PayPoint plc Annual Report 2017

FY2017 Annual Report · PayPoint plc

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Annual Report
2017

Annual report 2017

Our mission is to lead the market
in the provision of products to
consumer service companies
and retailers, through innovative
solutions and first class service.

Contents

Strategic report
1 Summary results
3 Chairman’s statement
4 Case studies
8 Our business model
10

Chief Executive’s review –
Strategic priorities

15 Key performance indicators
16 Review of business
20 Risks and uncertainties
Environmental matters,
23
employees, social, community
and human rights

Governance
28 Board of directors
40 Nomination Committee report
42 Audit Committee report
46 Remuneration report
64 Directors’ report
67

Statement of directors’
responsibilities
Independent auditor’s report
to the members of PayPoint plc

Financial statements
73
73

Consolidated income statement
Consolidated statement
of comprehensive income
Consolidated statement
of financial position
Consolidated statement
of changes in equity
Consolidated statement
of cash flows
Company statement
of financial position
Company statement
of changes in equity
Company statement
of cash flows
Notes to the consolidated
financial statements

Annual general meeting
95 Notice of annual general meeting
100 Officers & professional advisers

Statutory highlights1

Revenue

(2016: £212.6m)

£211.9m
(0.3%)

Gross margin³

(2016: 49.9%)

50.0%
0.1ppts

Profit before tax

£69.1m

(2016: £8.2m)

Ordinary dividend per share

(2016: 42.4p)

45.0p
+6.1%

Additional dividend per share

36.7p

—

Net revenue2

(2016: £123.6m)

£123.9m
+0.2%

Operating profit before
impairments and business disposal

(2016: £50.3m)

£52.3m
+4.0%

Earnings per share

87.5p

(2016: (3.1p))

Disposal proceeds
dividend per share

(2016: 21.0p)

38.9p
+85.3%

Total dividend per share

(2016: 63.4p)

120.6p
+90.2%

1. Mobile and Online are included in our statutory results up to the date of their respective disposals resulting in this year’s

performance not being directly comparable to last year. To more clearly review our financial performance we have included
highlights of our ongoing Retail networks in addition to the reported statutory highlights. Refer to note 4 to the financial
statements for a reconciliation of statutory results.

2. Net Revenue is an alternative performance measure. Refer to note 3 to the financial statements for reconciliation to revenue.
3. Gross margin is an alternative performance measure and is calculated by dividing gross profit by revenue.

Strong delivery against our strategic priorities
PayPoint One, our new retail platform,
successfully launched in June, with
3,600 sites at year end
Sale of Mobile completed in December
2016 for £26.5 million, with gross
proceeds of 38.9 pence per share
returned to shareholders

Collect+ arrangement successfully
restructured to allow PayPoint to serve
other UK carriers; expected to drive
a step change in our parcels business
over time
Continued growth in Retail networks
of 3.2% to 40,500 sites, including
11,300 in Romania

Financial highlights
Good growth in core Retail networks

— Gross revenue grew by 3.6%

to £203.4 million

— Net revenue² grew by 6.2%

to £117.5 million

— Operating profit grew by 0.9%

to £53.3 million

Retail services net revenue2 grew to
£39.9 million, an increase of 31.6%
Profit on the sale of Mobile of £19.5
million. Mobile sale proceeds of £26.5
million returned to shareholders.
Mobile goodwill of £30.8 million was
fully impaired in 2016.

Final ordinary dividend of 30.0 pence
per share, total ordinary dividend
of 45.0 pence per share, an increase
of 6.1%
Additional dividend of 36.7 pence
per share paid as part of commitment
to return surplus cash to shareholders
over a five year period to 2021.
Total dividends of 120.6 pence per
share paid to shareholders in the
year to 31 March 2017
Cash and cash equivalents at year
end of £53.1 million, net cash
generated from operating activities
of £42.2 million

Retail networks highlights1

Revenue¹

(2016: £196.4m)

£203.4m
+3.6%

Operating profit¹

(2016: £52.8m)

£53.3m
+0.9%

Net revenue2

(2016: £110.7m)

£117.5m
+6.2%

Profit before tax¹

(2016: £52.8m)

£53.3m
+0.9%

Gross margin %³

(2016: 48.2%)

49.5%
1.3ppts

Earnings per share¹

(2016: 62.5p)

64.3p
+2.9%

1. Retail networks consists of our UK, Ireland and Romanian retail businesses. A reconciliation, for each measure, from the statutory results to Retail networks is included

in note 4 to the financial statements.

PayPoint plc Annual Report 2017 1

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHighlights in numbers (Retail networks)

655m

transactions

23m

parcels

40,400

stores

300

clients

3,600

PayPoint One live

4,100

ATMs

6,100

Collect+ sites

10,000

card payment terminals

PayPoint One
Our state-of-the-art retail platform
launched in 2016

2 PayPoint plc Annual Report 2017

Chairman’s statement

I am pleased to report that the past year
has been one of further progress as we
seek to simplify and refocus the Group
on our Retail network business, in line with
our declared strategy.

Delivering our strategy
The sale of our Mobile payments business was completed
in December 2016 and concludes our programme of
rationalisation. In addition, we have restructured the
Collect+ arrangements, enabling us to add new carriers
to our UK retail services offering. We also successfully
launched PayPoint One, our next generation PayPoint
terminal with integrated Electronic Point of Sale Solutions
(EPoS), till and card functionality, and had rolled out 3,600
by the end of this financial year. We also continue to drive
existing and new retail services while seeking to improve
service delivery throughout the network.

The business is now more streamlined and focused on
driving value from the strength of our established retail
network. Whilst the board recognises there are structural
changes in UK cash payments and the energy sector,
PayPoint is well positioned to respond to these changes
and to deliver continuing growth in its UK retail services
and Romanian businesses.

Delivering for our stakeholders
Total dividends declared in the year to 31 March 2017 will
deliver a total of £82.1 million or 120.6 pence per share
to shareholders. This includes the ordinary dividend of
45.0 pence per share, the first annual instalment of the
additional dividend of 36.7 pence per share and the gross
proceeds from the sale of Mobile of 38.9 pence per share.

The board recognises that successful execution of the
PayPoint strategy is dependent on delivering first class service
to our retailers. To ensure we are consistently measuring
how we are performing against important key metrics, a new
‘Retailer Pledge’ has been developed and published.

Our people are critical to the successful execution of the
strategy and I would like to thank all colleagues for their
hard work and dedication over the past year.

Board appointments
In early 2017, Rachel Kentleton joined the board as Finance
Director following George Earle’s retirement. I would like
to thank George for his significant contribution over his
12 years of service since joining us upon our listing on
the London Stock Exchange in 2004. Two of our non-
executive directors, Neil Carson and David Morrison, will
step down on 26 May 2017 and 26 July 2017 respectively.
The board wishes them well and thanks them for their
valued contributions. David has served as a director since
1999 and has been instrumental in the development of
the Company. We welcome Rakesh Sharma, who was
appointed to the board on 12 May 2017 and will chair the
Remuneration Committee.

Conclusion
PayPoint is now a significantly more focused business.
Looking ahead, our priorities are to continue to drive growth
in retail services, manage the decline in cash payments
through developing new payment channels, improve our
service delivery and to run our business more efficiently.
We are also excited by the growth opportunities for our
Romanian business as we deepen and extend our presence
in a rapidly growing market.

Alongside this, we maintain our commitment to the capital
allocation programme outlined in May 2016, to return £125
million of surplus cash to shareholders over five years to
2021 alongside our ordinary dividend. The board remains
confident in the prospects for the business and the value
creation opportunity for our shareholders.

Nick Wiles
Chairman
25 May 2017

PayPoint plc Annual Report 2017 3

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Case studies

PayPoint One
Our new, state-of-the-art
retail platform was launched
in June 2016 and has proven
popular with independent
convenience retailers, with
over 3,600 live across the
UK. This already makes
PayPoint one of the largest
EPoS capable platforms in
the UK convenience sector
in the space of 9 months.

With no upfront cost and a low weekly fee,
retailers are able to use the PayPoint One platform
to run their whole store, offering EPoS, card
payments and traditional PayPoint services in
one device. Retailer feedback has been broadly
positive since launch.

The Pro version of EPoS will be launching in
summer 2017, targeted at more sophisticated
retailers who want full stock management,
supplier ordering and links to symbol groups
and wholesalers. PayPoint has already signed
an agreement with Nisa, with others expected
to sign up soon.

3,600 live
60% EPoS enabled
37m baskets

“ The new PayPoint One is very slick.
It’s so much faster than the set-up we
had before, which is important because
we’re an extremely busy store with a big
footfall. This means we have gained more
time and the customers are happy.”

Mr. Patel, Magnum News, London

4 PayPoint plc Annual Report 2017

“ Incredibly useful service for people
that work full time. I can now collect
items in my own time, at my own
convenience, from a store 5mins from
where I live - early in the morning, or
late in the evening. It’s good value and
so many brands use them. Brilliant!”

Trust Pilot review of Collect+

Parcels
Our Collect+ parcel service
continues to grow strongly
and uniquely delivers
a proposition that fuses
online and offline for the
benefit of online shoppers
and our retailers.

The service is available in 6,100 stores across the
UK and provides customers the ability to click
and collect, return or send parcels easily at a time
and location that is convenient to them.

Over 23 million parcels were processed over
the last 12 months with a high level of service
satisfaction from users (TrustPilot 9.2/10).

With the announcement of our new agreement in
December 2016, we see further growth in this area,
building our network to 7,000 stores and opening
up our service to other carriers to offer further
choice and convenience to online shoppers.

23m parcels
9.2/10 TrustPilot
score
6,100 stores

PayPoint plc Annual Report 2017 5

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSCase studies

MultiPay
MultiPay is our multichannel
payment service, offering
consumer service providers
a ready-made solution for
their full range of payments
via app, web, phone, text
and IVR, complementing
our cash in store services.

Clients benefit from streamlining their consumer
payment processing and transaction routing in a
seamlessly integrated and cost-effective solution.
The services are available either as a full portfolio
or by the client’s choice of preferred channels,
including our app which has a 4 star rating on the
Google Play and Apple App Stores. Clients can
choose to access our services as a full outsourced
model or by linking their own digital solutions to
our MultiPay payment suite.

MultiPay is particularly targeted to serve the
rollout of smart meters within the energy market.
For example, our service has helped Utilita to
become the fastest growing, challenger prepay
energy supplier and we have also signed several
other energy companies, including SSE, our first
big 6 energy client. Among other relevant sectors,
MultiPay is available to the local authority and
social housing sectors through a framework with
Procurement for Housing.

10m transactions
10 seconds or less
to top up
4/5 app rating

“ We are committed to delivering the
best possible experience and central
to this is providing a range of
different payment options for
customers. PayPoint has enabled
us to further enhance our service,
bringing convenience and simplicity
to our customers.”

Marc Brook,
Head of Smart, Economy Energy

6 PayPoint plc Annual Report 2017

Romania
Our business in Romania is
now the leading consumer
brand for bill payments, with
an extensive network of
11,300 stores and a brand
awareness of 75%. PayPoint
means trust, simplicity and
convenience for the everyday
needs of consumers.

The strong pull of PayPoint is equally attracting
new and deeper relationships with service
providers who want to access our expertise and
unrivalled network. Over the last 12 months, new
relationships have been signed and our Road Tax
service continues to be popular, with 72% more
payments made compared to the previous year.

More recently, our retail services offering is
beginning to expand, particularly our Colet
Expres parcel service currently being trialled in
Bucharest, working with the leading Romanian
carrier, FAN courier.

11,300 stores
88% satisfaction¹
75% awareness¹

“ We are happy with the results of our
PayPoint agreement, especially given
that our services cover the needs of
millions of Romanians, anywhere in
the country”

Dan Ciceu and Dan Alexandru Cobeanu
Scala Assistance founders

1. Research conducted by by Millward Brown for PayPoint Romania, between April and May 2016.

PayPoint plc Annual Report 2017 7

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOur business model

Our mission is to lead the market in
the provision of products to consumer
service companies and retailers,
through innovative solutions and
first class customer service.

Multichannel
payments

Retail technology
and services

Our retail
networks

40,400
stores

UK, Romania
and Ireland

Dividends to
shareholders

Strong cash
conversion

Innovation and
investment

8 PayPoint plc Annual Report 2017

Strategic priorities

Drive profitable growth
in UK retail services

Optimise profits
in UK bill payments
and top-ups

Business
optimisation

Deliver parcels volume
growth in the UK

Drive continued organic
growth in Romania

PayPoint plc Annual Report 2017 9

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSChief Executive’s review

The past year has been one of significant
strategic progress in reshaping and
simplifying the business.

Our Retail networks business delivered a profit before tax¹
of £53.3 million, an increase of £0.5 million. This was driven
by growth in net revenue² from retail services of £9.6 million²,
but offset by a decline in bill payments and top-ups of £2.8
million and additional investment costs arising from PayPoint
One, EPoS and MultiPay development and deployment.

In total this financial year we paid £78.5 million to
shareholders by means of the £29.5 million ordinary dividend,
the first instalment of the additional dividend of £8.3 million
and the return of £40.7 million from the proceeds of the sale
of Online and Mobile. Our business model continues to be
highly cash generative with £42.2 million of cash generated
from operating activities in the year.

Business model
We have unrivalled strength in convenience retail
payments and services with over 40,000 outlets across
the UK and Romania. In both markets our business has
two highly complementary business streams, payments
and retail services. These operate from a common retail
servicing capability and secure technology infrastructure.
This technology platform and our site network form the
foundation from which we will drive future value.

