PayPoint plc · LSE:PAY
PayPoint — FY2009 Earnings Presentation
58 slides from PayPoint's earnings presentation, May 28, 2009
Slide 1: PayPoint plc Preliminary Results Presentation
PayPoint plc Preliminary Results Presentation 28 May 2009 Strictly private and confidential
Slide 2: Agenda
Agenda • Highlights and operations review • Financial review • Summary • Q&A • Closing 2
Slide 3: Highlights and operations review
Highlights and operations review Dominic Taylor Chief Executive 3
Slide 4: PayPoint overview
PayPoint overview • Strong performance – Revenue up 7%* – Operating margin up 1% to 43%* – Resilience in the face of economic downturn • Continued strategic focus – Leader in cash payments – Premier UK retail network with near total population cover – Fast growing internet payments – Developing inte
Slide 5: PayPoint overview
PayPoint overview • Our investment in the business continues: – Collect+ joint venture with Home Delivery Network – PayPoint.net now fully integrated with PayCash launched, providing a cash payment option to internet shoppers – Launched bill payment in Romania, with 14 clients already contracted – R
Slide 6: PayPoint highlights
PayPoint highlights For periods ended March Transaction volume (million) Net revenue (£m illion) 600 80 500 70 60 400 50 300 40 30 200 20 100 10 - - 04/05 05/06 06/07 07/08 08/09 04/ 05 05/ 06 06/ 07 07/ 08 08/ 09 * The period ended 30 March 2008 is 53 weeks. All other periods are 52 weeks 6
Slide 7: PayPoint highlights
PayPoint highlights For periods ended March Operating profit (£million) PayPoint terminal outlets 35 30,000 UK & Ireland Romania 30 25,000 25 20,000 20 15,000 15 10,000 10 5 5,000 - - 04/05 05/06 06/ 07 07/ 08 08/09 04/05 05/06 06/07 07/08 08/09 * The period ended 30 March 2008 is 53 weeks. All othe
Slide 8: PayPoint's value chain
PayPoint’s value chain PayPoint creates value by offering: Consumers a rich on multiple with through offering to multiple through variety of synergistic client platforms online and supporting complementary transaction core segments conventional merchant business units services competencies retailers
Slide 9: Trading in economic downturn
Trading in economic downturn • Resilient performance – We help consumers to budget – 98% customer satisfaction (84% very satisfied) – Most of our payments are for essential services (non discretionary) – Local shops still needed for top up shopping – Long term client and retail contracts BUT – Inevi
Slide 10: Operations review
Operations review Transaction volumes up 10% For periods ended March Trans action volum e s by s e ctor (m illion) 600 550 General Online 500 450 ATM PP.net 400 350 300 250 200 150 100 50 - 2005 2006 2007 2008 2009 * The period ended 30 March 2008 is 53 weeks. All other periods are 52 weeks 10
Slide 11: Sector and market review
Sector and market review • Bill and general payments – Improved coverage within the retail network, underpinned by high customer satisfaction and good brand awareness – Energy prepaid volumes up 19% as a result largely of higher tariffs – Local authority/housing sector continuing to grow through res
Slide 12: Sector and market review
Sector and market review Bill and general payments continued… For periods ended March Bill payment volumes* (million) 100 Energy Water 90 Communications Other 80 70 60 50 40 30 20 10 - 2005 2006 2007 2008 2009 * excludes prepaid energy and transport * The period ended 30 March 2008 is 53 weeks. All
Slide 13: Sector and market review
Sector and market review • Online – Mobile market volumes down in the UK, Ireland and Romania – PayPoint online volumes down 6% – Partially offset by growth in prepay debit cards, e-money schemes, newer MVNOs and international calling cards – c. 2,100 new terminals installed in the UK which has incr
Slide 14: Sector and market review
Sector and market review • ATMs – Successful surcharge self replenishment model – low fixed costs – Achieved over 540 new site installations, with lower churn, resulting in a net 233 increase, closing with a total of 2,249 sites – Average transactions per ATM down to 565 per month as newer machines
Slide 15: UK retail review
UK retail review • 21,990 PayPoint terminal Terminal site outlets in UK and Ireland Epos only site (March 2009) ATM site • Successfully rolled out over 3,400 (net increase of over 2,100) agents in last year • Continuing to rollout agents to c.23,500 by April 2010 • Continued strong demand with
Slide 16: PayPoint's value to retailers
PayPoint’s value to retailers • Bill pay consumers visit store >25% more frequently than average shoppers1. • 82% retailers recognise footfall benefit • Bill pay consumer spends 72% more per week than average shopper (excluding bill value) 1. • PayPoint facility increases in-store spend across all c
Slide 17: Romania
Romania • A leading processor of mobile top ups on behalf of all operators, through two retail brands (PayPoint and PayStore) • PayPoint Romania fully integrated into the UK host for processing • Continued investment and knowledge transfer – Further network optimisation based on new client dynamics
Slide 18: Romania
Romania • Bill payment launched in August 2008 with 4 clients – Now 14 clients contracted – Over 1 million payments processed – Run-rate of 50k transactions per week 18
Slide 19: Internet payments
