PayPoint plc

Thank you very much and good morning, everyone, and welcome to our results presentation. Today, we'll give a brief overview of the business performance, highlights by division, and then Rob will take you through the financials, follow by some further detail on our reorganization, what it means for the business going forward, and why it represents, in our view, a major inflection moment for the business, and then finish off with our outlook before we open up to Q&A. So turning first to our headlines. Firstly, in terms of results, we're announcing record underlying pre-tax profits of 69 million pounds for the year. And in the year, returning over 90 million pounds to shareholders in the form of share buybacks, the special dividend and an ordinary dividends. Secondly, during the year, we've made strong progress in three of our key growth levers. in the launch of Paypoint Bank Local with Lloyds Bank and now Nationwide. We've launched Raw Mail Shop and the strategic investment by Raw Mail and Collect Plus. And our plans announced earlier in the year are now underway to simplify the group structure into four business units to drive both greater transparency and actually the platform necessary to deliver our target growth rate of 5% to 8% net revenue per annum. I think combined, these headlines demonstrate great energy and momentum in the business and point to genuine inflection points here as we focus on our plans for the next three years to deliver the next phase of growth in the business. We're also reiterating our confidence in the outlook for the current year, delivering further progress, exceeding the underlying profits achieved in FY26, and results will be in line with market expectations. In terms of our performance overview, Rob's going to cover these financial results in more detail in a moment. However, in terms of headlines, underlying EBITDA increased to £92 million, underlying PBT increased to £69 million, and net revenue increased to £190.8 million. And we increased the final dividend by 2% to 20 pence per share. As I said already, overall, these results demonstrate further resilience in performance for both the second half and for the year as a whole, and I think are a strong response to the specific headwinds we called out at our interims in November. On a divisional basis, shopping and payments and banking as businesses were up by 1.7% and 1.8% respectively. E-commerce was down by 4.9%, and we saw a solid increase of 3.5% in love to shop. And in terms of divisional highlights in shopping, we continue to grow our retailer network and increase our service fee and net revenue with our day-to-day focus on better supporting our retailer partners with greater commission generating opportunities and a broader range of essential community services. In year, we successfully launched PayPoint Bank Local, enabling both app and ship and pin consumer cash deposits through our network. with both Lloyds and Nationwide now live, with our expectation that further banks will follow during the year. And in terms of customer adoption, early signs are encouraging, with the deposit run rate already exceeding £3 million per week and growing quickly. In cards, in the second half of the year, we continue to strengthen the operating foundations to this business, with a greater focus on optimising profitability per merchant, over absolute site growth, ahead of the steps we've taken since in the early part of this year to fundamentally refocus this business. Despite a challenging year for both processed volume and card estate growth in both PayPoint and HandyPay, we've continued to enhance both our merchant value and product proposition. And in merchant rentals, the team have delivered another strong year. They're establishing a growing number of partnerships, including the one recently announced, are launched with Freedom Pay. And our business finance activities in partnership with ULEND had a further year of strong growth. In our FMCG activities, we delivered 40 brand campaigns through the year for a range of high-quality brands, and we've entered the current year with our strongest campaign pipeline. And in our ATM business, we've continued to see the positive impact of our recovery plan, site optimization activities in the second half with the rate of net revenue decline halving and looking forward we expect further progress in the current year from these activities with additional benefits from the rollout of BMC during the first half of this year. Overall in this business our use of data and analytics continues to play an increasingly critical role and will be central to how we manage our network in the future and I'll talk more about this later And e-commerce, after a strong first half for both parcel volumes and net revenue growth, the second half has been a period of consolidation, with the ongoing focus being on a combination of, firstly, accelerating the growth and opportunity from the Royal Mail strategic partnership, secondly, bedding in the reset of our commercial relationship with a combined in-post yodel, and developing detailed individual carrier growth plans. and investing in the Collect Plus network for the next stage of growth. In payments and banking, our key highlights have continued to be in the growth of our digital payments and open banking activities, the strengthening of our position in a number of our key sectors, including housing, and the leveraging of our multi-channel payment platform to better cross-sell our payment services within both our existing client base and grow our new business pipelines. OB Connect delivered the strong performance in the second half we'd anticipated, and we continue to make further progress in our cash-through-to-digital activities. And finally, in Love2Shop, a further year of strong performance, with good overall net revenue and billing growth, and strong performance across our key product distribution channels, including Love2Shop Business and installed by our income partnerships. and a solid performance from our prepayment part Christmas savings platform. Our technology investment has delivered enhanced product capabilities and a single domain love to shop e-com platform with the benefits of these expected in the current year and greater consumer brand awareness in both our B2B and our B2C channels. And as expected, the strong performance in the second half reflected the anticipated benefits of the timing of revenue recognition that we described in November. I'm now going to hand over to Rob, who will take you through our financials in more detail.

