Paypoint Plc · LSE:PAY
Paypoint — FY2018 Earnings Presentation
42 slides from Paypoint's earnings presentation, May 24, 2018
Slide 1: Results for the year ended 31 March 2018
Dominic Taylor, Chief Executive Rachel Kentleton, Finance Director 24 May 2018 Results for the year ended 31 March 2018
Slide 2: Introduction
Introduction
Slide 3: Continued strategic and operational progress
Continued strategic and operational progress 3 Good FY18 financial performance • Net revenue up £2.1m to £119.6 million, with underlying growth of £6.3m • Profit before tax £52.9 million, slightly ahead of expectations • Operating cashflows increased by 6.5% to £65.1 million • New financing facility
Slide 4: Reshaping phases complete, now set for growth
Reshaping phases complete, now set for growth 4 4 3 2 Future 1 8,500 PayPoint One live Grow PayPoint One ecosystem Launched EPoS Pro Launch new parcel and Mobile App carriers Launched MultiPay Continued strong cash- 19m transactions on flows from UK payments Mobile and Launched MultiPay and top-ups
Slide 5: Financial review
Financial review
Slide 6: Financial results
Financial results 6 Year ended 31 March 2018 2017 % £m £m change Gross revenue 213.5 211.9 0.8 Net revenue 119.6 123.9 (3.5) Other cost of revenue (19.6) (17.9) 9.5 Administrative costs (46.5) (53.7) (13.4) Operating profit before disposals 53.5 52.3 2.3 Impairments and disposals - 15.6 n.m. Share o
Slide 7: PayPoint* revenue growth continues
PayPoint* revenue growth continues 7 Year ended 31 March 2018 2017 % £m £m change Gross revenue 213.5 203.4 5.0 Net revenue 119.6 117.5 1.8 Other cost of revenue (19.6) (16.7) 17.4 Administrative costs (46.5) (47.5) (2.1) Operating profit 53.5 53.3 0.4 * Consists of our UK, Irish and Romanian retail
Slide 8: Underlying growth in net revenue
Underlying growth in net revenue 8 (net revenue 2017) (net revenue 2018) UK top- UK top- ups Parcels Parcels Parcels & other ups £16.9m (old fee) & £10.7m Other £17.7m £1.8m Cards Cards £9.7m UK retail £7.0m £7.5m UK bill services UK retail Service UK bill payments £36.6m fees services £52.4m £7.7m
Slide 9: Reduction in second half costs
Reduction in second half costs 9 £66.6m total 1 Half year analysis Third party costs 2018 costs D&A £24.0m £10.5m £35.4m £34.4m £28.8m £32.2m People First half Second half £32.1m 2016/17 2017/18 £m £123.1m 2 £0.5m 67 £0.4m £0.8m (£1.2m) £1.2m £2.2m (£2.7m) £66.1m £66.5m £66.6m £66.6m £0.4m £0.8m £64
Slide 10: Financing and working capital
Financing and working capital 10 • Working capital improvements – better terms for card rebate reduced from 3 months to 1 month • New dividend payment profile from 1 April 2019 (ordinary and additional) – quarterly payments will reduce working capital spikes • New financing facility in place - £75 m
Slide 11: Cash generation and use
Cash generation and use 11 Year ended 31 March 2018 2017 £m £m Profit before tax 52.9 69.1 Non-cash items / other 12.2 (8.0) Operating cash flows 65.1 61.1 Working capital – PayPoint / other 2.9 0.9 Working capital – Client funds 5.4 (11.6) Tax paid (10.3) (8.6) Capital and other expenditure (13.4)
Slide 12: Uses of cash
Uses of cash 12 4.3 4.3 3.5 Capex maintenance (£m) Maintain/optimise core business 2015/16 2016/17 2017/18 14.0 9.1 Capex 3.9 growth (£m) Invest for future performance 2015/16 2016/17 2017/18 Yodel 55.9 38.0 Dividends (£m) 27.4 Ordinary and additional Generate capital returns for shareholders 2015/1
Slide 13: Balance sheet remains strong
Balance sheet remains strong 13 Year ended 31 March 2018 2017 £m £m Goodwill 12.2 8.2 Other intangible assets 13.6 11.9 Property, plant & equipment & deferred tax 28.6 27.5 Cash 46.0 53.1 Working capital (34.9) (23.1) Current tax (4.2) (4.5) Net assets 61.3 73.1 Equity shareholders’ funds 61.3 73.1
Slide 14: Outlook
