Results for the year ended 31 March 2023
*PayPoint **P**lc*
*Results** for the **year ended 3**1* *March** 202**3*
*A **strong **year across the PayPoint Group **establishing a materially enhanced platform for future growth and reporting **profit before tax at the top end of range of market expectations *
*FINANCIAL HIGHLIGHTS*
· Net revenue^1 from continuing operations of £128.9 million (FY22: £115.1 million) increased by £13.8 million (11.9%)
· Underlying EBITDA^2 of £61.3 million (FY22: £58.2 million) increased by £3.1 million (5.2%)
· Underlying profit before tax (profit before tax excluding adjusting items)^3 of £50.8 million (FY22: £48.0 million) increased by £2.8 million (5.8%)
· Strong underlying cash generation from continuing operations excluding exceptional items^4 of £62.3 million (FY22: £53.9 million)
· Net corporate debt^5 of £72.4 million (FY22: £43.9 million) increased by £28.5 million, after cash of £61.9 million used in Appreciate Group acquisition.
· Increased ordinary final dividend of 18.6 pence per share declared, consistent with our progressive dividend policy, and representing an increase of 3.3% vs the final dividend declared on 26 May 2022 of 18.0 pence per share
· Authority in place, and to be renewed at AGM on 7 September 2023, for any future share buyback programme
*Year** ended 3**1* *March** 202**3* *FY23* *FY22* * Change*
Revenue from continuing operations *£**16**7**.**7**m* £145.1m 15.6%
Net revenue from continuing operations^1 *£**12**8.9**m* £115.1m 11.9%
Underlying EBITDA^2 *£**61**.3**m* £58.2m 5.2%
Underlying profit before tax (profit before tax excluding adjusting items)^3 – PayPoint segment *£50.3m* £48.0m 4.8%
Underlying profit before tax (profit before tax excluding adjusting items)^3 – Love2shop segment *£0.5m* - -
Underlying profit before tax (profit before tax excluding adjusting items)^3 *£50.8m* £48.0m 5.8%
Adjusting items^6 *£**(8.2)**m* £0.5m n/m
Profit before tax from discontinued operation including exceptional item *-* £30.0m n/m
Profit before tax *£**42.6m* £78.5m (45.8)%
Diluted earnings per share from continuing operations excluding adjusting items *6****.**3**p* 55.4p 8.8%
Ordinary paid dividend per share *34.6p* 33.6p 3.0%
Ordinary reported dividend per share *37.0p* 35.0p 5.7%
Cash generation from continuing operations excluding exceptional items^4 *£62.3m* £53.9m 15.6%
Net corporate debt^5 *£**(72.4)m* £(43.9)m 65.0%
Nick Wiles, Chief Executive of PayPoint Plc, said:
“This has been another strong year for the PayPoint Group where we have made significant steps to materially enhance our platform and capabilities to deliver sustainable, profitable growth and enhanced rewards for our shareholders. Our financial performance has been positive, with net revenue growth across all our business divisions, excellent progress in parcels and digital payments, and good momentum in our key growth areas of card processing, Open Banking, integrated payments and the prospect of new opportunities delivered through the acquisition of the Appreciate Group.
Our partnership philosophy across the Group, combined with an intensity and focus on execution, is already unlocking new markets and revenue opportunities for us, including the recently announced partnership with The Fed to launch a network of Park Christmas Savings Super Agents, our success in Open Banking working with Ovo and the Department for Energy Security and Net Zero, and several emerging opportunities in new verticals combining our extensive capabilities across payments and commerce.
We finished FY23 with good momentum, and trading has been positive in the first quarter of FY24 as we continue to leverage our enhanced platform and capabilities which includes: a full-strength sales team delivering high conversion rates and growing our respective estates in PayPoint and Handepay; healthy pipelines for our FMCG and integrated payments propositions; and a dynamic platform of innovative technology and solutions enabling integrated payments and commerce for our extensive base of clients, retailer partners and SMEs. We will continue to invest in growth areas across the Group in the coming year to further enhance our capabilities, unlock opportunities and accelerate our growth.
All of this underlines our confidence in delivering further progress and a quickening momentum in the new financial year, with the acquisition of Appreciate Group expected to be earnings enhancing in our first full year of ownership, and the Group trading in line with expectations.”
*STRATEGIC HIGHLIGHTS*
We have materially enhanced our platform across the Group in the past year: our integrated payments platform has expanded with the addition of Open Banking and prepaid solutions to our capability in card processing, Direct Debit and cash; our retailer and SME proposition is now stronger than ever, with multiple opportunities for partners to earn revenue; and our e-commerce offering has gone from strength to strength, delivering record volumes and an unparalleled in-store experience for consumers.
This enhanced platform will unlock future opportunities and deliver sustainable and profitable growth for shareholders, underpinned by our business-wide partnership philosophy and intensity of execution.
· *Appreciate Group** (now known as **Love2shop**)* – acquisition completed on 28 February 2023, opening up further revenue opportunities, expanding our capabilities in the gifting, rewards and prepaid savings markets and enabling the creation of enterprise level solutions into new markets, combining our extensive payments and commerce capabilities· *Open Banking* - partnership with OBConnect has already yielded positive results, particularly with our new PayPoint OpenPay service with Ovo to support Alternative Fuel Payment, rolling out our Confirmation of Payee service with the Department of Energy Security and Net Zero, launching a trial of our AIS customer support tool with Citizen’s Advice and a growing number of additional clients onboarded· *Central Government* - over £246 million of Energy Bills Support Scheme vouchers were redeemed across our extensive network of over 28,000 retailer partners from October 2022 to March 2023, providing a £400 payment over the winter months to households across the UK, all underpinned with greater engagement with key stakeholders, including Ofgem, UK Finance, Pay.UK and the Department of Energy Security and Net Zero· *Cards *- new acquiring partnership with EVO, becoming the single acquirer across the Group. The move enables our merchant estate acceleration plans and mid-market segment focus, increases our efficiency as an ISO and begins the journey to becoming a fully integrated Payment Facilitator· *E-commerce* - excellent volume growth year on year in Collect+, driven by strong partnership approach with carrier partners, our positive reputation as the leading carrier agnostic Out of Home network, and backed up by continued investment into the in-store customer experience· *Digital Payments* - our Payment Exception Service, delivered for the Department for Work and Pensions and enabling the digital disbursement of benefit payments, recorded significant growth year on year and received three industry accolades for Social Inclusion in Financial Services at the recent Payment Awards, FSTech Awards and Card and Payments Awards, underlining the vital role our solutions play in serving some of the most vulnerable people in the UK· *FMCG *– positive progress and partnerships established with Coca-Cola, Amazon, AG Barr and JTI, delivering a number of FMCG brand campaigns in the year and a strong pipeline of future activity. Our consumer engagement solution, PayPoint Engage, leverages our PayPoint One platform, advertising screens and imovo vouchering capability to help our retailer partners drive sales and help brands engage thousands of consumers across our network· *New Sectors *– continued expansion of our integrated payments solution, MultiPay, into the housing, charity and local authority sectors, including launching Direct Debit for POBL Housing and Thames Hospice, further Cash Out expansion across 6 new local authorities and delivering Confirmation of Payee services for 4 new local authorities across the UK
*DIVISIONAL HIGHLIGHTS*
*Strong** performance across the Group with **net revenue increases across all divisions*
*Shopping*
Shopping divisional net revenue increased by 5.6% to £62.0 million (FY22: £58.7 million), driven by the growth of our PayPoint One estate, the annual RPI increase and further enhancements to our retailer and SME propositions, including the launch of the new Android terminal in the Handepay cards business and the continued rollout of Counter Cash.