Thanks, Nick, and good morning, everyone. If I start with the income statement, net revenue of $190.8 million is up 1.7% on the prior year of $187.7 million. Total costs of $121.8 million are up 1.8%, with this leading to underlying profits of $69 million, which is up 1.5% year on year. I'll cover the key revenue and cost deltas in the following slides, but you can see for our two segments, pay point profits of 51.1 million are down versus the prior year of 53.4, and luxury shop profits of 17.9 million are up on the prior year of 14.6. Further down the slide, you've got adjusting items of 13.5 million, which includes 7.1 million of exceptionals, 1.2 million of movements on convertible low notes and other investments, and 5.2 in respect of amortization of acquired intangibles. The 7.1 of exceptionals includes 3.4 in respect of legal costs, and 2.2 million in relation to the recent reorganization of the business. And after adjusting items, this gives profits on a statutory basis of 55.5 million. Alongside the ongoing share buyback program, these profits support a 6.5% increase in our diluted underlying earnings per share, to 73.6 pence. Lastly, the closing net debt for FY26 was 132.5 million, and I'll cover this in the cash flow side shortly. Moving on to net revenue analysis, this slide breaks down revenue by segment and business area. Starting with shopping, revenue rose 1.7% to 66.3 million. with growth in service fee income more than offsetting low revenues in card payments, ATMs and counter cash. E-commerce revenue of $15.6 million is down on the prior year, with higher transaction volumes being more than offset by the new commercial terms with Impulse and Yodel, which we outlined in our half-year results. Payments and banking revenue rose 1.8%, driven by double-digit growth in digital, along with the inclusion of a full 12 months of OB Connect. and this growth more than offsets the decline in our legacy cash bill payments, which fell by 10% year-on-year. Combined, these three areas drove 1% growth in revenues for the Paypoint segment. Lofty Shop revenues of £53.5 million were up 3.5% year-on-year, with overall billings increasing by 5% to £385.8 million, driven by Lofty Shop business and a growth in physical card distribution. So combined, these two segments give overall group revenue of $190.8 million. This slide shows underlying profit progression year-on-year, from the $68 million of profits in FY25 to the $69 million in FY26. The first four blocks are revenue-related, which I've covered already. $1.1 million revenue grew from shopping, $12.8 million declined from e-commerce, $1 million from payments from banking, and $1.8 from love to shop. The last column is costs, which I'll break down further in the slide to follow. Overall costs are up 1.8%, as I said, from $119.7 million in FY25 to the $121.8 million. In managing this cost base, we continue to identify opportunities to drive further efficiencies across the group. So these revenue and cost filters give profits of $69 million that you see on the right-hand side of this slide. So this slide breaks down the key drivers of the 2.1 million cost progression year on year. Firstly, the inflationary cost pressures we kept minimal at an increase of 800k versus the prior year increase of 2.8 million. Secondly, the OB Connect increase of 2.1 million is due to the inclusion of a full 12 months of its costs versus the five months we had in the prior year. The financing costs have increased by 800k driven by the increase in our debt from the continuing share buyback programme. And lastly, we've had 1.6 million of people and overhead savings, with some of this driven by a high proportion of staff being capitalized, plus higher R&D tax credits coming through in the year. Overall, this results in a blow inflation