Outlook 14 Headwinds • DWP contract reduction £4m • Yodel renegotiation, second year impact £1m Growth drivers from a base of £47.9m • Further PayPoint One rollout to 12,400 outlets and mix improvement • Card services; volume growth • Pipeline of parcel deals; volume & revenue this year will be infl
Slide 15: Embedding PayPoint at the heart of convenience retail
Embedding PayPoint at the heart of convenience retail
Slide 16: PayPoint's unique business model
PayPoint’s unique business model 16 Growing portfolio Popular services for PayPoint One MultiPay Parcels customers, retailers and clients, which increase Over the counter ATM bill payments Top-ups engagement UK & Romania Differentiated Robust 24/ 7 Retailer & resilient settlement Operational support
Slide 17: Strong portfolio of products drives strategic priorities
Strong portfolio of products drives strategic priorities 17 Cash generation Illustrative Over-the- Top- counter ups bill Parcels payments ATM PayPoint One ecosystem Romania Decline Multi Growth -Pay Current position of priorities Omnichannel payments future Innovation Retail services future Investme
Slide 18: Convenience is the place to be and growing
Convenience is the place to be and growing 18 Behavioural change • Consumers want convenience, variety and choice, whether online or close to home Growing market • Forecast to grow by £7bn by 2022, along with online and discounters Independent retailers* 67% Independent retail opportunity Multiples
Slide 19: Strong progress on PayPoint One
Strong progress on PayPoint One 19 • What we have achieved 31 Mar 18 31 Mar 17 − Growth to over 9,000 stores (as of Total 8,550 3,601 21 May 2018) with continued rollout over next 12 months EPoS Base 3,718 1,421 − EPoS Pro version launched offering £10/week full stock management EPoS Core 4,678 2,18
Slide 20: Retail flexibility provided by our stock app
Retail flexibility provided by our stock app 20 Results for the period ended 31 March 2018
Slide 21: Value of EPoS to a typical store
Value of EPoS to a typical store 21 A typical store turnover is £1.2m per annum and invests £20,000 in stock There are 5 key areas where EPoS can help retailers: 1. Margin management Increasing to 20% would drive − Average margin achieved in store is £3,000 per £1,000 improved margin per stock stock
Slide 22: Strategic priorities
Strategic priorities 22 Delivering today Preparing for tomorrow Sustain leadership Embed PayPoint at PayPoint becomes in ‘pay as you go’, Innovate for future the Heart of the definitive parcel OTC & grow digital growth & profits Convenience Retail point solution Bill Payments • Link OTC cash trial •
Slide 23: Delivery roadmap
Delivery roadmap 23 May 2018 May 2019 Future Products T2 Sunset PP1 9000 12400 Rollout completed T4 Romania deployment iOS app EPoS IOT for store e.g. fridges Data/supply chain management LINK OTC Trial ATM Cards Net settlement Peak 18 Peak 19 Parcels Carrier 1 Carrier 2 Carrier 3 MultiPay Direct De
Slide 24: PayPoint uniquely placed to benefit from market growth
PayPoint uniquely placed to grow 24 Business Market Delivery Model + Opportunity + Roadmap = PayPoint uniquely placed to benefit from market growth Results for the period ended 31 March 2018
Slide 25: Summary
Summary 25 • Good FY 17/18 financial performance • Business reshaped and well positioned for future growth • Clear strategy in place to capture market opportunities, across a strong portfolio of products • Company reorganised to enable faster and more efficient innovation • Prioritised capital alloc
Slide 26: Appendices
Appendices
Slide 27: Appendix 1: Strategic priorities
Appendix 1 Strategic priorities
Slide 28: 1. Embed PayPoint at the heart of convenience retail
1. Embed PayPoint at the heart of convenience retail 28 • What we have achieved 31 Mar 18 31 Mar 17 − Growth to over 9,000 stores (as of Total 8,550 3,601 21 May 2018) with continued rollout over next 12 months EPoS Base 3,718 1,421 − EPoS Pro version launched offering £10/week full stock management
Slide 29: 2. PayPoint becomes the definitive parcel point solution
