PayPoint plc

welcome everyone to our annual uh results presentation for the year-ended march 2023 and also this morning the release of our q1 update and really firstly my apologies for the delay in our reporting this year i think really the impact of closing the appreciate transaction in the last month of our financial year and the knock-on effect this has had really in terms of coordinating a number of accounting firms to conclude our audit, I think, has been really quite considerable. The good news that this is done, we're with you today to take you through what we believe are really excellent set of results. We've laid out on this first slide our proposed agenda for today's presentation. The plan is very much I'll take you through the overview to our results and a more in-depth review of our strategy. Alan's going to review the numbers, followed by a very brief review of the business by division, a summary of our outlook, and then time for Q&A. We're really pleased to be reporting a further year of strong financial performance, where we've made progress in our strategy and in the transformation of our business. Our key headline numbers for the business as a whole, including a one-month contribution from the former Appreciate businesses, are very much at the top end of market expectations. and show a year-on-year net revenue of growth of over 11%, underlying EBITDA up over 5%, underlying PBT up over 5%, and cash generation up over 15% to 62.3 million pounds. And we've increased the dividend, final dividend by 3.3% to 18.6 pence per share. Within these numbers, There are some accounting policy changes, which Alan's going to take you through properly and reconcile when we get to the financial section of the presentation. The great news is we've delivered net revenue growth, I think, probably for the first time at each of our three businesses. In shopping, net revenue grew by 5.6%, reflecting a growth in the PayPal One retailer estate, a growth in service fee income, in car processing net revenue, a growing number of successful FMCG brand campaigns, and I think really further progress in our overall retail and partner engagement. In e-commerce, we had a really outstanding year, with net revenue growth by over 46.3% in terms of partial transaction volumes, which went through the Collect Plus network, and a total of 56.4 million transactions overall. I think we've been fortunate in being exposed to the right parcel categories. I think we've worked hard in partnership with our key carrier partners and started to really reap the benefits of our investment in in-store print technology as this has become increasingly important to the parcel consumer who use our network. In payments and banking, net revenue grew by 9.1% as we've made significant progress in the delivery and adoption of our digital payments proposition. We delivered a resilient performance in our legacy cash payments business, a stable and stabilizing performance in the second half in our cash through to digital activities, which include gaming, gifting, and neobanking. And we've secured a number of really important new business wins in our newer capabilities in direct debit and open banking. And for completeness, as I said already, we've included a one-month contribution from the former. Appreciate businesses in these headline numbers. So overall, a really pleasing performance from the business and the first time we've ever delivered net revenue growth in each of the three divisions. Turning now to an update on strategy and taking stock as to what we as a business and a management team are focused on as we continue to drive the business forward from here. As I said, as a management team, we've been taking stock both of our progress in the transformation of our business over the past three years and really challenging ourselves as to the key focus areas we have for the business as we look forward to the next stage in our growth. In our view, key building blocks are now largely in place of our focus today on four key areas. Firstly, the value creation and future opportunity from the M&A we've executed over the past three years, where we are in terms of our progress and accelerating the shift from our legacy cash flow payments business the digital multi-channel, multi-sector payments platform, and where we should invest internally our investment over the next three years to support our key areas of growth to maximize returns. And then finally, to ensure our strong cash flows allocated in a way that optimizes shareholder rewards and supports future performance of the business. I think the other key challenge we face is in communicating a clear and simple investment case to our investors, which brings to life the value we're building from the business and the business we have today, focuses attention on the right financial metrics and how we execute on well-defined opportunities for accelerating our growth and the shareholder returns that play from this. To this end, we have introduced EBITDAs and additional financial KPI, more of which later in the presentation. Looking firstly at our M&A over the past three years and the acquisitions we've made over the past three years have been essential steps in transitioning our business to a high growth multi-channel platform and growing a collection of customer service propositions, all of which add to value to our SME and our retailer network. I think firstly taking full ownership of Collect Plus has allowed us to accelerate our investment plans in this business open up the network to all major carriers, I think move the performance of business to a different level, and establish Collect Class as the number one out-of-home network. As you can see, growth continues to accelerate in this business as the network becomes more attractive to both carriers and their customers, and while it's important that we also drive commission and footfall into the retailer network. I'm Oboe. has proved to be an outstanding acquisition and a really critical technology in the delivery of our DWP payment exception service, cash-out capabilities, and our growing vouchering and FMCG brand partnerships and campaigns. The acquisition of RSM has been key to establishing our direct debit platform and our early charities proposition, while the investments in Optus Homes and OB Connect have respectively strengthened our Housing Association proposition guided us with a great open banking capability, which has really put us at the front of this emerging opportunity as we win a number of new clients and begin to drive a strong revenue stream from these early activities. The acquisition of HandyPay Merchant Rentals has created the opportunity for us to bring scale to our card processing and terminal leasing business, expand our SME network beyond traditional retail convenience, and bring a level of sector knowledge and expertise into the business that is absolutely fundamental to growing and succeeding in this market. Cards as a payment channel is also key to delivering on our multi-channel payment platform and success in our client