increase to our cost base to 121.8 million on the right of this slide. In terms of cash generation and net debt, midway down this slide, you can see our cash generation of 70.4 million for the year. million versus the prior year, and that's after various add-backs for adjusting items, DNA, share-based payments, and working capital. The working capital outflow is largely timing of payments to suppliers, which is expected to unwind in FY27. Further down, we had other outflows in respects of tax, paid $17.1 million, which includes the $9.4 million tax on the part disposal of Collect Plus, capex of $22.6 million, and the exceptional payment of 10.4 million in respect of utility settlement, plus a one-off pension contribution of 1.5 million. The acquisitions and investments of 37 million includes the 43.4 million inflow from the part disposal of Collect Plus, plus an outflow of 6.4 million in respect of OB Connect, taking full control. The share buyback of 30.1 million is consistent with what we've committed previously, with the prior year outflow of £14.9 million being nine-twelfths of the £20 million that we committed for the first 12 months. Our £60.8 million cash outflow for dividends includes the special dividend of £34.5 million that we paid in half-two, plus the normal dividend of £26.3 million, with this dividend being £1.5 million lower than the prior year as a result of the share buyback and consolidation reducing the number of shares in issue. So these movements result in a net overall cash outflow for the year of $35.1 million and closing net debt of $132.5 million. Briefly on balance sheet, overall net assets are down $21.5 million year on year, driven principally by the outflows in respect of the share buyback and dividends. In terms of key deltas versus the prior year, Non-corporate cash and cash equivalents is up 80.7 million, with this offset by a 76.5 million drop in restricted funds. This reflects a movement towards instant access accounts, which are attracting similar or higher rates of interest. Lows and borrowings up 28.5 million, with the drivers covered on the previous slide. Working capital is 22.9 million low, which reflects the 10.4 million payment to utility that we provided for in the prior year, plus the working capital outflow noted earlier. At the bottom of the slide, this gives overall net assets of 75.8 million. Finally, before I pass back to Nick, on capital allocation, our target leverage remains in the 1.2 to 1.5 range. With a normal increase in dividends of circa 2%, we expect to see dividend cover move from its current range to above two times over the next two years. This year we've returned over £90 million to shareholders through a combination of our ordinary dividend, special dividends and the share buyback. On the share buyback, so far we've returned £45 million with a further £30 million planned for FY27 and FY28 and that equates to an overall share buyback of £105 million in aggregate. This alongside the share consolidation targets an overall reduction in our issued shares of circa 30% from the commencement of our buyback back in July 2024 to the end of FY28. As with prior years, the level of buyback will be based on business performance, market conditions, and the overall capital needs of the business. On the right of this slide, our future cash requirements are similar to the prior year, outflows in respect of dividends, the share buyback, and capital expenditure, which we expect to be circa 21 million a share. Finally on our facility, We exercised a one-year extension to the facility last year, so this ends in June of 2029, and includes a £75 million non-amortising loan and a £90 million RCF, which supports our capital allocation policy and expected future needs of the business. I'll now pass you back to Nick.

