Released: 18/06/2009
com:20090618:RnsR0852U
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RNS Number : 0852U
Payzone plc
18 June 2009
18 June, 2009
Payzone plc ("Payzone" or the "Company")
Interim results for the six months ended 31 March 2009
Payzone announces the Company's interim results for the six months ended 31
March 2009.
HIGHLIGHTS
The group has performed well in challenging and changing markets:
Financial
* Pro forma EBITDA up 8% to E20.3m1
* Revenues for the period were E583m2
* Losses before tax for the period of E7m3
* Goodwill impairment charges of E77m
* Cash balances of E30.3m at 31 March 2009
* Payzone has instigated discussions with its finance providers to establish a
more appropriate long-term capital structure
Operational
* Disposal of French, Italian and Spanish businesses for gross consideration of
E20m
* Profitability of UK ATM business increased three-fold following various
operational improvements
* Operating costs of Payzone UK business reduced by 26%
* Group central costs reduced by 23%
* Transaction volumes in Romanian and Greece increased by 7% and 21%
respectively
* Disposal of Open Loop Gift business
* Network of electronic point-of-sale terminals and ATMs now numbers 136,300
Mike Maloney, Payzone's chief executive, said:
"Payzone has responded to a weak economy by vigorously restructuring its
businesses. By taking out cost and eliminating losses, the group has been able
to improve pro forma EBITDA, adjusted for disposals, currency and certain
special items, by 8% to E20.3m. This is a significant achievement when
transaction volumes have been affected by poor consumer sentiment.
"Payzone will need to continue to respond quickly and aggressively to the
operating challenges presented by the macroeconomic environment. The immediate
goal is for the company to establish a more appropriate capital structure, and
we look forward to achieving a satisfactory outcome from the current discussions
with our banks and other finance providers."
1. The pro forma figures compare the results for Payzone's continuing operations
in the six months to 31 March 2009 and in the six months to 31 March 2008. The
merger that created Payzone was completed in December 2007. This comparison also
excludes the effects of currency translation and certain special items
2. Excluding discontinued operations in Spain, France and Italy
3. Before impairment charges of E77m and intangible amortisation costs of E7m
Contacts
Payzone
Tel: + 353 1 207 6000
Mike Maloney / Nigel Bell
Media Enquiries
Powerscourt
Tel: +44 20 7250 1446
Paul Durman /Rory Godson
Chairman's statement
Introduction
I am pleased to report the results for Payzone plc for the 6 months period ended
31 March 2009.
Since Payzone was formed from the "merger" of Cardpoint plc ("Cardpoint") and
alphyra Holdings Limited ("alphyra") in December 2007, the Group's management
has had to respond to a deteriorating economic climate. The weakening of
consumer sentiment across Europe has had an impact on transaction volumes in
both our mobile phone top-up and ATM businesses.
Despite these challenges, Payzone's management has restructured the business to
limit the impact on group EBITDA, which increased 8% to E20.3 million on a
pro-forma basis (i.e. six months trading for both businesses), after adjusting
for disposals, currency translation effects and certain special items. Payzone's
Board regards this as a significant achievement which demonstrates the
resilience of our business in a market that has experienced declines in revenues
from mobile phone top-ups and ATM transactions.
Since the merger, Payzone has restructured its Board and operational management
team, realised cost synergies through the consolidation of operational
facilities in the UK and Germany, and continued the development of new products
and services for distribution across the Group's network.
In addition, we have re-branded the services offered by the legacy alphyra
business as "Payzone" and the Cardpoint business as "Cashzone". The Payzone
service involves the deployment and management throughout Europe of a terminal
distribution network which processes a variety of electronic transaction
services. The main products on the network include mobile phone top-up, utility
top-up, bill payment solutions, electronic gift vouchers and Electronic Funds
Transfer (EFT) processing. The Cashzone business deploys branded independent
ATMs in the convenience sector in both the UK and Germany.
The Board remains committed to establishing a more appropriate long-term capital
structure for the Company. As disclosed in March 2009, Payzone has instigated
discussions with its finance providers with that end in mind. These discussions
are expected to result in changes to the Company's financing arrangements.
Payzone will provide a further update as soon as practicable.
International Financial Reporting Standards
The results for the six months to 31 March 2009 are presented under
International Financial Reporting Standards ("IFRS") as required under the AIM
Rules for Companies.
