PayPoint plc

Ladies and gentlemen, thank you for standing by and welcome to Paypoint's half-year results call. For those of you wishing to ask a question on today's call, please ensure you are dialed into the conference call facility rather than using the audio webcast. Both details can be found in the invitation you received last week. Please also be advised that this call is currently being recorded for Paypoint's own internal purposes. With that, I would now like to hand the call over to Nick Wiles, Chief Executive Officer of PayPoint PLC, to begin with opening remarks. Nick, please go ahead.

Thank you, Saskia, and good morning, everyone, and welcome to our interim results presentation for the six months to September 2022. I'm joined this morning by Alan Dale, our Finance Director. We have Steve O'Neill here as well, our Head of Corporate Affairs. Our presentation is going to take our usual format. We've got quite a lot to cover this morning with an overview of our results, an update on strategy, followed by Alan taking you through our financial highlights before I give some additional background on the performance of the business and our division review and then opening up for questions. So really turning to the first half, our strategic focus remains on adding to our capabilities enhancing client and retailer partner proposition, and strengthening our business platform. And to achieve this through investment in our existing business and through acquisition, where we've identified additional capabilities that we can open up new sector verticals with or complementary growth markets. In the first half, in addition to our BAU, I'd like to highlight A few investments we've made, firstly in our direct debit platform to enhance our multi-pay proposition, and in our merchant rental business to strengthen our card merchant proposition. We've taken a minority investment in OB Connect, our open banking partner, in order to accelerate our progress in open banking and confirmation of payee. And on the 7th of November, we announced the recommended acquisition of Appreciate Group for £83 million, which I'll talk a little more about in a few moments. We've also completed the sale of our investment in Snappy Shopper for £5.5 million. When we made our investment, it was part of a broader commercial partnership in which we envisaged a really scalable home delivery proposition to support our retailer network. Sadly, this hasn't materialized. I think as appetite for home delivery has cooled a little, we see a viable Snappy network across our own thousand plus we'd hoped for. Hence, on this basis, whilst we continue to work with Snappy as a commercial partner, I don't think we think this scale warrants an investment and hence the sale that we've made in the first half. Operationally, there are some important highlights in each of our three business divisions. In shopping, our core pay point network continues to grow and we further expanded our counter cash networks with over 4,500 sites now live, with over 22.8 million pounds withdrawn through the network over the past year, and we recently hit our first million-pound withdrawal week. We've taken important steps to enhance our SME card proposition with a new Saturn terminal, improved pricing, one-month contracts, and next-day settlement. We're also seeing a strong performance in business finance via our ULend proposition, with almost £6 million lent across both Paypoint and HandyPay in the first half. In e-commerce, we've had an excellent first half, with parcel transaction volumes now up over 60%, enabled by our investment in in-store technology, stronger carrier partnerships, and I think a growing recognition of the value of the Collect Plus out-of-home network. And in payments and banking, we delivered a strong performance in the energy sector, driven by an increase in the frequency of consumer transactions and a higher energy price post the energy cap at the beginning of the year. Our cash-out and DWP payment services continue to grow, with over 4.5 million vouchers issued in the first half. And we continue to be active in supporting government and local authority exception to birth disbursements, including in the second half the EVSS household payments that we're paying through our network through to the spring of 2023. We are seeing some early success in the take-up from clients for our confirmation of payee service in partnership with OB Connect, and it's encouraging in terms of building a good pipeline for the future. And financially, we've had a positive first half with net revenues growth in each of the three businesses, and overall net organic revenue up 6%. On an underlying and pre-exceptional basis, pre-tax profit of £22.5 billion was up 2.1%, having taken a £700,000 provision for the funds that are outstanding currently with McColls. The business continues to generate strong cash flow. Our net debt is down over the first half. We've increased our dividend by 2.2%, And in terms of outlook, we're confident in the progress that we're making in transforming the business and in delivering our expectations for the current year. I think this slide is a really important reminder of really the critical role that we and our retailer partners play in delivering vital services into the community across the UK. And certainly as a business, it reminds us of our