Business reshaping drives retail revenue at PayPoint

The FTSE 250 firm’s net revenue for the six months to 30 September was down 3.2% at £56.5m, while its gross margin contracted 0.6 percentage points to 48.5%.

Operating profit before impairments and business disposals was up 0.6% to £24.4m, while its reported profit before tax fell 1.5%, also to £24.4m.

Earnings per share rose 0.1p to 29.1p.

PayPoint’s board confirmed an ordinary interim dividend per share of 15.3p - a 0.3p improvement on the same time last year - adding an additional interim dividend per share of 12.2p, which was in line with 12 months ago.

Operating cash flows during the period were ahead 5.3% on last year at £29.6m, although cash at period end fell 46.3% to £27.6m.

“PayByPhone, our mobile payment business, which was sold on 23 December 2016, and Drop and Collect, before our renegotiation with Yodel which completed on 16 December 2016 are included in last year's reported numbers making this year's interim performance not directly comparable,” PayPoint’s board said in explaining the numbers.

It said a better comparison was of its ongoing retail network, where revenue rose 2.3% to £97.6m and net revenue was ahead 5% at £56.5m.

Its gross margin there remained stable at 48.5%, while operating profit still slipped 2.7% to £24.4m and profit before tax fell 3%, also to £24.4m.

Earnings per share in the retail network were down 0.5p at 29.1p.

“It has been an exciting and busy six months for PayPoint as we have continued to reshape our business,” said chief executive Dominic Taylor.

“PayPoint One is already benefiting over 6,800 retailers and we have just launched EPoS Pro and our EPoS mobile app, innovations which will further help our convenience retailer customers drive significant additional efficiencies and value within their businesses.”

On the operational front, PayPoint said it continued the “successful roll out” of its new PayPoint One system, which reached 6,181 sites as at 30 September - an increase of 2,580 sites since 31 March - with further growth in the average weekly PayPoint One fee per site.

It remained on track to deliver its target of 8,000 PayPoint One installations by 31 March 2018.

There was also “strong” growth in card payment net revenue of 22.4%, driven by an increase in transactions, improved margins and a change in VAT treatment.

Further progress was also made in the parcel business, with volumes up 13.6% to 11.9 million and the network increased to more than 7,200 outlets ahead of the Christmas peak season.

PayPoint said Collect+ remained the “clear market leader” in parcel shop services.

In the payments space, the company said UK bill payments and top-up net revenue was broadly flat at £32.4m.

The positive growth from improvements to its client mix, the renegotiation of symbol commissions, increased average top-up values and increased eMoney volumes - which have a higher margin per transaction - was offset by a 9.7% reduction in transaction volumes.

Still, the firm said it saw “good momentum” in MultiPay, with transactions doubling to 6.7 million servicing 17 clients including SSE.

There was also ongoing strong growth in the company’s Romania operations, with net revenue increasing 17.1% to £5m and transaction numbers rising 6.6% to 38.8 million.

The acquisition of Payzone Romania was completed in October as well, the board confirmed.

“We continue to see strong card payment growth while MultiPay, our omni-channel payment solution, has now processed over 22.5 million transactions since launch,” Dominic Taylor added.

“Collect+ continues to perform strongly and has extended its lead in parcels, with a network now of over 7,200 sites.

“Finally, our Romanian business remains the clear market leader, further strengthened with the acquisition of Payzone Romania following the recent clearance of the transaction by the competition authorities.”

Going forward, PayPoint said its initiatives to improve company processes were taking effect.

For example, the PayPoint One prospecting-to-installation timeframe had reduced by 19% since last year.

The company’s cost base grew by £3.3m to £32.1m, which the board said reflected continued investment in PayPoint One, MultiPay and improving customer service.

It added that the increase was weighted to the first half of the year, and it expected minimal growth in the second half of the financial year.

“This continued progress underpins the Board's confidence in our strategy, allowing us to confirm the full year outlook which remains in line with previous guidance,” said Dominic Taylor.