Paypoint Plc · LSE:PAY
Paypoint — FY2008 Earnings Presentation
57 slides from Paypoint's earnings presentation, May 22, 2008
Slide 1: Preliminary Results Presentation
Strictly private and confidential Preliminary Results Presentation 22 May 2008
Slide 2: Agenda
Agenda Highlights and operations review Financial review Summary Q&A Closing 2
Slide 3: Highlights & operations review
Highlights & operations review Dominic Taylor Chief Executive
Slide 4: PayPoint overview
PayPoint overview Strong year’s performance, driven by a combination of – good revenue growth (35%) – operational gearing (46% operating margin, up 2ppts on a like for like basis) Results driven through implementation of PayPoint’s core business strategy, namely: – broadening our customer propos
Slide 5: PayPoint overview
PayPoint overview Sector share growth in all sectors and now overall cash payment market leader ahead of the Post Office First full year for our internet Payment Service Providers (PSP) now trading as PayPoint.net Acquired Pay Store – a leading Romanian mobile top-up business on 15 May 2007 5
Slide 6: PayPoint overview
PayPoint overview Our investment in the business continues: – integration at PayPoint.net, three hosted data centres reduced to one with disaster recovery at PayPoint operations centre in WGC; new billing system nearing completion – new communications and polling hardware, increasing processing ca
Slide 7: PayPoint highlights
PayPoint highlights For the year ended March Transaction volume (million) Net revenue (£m illion) 600 80 70 500 60 400 50 300 40 30 200 20 100 10 - - 03/04 04/05 05/06 06/07 07/08 03/ 04 04/ 05 05/ 06 06/ 07 07/ 08 * The year to 30 March 2008 contains 53 weeks. All prior years contain 52 weeks 7
Slide 8: PayPoint highlights
PayPoint highlights For the year ended March Operating profit (£million) PayPoint terminal outlets 30 25,000 25 20,000 20 15,000 15 10,000 10 5,000 5 - - 03/04 04/05 05/06 06/07 07/08 03/04 04/05 05/06 06/07 07/08 before exceptional items * The period ended 30 March 2008 was 53 weeks. All prior peri
Slide 9: Operations review
Operations review Growth in all sectors For the periods ended March Transaction volumes by sector (million) 550 500 General Mobile 450 400 ATM PP.net 350 300 250 200 150 100 50 - 2004 2005 2006 2007 2008 9
Slide 10: 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, boosting share Transaction volume in prepaid energy increased despite tariff reductions (particularly gas) early in 2007 Continued
Slide 11: Sector and market review
Sector and market review Bill and general payments continued… Local authority/housing sector continuing to grow through convenience exclusive arrangements with resellers E-money, gifting and prepay debit cards – leading cash top up channel – ‘The Times’, ‘The Sun’, ‘Daily Mirror’ etc. Continue
Slide 12: Sector and market review
Sector and market review Strong volume growth in bill and general payments Bill payment volumes* (million) 100 90 Energy Water 80 Communications Other 70 60 50 40 30 20 10 - 03/04 04/05 05/06 06/07 07/08 * excludes prepaid energy and transport 12
Slide 13: Sector and market review
Sector and market review Mobile PayPoint volume growth in UK – Driven by terminal and Epos growth (including Somerfield) – Sector share increased to 26% (2007:24%) – Mobile network direct top ups static at c. 22% PayPoint in Romania – Good growth opportunities from growing terminal base and scra
Slide 14: Sector and market review
Sector and market review ATMs Successful surcharge self replenishment model – low fixed costs Achieved over 450 new site installations but we have been pro- active in churning poor performing sites resulting in a net 156 increase Reorganised management, refocused sales effort in February 2,0
Slide 15: Sector and market review
Sector and market review ATMs continued…. ATM Sites 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Sept 03 Mar 04 Sept 04 Mar 05 Sept 05 Mar 06 Sept 06 Mar 07 Sept 07 Mar 08 15
Slide 16: Sector and market review
Sector and market review ATMs continued…. Average transactions per ATM is over 600 per month Growth expected to continue Average Monthly Transactions by Independent ATM Deployer Self-Fill Model 700 PayPoint 600 500 Self fill competitors 400 300 200 100 0 April 07 May 07 June 07 July 07 Aug 07 Se
Slide 17: Retail review
Retail review Terminal site Epos only site ATM site 19,878 PayPoint terminal outlets in UK and Ireland (March 2008) Successfully rolled out over 3,000 (net increase of over 2,000) agents over the past 12 months Continuing to rollout agents to c.21,400 by April 2009 Continued strong dem
Slide 18: Sector and market review