Our first business stream, payments, provides convenient
bill payment channels for the customers of major utilities
and service companies. The PayPoint network supports the
broadest range of payment types including bills, energy
prepayments, mobile and eMoney top-ups, licences, rents,
taxes, transport tickets, debt collection, deposits and
repayments. We also pay out cash benefits and rebates.
In payments, our retail partners are our distributors, earning
commission and benefiting from the hundreds of millions
of customer visits we generate. Some customers prefer to
pay online and our MultiPay product extends to mobile app,
website, IVR and text payments so we can help our clients
to help customers pay in the way that suits them best.

Our second business area builds on the strength of our retail
networks and our technology, enabling us to provide multiple
retail services to retailers. These additional services are
highly competitive offers to retailers, charging fees for some
services and earning commission for others. The range of
retail services is already extensive but we continually innovate
to generate new revenue streams. Our retail partners, in
turn, are able to offer their customers a widening range of
convenience payment products and services which keeps
them coming into the store. The principal retail services are
ATMs, card and other non-cash electronic payment solutions,
Western Union agencies, SIM card sales, parcels and EPoS.
As noted above, we have recently renegotiated the terms of
our parcels joint arrangement with Yodel, to allow PayPoint to

We have restructured the Group, with a new Executive
Board in place and a focused single company vision, set
of values and culture which together will drive ongoing
improvements in effectiveness and customer service.
We have rationalised the portfolio of businesses within the
Group, with the sale of Online in January 2016 for £14.3
million being followed in the year to 31 March 2017 by the
sale of Mobile to VW Financial Services for £26.5 million.
We have also concluded our discussions with Yodel, with
a new Collect+ arrangement agreed that enables PayPoint
to add new carriers to our UK retail services offering.

We continue to focus on the needs of our retail customers.
This year we launched our next generation terminal, PayPoint
One, which received positive early feedback, and at 31 March
2017 there were 3,600 sites operational. The terminal, with
enhanced functionality, changes the proposition we can offer
retailers and is a critical milestone for the business. We are
excited about the growth potential from the rollout of the
new terminal across our retail network alongside the other
initiatives underway in the business.

Our financial results reflect the refocusing of the business
with reported profit before tax of £69.1 million (2016:
£8.2 million), including the profit on the sale of Mobile to
VW Financial Services of £19.5 million partially offset by
the loss of £3.8 million on the restructure of the Collect+
arrangement with Yodel. The 2016 year included impairment
charges on Mobile and Online of £49.0 million.

This financial year also saw several non-recurring items,
some of which will impact our operating profit performance
in the financial year to 31 March 2018. These include a
non-recurring VAT recovery of £2.0 million (included in retail
services), the agreement to reduce Yodel parcel fees by
£3.0 million over the next 3 years effective from December
2016, and the closure by the Department for Work and
Pensions (DWP) of their Simple Payment Service which has
been generating over £4.0 million in net revenue per annum.

1. Retail networks consists of our UK, Ireland and Romanian retail businesses. A reconciliation, for each measure, from the statutory results to retail networks is included in note 4 to the

financial statements.

2. Net revenue is an alternative performance measure. Refer to note 3 to the financial statements for a reconciliation to revenue.

10 PayPoint plc Annual Report 2017

open the Collect+ network to other carriers. Our intention is
to create the definitive industry solution, allowing consumers
to pick up and drop off parcels at their local shop irrespective
of the carrier. Retail services have continued to grow strongly
in recent years and this business area is becoming increasingly
significant within our business mix.

In payments, we remain committed to delivering our strategy
which is focused on delivering multichannel payments
solutions and services to our customers where we have
retail networks. In retail services, we see significant growth
opportunities for our unique retailer network and our
differentiated and established technology platform to benefit
from the high street evolution towards convenience.

In order to execute our strategy, we have set out five clear
priorities for the year ahead:

1. Drive profitable growth in UK retail services

Market context
PayPoint’s services are particularly attractive to the
convenience retail sector, which includes newsagents,
general convenience stores, off licences and petrol station
forecourts. We are also complementary to the convenience
offers of larger format supermarkets. We build our
relationship with retailers through our field sales force of
50 professionals located throughout the UK and through
our contact centre which is situated in Welwyn Garden
City. We also hold quarterly Retailer Forums attended
by PayPoint retailers and management to ensure open
dialogue and communication.

PayPoint has payment relationships extending to over 29,000
UK outlets drawn from an available market of approximately
51,000 stores comprising 37,500 independents (of which
14,000 are symbol-affiliated stores) and 13,500 multiple and
managed symbol stores.¹ These 51,000 stores are PayPoint’s
core marketplace, with growth and any extension beyond
the convenience sector also representing an opportunity
for our retail services. Historically, PayPoint has restricted
supply of its branded payments footfall rather than looking
to achieve blanket coverage of the entire convenience retail
sector. As a result, PayPoint retailers are typically of good
quality, desired by our clients and envied by our competitors.
Overall, PayPoint pays our retailers over £50 million annually
in commission for their critical role in our payments and retail
services delivery.

Our retailers can be segmented into 3 broad sub-groups.
We have 8,500 outlets that are in multiple chains, including
The Co-op, McColls, One Stop and many other fuel and
convenience chains. We also have coverage in all Asda
stores, many Sainsbury’s Locals and increasingly in Tesco
Express, as even the major grocers see the power of our
footfall generation. The balance of our network is
in independents, who may be unaffiliated or linked to a
symbol group such as Spar, Costcutter, Nisa or Booker
Premier. We have 11,500 unaffiliated independents, out
of 23,500 in the UK and a further 9,000 symbol affiliated
outlets out of 15,400 independent and managed symbol
stores in the UK.

To serve multiples, we deploy our PPoS solution, a virtual
terminal that integrates into the retailer’s own EPoS system
for maximum operational efficiency.

1. Source: Association of Convenience Stores, Local Shop Report, September 2016
2. www.link.co.uk/about-link/statistics

For independents, we offer a standalone terminal. Most of
our retailers have our second generation yellow machine
(T2) that has been deployed since 2003. Last year we
launched PayPoint One, a transformational terminal
platform, with a full range of connectivity options including
WiFi and Bluetooth, which we will rollout across our
estate over the next few years. With PayPoint One, we
have also introduced a new EPoS capability which has
seen encouraging uptake to date and that we expect to
be a platform for significant future growth. PayPoint One
provides our retailers with the ability to serve customers
quickly, while providing advanced connectivity and
improving business efficiency all within a flexible and fully-
supported technology platform.

Each of our retail services has its own market context and
competitive dynamics, which are explained briefly here:

ATMs – we provide 4,100 ATMs out of an overall population
in the LINK network of 70,000, of which 52,000 are
non-bank branch machines2. Our machines are typically
located in-store and are filled by our retailers using their
own cash, including much of the money collected from
our bill payments. We offer both free to use and surcharge
machines with most new deployments being free to use.
In general, cash withdrawal volumes are expected to
decline steadily as the use of cash is eroded by contactless
payments. However, while this decline is reflected in a rise in
bank branch closures, growth in non-bank branch ATMs has
continued and PayPoint’s position in the market gives us
plenty of scope to grow.

Card Payments – we provide 10,000 of our retailers with
their in-store card payment solutions including Chip and
PIN and contactless cards and mobile schemes such as
Apple and Android Pay. We earn a margin on each payment
through revenue share arrangements with merchant
acquirers. In common with the market generally, we have
been experiencing very strong contactless payment
growth. These payments have a lower transaction value,
earning us slightly less per transaction but for a much
greater volume. This is a highly competitive market with
many offers from merchant acquirers and intermediaries.

Money Transfer – we provide 1,100 outlets in the UK with
Western Union agencies to serve the international money
transfer market. This is a value-added, rather than strategic,
service and we expect to remain a minor player.

SIM sales – we are selling mobile phone SIMs to 15,000
outlets and have approximately a 6% market share, making
a strong net revenue contribution. We earn commissions
based on the top-up values on activated SIMs which
we share with our retailers, and bonuses for achieving
predetermined targets.

EPoS – this is a new market for PayPoint which we entered
in June last year, with a price scanning solution built on the
Android tablet characteristics of PayPoint One, with its
large interactive screen, ergonomic design and advanced
scanning capability. PayPoint One provides an integrated
all-in-one solution, combining EPoS with card payments,
bill payments, proprietary hardware, cloud management,
business intelligence, service support and Android
applications to support our retailers’ businesses. We expect
our EPoS solution to be attractive to the independent
sector, many of whom may be first time users, but we also
expect strong symbol group adoption when we launch
our Pro version in summer 2017. The Pro version will have

PayPoint plc Annual Report 2017 11

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSChief Executive’s review continued

sophisticated stock management and ordering capability,
managed in the cloud, representing a step change in
EPoS market technology. We are also currently putting in
place the necessary links, to integrate with symbol group
wholesalers, to make the product more attractive.

There are numerous EPoS providers in the UK typically
serving more than one vertical, such as retail and hospitality.
In convenience retailing, EPoS provision is more fragmented
outside of the suppliers to the multiple chains. Suppliers
service a few thousand locations at most and often working
with legacy software sitting on older Microsoft Windows
platforms, with localised back office functions which do not
take advantage of cloud technology. EPoS products tend
to carry an upfront hardware investment, with additional
charges for installation and ongoing fees for service, support
and licensing. As a consequence take up can be limited.
With PayPoint’s modern technology and no upfront fees
for the hardware, we expect to make inroads into this market
and have been encouraged by the early take up.

Overall, the launch of PayPoint One integrates PayPoint’s
payments stream with card payments and EPoS into a
single leading edge hardware device. Our retail services
success over many years has built a balanced portfolio
of strong and highly competitive products with a good
mix of strategic and tactical services across high growth
and maturing markets. The market leading qualities of
the PayPoint One platform will enable us to significantly
increase our revenue over time by charging fees for the
platform and its EPoS capabilities.

Progress in year
Overall, retail services accounted for 36% of UK net
revenues, generating £39.0 million net revenue which
represented growth of 30.9% on the previous year.
We enjoyed continued growth in ATMs, card payments
and SIMs net revenues. We also secured a VAT recovery
of £2.4 million in card payments. The recurring net revenue
benefit from the corrected treatment is approximately
£1.0 million per annum.

We launched PayPoint One and installed over 3,600
new terminals of which 60% have EPoS activated, with
the remainder opting just to upgrade from our second
generation terminal to use our Till App. We have also largely
completed our EPoS Pro development for testing ahead
of launch in a few months’ time and have secured our first
symbol group integration agreements.

Future Delivery
We expect to achieve a PayPoint One network size of
8,000 sites by March 2018 with high levels of EPoS and
card payment attachment. This will include symbol retailers
as the Pro version of EPoS is launched and wholesaler
links are implemented. Nisa is the first symbol retailer to
contract to be integrated with our EPoS Pro platform
and we expect to sign others soon. Our card payments
volume should continue to grow strongly. We will focus on
protecting margins in a fiercely competitive market fuelled
by the growth in contactless payments, which has made
the convenience sector increasingly attractive. This year we
plan to extend our net settlement capability from ATMs to
card payments which should be a unique differentiator for
PayPoint by off-setting our retailers’ banking costs.

We will be investing in our ATM network to continue to
expand our presence throughout our retail network and
to upgrade legacy hardware.

1. Payments UK: 2016 UK Payments Markets – Summary

12 PayPoint plc Annual Report 2017

2. Deliver parcels volume growth in the UK

Market context
We provide 6,100 outlets with our Collect+ service, our joint
arrangement with Yodel, a leading carrier. Collect+ was the
first successful parcel collections and returns retail network in
the UK, launched in 2009. The service has subsequently been
copied by several other carriers but has not been matched
in scale or customer popularity. This is a large market; IMRG
states there are 250 million parcel returns a year and 165
million click & collect parcels, both growing rapidly.

Progress in the year
Collect+ is available in over 6,100 sites and the number
of parcels processed in the year was over 23 million.
Collect+ has gained a Trust Pilot score of 9.2 out of 10
and is now a trusted and well regarded consumer brand.
The restructured terms of the Collect+ joint arrangement
are now in place. In return for a reduced transaction fee,
PayPoint is no longer exclusively tied to using Yodel and
now has the opportunity to extend the network of carriers
we work with.

Future delivery
PayPoint has an exciting opportunity to capture a significant
share of the market. We have appointed a new Parcel
Services Director with a significant track record in the parcels
market to lead our efforts to capture new volumes.

In the coming years, we expect strong growth with many more
outlets and millions of extra parcels as the new approach beds
in, supported by strong continuing delivery from our existing
partner, Yodel. The new approach has come at a short-term
cost as we have agreed to progressively reduce fees received
from Yodel by £3.0 million over three years. On a like-for-like
volume basis, this is expected to impact the year to 31 March
2018 by £1.7 million with a further £1.0 million impact in the
year to 31 March 2019.

3. Optimise profits in UK bill payments and

top‑ups

Market context
Payments have traditionally been PayPoint’s most successful
business area and we have developed a market leadership
position in payment collection through convenience retail
outlets. Our UK network numbers 29,100 sites, meaning that
we are in the majority of available convenience retail outlets
and we handle approximately 500 million transactions per
annum through the network to a value of £9.0 billion.

There are over 4.9 billion regular consumer payments a
year¹, but the majority of these are made by direct debit
through the banks, which would be the billers’ preferred
collection method. However, this does not suit all
customers. PayPoint’s strength is in serving the millions of
householders, who prefer to pay their bills in cash over the
counter. This has been a resilient sector which has fuelled
our growth despite the long-term steady decline in cash as
a payment method in the UK economy, relative to electronic
and card payments.