Under IFRS the "merger" was accounted for as a reverse acquisition. As Cardpoint
has the power to govern the financial and operating policies of Payzone, it was
deemed to be the "acquirer" of alphyra and Payzone. Therefore the comparative
figures presented reflect six months trading from the Cardpoint businesses to 31
March 2008 and include the results from the Alphyra businesses since 5 December
2007. Payzone has elected to present its financial statements in euro.
Trading and profitability
Total revenues for the period were E583 million compared to revenues for the
same period in 2008 of E424 million. These figures exclude revenues from
discontinued operations following the disposal of our businesses in Spain,
France and Italy in October 2008. Revenues in 2008 only included the alphyra
businesses from the date of the merger 5 December 2007, i.e. four months. On a
pro forma basis revenues (excluding discontinued revenues) were 8% lower for the
six month period ended 31 March 2009 compared to the prior period.
Group EBITDA before special items increased by 24% to E20.3 million in the
period. On a pro-forma basis EBITDA decreased by 1%. Excluding the translation
effect of foreign exchange (both Sterling and Romanian Ron declined compared to
the same period last year) EBITDA increased by 8%.
Through the first half of the 2009 financial year each of the Group's businesses
has been focused on improving profitability and cash generation. In our Irish
and UK operations this has involved the relocation and removal of certain
loss-making mobile phone top-up terminals and ATMs to more profitable, high
footfall locations. The removal of such terminals and ATMs, along with lower
consumer spending driven by the worsening economic environment, has seen our
mature markets experience revenue declines year-on-year. Despite the
deteriorating macroeconomic environment, the renewed strategic focus of the
business has had positive results in the period with both the gross margin and
EBITDA margin improving by 2% and 5% respectively in the UK and Ireland segment.
The re-focused strategy in our UK mobile phone top-up and utility distribution
business has led to the rationalisation of certain non-core activities, reducing
the operating cost base by 26% in the period. Despite the UK experiencing a
decline in mobile phone top-up transaction volumes of 6%, utility and bill
payment transactions have increased 11% in the period.
Our UK ATM business has benefited significantly from operational improvements.
The business has had a renewed focus on profitable locations with the removal of
840 loss-making machines. The removal of such loss-making machines, along with a
market driven decline in withdrawal volumes, has led to a 31% decline in
revenues in the period. However, the refocused operations-led strategy has led
to a significant improvement in profitability with the gross margin and EBITDA
margin increasing by 2% and 8% respectively in the period. Total EBITDA
contribution from this business is three times greater than the same period last
year.
Our Irish business has had the benefit of launching new products onto its
distribution network such as prepaid motorway tolling and bill payment. Despite
the fall in mobile phone top-up transaction volumes the introduction of these
new differentiating products has helped improve the gross margin by 4% in the
period.
Our Northern European business, which includes Germany, the Netherlands and
Sweden, has experienced a decline in consumer demand which has led to lower
transactions in the period ended 31 March 2009 versus the same period last year.
However, the business has maintained its gross margin percentage by compensating
mobile phone top-up declines with growth in other revenues such as EFT and
cost-restructuring programs which have included the outsourcing of certain
operations.
Revenues in our Southern European business were up 33% on the same period last
year. This increase was driven by the migration of mobile phone top-up from
physical distribution to electronic, the rollout of new terminals and the launch
of bill payment and prepaid services. These developments increased transaction
volumes by 21% and 7% in our Greek and Romanian businesses respectively.
Management focus on central costs and restructuring through product
rationalisation has led to a reduction in central overheads by 23%.
Payzone conducted a goodwill impairment review as at 30 September 2008 which led
to an impairment of E149 million, and a charge was made in the full-year
accounts to write down the carrying value of goodwill to its recoverable value.
A further goodwill impairment review was carried out as at 31 March 2009. The
carrying value of goodwill was calculated to exceed its recoverable amount by
E77 million, and this amount has also been written off as an additional
impairment charge in the interim accounts. The recoverable amount of goodwill
was calculated based on its value-in-use which employs a discounted cashflow
model.
Losses before tax for the period were E7 million before impairment charges of
E77 million and intangible amortisation costs of E7M.
Finance costs include all debt interest costs for the period. These include
special items which include costs in relation to the restructuring of the
Company's debt and, in our comparatives, the termination of Cardpoint's banking
facilities and restructuring of the Company's debt (following the merger).