· Service fee net revenue increased by 8.3% to £17.9 million, reflecting growth in the number of revenue-generating PayPoint One sites to 18,453 (FY22: 18,120) and the impact of the annual RPI increase
· Card payment net revenue increased by 4.3% to £31.8 million, with an enhanced proposition for Handepay customers delivered, next day settlement now live across PayPoint and an increased focus on customer retention driven by AI and data analytics
· Card payment sites in the Handepay EVO estate grew to 18,397 (31 March 2022: 17,499) driven by the enhanced proposition, the new Android terminal and the increased optimisation of our sales efforts, now at full headcount and in spite of recruitment challenges earlier in the financial year
· UK retail network increased to 28,478 sites (31 March 2022: 28,254), with 70.0% in independent retailer partners and 30.0% in multiple retail groups
*E-commerce*
E-commerce divisional net revenue increased strongly by 46.5% to £7.3 million (FY22: £4.9 million) and transactions grew by 69.6% to 56.4 million (FY22: 33.3 million) through our e-commerce technology platform, Collect+, including regularly achieving over 1 million parcels processed per week. This was driven by our strength in clothing/fashion categories, the continued expansion of new services with carrier partners and the in-store experience investments made in Zebra label printers over the past 18 months.
*Payments & Banking*
Payments & Banking divisional net revenue increased by 9.1% to £56.2 million (FY22: £51.5 million), driven by continued growth in digital transactions and a resilient performance in the energy sector, partially offset by a reduction in cash through to digital volumes as consumer behaviour has continued to reset post Covid-19.
· Continued digital payments growth to 52.3 million transactions (FY22: 34.2 million) and net revenue increasing by 102.7% to £15.7 million (FY22: £7.8 million), with our Cash Out services and the DWP Payment Exception Service, delivered via i-movo
· Over £246 million of Energy Bills Support Scheme vouchers were redeemed across PayPoint’s extensive network of over 28,000 retailer partners, providing a £400 payment over the winter months to households across the UK, leveraging our Cash Out digital capability
· Cash payments net revenue delivered a resilient performance, decreasing by 5.4% to £33.6 million (FY22: £35.5 million) and transactions decreasing by 1.2% to 176.3 million (FY22: 178.4 million), with energy sector net revenue better than expected, only decreasing by 5% year on year, and the continued reduction in consumers topping up mobile phones in store
· Cash through to digital net revenue decreased by 16.5% to £6.9 million (FY22: £8.2 million) and transactions decreased by 19.6% to 8.5 million (FY22: 10.6 million), with volumes returning to pre-Covid-19 levels and a new baseline set for the category. In addition to the range of digital brands we work with, we are launching new partnerships with neo-banks, including JPMorgan Chase, enabling withdrawals and deposits across our extensive network of retailer partners
*RECONCILIATION OF RE**-PRESENTED **NUMBERS*
*£m* *FY23* *FY22*
Reported profit before tax from continuing operations *42.6* 48.5
Exceptional items *5.6* (2.9)
*Profit before tax from continuing operations excluding exceptional items* *48.2* *45.6*
Amortisation of intangible assets arising on acquisition – PayPoint (previous acquisitions) *2.**1* 2.4
Amortisation of intangible assets arising on acquisition – Love2shop *0.5* -
*Underlying profit before tax* *(profit before tax **excluding adjusting items**)* *50.8* *48.0*
*Underlying EBITDA* *61.**3* *58.2*
*BUSINESS DIVISION NET REVENUE AND MIX*
*Net revenue by business division (£m)* *FY23* *FY22* *FY2**1*
Shopping *62.0* 58.7 40.2
E-commerce *7.3* 4.9 3.6
Payments & Banking *5**6.**2* 51.5 53.3
PayPoint Segment Total *125.**5* 115.1 97.1
Love2shop Segment Total *3**.**4* N/A N/A
*PayPoint Group Total* *12**8**.**9* 115.1 97.1
*Business division mix* *FY23* *FY22* *FY21*
Shopping *4**8.1**%* 51.0% 41.4%
E-commerce *5.**6**%* 4.3% 3.7%
Payments & Banking *4**3.**6**%* 44.7% 54.9%
Love2shop *2**.**7**%* N/A N/A
*Enquiries*
*PayPoint plc* *FGS Global*
Nick Wiles, Chief Executive (Mobile: 07442 968960) Rollo Head
Alan Dale, Finance Director (Mobile: 07778 043962) James Thompson (Telephone: 0207 251 3801) (Email: PayPoint-LON@fgsglobal.com)
A presentation for analysts is being held at 9.30am today (28 July 2023) via webcast. This announcement, along with details for the webcast, is available on the PayPoint plc website: corporate.paypoint.com
*CHAIRMAN’S STATEMENT*
I am pleased to report that for the year under review, we have consistently applied the Principles of Good Governance contained in the 2018 UK Corporate Governance Code save that we have not completed a review of the effectiveness of Appreciate Group’s (“Appreciate”) risk management and internal control systems (with respect to Provision 29 of the Code) due to the proximity of the acquisition of Appreciate, which occurred on 28 February 2023, to our financial year-end.
The Board has carried out a review of the disclosures and management of climate related risks for the Task Force on Climate Related Financial Disclosures. Detailed disclosure is provided in the Annual Report, along with the further progress made on developing our broader ESG strategy.
*The year in review*
The business has maintained momentum in delivering against its strategic plan as we have continued our strategic development and diversification away from legacy cash bill payments, with growth in recently acquired businesses and through the acquisition of Appreciate. Effective governance together with the strong leadership from the Board has provided structure and stability to the business.
*Executive and Plc Boards*
The Board and Nomination Committee has continued to work on succession planning and Board composition. We have worked actively with Teneo People Advisory to ensure the Board has the necessary skills, experience and knowledge and, following an extensive search process, we were delighted to appoint Rob Harding as Chief Financial Officer. Rob will be joining the Company on 1 August 20203 and will replace Alan Dale who is retiring. I would like to express my gratitude for Alan’s contribution to the Company.