PayPoint has always been particularly strong in energy
payments as the breadth of our coverage in convenience
retail outlets, combined with extended opening hours,
provides an ideal solution for those who need to quickly

Retailer pledge
We will:

4 support and respect
you and deliver first
class service

4 always innovate to improve
our products and services
and the value we bring to
your business

4 listen and communicate

4 champion the importance

openly so we can
understand and respond
to your needs

of convenience retailers and
the challenges you face

and conveniently switch their energy back on. Growth in
the prepay energy sector peaked four years ago when a
combination of factors including high tariffs, cold weather,
high energy debts and high prepay meter installation rates
created strong demand. Recently, however, growth has
slowed, as the impact of these factors has reduced.

a consequence of the two year government electricity rebate
scheme coming to an end. Top-up transactions declined
15.3% as a result of the continuing long-term decline in UK
mobile top-ups. Payments account for 64% of overall UK net
revenues. Net revenues held up better than volumes as bigger
clients lost share to challengers, benefiting our pricing mix.

We expect that the introduction of smart meters, which
has been subject to delays in commissioning by the Data
Communications Company (DCC), will open more digital
payment options for consumers, and that payments by app
or website will erode some cash volumes in prepay mode.
As of 31 December 2016, there was a total of 22.8 million
gas meters and 27.5 million electricity meters operated by
large and small energy suppliers in domestic properties
across Great Britain. Active smart meters¹ (gas and electric)
accounted for 4.9 million of the total number of meters,
an increase of 2.9 million compared to 2015. In order to
address this opportunity, PayPoint has been developing its
MultiPay service in recent years and is well placed to serve
retail and digital payments through an integrated platform
for energy clients.

From 1 April 2017, the Competition and Markets Authority
has introduced a price cap for prepayment customers which
it estimates will reduce households’ heating bills by on
average £75 a year². It is too early to fully understand the
impact this will have on PayPoint, however we estimate each
prepay customer’s average top-up value is around £15 a visit.

The slowdown in the energy payments sector and
uncertainty around smart meters, combined with the longer
term decline in mobile top-ups and in cash as a payment
method in the UK economy, means that we anticipate
reducing net revenue in PayPoint’s traditional sectors.
As a result, our focus is on maximising profitability in UK
bill payments and top-ups, managing margins and cashflow
through both continuing innovation and a relentless focus
on business process and cost efficiency.

Progress in year
Bill payment volumes reduced by 6.6% in the year because
of softening energy prepay and a reduction in CashOut
transactions. CashOut transactions reduced as

MultiPay volumes have been growing strongly and we
handled 10.3 million payments, up 4.9 million from last year,
through our non-retail digital channels. We have also recently
completed the implementation for SSE, our first big 6 energy
client for MultiPay. The service is also proving particularly
attractive to some of the main challengers in the energy
market as well as smaller suppliers. At the end of the financial
year, 15 clients had contracted to use the service.

We have had a steady stream of new business and have
added 67 new schemes in the year including, for the first
time, local authorities deciding to work with us directly and
exclusively, having previously split their volumes across the
Post Office and PayPoint. We have also added clients for
digital voucher services, including a new arrangement with
Amazon which is still in its early days.

We also went live with our new FCA regulated Payment
Institution, PayPoint Payment Services Limited, which
allows us to provide certain regulated payment services
and to extend the range of our CashOut services.

Future delivery
The payments business is likely to continue to be affected
by the uncertainty relating to smart meters and the general
long-term decline of cash and top-ups. However, there is
a strong residual demand for cash payment that we will
continue to serve successfully and expand where possible,
with new schemes and products for our customers. As more
challenger businesses take share from the big traditional
suppliers, we would also expect to see some margin
benefits through less revenue concentration. We have also
been able to renegotiate terms with retailers and symbol
groups, improving margin, as a result of the diminishing
importance of mobile top-up volumes.

1. Department for Business, Energy & Industrial Strategy: Smart Meters Quarterly Report to end December 2016
2. Competition and Markets Authority: Modernising the energy market 24 June 2016

PayPoint plc Annual Report 2017 13

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Chief Executive’s review continued

5. Business optimisation

Our refocus on our retail businesses has highlighted
opportunities for us to invest in tools and capabilities
to enable our client and field teams to more effectively
sell a portfolio of products.

In conjunction with the rollout of PayPoint One, we have
also publicly pledged to our UK retailers that we intend to
deliver first class servicing of their requirements through
the entire lifecycle of on-boarding, operational support
and status changes. This will require us to invest in efficient
workflow and billing systems with accurate and timely
supporting information, for our retailers and ourselves,
so we can serve them effectively.

We are making a considerable investment of £4.0 million over
18 months in these tools and capabilities but are expecting
significant improvements in sales and operational efficiencies.

We are also reviewing our processes to ensure we are
innovating efficiently and driving maximum return for our
investments in product and technology.

Outlook
We have made good progress in reshaping the business,
including the disposal of Mobile and Online. This enables
greater focus on our retail network specifically by providing
EPoS solutions to our retailers and on pursuing a multi-
carrier strategy for parcels, both of which are exciting
prospects going forward. In time I believe there will be
opportunities to further extend our geographic footprint,
leveraging the scale and capability of our platform, however
international expansion will be a lower priority for the
immediate future.

To support our growth agenda, we are making incremental
investment in capabilities and tools to improve our sales
productivity, foster continued innovation, accelerate
commercial deployment and deliver greater operational
efficiencies.

For the current financial year, we expect robust net
revenue growth in UK retail services and Romania. This will
broadly offset the impact of our additional investments,
the reduced fees earned from Yodel and the expected
continuing net revenue reduction in UK cash payments,
including the ending of the Simple Payment Scheme and
the changing energy market dynamics.

We are confident that PayPoint is well positioned to
continue to drive sustainable medium-term earnings
growth, generate cash and support superior returns to
shareholders.

Dominic Taylor
Chief Executive
25 May 2017

We expect the year ahead to be adversely affected by a
recent decision of the DWP to discontinue its Simple Payment
Service from this summer, for which we have been the retail
partner. Unfortunately, the service has been a victim of its
own success in migrating customers away from the traditional
girocheque into other methods, giving the DWP the ability to
close down the option. This service has generated revenue for
PayPoint of over £4 million per annum historically.

PayPoint will continue to handle hundreds of millions
of payments for the UK’s leading consumer service
organisations and payments will remain a critical element
in our business mix going forward. Our unique payments
portfolio is central to the popularity of our brand with
retailers and consumers and provides the platform on
which our retail services are thriving. In addition, we are
well placed to drive further MultiPay growth with more
challengers, our first volumes for a big 6 supplier and
the potential to extend into other bill payment sectors,
including housing.

4. Drive continued organic growth in Romania

Market context
PayPoint Romania follows a similar business model to the
UK, but in a market in which cash bill payment is a mass
market proposition. Over 10 years, PayPoint has become
one of Romania’s most successful and popular financial
brands, handling on average 24% of our clients’ payments.
We expect cash to be the dominant bill payment method
well into the future. The range of payments solutions
offered by PayPoint is extensive including energy, telecoms
and pay TV bills, road tax, eMoney vouchers, insurance
premiums and loan repayments. As in the UK, we work
with all the leading suppliers.

Romania is also a strong remittance market, mainly as
receivers of payments from overseas. As in the UK, we work
with the market leaders Western Union in what is still a high
growth sector.

Progress in year
We have continued to make strong organic progress in the
year growing our net revenues in Romania to £9.1 million,
an increase of 28.2% on the prior year. Our retail network
has grown to 11,300 sites and includes strong representation
from independents and multiples, including Profi, Cora
and Carrefour. We enjoyed record volumes of 75 million
transactions, including growth in mobile top-ups, not just
bill payments.

Future delivery
The Romanian payments market continues to evolve with
clients moving away from the local post office creating further
opportunities for us. We will continue to expand our market
share with existing clients and to add new clients. In the year,
we successfully added our first local authority which we will
use as a case study to entice other local authorities.

We plan to extend our retailer services offering in Romania.
We are trialling a parcels service, Colet Expres, in Bucharest,
working with the leading Romanian carrier, FAN courier.
The home shopping market in Romania is still developing and
is generally based on cash on delivery, but we are excited
about the opportunity the parcels service presents.
In addition, we are trialling a card payment service for retailers.

We currently have an agreed offer to buy Payzone in
Romania, which is subject to competition authority approval.

14 PayPoint plc Annual Report 2017

Key performance indicators (KPIs)

In order to realise its strategic aims, PayPoint has identified areas of strategic focus
and records a number of KPIs to measure progress against them. The KPIs presented
this year have changed in that they exclude the disposed activities of Mobile and Online.
Whilst these KPIs are helpful in measuring the Group’s performance, they are not exhaustive
and the Group uses many other measures to monitor progress.

Strategic focus

KPI

Description and purpose

Maximise
shareholder
return
(see page 23)

Earnings per share
(Retail networks)1

Retail earnings (see note 11) divided by the weighted
average number of ordinary shares in issue during
the year (including potential dilutive ordinary shares).
Earnings per share is a measure of the profit of the
ongoing business attributable to each share.

Dividends
per share

Proposed final dividend and interim dividend divided by
the number of fully paid shares at the end of the year.
Dividend per share provides a measure of the return to
our shareholders.

Economic profit1

Operating profit before impairments and profit on
business disposals after tax and a charge for capital
employed, excluding cash, based upon the Group’s
cost of capital. Economic profit provides a consistent
measure of the profit aligned to the remuneration of
management.

Drive profitable
growth in UK
retail services
and continued
organic growth
in Romania
(see pages
11 and 14)

Retail networks
transactions

Number of transactions processed in the year on our
terminals and ATMs. Transaction volume provides a
measure of the source of revenue which is earned on
a per transaction basis.

Retail networks
transaction value

The value of transactions processed via our terminals
and ATMs. Transaction value provides a measure of the
source of revenue which is earned on a percentage of
the transaction value.

Retail networks
net revenue1

Revenue less: commissions paid to retail agents and
the cost of mobile top-ups and SIM cards where
PayPoint is principal. Net revenue reflects the benefit
attributable to PayPoint’s performance eliminating
pass-through costs and is a reliable indication of
contribution from business operations.

PayPoint One sites The number of sites with our PayPoint One platform.
This provides a measure of the source of service fee
revenue from PayPoint One terminals and EPoS.

Business
optimisation
(see page 14)

Retail networks
operating margin1

Operating profit before impairments and profit on
business disposals as a percentage of net revenue.
Operating margin provides a broad overview of the
efficient and effective management of the cost base.

Return on capital
employed1

Operating profit before impairments and business
disposals for the year divided by average month end
capital employed (net assets excluding cash). Return
on capital employed provides a broad overview of the
efficient and effective use of capital in our business.

Growth/(decline)
in Retail networks
yield per site1

Growth/(decline) in net revenue from Retail networks
divided by the average number of sites in the year.
Network yield provides a broad overview of the efficient
and effective use of our network.

People
(see pages
25 to 27)

Labour turnover

Number of permanent employees who left during the
year divided by average total permanent employees.
Labour turnover provides an indication of employee
job satisfaction.

1. These KPIs are alternative performance measures and are not directly comparable to statutory measures

2017

2016

64.3p

62.5p

45.0p

42.4p

£39.2
million

£32.8
million

654.8
million

668.2
million

£10.4
billion

£117.5
million

£110.7
million

3,601

45.3%

47.7%

184.3%

70.4%

2.2%

(2.9%)

29.0%

33.0%

PayPoint plc Annual Report 2017 15

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReview of business

The review of business presented includes highlights on
page 1, the Chairman’s statement on page 3 and the
Chief Executive’s review on pages 10 to 14.

Operating review

PayPoint is a service provider for consumer transactions
through various distribution channels, involving the
processing of high volume transactions, the management
of retailers and clients, the settlement of funds (collection
and transmission) and transmission of data in a secure
environment, by the application of technology.

The application of technology is directed on a Group basis
by the Group’s Executive Board to develop products
across the business, prioritised on an economic value
basis (generally by product), rather than on a subsidiary
by subsidiary basis and therefore the Group has only one
operating segment.

We have however, included an analysis of the number and
value of consumer transactions, revenue and net revenue
distinguishing between our Retail networks and Mobile
and Online.

Retail networks
The Group has established retail networks in the UK, Ireland
and Romania which continued to grow by 3.2% to 40,478 sites.

UK & Ireland Retail
network
Romania Retail network
Total sites

Year ended
31 March
2017
29,176

11,302
40,478

Year ended
31 March
2016
29,087

10,141
39,228

Change
%
0.3

11.4
3.2

In the first half of the year our focus was on the rollout of
PayPoint One terminals with 3,601 terminals installed at
sites by 31 March 2017. Our focus on rollout of PayPoint
One to our existing sites resulted in low growth in the total
number of UK sites of 0.3%. PayPoint One will replace the
previous version of our terminal and is a platform from
which we can launch and offer new services to retailers.

We continue to rollout PPoS to symbol groups who want to
provide PayPoint services, but have their own till and EPoS
applications and do not take our PayPoint One platform. At
year end there were 8,487 PPoS sites (2016: 8,101 PPoS).

In Romania, we increased the number of terminal sites
by 1,161 in the year, an increase of 11.4%.

