PayPoint plc

Ladies and gentlemen, welcome to the PayPoint Preliminary Results conference call. I am George, the course call operator. I would like to remind you that all participants will be listened only more than the conference has been recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star N1 on your telephone. For operator assistance, please press star N0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Nick Wiles, CEO. Please go ahead.

Thank you very much and good morning, everyone. Welcome to the presentation of our results for the year ended 31st of March 2024. As you can see from our agenda slide, we follow the usual format with me covering an overview of our results, strategy update, our business review and our outlook. Rob will be covering the financials ahead of us opening up to Q&A. We turn to the overview slide. It's really pleasing to be reporting a really robust performance for the year, which I think very much underpins our confidence in the outlook for the current year. and it's really an important step towards our near-term target of £100 million EBITDA. I think it's fair to say we delivered a real standout performance in parcels and in digital payments. We made good progress in our other key growth areas. In the final quarter of the year, we streamlined our organisational structure and our cost base to support the next stage of our growth, and we're really pleased to announce today alongside these results our intention to commence a three year share buyback programme with a clear intention in the first year to buy back at least £20 million of equity and the potential to increase this further in years two and three. This slide very much summarises our financial performance for the year. The key financial metrics of the business as a whole are strong and the overall financial performance of the business has more than met our expectations for the year as a whole. We will cover the individual divisional performance in more detail later. But as you can see, the net revenue headline performance shows solid growth in shopping, slightly down in payments and banking, an outstanding year in e-commerce. Turning to the share buyback, this is the final slide in this section, which covers the share buyback program, which we're announcing today. We will commence the program with a buyback of at least $20 already to increase this further in years two and three, subject to our performance market conditions, our overall cash generation and capital needs of the business. With respect to dividends, throughout the period, we propose to continue increasing dividends at a nominal rate, resulting in our dividend cover moving beyond our current earnings cover range of 1.5 to two times to a cover of over two times by FY27. Following significant investments we've made in the past, and certainly over the past four years, which have largely been done in finance from our own financial resources, which have been necessary to build growth, this program is very much the next step in enhancing shareholder returns, whilst balancing the capital needs of our business, a strong dividend policy, and ensuring we maintain an efficient capital structure, which we see as being somewhere around one times net debt to EBITDA. With that, I'll now hand you on to Rob, who will take you through our financial performance in more detail.