2. PayPoint becomes the definitive parcel point solution 29 • Best network and brand − Network was grown from just over 6,000 to over 7,400 sites across the UK − Tesco have opened over 400 locations along with over 700 in McColls − Trusted brand (Trust Pilot: 9.2 out of 10) − Opportunity to serve ot
Slide 30: 3. Sustain PAYG and grow digital bill payments (UK)
3. Sustain PAYG and grow digital bill payments (UK) 30 • Remain market leader in PAYG and over- the-counter bill payments − TV Licensing – new long term agreement − All major clients retained with good contractual/relationship stability − Stable/increasing market shares − More than 20 new clients ad
Slide 31: 4. Grow our Romanian business
4. Grow our Romanian business 31 • Strong country opportunity Net revenue £m − Cash has a 90% share of household payments − Growing economy; GDP growth of 4.6%, driven by 11.9 consumption 9.2 − Online growing but yet to take hold 6.8 7.0 − eCommerce yet to kick off – potential cards and parcels oppo
Slide 32: 5. Innovate for future growth and profits
5. Innovate for future growth and profits 32 Over-the-counter cash Card payment T4 trial with LINK Net Settlement • Trial of over-the-counter • Expansion of net settlement • Slimline terminal for cash withdrawal service in proposition to 10k card deployment in Romania 15 stores payment customers • I
Slide 33: Appendix 2: Local shop economics
Appendix 2 Local shop economics
Slide 34: Changing consumer behaviour
Changing consumer behaviour 34 Big changes over last 10 years: • Shift from ‘big, weekly’ shop to ‘top up, little and often’ shopping • Planned shopping down 9% but distress purchases up 5% • ‘Meal for tonight’ mission +6% but huge regional differences (7.2% of visits in London, 1.7% in Wales) • 11%
Slide 35: Local shop economics
Local shop economics 35 Anatomy of a typical convenience store: Value that PayPoint brings to local stores: • £1.2m p.a. turnover • Average of 1,200 consumer visits per month • Annual gross profit of 20% of turnover • Over 60% of PayPoint shoppers also bought • c. 1000 square feet shop items • Avera
Slide 36: Value of EPoS to a typical store
Value of EPoS to a typical store 36 A typical store turnover is £1.2m per annum and invests £20,000 in stock There are 5 key areas where EPoS can help retailers: 1. Margin management Increasing to 20% would drive − Average margin achieved in store is £3,000 per £1,000 improved margin per stock stock
Slide 37: Appendix 3: PayPoint One
Appendix 3 PayPoint One
Slide 38: PayPoint One
PayPoint One 38 Everything a modern convenience store needs Contactless Card Payments Parcel – pick up and drop off Bill Payments EPoS Future proof technology Results for the period ended 31 March 2018
Slide 39: Platform that grows with your business
Platform that grows with your business 39 Pro Core Base Launched Nov 2017 Launched Usage 2016 T2 Mobile App Launched Nov 2017 Cash Front of store Complete Legacy register EPoS EPoS Results for the period ended 31 March 2018
Slide 40: EPoS: Base, Core, Pro
EPoS: Base, Core, Pro 40 Base Core Pro £10** per week £15** / £20* per week £30 per week • PayPoint services-footfall • PayPoint services-footfall • PayPoint services-footfall Attract • Enhanced service (scanning) • Enhanced service (scanning) • Clear pricing & promotions • Clear pricing & promotion
Slide 41: EPoS: Mobile App
EPoS: Mobile App 41 Allowing retailers to: • See sales in real time • Change prices and promotions instantly • Control stock from anywhere Available to all PayPoint One users with functionality aligned to their EPoS package Results for the period ended 31 March 2018
Slide 42: Positive customer feedback
Positive customer feedback 42 How do you find PayPoint One to use? How likely are you to recommend PayPoint One to another retailer? from an outbound telephone customer satisfaction survey of 100 PayPoint One users Results for the period ended 31 March 2018