Within Retail networks we distinguish between three
business categories, namely bill and general, top-ups and
retail services and each is reviewed separately below.
Overall transactions declined by 13.4 million to 654.8 million
(2016: 668.2 million), with UK declining by 3.6% offset by
robust growth in Romania of 12.1%. Average transaction
values in prepaid energy and UK mobile top-ups continue to
increase which has offset the declining transaction volume.
Transaction value of £10.4 billion (2016: £10.4 billion) was
broadly in line with last year.

UK transactions
(million)
Romania transactions
(million)
Total transactions
(million)
Transaction value (£m)
Revenue (£m)¹
Net revenue (£m)²

Year ended
31 March
2017
579.8

Year ended
31 March
2016
601.3

Change
%
(3.6)

75.0

66.9

12.1

654.8

668.2

(2.0)

10,409.6
203.4
117.5

10,390.8
196.4
110.7

0.2
3.6
6.2

Despite the decline in transactions, revenue¹ increased £7.0
million to £203.4 million (2016: £196.4 million) due to card
payment VAT (discussed below), change in mix of clients
and growth in setup and service fees.

In prior years, card payment revenue was treated as
standard rated for VAT purposes with the VAT element
deducted from revenue. To bring our treatment in line with
the industry practice, this was changed to be VAT exempt,
resulting in a VAT recovery from HMRC of £2.4 million
relating to prior years. We expect that on an annualised
basis revenue will be approximately £1.0 million higher than
when treated as standard rated. As a result of the change
in VAT treatment, irrecoverable VAT, which is included as a
cost in administrative expenses, increased by £1.2 million
including £0.4 million related to prior years.

Net revenue has increased by £6.8 million to £117.5 million
(2016: £110.7 million) for the same reasons as revenue
set out above, plus a reduction of retailer commission
(£1.3 million).

1. Retail networks consists of our UK, Ireland and Romanian businesses. A reconciliation from the statutory results to Retail networks is included in note 4 to the financial statements.
2. Net Revenue is an alternative performance measure. Refer to note 3 to the financial statements for reconciliation to revenue.

16 PayPoint plc Annual Report 2017

Bill and general
Bill and general is our most established category and
consists of prepaid energy, bill payments and CashOut
services.

Transactions (million)
Transaction value (£m)
Revenue (£m)¹
Net revenue (£m)²

Year ended
31 March
2017
430.5
8,489.9
82.5
58.5

Year ended
31 March
2016
449.2
8,557.7
85.8
59.5

Change
%
(4.2)
(0.8)
(3.7)
(1.7)

Bill and general transactions were lower than the previous
year by 4.2%. UK and Irish bill and general transactions
were down 6.6% due to lower prepaid and CashOut energy
transactions. MultiPay continued to grow strongly with
transactions for the year ended 31 March 2017 reaching
10.3 million (2016: 5.4 million).

Growth in Romanian bill payment transactions continued
with an increase of 11.6% to 67.2 million (2016: 60.2
million). Romania continued to expand its market share with
existing clients to 23.8% in March (2016: 21.8%) and also
continued to add new clients across new sectors, including
its first local authority.

Net revenue of £58.5 million was 1.7% down on last year’s
£59.5 million, the mix of clients (increase in smaller but higher
yielding clients) and changes to our retail commission terms
reduced the impact from the decline in transaction volume.

Top‑ups
Top-ups include transactions where consumers can top
up their mobiles and prepaid debit cards. They can also
purchase eMoney vouchers and lottery tickets. In Ireland
and Romania, PayPoint is principal in the sale of mobile
top-ups and, accordingly, the face value of the top-up is
included in revenue and the corresponding costs deducted
when deriving net revenue.

Transactions (million)
Transaction value (£m)
Revenue (£m)¹
Net revenue (£m)²

Year ended
31 March
2017
68.9
731.6
63.6
19.1

Year ended
31 March
2016
79.0
767.4
63.3
20.9

Change
%
(12.8)
(4.7)
0.4
(8.4)

Top-up transactions decreased 12.8% to 68.9 million. The
reduction in UK mobile top-up transactions and The Health
Lottery was only partly offset by an increase in other UK
and Romanian top-up transactions. Romania increased its
top-up transactions by 16% to 7.3 million.

The average value of UK mobile top-ups continued to
increase which mitigated the reduction in net revenue,
which declined 8.4% to £19.1 million.

Retail services
Retail services are those we provide to retailers who form
part of our networks. Services include providing the PayPoint
One platform, which has a basic till application, EPoS, ATMs,
card payment, parcels, money transfer and SIMs.

Transactions (million)
Transaction value (£m)
Revenue (£m)¹
Net revenue (£m)²

Year ended
31 March
2017
155.4
1,188.1
57.3
39.9

Year ended
31 March
2016
140.0
1,065.7
47.3
30.3

Change
%
11.0
11.5
21.0
31.6

Retail services transaction volume has increased across all
major products: ATM transactions increased by 8.0%, card
payment transactions by 12.2% and parcels by 12.6% over
last year.

Net revenue growth of 31.6% to £39.9 million exceeded
the growth in transactions as a result of the benefit from
the change in VAT rating in card payments (see page 16 for
further details) the growth of service fees from PayPoint
One, a reduction in the card payment wholesale rate and
bonuses earned on our SIM activations.

The number of sites in the UK with retail services is as follows:

PayPoint One
Collect+
Card payment
ATM

Year ended
31 March
2017
3,601
6,167
10,024
4,165

Year ended
31 March
2016
38
5,936
10,111
4,120

Change
%

-
3.9
(0.9)
1.1

PayPoint plc Annual Report 2017 17

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReview of business continued

Mobile and Online
The Group disposed of its online payments business on
8 January 2016 and its mobile payments business on
23 December 2016. The results below reflect the trading
of these businesses up to the date of their respective
disposals.

Operating costs
Statutory
Operating costs (administrative expenses) decreased £2.1
million (3.8%) to £53.6 million (2016: £55.7 million) caused
by a £7.6 million reduction from Mobile and Online with
Retail networks increasing £5.5 million.

Retail networks
Retail networks’ operating costs increased by £5.5 million
to £47.5 million as a result of:

– lower VAT input recovery resulting from the VAT

treatment change for card payments;

– the rollout of PayPoint One;

– an increase in IT people costs; and

– an increase in LTIP and DABS bonus scheme costs.

Share of profit in joint venture
The accounting policy for joint arrangements and details of
the arrangement with Yodel are included in note 1 and 15 to
the notes to the financial statements. Our share of the Drop
and Collect Limited profit up to the date it was disposed of
as part of the arrangement was £1.2 million (2016: loss of
£0.2 million). A loss on disposal of £3.8 million was recorded
at the date of sale.

The new Collect+ joint arrangement has been accounted for
as a joint operation with the Group’s share of the royalty fee
included in revenue. Our share of income from 16 December
2016 to 31 March 2017 was £0.3 million.

Year ended
31 March
2017
40.3
136.0
8.5
6.4

Year ended
31 March
2016
150.5
3,650.9
16.2
13.0

Change
%
(73.2)
(96.3)
(47.4)
(50.9)

Transactions (million)
Transaction value (£m)
Revenue (£m)¹
Net revenue (£m)²

Financial Review

Mobile and Online are included in our statutory results up to
the date of their respective disposals resulting in this year’s
performance not being directly comparable to last year.
In order to assist users to more clearly review our financial
performance for the year we have provided an analysis of
our reported statutory results split between the ongoing
Retail networks and the now disposed of Mobile and Online.

Revenue
Revenue for the year was £211.9 million (2016: £212.6
million) and consists of Retail networks revenue of £203.4
million (2016: £196.4 million) and Mobile and Online revenue
of £8.5 million (2016: £16.2 million) up to the date of their
respective disposals. Revenue and net revenue analysis is
included in the operating review on pages 16 to 18.

Cost of revenue
In the current year ‘cost of sales’ was renamed ‘cost of
revenue’ to better reflect the nature of the costs included
in this category. The costs allocated to this category are
consistent with the prior year’s allocations.

Statutory
Cost of revenue reduced by £0.5 million to £106.0 million
(2016: £106.5 million), with a reduction from Mobile
and Online of £1.5 million offset by an increase in Retail
networks of £1.0 million.

Retail networks
Cost of revenue in Retail networks increased to £102.7
million (2016: £101.7 million). The revenue growth achieved
in Romanian top-ups, where PayPoint acts as principal,
increased the cost of top-ups by £4.2 million to £32.3
million (2016: £28.1 million). Depreciation and amortisation
increased by £1.7 million principally due to the launch and
rollout of PayPoint One. The above increases were partially
offset by a reduction in transaction costs from the lower
level of energy CashOut schemes and commissions paid
to retailers reducing to £53.7million. Retailer commissions
reduced as a result of the decline in UK bill payments and
top-up transactions and revenue and changes to the level
of commission share with symbol retailers.

Statutory gross profit margin remained broadly similar to
last year at 50.0% (2016: 49.9%), with Retail networks
gross margins increasing from 48.2% to 49.5% driven by
the £2.4 million VAT recovery and changes to the level of
commission share.

18 PayPoint plc Annual Report 2017

Operating margin
Statutory
The improved operating margin of 1.5ppts to 42.2% (2016:
40.7%) includes the benefit of reduced losses in the Group
results from Mobile and Online and the improved result
from the Drop and Collect joint venture.

Retail networks
Operating margin in retail networks declined by 2.4ppts to
45.3% (2016: 47.7%), as a result of increased operating costs.

Profit on sale of Mobile
Mobile was sold to Volkswagen Financial Services AG for
£26.5 million. After deducting sale costs, a profit on sale of
£19.5 million was recorded, details of which are included in
note 9 to the financial statements. The gross proceeds of
£26.5 million from the sale were distributed to shareholders
on 11 January 2017.

Profit before tax and taxation
The tax charge of £9.5 million (2016: £10.2 million) on profit
before tax of £69.1 million (2016: £8.2 million) represents
an effective tax rate1 of 17.8% (2016: 20.5%). The effective
tax rate reduced due to an adjustment to prior year taxes
following finalisation of those tax returns (£1.1 million,
effective tax rate reduced by 2.0%), reduction in Mobile
losses for which there was no tax relief and the increase of
a deferred tax asset for share based payments, taking into
account the increased likelihood of share schemes vesting
and related tax relief. The statutory tax rate reduced to
13.8% (2016: 125.7%) primarily as a result of no goodwill
impairments being recognised in the current year (2016:
£49.0 million).

Statement of financial position and capital expenditure
Non-current assets of £47.6 million were £8.4 million
higher than last year driven by substantially higher capital
expenditure (£17.5 million). Working capital increased by
£7.4 million caused by reduced client funds within trade
and other payables. Prior year client funds held were higher
than in previous years and this year due to the early Easter
holiday delaying transfers to clients.

Cash flow and liquidity
Cash generated by operations was £51.0 million (2016:
£69.0 million), reflecting strong conversion of profit to cash
and the reduction in client funds from last year.

Corporation tax of £8.6 million (2016: £9.9 million) was
paid in the current year and was net of refunds for over
payments made in prior years. Capital expenditure of £17.5
million (2016: £8.2 million) comprised the purchase of the
freehold of the adjacent building at Welwyn Garden City
for £3.6 million, which we already partly occupied, PayPoint
One terminals, EPoS and MultiPay development, data
centre development and purchase of ATMs.

Share incentive schemes settled in cash absorbed £0.4
million (2016: £0.6 million). Dividends paid were £78.5
million (2016: £27.4 million) details of which are included
in note 24 to the financial statements.

The Group has cash of £53.1 million, and has an undrawn
£45.0 million revolving term credit facility expiring in May
2019. Cash includes amounts held to settle short-term
client settlement obligations, which at the year end,
amounted to £20.2 million.

The additional dividend and final dividend, if approved by
shareholders, will utilise £37.1 million cash. The financial
statements have been prepared on a going concern basis
having regard to the identified risks and viability statement
on pages 20 to 22. The Group’s cash and borrowing
capacity provide sufficient funds to meet the foreseeable
needs of the Group including dividends.

Economic profit
PayPoint’s own measure of economic profit (defined
as operating profit excluding impairment and profit on
disposals of businesses, less tax and a nominal capital
charge of 10%) was £39.2 million (2016: £32.8 million),
an increase of 19.6%.

Dividend
We propose to pay a final dividend of 30p per share on
31 July 2017 (2016: 28.2p) to shareholders on the
register on 23 June 2017, subject to the approval of the
shareholders at the annual general meeting together with
the additional dividend of 24.5p per share. An interim
dividend of 15.0p (2016: 14.2p) was paid on 15 December
2016, making a total ordinary dividend for the year of
45.0p per share (2016: 42.4p), up 6.1%.

Rachel Kentleton
Finance Director
25 May 2017

1. Effective tax rate is the tax cost as a percentage of operating profit before impairments and profits and losses on business disposals.

PayPoint plc Annual Report 2017 19

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPrincipal risks and uncertainties

Risks
PayPoint’s business, financial condition or operations could be materially and adversely
affected by the risks summarised below. Although management takes steps to mitigate risks
where possible or where the cost of doing so is reasonable in relation to the probability and
seriousness of the risk, it may not be possible to avoid the occurrence of some or all of such
risks. The Group’s level of risk in each area remains broadly the same as last year except for
exposure to country and regional risk which has been reduced due to the sale of the Mobile
business, together with the risk of acquisitions not meeting expectations and the addition
of the risk associated with Brexit. The Group’s risk management policies and procedures are
also discussed in the governance statement on page 43.

Risk area

Potential impact

Mitigation strategies

Cyber, technology & process and Fraud

Loss or inappropriate
usage of data

Interruptions in business
processes or systems

The Group’s business requires the appropriate
and secure use of consumer and other
sensitive information. Electronic commerce
requires the secure transmission of
confidential information over public networks.
Increasingly, internal systems make use of third
party hosted services (cloud services) 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’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.