business. Having acquired this business, we've described a number of times before the importance of what we do next in terms of investing in this platform and our card capabilities so that we can generate growth, and a market-leading presence in cars. In particular, our plans to become a payfac, the strength in our product development plans to underpin our sales rate and the reduction of churn, in addition to expanding our sales capabilities as we open up new sectors. This acquisition is still very much a work in progress as we deliver the opportunity we see in cars. But I think it's clear our progress on this journey is encouraging, and we still see significant opportunity to create value from this acquisition. And finally, the recently closed acquisition of Appreciate, which has brought into the business two key activities. Firstly, a structured savings platform, a product in part Christmas savings. And secondly, the Love2Shop digital platform for employee and consumer rewards and a prepaid closed-loop channel. I hope what's clear is the common themes running through these acquisitions is the enhancement of our payment capabilities to provide a joined-up multi-channel payment platform and the strengthening of our services proposition available through our SME and our retailer network. We now believe we have the capability in place continued internal investment and good execution, we now have a really great business from which to generate significant returns for our shareholders as they look forward. Turning to the appreciate acquisition in a bit more detail. Firstly, and I think probably most importantly, the integration of the business is going well, with great cooperation between the two teams, really across all the functions, and in particular in the engine room of HR, IT development and systems, client management, and new business sales. So overall, it feels like there's a really good cultural fit between the two businesses, and we've moved quickly such that we're ensuring there is minimal disruption to a laser-like focus from both businesses on delivery and plan and the pursuit of new business opportunities where we can see them. For us, it's immediately clear there are considerable additional opportunities from both Love to Shop and Park Christmas Savings being part of the wider PayPoint business. We are already accelerating the development roadmap to invest and unlock and strengthen the Love2Shop proposition. The new business teams from both are already working together to join opportunities in both central and local government. And with our expanded corporate clients, we're adding to the new business initiatives already underway in Love2Shop. And I think this will certainly see a growth in billings both in the current year and in the years ahead. The Park Christmas Savings business is a great addition to our consumer proposition, targeting a demographic which is consistent with many of the consumers who already use our services through our Retailer Partner Network. In addition to the current Park's Christmas Savings direct debit and agent customer recruitment channels, we have now launched an additional channel in partnership with the NFRN to create a network of Paypoint retailer super agents to recruit and support Park Christmas Saviors, starting with the soon-to-be-launched Christmas 2024 campaign. This launch is already off to a strong start, with retailer sign-ups strong, and I think sort of hot off the press, I think we're now looking at an additional 125 new to Paypoint retailers who actually have adopted the Park Christmas Saviors opportunity. We believe this will add meaningfully an incremental growth to the £161 million of billings achieved by Park Christmas Savings in the last financial year and the current 350,000 families already saving with us. In addition, we're already looking at the opportunity for additional prepaid savings solution partners and also for other areas where we can support milestone events such as weddings to add further to the growth process. Beyond BAU for this business, we're already seeing the prospect of a number of new opportunities and partnerships from the acquisition, where the ability to bring together closed-loop payments, vouchering, rewards, grant campaigns, and redemption, in addition to broader payments, is creating the opportunity to unlock new markets and revenue, more of which we reported our interns in November. So overall, I don't think we could be more pleased with the early progress we're making, both in Love to Shop and Park Christmas Savings. We're clear that they are really great businesses, which we believe will add considerable value to the enlarged group. This next slide sets out what we think is a very straightforward way to our response to really the key question we've been asked a number of times, which is, how do we make money from the Love to Shop business? Firstly, As I've already described, the appreciated acquisition brought two revenue streams, half Christmas savings and love to shop. In terms of how we manage both, our starting point for measuring progress and performance is billings, i.e. transaction volume, in much the same way as we view any other transaction-based businesses across the group, such as payment transactions, parcels, and card processing volumes. Then in terms of revenue streams, In both businesses, there are four. Firstly, your retailer service and management fees. Secondly, your card fee. Thirdly, the non-redemption income at the end of the life of the card. And fourthly, interest earned on cash balances. Inevitably, between the two businesses, there is a different weighting between these four. Again, as a financial model, this is consistent with the way we recognize revenue streams elsewhere in the business, in shopping, in e-commerce, in payments and banking. And to summarize what the business model actually looks like, as I said already, billings is the most immediate KPI. We measure it on a weekly basis in much the same way we measure other transactions across the business as a whole. These billings are quickly converted into cash And as I said before, held in trust against the future spend and redemption of the cards that we've issued. Revenue is then recognized during the life and at the end of the life of the card in the four key areas I've described, leading to a profit recognition and ultimately PBT. In respect of profit recognition, this has been a key adjustment that we've made post acquisition and which Alan will talk about later in his section. as we've restated the recognition of non-redemption income, such that we recognise this now at the expiry of the card, rather than estimating or recognising in the life of the card. As such, we're accounting for this in a more conservative and consistent way with the way that other leading peers do in the sector. Moving this accounting treatment has no impact on our cash flow, simply the timing of recognition of profit or non-redemption income,

and how we show this in the P&L. Our second focus area is the acceleration in the shift from cash to digital payments.

