Paypoint IMS

Provides clients with specialist consumer payment transaction processing and settlement across a wide variety of markets: (energy pre and post-payment, telecoms, housing, water, transport, e-commerce, parking and gaming) through its retail networks, internet and mobile phone channels. I have a holding in my income portfolio (epic code: PAY).

Paypoint released their third quarter IMS today declaring that transactions processed for the quarter were 216.9m, up 5.5% and revenues of £58 million were up 2% on last year. 

 

UK and Irish bill and general transactions were up 1% on last year. 

 

Retail services transactions (ATMs, debit/credit cards, parcels, money transfer and mobile phone SIM cards) up 29% on last year. 

 

Mobile top-ups continued to decrease as the prepaid mobile sector declined.  

 

The number of UK & Irish retail sites at 31 December numbered 28,292, up by 295 since the half year end. 

 

Romania, continued with its profitable growth and had 9,024 sites an increase of 268 in the quarter. 

 

Collect+ ( the JV with Yodel) saw volumes increase by 37% to over 5.8m transactions and the network increased by 205 sites to 5,822 in the quarter.

 

Mobile and Online transactions increased by 9% to 36.5m in the period, although net revenues in the quarter were lower than last year.

 

Net cash at 31 December was £28m, after payment of the interim dividend of £8.4m in the period, compared to £25m at 30 September 2014.

 

Of some concern the company stated that HMRC had issued a ruling, that is effective  from 1 March 2015, that renders some services partially exempt for VAT; which means that on related costs the VAT would be irrecoverable.  The ruling would cost the company between £1m and £2m .

Commenting on the outlook for the year chief executive Taylor said: "We expect to deliver results for the full year to March 2015 within the range of market expectations..."

 

Although outside of their control, it was disappointing news on the VAT ruling, but despite that, they still expect to be within the range of analysts' estimates, which I make 55.4p to 57.5p EPS.  Even at the lower part of this range it would still give adequate cover to an expected 38p dividend, a yield of 4.5% on today's reduced price of 837 (down 4.1%).  Reasonable value for a highly cash generative business paying out a growing dividend, assuming you can stomach the continual drag, on about a third of their revenues, from the mobile top-ups business.