The Group has established physical security
controls at its data centres and 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, including the significant use of data
and communications encryption technology,
improvements in e-mail and web filtering and
testing and removal of system vulnerabilities.
We have also developed plans for responding
to a breach of security.

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.

Clients, agents & other third parties

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.

20 PayPoint plc Annual Report 2017

Risk area

Potential impact

Mitigation strategies

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.

The Group monitors client and retailer
concentration risk to ensure that no one client
or retailer accounts for a disproportionate
share of the Group’s net revenue. In addition,
the Group continues to acquire new clients
and retailers to reduce reliance on existing
sources of revenue.

Legal, regulatory & compliance

Legislation or regulatory
reforms and risk of non‑
compliance

The Group is largely unregulated by financial
services regulations, although in the UK we
have Payment Institution status (through
PayPoint Payment Services Limited), which
enables the provision of regulated payment
services, under the Payment Services
Regulations 2009, including certain CashOut
services. The Group’s agents which offer
money transfer on behalf of third party clients
are licensed as Money Service Businesses by
HMRC. We are 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. A review is underway to ensure
that the Group is compliant with the
requirements of the General Data Protection
Regulations prior to the May 2018 deadline.

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.

Loss or infringement of
intellectual property
rights

HR/Personnel

Dependence on
recruitment and retention
of highly skilled personnel

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 defends vigorously all third party
infringement claims.

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.

PayPoint plc Annual Report 2017 21

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPrincipal risks and uncertainties continued

Risk area

Potential impact

Mitigation strategies

Economic Growth

Brexit

The effect on inter-company transactions and
the Group’s international expansion plans may
be adversely affected by the outcomes of the
negotiations between the UK government and
the other member countries during the UK’s
exit from the European Union.

Due to the current uncertainties with the
Brexit negotiations the Group is still
considering appropriate mitigation strategies.
However, the bulk of the Group’s operations
and revenues are UK-based. Romania and
Ireland will remain within the EU and are
unlikely to be significantly affected by Brexit.

Foreign exchange
fluctuations

As the Group operates in Romania and Ireland,
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.

Product/project management

Technological changes
and increasing
competition

The Group operates in a number of
geographic, product and service markets that
are highly competitive and subject to rapid
technological changes, for example the
introduction of smart meters, new payment
solutions and the movement of UK consumers
away from cash payments. 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. 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, MultiPay has been launched.

In making the assessment, the Directors have also
considered the Group’s robust capital position, the
cash-generative nature of the business, the ability of the
company to reduce costs and the access to available credit.

The financial statements have, therefore, been prepared on
a going concern basis and the Directors have a reasonable
expectation that the Group will remain viable over the three
year assessment period.

Viability and going
concern statements

The Directors consider the Group’s viability over a three
year period, on an annual basis, as part of their risk
monitoring programme. The three year period is considered
appropriate as it aligns with the Group’s financial planning
cycle. In determining the Group’s viability its business
activities together with factors likely to affect its future
development and performance described in the Chief
Executive’s review on pages 10 to 14 (in particular, changes
to the Group’s structure, strategy and priorities) and the
principal risks and uncertainties set out on pages 20 to
22 were considered. It was determined that none of the
individual risks in isolation would compromise the Group’s
viability and therefore a number of different severe but
plausible principal risk combinations were considered. These
included the downside scenario of the loss of a large clients,
slower than anticipated growth in retail services and a quicker
than expected decline in the cash payments business.

22 PayPoint plc Annual Report 2017

Environmental matters, employees, social, community
and human rights

PayPoint is committed to dealing fairly and with a high level of integrity with all its stakeholders,
including clients, retailers, merchants, consumers, local communities, shareholders and our
people. We comply with statutory obligations in all areas and subject our practices to high
levels of scrutiny. We publish results twice each year and provide two interim management
statements, complying with reporting and disclosure obligations. This report sets out our
approach and the way we measure our success in dealing with each group of stakeholders.
Information about the approach we take with our employees can be found on pages 25 to 27.

Clients

Retailers and consumers

Local communities

Shareholders

Information on
stakeholders

Over 300 clients including
those via reselling
arrangements.

Over 40,000 retailers in UK,
Ireland and Romania and
provide a service to millions of
consumers.

Where our employees live
and work.

601 shareholders at
31 March 2017.

To provide stable, reliable and
a broad range of services to
help generate consumer
footfall for retailers who serve
their communities.

We seek to provide an
unparalleled service to our
retailers and consumers.

Impact

Provision of convenient
services for consumer
payments.

Engagement

Provision of a high
standard of service to our
clients and open
communication. Client
contracts contain service
level agreements, which
are set to a high standard.
Specific performance is
measured for key
elements, including
system availability and file
delivery.

How we interact
and support the
stakeholders

Communication - major
clients have regular
review meetings with
dedicated Strategic
Account Managers

In the UK, terminal availability
is over 99% and when a
terminal needs to be replaced,
it is achieved within four hours
across the UK in 98% of
cases. The breadth of
products offered by PayPoint
is greater than any other
network.

An annual retailer survey is
carried out to understand how
we can improve our service.
We also invite retailers to
attend an annual forum to
discuss new products and
obtain regular retailer
feedback.

Major multiple retailers have
regular review meetings with
dedicated account managers.

Financial support to local
charities.

Maximise
shareholder return.

Please see page 39

Shareholders are invited
to attend the annual
general meeting and
executive directors
meet with major
shareholders twice a
year to discuss the
Group’s results.

PayPoint has a charity
committee made up of
employee volunteers
which provides support,
funded by the Company,
to fundraising activities
carried out by its
employees for charities
which are important to
them. These include local
charities in the
communities in which its
employees live and work.

In September 2016
PayPoint was appointed
as an Enterprise Advisor
to a local secondary
school in order to support
their students with the
transition from school to
the workplace.

During the year, PayPoint
donated £25,000 to over
20 local and national
charities, which was
supplemented by funds
raised by employees
themselves.

We offer our network to
collect for certain
charities free of charge,
including the BBC’s
Children in Need telethon.

58% of PayPoint’s ATM
network is ‘speech-
enabled’, the largest
proportion of an
independent network in
the UK.

PayPoint plc Annual Report 2017 23

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSEnvironmental matters, employees, social, community
and human rights continued

Environment
PayPoint’s main impact on the environment stems from our
use of resources to run offices in the UK, Ireland and Romania.

We measure our carbon footprint in accordance using the
Green House Gas (GHG) protocol. This allows us to monitor,
by region, our carbon footprint and implement, where
practical, targets to reduce our carbon footprint.

The two primary sources of PayPoint’s carbon emissions are
business travel and energy consumption. We visit existing
and prospective retailers in the UK, Ireland and Romania.
Routes are pre-planned to ensure efficiency where possible.
Management regularly visits our businesses to review and
improve performance. We aim to avoid unnecessary travel.
Energy consumption arises from our offices in the UK
and Romania. We have a cycle to work scheme for our UK
employees. We encourage employees not to print unless
necessary and our board papers are sent electronically
rather than printed and sent by post.

PayPoint’s services help consumers to reduce the number
of unnecessary car journeys through the convenience
of our outlets which are usually available within a short
walking distance.

We recycle wherever possible, including paper, cans,
plastic cups, cardboard, toners, print cartridges and
computer equipment.

Our approach to waste management remains unchanged
year on year. Reported landfill waste has increased as a
result of new technology deployed by our waste collection
supplier which accurately measures the weight of waste
collected. Previously estimations were made based on
the volume of waste collected. The total volume of waste
collected in the year was similar to last year. As a result, the
total reported waste has increased and the proportion of
waste recycled has fallen. Plans are in place to reduce total
waste and increase recycling over the coming year.

Waste
Landfill
Recycled
Total
% recycled

Year ended
31 March 2017
(tonnes)

Year ended
31 March 2016
(tonnes)

23.0
17.4
40.4
43.07%

13.5
18.6
32.1
57.94%

Change %

70.4%
(6.5%)
25.9%

GHG emissions
In this section we report on all required greenhouse gas
(GHG) emissions in accordance with the Companies Act 2006
(Strategic Report and Directors’ Report) Regulations 2013.

We report using a financial control approach to define our
organisational boundary. A range of approaches can be
taken to determine the boundaries of an organisation for
the purposes of GHG reporting including financial control,
operational control or equity share.

The methodology used to calculate our emissions is based
upon the Environmental Reporting Guidelines: including
mandatory greenhouse gas emissions reporting guidance
(June 2013) issued by DEFRA which make it clear that,
in most cases, whether an operation is controlled by the
organisation or not does not vary based on whether the
financial control or operational control approach is used.
The 2013 UK Government GHG Conversion Factors for
Company Reporting have been used to calculate our
emissions based on data gathered from each of our
business units.

Global GHG emissions data for the year is as follows:

Units
tonnes
CO2e

tonnes
CO2e

Impact
Scope 1
(direct emissions
from fuel combustion)
Scope 2
(indirect emissions
from purchased electricity,
heat and cooling)
Scope 3
(business travel,
waste and water)
Total
Intensity measurement:
Total tonnes of CO2e
per employee1

Year ended
31 March 2017
373

Year ended
31 March 2016
346

1,120

1,322

680

764

2,173
3.3

2,432
3.4

1. We have used the average number of employees to calculate our intensity measure as the
majority of our emissions are directly related to business travel and energy consumption
at our head office locations.

24 PayPoint plc Annual Report 2017

People development
Performance and talent management processes are in
place to ensure a continued focus on high performance and
people development. All employees formally discuss their
performance and development with their manager twice
a year and individual performance has a direct influence
on pay review and bonus outcomes. We hold consistency
meetings to ensure that employees are rated fairly and
that the overall spread of ratings reflects the performance
of the Company. Training is undertaken locally based on
individual and business needs. Managers attend a two day
Management Development Workshop to ensure that they
develop the skills that they need to manage their people
effectively, and in 2016 we supplemented this with the
introduction of management skills workshops running
throughout the year. 50% of our annual training budget
is reserved exclusively for IT training to ensure that our IT
employees continue to develop the technical skills that they
need to develop and maintain PayPoint’s innovative retail
technology solutions.

PayPoint is committed to supporting the development of
entry level talent via apprenticeships. Three apprentices are
currently employed within our IT function and we plan to
expand the programme over the course of the next year.

Diversity
PayPoint values diversity and offers an environment where
all are treated equally and which is free from discrimination
in respect of gender, ethnicity, religion, sexual orientation,
age or disability.

42% of our employees are female and the representation on
the Executive Board is 43% with three women on a board of
seven members.

PayPoint is committed to treating applicants with
disabilities equally and supporting people who become
disabled during their career with the Company. This includes
making reasonable adjustments both to the recruitment
process for applicants and to the working environment
for employees, in order that they can achieve their full
potential.

Human rights
PayPoint supports fundamental human rights, such as
the right to privacy, safety and to be treated fairly, with
dignity and respect. Our employment standard sets out
our commitment to good employment practices and the
principles to govern the practices adopted in each of our
businesses. All employees have a right to safe conditions
of work, consideration of their welfare, fair terms of
employment, reward and treatment, clarity and openness
about what is expected.

People
PayPoint employed, on average, 660 members of staff
during the period. We aim to create a positive working
environment that enables us to attract and retain a talented
workforce. Employee turnover decreased during the year as
changes implemented in the previous year were embedded.
One third of UK turnover was instigated by the business as
part of our programme of transformation and we expect
turnover to remain at similar levels as we continue to
transform and ensure that we have the shape and size of
organisation needed to deliver our future plans.

Culture
PayPoint’s culture of openness, honesty and accountability
is an essential part of our success. We communicated a new
set of values in 2016 to reinforce the culture and behaviours
that we believe will enable us to continue to deliver innovative
solutions and provide first class service to our customers.
We are actively engaging with our people to bring the values
to life in the work that we do. See our six values on the
following page.

Engagement
PayPoint recognises that all of our employees play a part
in delivering the Group’s performance. We keep our people
informed of company performance and new developments
via formal business update meetings, staff briefings, regular
team meetings and company newsletter. All employees
are invited to participate in two meetings a year where the
directors present the performance of the Group. Overseas
offices participate by webcam.

PayPoint invites all employees to complete an annual
engagement survey in order to encourage two way
communication and co-create action plans to enable the
business to continually improve. We launched a new survey
in 2016 in which 89% of employees participated and we
achieved an overall engagement score of 71%. This is below
the 78% achieved in the prior year although the results are
not directly comparable due to the change in survey provider.

PayPoint operates a Share Incentive Plan to enable all UK
employees to share in the success of the Company. 40% of
employees actively participate in this plan, an increase from
36% in the prior year.

PayPoint plc Annual Report 2017 25

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSEnvironmental matters, employees, social, community
and human rights continued

Our values
Our mission is to lead the market in the provision of products
to consumer service companies and retailers, through
innovative solutions and first class service.

We do this by living our six values, which together form the
DNA of our culture. They guide our behaviour and interactions
with all of our customers.

Accountable

Enquiring

Team player

Customer
focused

Ambitious

Passionate

In addition to our twice yearly
appraisal of our people
against these values, we also
recognise individuals who role
model our values via our
Annual Awards event and
Monthly Values Award
programme. Each month we
reward an employee with
a trophy, £200 worth of
vouchers and the use of a
premium car parking space.

