PayPoint plc (the 'Company')
23 June 2016
Publication of Annual Report and Notice of 2016 Annual General Meeting
The Company has today published its Annual Report and Financial Statements for the year ended 31 March 2016 ('2016
Annual Report') on its website www.paypoint.com
In accordance with Listing Rule 9.6.1, the 2016 Annual Report and notice of Annual General Meeting will shortly be
available for public inspection on the National Storage Mechanism (NSM) - Morningstar (www.morningstar.co.uk/uk/nsm ).
The Company will hold its 2016 Annual General Meeting on Thursday, 28 July 2016 at 12 noon at the offices of
Canaccord Genuity, 88 Wood Street, London EC2V 7QR.
In addition, following the release on 26 May 2016 of the Company's preliminary results for the year ended 31 March
2016, which are also available at www.paypoint.com, the
Company makes the following additional disclosure in compliance with Rule 6.3.5 of the Disclosure and Transparency Rules of the UK
Financial Conduct Authority. Together these constitute the information required to be communicated to the media in unedited full
text through a Regulatory Information Service. This information is not a substitute for reading the full 2016 Annual Report and
Financial Statements.
Statement of directors' responsibilities
The directors are responsible for preparing the annual report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law, the
directors are required to prepare the group financial statements in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union and Article 4 of the IAS Regulation and have also chosen to prepare the parent company
financial statements under IFRS as adopted by the EU. Under company law, the directors must not approve the accounts unless they
are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company
for that period. In preparing these financial statements, International Accounting Standard 1 requires that directors:
- properly select and apply accounting policies;
- present information, including accounting policies, in a manner that provides relevant, reliable, comparable
and understandable information;
- provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to
enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position
and financial performance; and
- make an assessment of the Company's ability to continue as a going concern.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to
ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Responsibility statement
The directors confirm that to the best of their knowledge:
-
the financial statements, prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
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the Strategic Report includes a fair review of the development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal
risks and uncertainties that they face; and
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the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company's performance, business model and strategy.
The Annual Report on pages 1 - 57 was approved by the Board of Directors and authorised for issue on 26 May 2016
and signed on behalf of the Board by:
Nick Wiles, Chairman
Dominic Taylor, Chief Executive
Risks and uncertainties
| Risk area |
Potential impact |
Mitigation strategies |
Loss or inappropriate usage of data
|
The group's business requires the appropriate and secure use of consumer and other
sensitive information. Mobile telephone and internet-based electronic commerce requires the secure transmission of
confidential information over public networks, and several of our products are accessed through the internet. Fraudulent
activity, cyber-crime or security breaches in connection with maintaining data and the delivery of our products and services
could harm our reputation, business and operating results.
|
The group has established rigorous cyber security, anti-fraud and whistleblowing standards,
procedures, and recruitment and training schemes, which are embedded throughout its business operations. The group also
screens new employees carefully. Continued investments are made in cyber security infrastructure, including the significant
use of data and communications encryption technology, improvements in e-mail and web filtering and the introduction of
enhanced data leakage prevention tools. We have also developed plans as to how we would respond to a breach of security.
|
| Dependence upon third parties to provide data and certain operational services |
The group's business model is dependent upon third parties to provide operational services,
the loss of which could significantly impact the quality of our services. Similarly, if one of our outsource providers,
including third parties with whom we have strategic relationships, were to experience financial or operational difficulties,
their services to us would suffer or they may no longer be able to provide services to us at all, significantly impacting
delivery of our products or services.
|
The group selects and negotiates agreements with strategic suppliers and agents based on
criteria such as delivery assurance and reliability. Single points of failure are avoided, where practicable and economically
feasible. Controls are regularly reviewed and improved to minimise risk of retailer churn caused by financial loss to
retailers through fraudulent third party activity.
|
| Exposure to legislation or regulatory reforms and risk of non-compliance |
The group is largely unregulated by financial services regulators although in the UK we
have Payment Institution status, through PayPoint Payment Services Limited for prefunded cash payments to consumers. The
group's agents which offer money transfer on behalf of third party clients are licensed as Money Service Businesses by HMRC.
