Paypoint Plc · LSE:PAY
Paypoint — H1 2004/05 Earnings Presentation
53 slides from Paypoint's earnings presentation, Dec 7, 2004
Slide 1: Interim Results Presentation
Strictly private and confidential Interim Results Presentation 7 December 2004
Slide 2: Introduction
Introduction David Newlands Chairman
Slide 3: Agenda
Agenda ! Introduction ! Highlights and Operations Review ! Financial Review ! Summary ! Q&A ! Closing 2
Slide 4: Highlights & Operations Review
Highlights & Operations Review Dominic Taylor Chief Executive
Slide 5: PayPoint Overview
PayPoint Overview ! Branded cash payment collection network ! Founded in 1996 by client investors; listed in September 2004 ! Strategy based on differentiation through: " the breadth of the consumer offer / brand " the quality and convenience of its retail network " technology & know how for an effi
Slide 6: PayPoint Highlights
PayPoint Highlights Net revenue Operating profit Margin 18,000 5,000 40% 16,000 4,000 30% 14,000 20% 12,000 3,000 10% £000's 10,000 2,000 £000's 8,000 0% 1,000 01/02 02/03 03/04 04/05 6,000 -10% 4,000 - -20% 2,000 01/02 02/03 03/04 04/05 -1,000 -30% - 01/02 02/03 03/04 04/05 -2,000 -40% For the six
Slide 7: PayPoint Highlights
PayPoint Highlights Transaction volume Transaction value PayPoint Outlets 120 1,400 16,000 100 1,200 14,000 1,000 12,000 80 10,000 Millions 800 £bn 60 8,000 600 6,000 40 400 4,000 20 200 2,000 - - - 01/02 02/03 03/04 04/05 01/02 02/03 03/04 04/05 01/02 02/03 03/04 04/05 For the six months ended 30th
Slide 8: Operations Review
Operations Review ! Strong set of results underpinned by successful implementation of our strategy – transaction volume growth – driving differentiation ! There has been strong growth in all sectors Transaction volumes by sector 120,000 100,000 ATM Mobile 80,000 General £000's 60,000 40,000 20,000 -
Slide 9: Sector and Market Review
Sector and Market Review Bill and General Payments ! General growth across all sectors; ! Growth in Quantum (gas prepayment) volumes ! In particular PowerGen, Eastern and Norweb electricity regions Powergen weekly volumes 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 - 01/09/2003 01/12
Slide 10: Sector and Market Review
Sector and Market Review Bill and General Payment Cont... ! Emerging transport sector ! Mail order payments launched 9
Slide 11: Sector and Market Review: Mobile
Sector and Market Review Mobile ! Strong continued growth - but will mature ! Slower than expected migration from the terminal to retailers own till systems gives one off benefit to mobile margins Pre-pay airtime by payment method Credit Card (source TNS) Paper Voucher 4,000 Electronic 3,500 3,000 £
Slide 12: Sector and Market Review: ATMs
Sector and Market Review ATMs ! Surcharge self replenishment model ! Achieved 50 new sites per month ! 764 ATM sites live at 6 December with an initial target of 2,000 ! Average transactions per ATM is 600 per month ! Total ATM outlay is c. £6 million – to be recovered from Agents ATM transactions 6
Slide 13: Retail Review
Retail Review ! 14,600 PayPoint outlets ! 3,000 new terminal sites by end 2005/6 ! Prospect list remains at 10,000 ! Churn 5% per annum 12
Slide 14: New Terminal
New Terminal ! New terminal (T2) is now being rolled out (1,733 T2s at 6 Dec 2004) – faster and better communication links – lower cost of operation – contactless smart card capability – touch screen – chip and pin compliant ! Total investment program of £6m 13
Slide 15: Financial Review
Financial Review George Earle Finance Director
Slide 16: Strong volume driven top line growth and margin enhancement
Strong volume driven top line growth and margin enhancement £000’s H1 04/05 H1 03/04 % increase Turnover 39,949 29,681 35% Cost of sales 27,862 21,790 28% Gross profit 12,087 7,891 53% Margin 30% 27% 14% 15
Slide 17: Growth in agents' commissions and net revenue
Growth in agents’ commissions and net revenue H1 04/05 H1 03/04 % increase £000’s Turnover 39,949 29,681 35% Cost of sales 27,862 21,790 28% Gross profit 12,087 7,891 53% Margin 30% 27% 14% Turnover ~ years ended 31 March Turnover £80m £70m £60m CAGR 49% £50m Net revenue £40m CAGR 31% £30m £20m £10m
