Paypoint Plc · LSE:PAY
Paypoint — FY2010 Earnings Presentation
66 slides from Paypoint's earnings presentation, May 27, 2010
Slide 1: PayPoint plc Preliminary Results Presentation
PayPoint plc Preliminary Results Presentation 27 May 2010 Strictly private and confidential
Slide 2: Agenda
Agenda • Highlights & Strategy • Operational Review • Financial Review • Summary and Outlook • Q&A 2
Slide 3: Highlights & Strategy
Highlights & Strategy Dominic Taylor Chief Executive 3
Slide 4: Established and developing business streams
Established and developing business streams Established business streams: – Generate the group’s profits and cash flows – Provide unique retail/internet proposition to clients – Strongly differentiated to clients and retailers – With significant barriers to entry Developing business streams: – In la
Slide 5: PayPoint highlights
PayPoint highlights • Established business streams delivered to plan: – Over 650 net additions to UK retail network, reinforcing our value to retailers – Strong growth in retail services (transactions 23% up) – 22% transaction growth in internet payments – New value added services • Investment in de
Slide 6: Camelot
Camelot What is proposed? Our position: • Camelot seeking to enter our UK • Robust response, underpinned by retail market strong legal advice and counsel’s opinion • Subject to NLC consent - decision pending • Client proposition designed around bespoke service for • Mobile top-up; bill payment; vuln
Slide 7: Changing landscape drives opportunity
Changing landscape drives opportunity Technology Regulatory High levels of internet penetration Banking regulations Wireless communications Data security standards New payment media Cross-border developments New payment technology Cheques being phased out EPOS integration Market Consumer Growth in n
Slide 8: Consumer payments value chain
Consumer payments value chain High Growth Payment Payment Transaction Financial medium Channel Processor settlement New Economy E-comm / Businesses Mobile money E-comm / Consumers Mobile mobile operator mobile E-money Internet site PSP Acquirer Bank transfer Debit card ISP / Terminal Bureau Telephon
Slide 9: PayPoint at float
PayPoint at float Payment Payment Transaction Financial medium Channel Processor settlement Consumers E-comm / Businesses Mobile money E-comm / Mobile mobile operator mobile E-money Internet site PSP Acquirer Bank transfer Debit card ISP / Terminal Bureau Telephone operator Credit card Cash / cheque
Slide 10: PayPoint with internet payments
PayPoint with internet payments Payment Payment Transaction Financial medium Channel Processor settlement Consumers E-comm / Businesses Mobile money E-comm / Mobile mobile operator mobile E-money Internet site PSP Acquirer Bank transfer Debit card ISP / Terminal Bureau Telephone operator Credit card
Slide 11: PayPoint today
PayPoint today Payment Payment Transaction Financial medium Channel Processor settlement Consumers E-comm / Businesses Mobile money E-comm / Mobile mobile operator mobile E-money Internet site PSP Acquirer Bank transfer Debit card ISP / Terminal Bureau Telephone operator Credit card Cash / cheque Co
Slide 12: Four elements of strategy
Four elements of strategy Payments Selected Value added Geographic capability vertical services / reach markets content Multiple payment Differentiation to High volume channel through media Ability to import know recurring payments products & services how and replicate Multiple payment UK strategy c
Slide 13: Progress and opportunity
Progress and opportunity Í Vertical markets Î eCommerce / Household Transport Telecoms Others … Gaming Parking Energy Other bills Í Payment channel Î Terminal networks 9 9 9 9 9 9 Internet 9 9 9 9 Mobile Phone 9 9 9 9 Existing capability 9New Opportunity • Developing cross functionality in selected
Slide 14: Operations review
Operations review 14
Slide 15: Established business streams