Our Mobile business is subject to Payment Card Industry Data Security Standards regulated by the card schemes. Regulatory
reform could increase the cost of the group's operations or deny access to certain territories in the provision of certain
services. Non-compliance with law, regulation, privacy or information security laws could have serious implications in cost
and reputational damage to the group.
|
The group's legal department works closely with senior management to adopt strategies to
educate legislature, regulators, consumer and privacy advocates and other stakeholders to support the public policy debate,
where appropriate, to ensure regulation does not have unintended consequences over the group's services. The group has in
place a business ethics policy which requires compliance with local legislation in all the territories in which the group
operates. A central compliance department co-ordinates all compliance monitoring and reporting. Subsidiary managing and
finance directors are required to sign annual compliance statements.
|
| Interruptions in business processes or systems |
The group's ability to provide reliable services largely depends on the efficient and
uninterrupted operation of our computer network systems, financial settlement systems, data and call centres, as well as
maintaining sufficient staffing levels. System or network interruptions, recovery from fraud or security incidents or the
unavailability of key staff or management resulting from a pandemic outbreak could delay and disrupt our ability to develop,
deliver or maintain our products and services, causing harm to our business and reputation and resulting in loss of customers
or revenue.
|
Comprehensive business continuity plans and incident management programmes are maintained
to minimise business and operational disruptions, including fraudulent activity, system failure or pandemic incidents.
Support arrangements have been established with third party vendors and there are strict standards, procedures and training
schemes for business continuity.
|
| Dependence on recruitment and retention of highly skilled personnel |
The ability of the group to meet the demands of the market and compete effectively is, to a
large extent, dependent on the skills, experience and performance of its personnel. Demand is high for individuals with
appropriate knowledge and experience in payments, IT and support services. The inability to attract, motivate or retain key
talent could have a serious consequence on the group's ability to service client commitments and grow our business. |
Effective recruitment programmes are on-going across all business areas, as well as
personal and career development initiatives. The executive management reviews talent potential twice a year and retention
plans are put in place for individuals identified at risk of leaving. Compensation and benefits programmes are competitive
and also reviewed regularly.
|
Technology change may render products obsolete
|
There are rapid changes in technology in the payments industry including the development of
new payment methods, particularly on smart phones and tablets, but also as a consequence of technology changes in other areas
e.g. smart meters, which will replace the use of the energy keys and gas cards currently used to pay for prepaid energy. Such
changes may render current and new products, such as the PayPoint One new terminal currently being rolled out, and services
obsolete.
|
IT development resource is directed at a group level and developments are in hand to ensure
the group has relevant products in place to meet the demands brought about by changing technology. For smart meters, a
multi-channel product has been developed and launched.
|
| Exposure to materially adverse litigation |
The group contracts with a number of large service organisations for which it provides
services essential to their customers. Failure to perform in accordance with contractual terms could give rise to litigation.
|
The group seeks to limit exposure in its contracts. Mitigating actions are taken where
contractual exposures are above the norm, including insurance coverage, where appropriate and economically sustainable.
|
| Exposure to country and regional risk (political, financial, economic, social) in
North America, United Kingdom, Romania, France and Ireland |
The group's geographic footprint subjects its businesses to economic, political and other
risks associated with international sales and operations. A variety of factors, including changes in a specific country's or
region's political, economic or regulatory requirements, as well as the potential for geopolitical turmoil, including
terrorism and war, could result in loss of services, prevent our ability to respond to agreed service levels or fulfil other
obligations. These risks are generally outside the control of the group.
|
The group's portfolio is diversified by geography, by product, by sector and by client in
order to protect itself against many of these fluctuations, especially those that are restricted to individual territories
and market sectors, although the bulk of its operations and revenues are UK based.
|
| Exposure to consolidation among clients and markets |
Consolidation of retailers and clients could result in reductions in the group's revenue
and profits through price compression from combined service agreements or through a reduced number of clients.
|
No single client accounts for more than 6.0% of the group's net revenue, and no single
retailer accounts for more than 4.7% of the group's net revenue, which reduces the probability of this potential risk having
a significant impact on the group's business. In addition, the group continues to expand its developing businesses, and in
CashOut (reversing the flow of money through its retail networks).
|
Acquisitions may not meet expectations
|
The group's acquisitions, strategic alliances and joint ventures may result in financial
outcomes that are different than expected. The net sale proceeds from the proposed sale of the mobile payments business may
not exceed its carrying value.