We also welcome Guy Parsons as Non-Executive Director to the Board having previously been Executive Chairman of Appreciate Group.
During the year the Executive Board was strengthened in key areas to: a) drive growth (Nick Williams-Parcels and Anthony Sappor- Retail Proposition and Partnerships) and b) enhance integration with Appreciate Group (Julian Coghlan and Talha Ahmed – respectively Managing Director and Finance Director of Love2shop & Park Savings).
*Board Evaluation*
Following last year’s internal evaluation, we have again this year conducted an internal evaluation of the Board, its Committees and the Chair, which confirmed that our Board and Committees continue to operate effectively. More information on the process and results of that evaluation can be found in the Annual Report. We have completed a tender for an external third party to carry out the Board evaluation in 2023-24. This is being progressed in H1 FY 2024.
*Stakeholder Engagement*
The success of PayPoint depends upon the Board making informed decisions for the benefit of shareholders having regard to the wider requirements of all our stakeholders. The Board receives regular investor updates throughout the course of the year. The Company’s Annual General Meeting will be held at PayPoint’s registered office on 7 September 2023 where you will have the opportunity to meet the Board and members of the Executive Board. The matters to be approved by shareholders are set out in our Notice of Annual General Meeting which will be mailed to shareholders in August.
This year we continued to develop our work force engagement activities including receiving a full briefing on the employee engagement survey results and Directors meeting directly with employees. Full details of our people and culture activities are set out in our Annual Report.
Our retail partners and SMEs remain central to our business and the Board continued to receive regular briefings throughout the year on our retailer engagement proposition and the work we do to enable clients to provide vital services in the community.
*Conclusion*
I would like to conclude by thanking my Board colleagues for their continued support and commitment over the past year and to thank Nick Wiles and the whole Executive team for their dynamic management of a rapidly changing business environment in difficult economic circumstances.
If you wish to discuss any aspect of our governance arrangements, please contact me via our Company Secretary, Brian McLelland, via email at CompanySecretary@paypoint.com.
*Giles Kerr*
*Chairman*
27 July 2023
*CHIEF EXECUTIVE’S REVIEW*
*Strong* *year delivering an enhanced platform for growth*
This has been another strong year for the PayPoint Group where we have made significant steps to materially enhance our platform and capabilities to deliver sustainable, profitable growth and enhanced rewards for our shareholders. Our financial performance has been positive, with net revenue growth across all our business divisions, excellent progress in parcels and digital payments, and good momentum in our key growth areas of card processing, Open Banking, integrated payments, and the new opportunities delivered through the acquisition of the Appreciate Group.
*Expanded capabilities and partnership philosophy opening up new revenue opportunities*
Strategically, we were particularly delighted to complete the acquisition of Appreciate Group (now known as Love2shop) in February 2023, one of the UK’s leading digital platforms for employee and customer rewards, helping brands and businesses attract, retain and delight customers and employees. Appreciate Group has a well-established technology platform, more than 400,000 customers, a network of popular brand partners, and significant headroom for growth across the large and growing UK gift card and voucher market, which is valued in excess of £8 billion per annum. As indicated previously, the acquisition is expected to be earnings enhancing on an adjusted basis in FY24 and will deliver attractive returns for shareholders, opening up further revenue opportunities and expanding our capabilities in the gifting, rewards and prepaid savings markets.
Our partnership philosophy across the Group, combined with an intensity and focus on execution, is already unlocking new markets and revenue opportunities for us. We were particularly delighted to announce our new partnership with The Federation of Independent Retailers (The Fed) on 3 May 2023 to create a network of Park Christmas Savings Super Agents. This is the first major initiative announced following the completion of the acquisition of Appreciate Group. The deal will see our two organisations working together to create an initial network of 1,500 Super Agents in FY24 for the Christmas 2024 savings season, with retailers recruiting savers in their area and creating an additional opportunity to earn over £1,000 per annum from the service. This is reflective of the strength of our relationship with The Fed, their executive team and member base, and more broadly the partnership approach that we have adopted across the Group to enhance our relationships and unlock further growth opportunities across new and existing markets.
Furthermore, our Open Banking partnership with OBConnect has enhanced our integrated payments platform and already yielded positive results, particularly with our new PayPoint OpenPay service with Ovo to support Alternative Fuel Payments and rolling out our Confirmation of Payee service with the Department of Energy Security and Net Zero. We see Open Banking as a key growth area where we can partner with organisations in the public and private sector to enhance their payment offering and improve customer support to those in need.
*Accelerated revenue growth **and momentum **across all business divisions*
*Shopping*
In Shopping, our retailer partner and SME propositions have been enhanced further with strong take up and positive feedback from our partners. The overall PayPoint network and PayPoint One estate have grown again this year and our broader commitment to our retailer partners to deliver further value and opportunities to earn has delivered an increase to retailer commission paid out of over +15% year on year. New services and transaction volumes have driven this positive impact to retailer partner revenues, including our Counter Cash solution, which is now enabled in 5,680 sites, with 1,930 sites transacting regularly and over £42.9 million withdrawn in the financial year, and good growth in our FMCG consumer engagement proposition, PayPoint Engage, delivering brand campaigns leveraging our PayPoint One platform, advertising screens and i-movo vouchering capability.
In Handepay, we have ended the year with our strongest ever sales performance in H2 FY23 and have returned the EVO merchant book back to growth, ending the year at 18,397 sites, with the sales team now at full headcount and in spite of recruitment challenges experienced earlier in the financial year. This positive progress since H1 FY23 has been driven by the enhanced proposition, new Android terminal and the increased optimisation of our sales efforts in the Handepay business; and in PayPoint, improved cards pricing and next day settlement were launched for new and existing merchants. As we move into the new financial year, we look forward to accelerating our cards business further and proactively targeting the mid-market merchant segment with a dedicated team. We will continue our focus on equipping our people with better data, AI tools and analytics to have quality conversations with retailer partners/SMEs and a stronger focus on retention and yielding improved conversion rates. In addition, the positive performance of Business Finance via YouLend across both PayPoint and Handepay was particularly pleasing, supporting our retailer and SME partners during the current economic challenges.
We have continued our extensive efforts to strengthen our retailer partner relationships and drive adoption of these new opportunities to earn, including regular face to face store visits and ‘cash and carry’ days, new retailer forums, more direct communications and our strengthened relationships with the key trade associations, including the Association of Convenience Stores (ACS), the Scottish Grocers’ Federation (SGF) and the Federation of Independent Retailers (the Fed). The feedback and support received from these organisations has been critical to our continued commitment to support our retailer partners in delivering vital community services across the UK and responding to changing consumer needs in the UK convenience sector.