Established business streams Bill and general Top-ups payments – Core to our bespoke client – Strong growth in e-money proposition and our unique market transactions (43%) positioning – Offset by mobile market volumes – Improved retail coverage (with down in all countries continued strong demand), h
Slide 16: Established business streams: retail services
Established business streams Retail services – Our retailers, whether multiple or independent, are at the heart of our delivery capability and are trusted by consumers – Continued strong retail demand for PayPoint with low churn – Opportunity to drive further revenues from retail services, with much
Slide 17: Established business streams: internet
Established business streams Internet – PayPoint.net processes payments from consumers to web merchants via acquiring banks Ecommerce Market Share by Revenue - 2008 UK eCommerce Transaction Value* PP.net ranks 5th with 7% UK PSP Market Share 200 35 180 30% 160 30 140 25 Transaction Value - €bn 120 2
Slide 18: Established business streams: internet
Established business streams Internet • Internet proposition core to our payments hub proposition to clients in our various vertical markets • Differentiation achieved through: – leveraging our UK retail proposition: • PayCash – generating much interest amongst existing and prospect clients (incl. M
Slide 19: Developing business streams: Romania
Developing business streams Romania • Entry into Romania through acquisition of mobile top up network • Bill payment proposition launched in August 2008 with 4 clients – 22 clients now live – > 5.5m payments processed in year (6x increase) • Mobile market down • Accelerated retail network growth – r
Slide 20: Developing business streams: Collect+
Developing business streams Collect+ • JV formed in Feb 2009 and business launched in May • Dream team JV to create new consumer parcels offer – PayPoint providing retail network expertise and technology – Home Delivery Network provides parcel logistics and distribution capability along with mail-or
Slide 21: Developing business streams: Collect+
Developing business streams Collect+ • Ebay UK MD announced as CEO of Collect+ • Good progress in our first year: – Increased to 3,400 Collect+ sites – Large internet merchants showing considerable interest – Clients include: Choice, Empire stores, Envirofine, Great Universal Kays, Littlewoods, Mars
Slide 22: Developing business streams: PayByPhone
Developing business streams PayByPhone • Acquisition of Verrus UK Limited and Verrus Mobile Technologies Inc (PayByPhone) on 9 March • Leading provider of mobile phone payments for parking • Established in North America 9 years ago; based in Vancouver, Canada • UK business set up as independent lice
Slide 23: PayByPhone major contracts
Developing business streams PayByPhone major contracts Denver Birmingham Aspen (trial) London Westminster, Islington, Washington DC Barnet, Enfield, Tower Vancouver (trial) Hamlets San Francisco (new award) Issy de Moulineaux, Miami Paris Ft Lauderdale New Orleans • International business: currently
Slide 24: PayByPhone growth
Developing business streams PayByPhone growth • Business has been growing rapidly year on year • Success in Westminster has been fundamental to credibility around the world 5/27/2010 PAGE 24 24
Slide 25: PayByPhone market opportunities
Developing business streams PayByPhone market opportunities • Mass market application for mobile payments – North American and European parking markets $65bn pa. – Internationally scalable • Compelling attractions to parking operators – Significant financial benefits: Westminster costs down 20% and
Slide 26: PayByPhone strategic fit
Developing business streams PayByPhone strategic fit • Builds on our payment hub philosophy, adding mobile payment • Adds a new high volume consumer payment vertical • Ability to create value added services around existing applications • PayPoint will benefit from – Substantial growth in market for
Slide 27: Developing business streams