We've now built, through a combination of acquisition and in turn investment, a differentiated platform that supports payments across cash, direct debits, cards, open banking, and with a full range of support tools I think this is really well illustrated in the right-hand side of the chart. Digital net revenue growth year on year was over 100%, £15.7 million. And this arose from combination of delivering large central government support schemes, such as the DWP Payment Exception Service, winning new business in non-energy sectors, such as local authorities and housing. For us, our long-term success in accelerating the shift to digital payments is now dependent on winning and integrating new business across a number of key sectors, such as local and central government, further progress with the housing associations, more wins in charities, along with a continued strong presence in doing more for our clients in energy and other utilities. We see the early signs of success And we're building on this success as we execute on a growing new business pipeline in each of these sectors. And you'll see more of this as we develop through the year with obviously the next update in November. This next slide sets out again in what we think is a simple way of the structure of our business today. The capabilities we have in our payments platform and in our retailer network service proposition. And importantly, through the color coding, prospects for growth over the next three years. On the left-hand side, we've set out our payment platform in terms of our capabilities and the key sector verticals we're working with today or targeting in the future. Our strategy over the past three years has been to establish this comprehensive payment capability that you see today, such that we have what we need to win business and have a market-leading presence in each of these key sector verticals. In our view, with the exception of cash, each of these payment channels represent growth opportunities for us, and we believe we are uniquely placed to deliver this full range of integrated payment channels on a single platform. And while cash is highlighted here in red, it does remain a critical payment channel for many of our clients in both existing and in target sectors. On the right-hand side, we set up the service proposition today, which we have available through our retailer and our SME network. At a headline level, we have over 62,000 total locations. And within this, we have over 28,000 retailer locations and over 18,400 K.1 locations. However, the real key for us over the past three years is within this significant overarching network is to size individual product proposition networks very specifically to the opportunity and coverage needs for each. A great example of this is probably parcels, where our overall CollectPlus network is over 10,000 stores. But even within this, each carrier has a coverage that works best for them. In the network we have today, we want our retailers to offer multiple pay point products rather than simply bill pay. And as a result, almost 50% of our pay point retailers now offer at least three pay point one services. As we go forward, we want this number to grow further. As I've highlighted here in green, the majority of these service propositions are in growth mode. And this strategy, we believe, creates greater commission opportunities for our retailers drives footfall, and will deliver a better overall customer experience and service. At a high level, on this next slide, we believe unlocking new clients and markets and driving more customer adoption through our retailer network will deliver a meaningful uplift in our financial performance. And we set ourselves the clear financial objectives delivering in excess of 100 million EBITDA over the next year period from this plan. We believe we have the opportunity to leverage our materially enhanced platform in the way I've described this morning, which emphasizes growth in the key areas of integrated payments, cards, retail proposition, parcels and rewards, We were able to deliver further payment transaction growth from the integrated platform that we've created. And as I've described already, the significant momentum we have in open banking and our successes in energy, very success in housing, our very success in local and central government. As you see this morning, we're enhancing our retailer proposition. We're driving forward the next generation of technology with integrated EPOS solutions for a number of key partners. and we're driving further multiple services into our retailer partners. We have clear acceleration plans for cards. We're launching our mid-market card proposition. We're moving to a single acquirer, beginning that journey to becoming a payback. We have great momentum in parcels with plans to deliver additional volume as we bring on even further carriers and work closer to the ones that we're working with today. We've only just started to identify and see the incremental opportunity in love to shop in terms of employee and customer rewards as we unlock revenue opportunities and grow further both love to shop and part Christmas savings. We see the opportunity to unlock new markets and with it the revenue from enterprise level solutions as we bring together all the capabilities we have across the business in one tailored proposition as we target new sectors. I hope it comes across clearly. We have intensity and focus in that execution. We have a great control of both cost and a real tight management culture. These ingredients, we believe, are key in terms of the building blocks that we have in place today to deliver that £100 million plus EBITDA over three years. And finally, what does this mean in terms of delivering enhanced shareholder returns? We believe our starting point is a strong one, as we already highlight a very strong cash profit generating business, the current year generating over 62 billion pounds of gross cash flow. Even with the healthy internal investment needed to support our growth, including IT development, this growing cash flow profile allows us to reduce our current debt quickly and support our current progressive dividend policy. As Alan will describe in a moment, we believe we're in a great position in which earnings and cash flow are growing. We expect our EV-EVDA ratio to be below one times during the next financial year. Our target earnings cover range of 1.5 to two times. We expect to deliver progressive dividend policy, all of which we believe will create credible choices for the business in terms of allocating surplus capital as we look forward. To this end, you see we've highlighted our proposed renewal of our buyback authority for any future buyback programme. And I think against this background, I will now hand over to Alan who will take you through the financials.