Internet payments Online consumer spend - UK ecommerce £millions 60 • PayPoint.net processes 50 +15% 40 payments between 30 +25% consumers and web 20 10 merchants via acquiring 0 2007 2008 2009 banks Source: IMRG • PayPoint.net trading profitably in a growing market • Growth in the year – Merchants
Slide 20: Internet payments
Internet payments • PayCash launched in late 2008 – Synergy product providing differentiation – Generating much interest amongst prospect and existing merchants (incl. Moonpig, PKR, Ann Summers, Uniqlo, Streetcar) • Collect+ will provide further differentiation • PayPal launched in March 2009 – prov
Slide 21: Collect+ 'Dream team' JV to create new consumer parcels offer
• launched today • ‘Dream team’ JV to create new consumer parcels offer – PayPoint provides retail network expertise and technology – Home Delivery Network provides parcel logistics and distribution capability along with mail-order and internet client portfolio • Home Delivery Network are UK’s no.2
Slide 22: Returns proposition developed; c.1,250 agents live
• Returns proposition has been developed in recent months – c.1,250 PayPoint agents already live nationwide – Over 3,500 returns being processed per week • Collection service to be launched within the next 2 months – Significant interest being generated from mail-order catalogues and internet mercha
Slide 23: Financial review
Financial review George Earle Finance Director 23
Slide 24: Volume driven top line growth
Volume driven top line growth £000 08/09 07/08 Increase Like for like increase Revenue 224,351 212,145 6% 7% Cost of sales 160,496 155,591 3% 5% Gross profit 63,855 56,554 13% 15% Margin 28% 27% 24
Slide 25: Revenue growth driven by volume
Revenue growth driven by volume £000 08/09 07/08 Increase Revenue 224,351 212,145 6% Cost of sales 160,496 155,591 3% Gross profit 63,855 56,554 13% Gross margin 28% 27% Revenue 07/08 212,145 Volume 5,919 Mix/price 1,999 PayPoint.net & PayPoint Romania 3,355 Other 933 08/09 224,351 25
Slide 26: Gross profit increased by 13%
Gross profit increased by 13% £000 08/09 07/08 Increase Revenue 224,351 212,145 6% Cost of sales 160,496 155,591 3% Gross profit 63,855 56,554 13% Gross margin 28% 27% Cost of sale 08/09 07/08 Commission 83,891 83,439 Depreciation/ amortisation 5,698 5,719 Mobile top-ups as principal 59,317 55,468 A
Slide 27: Operational gearing improves like for like net margins
Operational gearing improves like for like net margins £000 08/09 07/08 Increase Like for like increase Net revenue 77,398 69,860 11% 13% Operating profit 33,361 29,200 14% 20% Operating margin 43% 42% 1ppt Interest 1,241 1,204 PBT 34,602 30,404 14% 19% Tax 10,818 9,424 Profit after tax 23,784 20,98
Slide 28: Operating costs under control
Operating costs under control £000 08/09 07/08 Increase Net revenue 77,398 69,860 11% Operating profit 33,361 29,200 14% Interest 1,241 1,204 Profit before tax 34,602 30,404 14% Tax 10,818 9,424 Profit after tax 23,784 20,980 13% Operating profit £000 07/08 29,200 Increase in gross profit 7,301 Staf
Slide 29: Strong cash flow
Strong cash flow £000 08/09 07/08 Operating cash flow before 40,141 36,040 movement in working capital Changes in working capital* 900 (752) Operating cash flow 41,041 35,288 Capital expenditure (9,118) (5,409) Net investment income 1,164 1,233 Tax paid (7,940) (6,362) Cash flow before dividends 25,
Slide 30: Net cash £36.3m
Net cash £36.3m £000 Net cash at start (including client cash* £8m) 27,727 Cash inflow 25,147 Dividends (11,077) Acquisition of subsidiaries and investment (2,608) Purchase of own shares (2,489) Other (355) Net cash at end (including client cash* £8m) 36,345 *Client cash is cash to which PayPoint ha
Slide 31: Summary & outlook
Summary & outlook Dominic Taylor Chief Executive 31
Slide 32: Summary & outlook
Summary & outlook • We expect further growth in revenues in the UK by increasing share in bill and general payments, online and ATMs • We plan to install 1,500 more sites in the UK and 900 more bill payment sites in Romania this year. • PayPoint.net is trading profitably and is set for continued gro
Slide 33: Q&A
Q&A 33
Slide 34: Appendices
Appendices 1.PayPoint management team 2.Five year trading record 3. Background information on PayPoint 4. Materials to support the consumer transaction 34
Slide 35: Management team
Appendix I Management team • David Newlands (Non Executive Chairman) formerly GEC, Deputy Chairman of Standard Life and currently Chairman of Tomkins and KESA • Dominic Taylor (Chief Executive) formerly Vodafone, Granada • George Earle (Finance Director) formerly Centrica, GEC, Saatchi, Deloitte & T
Slide 36: Five year trading record
Appendix 2 Five year trading record 36
Slide 37: Five year trading record
Appendix 2 Five year trading record March year end 2005 2006 2007 2008 2009 Transactions million 258.5 322.1 414.1 503.3 546.0 (1) Revenue £ million 89.1 120.0 157.1 212.1 224.4 Net revenue(1,2) £ million 36.9 46.1 57.7 69.9 77.4 Net revenue per transaction(2,3) p 14.2 14.3 13.9 13.9 14.2 Costs (4)
Slide 38: Five year cash flow
Appendix 2 Five year cash flow March year end 2005 2006 2007 2008 2009 £'m Operating profit (excluding ABTs deferred revenue release and exception items) 12.0 19.3 25.2 29.2 33.4 Exceptional items (4.6) - - - - Operating profit 7.5 19.3 25.2 29.2 33.4 Adjustments for depreciation and amortisation 1.