purpose, which is to make people's lives easier every day. This brings to life our business values and something everyone within PaperPoet is very proud of. In the first half, in support of the communities we serve, we provided a range of government services through our network, including the disbursement of nearly £60 million of financial support on behalf of the DWP and over £55 million of energy bill support in the form of vouchers, which have already been redeemed through This next slide shows how the transformation in the business comes through the numbers for the first half and the key underlying drivers to each of the three businesses. Net revenue for the business increased by a headline 6% to 59.5 million pounds, with our total SME retail locations remaining in excess of 63,000. In shopping, Net revenue increased by 3.2%, reflecting a 2.6% growth in the Paypoint estate to just under 19,000 sites, an increase in our service fee, a resilient performance in cards, and progress in the take of our enhanced proposition, including in particular countercash and MyStore Plus. In e-commerce, net revenues have increased by over 45% to £3 billion, reflecting a 60% growth in parcel transaction volumes to 23 million parcels. This growth has been driven by our continued investment in in-store technology, an enhancement to our consumer experience, and the strengthening of our carrier partnerships. In payments and banking, net revenue has increased by 6.1% to £25.7 million, reflecting a resilient performance in cash bill payments, continued settling back of our e-money transactions post-COVID, and a strong performance from digital payments, and in particular for DWP. At the heart of our transformation has been a clear strategy of buy, grow, and invest, with M&A being a key element of this strategy, as we sought to add capability, secure entry points into new growth markets, and enhance our technology offering with a focus on the U.K., This slide summarizes the M&A steps we've taken over the past three years. Each of these acquisitions has been consistent with these key themes, which we believe we rapidly and successfully integrated into the wider PayPoint business, and each are now contributing both financially to the wider business proposition. I have already referred to our investment in SAPI, which we sold during the first half, and as I described earlier, Visage at the time of our investment has not materialized, but the more likely estate size today of between 300 and 500 has really been much more likely, and as such doesn't warrant the time focus and cap in investment that we had had in mind. Our commercial partnership continues, and we hope that the growth of the snappy estate within our network will be to the scale I referred to earlier. This slide is just a reminder of the PayPoint universe and the additions we've made to partners and proposition across three businesses during the first half. Our particular call-ups are in e-commerce, the addition of the Royal Mail, Amazon Returns, and Wish.com as carrier partners and new additional services, each with bespoke networks within the overall Collect Plus network. In payments and banking, we've added the services that come with our partnership with OB Connect in open banking and confirmation of payee. We also continue to work with a number of newspaper groups to develop a digital subscription service. And finally, through iMOVO, we've expanded further the support we are giving local authorities and governments to enhance and enable their various disbursement schemes. And in shopping, We've gathered pace in the rollout of a number of FOCG campaigns across the network in support of a strong slate of major brands. We've strengthened our card proposition and added funding circle to our successful business finance proposition. Turning now to the acquisition of Appreciate Group. I think one of the key themes to emerge since we announced the proposed acquisition earlier this month has been very much What have we seen in the Appreciate business that the market has not so far seen? Firstly, we see a business undergoing significant change and transformation in many ways similar to the journey that we at PayPoint have been on in terms of seeking to identify growth, bringing technology and investment to unlock new opportunities in the business. The business today is no longer a Hanters business and hasn't been for some time. As you will have seen from their interim results announced on Tuesday, the business is led by a strong management team who have identified clear opportunities to grow the business and are already in the early stages of implementing these plans, making the necessary technology investments to establish a strong digital capability at the heart of the Love to Shop brand and engaging with corporate and consumer customers in a way they haven't done before. A reminder of the overall mix of the business today. It has a strong customer base of over 400,000 customers, split across the corporate and consumer business, and more than 200 redemption partners. In the corporate business, which makes up about 62% of group revenue, the business has a strong corporate employee rewards and incentives proposition, centered on its love-to-shop brand, with a growing corporate client base, meaningful scale, and growing annual billings. The consumer business, which makes