26 PayPoint plc Annual Report 2017

Reece Jones
Retail Operations
January 2017 Values
Award Winner

James King
Finance Operations
November 2016
Values Award Winner

Reece was nominated for the
Customer focused value for his
positive, helpful attitude and support
given to many different people in the
business. In particular, Reece guides
our Territory Development Managers
through contract completion and once
took contracts home on a Friday
evening, for a TDM to collect on
Saturday in order to secure sales
first thing on Monday.

James was nominated for the Customer
focused value for the excellent work he
delivers on reconciling and processing
client settlement payments. This vital
area requires exemplary customer
communications and an ability to work
under pressure, which James constantly
delivers. He has received excellent
feedback from internal and external
clients for his work to ensure payments
are delivered accurately and on time.

PayPoint has the following policies in place:

equal opportunities - we treat job applicants, employees
and temporary staff equally, regardless of their sex, sexual
orientation, age, race, ethnic origin or disability. It is also the
Group’s policy to retain employees who may become
disabled while in service and provide appropriate training
as necessary.

whistle‑blowing - we are committed to ensuring that
malpractice is prevented and immediately dealt with, should
it arise. We encourage employees to raise their concerns
about any malpractice promptly and we have an established
procedure for raising any such concerns.

health and safety - we recognise that effective health and
safety management is fundamental to running a successful
business. We are committed to operating high standards,
designed to minimise the risk of injuries and ill health to
employees, contractors, visitors and others who come into
contact with the business, so far as is reasonably practicable.

disciplinary and grievance procedures - we provide a fair
and consistent method of dealing with disciplinary problems
and treat misconduct with appropriate action. We ensure
that we treat any grievance an employee may have relating to
their employment in a fair and reasonable manner.

bullying and harassment - we promote a working
environment free of harassment and individuals who believe
that they are being subjected to any form of harassment are
encouraged to come forward to have the issue resolved.

business ethics - we set out clear standards for ethical
relationships and conduct to be maintained by employees
and sub-contractors and conduct our business in
accordance with the highest ethical standards. We do not
offer or accept any bribes.

training and development - all employees meet twice a
year with their line manager to discuss performance and any
development needs. Training is provided either in-house or
externally. We also sponsor employees through further
professional and technical qualifications. We promote
internally, where appropriate.

PayPoint’s employees
(Numbers are average unless
otherwise stated)
General
Number of staff employed
during the period
Length of service
Staff turnover
during period
Sickness absence rate
% working part-time

Gender diversity
Number of women employed
% of all employees
Number of men employed
% of all employees

PayPoint plc directors
Number of women employed
at 31 March 2017

% of PayPoint plc directors
Number of men employed at
31 March 2017
% of PayPoint plc directors

Senior management1
Number of women employed
% of senior management
Number of men employed
% of senior management

Ethnic minorities
% of all employees
% of management grades

Disabled employees
% of all employees

Age profile
Employees under 25
Employees 25 to 29
Employees 30 to 49
Employees 50 and over

Rest of the world

Year
ended
31 March
2017

Year
ended
31 March
2016

Year
ended
31 March
2017

Year
ended
31 March
2016

469

507

191

206

5 years 5 years 4 years 4 years
30%

33%

29%

27%

2.5%
10%

2.4%
10%

2.0%
6%

1.0%
7%

198
42%
271
58%

214
42%
293
58%

22%
7

10%
7

78%

90%

87
46%
104
54%

‑

0%
‑

84
41%
122
59%

0%
-

2
27%
6
73%

2
26%
6

-
0%
1
74% 100% 100%

‑
0%
1

31%
18%

29%
24%

11%
5%

13%
7%

47
79
269
74

43
87
301
76

22
28
133
9

23
32
142
9

1. Senior management includes the Group Executives and managing director

Approved by the board of directors and signed on behalf
of the board.

Dominic Taylor
Chief Executive
25 May 2017

PayPoint plc Annual Report 2017 27

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSCorporate governance report

Board of directors

28 PayPoint plc Annual Report 2017

1. Nick Wiles
Non-executive Chairman
Appointed to the board 22 Oct 2009
Appointed as Chairman 8 May 2015
Nick retired as Chairman of UK investment banking at
Nomura in 2012. He has worked in banking for more than
20 years, with the majority of this time at Cazenove &
Co, where he was a partner prior to incorporation. He
is currently a non-executive director of Primary Health
Properties plc.

2. Gill Barr
Non-executive director
Appointed 1 Jun 2015
Gill has held senior strategy and marketing positions at
John Lewis, Kingfisher, MasterCard and KPMG. Most
recently she was Group Marketing Director for The Co-
operative Group. She was a Non-Executive Director of
Morgan Sindall plc for eight years and now has a portfolio
of Non-Executive Directorships. She is a Trustee Director
for Willis Towers Watson’s master trust pension fund
LifeSight. She is the Chair of the Customer Challenge Group
for Severn Trent Water plc. She was recently appointed
Advisory Board Member, Wiltshire Farm Foods.

3. Neil Carson OBE
Non-executive director
Appointed 23 July 2014
Neil worked for 34 years for Johnson Matthey (JM), the
FTSE 100 chemical company. Starting as an engineering
graduate trainee, he worked in each of the divisions in
a number of different roles serving global markets.
He joined the board of JM in 1999 as Division Director
of the Autocatalyst division and became the CEO in 2004,
standing down in 2014. Neil was a founder member of
the Prince of Wales Corporate Leaders Group on Climate
Change. Neil is currently Chairman of TT Electronics. He is
also Honorary President of the Society for the Chemical
Industry. He was awarded an OBE for services to the
Chemical Industry in 2016.

4. Giles Kerr
Non-executive director
Appointed 20 Nov 2016
Giles was formerly National Partner with Arthur Anderson
& Co and previously held a number of positions with
Amersham plc within finance and corporate development,
culminating in his role as Group Finance Director. Giles
is Director of Finance of Oxford University and is a non-
executive director of BTG plc, Senior plc and Adaptimune
Therapeutics plc.

5. Rachel Kentleton
Finance Director
Appointed 3 January 2017
Rachel joined PayPoint in January 2017. Rachel is a qualified
accountant and has held a number of finance and investor
relations roles at Unilever, NatWest, Diageo and SABMiller.
Rachel’s most recent role immediately prior to joining
PayPoint was as Group Director, Strategy & Implementation
at easyJet. Rachel is also a non-executive director of
Persimmon plc, where she is chair of the Audit Committee
and a member of the Risk and Nomination Committees.

6. David Morrison
Non-executive director
Appointed 12 Jan 1999
David has been Chief Executive of Prospect Investment
Management (Prospect) since 1999, when he started
the company. He became a director of PayPoint in 1999
following an investment in the company by clients of
Prospect. Prior to establishing Prospect, he had worked in
the venture capital sector with 3i, Abingworth Management
and Botts & Company. He is currently a non-executive
director of Record plc and several private companies.

7. Rakesh Sharma
Non-executive director
Appointed 12 May 2017
Rakesh was appointed to the PayPoint board in May 2017.
Rakesh started his career as an electronic design engineer at
Marconi in 1983, before moving to Dowty as Chief Engineer
in 1989. He was appointed Marketing Director of that
business in 1993, when Ultra Electronics (Ultra) was formed.
Rakesh has managed businesses and divisions across the full
range of Ultra’s wide portfolio, with consistent success in
driving growth in the Ultra group. He became Chief Executive
of Ultra in 2011, a position which he holds to date.

8. Dominic Taylor
Chief Executive
Appointed 4 Aug 1998
Dominic joined PayPoint in 1997 as Retail Director and was
appointed to his current role in August 1998. He was a Royal
Naval officer for 12 years, following which he completed
an MBA at the Cranfield School of Management. In 1991,
Dominic joined the Vodafone Group where he led a number
of initiatives including the development of its SMS service
and a bid for the National Lottery, before becoming Sales and
Marketing Director for the indirect sales of mobile phones to
retailers. In 1996, Dominic joined Granada plc as a director of
Granada Technology Group and Managing Director of Granada
Business Technology, supplying film and telecommunications
products into the hotel and leisure sectors.

9. Tim Watkin-Rees
Business Development Director
Appointed 22 Sept 1998
Tim was a founder director of PayPoint in 1996 and has been
responsible for group business development throughout the
company’s history. He previously worked in retail banking and
payments with Lloyds Bank, KPMG Management Consultants
and Nexus (later Sligos and now Atos). He is an Associate of
the Chartered Institute of Bankers.

PayPoint plc Annual Report 2017 29

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSCorporate governance report continued

Leadership team bios

30 PayPoint plc Annual Report 2017

1. Dominic Taylor
Chief Executive
Dominic joined PayPoint in 1997 as Retail Director and was
appointed to his current role in August 1998. He was a Royal
Naval officer for 12 years, following which he completed
an MBA at the Cranfield School of Management. In 1991,
Dominic joined the Vodafone Group where he led a number
of initiatives including the development of its SMS service
and a bid for the National Lottery, before becoming Sales and
Marketing Director for the indirect sales of mobile phones to
retailers. In 1996, Dominic joined Granada plc as a director of
Granada Technology Group and Managing Director of Granada
Business Technology, supplying film and telecommunications
products into the hotel and leisure sectors.

2. Tim Watkin-Rees
Business Development Director
Tim was a founder director of PayPoint in 1996 and has been
responsible for group business development throughout the
company’s history. He previously worked in retail banking and
payments with Lloyds Bank, KPMG Management Consultants
and Nexus (later Sligos and now Atos). He is an Associate of
the Chartered Institute of Bankers.

3. Rachel Kentleton
Finance Director
Rachel joined PayPoint in January 2017. Rachel is a qualified
accountant and has held a number of finance and investor
relations roles at Unilever, NatWest, Diageo and SABMiller.
Rachel’s most recent role immediately prior to joining
PayPoint was as Group Director, Strategy & Implementation
at easyJet. Rachel is also a non-executive director of
Persimmon plc, where she is chair of the Audit Committee
and a member of the Risk and Nomination Committees.

4. Susan Court
Head of Legal
Company Secretary
Susan joined PayPoint in 1999 as sole in-house counsel,
directly from private practice, and has been responsible
for the legal and regulatory aspects of the PayPoint group
throughout her tenure.

Having been directly involved in the PayPoint IPO in 2004,
Susan has been responsible for establishing an in-house
legal team and ensuring its full integration into the PayPoint
group in order to service rapid growth and change in
the business while taking account of the ever-evolving
regulatory payments landscape.

5. Jon Marchant
Chief Information Officer
Jon joined PayPoint in early 2011 and is responsible for
all aspects of IT management and retail operations within
the business. An experience IT and operations leader
and change specialist, he has worked in several bluechip
financial services and retail organisations during his career
including Halifax, Co-operative Group, Capital One and
Scottish Widows.

6. Katy Wilde
Human Resources Director
Katy joined PayPoint as HR Director in 2012 with responsibility
for the development and implementation of our people
agenda. Prior to joining PayPoint Katy worked for RSA
Insurance Group where she held a number of senior business
partnering roles in the UK and latterly in the Emerging Markets
business where she was responsible for ensuring the delivery
of the HR agenda across 22 countries in Central and Eastern
Europe, Asia, the Middle East and Latin America.

Prior to that Katy spent seven years at General Electric where
she held HR roles in both their consumer finance and insurance
businesses. Katy has a degree in International Business and
Modern Languages from Aston University and is a Chartered
Member of the CIPD.

7. Lewis Alcraft
Commercial Director
Lewis was appointed to his current role of Commercial
Director in 2015 and leads PayPoint’s broader commercial
agenda, across retail and client partners. On joining the
business in 2007, Lewis led PayPoint’s relationship with
BBC TV Licensing, before moving on to various roles
including heading PayPoint’s product and client teams.

Prior to PayPoint Lewis was a senior client manager at CPM,
a marketing agency within the Omnicom group of companies.

8. Mugur Dogariu
Managing Director, PayPoint Romania
Mugur has been Managing Director of PayPoint Romania
since August 2008 and has overseen impressive growth in
the retail network to over 11,000 stores across Romania, as
well as transaction growth from over 1 million in 2008/2009,
to 75 million in 2016/17.

Mugur previously held senior management roles in sales
and marketing for Nestle, Rhone Poulenc, Renania Trade
and Interbrands Marketing & Distribution. Mugur holds
an Executive MBA from ASEBUSS and The Kennesaw
State University, as well as a Professional Certificate in
Management from the British Open University and a degree
from the University of Agronomic Sciences and Veterinary
Medicine of Bucharest.

PayPoint plc Annual Report 2017 31

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSCorporate governance report continued

Chairman’s statement on governance

Dear Shareholder,

I am pleased to present the Corporate Governance report
on behalf of the PayPoint plc board. This report gives
insight into the corporate governance workings of the
board as well as details of how the principles of the UK
Corporate Governance Code (the Code) have been applied
during the year under review.

Culture and values
The board continues to set the right tone from the top
by providing entrepreneurial leadership through good
governance and accountability for the benefit and
protection of our shareholders, and the sustainable growth
of the business as a whole. One of the key developments in
the culture of PayPoint during the year, which was endorsed
by the board, was the establishment and implementation
of formal corporate values to underpin operations of the
day-to-day activities and overall business. The values
adopted which are: Accountable, Enquiring, Team player,
Customer focused, Ambitious and Passionate, reinforce the
culture of good governance across the organisation and
demonstrate the willingness within PayPoint to work in a
positive manner with our clients, retailers, employees and
other stakeholders. Further details of the PayPoint values
are on page 26.