Slide 39: Balance sheet
Appendix 2 Balance sheet March year end 2006 2007 2008 2009 £'m Non-current assets Goodwill - 18.2 27.4 27.6 Other intangilble assets - 2.8 2.7 2.0 Property, plant and equipment 8.9 11.8 13.5 16.1 Deferred tax asset 1.2 1.6 1.6 1.6 Investment - - - 0.6 10.1 34.5 45.2 47.9 Current assets Inventories
Slide 40: Background information on PayPoint
Appendix 3 Background information on PayPoint 40
Slide 41: PayPoint overview
PayPoint overview • Founded in 1996 by client investors as a branded cash payment collection network • Listed in September 2004 • The UK sector leader: • Prepay transactions (energy, mobile and transport) • Convenience cash payment collection • Smart payment technology • Growing position in online p
Slide 42: Highlights
Appendix 3 Highlights • Recognised brand and high customer Financial performance satisfaction March year end 2002 2003 2004 2005 2006 2007 2008 2009 • Strong organic growth Ave no of terminals 7,922 10,820 10,991 12,253 14,202 16,417 18,708 20,934 Transactions (m) 106.3m 154.3m 204.5m 258.5m 322.1m
Slide 43: Our development
Appendix 3 Our development 1996 - Founded by client investors 1998 - Refinanced and new management team appointed Grow 1999 - National network completed transaction volumes: 2002 - Turned profitable and cash generative More Clients 2003 - Congestion charging and ATMs More 2004 – Listed o
Slide 44: Retail business overview
Appendix 3 Retail business overview CLIENT Issue customers with: Comprehensive scope -swipe or smart cards -barcoded bills -smart keys -details of local outlets • Brand PAYPOINT Poll information from terminal • Technology/know-how Send Client details Collect payments from Retail CONSUMER Agent Take
Slide 45: The PayPoint UK network
Appendix 3 The PayPoint UK network Terminal site Epos only site 21,990 Retail Agents including 3,285 ATM site with Epos connections and 2,249 ATM sites commission more than £4,000 per annum per agent footfall (c.450 transactions per week) 39% multiple outlets, remainder independent N
Slide 46: UK Clients
Appendix 3 UK Clients • Many quality clients, many long term contracts, generally 3 – 5 years • Top 10 clients deliver 65% of transactions Energy Telecoms/Media Water Transport Other British Gas BT O2 Bristol Water TfL (Capita) AON Eircom Orange Dee Valley Water Arriva Leger Holidays EdF Yorkshire W
Slide 47: The PayPoint Romanian network
Appendix 3 The PayPoint Romanian network 47
Slide 48: PSP transaction flow
Appendix 3 PSP transaction flow 48
Slide 49: PayCash – merchant's website
PayCash – merchant’s website 49
Slide 50: PayCash – consumer voucher
PayCash – consumer voucher 50
Slide 51: Core business strategy
Appendix 3 Core business strategy • Grow transaction volumes • optimise retail agent coverage • offer multiple transaction platforms • grow client base • grow existing and develop new services • expand geographic coverage • Leverage the asset base • brand • service differentiation • technology/syste
Slide 52: Summary
Appendix 3 Summary • Established business with a unique combination of assets • extensive UK national network • Growing online network • established brand • strong contract portfolio • robust and innovative technology • Strong competitive positioning • barriers to new entrants • Unique opportunity t
Slide 53: Materials to support the consumer transaction
Appendix 4 Materials to support the consumer transaction 53
Slide 54: Client payment media
Appendix 4 Client payment media 54
Slide 55: Retailer external signage
Appendix 4 Retailer external signage 55
Slide 56: POS merchandising
Appendix 4 POS merchandising 56
Slide 57: Terminals and ATMs
Appendix 4 Terminals and ATMs 57
Slide 58: Terminal receipts
Appendix 4 Terminal receipts E-TopUp Sample SPAR Tag E Voucher Utility Payment Transport Ticketing 58