Developing business streams Established Developing Total Adjust As reported business business streams Collect+ streams Transactions (million) 2010 540 12 552 - 552 2009 535 10 545 - 545 Throughput £000 2010 9,560,776 127,647 9,688,423 - 9,688,423 2009 8,845,846 35,291 8,881,137 - 8,881,137 Revenue £
Slide 28: Financial review
Financial review George Earle Finance Director 28
Slide 29: Transactions
Transactions 09/10 08/09 Increase million million / decrease) Retail networks Bill and general 339 334 1.5% Top-ups 129 143 (9.7%) Retail services 39 32 23.4% Internet 44 36 22.1% PayByPhone 1 - - 552 545 1.3% • Bill and general increase from Romanian bill payment • Decline in mobile top-ups by 15.1
Slide 30: Throughput
Throughput 09/10 08/09 Increase £million £million / (decrease) Retail networks Bill and general 5,925 5,549 6.8% Top-ups 1,167 1,199 (2.7%) Retail services 377 379 (0.4%) Internet 2,216 1,754 26.3% PayByPhone 3 - - 9,688 8,881 9.1% • Bill and general throughput reflecting the increase in higher valu
Slide 31: Revenue
Revenue 09/10 08/09 Increase £000 £000 / (decrease) Retail networks 58,564 60,566 (3.3%) Bill and general 108,508 135,013 (19.6%) Top-ups 16,168 14,527 11.3% Retail services 9,968 11,798 (15.5%) Internet PayByPhone 283 - Other 3,112 2,447 27.2% 196,603 224,351 (12.4)% • Bill and general revenues dec
Slide 32: Revenue to net revenue
Revenue to net revenue 09/10 08/09 Increase /(decease) £000 £000 Revenue 196,603 224,351 (12.4%) Agent commission (73,178) (83,891) 12.7% Mobile top-ups and SIM cards (43,520) (59,317) 27.0% Acquiring bank charges (2,499) (3,745) 33.3% Net revenue 77,406 77,398 - • Agent commission reduction reflect
Slide 33: Net revenue
Net revenue 09/10 08/09 Increase /(decease) £000 £000 Retail networks Bill and general 33,586 33,653 (0.2%) Top-ups 24,272 25,692 (5.5%) Retail services 8,684 7,553 17.9% Internet 7,469 8,053 (7.3%) PayByPhone 283 - Other 3,112 2,447 27.2% Revenue 77,406 77,398 - • Bill and general flat as gains off
Slide 34: Costs
Costs 09/10 08/09 Increase / (decrease) £000 £000 Net revenue 77,406 77,398 0.3% Depreciation/ amortisation (4,820) (5,698) 15.4% Other cost of sales (9,093) (7,845) (18.7%) Operating costs (29,421) (30,171) 2.5% Operating profit 34,072 33,684 1.2% • Depreciation lower as terminals and ATMs reach en
Slide 35: Profit before tax
Profit before tax 09/10 08/09 Increase /(decrease) £000 £000 Operating profit 34,072 33,684 1.2% Share of loss on JV (1,601) (323) Interest 174 1,241 Profit before tax 32,645 34,602 (5.7%) Tax 10,513 10,818 Profit after tax 22,132 23,784 (6.9%) • Collect + loss as expected • Interest income reduced
Slide 36: Cash flow
Cash flow 09/10 08/09 £000 £000 Operating profit 34,072 33,684 Add back non cash items 5,759 6,457 Changes in working capital (1,103) 446 Capital expenditure (2,607) (9,118) Net investment income 181 1,164 Bank loan 6,000 0 Tax paid (13,702) (7,940) Acquisition and investment in subsidiaries (30,722
Slide 37: Summary & outlook
Summary & outlook Dominic Taylor Chief Executive 37
Slide 38: Summary & outlook
Summary & outlook • In current financial year trading is in line with company expectations • Our established business streams are strong, with further opportunities to grow • Our developing business streams have substantial growth potential, with profitability in sight • Together, they are a solid f
Slide 39: Q&A
Q&A 39
Slide 40: Appendices
Appendices 1.PayPoint management team 2.Five year trading record 3. Background information on PayPoint 4. Consumer transaction - UK retail - PayByPhone - Collect+ 40
Slide 41: 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 42: Five year trading record
Appendix 2 Five year trading record 42
Slide 43: Five year trading record
Appendix 2 Five year trading record March year end 2006 2007 2008 2009 2010 Transactions million 322.1 414.1 503.3 544.6 551.9 Revenue £ million 120.0 157.1 212.1 224.4 196.6 Net revenue(1) £ million 46.1 57.7 69.9 77.4 77.4 Net revenue per transaction(1,2) p 14.3 13.9 13.9 14.2 14.0 Costs (3) £ mil
Slide 44: Five year cash flow