Well, thanks. Turning now to the business reorganisation and why it's so important to the next stage in our growth, what will be different, why we believe it provides a major reflection point for the business, and what executed underpins our net revenue growth target of 5% to 8% per annum. Firstly, reorganization creates a transparent, more accountable structure and a simplified business model with a logical grouping of our business activities and channels to each market. Externally, it makes the business easier to understand, and internally it establishes better ownership. It will enable a clear strategy for each business unit, a greater focus on the delivery of our key growth projects, ensure investment in the key enablers to growth, including in several of our key areas additional commercial sales resource, refreshed and on-point marketing, and the next phase of product and capability development. a better harnessing of the value from our data analytics and AI capabilities to support key decisions and investment and drive cross-business cooperation. This will result in a balanced growth strategy for the business as a whole, combining disciplined investment to support the highest growth opportunities in each business unit, while managing for value on more mature and legacy activities to maximize their longevity and cash generation. In recent years, I think we've done a great job in demonstrating cost discipline and use of our capital, develop our capabilities and modernize our business. We now need to demonstrate a similar focus on the investment and operating disciplines required to deliver consistent growth and our target net revenue growth rate of 5% to 8% per annum. Achieving this objective is critical to the next stage of our business. I'm turning now to an overview of actually what the reorganization of the business looks like. As I said earlier, activities have now been grouped into a simplified structure with four distinct business units. The product or services for each of these business units are now served by clearly defined distributional go-to-market channels. This structure will better enable each business unit the operational focus and targeted investment in technology a go-to-market strategy, including marketing and sales, and use of our data analytics and AI tools to strengthen our market position and maximize opportunities for revenue growth. One of the primary objectives of this reorganization is to better support and enable growth. In network services, the key distribution channel for our four primary products and services that make up our core community services proposition, is through our 30,000 location retailer network. Today, Network Services is our largest single business unit, with important growth levers such as consumer and SLE banking, parcels, and the digital content and engagement platform key to the next stage in our growth, supported by a better performing network and adoption of our services and higher revenue of retailer. In digital payments and open banking, This is a great example of where we are investing further in our sales, our technology, and client support resources as the primary channels to support our existing clients and accelerate our new business pipeline. Having now established a leading technology platform combining digital payments, open banking, and real-time credit scoring, the key to this business unit fulfilling its potential as our fastest growing business is a strong go-to-market strategy. combining marketing, sales, and further product development and innovation. In love to shop, our distribution channel strategy is already well underway and embedding across the business with a clear focus on maximizing the lifetime value of our products in each distribution channel across both physical and digital products and into both B2B and B2C channels. Further investment in technology, Our platform and new products remain key to maximizing the potential of this business during the next stage of its growth. In merchant services, it's become increasingly clear that we needed to do something fundamentally different and radically change our model. A reset strategy in merchant acquiring has resulted in a reshaped SMB team, focused on higher value merchants, and the addition of a mid-market team focused on selling a broader range of payment capabilities, including A2A payments, direct debit, allowed to shop, hosted on a single platform. As well as dedicated additional resource to support the onboarding and in-life management of our merchant network, we now also have separated dedicated sales channels for merchant rentals and business lending, both of which have clear strategies for accelerated growth. The immediate financial impact of this reset has been a lower cost base and a more profitable business and a stronger platform from which to resume growth and a more compelling future go-to-market strategy. In each of these business units, the better grouping of activities, clear go-to-market strategies, a greater focus on execution with greater accountability will drive better performance and ensure each business unit is set up to maximize its opportunities. It will create greater opportunity for cooperation between business units, most particularly as we develop further our payment capabilities. Now turning to each business unit and what will be different. Starting with network services, I think based on our findings from deploying our store growth specialist team in the field over the past year and supported by our data analytics team, it's clear there's a great deal more we can do to grow our retailer value. We can increase revenue per store. We can improve compliance. We can widen our product penetration service adoption and provide a better service to our retailer partners and their customers. The opportunities for our retailers to make money from being a pay point retailer have never been greater. We just need to raise our game to unlock this potential. The first step in what's going to be different is the way we will organize ourselves. We've now restructured into four primary regions and 36 sub-regions with the field team, retail services and finance teams fully integrated in each of these regions. This will result in a more efficient operating model and improve coordination between