The Group has performed well in a challenging and changing market and continues
to be underpinned by merchant and operator contracts. Our terminal estate, which
includes electronic point of sale (EPOS) and ATMs, totalled 136,300 at the end
of March 2009. Our terminals are located at a variety of convenience locations
throughout the UK and Europe. In Ireland and the UK we continue to expand our
product offerings through new product launches such as motorway tolling. EFT,
prepaid parking and prepaid utilities, all of which are expected to contribute
to future profitability. In Northern Europe we are increasing our market share
through product enhancements and new merchant contracts. Southern European
growth is still largely driven by market share growth through terminal estate
and product expansion as well as the migration of mobile phone top-up from
physical cards to electronic distribution.
Disposals
On 8 October 2008 Payzone announced the disposal of its French, Italian and
Spanish businesses for a total gross consideration of E20 million. Of this sale
price E13.2 million was payable in cash and E6.5 million comprised of the
assignment of financial guarantees. The purchasing Company was LCom, a 100%
subsidiary of Proximania, which is a publicly quoted French company specialising
in airtime product distribution. The funds were partially used to set against
the Company's debt.
The disposal of these Payzone subsidiaries fits with our strategy of focusing on
markets where Payzone had both a strong market presence and growth potential
from offering new services.
We continue to regularly examine all subsidiaries to determine their strategic
fit within the Payzone Group and to ensure that we allocate resources to the
markets where we anticipate optimal returns. Consequently certain non core
assets have been classified as held for resale.
Growth
The Group's strategy for growth continues to be that of growing transaction
volumes organically through improving the quality of deployment and offering a
broader range of products across our existing distribution network. We continue
to invest in our core businesses in mobile phone top-ups and electronic payments
that have demonstrated robust profitability and which can drive growth. There
will be a continued focus in exiting and re-negotiating legacy loss-making
contracts as well as the evaluation of outsourcing or in-sourcing of certain
activities to bolster profitability for both the ATM and mobile phone top-up
terminal estates.
Cashflow and borrowings
As reported on 12 March 2009, given the continued challenging market conditions
being experienced by the Group's businesses, the Company instigated discussions
with its finance providers covering a range of financing options with a view to
establishing a more appropriate long term capital structure for the Company.
These discussions continue and are expected to result in changes to the
Company's existing arrangements.
Management structure
There were no changes to the Board during the period.
The Board has met on a regular basis throughout the period to assess and direct
the Company through the current operational and financing activities.
Outlook
We remain focussed on maintaining the financial stability and profitability of
the Company and are confident that, in conjunction with Payzone's various
stakeholders, we can achieve a successful outcome from the ongoing restructuring
activities.
The management team has made a significant contribution to improving the
stability of the Group through restructuring the cost base of the business.
Despite some progress there remain challenges in our key markets as the
macroeconomic environment has continued to deteriorate. The various
restructuring activities which have included cost-cutting, pricing changes and
business rationalisation have helped mitigate the majority of these downward
pressures, but the business will need to continue to anticipate and change in
line with the operating environment.
We are grateful to our shareholders for supporting the Company during a
difficult period. We are especially grateful to the management and staff who
have also shown great commitment through the first half of 2009.
CONSOLIDATED UNAUDITED INCOME STATEMENT
Six Months Ended 31 March 2009
6 months to 6 months to 12 months to
31 March 31 March 30 September
2009 2008 2008
Notes E'000 E'000 E'000
Revenue 583,303 423,899 1,015,153
Cost of sales (543,873) (389,229) (931,943)
Gross profit 39,430 34,670 83,210
Administrative expenses - excluding
amortisation of intangible assets and (32,270) (28,548) (65,542)
special items
Administrative expenses - special items 6 (75,757) (153,667) (178,799)
Administrative expenses - amortisation
of intangible assets (7,164) (4,690) (15,218)
Administrative expenses (115,191) (186,905) (259,559)
Operating loss (75,761) (152,235) (176,349)
Finance income 1,123 139 1,374
Finance costs - excluding special items (15,410) (10,406) (25,697)
Finance costs - special items 7 (456) (2,818) (4,286)
Finance costs (15,866) (13,224) (29,983)
