Paypoint Plc · LSE:PAY
Paypoint — FY2017 Earnings Presentation
52 slides from Paypoint's earnings presentation, May 25, 2017
Slide 1: Preliminary results for year ended 31 March 2017
Dominic Taylor, Chief Executive & Rachel Kentleton, Finance Director 25 May 2017 Preliminary results for year ended 31 March 2017
Slide 2: Agenda
Agenda 2 Introduction 4 Financial review 6 Looking ahead – business priorities 17 Summary and future developments 34 Appendices Operating review comparatives 37 Materials to support the consumer transaction 41 Our retail environment & local shop economics 50 Results for the year ended 31 March 2017
Slide 3: Introduction
Introduction
Slide 4: Strong progress in delivery
Strong progress in delivery 4 Strategic • Sale of Mobile completed in December 2016, with proceeds returned to shareholders • Collect+ successfully renegotiated with opportunity to drive step change in parcels • PayPoint One now deployed in 4,200 sites, integration agreement reached with Nisa Operat
Slide 5: Financial review
Financial review
Slide 6: Statutory results show impact of business restructuring
Statutory results show impact of business restructuring 6 Year ended 31 March 2017 2016 % £m £m change Gross revenue 211.9 212.6 (0.3) Net revenue 123.9 123.6 0.2 Other cost of revenue (17.9) (17.6) 1.8 Administrative costs (53.7) (55.7) (3.7) Operating profit before impairments and disposals 52.3 5
Slide 7: Analysis of the moving parts
Analysis of the moving parts 7 Statutory Ongoing Year ended 31 March 2017 result Mobile C+ business £m £m £m £m Gross revenue 211.9 (8.5) - 203.4 Net revenue 123.9 (6.4) - 117.5 Other cost of revenue (17.9) 1.2 - (16.7) Administrative costs (53.7) 6.2 - (47.5) Operating profit before impairments and
Slide 8: Retail networks growth continues
Retail networks growth continues 8 Year ended 31 March 2017 2016 % £m £m change Gross revenue 203.4 196.4 3.6 Net revenue 117.5 110.7 6.2 Other cost of revenue (16.7) (16.0) 4.5 Administrative costs (47.5) (42.0) 13.3 Operating profit 53.3 52.7 0.9 Net interest - - - Profit before tax 53.3 52.7 0.9
Slide 9: Analysis of Retail networks operating profit
Analysis of Retail networks operating profit 9 £m 60 £2.0m (£1.7m) 55 (£4.1m) £123.1m £7.2m (£2.8m) 50 £113.7m £52.7m £53.3m 45 40 Retail networks Net revenue Net revenue VAT recovery Depreciation Cost increases Retail networks operating profit bill payments retail services operating profit 2016 & t
Slide 10: Analysis of Retail networks net revenue
Analysis of Retail networks net revenue 10 (net revenue 2017) UK retail services £39.0m £m 125 UK top-ups Romania £16.9m £9.2m 120 UK bill £123.1m payments £52.4m £2.1m 115 £113.7m 110 £9.2m (£2.3m) £117.5m (£2.2m) 105 £110.7m 100 Retail networks UK top-ups UK bill payments UK retail services* Roman
Slide 11: Analysis of Retail networks costs
Analysis of Retail networks costs 11 Third party Depr & costs amort £23.5m £m £7.4m 70 People £123.1m £33.3m * (costs 2017) 65 £1.4m £113.7m £0.8m £1.7m 60 £2.3m £64.2m £58.0m 55 1 Retail networks People costs Depreciation and PayPoint One Other third party Retail networks costs amortisation rollout
Slide 12: Strong balance sheet
Strong balance sheet 12 Year ended 31 March 2017 2016 £m £m Goodwill 8.2 8.1 Other intangible assets 11.9 8.0 Property, plant & equipment and other non current assets 27.5 21.5 Assets held for sale and Collect+ - 3.4 Cash1 53.1 80.8 Working capital (23.1) (30.4) Current tax liability (4.5) (3.5) Net
Slide 13: Cash generation and use
Cash generation and use 13 Year ended 31 March 2017 2016 £m £m Profit before tax 69.1 8.2 Non-cash items (7.6) 48.9 61.5 57.1 Share based remuneration (0.4) (0.6) Working capital (10.5) 11.7 Tax paid (8.6) (9.9) Capital and other expenditure (17.5) (8.1) Free cash flow 24.5 50.2 Net cash from busine
Slide 14: Capital return
Capital return 14 Adjusted earnings (basic) and dividends per share - track record Ordinary DPS Additional DPS Disposal proceeds DPS Basic EPS 120.0p 100.0p 38.9p 80.0p 64.2p 57.6p 58.4p 60.0p 52.9p 45.7p 21.0p 36.7p 39.8p 40.0p 35.6p 35.2p 31.1p 32.9p 15.0p 27.7p 25.0p 42.4p 45.0p 20.0p 38.5p 35.3p
Slide 15: Outlook
Outlook 15 • UK business in transition • SPS contract expected to terminate sometime between September 2017 and March 2018. Full year effect £4m • Reducing Yodel fee – impact £1.7m 2018, further £1.0m 2019 • Impact of investment on PayPoint One, MultiPay, tools and capability • Non-recurring net VAT
Slide 16: Looking ahead
Looking ahead Our Retail Networks are our most valuable assets We have 5 business priorities to deliver
Slide 17: Our Retail Networks are our most valuable assets