field and the retail hub and a better real-time support to our retailers. In addition, we'll use our data analytics and AI tools to optimize our field sales resource and better equip them in their engagement with the retailer network. Good examples of this in action are how in the future we task the workflow of the field team, measure the outcomes of our retailer visits, and engagement to drive adoption and compliance, such that we can measure progress in growing the number of services delivered and the revenue per site. While executed, this will result in more efficient use of our field team as a resource, a higher performing network, better revenue per retailer, and stronger retailer relationships, with a greater emphasis on retailer quality rather than network growth. For the current year, our priorities are clear. Number one, launching and embedding this new operating model, measuring its impact with our retailers, and a small number of performance-related KPIs, continuing the expansion of our key community services into the network, including bank local parcels, and a high value digital engagement proposition. It's clear to us as the PayPoint network becomes increasingly important in the delivery of essential services into the community and our service partners become even more demanding in the quality of the service we deliver, this organizational change and growing retail value as a strategy represents a fundamental change in the way we deliver services through the network. In digital payments and open banking, We're bringing together Multipay, OB-Connect, and Aperidata onto a single technology platform and under a single management and operating structure. The capabilities of this platform are really exciting. We have a digital payments platform enabling secure payments for major organizations across housing, government, utilities, local authorities, and financial services through open banking, cards, direct debit, and cash with a multiple of channels. We have a SaaS data sharing platform, providing a resilient network for open banking, COP, and other data sharing, and a real-time credit reference and transaction analytics powered by open banking and AI. And the key to this business, as I've said already, in fulfilling its potential, is investment in a comprehensive go-to-market strategy, including commercial sales marketing and next-phase product development. And with this in mind, the key priorities for the year ahead are to deliver further product innovation and new business wins in OB Connect, accelerate new business growth and upside into the pay point client base, and afford a set of payment capabilities, and continue to develop our technology partnerships and collaborations to develop new opportunities. In love to shop, the growth building blocks have been established over the past two years to a combination of investment in technology, product and platform investment as well. The clear focus now for this business is to maximise the lifetime value of billings in each of our distribution channels, strengthen the go-to-market strategy, and reinforce the love-to-shop market leading position in each of its product markets and distribution channels. The establishing of additional partnerships, such as Vanquish and NLP, further creates opportunity for this business. In the current year, The focus is on ensuring a mix of business which delivers revenue growth from a continued strong performance from love-to-shop business, maximizing the value of a single love-to-shop digital platform, both B2B and B2C channels, and further growing physical distribution on the high street through the Paypoint network and through our income partnership. And finally, in merchant services, as I said already, a fundamental reset of strategy in this business with a focus on net revenue, improved profitability for new business in the mid-market sector and in our existing merchant estate, which is to be managed for value rather than pure estate growth. The outcome of this will be a go-to-market strategy focused on measured growth in the mid-market segment with improved net revenue and profitability, better in-life management of the existing merchant estate, an additional sales channel established to focus on selling a multiple payment product, in the former SMB market segmentation. In addition, both merchant rentals and business finance are targeting further growth, driven by major partnerships, including FreedomPay and ULent. Overall, in establishing a logical grouping of business for each of our business units, creating clear go-to-market strategies and distribution channels for delivery, we're bringing about fundamental change in the Paypoint business and the opportunity to maximize the potential from the collective services and capabilities we have in the business today. We know looking forward for the business to succeed and fill its potential, we need to establish a growth rate of at least 5% to 8% per annum. And the actions I have described today underpin the principles of what will be different in the business and are key to meeting this objective. And then finally, just turning to our outlook. In terms of outlook, it's important to recognize, firstly, the current year is a key year for the business. With the reorganization now well underway and the driver of significant change throughout the group, as we deliver on our number one business priority, which is to build a business platform from which we deliver a consistent 5% to 8% net revenue growth per annum. It's been a busy first quarter already as we implement the organizational changes. We ensure that we've minimized the disruptions of the trading momentum in the business, and we get off to a good start to the year. And early indications are that we've achieved this and started the year well. In terms of profit balance for the current year, we may have a slightly greater weighting towards the second half compared to the first, certainly when compared to FY26. although the board remains confident in both exceeding the underlying profits achieved in FY26 and the results which will be in line with market expectations. And we look forward to hosting a capital market stay in the second half of the year, potentially in Q4 of the current calendar year. And with that, we're happy to answer questions.