up about 38% of group revenues, is centered on part Christmas savings, delivering support through prepayment savings to consumers seeking to plan and save for Christmas and other occasions via direct consumer relationship and also through an established agent network. We see enormous potential for this business given its complementary customer demographic with PayPoint, and to build on the work the Appreciate Management team have already undertaken to revive growth in this business, particularly given the relevance of this proposition in the current times we're living in. In terms of the opportunity we see going forward for the combined business, we described a couple of weeks ago the four key pillars to the opportunity, which we believe creates both a compelling financial Firstly, a strengthening of the Paypoint universe and its proposition. Secondly, opening up new growth opportunities in new and existing markets. Thirdly, bringing together complementary capabilities and operating efficiencies. And fourthly, a strong financial case to deliver earnings enhancement and value creation for Paypoint shareholders. And based on these pillars, we describe in the next couple of slides how we intend to unlock this value. Here we've sought to show a build-up of the value we can generate from the acquisition through a number of building blocks. Firstly, the acquisition based on market estimates and the combination of the two businesses, earnings enhancing in the first full year to March 2024, having taken account of the additional P&L charges of DNA and interest on the acquisition debt. Secondly, there are a number of immediate and tangible cost benefits, from a single PLC structure for the combined business, which we expect to quickly deliver and will add to the base financial case. Thirdly, we've identified a number of operational revenue opportunities from bringing the existing appreciated digital payments in-house and across the Multiplay platform, which we believe will deliver a better customer service and reduce processing costs. And then finally, we see a number of key opportunities to drive enhanced revenue growth as a combined business. In part, prepayment savings, we see a great opportunity to accelerate growth and unlock further value in this business. As I said already, as a starting point, we see a huge overlap with the customer basis of Park Savings and our core bill payment customer demographic. With the opportunity to take a number of steps over the next 12 to 18 months, strengths and service we can provide this community. As you may have seen from their interim results on Tuesday, the Appreciate management team already have what they call a returning to growth strategy underway in the business to deliver growth for the next savings system through a combination of a retention and growth strategy with their direct savings customers, greater engagement with their existing agent network, and plans to develop the propositions In support of this strategy, Viz is also launching digital tools to support agents, reduce churn, and improve recruitment. In addition to these two existing marketing channels of direct and agent, we see a significant opportunity to develop a third complementary sales channel based on a subset of our retailer network. Initially, we have in mind a starting point of between 2,000 to 3,000 retailers, who have become super agents at the heart of their communities, supporting savers and growing the overall number of part payment savers. Finally, we see a great opportunity to expand the range of budgeting and occasions beyond just Christmas, supported by the right proposition, value, and a range of redemption partners. In corporate rewards and gifting, we see a clear path to accelerate the growth plans already underway in this business. Through firstly building on the current success, the management team in broadening out the corporate client base, in the first half of the current year, this client base has grown by 14%, and within this growth, there's been a strong performance in the corporate rewards and incentives market, where the business has delivered first half growth of about 21%. In addition, There is a growing opportunity to develop white label solutions for corporates in both the public and private sectors. We've already started to work with a number of local authorities to offer this rather than simply offering cash. And there is certainly scope to further develop this with a view to offering products with cost of living in mind. And finally, we see the opportunity of cross-selling the multi-pay platform across the Appreciate client base. And in consumer and gifting, firstly, supporting the existing appreciate plans to focus on this aspect of the business as it is a key driver to lead into the corporate business. And in addition, expand the love to shop offering available today in about 9,000 of our paper and independent stores from a pin-on-receipt proposition to a physical card, which we believe is more likely to drive growth in gifting rather than self-use. Overall, we're in no doubt this is an important acquisition for the business and an opportunity to do a great job in combining the two businesses, accelerate top-line growth, and deliver significant value for our pay point shareholders. And with that, I'd like to hand on to Alan to cover the financial review.