*E-commerce*
In E-commerce, our year-on-year performance has been excellent, driven by our strength in the clothing and fashion categories, the continued expansion of new services with carrier partners, including Amazon and Wish.com, and the in-store experience from investment made in Zebra label printers over the past 18 months. In each of our carrier relationships, we have developed plans for the year ahead to grow volumes further through our network and to continue enhancing the in-store customer experience. We were also pleased to support Royal Mail business customers in 1,455 sites in September and October to keep mail moving during the recent industrial action.
*Payments & Banking*
In Payments and Banking, we continue to diversify our digital payments client base and strengthen our integrated payments platform as we expand the range of digital solutions that we can deliver to support our clients across multiple sectors, including government, local authorities and housing associations. Our Payment Exception Service, delivered for the Department for Work and Pensions, recorded significant growth year on year, after launching in August 2021 and making a contribution for half of the previous financial year. We were delighted that the service received three industry accolades for Social Inclusion in Financial Services at the recent Payment Awards, FSTech Awards and Card and Payments Awards, underlining the vital role our solutions play in serving some of the most vulnerable people in the UK.
Similarly, over £246 million of Energy Bills Support Scheme vouchers were redeemed across our extensive network of over 28,000 retailer partners from October 2022 to March 2023, providing a £400 payment over the winter months to households across the UK. This vital support for consumers to help with the Cost of Living leveraged our Cash Out digital capability. All of these efforts have been underpinned with greater engagement with key senior stakeholders across the sectors we operate in, including Ofgem, UK Finance, Pay.UK and the Department of Energy Security and Net Zero.
*Further progress on our ESG commitments*
Our Environment, Social and Governance (ESG) strategy has also developed further in the year, as we consider our social responsibility and impact as an Executive team and business towards each of these key areas. In July 2022, we fulfilled our commitment to ensure all employees are paid a minimum of the Real Living Wage and Electric Vehicle charging points have now been installed at our head office, supporting the use of electric vehicles by our employees and visitors. An inaugural Pride Month programme was launched in June 2022, as part of our ‘Welcoming Everyone’ activities, providing educational content, further meetings of our LGBTQ+ network and events to bring colleagues together, building on our commitments to diversity, equity and inclusion and supporting our vision to create a dynamic place to work. We also partnered with Citizens Advice and Advice Scotland to support important Cost of Living targeted consumer campaigns across our network, via receipt advertising, social media and retailer communications.
*Update on claims against PayPoint*
As announced on 29 March 2023, the Group received ‘letter before action’ correspondence from a small number of market participants relating to issues addressed by commitments accepted by Ofgem as a resolution of its concerns raised in Ofgem’s Statement of Objections received by the Group in September 2020. The Ofgem resolution to the case did not include any infringement findings.
Claims have now been served by Utilita Energy Limited and Utilita Services Limited (“Utilita”) and Global-365 plc and Global Prepaid Solutions Limited (“Global-365”). The Group is continuing to take legal advice on these two claims and its position is unchanged. It rejects both claims in their entirety and intends to vigorously defend its position.
The Group is confident that it will successfully defend the claim by Utilita, which does not provide any clear evidence to support the cause of action or the amount claimed, and also that it will successfully defend the claim by Global 365, which fundamentally misunderstands the energy market and the relationships between the relevant Group companies and the major energy providers, whilst also over-estimating the opportunity available, if any, for the products offered by Global 365.
The Group will continue to update the market on a quarterly basis as part of its financial reporting cycle.
*Outlook and dividend*
Our enhanced platform and expanded capabilities across the Group, combined with our business-wide partnership philosophy and intensity of execution, give the Board confidence in delivering further progress in the current financial year and meeting expectations.
The opportunity to deliver enterprise level solutions, combining our extensive capabilities, is significant and enables us to deepen our relationships with existing clients as well as expanding into new verticals.
Trading early in the current financial year has been positive, as we have confirmed in our Q1 FY24 trading update, continuing the performance seen in FY23. We have detailed execution plans in place to capitalise on the positive momentum built up in our key growth areas of card processing, Open Banking, parcels, integrated payments and the new Love2shop division, delivering profitable growth in our retail and card estates, further enhancements to our proposition and positive new business growth in key target sectors.
As we continue to integrate the Appreciate Group into our business, we have been giving careful thought as to the key performance metrics for the L2S activities, considering the importance of growing billings as an early indicator of progress, strong cash generation and its contribution to the EBITDA of the business as a whole and the recognition of profit from a business model which incorporates, management / service fees, interest on cash balances and revenue from non-redemption income. In the current year we are focused on driving the immediate key performance indicator of billings in Park Christmas Savings and Love2shop through our extensive plans to grow the core business, expand areas of cooperation across the business and unlock new revenue opportunities as we leverage the expanded capabilities of the wider Group.
In confirming our own positive trading outlook, we are alert to the potential impact on consumers from the broader economic challenges, including any changes to consumer behaviours in the energy sector, all of which we monitor closely across the business.
The Board has proposed an ordinary final dividend of 18.6p per share, an increase of 3.3% vs the final dividend declared on 26 May 2022 of 18.0 pence per share, consistent with our progressive dividend policy of a target cover range of 1.5 to 2.0 times earnings excluding exceptional items, reflecting our long-term confidence in the business, the strength of our underlying cash flow, and the enhanced growth prospects across the Group.
Our compelling characteristics of strong cash flow and resilient earnings remain constant, and our materially enhanced platform is positioned to deliver sustainable and profitable growth for our shareholders, and further progress in the delivery of these objectives in the current year.