We will now begin the question and answer session. The first question comes from the line of Michael Donnelly from Investec. Please go ahead.

Good morning. Can you hear me okay?

Good morning, Michael. Hi.

Morning. Two from me, please. First of all, Nick, on competitive positioning, what is it that you see that differentiates open banking and the payments platform when you're working against competitors on winning new clients? And secondly, on the reorg, are there any tangible early stage benefits that you can see in your internal management data, maybe even anecdotally that you might be able to share with us at this stage, or is it too early even for that? Thanks.

Thank you, Michael. I think the first thing is that we start in a really great position with respect to our digital payments and open banking business because we have a fantastic customer base. And I think that one of the key things that we need to much better leverage is the opportunities that come from actually working with such an extensive client base across housing, utilities, local and central government, charities. And we really do start in a great place. And I think that I think one of the really early opportunities comes from actually bringing together all the capabilities of that platform onto a single management organization and structure. And I think that the principal competitive advantage we start with, as I said already, is actually the sort of the scale of that opportunity in terms of our existing base. I think that the investment we're making in commercial sales and the investment we're making in marketing to really get marketing on point, I think will really actually step up the competitive advantage that we have and importantly, have very relevant payment solutions into those specific markets. And I think when one begins to think about actually sort of our go-to-market strategy, it's really making the relevance of actually the payment channels that we have actually to the clients that we have today. And I think joining up the dots in that way, I think really positions us very well to both really upsell those payment capabilities into our existing pay point client base, but also have a really compelling proposition actually to build our new business pipeline. I think there's very clear evidence already in the partnerships we're establishing, whether that's in A2A payments, whether that's in the development of trust frameworks. You know, I think that we bring something really strong to partnerships in opening up those payment areas. So, I think it's early days, but I think this has the potential to be by far our fastest growing business and the one that's really long-term. In terms of reorganization, you're absolutely right. It's very early days. But what I would say is that I think the whole business has really been energized by the opportunity of creating really logical groupings of businesses that and importantly, creating much more transparent and accountable organizational structures. And I think that's particularly the case when we talk about the way that we manage the network services businesses, and importantly, how we actually engage with our retailers into the future. I think one of the biggest frustrations we've had historically is the inability to solve challenges and problems that our retailers have in real time, where our field team identify issues in the field, and we're not organized to be able to respond to those in a real-time way. In organizing the businesses we have done now, having the four integrated regional structures with the 36 subsets sitting beneath it, there's the ability there to actually sort of join up what happens at the retail hub and what's happening real-time in the field in a way that actually addresses issues in a really timely and efficient way. Unquestionably, it's going to create a more efficient Operating model, as I said already, creates the ability to embrace the opportunities from our AI tools and our data analytics tools to really provide a much stronger, more comprehensive service. So I think that's going to be a very early win. And I think similarly across the business, I think this sort of regrouping of our activities has really shone a really strong light onto the area that actually we need to sharpen up on. and where we need to really focus our investment. And I said a number of times today, I think it's really focused minds around our go-to-market strategies, which unquestionably are actually sort of the heart of actually sort of what will drive our new business. And that's what will drive ultimately our growth rate of 5% to 8% per annum. There's a lot more to unpack here, and I'm hoping we'll be able to do that at the Capital Markets Day later this year.

Thank you. That's very helpful.

Ladies and gentlemen, there are no more questions at this time. I would now like to turn the conference back over to Nick Wiles, CEO, for any closing remarks.

Thank you very much, and everybody, thank you very much for joining us this morning, and I hope that you join us later in the year for our Capital Market today. Speak to you soon. Thank you. Bye-bye.