Yes, thanks, Nick. Good morning, everyone. As you've just heard from Nick, the group has had a good first half as it continued its transformation, and we have announced our offer for Appreciate Group. My part of the presentation is focused on the positive performance being reported, reflecting the enhanced platform, as well as the contribution from our recent acquisitions, which were included for the whole of the prior period. With the highlights slide, the key starting point is our reported profit report tax at 21 million, highlighted in the middle. Down from the prior period, 55 million, which reflected the 30 million exceptional profit on sale of Romania. We have other exceptional items, In the current period, as Nick has just discussed, we had the $1.2 million loss from our disposal in the Snappy Group and some initial acquisition costs for the Appreciate transaction. Last year, there was the $2.9 million gain from the accounting for the contingent consideration relating to our iMovo acquisition. My key focus in the following slides, therefore, will be on the profit from continuing operations, which, excluding those exceptional items, has increased 2.1% 22.5 million for the period. Other focuses would include the increased net revenue and the improved cash generation. Focusing on our continuing operations, you can see in the middle section we've analyzed the 0.4 million or 2.1% profit before tax improvement compared to the same prior period, with all three divisions showing organic net revenue growth. We have specifically called out the 0.7 provision we have set up for the outstanding funds from the McCall's administration. This is because, as a one-off item, it distorts the operating margin and, but for its effect, the continuing operations profit before tax would have been an increase of 1.1 million or 5.5%. We also show the impact of the restatement on prior results relating to the IFRIC account and clarification on intangible assets that we explained and adopted at the year end. Our shopping division saw $1 million net revenue growth, primarily from growth in the service fee revenue from our Pay.One product. The e-commerce division has seen a considerable increase of $0.9 million in net revenue, an excellent 45.7%. The net revenue for payments and banking division also increased, which is a good change from the declines we've seen in previous periods from the continuing decline in the use of cash. This is as a result of the solid performance and energy our continuing transformation, and in particular, the contribution from the iMobo acquisition. There is a separate slide later which will discuss the 2.3 million increase in costs. As I've just highlighted, all three divisions saw a net increase in net revenue. Our shopping division increased 3.2% in net revenue from 29.8 million to 30.8 million. Service-free revenue increased by 0.7 million, or 9.2%, driven by an increase of 339 revenue-generating Pay.1 sites since this time last year. Considerable site increases in the higher revenue point of core compared to base, and the annual RPI increase. It should be noted that we did not put through the whole RPI increase in a move to help our retailer partners. Nick is going to go into detail later on the performance of our card business. The excellent 45.7% increase in net revenue in our e-commerce division is particularly pleasing, with recent volumes of over 1 million transactions a week, and which puts us into a great place as we come into the peak period. The payments and banking division saw increased net revenue of 1.5 million, or 6.1%, with a number of business lines moving in different directions. Cash bill payments just decreased by 0.1 million due to the strong energy sector, performance increasing 8.1%. The increase in the price cap has seen customers topping up more frequently and with increased average transaction values. In particular, digital net revenue increased by 2.9 million, or 87.1%, with a positive performance in all business lines, including the DWP payment exception service delivered by the iMogo acquisitions. We have continued to work at keeping a tight control on costs in the year, and this slide focuses on explaining the increased reported costs for continuing operations while looking at the 3 million net increase in costs. This total increase includes the 0.7 million one-off McCall's provision. We start by showing the benefit from the restatement of prior results relating to the IFRIC accounting classification. The largest increase results from our investment in people, and in particular our sales teams. Like most other businesses, we faced inter-wage inflation, but our overall net increases were limited to 4%. As discussed in previous result calls, we have faced recruitment issues in our field teams and so have put through increases late in the first half of the prior year to partly counter this. The increase in asset leasing costs reflects the change in accounting treatment for our merchant rentals card lease products. These are now operating leases, and so we have a depreciating asset expense rather than with the accounting for net investment in finance leases. A number of our products have related transaction processing costs, and with the increase in revenue, we can see an additional $0.6 million of such costs coming through. As explained at the end of last year, we again see lower depreciation due to a number of assets having reached their end of life in the prior year and the clarification of the useful life for our Pay.1 assets. Financing costs did not have a variance and to stay steady with the benefit of the decrease in net debt being offset by the increase in interest rates. With our cash generation, the key point is that we have strong cash generation from our continuing operations. The profit before tax from continuing operations of $21 million has been adjusted for exceptional items, depreciation, amortization, and working capital to arrive at a strong continuing operations cash generation of $28.3 million. This is 6.5 million better than the same period last year, as we haven't had the same level of working capital changes compared to the prior period. Together, these funds were used to pay for increased dividends of 12.4 million, the investment in our open banking partner, OB Connect, and 1.6 million increased capex required from the change in our card lease product. Previously, the purchase of card terminals went through the net investment in finance leases and was reflected in working capital changes. Another key point is that we reduced our net debt by 4.5 million in the half year. As covered earlier, we have sold our investment in the Snappy Group for 5.5 million, but that transaction completes in October. This next slide shows how our balance sheet has changed since the prior year end. The balance sheet has strengthened, with net assets increasing by 5.1 million to 88.4 million, facilitated by our strong cash generations. The key thing is our 5.5 million reduction in net debt as we continue to deleverage. The main change in constituents is the investment in Snappy Group is no longer treated as an associate and at the period end was an asset held for sale. The dividends and financing slide covers a number of topics. We have set out in the table our new financing structure we've put in place before our offer for Appreciate Group. This includes a new $36 million three-year amortizing loan, and our RTF facilities will be extended to 2026. This covers the $63 million cash element expected to be paid in the first half of next year. Other material cash flows for the next six months include dividends and capex, where, based on current expectations, we would expect to be spending a further $6 million on terminals and systems. As we have seen, our business is very cash-generative, Although nothing is guaranteed, we would expect in normal circumstances for the combined businesses to return to a ratio of net debt to EBITDA below 1 by the end of the financial year 2024-2025. Turning to dividends, we have provided a reminder of our previously stated capital allocation policy that is unchanged after the Appreciate Group announcement. Consideration is given to future investment, whether acquisition opportunities such as Appreciate or OB Connect or CAPEX, to drive future revenue or provide resilience and efficiency. Our dividend policy targets a cover ratio of 1.2 to 1.5 times earnings, earnings being from continuing operations and excluding exceptional items. As highlighted in my first page, diluted earnings per share from continuing operations excluding exceptional items grew 5.1%, 26.6 pence. Consistent with our policy, we are declaring an increased interim dividend of 18.4 pence, payable in two-week installments. This is an increase of 2.2% compared to last year's 18 pence final dividend and an increase of 8.2% compared to last year's 17 pence interim dividend. This increased dividend reflects the confidence we have in the business for the future. I trust that was a helpful insight and we'll now pass back to Nick.

