PayPoint organic revenue grows despite UK retailer churn

PayPoint’s group organic revenue grew 4.2% to £28.4m in its first quarter, it reported on Wednesday, with UK retail services net revenue improving 10.5%.

The FTSE 250 company said that UK growth was driven by its new ‘PayPoint One’ retailer system, as well as card payment transactions and ATM transactions.

Romania net revenue, as reported in constant currency, grew 16.1% in the three months to 30 June, while UK parcel volumes were up 16.6% to 6.1 million.

“We have continued our repositioning of the business in the new financial year, as we have driven profitable growth in UK retail services, increased parcel volumes and delivered another strong performance in Romania,” said PayPoint chief executive Dominic Taylor.

“The successful roll out of our innovative new PayPoint One terminal in the UK continues, following its launch last September.”

PayPoint said its organic revenue growth occurred despite a 4.5% reduction in transaction volumes to 150.3 million, which the board said was a result of an expected decline in its UK prepaid energy volume.

That was partially offset by an improvement in net revenue per transaction, the board claimed, through a shift to smaller but higher-yielding clients, combined with “strong” growth in its MultiPay platform through which transactions doubled to 3.3 million.

On a reported basis - including the results of PayByPhone, which was sold on 23 December 2016 - net revenue reduced 4% to £28.4m.

UK and Ireland retail services net revenue was up 10.5% driven by PayPoint One service fees, card payment transactions which grew by 8.3% to 24.1 million and ATM transactions which increased 5.0% to 10.2 million, the board claimed.

“Our PayPoint One terminal, which launched in September 2016, is now in operation in 5,000 sites, an increase of 1,296 since the beginning of this financial year,” PayPoint’s board said in its statement.

“We remain on target to reach 8,000 sites by 31 March 2018.

“Due to the strong take up of PayPoint One by our retailers, we have introduced and standardised the service fees for legacy terminals across 14,000 sites.”

As expected, that caused a “small” amount of retailer churn, the board reported, and its UK network reduced by 449 during the first quarter to 28,727 outlets.

“We are also pleased with the performance of our parcel service, which increased volume by 16.6% to 6.1 million.

“The Collect+ network expanded to 6,521 sites up by 354 since the beginning of the financial year.”

As anticipated, net revenue in bill and general decreased by 2.7% as transaction volume declined by 11.2%, which PayPoint claimed was driven primarily by a 15.1% reduction in prepay energy volume, with a shift in mix towards smaller but higher yielding clients partially offsetting the decrease in transactions.

Top-up transactions declined by 14.4% as the prepaid mobile sector continued to contract.

Romania continued to grow, with net revenue reported in constant currency increasing by 16.1% and in GBP increasing by 25.3%.

Total transactions in the country increased 9.1% from last year to reach 19.3 million.

“Our Romanian network continued to expand with PayPoint at 11,477 retailer sites at 30 June 2017, up 175 since the beginning of the financial year.”

The group had net cash of £56.9m, up from £53.1m at the start of the year, including the balance held in respect of short term client settlement obligations which was £17.6m, down from £20.2m.

“We are on target to achieve 8,000 installations by the end of this financial year, with 5,000 terminals already in service,” Dominic Taylor added.

“This good progress underpins the Board's confidence in our strategy and our full year outlook remains in line with previous guidance.”