Slide 18: Volume and commission growth
Volume and commission growth £000’s H1 04/05 H1 03/04 % increase Turnover 39,949 29,681 35% Cost of sales 27,862 21,790 28% Gross profit 12,087 7,891 53% Margin 30% 27% 14% Turnover £000’s H1 03/04 29,681 Volume 3,429 Mix/price 672 Other 146 Commissions 6,021 H1 04/05 39,949 17
Slide 19: Margin improved through lower telecom costs
Margin improved through lower telecom costs £000’s H1 04/05 H1 03/04 % increase Turnover 39,949 29,681 35% Cost of sales 27,862 21,790 28% Gross profit 12,087 7,891 53% Margin 30% 27% 14% Cost of sales H1 04/05 H1 03/04 £000’s £000’s Commissions paid 22,913 16,767 Depreciation 1,196 902 Other (inclu
Slide 20: Operational gearing improves margins
Operational gearing improves margins £000’s H1 04/05 H1 03/04 % increase Net revenue 16,530 12,458 33% Operating profit* 4,665 1,237 277% Interest 219 (97) Profit before tax 4,884 1,140 328% Tax (855) - Profit after tax 4,029 1,140 253% * Before exceptional items 19
Slide 21: Operating costs under control
Operating costs under control £000’s H1 04/05 H1 03/04 % increase Net Revenue 16,530 12,458 33% Operating profit 4,665 1,237 277% Interest 219 (97) Profit before tax 4,884 1,140 328% Tax (855) - Profit after tax 4,029 1,140 253% Operating profit £000’s H1 03/04 1,237 Increase in gross profit 4,196 D
Slide 22: Strong cash flow
Strong cash flow Six months to 30th September 2004 2003 £000’s £000’s EBITDA* 5,861 2,158 Change in working capital# 962 (284) Operating cash flow 6,823 1,874 Capital expenditure (1,179) (1,246) Interest received 219 (97) Cash flow before dividends 5,863 531 * Before exceptional items # Working capi
Slide 23: Net cash increased to £15m
Net cash increased to £15m Six months to 30th September 2004 £000’s Net cash at start (including client cash* £4.7 million) 12,625 Cash in flow 5,863 Reduction in client cash (2,303) Payment of exceptional items (300) Loan stock converted to equity 82 Dividends (778) Net cash at end (including clien
Slide 24: Outlook & Summary
Outlook & Summary ! Growth expected to continue in the second half…. – seasonal uplift in transaction volumes – T1 terminals written down ! But….. – reduction in rate of mobile growth – migration of mobile from terminals to retailers’ till systems – marketing spend to replace existing point of sale
Slide 25: Q&A
Q&A
Slide 26: PayPoint plc Interim results announcement
PayPoint plc Interim results announcement 7th December, 2004
Slide 27: Appendices
Appendices 1. PayPoint Management Team 2. Five year trading record 3. Background information on PayPoint 4. Materials to support the consumer transaction 5. PayPoint’s new Point of Sale An overall picture of sustained growth 26
Slide 28: PayPoint Management Team
Appendix 1 PayPoint Management Team
Slide 29: Management Team
Appendix I Management Team # David Newlands (Non Executive Chairman) ex GEC, current Chairman of Tomkins, KESA and Deputy Chairman of Standard Life # Dominic Taylor (Chief Executive) ex-Vodafone, Granada # George Earle (Finance Director) ex Centrica, GEC, Saatchi, Deloitte & Touche # Tim Watkins-Ree
Slide 30: Five year trading record
Appendix 2 Five year trading record
Slide 31: Five year trading record
Appendix 2 Five year trading record March year end 2000 2001 2002 2003 2004 £'m Trans actions (m ) 71.1 89.5 106.3 154.3 204.4 (1) Turnover including agent com m is s ions 12.9 15.8 23.6 43.8 67.1 Net revenue (1,2) 9.6 11.2 13.8 20.9 28.6 Net revenue per trans action (2,3) 11.2p 11.5p 12.2p 12.7p 13
Slide 32: Five year cash flow
Appendix 2 Five year cash flow March year end 2000 2001 2002 2003 2004 £'m EBIT (excluding ABTs deferred revenue release) (8.7) (4.4) (1.4) 2.7 6.1 ABTs deffered revenue releas e 0.7 0.7 2.5 6.5 0.1 EBIT (8.0) (3.7) 1.0 9.2 6.2 Depreciation charge 1.8 1.1 1.2 1.4 2.0 Working capital 2.9 3.3 (0.3) (6
Slide 33: Balance sheet