Thanks, Alan. Turning now to our divisional review, and firstly starting with our shopping division. Our headline performance shows a 3.2% growth in net revenue to £30.8 million, with our retail service activities delivering underlying growth of 7.8%, and cars down a modest 0.6%. During the first half, we remained focused on growing the Pay.1 estate, which grew by 2.6%, and enhancing our retailer proposition through better retail engagement and the rollout of additional services, such as countercash, business finance through ULend, a strong slate of FMCG campaigns for a number of major brands, our MyStorePlus retailer app reward, and the merchandising rollout of our eMoney proposition. In cards, as I will describe in more detail in a moment, We've enhanced our SME and retail proposition with the launch of a new Android terminal, supported by a one-month contract, next-day settlement, and strong pricing. In addition, we've taken steps to deliver a change in our sales and retention performance, supported by better data analytics and AI tools. Turning now in more detail to the progress we're making in our card business, and to firstly remind you of the opportunities we outlined in November 2020 when we acquired HandyPay Merchant Rentals. At the time, we grouped these under four headings. To drive synergies, we're bringing the two businesses together under a single acquirer, improving the sales rate for adoption of best practice, reducing merchant churn, and levering our data and analytics to better manage our merchant state. On the next slide, We have summarized our progress in each of these focus areas and our priorities for the second half. Firstly, in terms of our acquired strategy, it's fair to say here we've made the least progress of our four priorities. It's clear as to our thinking and that we need to, our future acquired partner, in our future acquired partner, we need one that can offer a broader range of capabilities. to support our future growth plans in multi-pay and in particular our growth into new sector verticals where capabilities such as PayFact are essential. As we look to the second half, I'm more hopeful that we will bring this work to a conclusion and as such we can move our business to a single acquirer platform and unlock the synergies this will bring, hopefully during the first half of next year. In terms of delivering an improvement in our sales rate, progress in both the HandyPay and PayPoint sales teams is really exciting. Despite a tough recruitment market during the first half, which has limited our ability to have a full headcount, the impact of our new sales director has been really significant, with improved productivity across both teams, supported by our most competitive proposition ever, with a creative and agile approach to sales and promotions, such that into the second half we're And we believe there are more to come from future enhancements to our proposition and actions to address our recruitment challenge. With respect to leveraging our analytics, our teams now have the tools to drive better conversations with our merchants, with supporting analytics to drive a better and more optimized effort across both Paypoint and HandyPay, with a further rollout of these tools and supporting CRM capability into the second half. In addition to strengthening our sales capability, we've now established a clear focus and accountability in the business for reduction of merchant churn. Without doubt, this is a challenge across all players in the card industry, and we understand the need to be smart around how we use our data analytics to better anticipate churn in our merchants from their trading and actually analyze the data better in our business so we can deploy the right retention tactics at the right time to manage this. Building on some early success, we're now expanding our retention activity across both PayPoint and HanduPay, developing further analytics and AI tools to support this initiative. Overall, I think over the last two years, we've built confidence in the progress we're making and our ability to reduce churn, resume growth, and really drive a strong and healthy card estate business. This slide very much brings to light the quality of our existing merchant estate across our three acquirers. And to remind you, we currently write new business onto both Evo and Lloyds CardNet, but not the legacy WorldPay book. In total, we have over 31,500 card merchant sites. And over the period, we saw an increase in the Evo book and a small decrease in the Lloyds CardNet book and a larger increase in the WorldPay book. And in summary, we believe we've now got the most competitive attractive proposition ever, a strong and improving sales team performance, a highly attractive and resilient merchant estate. We've made significant steps forward in our analytics and retention plans, and I think for the first time are really leveraging the car's DNA of talent that we've very much brought into the business. So I think really we have a platform now to accelerate growth in our car payments business, and evidence of that I think you will see coming through in the second half and into next year. In e-commerce, we've seen a 45% growth in net revenue and 60% growth in parcel transactions in the first half, enabled through our investment in in-store technology to enhance consumer experience, a strengthening of our carrier-partner relationships, and establishing Collect Plus as very much the number one out-of-home network. In the first half, we benefited from the strength in clothing and fashion categories, the continued expansion of new services with carrier partners, and our investment in the Zebra label printers. In addition, we have launched a number of new partnerships which have yet to start contributing fully, including a network for Wish.com, expanding further our relationship with Amazon into Amazon Returns, and some early work with the Royal Mail. through action. In our payments and banking division, we have delivered a 6.1% increase in net revenue to £25.7 million. Underpinning this performance has been an 87% increase in our digital payments net revenue, reflecting a strong performance from IMOGO in particular, a reduction of 21% in net revenue in our cash through to digital business, where both gifting and neobanking transactions have been resilient. The gaming transactions have continued to return back to pre-COVID levels. And into the second half, this decline now looks to have leveled off at around 10% below similar periods last year. And in cash, we've had a resilient first half performance, with cash bill payments in particular showing a solid performance. In terms of progress over the half, As we've said already, we've seen a strong performance in the energy sector with net revenues up 8.1% and transaction volumes up 6%, driven by increased frequency and value of customer transactions. Cash out and the DWP services have been strong with over 4.5 billion vouchers issued in the first half. We now have nine energy providers signed up for the disbursement of energy vouchers. through the EVSS scheme we started during the first half and will be equally active into the second. And we have six clients now live for our confirmation of payee service by OB Connect, our open banking partner. And we have seen a significant contribution from our Omovo acquisition with over 2.6 million pounds of net revenue generated in the first half through a combination of our services to the EWP and our cash-out service is being used by an increasing number of local authorities, with the prospect of further contributions into the second half from the energy bill support scheme and our newspaper partnerships. And we have also made, during the half, solid progress within the business in terms of delivering our ESG program, our commitment to the real living wage, and a culture of diversity and inclusion throughout the business. We've also continued our program of IT investment to support our service delivery and resilience. Turning now to the outlook. I hope as you've seen throughout the presentation, we remain confident in the progress we're making in the transformation of our business and the rebalancing towards growth and improving shareholder returns. We're pleased with the progress we've made in the first half and the continued role we and our retailers provide in supporting communities in which we serve. As we look to the year as a whole, we see the seasonal balance of our business resetting such that we have a more usual second half weighting to the year as a whole, more traditionally the weight of the business pre-COVID. Our increased interim dividends declare a message of our confidence in the business, its resilience, our continued strong cash flow, and the progress we're making. And we are very clear in our delivery of expectations and confidence in delivering those expectations for the remainder of this year. And with that, I'm very happy to open up for questions.