Appendix 2 Five year cash flow March year end 2006 2007 2008 2009 2010 £'m Operating profit 19.3 25.2 29.2 33.7 34.1 Adjustments for depreciation and amortisation 2.3 3.8 5.7 5.7 4.8 Share based payment reserve - - 1.1 0.8 0.9 Operating cash flows before movements in working 21.6 29.0 36.0 40.1 39.8
Slide 45: Balance sheet
Appendix 2 Balance sheet March year end 2007 2008 2009 2010 £'m Non-current assets Goodwill 18.2 27.4 27.6 56.9 Other intangilble assets 2.8 2.7 2.0 1.4 Property, plant and equipment 11.8 13.5 16.1 14.8 Deferred tax asset 1.6 1.6 1.6 1.2 Investment - - 0.6 0.7 34.5 45.2 47.9 74.9 Current assets Inve
Slide 46: Background information on PayPoint
Appendix 3 Background information on PayPoint 46
Slide 47: Trading in economic downturn
Appendix 3 Trading in economic downturn • Resilient performance – We help consumers to budget – 97% customer satisfaction (82% very satisfied) – Most payments are for essential services (non discretionary) – Local shops still needed for top up shopping – Long term client and retail contracts BUT – I
Slide 48: Our development
Appendix 3 Our development 1996 - Founded by client investors 1998 - Refinanced and new management team appointed Grow 1999 - National network completed transaction volumes: 2002 - Turned profitable and cash generative More Clients 2003 - Congestion charging and ATMs More 2004 – Listed o
Slide 49: Retail business overview
Appendix 3 Retail business overview CLIENT Issue customers with: Comprehensive scope -swipe or smart cards -barcoded bills -smart keys -details of local outlets • Brand PAYPOINT Poll information from terminal • Technology/know-how Send Client details Collect payments from Retail CONSUMER Agent Take
Slide 50: The PayPoint UK network
Appendix 3 The PayPoint UK network Terminal site Epos only site 22,643 Retail Agents including 4,813 ATM site with Epos connections and 2,360 ATM sites commission more than £3,000 per annum per agent footfall (c.450 transactions per week) 32% multiple outlets, remainder independent N
Slide 51: UK Clients
Appendix 3 UK Clients • Many quality clients, many long term contracts, generally 3 – 5 years • Top 12 clients deliver 70% of transactions Energy Telecoms/Media Water Transport Other British Gas BT O2 Dee Valley Water System One O2 Money EdF Eircom Orange Yorkshire Water PayPal Northumbrian Metrocoa
Slide 52: PSP transaction flow
Appendix 3 PSP transaction flow 52
Slide 53: PayCash – merchant's website
Appendix 3 PayCash – merchant’s website 53
Slide 54: PayCash – consumer voucher
Appendix 3 PayCash – consumer voucher 54
Slide 55: Materials to support the consumer transaction
Appendix 4 Materials to support the consumer transaction 55
Slide 56: UK Retail: PayPoint's value to retailers
Appendix 4 UK Retail: PayPoint’s value to retailers • Bill pay consumers visit store 20% more frequently than average shoppers1. • 78% retailers recognise footfall benefit 2. • Bill pay consumer spends 50% more per week than average shopper (excluding bill value) 1. • PayPoint facility increases in-
Slide 57: UK Retail: Client payment media
Appendix 4 UK Retail: Client payment media 57
Slide 58: UK Retail: Retailer external signage
Appendix 4 UK Retail: Retailer external signage 58
Slide 59: UK Retail: POS merchandising
Appendix 4 UK Retail: POS merchandising 59
Slide 60: UK Retail: Terminals and ATMs
Appendix 4 UK Retail: Terminals and ATMs 60
Slide 61: UK Retail: Terminal receipts
Appendix 4 UK Retail: Terminal receipts E-TopUp Sample SPAR Tag E Voucher Utility Payment Transport Ticketing 61
Slide 62: PayByPhone: Parking payment: IVR, SMS, mobile web
Appendix 4 PayByPhone: Parking payment: IVR, SMS, mobile web PAGE 62 PAGE 62 62
Slide 63: PayByPhone: Consumer value proposition
Appendix 4 PayByPhone: Consumer value proposition 5/27/2010 PAGE 63 63
Slide 64: Collect+: Easy Store Locator
Appendix 4 Collect+: Easy Store Locator 64
Slide 65: Collect+: Online Label Solution
Appendix 4 Collect+: Online Label Solution 65
Slide 66: Collect+: UK Network
Appendix 4 Collect+: UK Network • Target network density - 1 Mile urban - 5 Mile rural • Target 5,000 locations 3,500 locations live 66