Yeah, thanks, Nick. And good morning, everyone. As you've just heard from Nick, the group has had a strong year as it continued its transformation and finished it with the acquisition of Appreciate Group. Appreciate Group is now referred to as Love to Shop. and we show it as a new division in analysis, as well as report it as a separate segment. Given Love to Shop only contributed one month to our results, in the following pages I will mainly talk to the positive performance of the historic Paypoint segment, separating out the impact of the exceptional items and amortization of intangible assets arising on an acquisition to get to our underlying results. With the highlights slide, the key starting point is our net revenue growth of 11.9% to 128.9 million, which I'll cover in more detail later. This has led to an underlying profit before tax on our new reporting basis of 50.8 million, a 5.8% increase compared to the represented prior year of 48 million. On the next slide, I will walk through how we've represented our results. after considering the impacts arising from changing the historic accounting policy for that shop. The underlying result is after adjusting for exceptional items, and as I just said, is now also for amortization of the intangible assets arising on acquisition, which have greatly increased, I'd say, with the FreeShape group. In the year, we had 5.6 million of exceptional items. In the first half, we previously announced the 1.3 million lost from our disposal of our investments in Snappy Shopper, and then we have had 4.3 million of acquisition costs for the Appreciate transaction. We are now focusing on underlying EBITDA as a KPI, as it reflects a better view of operational performance and showed a good 5.2% growth. This key slide explains the changes in all our PBT measures So let me walk you through from left to right. The starting point for orientation is last year's profit before tax, excluding exceptional items of 45.6 million. Our approach now is to focus on the operational performance, and so we exclude amortization of intangible assets arising on acquisition, which then gets us to the key represented underlying profit comparative of 48 million for financial year 22. The important area for our pay point segment is in the centre, where we've analysed a 2.3 million or 4.8% increase in underlying profit, with all three divisions showing organic net revenue growth. Moving to the right of this year's 50.3 million underlying profit, you can see the impact of the one month Love to Shop 0.5 million underlying profit. We have previously announced this was expected to be a small loss as the business is seasonal, with profit rates generated mainly in Q3 of the financial year. However, as Nick has said, we have had to change the historic accounting policy for Love to Shop in relation to its non-redemption income. This is now recognised only when a product expires and is more lumpy according to when batches of products expire. We benefited in March from a high number of expiries. The group underlying profit increased to 50.8 million by 5.8%. The 2.6 million of amortization of intangible assets reflects the increase of one month of amortization of those assets relating to love to shop. For financial year 24, we anticipate the full year equivalent to be a cost of 8.1 million. Within this, due to the change in their historic accounting policy, we do have a 7.5 million specific assets to amortize over two years, and the level of this will then decrease in financial year 26, by 3.7 million per annum. We complete the journey to this year's 42.6 million reported PBT with the 5.6 million of exceptional items I've just discussed. As I've just highlighted, all three divisions saw an increase in net revenue. Our shopping division increased 5.6% from 58.7 million to 62 million. Service fee net revenue increased by 1.3 million, or 8.3%, driven by an increase of 333 revenue-generating Paypoint 1 sites since this time last year. Car payments net revenue increased by 1.4 million, or 4.3%. The growth has come from our handy-pay merchant rentals business with Paypoint RSM flat. We have seen increased transactions, but had a lower average transaction value. ATMs and counter cash net revenue decreased by 0.4 million, or 4.2%. The result is impacted by the reduced demand for cash, but the use of our new product, countercash, continues to grow with increasing sites and almost 43 million withdrawn in the year. The excellent 46.3% increase in net revenue in our e-commerce division is particularly pleasing. We've continued volumes of over 1 million transactions a week benefiting from our investment in the in-store label printing. The payments and banking division saw increased net revenue of 4.7 million or 9.1%, with a number of business lines moving in different directions. Cash bill payments decreased by just 2.2 million or 6.3%. In the first half, we had seen energy consumers topping up more frequently and with increased average transaction values. However, in the second half, the government's EBSS scheme impacted these transactions as they've benefited our digital transactions. Digital net revenue increased by 7.9 million or 102.7%. We had a full year of the DWP payment exception service delivered via iMovo and strong growth in cash out in the second half driven by the EBSS scheme. Cash through