Board changes and succession
As I stated in my Chairman’s statement at the beginning
of this annual report on page 3, George Earle retired as
Finance Director and board member at the end of the
financial year under review. George had served on the board
for 12 years in which time he made a significant contribution
to the Company in his robust and prudent management
of its financial affairs. On behalf of the board, I would like
to thank George for his personal commitment and service
to PayPoint. The board was delighted to welcome Rachel
Kentleton as successor to George Earle. Rachel joined
PayPoint and the board on 3 January 2017. Rachel brings
considerable financial and operational experience together
with a wide knowledge of investor relations and strategy.

Neil Carson also notified the board, during the year, of
his intention to step down as a director, due to his other
external commitments. An extensive and rigorous search
process was initiated to identify a new non-executive
director and the board was unanimous in supporting
the appointment of Rakesh Sharma on 12 May 2017.
Rakesh brings valuable experience to the board and his
appointment strengthens the board’s composition in
terms of relevant experience, knowledge and skills. Upon
his appointment, Rakesh became a member of the Audit,
Remuneration and Nomination Committees, and he will take
over the chairmanship of the Remuneration Committee
when Neil steps down. On behalf of the board, I thank Neil
for his service and welcome Rakesh with whom the board
looks forward to working closely.

As was reported in last year’s annual report, David Morrison
is due to retire from the board at the 2017 annual general
meeting, however the board has decided that in view
of the recent appointment of a new independent non-
executive director, there would be no further appointment
made to replace David on the board at this time. However,
the board will continue to keep its composition under
review, and make any directorate changes as it deems
necessary or required. Taking into consideration the size
and the business of the Company, the board determined
that it has the appropriate balance of skills, experience,
independence and knowledge to enable the discharge of its
responsibilities effectively, and that it will continue to do so
after the departure of David Morrison.

In light of the various changes to the board’s composition,
succession planning remained at the forefront of the
board’s agenda throughout the year, with the Nomination
Committee leading the process to ensure that it was formal,
rigorous and transparent, and making recommendations for
board appointments. Details of succession planning and the
process by which the new directors were appointed are set
out in the Nomination Committee report on page 40.

The board acknowledges that its composition during the
year did not comply with the Code in that the independent
non-executive directors made up less than half of the
board, however, as was detailed in the 2016 annual report,
this composition will remain as is to ensure continuity in
light of the number of changes to the board’s membership,
until the retirement of David Morrison at the 2017 annual
general meeting, at which time the composition of the
board will become compliant with the Code.

32 PayPoint plc Annual Report 2017

Board committees
In this corporate governance section of the annual
report, the board committees, of Audit, Nomination and
Remuneration, have reported on their activities for the year
under review (see pages 42, 40 and 46). These activities
comprise the roles and responsibilities delegated by the
board to each committee, but for which the board retains
overall responsibility. Some of the key activities undertaken
and reported on for each committee include: the Audit
Committee - risk management and external audit tender
(see page 42); Nomination Committee – succession planning
and director appointment (see page 41); Remuneration
Committee - consultation with major investors on the
directors’ remuneration policy (see page 46).

In conclusion, the board remains confident of the strategic
plan and of the governance processes in place to bring
about its delivery in order to ensure sustainable growth of
the business. We hope that this Governance Report serves
its purpose of providing you with insight into the corporate
governance of PayPoint plc.

Nick Wiles
Chairman
25 May 2017

Oversight
In February 2017, the board held a strategy session at
which the strategic plan of the Company (which had been
approved by the board in 2016) was reviewed to ascertain
that the general direction of the business continued to
be in line with the strategic plan. Throughout the year the
board continuously monitored progress in the business and
against strategy with reference to the KPIs which are set
out on page 15.

The board devoted sufficient time to consider in depth the
key activities and transactions that occurred during the
year, including, the launch of the PayPoint One terminal,
the sale of the Mobile payments business and the new
arrangement with respect to Collect+. In each case the
board determined that there were strong governance
processes in place to ensure their proper implementation.

Effectiveness
The board conducted an internal evaluation during the
year, the overall conclusion of which was that all the board
members were very satisfied with the performance of
the board and each of the committees. The details of
this evaluation process including the suggestions for
improvements therein, are set out on page 38.

With the constant change in the regulatory environment the
board considers it of utmost importance to keep abreast,
either through specific training or general briefings, of
changes in regulations that would have a significant impact
on the organisation. For instance, the board received
targeted training on the new Market Abuse Regulations that
came into effect during the year under review.

All directors are given the opportunity of going out on field
visits to retailers, in order to give them a broader view of the
Group’s operations.

PayPoint plc Annual Report 2017 33

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSCorporate governance report continued

Compliance statement

The board considers that throughout the year under review,
it has complied with the provisions of the September 2014
version of UK Corporate Governance Code (the Code) as
issued by the Financial Reporting Council, with the exception
that for the financial year under review only three of the four
non-executive directors were determined by the board to
be independent. The independent non-executive directors
were Neil Carson1, Gill Barr and Giles Kerr. David Morrison is
the non-executive director who was not considered to be
independent. Therefore throughout the year, less than half
of the board were independent non-executive directors,
excluding the Chairman, and the reason for this deviation
from Code provision B1.2 is addressed on page 32.

A copy of the Code can be found at https://www.frc.org.uk/
Our-Work/Codes-Standards/Corporate-governance/UK-
Corporate-Governance-Code.aspx

This report describes how the principles of corporate
governance in the Code have been applied by the Company.

Leadership

Corporate governance structure
The board has in place, a sound corporate governance
structure with clearly defined roles and responsibilities
as shown in the chart below. This governance structure
enables the proper implementation of the strategic aims of
the Company resulting in the growth of the business, and
ensuring that the interests of the shareholders and wider
stakeholders are protected in the process.

The board
The board is collectively responsible for the long term success of
the Company and provides effective leadership by setting the
strategic aims of the Company and overseeing the efficient
implementation of these aims in order to achieve sustainable
growth of the business. The current board members are as
shown on page 28. The board delegates certain roles and
responsibilities to board committees and to the Chief Executive

but still retains overall responsibility and has a schedule of
matters reserved for its approval which is contained in the
delegated authorities document. This allows for in depth review
and insight into applicable matters by the committees before
they report back to the board. The delegated authorities
including the roles and responsibilities of each of the committees
can be found at https://www.paypoint.com/en-gb/about/
investor-relations/corporate-governance

Audit Committee
Summary of responsibilities
include:
- Monitoring the statutory

audit of the financial
statements and financial
reporting process

- Monitoring the

effectiveness of internal
controls and risk
management

- Establishing and
overseeing the
relationships with the
Company’s auditors

More information can be
found on pages 42.

Nomination Committee
Summary of responsibilities
include:
- Review structure, size and
composition of the board

- Consider succession
planning for directors
- Identify and nominate
candidates to fill board
vacancies

More information can be
found on pages 40.

Remuneration Committee
Summary of responsibilities
include:
- Determining the policy
(for board approval) on
remuneration of the
Chairman and executive
directors

- Exercising discretion on

remuneration issues in line
with policy

- Establishing the
relationship with
remuneration consultants

More information can be
found on pages 46.

Market disclosure
Committee
This committee was
established by the board
during the year under review.
Its main responsibility is
overseeing the disclosure of
information by the Company
to ensure that it meets its
obligations under the new
Market Abuse Regulation.
Its members are the Chief
Executive, the Finance
Director and the Company
Secretary.

Chief Executive
The Chief Executive is responsible for running the Group’s
business and in doing so, he delegates authority to the
executive board, to the managing director and finance director
of PayPoint Romania and to the managing director and finance
director of PayPoint Payment Services Limited. His roles and
responsibilities are set out on page 36.

PayPoint
Romania
PayPoint Romania is headed
by the managing director
who together with the
finance director form the
management team of the
business. They are
responsible for the
day-to-day operation of
PayPoint Romania. The
managing director reports
to the Chief Executive.

Executive Board
The executive board is headed by the Chief Executive and
comprises the Finance Director, Business Development Director,
Chief Information Officer, Commercial Director, HR Director and
Company Secretary/Head of Legal. The executive board is
responsible for the day-to-day management of the Group’s
(excluding PayPoint Romania and PayPoint Payment Services
Limited) operations, including: risk management; preparation and
presentation of the strategy plan and the annual budget to the
board; and the implementation of these strategic plans and other
decisions as approved by the board. The board oversees the
activities of the executive board

PayPoint Payment
Services Limited (PPSL)
PPSL is the FCA regulated
entity of the Group which is
authorised as a payment
institution to provide
regulated payment services
(including certain CashOut
services) under the Payment
Service Regulations 2009.
The managing director of
PPSL reports to the Chief
Executive.

1. Neil Carson will be stepping down from the board on 26 May 2017 and Rakesh Sharma was appointed as an independent non-executive director on 12 May 2017.

34 PayPoint plc Annual Report 2017

Meetings
The board and its committees meet regularly throughout
the year with meetings scheduled: around key dates in
the Company’s corporate calendar, and to consider key
corporate transactions or events that may arise. There
were ten scheduled meetings during the year under
review, six of which were full board meetings and four were
held by telephone conference. Of the meetings held by
telephone conference, two were to consider and approve
the interim management statements, while the other two

were to consider and approve the appointment of Rachel
Kentleton to the board, and the sale of the Mobile business
as well as the new arrangements with respect to Collect+,
respectively. The table below shows directors’ attendance
of board and committee meetings. Where a director is
unable to attend a particular meeting, he or she receives
and reads the papers for consideration at that meeting,
and provides input through discussion with the Chairman
of the board or the chairman of the relevant committee,
in advance of the meeting.

Directors’ meeting
attendance
2016/17

Membership
of committees

n
o
i
t
a
n
m
o
N

t
i
d
u
A

n
o
i
t
a
r
e
n
u
m
e
R

Non-Executive Directors
Gill Barr
Neil Carson
Giles Kerr2
David Morrison2
Nick Wiles
Executive Directors
George Earle3
Rachel Kentleton4
Dominic Taylor
Tim Watkin-Rees

Board

Audit Committee

Nomination Committee

Remuneration Committee

Meetings
attended

Maximum
possible to
attend

Meetings
attended

Maximum
possible to
attend

Meetings
attended

Maximum
possible to
attend

Meetings
attended

Maximum
possible to
attend

10
10
9
8
10

8
3
10
10

10
10
10
10
10

9
3
10
10

6
6
6
5*
6

5*
2*
6*
6*

6
6
6
5*
6

5*
2*
6*
6*

4
4
4
4
4

-
-
4*
-

4
4
4
4
4

-
-
4*
-

7
7
7
6*
7

2*
-
7*
2*

7
7
7
6*
7

2*
-
7*
2*

* By Invitation. The executive directors are not members of any of the board committees and they attended only the committee meetings to which they were specifically invited. David

Morrison is not a member of the Audit and Remuneration Committees and he only attended meetings of these committees to which he was specifically invited.

1. Rakesh Sharma joined the board on 12 May 2017 therefore he was not eligible to attend any of the meetings for the financial year under review.
2. Giles Kerr was unable to attend one board meeting at which the third quarter interim management statement was considered while David Morrison was unable to attend one full board

meeting and one board meeting at which Rachel Kentleton’s appointment to the board was considered.

3. George Earle stepped down from the board on 31 March 2017. He was unable to attend the last full board meeting held for the financial year and he did not attend the board meeting at

which the appointment of his successor was considered and approved.

4. Rachel Kentleton joined the board on 03 January 2017 and attended all board meetings held after her appointment.

The Chairman sets the agenda for board meetings and
he ensures that informed decisions are reached in an
effective manner by facilitating open discussion and debate
of agenda items by board members. Consultations with
management and external advisers are held as necessary
to aid the board’s decision making process. The work
undertaken by the board during the year is set out in the
tables below:

The agenda for each full board meeting included
the following as standing items:

– Consideration for approval of the previously held board

meeting minutes.

– Board committee reports on the committee meetings

which were usually held prior to the board meetings, and
included all matters which had been delegated to the
committees and which required board approval.

– A management report prepared and presented by the

Chief Executive which covered group operations. Over the
course of the year, this included updates and reports on:

- the proposed sale of the Mobile payments business;
- the discussions around the new joint venture

arrangements for Collect+;

– Group health and safety report which covered any health

and safety incidents that may have occurred and the
actions taken in that respect, including any updates on
previous actions.

Other matters which were covered as a matter of
routine during the year included:

– Strategy - during the year the board agreed that in

order to ensure strategic issues are fully and properly
addressed, there would be bi-annual strategy sessions
– one in February which would be a one-day strategy
update session, and a two-day strategy session in
September at which the board will consider the strategic
plan (whether existing or proposed) in depth. Accordingly,
for the year under review, the board held a strategy
update session in February where the executive board
gave updates on the implementation of the strategy key
among which included:

- renegotiation of the Collect+ arrangement with Yodel;
- sale of the Mobile payments business to VW Financial

Services;

- development and deployment of PayPoint One

and EPoS;

- various ongoing projects within the business;
- a development programme for the executive board; and
- other operational matters for the board’s consideration.

- bill payments and MultiPay;
- retailer relations; and
- executive board development.

PayPoint plc Annual Report 2017 35

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS

Corporate governance report continued

– Review of annual report and preliminary results.

– Review of executive director’s presentation of the full

year results to analysts and investors.

– Bi-annual review and approval of the interim management

statements for release to the market.

– Review of the directors’ conflicts of interest register.

– Review and approval of interim dividend and

recommendation of final dividend.

– Review of management accounts and business

performance, including forecasts.

– Board evaluation (see page 38).

– Review of delegated authorities and recommended

committees’ terms of reference.

– Consideration and approval of the recommended terms

for renewal of Company insurance.

– Consideration and approval of the budget for the

financial year.