Our Retail Networks are our most valuable assets 17 Our Retail Networks • Over 40,000 sites (UK and Romania) in convenient locations close to where people live and work • Highly differentiated • Enabled with technology designed to create a platform for growth Our Payments business Our Retail Service
Slide 18: Growth and importance of convenience
Growth and importance of convenience 18 There is a structural change in the way we shop, driven by growth … ‘Britain's high streets • in online shopping (£38.4bn in 2012 to £64.5bn in 2016) under strain as 15 shops close every day’ • in destination shopping and entertainment centres Resulting in the
Slide 19: PayPoint's landscape in the UK
PayPoint’s landscape in the UK 19 Major multiple groups Symbols and independents Huge investment in latest technology Lower investment in technology Highly complex More fragmented organisations Less collective buying power and Substantial buying underserved power with suppliers Symbols Independents
Slide 20: PayPoint's competitive advantage
PayPoint’s competitive advantage 20 Most advanced and integrated technology platform • PayPoint One proposition is tablet/Android based • Central to retailer operations Footfall benefit driven by payments and Collect+ • The PayPoint shopper spends more per basket (£8.78 vs. £6.13 convenience average
Slide 21: We have 5 business priorities to deliver in 2017/18
We have 5 business priorities to deliver in 2017/18 21 1. Profitable growth in UK retail services 2. Deliver parcels growth 3. Optimise profits in UK bill payments and top-ups 4. Drive organic growth in Romania 5. Business optimisation Results for the year ended 31 March 2017
Slide 22: Profitable growth in UK Retail Services
Business Priority 1 1. Profitable growth in UK Retail Services 22 • Net revenue growth continues, up 30.9% to £39.0m • Driven by extending product attachment into our network and driving performance • We continue to invest in PayPoint One, EPoS, ATMs and Net Settlement for cards • Legacy charge of £
Slide 23: Profitable growth in UK retail services
Business Priority 1 Profitable growth in UK retail services 23 Card payments growing, particularly We have a strong track record of retail contactless services innovation Results for the year ended 31 March 2017
Slide 24: PayPoint One - a technology platform to drive growth
Business Priority 1 PayPoint One - a technology platform to drive growth 24 1 2 3 4 Serve customers Advanced Improve Future proof quickly connectivity business technology efficiency Easy to use, intuitive Broadband, WiFi, High quality, Flexible and 11.6 inch touchscreen Bluetooth feature-rich EPoS e
Slide 25: EPoS moves PayPoint to the heart of the store
Business Priority 1 EPoS moves PayPoint to the heart of the store 25 Increasing revenue/value per store Pro Core Coming in Summer 2017 Base Usage T2 Sophisticated Sophisticated EPoS including Cash front of store stock Legacy register capability management Already the largest EPoS capable platform in
Slide 26: PayPoint One progress
Business Priority 1 PayPoint One progress 26 Live Count 22nd May Total 4,227 EPoS Base 1,657 EPoS Core 2,567 EPoS Pro 3 (test sites) Aim to achieve 8,000 sites by March 2018 Results for the year ended 31 March 2017
Slide 27: Deliver parcels growth
Business Priority 2 2. Deliver parcels growth 27 Home delivery market of over 2.1bn parcels, growing at c.6% per annum and expected to continue • Returns growth driven by high volume fashion • C&C volume growth even stronger across ‘own store’ and third party outlets Collect+ is the market leader, w
Slide 28: Optimise profits in UK bill payments
Business Priority 3 3. Optimise profits in UK bill payments 28 Pre-payment average transaction values (ATVs): Energy market dynamics • Fewer prepay meters being installed, spend down 3% yoy • Average payment value is up 2% and 4% (gas/electricity) • Lowest energy debt levels in over 10 years • Price
Slide 29: Energy market impact on PayPoint
Business Priority 3 Energy market impact on PayPoint 29 • Our consumer base has remained stable, including over 6m cash paying customers • Our market share of cash over the counter payments remains strong across legacy and smart meters • We are successfully defending volume decline with increased ma
Slide 30: MultiPay continues to make good progress
Business Priority 3 MultiPay continues to make good progress 30 The Product Commercial progress • MultiPay has already demonstrated its Smart Meter • Non cash volume has doubled over the last year, with readiness SSE about to go live • Well positioned to continue to capture energy market • 60% of on
Slide 31: Drive organic growth in Romania
