03/08/2005
PayPoint is a payment collection network used for the cash payment of bills, as well as pre-payments for mobile phones and energy meters. Fronted by chief executive Dominic Taylor, the company offers investors excellent cashflows, rising margins and rapid growth across a swathe of sectors.
PayPoint floated on the Full List with a £30 million funding at 192p last year. Historically, it has collected payments through its network of retail agents for water companies, British Gas and BT. Today, the client base includes UK energy, cable and mobile phone companies, as well as water companies and local authorities.
'We are contracted to pretty much all of them,' says Taylor, 'and I am excited about this whole business. We have grown entirely organically to date, and there is plenty more organic growth to go for.'
Currently, roughly 16,000 outlets use PayPoint's systems, including 13,100 retail outlets with dedicated terminals and 3,000 outlets with EPOS connections to its systems. The company's retail agents include newsagents, supermarkets and off-licences, with multiples such as Londis, Somerfield and Costcutter accounting for half the retail agency network. PayPoint provides the technology, the training and the merchandising free of charge. Retailers earn commissions for each payment taken.
Over 95 per cent of UK households are situated within one mile (in urban areas) or five miles (in rural areas) of one of the group's retail agents. Adding more thrust to growth prospects, PayPoint recently joined LINK as an independent ATM deployer.
Last year to March was exceptionally strong, with turnover sparking up 29 per cent to £36.9 million. That was ahead of forecasts, as terminal numbers rose 15 per cent. Gross margins nudged up from 29 per cent to 31 per cent and pre-tax profits, after exceptional items, rose from £6 million to £8.1 million (pre-exceptional profits were £12.6 million). Improved operating cashflow of £17.4 million (£12.5 million) reflected strong conversion of profit to cash.
Taylor flagged up strong transaction growth across all sectors. General payment volumes benefited from the continuing decline in Post Office branches, new contracts and rising energy prices. Growth in mobile top-ups was driven by network operators migrating from paper vouchers to electronic systems.
'We never operated in the paper environment,’ says Taylor. ‘As operators migrated over, it really affected our rate of growth.’ He is also keen to point to progress at the ATM business, where about 50 new machines are being rolled out per month.
Taylor plans to broaden the range of payments across a growing network of retailers, drive up usage levels and cast an eye overseas, too. This year, investors might expect a jump in profits from £12.6 million to £14.5 million, giving earnings of 18.1p. That should be followed by £16.8 million and 17.2p the following year. PayPoint trades on forward earnings multiples of 14.4 and 15.2. Given growth prospects, a higher rating would not be hard to justify.
| LSE | £323.64m |
478.00p
|
-11.00p
|
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