Sector and market review PayPoint.net Accelerating growth in Internet commerce Acquired two companies last year for £20m - rebranded as PayPoint.net – new website imminent Process payments between consumers and web merchants via acquiring banks and are known as Payment Service Providers Reve
Slide 19: Sector and market review
Sector and market review PayPoint.net continued…. Data centres have been reduced from three to one and a new billing platform is near completion Opportunity to cross sell internet business to PayPoint’s existing clients and vice versa and to leverage PayPoint’s retail network New management te
Slide 20: Romania
Romania Large Central East European country (22m population); nearly all bill payments are in cash Acquired Pay Store – the leading independent pre-pay distributor for £10.3m in cash Orange and Vodafone are major clients. Third network, Cosmote now contracted We have started processing from
Slide 21: Romania
Romania National branded bill payment proposition has been developed and launch plans are well advanced with 4 founding clients 4,000 terminal sites deployed for electronic top ups, with an additional 2,000 selling scratch card vouchers Expect to roll out a further 1,500 sites in current year
Slide 22: Technology based differentiation
Technology based differentiation Maintaining reputation for service excellence and technology leadership – 4 hour terminal swap out – BBC TV Licence first time registration – functionally rich terminal Trial potential for web and mobile technologies in service and payment enhancements – mobile p
Slide 23: Financial review
Financial review George Earle Finance Director
Slide 24: Strong volume driven top line growth
Strong volume driven top line growth £000 07/08 06/07 % Like for like Increase % increase Revenue 212,145 157,068 35% 11% Cost of sales 155,591 111,068 40% 11% Gross profit 56,554 46,000 23% 9% Gross margin 27% 29% Margin excluding 36% 34% top-ups as principal 24
Slide 25: Revenue growth driven by volume
Revenue growth driven by volume £000 07/08 06/07 % Increase Revenue 212,145 157,068 35% Cost of sales 155,591 111,068 40% Gross profit 56,554 46,000 23% Gross margin 27% 29% Revenue £000 06/07 157,068 Agent commission 6,453 Irish mobile top-ups 6,619 Other volume 8,190 Mix/price (2,014) Acquisitions
Slide 26: Gross profit increased by 23%
Gross profit increased by 23% £000 07/08 06/07 % Increase Revenue 212,145 157,068 35% Cost of sales 155,591 111,068 40% Gross profit 56,554 46,000 23% Gross margin 27% 29% Cost of sales 07/08 06/07 Change £000 £000 % Commissions payable 83,439 76,986 8% Depreciation/amortisation 5,719 3,815 50% Mobi
Slide 27: Operational gearing improves like for like net margins
Operational gearing improves like for like net margins £000 07/08 06/07 % Like for like Increase % increase Net revenue 69,860 57,699 21% 10% Operating profit 29,200 25,202 16% 12% Operating margin 42% 44% -2 ppts +2 ppts Interest 1,204 1,395 Profit before tax 30,404 26,597 14% 15% Tax (9,424) (7,85
Slide 28: Operating costs under control
Operating costs under control £000 07/08 06/07 % Increase Net revenue 69,860 57,699 21% Operating profit 29,200 25,202 16% Operating margin 42% 44% Interest 1,204 1,395 Profit before tax 30,404 26,597 14% Tax (9,424) (7,859) Profit after tax 20,980 18,738 12% Operating profit £000 06/07 25,202 Incre
Slide 29: Strong cash flow
Strong cash flow 07/08 06/07 £000 £000 Operating cash flow before 36,040 29,991 movements in working capital Change in working capital# (752) 3,122 Operating cash flow 35,288 33,113 Capital expenditure (5,409) (6,452) Net investment income 1,233 1,280 Tax paid (6,362) (6,007) Cash flow before divide
Slide 30: Net cash £27.7m
Net cash £27.7m £000 Net cash at start (including client cash* £7 million) 24,324 Cash inflow 24,750 Increase in client cash 711 Dividends (9,738) Movement in loans and leases (246) Effect of foreign exchange rate change (5) Acquisition of subsidiaries and investment (8,602) Purchase of own shares (
Slide 31: Summary & outlook
Summary & outlook Dominic Taylor Chief Executive
Slide 32: Summary & outlook
Summary & outlook We expect further growth in revenues in the UK by increasing share in bill and general payments, mobile top-ups, ATMs and from Post Office closures Plan 1,500 more terminals in the UK this year In Romania we plan to install 1,500 PayPoint terminals to complement the existing
Slide 33: Summary & Outlook continued…
Summary & Outlook continued… Trading in the current year is line with the company’s expectations In the first half, the growth in the core business will be offset by the continuing losses in Pay Store and the shorter trading period of 26 weeks (2007: 27 weeks) Directors are confident of contin
Slide 34: Q&A
Q&A
Slide 35: Appendices
Appendices 1. PayPoint management team 2. Five year trading record 3. Background information on PayPoint 4. Materials to support the consumer transaction