*Nick Wiles*
*Chief Executive *
27 July 2023
*MARKET OVERVIEW*
Key trends and changes during the FY22/23 financial year in the UK markets in which PayPoint operates include:
*Macro-economic factors*
· The Consumer Prices Index (CPI) grew to 10.2% in March 2023, driven by increased food and energy costs.^7
· The GfK UK Consumer Confidence Index2 rose six points to -30 in April 2023 (vs -36 in March 2023), and up 19 points from a historic low of -49 in September 22 and -45 in January.^8
· UK retail sales volumes rose by 0.6% in the three months to March 2023 when compared with the previous three months; the first three-month on three-month rise since August 2021.^9
· GDP is projected to contract in 2023 as tighter financial conditions weigh on consumer spending – which accounts for around two-thirds of the economy.^10
*Convenience retail*
· Lumina Intelligence's current full-year valuation estimate for the UK convenience market is £47.3 billion, up 4.6% from £45.2 billion in 2022.^11
· Convenience shoppers are reducing frequency of visits (-4%). However, high inflation and an increase in basket size has driven an increase in average basket spend of £7.70, +12.7% year-on-year with the average basket size up 4% to 2.8 items.^12
· In-store purchasing has increased year-on-year up 2.4%, with delivery occasions losing 2.2% of share. Shoppers are using delivery services less frequently due to a shift towards returning to pre-pandemic habits as well as increased price sensitivity.^13
· PayPoint One basket data shows the average goods only convenience store average basket spend (May 22 to April 23) increased to £7.06 vs £6.92 the previous period. 66% of the purchases were made by cash and 34% by card which is a 3% decrease in cash use on the previous period.^14
· Total UK convenience store numbers remained resilient in 2022, with marginal growth of 0.6% to 47,861.^15
· In 2022 the sector saw the biggest growth in the number of Co-Operatives up 78 (+2.3%) to 3,394 and a decline of 71 (-1.5%) to 4,790 in Forecourt convenience stores.^16
· In a Consumer Home Delivery review 2022/23, IMRG found consumers prefer to collect orders, purchased via click and collect from a convenience store (60%) than a retailer’s own store (48.7%)^17
*Card payments*
· In 2021, 57% of all payments in the UK were made using cards.^18
· From February 2022 to Februray 2023, there were 25.8 billion card transactions in the UK.^19
· In the financial year, card payment volumes increased by 4.5% year on year across the PayPoint Group, with growth seen across the Handepay, PayPoint and RSM 2000 books.
· Latest UK Finance data shows £57.7 billion was spent on debit cards in February 2023 up 8.2% on February 2022 and £17.3 billion on credit cards which was a 9.8% increase on the previous year. The number of debit card transactions were up 9% to 1,800 million and credit transaction were up 7.1% year on year to 304 million transactions.^20
· In the SME markets that our Handepay business serves, businesses employing 0-49 people, account for 99% (5.47 million) of the total UK business population, 77% (4.1 million) of the businesses have no employees, with 12% (1.1 million) classed as micro-businesses with 0-9 employees. Retail, auto trade and hospitality businesses make up circa 14% of the SME sector.^21
*Cash Economy *
· From October 22 to March 2023, £249 million in £400 payments were distributed across our network of 28,000 stores for the Governments Energy Bills Support Scheme.
· Our Payment Exception Service, run for the Department for Work and Pensions, won three industry awards for Social Inclusion in Financial Services and has grown year on year underlining the continuing importance of delivering cash payments to those without access to a standard bank account.
· Latest data from LINK’s March 2023 report show ATM transactions were 127 million, 5.4% lower than March 22, and that each month in 2023 has seen volumes below 2022, however it was 11% higher than March 21, which was still during a period of lockdown. The value withdrawn also fell by 1.7% compared to March 22, a smaller reduction than volumes as the average withdrawal value continued to rise and the £6.8 billion withdrawn in March remains a very significant amount of cash.
· ATM coverage across the UK in 2023 continues to be broadly stable and consistent, with a very slow decline in non-branch free-to-use ATMs in the last year. Branch and charging ATM numbers continue to decline at a faster rate as bank branches close and host locations decide they no longer need charging ATMs or no longer take in enough cash to replenish them.^22
· PayPoint’s Counter Cash service, which offers cashback without purchase and balance enquiries over the counter continues to grow and is now available in over 5,680 PayPoint stores across the UK with over £1m of withdrawals per week with almost a third of the withdrawals for amounts not available from traditional cash machines.
*Parcels*
· According to IMRG’s Consumer Home Delivery Report UK, online retail sales fell -10.5% year on year in 2022
· Consumers choosing a third-party click and collect location prefer a staffed location (55%) rather than a self-serve locker-type site (13%), and they generally would travel two to five miles (68.2%) to pick up the item.^23
· Click & collect from a retailer’s store is the standout consumer choice, but when asked if they could choose a click & collect location, more consumers selected a convenience store/supermarket (60%) than the retailer’s own store (48.7%).^24
· UK, non-food retail sales are forecasted to increase from £242.7bn to £248.9bn in 2023 – an increase of £6.2bn or 2.6% in value terms. However, volume growth is predicted to decline 4.9% which reflects an inflationary rise in prices rather than an actual increase in the quantity of goods purchased.^25
· This contrasts with the strong performance seen in the Collect+ network which has seen excellent volume growth year on year in Collect+, driven by strong partnership approach with carrier partners, our positive reputation as the leading carrier agnostic Out of Home network, and backed up by continued investment into the in-store customer experience.
· The Out of Home (OOH) market comprises click and collect, returns and send propositions. The click and collect market is 11% of all volumes with 150 million parcels per year and is expected to double by 2025^26. Returns and send volumes are estimated at c.185 million and c.380 million parcels per year respectively.^27
*Bill payments and top-ups*
· 2022 was a much more stable year for the energy supplier market with only four suppliers exiting the market, leaving 23 active suppliers, down from 51 suppliers at the beginning of 2021.^28
· In October 2022, the UK Government introduced the Energy Bills Support Scheme which gave every household a £400 discount on their household energy bills which was paid in installments over six months from October 22 to March 23.
· In August 22, Ofgem announced the Default Tariff Cap would be updated on a quarterly basis rather than every six months so that it can reflect the changes in the cost of energy sooner.
· The dual fuel energy price cap for pre-pay customers for April to June 2023 decreased to £3,325 from the high of January to March 2023 of £4,358.^29
· Non-Big Six energy providers combined market share increased marginally to 29.6%17 at the end of January 2022 (29% as of 31 March 2021).^30
· At the end of 2022, 31.3 million smart and advanced meters were in homes and businesses across the UK, with 55% of all meters are now smart or advanced. A total of 3,7 million meters were installed in 2022 a decrease of 4% on 2021 total.^31
· PayPoint data shows the average number of customer energy top up-ups per year is slightly down at 38.3 vs. 38.9 top up transactions with the overall average spend increasing to £708.25 vs £578.80 the previous year due to the increase in energy prices.^32
· The number of mobile pre-pay (pay-as-you-go) subscriptions declined to 21.5 million in April 2022, from 22.2 million in April 2021^33
*Open Banking*
· Over 7 million consumers and businesses (of which 750,000 are SMEs) are using innovative Open Banking enabled products and services to manage their money and to make payments. ^34
· In 2022, Authorised Push Payment (APP) fraud losses were £485.2 million (down 17%) with protections such as Confirmation of Payee sighted as having an impact on the reduction. With our partners, obconnect, we have processed 25 million CoP requests in the last year, with an estimated 12% of those helping to prevent fraudulent transactions^35
· Open Banking payments have more than doubled, with over 68 million open banking payments in 2022 (up from 25 million in 2021)^36
· Since going live with our PISP payment solution at the beginning of May 23, we have processed over 57,000 payments for our first energy client with the number rising each day as customers begin to adopt this new payment method.