to digital net revenue decreased by 1.3 million or 16.5%. Volumes have returned to pre-COVID levels, which we believe is the new baseline set for this category. As always, we have continued to work at keeping a tight control on costs in the year with all the inflationary pressures. The overall increase for the paypoint segment was 8.1 million, or 12.1%. One of our largest increases was ultimately investments 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%. Whilst we had a number of vacancies in the first half, our sales teams are back up to strength and performing well at the end of the year. The increase in asset leasing costs reflects the change in accounting treatments for our merchant-relevant towards 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 additional costs coming through. The largest of these was in relation to the second half EBSS business, but there were further costs in relation to cash out and multi-pay businesses. There was then the 0.7 million one-off impact on McCall's provision announced in the first half. As explained at the end of last year, we again see low depreciation due to a number of assets having reached their end of life in the prior year. Financing costs have increased due to our debt being at variable rates, but this was largely offset by the continued deleveraging. Finally, we have the one-month love to shop segment costs, which includes the allocation of finance costs relating to the acquisition. Overall, this is largely offset by the interest income within other revenue that love to shop earn on funds waiting to be converted into cards and vouchers or paying for redemption of retailers. With our cash generation, the key point is that excluding exceptional items, we have strong conversion of profits to cash. The group profitable total tax from continuing operations of £42.6 million has been adjusted for exceptional items, depreciation, amortisation and working capital to arrive at a strong continuing operations cash generation of £62.3 million. This is £8.4 million better than last year, primarily due to working capital changes, including £2.4 million relating to net investment in finance leases and £2.5 million in relation to acquisition expenses. Together, these funds were used to pay increased dividends of $25.1 million, a $3.3 million investment in our open banking partner, OB Connect, and $4.7 million increased capex required for the changes 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. The cash element of acquiring Preciate was $61.9 million, with $16.3 million cash acquired giving a net impact of £45.6 million. We've sold our investment in Snappy Group for £5.5 million. And other than these net investment cash flows, we have paid £10.8 million of our existing amortising loan. This next slide shows how our balance sheet has changed since prior year end. All the main changes are as a result of buying pre-shade, as can be seen in the Love to Shop segment balance sheet column. Love to Shop only has a small amount of net assets So most of the acquisition cost is allocated to the 59.6 million of goodwill and 40.2 million of amortising intangible assets. Of the goodwill, some 14 million arises from the love to shop change in accounting policy, where we've had to recognise 18 million additional financing liability and 4 million in deferred tax. These liabilities then keep getting replaced, and so balance will stay in working capital. The acquisition was made through refinancing of 61.9 million of debt and 17.2 million of equity. The main other balances in Love to Shop are the 120 million cash held as client funds and monies held in trust, ready to pay for either the future purchases of vouchers and cards or to settle to retailers for vouchers and cards issued but not yet redeemed, offset by equal amounts of payables. As part of the pre-share acquisition, we issued 3.6 million of shares, creating a merger reserve of $17.3 million. The dividend and financing slide covers a number of topics. We have set out in the table our new financing structure that we've put in place before our offer for Appreciate Group. Material cash flows for the next year include dividends and capex, where based on current expectations, we'd expect to be spending a third of our $18 million on terminals and systems. As we have seen, our business is very cash-generative, and although nothing is guaranteed, we would expect in normal circumstances for the combined business to return to a ratio of net debt of EBITDA below 1 by the end of financial year 24-25. Turning to dividends, we have provided an update to our progressive capital allocation policy. Our dividends policy now targets a cover ratio of 1.5 to 2 times earnings, earnings being from continued operations and excluding exceptional items. Consideration is given to future investments, whether acquisition opportunities such as Appreciate or OB Connect or CapEx to drive future revenue or provide resilience and efficiency. Consistent with our progressive policy, we are declaring an increased final dividend of 18.6 pence, payable in two equal installments. This is an increase of 3.3% compared to last year's 18 pence final. This increased dividend reflects the confidence we have in the business for the future. I trust that was a helpful insight. And when I pass back to Nick for a brief review by division.