Share of losses of associates (408) (526) (1,162)
Loss before taxation (90,912) (165,846) (206,120)
Income tax (charge)/credit (23) 322 2,186
Loss for the period from continuing (90,935) (165,524) (203,934)
operations
Discontinued operations
Loss from discontinued operations (871) (925) (1,990)
Loss retained for the financial period (91,806) (166,449) (205,924)
Profits attributable to minority interest 71 110 462
Attributable to equity holders of the parent (91,877) (166,559) (206,386)
Basic and diluted loss per share (cent per share) 8 (21c) (89c) (67c)
CONSOLIDATED UNAUDITED BALANCE SHEET
As at 31 March 2009
As at As at As at
31 March 31 March 30 September
2009 2008 2008
Notes E'000 E'000 E'000
Assets
Non-current assets
Property, plant and equipment 36,846 83,569 71,992
Goodwill and intangible assets 147,158 316,178 303,323
Investment in associated companies - 640 -
Derivative financial instrument and available for sale
financial assets - 124 697
Deferred tax 418 1,457 572
Total non-current assets 184,422 401,968 376,584
Current assets
Inventories 6,008 24,160 18,782
Trade and other receivables 46,990 87,207 91,636
Restricted cash 15,295 13,154 17,072
Cash and cash equivalents 11 30,299 24,762 43,348
Total current assets 98,592 149,283 170,838
Assets of disposal groups held for sale 102,519 - 30,044
Total assets 385,533 551,251 577,466
Current liabilities
Borrowings 9 (291,868) (291,171) (14,951)
Trade and other payables (117,439) (192,096) (199,701)
Current tax liabilities (286) (1,233) (1,267)
Provisions (383) (15,442) (7,833)
Total current liabilities (409,976) (499,942) (223,752)
Liabilities of disposal groups held for sale (61,465) - (21,041)
Non-current liabilities (471,441) (499,942) (244,793)
Deferred tax liability (9,684) (18,540) (16,914)
Borrowings 9 (839) (1,971) (278,462)
Provisions (2,524) (5,343) (6,993)
Derivative financial instrument (5,387) (902) -
Total non-current liabilities (18,434) (26,756) (302,369)
Total liabilities (489,875) (526,698) (547,162)
Net assets (104,342) 24,553 30,304
CONSOLIDATED BALANCE SHEET - continued
As at 31 March 2009
As at As at As at
31 March 31 March 30 September
2009 2008 2008
Note E'000 E'000 E'000
Equity
Called up share capital 10 6,003 4,263 6,003
Share premium account 10 346,520 314,886 346,840
Reverse acquisition reserve 10 12,036 12,036 12,036
Hedging reserve 10 (5,387) (902) 573
Translation reserve 10 (64,556) (37,938) (27,881)
Retained (losses) 10 (399,646) (268,057) (307,884)
Equity attributable to equity holders of the parent (105,030) 24,288 29,687
Minority interest 10 688 265 617
Total equity (104,342) 24,553 30,304
CONSOLIDATED UNAUDITED CASH FLOW STATEMENT
Six Months Ended 31 March 2009
Six months Six months Year
ended ended ended
31 March 31 March 30 September
2009 2008 2008
Notes E'000 E'000 E'000
Cash (outflow)/inflow from continuing
operating activities
Loss before taxation (90,912) (165,846) (206,120)
Depreciation of property plant and equipment 13,179 12,017 22,996
Amortisation of intangible assets 7,164 4,690 15,218
Goodwill impairment 76,531 143,081 149,173
Share of losses for associates 408 526 1,162
Finance income (1,123) (139) (1,374)
Finance costs 15,866 13,224 29,983
Loss on sale of property, plant and equipment (1,859) - (78)
(Profit) on business closures and disposals (3,665) - -
Share based payment expense 115 3,840 3,840
15,704 11,393 14,800
Net Cash (outflow)/inflow from discontinued (871) (114) 24
operations
Operating cashflows before movements
in working capital and provisions 14,833 11,279 14,824
Decrease in inventories 2,008 4,402 8,247
Decrease/(increase) in receivables 19,092 1,159 (15,376)
(Decrease) in payables (31,726) (45,095) (2,640)
(Decrease)/increase in provisions (5,557) 14,192 4,892
Cash (outflow)/inflow from operating activities (1,350) (14,063) 9,947
Income tax paid (911) (189) (738)
Interest paid (11,393) (10,169) (26,315)
Net cash flow (used in) operating activities (13,654) (24,421) (17,106)
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired - 10,982 10,982
Acquisition of property, plant and equipment (6,042) (3,069) (16,771)
Acquisition of intangible assets (1,908) (3,133) (4,320)
Funding of associate - - (1,100)
Payments in relation to closure of business (419) - -
Proceeds from sale of subsidiaries, net of 7,376 - -
cash disposed of
Proceeds from sale of property, plant and equipment - - 295
Proceeds from sale of financial asset 2,072 - -
Interest received 1,123 139 1,374
Net cash flow from/(used in) investing activities 2,202 4,919 (9,540)
Cash flows from financing activities
Proceeds from issuance of ordinary shares, net of costs (338) 9,251 42,948
Proceeds from issuance of preference shares - - 5,323
Repayment of borrowings (15,235) (267,648) (283,771)
Proceeds from borrowings 12,800 290,981 295,000
Net cash flow (used in)/from financing activities (2,773) 32,584 59,500
CONSOLIDATED UNAUDITED CASH FLOW STATEMENT - continued
Six Months Ended 31 March 2009
Six months Six months Year
ended ended ended
31 March 31 March 30 September
2009 2008 2008
Notes E'000 E'000 E'000