As a consequence of a proposal by Yodel, our joint venture partner in Collect+, to increase its charges to the joint venture
we are in discussions over the future of the joint venture.
|
The group assesses all acquisitions rigorously, using both in-house experts and
professional advisers. In addition, the group conducts regular reviews to monitor performance.
|
Exposure to the unpredictability of financial markets (foreign exchange,
interest rate and other financial risks)
|
As the group operates on an international basis, it is exposed to the risk of currency
fluctuations and the unpredictability of financial markets in which it operates.
|
The group's financial risk management seeks to minimise potentially adverse effects on the
group's financial performance.
|
| Exposure to increasing competition |
The group operates in a number of geographic, product and service markets that are highly
competitive and subject to technological developments for example the introduction of smart meters and new payment solutions.
Competitors may develop products and services that are superior to ours or that achieve greater market acceptance than our
products and services, which could result in the loss of clients, merchants and retailers or a reduction in revenue.
|
The group is committed to continued research and investment in new data sources, people,
technology and products to support its strategic plan.
|
| Loss or infringement of intellectual property rights |
The group's success depends, in part, upon proprietary technology and related intellectual
property rights. Some protection can be achieved but in many cases, little protection can be secured. Third parties may claim
that the group is infringing their intellectual property rights or our intellectual property rights could be infringed by
third parties. If we do not enforce or defend the group's intellectual property rights successfully, our competitive position
may suffer, which could harm our operating results.
|
The group, where appropriate and feasible, relies upon a combination of patent, copyright,
trademark and trade secret laws, as well as various contractual restrictions, to protect our proprietary technology and
continues to monitor this situation. The group also vigorously defends all third party infringement claims.
|
| Data centre security breaches |
The group is highly dependent on information technology networks and systems to process,
transmit and store electronic information. Fraudulent or unauthorised access, including security breaches of our data
centres, could create system disruptions, shutdowns or unauthorised disclosure of confidential information.
|
The group's data centres are protected against physical break-ins. The group has strict
standards and procedures for security and fraud prevention.
|
- ends -
Enquiries:
Susan Court
Company Secretary, PayPoint plc
Tel: +44 (0)1707 600300
ABOUT PAYPOINT
We support market leading national networks across 39,000 convenience stores in the UK and Romania so that our
customers are always close to a PayPoint store. In thousands of locations, as well as at home or on the move, people use us better
to control their household finances, essential payments and in-store services, like parcels. Our UK network contains
more branches than all banks, supermarkets and Post Offices together, putting us at the heart of communities for over 10 million
regular weekly customers.
We have a proven track record of decades of tech-led innovation, providing retailers with tools that attract customers into their
shops. Our industry-leading payments systems give first class service to the customers of over 1,500 clients - utility companies,
retailers, transport firms and mobile phone providers, government and more.
We are on and offline; providing for payments by cash, card including contactless; retail, phone and digital; at
home, work and whilst out and about from Land's End to the highlands and islands - helping to keep modern life moving.
Multichannel payments
We offer clients streamlined consumer payment processing and transaction routing in one, seamlessly integrated solution, through
MultiPay. This gives customers the flexibility to pay in the way that best suits them; including mobile app, online, text,
phone/IVR and cash in-store.
MultiPay is live with Utilita, a fast growing challenger energy supplier. We have signed several other energy
companies, a framework agreement with Procurement for Housing and, significantly, Scottish and Southern Energy, our first Big 6
energy client
Retail networks
In the UK, our network includes over 29,000 local shops including Co-op, Spar, Sainsbury's Local, Tesco Express and thousands of
independent outlets. These outlets are quick and convenient places to make energy meter prepayments, bill payments, benefit
payments, mobile phone top-ups, transport tickets, TV licences, cash withdrawals and more.
Our Romanian network continues to grow profitably. We have more than 10,200 local shops, helping people to
make cash bill payments, money transfers, road tax payments and mobile phone top-ups. Our clients include all the major utilities
and telcos and many other consumer service companies.
In the UK, our Collect+ joint venture with Yodel offers parcel drop-off and pick-up services in nearly 6,000
convenience stores. Customers use Collect+ to handle parcels from major retailers including Amazon, eBay, ASOS, New Look, John
Lewis, House of Fraser, M&S and Very.
The UK network also includes over 4,200 LINK branded ATMs, and 10,000 of our terminals enable retailers to accept
debit, credit and contactless payments, including Apple Pay.
We operate over 3,000 Western Union agencies in the UK and Romania for international and domestic money
transfers.
This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions
clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: PayPoint plc via Globenewswire
HUG#2022733