Thanks, Adam. I'm now really sort of turning to each of the divisions, but very much at a high level. Looking firstly at shopping, as you can see, net revenue increased by 5.6% to £62 million. That growth very much driven by the 8.1% increase in the estate, our service fee, a strong car platform, merchant estate growth and importantly an enhancement of our retailer proposition and engagement across counter cash business finance my store plus another allowance for our proposition within the headline number the retail services piece is up 6.7 and card processing up 4.6 and within card processing our card estate the evo estate which is our most active book is growing strongly Lloyd's card net is broadly flat. And as you know, the dormant world pay book continues to decline rather in line with our expectations. But I think an encouraging run for Paul is actually from our shopping division. We highlight here very briefly our retailer and S&P proposition, a progress in the year. We've talked already about the enhancement to our proposition across HandyPay and the PayPoint card services business. We've had our strongest ever sales performance in the second half of the year. And that momentum in cards in particular has really continued into the first quarter. We've had a further expansion of our counter cash, which is now enabled in over 5,600 of our sites. And we've had a positive performance from business finance via the ULEN proposition, where we've entered the year over £12.5 million. Some really, really good FMCG campaigns building momentum. We've worked with a number of major brands, particularly in the second half. We've got a really strong pipeline, which has been playing out in the first quarter of this year, with Coca-Cola, with Amazon, with AG Bar, JTI, and other major brands. I think there's some really encouraging opportunities as we look further into the year. And it's really pleasing that our retailer engagement has moved positive. Our net promoter score for the year has now moved into positive territory, which is always a great sign with our retailer community. Turning to e-commerce, continued terrific momentum. Net revenue up 46.3%, parcel transactions up 69.8%, 56.4 million parcel transactions. I talked already about really the key drivers to that. The development of that e-commerce delivery platform is a continued investment in-store and it's the reshaping of our carrier relationships. expansion of our brand portfolio and the driving of a really great service proposition we've shown here on our growing number of partners and i think this this sort of roster speaks to itself really and i think we're now working with pretty well every major carrier here in the uk looking forward it's about how do we go from here how do we continue to build a strong momentum We're looking already at where we can build new partnerships, which we've either launched in the back end of last year or into the current year. The Google store-to-store parcel proposition is now really gathering pace. We're moving into lockers with InPost to support store-to-store parcels. We've launched a partnership with Wish.com, and we are now rolling out at greater speed our Amazon returns proposition, which is now available in over 2,000 sites across the UK. and we actually rapidly rolled out just over 1,450 Collect Plus sites to support the Royal Mail, particularly its business customers. Turning to payments and banking, really the story here is focused on digital growth. Whilst the headline number showed net revenue growing by 9.1% to £56.2 million, the real driver here has been actually the growth in our digital business, which is up over 100% to £15.7 million of net revenues. As I said earlier, our cash through to digital business has now stabilised. In-year, it was down 16.5% in terms of net revenue to £6.9 million. And certainly, during the second half and into the first quarter of the current year, that year-on-year volume has now stabilised at around flat. And cash, down 5.4% in terms of the payment channel, but still contributing over 33 million pounds of net revenue. As we look to the drivers, there's some really important highlights to call out here. As I said already, really strong progress in digital transactions. Our payment exception service delivered for the Department of Work and Pensions showed net growth in Europe over 179% to 4.4 million pounds. We dispersed over £246 million worth of energy bills, support payment vouchers through our network. And as I said already, actually, we've seen some stable performance through cash through to digital with a growing number, and importantly, a growing number of clients, including Netflix, Google Pay, and amongst our neobanks, Monzo and JPMorgan Chase. And there are more of those to come in during the course of this year. And I think our priority as we go forward is the driving of our new network in terms of love to shop i've talked a lot about this business already i think it's fair to say that they had a strong operational year of both hot christmas savings and love to shop we've looked already about how we actually drive and support this business going forward and particularly how we identify the real opportunities actually of the businesses coming together I think our priority in the current year is very much about ensuring we have, A, a very good Christmas 2023 savings program with part Christmas savings. And importantly, actually, we set the platform for a really good campaign for Christmas savings into 2024. We're working hard to unlock further growth in the corporate business for Love to Shop and leveraging the client base we have with Paypoint. And we're really accelerating our technology development have across the two businesses. We're making really great progress in a key focus area, which is around building the culture and inclusiveness of the organization. We've made good progress in our ESG program. We've delivered a comprehensive program of welcoming everybody activities, which builds our commitments to diversity, to equity, and to inclusion. We've been doing a number of major partnerships, including those with Citizens Advice and Advice Scotland, very much around supporting cost-of-living targeted customers with consumer campaigns, advice, and technology support. And we continue in our program to improve the quality of our IT service through this transformation so we've got the right resilience to our service and IT capabilities. And that's very much the focus as we go into the current year. Before I turn to the outlook, I think it's just worth actually firstly reflecting on a great set of first quarter results, which were also announced this morning, and also in a year when there have been so many moving parts, just to summarize two or three key points, which are the real takeaways from the presentation this morning. Firstly, I hope it's clear we've announced a really strong set of results today to underline the progress that we're making in delivering transformation and accelerated profit performance in the business. That's come through, I hope, from the results and also from the Q1 announcement we also made this morning. The second point is that we are quickly integrating the appreciated acquisition into the wider business, and both part Christmas savings allowed to shop are delivering well to plan in the current year, and we're already seeing significant additional opportunities from the added capability that each brings to our enlarged business. And thirdly, I hope that our ambition and focus and belief in this business is really coming through today in terms of the significant growth opportunity we see over the next three years. And that's why we've announced a three-year EBITDA target, which is in excess of £100 million, which we feel is a real measure of our ambition and the confidence we have in the plans that we described to you today. And then just sort of finally, just turning to the outlook, I think the outlook on our Q1 results announced this morning really made it clear, firstly, as we've described this morning, the enhanced platform and expanding capabilities across the group, combined with a more energised and engaged culture, gives us great confidence in delivering further progress in the current year and in meeting expectations. As you will have seen from our Q1 results this morning, we've made a positive start to the year across all the divisions, Continuing the performance we've reported on for the full year to March, it's particularly pleasing that we've actually delivered growth in the first quarter across every product in our estate, including Pay.1, card merchants, ATMs, and counter cash. Our growth in parcels and its performance in the first quarter absolutely stands out. although with the exception, I think possibly of cash bill payments, all areas of the business continue to grow and deliver profitable growth. I mean, as a business, we remain alert to the broader economic challenges, and particularly those that our consumers and customers face at this time, and that includes any changes that we see to consumer behaviors in the energy sector. And the impact of this, we're obviously monitoring closely. However, we're building a strong business model based on hopefully transparent performance measurement metrics, strong cash generation, and the investment and operational executions in place to deliver really sustained growth. Our confidence in the year ahead is reflected in a further increase in the dividend, while growing further the underlying cash and earnings cover, and a strong belief in our confidence as a board in delivering further progress in the execution of our strategy in the current year. And I think with that, we should open up for questions, Steve.