Thank you. Ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad. If you should then wish to retract your question, please press star 2. As a reminder, you must be dialed into the conference call facility to ask a question. And our first question today comes from Orson Rout of Barclays. Please go ahead.

Hi, thanks for taking my questions. Free for me, perhaps. First on the handy pay, I saw that revenue this year was only flat year on year, perhaps somewhat lighter than we would have anticipated. So maybe two on that first. I mean, you've changed the contracting from multi-year to one month and 12 month contracts. Can you try and quantify for us what the headwind is you're seeing from this? And do you expect this to be a further headwind into H2 and the outer years or is this starting to become less of a headwind now? Then the second would also be on handy pay, and I saw in the report that that churn has started increasing slightly. Now, you seem to be quite bullish into the turn into H2, so I was just wondering if you sort of could explore and give some color on why churn in H1 increased and what you've seen changing over the last couple of months perhaps. And then the third question is just more broadly on the outlook and the typical seasonality returning that you've spoken to. So just wanted to get some color here. Are you expecting quite a significant acceleration into H2 in this case? And it would be helpful if you could give some additional details regarding the puts and takes here. Because, of course, macro is slowing and looking at the spending data, we are seeing spending decreasing in recent weeks. But perhaps this is being counterbalanced, for example, through the rising energy prices, which are helping the bill payments business. So I was just wondering if you could sort of speak to the puts and takes that give you confidence. in H2 despite the tougher macro. Thank you.