Net (decrease)/increase in cash and cash (14,225) 13,082 32,854
equivalents
Cash and cash equivalents at beginning of period 44,252 12,440 12,440
Exchange gains and losses on cash and cash (1,565) (760) (1,042)
equivalents
Cash and cash equivalents at end of period 11 28,462 24,762 44,252
CONSOLIDATED UNAUDITED STATEMENT OF RECOGNISED INCOME AND EXPENSE
Six Months Ended 31 March 2009
Six months Six months Year
ended ended ended
31 March 31 March 30 September
2009 2008 2008
E'000 E'000 E'000
Exchange differences on translating foreign operations (36,675) (37,412) (27,355)
Cash flow hedges (5,960) (1,206) 269
Net loss recognised directly in equity (42,635) (38,618) (27,086)
Loss for the period (91,806) (166,449) (205,924)
Total recognised income and expense for (134,441) (205,067) (233,010)
the period
Attributable to:
Equity holders of the parent (134,512) (205,177) (233,472)
Minority interest 71 110 462
Total recognised income and expense for (134,441) (205,067) (233,010)
the period
NOTES TO THE FINANCIAL INFORMATION
1 Going concern
This financial information has been prepared on a going concern basis. The
validity of this assumption is dependent on the group achieving operating
profitability for the years ending 30 September 2009 and 30 September 2010 and
the continued support of the group's bankers.
During the period ended 31 March 2009 the group incurred a loss (after
impairment charges) of E91,877K (2008: E166,559K). At the period end the group
has cash and cash equivalents of E30,299K (2008: E24,762K).
The directors have reviewed the forecast trading results of the group for a
period of three years from the date of approval of this financial information.
The directors recognise that there are significant external factors which could
negatively impact on trading performance and cash flow generation during that
period.
The business has seen and, indeed, anticipated in its planning some softening in
demand for prepaid mobile phone top-ups in some of its markets. In the current
economic climate this softening could accelerate. In addition the business has
seen some tightening of credit from suppliers which it has been able to absorb.
Further tightening of credit would put additional pressure on cash flow. The
depreciation in the value of Sterling has had an impact given that a large
proportion of cash flow is generated in the UK.
However, the directors believe that the Group operates robust business models
across its divisions, which are strongly cash generative. Furthermore the
directors are satisfied that management has already taken and will continue to
take steps to allow the group to achieve operating profitability notwithstanding
the current economic climate. In addition the Group has various mechanisms and
opportunities to ensure that it can react to changes in the geographic
territories in which it operates. These include:
* Redeploying profit generating assets
* Leveraging IT efficiencies across the Group
* Further reducing variable costs
* Disposal of businesses not considered a strategic fit for the group
The directors are satisfied that in view of the group's existing bank
relationships, the expected trading and disposal program, and the associated
cash flow performance, the Group should have the necessary resources to meet its
expected financial obligations. Accordingly, they believe it is appropriate for
the financial statements to be prepared on a going concern basis.
2 General information
The principal activity of Payzone Plc and its subsidiary undertakings (the
group) is the deployment of a network of Payzone owned terminals and ATM
machines, which process a variety of electronic transaction services. The main
products on the network include electronic phone top up, utility top up, EFT
processing and ATM cash withdrawal. The group operates in 18 countries across
Europe, with the group headquarters based in Dublin. There are circa 700 people
employed within the group.
The company is a public limited liability company incorporated and domiciled in
the Republic of Ireland. The address of its registered office is 4 Heather Road,
Sandyford Industrial Estate, Dublin 18.
The company has its primary listing on the AIM stock exchange in London.
3 Basis of preparation
This financial information has been prepared in accordance with the group's
accounting policies under IFRS. Full details of the accounting policies adopted
by the group are set out in note 5. The accounting policies are those that will
be applied in preparing the financial statements for the year ending 30
September 2009.
The preparation of this financial information in conformity with IFRS requires
the use of certain critical accounting estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
reporting period and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on management's best
knowledge of the amount, events or actions, actual results ultimately may differ
from those estimates. The areas involving a high degree of judgement or
complexly, or areas where assumptions and estimates are significant to the
financial report are disclosed in note 4.