· OpenBanking.org have highlighted some of the most common financial challenges and how Open Banking enabled tools can offer ways for consumers to take greater control of their finances, by consenting to share their banking data, they can get a clear view of all their incomings and outgoings to help them better understand their finances, access affordable credit, particularly if they don’t meet traditional lending criteria and to understand their eligibility to switch to an affordable energy tariff.^37
*Gift Cards and Vouchers*
· The UK Gift Card market is estimated to be worth £7.2 billion in 2022, up from £6.8 billion in 2021. The year-on-year growth was driven by the rise of contactless payments, and the growing trend of employers offering gift cards as a perk to employees.^38
· Gift cards continue to encourage additional spend, with around two-thirds of shoppers typically spending more than the value of gift card they received over 2022. Younger shoppers (Gen Z) are willing to spend triple the amount of a gift card they are redeeming.^32
· The B2C market has grown 13.3% against a backdrop of retail sales that have faced difficulties due to inflation and cost of living.^32
· The B2B sector represents 57.4% of the total market in 2022 below the highs of 67.3% seen in 2020 which bring the market more in line with the B2C market post Covid.^ 32
· The average monthly proportion of UK consumers purchasing gift cards for someone else remained robust over 2022, at 18.0% vs 18.5% in 2021.^32
· UK retail spend forecasted to be £380bn +3% on PY due to inflation +7.7%, triggering a -4.6% decline in volume of shoppers (particularly the less affluent)^32
· In April 2023, 34.5% of UK consumers bought gifts and gift cards. A decline on PY April from 37.5%^32
· 11% of those that did not purchase gift cards said this was because they have cut back on non-essential spending^32
· Proportion of consumers purchasing gift cards for someone else in April was 15.8% compared to 16.7% on PY April (a notable decline)^32
· 7.4% purchasing for self use was also lower than 7.8% on PY April^32
· Digital continues to increase in popularity. The proportion of digital cards through employee benefit programme was 12.2%, +9.3% on the month prior^32
· Proportion of gift card buyers purchasing digital cards in April increased to 26.8% from 25.9% during the month prior – a continuing trend^32
· This is at the expense of online purchasing on physical gift cards: 33.1% of gift buyers in April ’23 compared to 40.4% in PY^32
· Multistore gift cards see more significant YOY decline: share of 33.9% in April’23 compared to 41.1% in April 2022. However, they should be well placed to benefit from the post pandemic return to physical shopping as a hobby. Retail gift cards have experienced a lower decline as a result of this activity^32
· 18.2% purchased experience gift cards in April compared to 26.6% in 2022. Those purchasing for leisure activities also saw a decline from 18.2% in 2022 to 14% in 2023^32
· 39.5% of consumers received at least one gift card over the last three years through work rewards or incentives.^39
**PROGRESS AGAINST OUR STRATEGIC PRIORITIES**
*SHOPPING BUSINESS DIVISION –* *FY23** net revenue £**62.0m** (**FY22**: £**58.7m**)*
*PRIORITY 1: **EMBED PAYPOINT GROUP AT THE HEART OF SME AND CONVENIENCE RETAIL BUSINESSES*
*FY23** Progress*
· SME and retailer proposition enhanced across Handepay and PayPoint card services: new Android terminal launched in Handepay with positive merchant feedback, supported by one-month contracts and next day settlement delivered in FY23; improved pricing and next day settlement launched for new PayPoint card payment merchants from 1 July 2022 and to existing customers in October 2022, boosting cash flow to our retailer partners
· Strongest ever sales performance delivered in H2 FY23 and a largely full-strength sales team recruited across Handepay and PayPoint, following recruitment challenges experienced in H1 FY23. This positive momentum has been supported by our most competitive and attractive proposition ever and a more detailed focus on customer service and retention, leveraging our AI and data analytics capabilities
· Further expansion of Counter Cash, now enabled in 5,680 sites and with 1,930 sites transacting regularly in the year, with over £42.9 million withdrawn in the financial year, offering vital access to cash over the counter and complementing the existing ATM estate
· Positive performance of Business Finance via YouLend with over £12.5 million lent, supporting our retailer and SME partners during the current economic challenges
· FMCG – good progress with a number of FMCG brand campaigns delivered in the second half and strong pipeline of future activity, partnering with Coca-Cola, Amazon, AG Barr and JTI. Our consumer engagement solution for brands, PayPoint Engage, leverages our PayPoint One platform, advertising screens and i-movo vouchering capability to help our retailer partners drive sales and help brands engage thousands of consumers across our network, with redemption rates of up to 40%
· Retailer engagement - positive progress made on retailer partner Net Promoter Score and satisfaction, supported by regular engagement with key trade associations, launch of new retailer forums with the Scottish Grocer’s Federation and National Federation of Retail Newsagents and a comprehensive communications programme to drive new services and opportunities to drive revenue for our retailer partners
*E-COMMERCE BUSINESS DIVISION –**FY23** net revenue £**7.3m** (**FY22**: £**4.**9**m**)*
*PRIORITY 2: BECOME THE DEFINITIVE TECHNOLOGY-BASED E-COMMERCE DELIVERY PLATFORM FOR FIRST AND LAST MILE CUSTOMER JOURNEYS*
*FY23** Progress*
· New partnerships launched in Q4 FY23 with Yodel for store-to-store parcels and InPost for locker to store parcels
· Partnership launched with Wish.com in H1 FY23, one of the largest ecommerce marketplaces in the world, enabling consumers to click-and-collect at over 1,600 Collect+ sites
· Amazon returns rollout expanded to over 2,000 sites and further integrations rolled out for Print In Store, which saw significant growth in H2 FY23
· Rapid rollout of 1,455 Collect+ sites in September and October to support Royal Mail business customers, helping keep mail moving during industrial action
*PAYMENTS & BANKING BUSINESS DIVISION –* *FY23** net revenue £**5**6.**2**m** (**FY22**: £**51.5m**)*
*PRIORITY 3: SUSTAIN LEADERSHIP IN ‘PAY-AS-YOU-GO’ AND GROW DIGITAL BILL PAYMENTS*
*FY23** Progress*
· Continued strong progress in digital transactions, with growth of +53.0% year on year, and further expansion of our client relationships with our enhanced integrated payments platform, including launching direct debit with POBL Housing, our new PayPoint OpenPay service with Ovo to support Alternative Fuel Payments, and rolling out our Confirmation of Payee service with the Department of Energy Security and Net Zero, leveraging our Open Banking capability
· Our Payment Exception Service, delivered for the Department for Work and Pensions, recorded significant growth year on year with net revenue +179% to £4.4m (FY22: £1.6m) and transactions +317% to 12.5m (FY22: 3.0m). The service received three industry accolades for Social Inclusion in Financial Services at the recent Payment Awards, FSTech Awards and Card and Payments Awards, underlining the vital role our solutions play in serving some of the most vulnerable people in the UK