Do you want to start with the answer around handy pay?

Yeah, sure. Yeah, also, as you say, yeah, the handy pay merchant rentals net revenue was flat, you know, which is disappointing for us because, you know, we do feel this is, you know, a very good acquisition and a good business for us. You know, you mentioned the one month, 12 months. Is that going to be headwinds? We actually feel that was, you know, something we did back in last October, which is a real benefit for us. Because if you look at the changes that are coming out of the PSR review, there's lots of changes to contracts, and contracts are going to have to shorten. So, you know, we actually made that change back in last October, which puts us at an advantage. And the other things that are coming along, which Nick mentioned, is, You know, we've just now adopted the new Saturn Android terminal as our standard terminal, which moves away from the old kind of, you know, more traditional black pin pads you see around everywhere. And, you know, that's already giving us traction in growing our sales. And then the other thing Nick was saying is about the actual productivity of our sales force has improved. Where we've been held back, and we're being quite open about it, is I'd say the recruitment is a very competitive business. But what we've seen is, you know, we've got our new sales director in place. She's really looked at our sales force, driven up their productivity. And if we can recruit the more people with that extra productivity, that is really going to help, you know, the car business grow, I'd say, into the next year.

I mean, also, there are quite a lot of numbers that we share in the first half around sort of the performance of the cars business. And I think, you know, I think if you look at them, I think it's important first to distinguish We actually grew the number of merchants on the Evo book in the first half. Slightly what's happening to WorldPay is a little bit out of our control. We have just re-signed the WorldPay contract, which I think will give us more opportunity to be proactive around managing that estate going forward. But I think if you look at actually the key drivers here, as Alan has said, firstly, we're seeing a much higher level of productivity from our sales teams. Secondly, I think we now have a proposition of quality and value that we haven't had historically. And I think the early evidence is actually that's driving much better retention and much better actually sort of growth actually in the books on which we're now writing, which is EVO. And if you actually look at the actual revenue points, the net revenue in total was down slightly by 0.6 of a percent to 15.9 million pounds. But actually the handy paid business increased actually the amount of value processed quite materially in the first half. So I think there are a lot of numbers that move around in this business. But I think the core reality is the platform now is probably stronger than it's ever been in order to grow this business from here. In terms of the outlook, I mean, firstly, as we've said, we expect to return to the more seasonal balance of H2 weighting over H1. I don't think there's anything new in and of itself in that. And obviously energy transactions are higher during the winter than they are during the summer. There's some seasonality to our parcels business. More broadly, there's a whole seasonal weighting towards the second half of this year across many of our businesses. In addition to that, FMCG campaigns have been very much second half weighted. There's been a buildup of FMCG in the business during the first half. And a number of those campaigns are now going of the second half. And in terms of the headwinds, I think that the reality is that there is a huge amount of government support going into the most needy in the community in terms of supporting and helping very difficult situations around cost of living. We participate in that through the DWP, through the disbursements, through local authorities. That has an impact positively for us. It also has a potential number of top-ups we see particularly in electricity. So balancing that out is actually one of the question marks for the second half. Clearly the other question mark for the second half is really what happens to consumer activity and consumer behaviors post-Christmas and whether you actually see less activity in our parcels business and less activity in terms of transaction flows in our car business. But I'd like to think that we've anticipated some of that we have in the year as a whole. That's super helpful. Thanks a lot.