This financial information is for the six months ended 31 March 2009.
The following provides a brief outline of the likely impact on future financial
statements of relevant IFRS which have not been early adopted in this financial
information:
IFRS 8 - Operating segments (effective for accounting periods beginning on or
after 1 January 2009). IFRS 8 sets out the requirements for disclosure of
financial and descriptive information about an entity's operating segments and
also about the entity's products and services, the geographical areas in which
it operates, and its major customers. The IFRS replaces IAS 14 Segment
Reporting. The expected impact is still being assessed in detail by management,
but it appears likely that the manner, in which the segments are reported, will
change in a manner that is consistent with the internal reporting provided to
the chief operating decision-maker. The Group will apply IFRS 8 from 1 October
2009.
IAS 23 - (Amendment), Borrowing Costs (effective for annual periods beginning on
or after 1 January 2009). The Amendment to IAS 23 requires that an entity shall
More to follow, for following part double-click [nRn2R0852U] .
RNS Number : 0852U
Payzone plc
18 June 2009
18 June, 2009
Payzone plc ("Payzone" or the "Company")
Interim results for the six months ended 31 March 2009
Payzone announces the Company's interim results for the six months ended 31
March 2009.
HIGHLIGHTS
The group has performed well in challenging and changing markets:
Financial
* Pro forma EBITDA up 8% to E20.3m1
* Revenues for the period were E583m2
* Losses before tax for the period of E7m3
* Goodwill impairment charges of E77m
* Cash balances of E30.3m at 31 March 2009
* Payzone has instigated discussions with its finance providers to establish a
more appropriate long-term capital structure
Operational
* Disposal of French, Italian and Spanish businesses for gross consideration of
E20m
* Profitability of UK ATM business increased three-fold following various
operational improvements
* Operating costs of Payzone UK business reduced by 26%
* Group central costs reduced by 23%
* Transaction volumes in Romanian and Greece increased by 7% and 21%
respectively
* Disposal of Open Loop Gift business
* Network of electronic point-of-sale terminals and ATMs now numbers 136,300
Mike Maloney, Payzone's chief executive, said:
"Payzone has responded to a weak economy by vigorously restructuring its
businesses. By taking out cost and eliminating losses, the group has been able
to improve pro forma EBITDA, adjusted for disposals, currency and certain
special items, by 8% to E20.3m. This is a significant achievement when
transaction volumes have been affected by poor consumer sentiment.
"Payzone will need to continue to respond quickly and aggressively to the
operating challenges presented by the macroeconomic environment. The immediate
goal is for the company to establish a more appropriate capital structure, and
we look forward to achieving a satisfactory outcome from the current discussions
with our banks and other finance providers."
1. The pro forma figures compare the results for Payzone's continuing operations
in the six months to 31 March 2009 and in the six months to 31 March 2008. The
merger that created Payzone was completed in December 2007. This comparison also
excludes the effects of currency translation and certain special items
2. Excluding discontinued operations in Spain, France and Italy
3. Before impairment charges of E77m and intangible amortisation costs of E7m
Contacts
Payzone
Tel: + 353 1 207 6000
Mike Maloney / Nigel Bell
Media Enquiries
Powerscourt
Tel: +44 20 7250 1446
Paul Durman /Rory Godson
Chairman's statement
Introduction
I am pleased to report the results for Payzone plc for the 6 months period ended
31 March 2009.
Since Payzone was formed from the "merger" of Cardpoint plc ("Cardpoint") and
alphyra Holdings Limited ("alphyra") in December 2007, the Group's management
has had to respond to a deteriorating economic climate. The weakening of
consumer sentiment across Europe has had an impact on transaction volumes in
both our mobile phone top-up and ATM businesses.
Despite these challenges, Payzone's management has restructured the business to
limit the impact on group EBITDA, which increased 8% to E20.3 million on a
pro-forma basis (i.e. six months trading for both businesses), after adjusting
for disposals, currency translation effects and certain special items. Payzone's
Board regards this as a significant achievement which demonstrates the
resilience of our business in a market that has experienced declines in revenues
from mobile phone top-ups and ATM transactions.
Since the merger, Payzone has restructured its Board and operational management
team, realised cost synergies through the consolidation of operational
facilities in the UK and Germany, and continued the development of new products
and services for distribution across the Group's network.