Thank you, Nick, and good morning, everyone. If we go to the first slide, that's got net revenues for the year of £181 million, which is up 40.4% or £52.1 million versus the prior year. Of this increase, £47.9 million is the inclusion of a full 12 months of love to shop, and the remaining £4.2 is from the pay point segment. I'll cover this in more details on the next slide. Underlying EBITDA of 81.3 million is an increase of 32.6% or 20 million year on year, again driven by the full 12 months of love to shop, which accounted for 16.8 million of the 20 and the remaining 3.2 EBITDA growth coming from the pay point segment. Underlying BBT for the year of 61.7 million is up 21.5% or 10.9 million on the prior year, with love to shop accounting for 100,000 from the pay point segments. Adjustee items of 13.5 million include 8.1 million of amortization of acquired intangibles. That's a step up versus the prior year, primarily because I've loved to shop inclusion. We've got 200K net movement on convertible loan notes and 5.2 million of exceptional items, which is 2 million in restructuring, 2.1 million of legal costs and defensive claims, and 1.4 million in respect to the recent refinancing. Diluted EPS, excluding adjusting items, of 62.6 pence is up 3.8% on the prior year of 60.3. And lastly on this slide, net debt of 67.5 million is down 6.8% versus the prior year of 72.4 million, which I'll cover in a few slides and cash flow. The next slide gives more detail on net revenues across the group. For the PayPoint segment, overall revenue growth of 4.2 million, is driven by strong performance in e-commerce, which saw revenue growth of 61.6% to 11.8 million, supported by transaction volumes exceeding 100 million in a year. Shopping provided positive growth of 3.9%, with growth in service fees, card payments, and other, such as FMCG, more than offsetting ATM and counter cash performance. This growth has been part dampened by a drop in payments and banking revenues, which fell 2.7 million year on year, And that's driven by the decline in legacy cash and bill payments, plus some one-off energy bill support scheme benefit for the prior year, which benefited digital to the tune of 3.5 million. In terms of love to shop revenues, the full year net revenue of 51.3 million compares to 3.4 million for the prior year, which just includes one month post-acquisition. And then we move on to profits. This slide shows the profit progression year on year. The first four columns to the left reconcile the prior year reported and underlying profits, with adjusted profits of 50.8 million before exceptionals of 5.6 and 2.6 million of other adjusting items. The next six columns in the middle of this slide show the drivers of the 200K increase in pay point segment profits. And we can see here the 2.4 million and 4.5 million revenue growth from shopping and e-commerce, part dampened by 2.7 million decline in payments and banking, plus cost growth of 3.4 million and 0.6 million extra financing costs, which I'll cover on the following slide. These movements give 0.2 step up in profits from 50.8 million to 51 million for the year, and the extra 10.7 million of profits comes from love to shop, giving overall group profits of 61.7 million. This slide gives a little bit more granularity on cost delta versus prior year. For the pay point segment, overall costs went up 5.3% from £75.2 million to £79.2 million. And you can see some of the drivers on this chart. Asset leasing costs of £1.6 million, investment in fuel sales £1 million, investment in people and salary increases of £2.4 million, finance costs of £0.6 million plus £1 million in DNA and other. And these costs have been part dampened by £1.1 million of PLC synergies and £1.5 million of lower fulfilment costs. and bringing in lot to shop costs of 37.2 gives an overall cost base of 119.3 million. In terms of cash flow, reported profits before tax, post adjusting and exceptionals were 48.2 million. And the key movements to get to the 57.9 million cash from operating activities are essentially DNA and working capital. For DNA, the 20.7 million for the year is up 10.2 million on the prior year, And the delta is really driven by 11 months' DNA from love to shop of 2.3 million, plus an extra 5.5 million of acquired intangibles, and plus an increase in pay point DNA of 2.4 million. Working capital was an outflow of 11.8 million for the year. And the three key drivers of that 11.8 are essentially, A, an increase in credit terms for a key customer, which is 3.7 million. B, an unwind in accrued acquisition costs, the love to shop acquisition, which is 3.2 million. gives cash generation of 57.9 million and after deducting tax of 8.4 million capex another of 17.2 million 0.1 of investments and 27.3 of dividends gives an overall inflow for the year of 4.9 million that's brought our net debt down as i said earlier from 72.4 to 67.5 million very briefly on the balance sheet The two most sizeable swings on this slide that I've really already covered, other intangibles, 8.2 million lower, driven by that 8 million of amortization of acquired intangibles. And secondly, on working capital, the 11.7 swing, which again is driven by the swings that I spoke of previously. On the last slide before I pass back to Nick on dividends, the 19.2 P final dividend is a progressive increase compared to the 18.6 P for the prior year. The 20 million share buyback Nick has covered and in delivering our three year plan, it provides the opportunity to maintain or potentially increase the level of buyback in years two and three, whilst targeting gearing levels of one times. And we will revisit the buyback in 12 months time to determine the level of buyback for year two. On capital allocation, we will continue to invest in capital expenditure to support revenue growth and the resilience of our IT estate, and also pursue investment opportunities that are of strategic importance to the group. On net debt, I've covered this mostly on previous slides, and the main outflows for FY25 will be dividends, the share buyback, along with capex and investment spend. On financing, this month we successfully renegotiated a new facility and have brought on board two new lenders in the last few months. This is a £135 million facility, of which there is a £90 million RCF, plus a non-armatisation loan of £45 million. The duration of the facility is four years and therefore expires in June of 2028. I'll now pass back to Nick.