Appendix 2 Balance sheet March year end 2003 2004 £'m Fixed Assets Tangible assets 2.4 2.2 Current Assets Debtors - due within one year 9.2 10.3 Debtors - due after one year 2.2 0.4 Cash at bank and in hand(1) 4.4 13.8 15.8 24.5 Creditors: amounts falling due within one year (11.7) (15.6) Net curren
Slide 34: Background information on PayPoint
Appendix 3 Background information on PayPoint
Slide 35: Our Business and its Metrics
Appendix 3 Our Business and its Metrics Our business objectives Our business metrics ! To provide clients with a cost ! 400+ clients effective retail network for their customers to make regular cash ! 204m annual transactions (2003/04) payments ! £2.3 billion payment throughout ! To provide consumer
Slide 36: Highlights
Appendix 3 Highlights # Recognised brand and high customer satisfaction Financial performance # Market leading position in energy CAGR prepayments and a market leader in retail bill March year end 1999(1) 2000 2001 2002 2003 2004 '99 - '04 payments1 Ave no of terminals 4,761 7,278 7,496 7,922 10,820
Slide 37: Our Development
Appendix 3 Our Development # 1996 - Founded by Client investors; British Gas; BT; BBC; London Electricity and 4 water companies Grow # 1998 - Refinanced and new management team appointed transaction volumes: # 1999 - National network completed More Clients # 2002 - Turned profitable and cash generat
Slide 38: Business overview
Appendix 3 Business overview CLIENT Issue customers with: -swipe or smart cards -barcoded bills -smart keys -details of local outlets Comprehensive scope PAYPOINT Poll information from terminal Send Client details Collect payments from Retail CONSUMER # Brand Agent Take payment and device Pay commis
Slide 39: The PayPoint Network
Appendix 3 The PayPoint Network # 12,017 Retail Agents and 3,000 EPoS connections (Sept 2004) # commission more than £2,800 per annum # footfall (c.340 transactions per week) # 50% multiple outlets, remainder independent # Network optimised for Client service and efficiency - extensive agent modelli
Slide 40: Clients
Appendix 3 Clients # Over 400 high quality clients, many long term contracts, generally 3 – 5 years # Largest client (Orange) 20% of gross revenue, top 10 deliver 83% Energy Telecoms/Media Water Transport Other British Gas BT O2 Anglian Water TfL (Capita) AON EdF (London, SWEB, Eircom Orange Bristol
Slide 41: PayPoint's current markets
Appendix 3 PayPoint’s current markets Market size Positioning # Market leader in energy prepayments # 5.7m energy prepayment meters Bill/General payments # Alphyra retain 2 regions v. PayPoint’s 8 # 1bn transactions p.a. (APACS) regions (137m txns in 2003/4) # 17m congestion charges p.a. (TfL) # Pos
Slide 42: Financial performance
Appendix 3 Financial performance Transaction volume (m) Turnover(1) Net revenue(1)(2)(3) 250 £80m £35m £70m £30m 200 £60m £25m £50m 150 £20m £40m £15m 100 £30m £10m £20m 50 £10m £5m 0 £0m £0m 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 Bill Payments Top-ups ATM PayPoin
Slide 43: Financial Performance
Appendix 3 Financial Performance EBITDA* Earnings before Tax* Free cash flow £10m £8m £12m £8m £6m £10m £6m £4m £8m £4m £2m £6m £2m £0m £4m 2000 2001 2002 2003 2004 £0m (£2m) £2m 2000 2001 2002 2003 2004 (£2m) (£4m) £0m 2000 2001 2002 2003 2004 (£4m) (£6m) (£2m) (£6m) (£8m) (£4m) (£8m) (£10m) (£6m)
Slide 44: Strategy
Appendix 3 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 # blue chip clien
Slide 45: 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 46: Materials to support the consumer transaction
Appendix 4 Materials to support the consumer transaction
Slide 47: Client payment media
Appendix 4 Client payment media
Slide 48: Retailer external signage
Appendix 4 Retailer external signage
Slide 49: POS merchandising
Appendix 4 POS merchandising
Slide 50: Terminals and ATMs
Appendix 4 Terminals and ATMs
Slide 51: Terminal receipts
Appendix 4 Terminal receipts E-TopUp Congestion Charging E Voucher Utility Payment Transport Ticketing
Slide 52: PayPoint's new point of sale
Appendix 5 PayPoint’s new point of sale
Slide 53: Network re-branding
Appendix 5 Network re-branding EXISTING BRANDING RE- BRANDING 2005 Wall sign Window sign Interior ceiling sign