Paypoint finals

Provides clients with specialist consumer payment transaction processing and settlement across a wide variety of markets: (energy pre and post-payment, telecoms, housing, water, transport, e-commerce, parking and gaming) through its retail networks, internet and mobile phone channels. I have a holding in my income portfolio (epic code: PAY).

Paypoint announced full year results to 31 March 2012 today and came in at the top end of expectations.  There was further good news of a special dividend of 15p per share on top of the full year dividend of 30.4p, which in itself had been increased by 14.7%.

Sales were up 4.2% at £208.5m and EPS increased by 3.8% to 45.3p.  One of Paypoint's strengths is its excellent cash flow.  Free cash flow (FCF) was 10.1% higher at £30.4m or 44.4p per share and they ended the year with net cash on the balance sheet of £46.6m an increase of £11.1m on last year, hence the payment of a special dividend.

Over the past 5 years Paypoint has generated owner's equity (ie. increase in the book value per share plus dividends per share) at a rate of 31.8% pa and FCF on book value of 29.6% pa - a creditable performance.

Although the company has a high weighted average cost of capital of 10.5%, due to its inefficient balance sheet carrying net cash, their high return on capital at over 70% ensures that substantial value is added as the business grows.

The ubiquitous signs demonstrate the coverage that Paypoint have in retail in the UK, but they are also present in Ireland and Romania; in total this represents 87% of group revenue:

 

  



Their joint venture with Yodel in Collect+ (a collection & delivery point at convenience stores for on-line ordered products), although currently loss making (£1.9m loss down from £3.7m LY), it has substantial potential for growth.  They currently handle 7.7m transactions from an estimated market size of "click & collect" of about 37m which is estimated to grow by 33% pa over the next 5 years:

 

 

 

 

Their internet and mobile payment business represents 13% of group revenue (trading in UK, France & USA), one area which many will have come across is the parking payment system:

 

 

 

In essence, Paypoint is a cash generative business, with a focus on returns to shareholders, operating as a facilitator in a growing market that reflects the changing way in which the public is transacting with providers of goods & services.