT infrastructure for future growth • Virtual terminal with Ppos and ATMs in UK • Two hosted data centres to replace existing data centres • Development includes CRM for retail agents/extranet, DWP Simple Payment service, enhanced settlement and management reporting for internet gaming merchants • Capital spend should reduce once these developments have completed 12
Key Messages • Net revenue and profit growth • Excellent cash conversion • Ongoing investment to secure future growth • Balance sheet strong • Sustainable dividend growth 13
Operational review 14 14
UK & I retail network • As our most established business, it is core to our Group capability and accounts for 82% of the Group’s net revenue • Market leading ‘over the counter’ payments proposition with strong differentiation through the range of payments we accept and breadth of retail relationships across 24,000 sites • Our relatively mature payments sector net revenues (accounting for 50% of the company’s net revenue) continue to grow, up 7.6% • The launch of the DWP’s Simple Payment service later this year will further grow payments sector net revenue • Within the top up sector, the decline in mobile net revenue has been mitigated by good growth in e-money net revenues and the launch of the Health Lottery 15
UK & I retail network • Our large retail network allows us to leverage retail services, with strong net revenue growth 28% up, and now accounting for 19% of the company’s net revenue – ATMs +9%; debit and credit +25%; SIM sales +36%; parcels volumes growth 3.5x • We plan to continue our focus on retail services innovation – Field sales force increased by 50% – Virtual terminal rollout; 2,600 now live – Broadband connectivity rollout; over 700 now live – ‘MyPayPoint’ agent extranet rollout; 7,800 currently registered – Investing in CRM system for our retail agents 16
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