Slide 36: 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 37: Five year trading record
Appendix 2 Five year trading record
Slide 38: Five year trading record
Appendix 2 Five year trading record March year end 2004 2005 2006 2007 2008 Transactions million 204.4 258.5 322.1 414.1 503.3 (1) Revenue £ million 67.1 89.1 120.0 157.1 212.1 Net revenue(1,2) £ million 28.6 36.9 46.1 57.7 69.9 Net revenue per transaction(2,3) p 13.3 14.2 14.3 13.9 13.9 Costs (4) (
Slide 39: Five year cash flow
Appendix 2 Five year cash flow March year end 2004 2005 2006 2007 2008 £'m Operating profit (excluding ABTs deferred revenue release and exception items) 6.1 12.0 19.3 25.2 29.2 Exceptional items - (4.6) - - - ABTs deffered revenue release 0.1 - - - - Operating profit 6.2 7.5 19.3 25.2 29.2 Adjustme
Slide 40: Balance sheet
Appendix 2 Balance sheet March year end 2006 2007 2008 £'m Non-current assets Goodwill - 18.2 27.4 Other intangilble assets - 2.8 2.7 Property, plant and equipment 8.9 11.8 13.5 Deferred tax asset 1.2 1.6 1.6 10.1 34.5 45.2 Current assets Inventories 1.1 1.7 1.3 Trade and other receivables 12.1 20.7
Slide 41: Background information on PayPoint
Appendix 3 Background information on PayPoint
Slide 42: PayPoint overview
PayPoint overview Branded cash payment collection network Founded in 1996 by client investors; listed in September 2004 The UK sector leader: Prepay transactions (energy, mobile and transport) Convenience cash payment collection Smart payment technology Premium offer in the market, bas
Slide 43: Our business and its metrics
Appendix 3 Our business and its metrics Our business objectives Our business metrics To provide clients with a cost 503m annual transactions effective retail network for (2007/08) their customers to make £7.5 billion payment throughput regular cash payments (2007/08) To provide consumers wit
Slide 44: Highlights
Appendix 3 Highlights Recognised brand and high customer satisfaction Financial performance Market leading position in energy prepayments and a market leader in retail bill March year end 2000 2001 2002 2003 2004 2005 2006 2007 2008 payments Ave no of terminals 7,278 7,496 7,922 10,820 10,991 12
Slide 45: Our development
Appendix 3 Our development 1996 - Founded by client investors 1998 - Refinanced and new management team appointed Grow transaction 1999 - National network completed volumes: 2002 - Turned profitable and cash generative More Clients More 2003 - Congestion charging and ATMs Services More 2
Slide 46: Business overview
Appendix 3 Business overview CLIENT Comprehensive scope Issue customers with: -swipe or smart cards -barcoded bills -smart keys -details of local outlets Brand PAYPOINT Poll information from terminal Send Client details Technology/know-how Collect payments from Retail CONSUMER Agent Take payment
Slide 47: The PayPoint UK network
Appendix 3 The PayPoint UK network Terminal site 19,878 Retail Agents including 2,833 with Epos only site Epos connections and 2,016 ATM sites ATM site commission more than £4,000 per annum per agent footfall (c.450 transactions per week) 39% multiple outlets, remainder independent N
Slide 48: Clients
Appendix 3 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 Bristol Water British Gas BT O2 TfL (Capita) AON Dee Valley Water EdF (London, SWEB, Eircom Orange Arriva Leger Holidays
Slide 49: PayPoint's current markets
Appendix 3 PayPoint’s current markets Market size Positioning Sector leader in energy prepayments Bill & general payments 5.7m energy prepayment meters Payzone retain 1 region v. PayPoint’s 8 regions (263m txns in 2006/7) 300m in PO Post Office strength in general payments but 15m conges
Slide 50: Core business strategy
Appendix 3 Core business strategy Grow transaction volumes optimise retail agent coverage grow client base grow existing and develop new services expand geographic coverage Leverage the asset base brand service differentiation technology/systems and development retail network b
Slide 51: Summary
Appendix 3 Summary Established business with a unique combination of assets extensive UK national network established brand strong contract portfolio robust and innovative technology Strong competitive positioning barriers to new entrants Attractive financial model rapidly growing
Slide 52: Materials to support the consumer transaction
Appendix 4 Materials to support the consumer transaction
Slide 53: Client payment media
Appendix 4 Client payment media
Slide 54: Retailer external signage
Appendix 4 Retailer external signage
Slide 55: POS merchandising
Appendix 4 POS merchandising
Slide 56: Terminals and ATMs
Appendix 4 Terminals and ATMs
Slide 57: Terminal receipts
Appendix 4 Terminal receipts E-TopUp Congestion Charging E Voucher Utility Payment Transport Ticketing