In addition, we have re-branded the services offered by the legacy alphyra
business as "Payzone" and the Cardpoint business as "Cashzone". The Payzone
service involves the deployment and management throughout Europe of a terminal
distribution network which processes a variety of electronic transaction
services. The main products on the network include mobile phone top-up, utility
top-up, bill payment solutions, electronic gift vouchers and Electronic Funds
Transfer (EFT) processing. The Cashzone business deploys branded independent
ATMs in the convenience sector in both the UK and Germany.
The Board remains committed to establishing a more appropriate long-term capital
structure for the Company. As disclosed in March 2009, Payzone has instigated
discussions with its finance providers with that end in mind. These discussions
are expected to result in changes to the Company's financing arrangements.
Payzone will provide a further update as soon as practicable.
International Financial Reporting Standards
The results for the six months to 31 March 2009 are presented under
International Financial Reporting Standards ("IFRS") as required under the AIM
Rules for Companies.
Under IFRS the "merger" was accounted for as a reverse acquisition. As Cardpoint
has the power to govern the financial and operating policies of Payzone, it was
deemed to be the "acquirer" of alphyra and Payzone. Therefore the comparative
figures presented reflect six months trading from the Cardpoint businesses to 31
March 2008 and include the results from the Alphyra businesses since 5 December
2007. Payzone has elected to present its financial statements in euro.
Trading and profitability
Total revenues for the period were E583 million compared to revenues for the
same period in 2008 of E424 million. These figures exclude revenues from
discontinued operations following the disposal of our businesses in Spain,
France and Italy in October 2008. Revenues in 2008 only included the alphyra
businesses from the date of the merger 5 December 2007, i.e. four months. On a
pro forma basis revenues (excluding discontinued revenues) were 8% lower for the
six month period ended 31 March 2009 compared to the prior period.
Group EBITDA before special items increased by 24% to E20.3 million in the
period. On a pro-forma basis EBITDA decreased by 1%. Excluding the translation
effect of foreign exchange (both Sterling and Romanian Ron declined compared to
the same period last year) EBITDA increased by 8%.
Through the first half of the 2009 financial year each of the Group's businesses
has been focused on improving profitability and cash generation. In our Irish
and UK operations this has involved the relocation and removal of certain
loss-making mobile phone top-up terminals and ATMs to more profitable, high
footfall locations. The removal of such terminals and ATMs, along with lower
consumer spending driven by the worsening economic environment, has seen our
mature markets experience revenue declines year-on-year. Despite the
deteriorating macroeconomic environment, the renewed strategic focus of the
business has had positive results in the period with both the gross margin and
EBITDA margin improving by 2% and 5% respectively in the UK and Ireland segment.
The re-focused strategy in our UK mobile phone top-up and utility distribution
business has led to the rationalisation of certain non-core activities, reducing
the operating cost base by 26% in the period. Despite the UK experiencing a
decline in mobile phone top-up transaction volumes of 6%, utility and bill
payment transactions have increased 11% in the period.
Our UK ATM business has benefited significantly from operational improvements.
The business has had a renewed focus on profitable locations with the removal of
840 loss-making machines. The removal of such loss-making machines, along with a
market driven decline in withdrawal volumes, has led to a 31% decline in
revenues in the period. However, the refocused operations-led strategy has led
to a significant improvement in profitability with the gross margin and EBITDA
margin increasing by 2% and 8% respectively in the period. Total EBITDA
contribution from this business is three times greater than the same period last
year.
Our Irish business has had the benefit of launching new products onto its
distribution network such as prepaid motorway tolling and bill payment. Despite
the fall in mobile phone top-up transaction volumes the introduction of these
new differentiating products has helped improve the gross margin by 4% in the
period.
Our Northern European business, which includes Germany, the Netherlands and
Sweden, has experienced a decline in consumer demand which has led to lower
transactions in the period ended 31 March 2009 versus the same period last year.
However, the business has maintained its gross margin percentage by compensating
mobile phone top-up declines with growth in other revenues such as EFT and
cost-restructuring programs which have included the outsourcing of certain
operations.
Revenues in our Southern European business were up 33% on the same period last
year. This increase was driven by the migration of mobile phone top-up from
physical distribution to electronic, the rollout of new terminals and the launch
of bill payment and prepaid services. These developments increased transaction
volumes by 21% and 7% in our Greek and Romanian businesses respectively.
Management focus on central costs and restructuring through product
rationalisation has led to a reduction in central overheads by 23%.
Payzone conducted a goodwill impairment review as at 30 September 2008 which led
to an impairment of E149 million, and a charge was made in the full-year
accounts to write down the carrying value of goodwill to its recoverable value.