So ladies and gentlemen, if you would like to ask a question, please press 9 and star on your telephone keypad. In case you wish to cancel your question, press 9 and star a second time. And the first question comes from Joe Grant, Liberum. Please start with your question.

Good morning. Good morning, Joe. Good morning, Joe. Can I have three questions, first of all? Firstly, amazing result on digital. Could you give us some indication of the expectation for future revenues from DWP? And then secondly, you talked helpfully about capital allocation. It would be very interesting to hear your perspective on what gaps you might have and what sort of businesses you might look to buy. And finally, with regards to the new accounting policy at Appreciate and the profit recognition at the end of the term of the contract, could you give us some indication of what that means for EBITDA, if anything?

Okay. I'll try and tackle the first one. Firstly, in terms of DWP, I think, look, That was a very, very strong year of growth for DWP as that contract came to full fruition in year. I think from this point on, the contribution that DWP makes to the growth in our digital business will be limited. I mean, we cannot continue to grow at that rate with that contract. But I think it's reasonable to say the broader contribution from So I think you will see more moderated growth in our digital payment business, but nevertheless, actually still double-digit strong growth. But don't expect that DWP will be the primary driver of that in the current year. In terms of M&A and capabilities, look, I hope the one thing that has come across clearly this morning is that we believe that over the past three years, the work we've done has assembled the collective capabilities that we need to have that sort of comprehensive multi-channel payment business. And to that end, I think those pieces are now in place, and I wouldn't expect us to be making major further steps in M&A. I think the principal thing we need to do now is firstly to do the right level of actually internal investment, particularly around business initiatives. And I think putting volume onto that payment platform now is the key to actually delivering a really strong return from the investment we've made. So I would expect that actually M&A will be limited and very much sort of inferred by its nature. And actually what we will see is sort of a steady level of investment consistent with what you've seen in the previous years. Alex?

Yeah, with the accounting policy, it doesn't really make any major change to EBITDA. As we've already said, it doesn't affect the cash flows. It's really the recognition of income. And all that's happening is we've changed the timing of that. So it's at the end when cards and vouchers have expired. But if you think about it, therefore, a business that's been done in the past is coming through into this year. And, you know, some of this year's stuff we would have expected to recognize goes into next year. And it's just a timing thing. So it shouldn't affect the EBITDA that much.

That's what I thought. Thank you very much.

And the next question comes from Orson Wood Barclays. Please go ahead with your question.

Hey, thanks for taking my question. The first is just on the Q1 performance, specifically in payments and banking, where there's been quite a sequential slowdown to sort of minus 6% decline. And I was just wondering if I look at the comps, last year Q1 was actually the weakest quarter and comps in payments and banking do look to get much tougher for the rest of the year. So I was just wondering in terms of phasing, should we expect payments and banking to get worse from here? So should we expect double-digit declines during the coming quarters? Or are there certain factors within digital which should mean that you should be able to counteract that sort of weakness that you've seen in Q1 in the division? So that's the first question. As a follow-up, just to outlook for overall organic revenue, I mean that payments and banking performance, we've seen our organic revenue for the total business also drop down significantly to sort of 2% growth. I was just wondering on an organic basis, can you commit to expecting positive growth for the overall business across all of the quarters this year or Depending on macro, is it possible that because of payments and banking comps becoming tougher that we could see some volatility quarter to quarter? I'll leave it with these two and we'll maybe come up with a follow-up. Thank you. Sure.

Thank you for that. Well, I think the starting point is that the payment of banking divisioning also decreased by 5.8%. And I think if we split that between digital and cash bill payments, what you will see is actually that digital payment growth in the quarter continued, increasing by 14.7% in terms of net revenue. And as we highlighted in our statement, cash payments decreased by just over 13%. And I think that the principle of reason for that was I think there was a hangover from the EVSS scheme and actually what that meant in terms of consumers holding on to value beyond the end of the quarter. Because if you recall, the last payment for that was made in March. So April and potentially into May saw consumers holding on some of those credits and hence actually consumed or paid for less within actually that quarter. And secondly, I think that we saw some very unseasonally warm weather in May and June, which I think impacted energy consumption. And thirdly, as I highlighted actually when I talked about the outlook, I think there is a reality that consumers have been thinking hard about their behaviors around energy consumption. Although I don't know what that will mean as we get into the sort of the later part of the year when we get to more seasonal consumption. Our expectation is still that we will see a solid performance from cash flow payments for the year as a whole. We will see a solid performance from payment and banking as a whole. And I would expect to see sequential growth in with the outlook statement that we made as a whole. So you're absolutely right. The first, the underlying organic growth in the first quarter, which is over 2%, I think there's always a challenge in a business that's actually trying to report quarterly but run the business for the longer term. I think everything that we've described today is around delivering consistent year-on-year growth in this business at a level that we haven't seen before. And I don't think there's anything for delivering that.