· Over £246 million of Energy Bills Support Scheme vouchers redeemed across our extensive network of over 28,000 retailer partners from October 2022 to March 2023. PayPoint partnered with 9 energy providers to deliver the Energy Bills Support Scheme, providing a £400 payment over the winter months to households across the UK. This vital support for consumers to help with the Cost of Living leveraged our Cash Out digital capability
· Cash through to digital – good progress in expanding client base and services provided in gifting (Netflix and Google Play) and neo banks (Monzo and JP Morgan Chase), to complement existing gaming portfolio
· Cash through to digital - consumer awareness campaign for gifting expanded with over 10,000 display units rolled out to stores across the UK ahead of key Christmas trading period, including major multiple groups like Midcounties Co-operative, promoting our portfolio including Amazon, Xbox, PlayStation, Paysafe and Love2shop
*PRIORITY 4: BUILDING A DELIVERY FOCUSED ORGANISATION AND CULTURE*
*PAYPOINT GROUP*
*FY23** Progress*
· Good progress against our ESG programme, including commitment to ensure all employees are paid a minimum of the Real Living Wage delivered in July 2022, 5 electric vehicle charging points installed at our Welwyn Garden City head office in November 2022, and Diversity, Equity and Inclusion training delivered in January 2023
· Delivered a comprehensive programme of ‘Welcoming Everyone’ activities, building on our commitments to diversity, equity and inclusion and supporting our vision to create a dynamic place to work: including our inaugural Pride Month programme launched in June 2022, providing educational content and further meetings of our LGBTQ+ network; International Women’s Day events across the Group; and an external speaker session focused on life over 50
· Love2shop (formerly known as Appreciate Group) recognised as one of the UK’s Best Workplaces™ 2023 by Great Place to Work® UK
· Partnered with Citizens Advice and Advice Scotland to support important Cost of Living targeted consumer campaigns across our network, via receipt advertising, social media and retailer communications
· Continued progress on improving our IT service delivery through the transformation into cross-functional product engineering teams with full responsibility for service delivery and product development of each service, the completion of infrastructure consolidation work resulting in reduced energy use at the PayPoint head office, the highest levels of service availability delivered with 100% uptime achieved on core processing systems and a continued focus on cyber-security, with the rollout of a new SAST and DAST scanning tool across engineering teams and the launch of a Bug Bounty programme
*LOVE2SHOP** DIVISION (FORMERLY KNOWN AS APPRECIATE GROUP)*
*NB. **Progress in this division is shown for the full financial year pre-acquisition. There is a **one-month** cont**r**i**b**ution to FY23** preliminary results** following completion of **the **acquisition on 28 February 2023*
*FY23 Progress*
· Park Christmas Savings completed fulfilment of its Christmas 2022 order book - this was 2% lower than prior year which was a significant improvement on recent trends and ahead of expectations, underpinned by record levels of retention and conversion. The savings cycle for Christmas 2023 is well underway and as part of the strategy to return to growth, the order book is expected to be c2% higher than prior year, the first growth in the order book in 6 years
· Love2shop Business saw strong levels of new business growth in client numbers, increasing by 19% on prior year
· 49 new retail partners added across the Love2shop platforms, adding to appeal and breadth of choice for consumers, including Sports Direct, The Entertainer and B&M, and Trustpilot score increased to 4.8/5
· Building on the strong momentum in both Park Christmas Savings and Love2shop, integration work is already well underway, unlocking commercial revenue enhancements and continuing our focus on organisational alignment
· A small profit was generated in March 2023, before taking into account any acquisition related amortisation and financing costs. The business is of a seasonal nature where profit is primarily generated in Q3 of the financial year
**FY24**** STRATEGIC PRIORITIES**
Our strategic priorities have been refreshed for the FY24 financial year to reflect the expansion of our business and materially enhanced platform across the Group delivering sustainable, profitable growth and enhanced rewards for our shareholders.
*SHOPPING BUSINESS DIVISION*
*PRORITY 1 - **EMBED PAYPOINT GROUP AT THE HEART OF SME AND CONVENIENCE RETAIL BUSINESSES*
· Continue to enhance the retailer proposition, driving retention and delivering more opportunities to earn for retailer partners
· Launch next generation retail technology into PayPoint network
· Build on the strong momentum in Cards business, with a continued focus on sales and retention and the development of our SME proposition
· Begin the process to become a Payment Facilitator, bringing all new business under a single acquirer
*E-COMMERCE BUSINESS DIVISION*
*PRIORITY 2: BECOME THE DEFINITIVE TECHNOLOGY-BASED E-COMMERCE DELIVERY PLATFORM FOR FIRST AND LAST MILE CUSTOMER JOURNEYS*
· Deliver carrier expansion plans ahead of peak 2023 trading, including rolling out additional sites and volume for Amazon, DPD and Yodel
· Expand successful print in-store service to entire Collect+ store network
· Launch new Yodel Store to Store service for Vinted, building on excellent volume growth over last 12 months
*PAYMENTS & BANKING BUSINESS DIVISION*
*PRIORITY 3: **GROW INTEGRATED PAYMENTS PLATFORM ACROSS CARDS, DIRECT DEBIT AND OPEN BANKING*
· Drive further growth in our integrated payments platform, MultiPay, with a continued sector focus on housing, charities and local government
· Build on the strong momentum in Open Banking, working with OBConnect, to expand services for existing and new clients
· Reinforce PayPoint’s position as the leader in disbursement services for central and local government
*LOVE2SHOP** BUSINESS DIVISION*
*PRIORITY 4: REINFORCE LEADERSHIP POSITION IN GIFTING, REWARDS AND PREPAID SOLUTIONS*
· Strengthen Love2shop’s position as the market-leading, multi-retailer gifting provider
· Grow Park Christmas Savings billings, through enhanced marketing activity and launch of Super-Agent network across PayPoint retailer base
· Unlock further growth in Corporate business for Love2shop, leveraging the client base across PayPoint Group
· Accelerate technology development plans to enhance client integrations and capabilities
*PAYPOINT GROUP*
*PRIORITY 5: BUILDING A DELIVERY FOCUSED AND INCLUSIVE ORGANISATION*
· Complete successful integration of Love2shop and launch of Northern Hub
· Deliver secure and resilient technology platform and services to all partners and launch improvements to core billing/settlement systems
· Make further progress on our ESG approach across the enlarged business to deliver responsible and sustainable value for shareholders
· Continue our ‘Welcoming Everyone’ programme
· Execute with intensity and accountability
*KEY PERFORMANCE INDICATORS*
PayPoint Group has identified the following KPIs to measure progress of business performance:
*KPI* *Description, purpose and reference* *2022/23* *2021/22* *20**20**/**21*
*Overall performance*
Net revenue from continuing operations
(£ million) Revenue from continuing operations less commissions paid to retailers and Park Christmas agents and costs where the Group is principal for SIM cards and single retailer vouchers. This reflects the benefit attributable to the Group’s performance eliminating pass-through costs and is an important measure of the overall success of our strategy.