Business Priority 4 4. Drive organic growth in Romania 31 Payments Retail coverage in Romania • Cash dominates Romanian household payments (c.90% share) • Bill payment driving our growth, txns up 11.6% yoy • Bill payment share 23.8% (March 2016: 21.8%), supported by national advertising • Competitio
Slide 32: PayPoint advertising in Romania
PayPoint advertising in Romania 32 Results for the year ended 31 March 2017
Slide 33: Business optimisation
Business Priority 5 5. Business optimisation 33 We continue to review our operations, systems and processes for efficiency and cross functional alignment We are investing in better tools, systems and capability to drive growth • To enable our sales teams to be more productive • To accelerate commerc
Slide 34: Summary and future developments
Summary and future developments
Slide 35: Summary and future developments
Summary and future developments 35 We are focused entirely on the development of our retail businesses post the sale of Mobile and Online We will transition our UK business and grow our retail services primarily by • Continuing the rollout of PayPoint One • Launching EPoS Pro and integrating the sym
Slide 36: Appendices
Appendices
Slide 37: Appendix 1: Operating review comparatives
Appendix 1 Operating review comparatives
Slide 38: Retail Payments and Services – UK & Ireland
Retail Payments and Services – UK & Ireland 38 Payments UK & Ireland 2017 2016 • Bill and general volume down 6.6%, net revenue Transactions (m) 579.7 601.3 down 3.8% • Continued opportunities to sell to new clients Net revenue (£m) 108.3 103.5 • Mobile top-ups net revenue continued to decline Termi
Slide 39: Collect+
Collect+ 39 New arrangement agreed with Yodel • PayPoint free to sign new carriers and (non Yodel) retailers • Sale of Drop and Collect to Yodel (where logistics costs sit) Collect+ 2017 2016 • Yodel and PayPoint own Collect+ brand 50/50 Transactions (m) 23.3 20.7 Sites 6,167 5,936 Collect+ • Growth
Slide 40: Retail Payments and Services - Romania
Retail Payments and Services - Romania 40 Payments Romania 2017 2016 • Bill payment transactions increased by 11.6% Transactions (m) 75.0 66.9 • Bill payment share 23.8% (March 2016: 21.8%), up 2.0 ppts from March 2016, with significant growth Net revenue (RON m) 49.1 43.3 opportunities supported by
Slide 41: Appendix 2: Materials to support the consumer transaction
Appendix 2 Materials to support the consumer transaction
Slide 42: UK Retail: Client media payment
Materials to support the consumer transaction UK Retail: Client media payment 42 Results for the year ended 31 March 2017
Slide 43: UK Retail: Retail store
Materials to support the consumer transaction UK Retail: Retail store 43 Results for the year ended 31 March 2017
Slide 44: UK Retail: Terminals, Pin Pads and ATMs
Materials to support the consumer transaction UK Retail: Terminals, Pin Pads and ATMs 44 Results for the year ended 31 March 2017
Slide 45: UK Retail: PPOS virtual terminal
Materials to support the consumer transaction UK Retail: PPOS virtual terminal 45 Results for the year ended 31 March 2017
Slide 46: www.collectplus.co.uk
Materials to support the consumer transaction www.collectplus.co.uk 46 Results for the year ended 31 March 2017
Slide 47: Collect+: Phone pick up barcode
Materials to support the consumer transaction Collect+: Phone pick up barcode 47 Results for the year ended 31 March 2017
Slide 48: Collect+: UK network locations live
Materials to support the consumer transaction Collect+: UK network 48 Target network density - 1 mile urban - 5 mile rural >6,100 locations live Results for the year ended 31 March 2017
Slide 49: Appendix 3: Our retail environment & local shop economics
Appendix 3 Our retail environment & local shop economics
Slide 50: UK retail channel forecast
UK retail channel forecast 50 Further decline in big box supermarkets, convenience holding steady and online continuing to thrive 2016 2021 48.4% 44.3% £179bn £197bn 21.0% 21.3% 12.7% 9.2% 8.4% 10.0% 9.0% 5.8% 5.6% 4.3% Hypermarkets Supermarkets Convenience Discount Online Other Results for the year
Slide 51: Changing consumer behaviour
Changing consumer behaviour 51 Big changes over last 10 years: • Shift from ‘big, weekly’ shop to ‘top up, little and often’ shopping • Planned shopping down 9% but distress purchases up 5% • ‘Meal for tonight’ mission +6% but huge regional differences (7.2% of visits in London, 1.7% in Wales) • 11%
Slide 52: Local shop economics
Local shop economics 52 Anatomy of a typical local store: Value that PayPoint brings to local stores: • £1.2m p.a. turnover • Average of 1,200 consumer visits per month • Annual gross profit of 20% of turnover • Over 60% of PayPoint shoppers also bought • c. 1000 square feet shop items • Average inv