PayPoint performing in line despite certain headwinds

Payment services and technology provider PayPoint posted a 3.6% improvement in group like-for-like net revenue for the three months to 31 December on Thursday, to £31.8m.

The FTSE 250 company said UK retail services like-for-like net revenue grew by 4.6%, driven by its new PayPoint One offer, with the technology now in 7,459 sites, of which 1,094 were operating the firm’s ‘EPoS Pro’ proposition.

It also reported continued momentum in MultiPay, with transactions up 80.1% to 5.6 million.

Romania net revenue grew by 42.2%, which the board said was primarily driven by the acquisition of Payzone.

“We are pleased with our performance this quarter as we have continued to drive profitable growth in UK retail services and in Romania,” said chief executive Dominic Taylor.

Group retail networks net revenue declined 4.3% to £31.8m from £33.3m, however, with the board saying that last year there was a one-off VAT recovery of £2.4m.

Excluding the VAT recovery, like-for-like net revenue would have increased 3.6%.

The decline was partially offset by strong growth in PayPoint One service fees and Romania performance.

Group retail networks transaction volumes reduced - as expected - by 1.7% to 172.7 million transactions, which the board put down to lower UK bill and general volumes partially offset by strong volume growth in Romania.

UK retail services net revenue decreased by 18.1%, which was reportedly reflective of the revised commercial terms with Yodel and the card payment VAT recovery.

Excluding those items, net revenue increased by 4.6%, driven by PayPoint One service fees.

PayPoint One, which was now in 7,459 sites, was supplemented by EPoS Pro, which was already successfully operating in 109 sites following its launch in November.

“We remain on target to reach over 8,000 sites by 31 March,” the board claimed.

Card payment transactions grew 3.4% to 23.4 million, and ATM transactions grew 1.4% to 10.2 million.

“In light of the performance with some of our ATM sites and LINK's proposals to reduce the interchange rate, we have commenced an initiative to reallocate a portion of our ATM estate to better performing locations,” PayPoint explained.

Collect+ parcel service volumes declined by 3.1% to 7.0 million as a result of reduced volumes in Yodel, validating the board’s strategy to expand the parcel service to other carriers and to reduce its dependence on any single carrier.

As at 31 December, Collect+ was in around 7,200 sites.

UK bill and general net revenue decreased, as anticipated, by 3.3% as transaction volumes declined by 10.5%.

That was driven by a 13.9% reduction in prepay energy volume, offset somewhat by continued momentum in MultiPay where transactions increased by 80.1% to 5.6 million.

“Our strategy of pursuing an increased mix of smaller but higher yielding clients continues to perform well, partly offsetting the impact of reduced transactions,” PayPoint explained.

UK top-up transactions declined by 15.9% from 15.5 million to 13.1 million as result of UK prepaid mobile transactions reducing by 19.1%, partially offset by increased eMoney top-ups.

Romania net revenue grew by 42.2%, mainly driven by the acquisition of Payzone in October.

Total transactions in the country increased 49.2% to reach 28.7 million, and as at 31 December, the firm’s Romanian network consisted of 11,755 PayPoint and 9,714 Payzone sites.

Looking at the books, the group had net cash of £48.4m at period end - up from £27.6m at the start of the period - which included client cash of £48.1m, which was up from £18.1m.

The increased proportion of client cash was due to the Christmas trading period, which was settled on 2 January.

PayPoint said the interim dividend of £10.5m, rising from £10.2m a year ago, and the additional dividend of £8.3m, were both paid in the quarter.

“In November we launched our PayPoint One mobile app and EPoS Pro which is already successfully operating in over 100 retailers,” commented Dominic Taylor.

“PayPoint One is on target to exceed 8,000 installations by the end of this financial year, with over 7,400 sites now live.”

Taylor said MultiPay had continued to grow, with more than 125,000 transactions processed on 22 December - its peak trading day - an increase of 67% compared to last year.

“Together with the revenue benefit we have been driving from an improved client mix has resulted in a solid performance in UK bill and general.

“In Romania, the acquisition of Payzone has further strengthened our position with its integration into our existing operations progressing well,” Taylor added.

“Overall performance for the quarter met our expectations therefore the full year outlook remains in line with previous guidance.”