(See Financial review – ‘Overview’ on page 16) *12**8**.**9* *115.1* *97.1*
Underlying EBITDA
(£ million) This measures our earnings from continuing operations before interest, tax, depreciation and amortisation and exceptional items. This is an important measure as it is widely used by investors, analysts and other interested parties to evaluate profitability of companies
(See Financial review – ‘Overview’ on page 17) *6**1.**3* *58.2* *46.6*
Underlying profit before tax (profit before tax excluding adjusting items)
(£ million) Underlying profit before tax (profit before tax excluding adjusting items), provides a measure of the operational performance of the Group. This reflects the rebalancing of the business towards growth opportunities, the shift away from our legacy cash payments business and is an important measure of the overall success of our strategy.
(See Financial review – ‘Overview’ on page 16) *50.8* *48.0* *36.9*
Net corporate debt
(£ million) Net corporate debt represents cash and cash equivalents excluding cash recognised as clients’ funds, retailer partners’ deposits, and cash and voucher deposits, less amounts borrowed under financing facilities (excluding IFRS 16 liabilities). This shows how the Group is utilising its finance facilities to invest in growth, and will be an important measure of how the Group intends to deleverage over the next few years.
(See Financial review – ‘Group statement of financial position’ on page 22) *72.4* *43.9* *68.2*
Cash generation from continuing operations excluding exceptional items
(£ million) Profit before tax from continuing operations excluding exceptional items, tax, depreciation and amortisation, and adjusted for corporate working capital movements (excludes movement in clients’ funds, retailers’ deposits, and card and voucher deposits). This represents the cash generated by operations which is available for investments, capex, taxation and dividend payments.
(See Financial review – ‘Group Cash flow and liquidity’ on page 22) *62.**3* *53.9* *46.9*
*Shareholder returns*
Diluted earnings per share from continuing operations excluding adjusted items
(Pence) Diluted earnings per share excluding adjusting items (earnings from continuing operations excluding adjusting items) divided by the weighted average number of ordinary shares in issue during the year (including potentially dilutive ordinary shares). Earnings per share is a measure of the profit attributable to each share.
(See note 7 to the financial information on page 45) *6****.**3* *5**5**.**4* *4**3.4*
Dividends paid per share
(Pence)
(Group) Dividends (ordinary) paid during the financial year divided by number of ordinary shares in issue at reporting date. Dividends paid per share provides a measure of the return to shareholders.
(See Financial review – ‘Dividends’ on page 23) *34.6* *33.6* *31.2*
*Non-financial* Network stability
one-mile urban population cover
(%) Total urban population covered within a one-mile radius of a PayPoint site. This is monitored to ensure PayPoint are above our minimum SLA of 95%.
*99.3* *99.2* *99.4*
Network stability
five-mile rural population cover
(%) Total rural population covered within a five-mile radius of a PayPoint site. This is monitored to ensure PayPoint are above our minimum SLA of 95%. *98.5* *98.2* *98.3*
Retailer partner site churn
(%) The percentage of the retailer partner network, that on an annual basis, exits PayPoint. This is calculated by taking the number of retailers who exited PayPoint in the period (excluding suspended sites), divided by the average number of total UK retailer partner sites for the period. This helps track the movement in total UK retailer partner sites.
*7.2* *5.3* *3.6*
Employee engagement
(%) Measures the overall employee engagement, calculated by our survey provider. The survey provides insight into the health of our organisation, enabling the identification of what is important to our people so that appropriate action can be taken. *71.0* *72.0* *77.0*
*FINANCIAL REVIEW *
The completion of the acquisition of Appreciate Group plc (Appreciate) in February 2023 was the latest step in the three years of our transformation away from our traditional cash markets towards digital. Our Corporate activity started in April 2020 with the buyout of our JV partner in Collect+, our parcels business, then acquisitions of i-movo for digital vouchering, Handepay/Merchant Rentals for cards business and RSM2000 for Direct Debits. In addition, investments have been made in OBConnect, our Open Banking partner and Optus Homes in the Housing sector. PayPoint sold its Romanian business at the start of the prior year and that is the discontinued operations in the table below, the focus of the review therefore is on continuing operations.
The Appreciate acquisition is now referred to as our Love2shop (L2S) division and is reported as a separate segment. The financial review discusses the whole Group as well as the two segments so that shareholders can understand the one-month L2S impact separately from our historic PayPoint business which had another strong year.
2
*£m* *
*
*Year ended*
* 31 March *
*2023* Re-presented^40Year ended
31 March
2022 Change
%
PayPoint segment *160.1* 145.1 10.3%
Love2shop segment *7**.**6* - n/m
*Total revenue continuing operations* *16**7**.**7* 145.1 15.6%
PayPoint segment *125.5* 115.1 9.1%
Love2shop segment *3**.**4* - n/m
*Total net revenue** continuing operations* *12**8**.**9* 115.1 11.9%
PayPoint segment *(75.2)* (67.1) 12.1%
Love2shop segment *(**2**.**9**)* - n/m
*Total costs** continuing operations * *(78.**1**)* (67.1) 16.4%
PayPoint segment *50.3* 48.0 4.8%
Love2shop segment *0.5* - n/m
*Underlying p**rof**i**t before tax* *50.8* 48.0 5.8%
Adjusting items:
Amortisation of intangible assets arising on acquisition
*(2.6)*
(2.4)
8.3%
Exceptional items *(5.6)* 2.9 n/m
*Profit before tax** from continuing operations* *42.6* 48.5 (12.4)%
Profit before tax from discontinued operations *-* 30.0 n/m
*Profit before tax* *42.6* 78.5 n/m
Underlying EBITDA^41 *61.**3* 58.2 5.2%
Cash generation *62.3* 53.9 15.6%
Net corporate debt^42 *(72.4)* (43.9) 65.0%
Profit before tax from continuing operations of £42.6 million (2022: £48.5 million) decreased by £5.9 million (12.4%). The decrease reflects current year exceptional costs incurred of £5.6 million against the prior year exceptional income of £2.9 million.
The underlying profit before tax increased by £2.8 million (5.8%) to £50.8 million (2022: £48.0 million). This result includes £0.5 million profit on the Love2shop segment for one month. This is due to the seasonal nature of the business where profit is primarily generated in Q3 of the financial year. The historic PayPoint segment underlying profit before tax increased by £2.3 million (4.8%) to £50.3 million (2022: £48.0 million).
Total revenue from continuing operations increased by £22.6 million (15.6%) to £167.7 million (2022: £145.1 million). Net revenue from