A further goodwill impairment review was carried out as at 31 March 2009. The
carrying value of goodwill was calculated to exceed its recoverable amount by
E77 million, and this amount has also been written off as an additional
impairment charge in the interim accounts. The recoverable amount of goodwill
was calculated based on its value-in-use which employs a discounted cashflow
model.
Losses before tax for the period were E7 million before impairment charges of
E77 million and intangible amortisation costs of E7M.
Finance costs include all debt interest costs for the period. These include
special items which include costs in relation to the restructuring of the
Company's debt and, in our comparatives, the termination of Cardpoint's banking
facilities and restructuring of the Company's debt (following the merger).
The Group has performed well in a challenging and changing market and continues
to be underpinned by merchant and operator contracts. Our terminal estate, which
includes electronic point of sale (EPOS) and ATMs, totalled 136,300 at the end
of March 2009. Our terminals are located at a variety of convenience locations
throughout the UK and Europe. In Ireland and the UK we continue to expand our
product offerings through new product launches such as motorway tolling. EFT,
prepaid parking and prepaid utilities, all of which are expected to contribute
to future profitability. In Northern Europe we are increasing our market share
through product enhancements and new merchant contracts. Southern European
growth is still largely driven by market share growth through terminal estate
and product expansion as well as the migration of mobile phone top-up from
physical cards to electronic distribution.
Disposals
On 8 October 2008 Payzone announced the disposal of its French, Italian and
Spanish businesses for a total gross consideration of E20 million. Of this sale
price E13.2 million was payable in cash and E6.5 million comprised of the
assignment of financial guarantees. The purchasing Company was LCom, a 100%
subsidiary of Proximania, which is a publicly quoted French company specialising
in airtime product distribution. The funds were partially used to set against
the Company's debt.
The disposal of these Payzone subsidiaries fits with our strategy of focusing on
markets where Payzone had both a strong market presence and growth potential
from offering new services.
We continue to regularly examine all subsidiaries to determine their strategic
fit within the Payzone Group and to ensure that we allocate resources to the
markets where we anticipate optimal returns. Consequently certain non core
assets have been classified as held for resale.
Growth
The Group's strategy for growth continues to be that of growing transaction
volumes organically through improving the quality of deployment and offering a
broader range of products across our existing distribution network. We continue
to invest in our core businesses in mobile phone top-ups and electronic payments
that have demonstrated robust profitability and which can drive growth. There
will be a continued focus in exiting and re-negotiating legacy loss-making
contracts as well as the evaluation of outsourcing or in-sourcing of certain
activities to bolster profitability for both the ATM and mobile phone top-up
terminal estates.
Cashflow and borrowings
As reported on 12 March 2009, given the continued challenging market conditions
being experienced by the Group's businesses, the Company instigated discussions
with its finance providers covering a range of financing options with a view to
establishing a more appropriate long term capital structure for the Company.
These discussions continue and are expected to result in changes to the
Company's existing arrangements.
Management structure
There were no changes to the Board during the period.
The Board has met on a regular basis throughout the period to assess and direct
the Company through the current operational and financing activities.
Outlook
We remain focussed on maintaining the financial stability and profitability of
the Company and are confident that, in conjunction with Payzone's various
stakeholders, we can achieve a successful outcome from the ongoing restructuring
activities.
The management team has made a significant contribution to improving the
stability of the Group through restructuring the cost base of the business.
Despite some progress there remain challenges in our key markets as the
macroeconomic environment has continued to deteriorate. The various
restructuring activities which have included cost-cutting, pricing changes and
business rationalisation have helped mitigate the majority of these downward
pressures, but the business will need to continue to anticipate and change in
line with the operating environment.
We are grateful to our shareholders for supporting the Company during a
difficult period. We are especially grateful to the management and staff who
have also shown great commitment through the first half of 2009.
CONSOLIDATED UNAUDITED INCOME STATEMENT
Six Months Ended 31 March 2009
6 months to 6 months to 12 months to
31 March 31 March 30 September
2009 2008 2008
Notes E'000 E'000 E'000
Revenue 583,303 423,899 1,015,153
Cost of sales (543,873) (389,229) (931,943)
Gross profit 39,430 34,670 83,210
Administrative expenses - excluding
amortisation of intangible assets and (32,270) (28,548) (65,542)
special items
Administrative expenses - special items 6 (75,757) (153,667) (178,799)
Administrative expenses - amortisation
of intangible assets