Okay.

Thank you. And we're now moving on to our next questioner, which is Joe Brent of Liberum. Please go ahead.

Good morning, gentlemen. Good morning, Joe. Three questions, if I may. On Love to Shop, I think you're currently in 9,000 stores. How much do you think that could realistically grow to? Secondly, you talk about moving to a single acquirer platform. Would that be one of the existing acquirers? And can you explain a little bit more what those benefits might be? And then on PARC and the revenue synergies there, could you give an indication of, am I right in thinking there's sort of 10% margin in that business? And could you give an indication of of what the payaway might be to the super agents.

We'll do our best on the last one, and I think if there were advisors in the room, they would probably be looking at us now and saying, we have to take a keg when we're in the middle of an offer. But I'll do the best I can. On the first one, I think it's really important to distinguish between a presence in store with PIN on receipt and a presence in store with ARG. And I think what our experience tells us that however hard we try, pin-on-receipt is very much for self-use. And if we want to make meaningful progress in gifting, then we need to have a physical card in store. And certainly one of the early conversations that we would like to have with educators around how we merchandise in those same stores, which are having success with pin-on-receipt, to make those card stores. And I think we're going to make progress in gifting through our network. So to be clear, if you look at our e-money business today in aggregate, gifting is a very small percentage of that. And hence, I think there's real opportunity to grow that, both for appreciated, but importantly also for our retailers in terms of further reasons for footfall and commission. On a single acquirer platform, I think you will understand that we're at a very delicate stage in terms of identifying our single acquirer partner going forward. And given that today we work with two live acquirers and one passive, I'd rather not comment on who the outcome is likely to be. But I think in terms of synergy, I mean, first and foremost, we would like to think that if you actually have the size of book and the growth prospects we have in that book, to get very keen terms, the acquirer relationship, that's number one. And number two, and probably as importantly, you have a genuine partner there in which you can develop the right capabilities, the right platform, and the right ability to actually expand our car business. And Mark Latham, who runs that business, has been working really closely with the team, actually, to really identify the best acquirer partner for actually the next stage in the growth of this business. And I think, you know, good commercial terms makes us actually super competitive in that market. Finally, on part, I don't think we can comment further on really what the margin profile of that business is beyond what you would have seen from actually the announcements that the depreciate have already made. We do think that the creation of that third selling channel will make a really big difference. We really think from the conversations we've already had, there's a real appetite from our retailer network to provide that service grow that sort of third leg. And I think it's probably fair to say that we can talk more about that actually in May when we've actually sort of acquired the business that are in full control of it and talk without the constraints of being at a takeover period.

Thank you. That makes good sense. Thank you. Thanks, Chair.

Thank you. And as another reminder, to ask a question today, please signal by pressing star 1. We will pause for a brief moment. As there appears to be no further questions at this time, I'd like to hand the call back over to you, Nick, for any additional or closing remarks.

Thank you very much. And thank you, everybody, for joining us this morning. I think, as you can see, there's an awful lot going on in our business. We're confident as to our outlook in the second half and look forward to updating you further in May. So thank you, everybody. Have a good day.

Thank you. That concludes today's call. Thank you for your attention. for joining, ladies and gentlemen. You may now disconnect.