That's very helpful. If I may ask one more follow-up on the handy pay business specifically. You spoke to the strategy of becoming a pay factor. I was just wondering what the underlying rationale for that is and the progress that you've made. We've obviously seen one of the key competitors, Dojo, transform sort of from an independent selling organization to an acquirer themselves. I was just wondering, longer term, is that something that you could envision as well, to sort of in-house acquiring within the handy pay business, or is first sort of the step just to make this move to become more of a payfac? Thank you.

Yeah, I mean, I think as I've tried to describe in the strategy section today, that the whole Our whole card business is very much work in progress. A year ago, if you look at the front end of the business, we had a sales team operating the market of half the size we've got today. One of the internal plans we have is what we call the acceleration plan, which is to grow that sales team further, and with it actually expand into new sectors, and in particular, into the mid-market. To give you some sort of numbers to that, As you'll be aware, we've sequentially grown our EVO merchant base consistently each quarter, and we had a very strong quarter the first quarter of this year. And if you compare the beginning of Q1 2023, our first quarter of last year, we opened at $17,500. EVO merchants today were just under 19,000, which I think is a really good measure of growth. And the reason why I sort of give that background is because I think there are a number of really key ingredients to the decision to move from being an ISO to becoming a payfac. And the principle run around that is that you have to have confidence in your ability to grow the card process volume that you have as a business. Secondly, you actually have to have confidence that you can build the right infrastructure that actually manages that process volume in a way that actually gives you greater control of your consumer and greater control of the merchant who is actually taking your service. And the upside of that is clearly that you get a better slice of the margin, the transacting margin that's available to you through actually the sequence of actually managing that merchant. And we're in the process of building the right infrastructure with the right growth in process volume so that we can capture more of the margin during the life of that merchant. And I think they're the principles that give us confidence that paste in the right way, moving to a place where we have payback will enhance the value of this business and its returns.

Great. That's encouraging to hear. Thank you.

and we have one more question coming from alan wells jeffries please go ahead with your question hey good morning gentlemen um just two quick ones from me um just firstly on the 100 million midterm eda target could you maybe provide um either just a little bit of color around um how you feel the building blocks develop there and particularly interesting how you maybe see the the split of that hundred million between the key divisions, shopping, e-commerce, banking, love to shop, how you see the business looking like in under the 100 million EBITDA scenario. And then my second question, I noticed in the financial highlights, obviously you highlight the authorization for buybacks within there. I wonder if you just can maybe just provide a little bit of what's the thinking behind that and how would you think about potential timing there if there's anything to be done? Thank you.

Alan, thank you. And we thought very hard about sort of, I mean, there was always a risk and a target because it puts you on the hook. And I think as a management team, as a board, I think we want to be accountable for the confidence we have in our ability to grow this business. Really the purpose of actually spending the time we did on the strategy section this morning was to say, to your point, where are the levers of growth here? And I think if you go to the back of the pack, page 37, It gives you a view today of actually sort of what the split is across the divisions. And I think, you know, where do we see the key areas of growth? I think for us, number one is the continued growth that is available to us if we execute well in parcels. That business is growing quickly and we see further growth as we go forward over the next two to three years. I think our confidence in our journey to digital is really taking shape. And I think one of the key things that will really evidence that progress is bringing more volume from winning more new business across the range of sectors that are highlighted this morning. Having built this multi-channel payment platform, the key now is to win new business so that we really put volume onto that platform. We need to see transaction volume across the full range of channels to really put that sort of next level of engine of growth. And that's going to come from, in my opinion, open banking, growth in digital and particularly within that growth in direct debit, the opportunities that come actually from prepayment, close prepayment that come from love to shop. I think the other area is that we're really expanding the revenue opportunities and with that, the commission opportunities for our retailers across our retailer propositions, whether that's pound to cash, a reinvigoration of our ATM business, I think there are really great opportunities available to us in FMCG. There are a number of new propositions that we're bringing actually to the retailers over the next nine to 12 months. So I think there's a balanced approach there, but unquestionably, it starts actually with delivering more new business across more new sectors onto our digital payment platform. You also asked about buyback. We've always had the authority. I think we're reminding our shareholders that we will renew that at the AGM, I think, on the 7th of September. I think the cash generation of our business gives us choices. And certainly, as you get further into the three-year plan to deliver 100 minutes of EBITDA, those choices grow as we delever very quickly our balance sheet. And the cash generation actually continues to grow in the business. I think we have to be minded to that because we have to be minded to every area that can enhance the value that we can create for shareholders. And if the share price continues at this level and we have excess capital, that would seem to be a very obvious consideration for us to have as a board.

Makes perfect sense. Thank you very much.

At the moment, there seem to be no further questions. If you would like to ask a question, please press 9 and star on your telephone keypad. As there are no further questions from the participants, I would like to hand the floor back to Nick Wilds.

Thank you very much. Everybody, thank you so much for joining us this morning. Again, I apologize for the delay in announcing results. I hope they were worth the wait. And we have our AGM coming up in early September, and we look forward to updating you really with our interim results in November. But hopefully we will see you before then. Thank you for joining us. Have a good day.