Other important topics covered by the board during the
year included:

– Review of the capital allocation programme to return
£125 million of surplus cash to shareholders over five
years to 2021, in addition to the ordinary dividends paid
by the Company.

– Approval of the Company’s statement on slavery and

human trafficking.

– Approval of a new securities dealing policy and code in

accordance with the Market Abuse Regulations.

– Consideration of the legal issues surrounding Brexit and

the effect of such issues on PayPoint.

– Consideration of the proposals for use of market leading
CRM and ERP solutions to improve customer service
capabilities and operational efficiency within PayPoint.

In addition to the pre-scheduled board meetings, there
were two additional board meetings held during the
year at which the following key events were tabled:

– Consideration and approval of the recommendation to

appoint Rachel Kentleton to the board.

– Consideration and approval of the agreements for

the sale of the Mobile payments business and the re-
structure of the Collect+ joint venture arrangement.

Division of roles and responsibilities

The Chairman is responsible for the leadership of the
board and for ensuring the effectiveness in all aspects of
the board’s role. The Chairman chairs board meetings and
regularly consults with the executive directors regarding
on-going business. His other significant commitments
are disclosed in his biography on page 29. The board
considers that these commitments do not hinder his ability
to discharge his responsibilities to the Company and its
subsidiaries.

There is a clear division of responsibilities between the
Chairman, the Chief Executive and the Senior Independent
Director which has been agreed by the board as follows:

Chairman
Nick Wiles is the Chairman and he is responsible for the
effective running of the board and for ensuring that the
board as a whole plays a full and constructive part in the
development and determination of the Group’s strategy
and overall commercial objectives. His other main
responsibilities include:

– Setting the board’s agenda and ensuring the board
receives accurate, timely and clear information on
all matters reserved to its decision and the Group’s
performance and operations.

– Ensuring, with the advice of the Company Secretary

where appropriate, compliance with the board’s approved
procedures.

– Arranging informal meetings of the directors, including
meetings of the non-executive directors at which the
executive directors are not present, as required to ensure
that sufficient time and consideration is given to complex,
contentious or sensitive issues.

– Chairing the Nomination Committee, and, in that role,
initiating change and succession planning in board
appointments to retain and build an effective and
complementary board, and to facilitate the appointment
of effective and suitable members and chairmen of board
committees.

– Ensuring that there is effective communication by the
Group with its shareholders, including by the Chief
Executive and Finance Director, and ensuring that
members of the board develop an understanding of the
views of the major investors in the Group.

– Promoting the highest standards of integrity, probity
and corporate governance throughout the Group and
particularly at board level.

Chief Executive
Dominic Taylor is the Chief Executive and he is responsible
for running the Group’s business by proposing and
developing the Group’s strategy and overall commercial
objectives, which he does in close consultation with the
Chairman and the board. He heads the executive board the
responsibilities of which are set out on page 34. His other
main responsibilities include:

– Providing input to the board’s agenda and ensuring

that the executive board gives appropriate priority to
providing reports to the board which contain accurate,
timely and clear information.

– Ensuring, in consultation with the Chairman and the
Company Secretary as appropriate, that he and the
executive board comply with the board’s approved
procedures.

– Ensuring that the Chairman is alerted to forthcoming
complex, contentious or sensitive issues affecting the
Group of which he might not otherwise be aware.

– Providing information and advice on succession planning,
to the Chairman, the Nomination Committee, and other
members of the board, in respect of the executive board.

– Leading the communication programme with

shareholders.

– Promoting, and conducting the affairs of the Group with
the highest standards of integrity, probity and corporate
governance.

36 PayPoint plc Annual Report 2017

Senior Independent Director
Neil Carson1 is the senior independent director and he
is responsible for supporting the Chairman in his role by
working with the Chairman and other directors to resolve
any issues that may arise. His other main responsibilities are:

During the financial year, Rachel Kentleton joined the
board on 3 January 2017 and George Earle retired from
the board on 31 March 2017. Further information on
directors’ appointment and resignation can be found
in the Nomination Committee report on page 40.

– Chairing the Nomination Committee when it is

considering succession to the role of Chairman
of the board.

– Meeting with the non-executive directors at least once
a year to appraise the Chairman’s performance and on
such other occasions as are deemed appropriate.

– Being available to Shareholders if they have concerns

which contact through the normal channels of Chairman,
Chief Executive or Finance Director has failed to resolve
or for which such contact is inappropriate.

– Having sufficient contact with major Shareholders and

financial analysts to obtain a balanced understanding of
the issues and concerns of such shareholders.

Non-executive directors
All the non-executive directors bring considerable knowledge
and experience to board deliberations. Non-executive
directors do not participate in any of the Company’s
share schemes or bonus schemes and their service is non-
pensionable. The balance and independence of the board
is kept under review by the Nomination Committee.

During the year, the Chairman held meetings with the
non-executive directors without the executives present.
These meetings were held immediately following a full
board meeting. There were no unresolved concerns about
the running of the Company.

Effectiveness

Composition
The board is comprised of an appropriate balance of skills,
experience, independence and knowledge, which enables
it to discharge its responsibilities effectively. The directors
have a range of backgrounds including retail, payments
services, banking, investment management, sales and
marketing, and finance, and possess a wealth of experience
which attunes them to the industry in which PayPoint
operates. This balance of skill and independence creates
an environment that encourages the effective challenge
and development of the strategic aims of the Company.
At the end of the year under review, there were eight
directors on the board: Nick Wiles, the non-executive
Chairman, three executive directors: Dominic Taylor,
Rachel Kentleton and Tim Watkin-Rees, and four non-
executive directors: Gill Barr, Neil Carson, who is also the
senior independent director, Giles Kerr and David Morrison.
Subsequent to the year end it is Neil Carson’s intention
to step down from the board and in view of this, Rakesh
Sharma has been appointed as an independent non-
executive director. The biographies of each of the
directors can be found on page 29.

The board determined that Gill Barr, Neil Carson, Giles Kerr and
Rakesh Sharma are independent for the purposes of the Code.

The terms and conditions of appointment of the non-
executive directors and the executive directors’ service
contracts are available for inspection at the Company’s
registered office during normal business hours and will be
available at the annual general meeting.

The directors have disclosed all their significant external
commitments which the board has considered and is satisfied
that all the directors are able to allocate sufficient time to the
Company to discharge their responsibilities effectively.

Training and support
All directors receive full, formal and tailored induction
on joining the board. Following Rachel Kentleton’s
appointment to the board during the year, she underwent
a comprehensive induction programme which spanned the
four-week period after her appointment, and which included
the following:

Week 1

– Receiving a corporate governance pack containing: the
corporate and organisational structure of PayPoint,
delegation of authorities and terms of reference, relevant
policies and procedures, and access to previous board
minutes, and attending the standard Company induction
which is given to all new employees.

– Holding a series of meetings to gain a deep understanding
and knowledge of PayPoint with her direct reports in the
finance team, the executive directors, the HR Director and
the Product Director.

– Deep-dive sessions with members of the finance

team looking into various areas which included among
others planning, forecasting, financial systems, risk and
compliance, and transaction processing.

– Introductory meetings with brokers, analysts, bankers

and the audit partner.

Week 2

– Meetings with the Company Secretary/Head of Legal

and the Commercial Director and Marketing Director for
overviews of these functions and the areas they cover.

– Holding deep-dive sessions with the Chief Information

Officer, and the Product Managers on products including
technical products and services such as EPoS, Cards,
ATMs, MultiPay, PayPoint One, Parcels etc.

– Holding a manager induction session with the HR

Director.

1. Giles Kerr will become the Senior Independent Director when Neil Carson steps down from the board.

PayPoint plc Annual Report 2017 37

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Corporate governance report continued

Week 3

– Visiting the Collect+ office.

– Attending the product and commercial strategy day.

– Full day out in the field with a Territory Development

Manager visiting retail stores.

Week 4

– Visit to PayPoint offices in Romania which comprised:

– Series of meetings with the staff.

– A full day out with the Managing Director visiting retail

stores.

Directors are provided with clear and accurate information
pertaining to matters to be considered at the board and
its committee meetings. This information is provided in a
timely manner to ensure an appropriate level of review by
each director ahead of the meetings. In the months where
there are no scheduled board meetings the directors
receive management accounts and reports on the status
of the business. In addition to board meetings, directors
have dinners during the year at which relevant items are
identified beforehand and discussed in detail.

During the course of the year, the board is briefed on any
significant changes in the law, regulations, governance
codes or developments within PayPoint which affect their
roles both on the board and on board committees. Experts
and advisers are brought in as necessary to present to
the board on technical subject matters. For instance, the
board received tailored and comprehensive training from
external legal advisers, on the Market Abuse Regulations
and the obligations thereunder, including the requisite
processes to ensure compliance with the regulations. The
Company Secretary also provides updates to the board on
governance matters as and when it is pertinent to do so.

The directors have access to the Company Secretary
as well as members of the executive board and senior
management, and they can also seek independent
professional advice if this is deemed necessary for the
proper performance of their duties.

Evaluation

Actions from 2015/16
evaluation

Steps taken

– More regular non-

– The non-executive

executive director only
meetings to consider
and give feedback to the
executive directors on
management performance

– Increased interaction

between the executive
directors and the non-
executive directors
to ensure the latter
have a more in-depth
understanding of the
Group’s business

directors and the Chairman
have met regularly
during the year, typically
such meetings are held
immediately following a
board meeting without the
presence of the executive
directors. These meetings
have aided more in-depth
consideration of executive
director and management
performance and in turn
resulted in constructive
feedback.

– There have been more
avenues for interaction
between the non-executive
directors and the executive
directors including other
members of the executive
board. For instance
executive board members
are invited to attend board
dinners and they prepare
and present at the board
strategy sessions.

During the year the board once again undertook an internal
evaluation the purpose of which was to evaluate its and
its committees’ performance and processes, as well as
individual director performance, by identifying areas which
the board and committees perform well, and any areas
for improvement. As was done in the previous year, there
were two parts to the evaluation process which was led
by the Senior Independent Director. The first part was
the completion of a comprehensive questionnaire by each
of the directors, while the second part of the evaluation
process, following the completion of the questionnaire, was
one-to-one meetings between each director and the Senior
Independent Director. At these meetings the feedback given
by the directors in the questionnaire was discussed and the
directors had the opportunity to put forward any actions
for improvement, both at individual and board levels as they
thought fit. The Senior Independent Director then presented
the results of the evaluation at a board meeting. The
following is a summary of the key outcomes and suggested
actions for improvement from the internal evaluation:

Outcomes:

– General expression of satisfaction with the process by

which the board reached agreement on the strategy. This
showed that the board worked effectively together.

– The size of the board including the skill and experience
therein were deemed satisfactory for the size of the
business.

– The relationship between the Chairman and the Chief
Executive was working well and had the right level of
challenge, support and encouragement.

38 PayPoint plc Annual Report 2017

Actions:

Remuneration

– Proposed non-executive directors’ only dinner with the
Chairman as an opportunity for increased interaction
between these directors.

– Increased oversight of the performance of members of
the executive board to ensure that they are equipped to
deliver on the strategic plan.

Re-election
In accordance with the provisions of the Code all directors
submit themselves for election or re-election at each annual
general meeting. The board’s recommendations in respect
of the election or re-election of each director can be found
in the notice of meeting on pages 95 to 99.

Insurance
The Company maintains appropriate insurance cover in
respect of legal action against the directors.

Conflicts of interest
Under the articles of association, the board has authority
to approve any conflicts or potential conflicts of interest
that are declared by individual directors; conditions may be
attached to such approvals and directors will generally not
be entitled to participate in discussions or vote on matters
in which they have or may have a conflict of interest.

A register of conflicts is maintained and is reviewed at
least annually to ensure all details are kept up-to-date.
Authorisation is sought prior to the appointment of any new
director or if any new conflicts arise. No material conflicts were
reported by the directors in the financial year under review.

Accountability

Financial and business reporting
Please refer to the following pages of this annual report for
information on how the board has carried out the financial and
business reporting obligations as stipulated under the Code:

– Page 67 for the board’s responsibility statement setting

out the steps taken to present a fair, balanced and
understandable assessment of the Company’s position
and prospects.

– Pages 3 to 27 for the strategy and business model which
explains how the Company generates and preserves value
over the longer term and the strategy
for delivering the objectives of the Company.

– Page 66 for the statement that the financial statements

have been prepared on a going concern basis.

Risk management and internal control
The board has overall responsibility for establishing and
maintaining sound risk management and internal control
systems, and for monitoring of these systems to ensure
that they are effective and fit for purpose. The Audit
Committee provides support to the board in this regard
and oversees the monitoring process. Further information
on the risk management and internal control system is set
out in the Audit Committee report on page 44.

The board has carried out a robust assessment of the
nature and extent of principal risks facing the Group
and how these risks could affect the business, financial
condition or operations of the Group. The explanation of
these principal risks including how they are being mitigated
can be found on pages 20 to 22, and a statement on how
the directors have assessed the prospects of the Group
taking into account the current position and principal risks
and uncertainties is on page 22.

Details of how the principles of the Code have been applied
in respect of directors’ remuneration are set out in the
Remuneration Committee report on pages 46 to 63.

Shareholder relations

The directors consider that the annual report and accounts
play an important role in providing shareholders with an
evaluation of the Company’s position and prospects.
The board aims to achieve clear reporting of financial
performance to all shareholders. The board acknowledges
the importance of an open dialogue with its institutional
shareholders and welcomes correspondence from private
investors. The Senior Independent Director is available to
address any unresolved shareholder concerns.

In addition to information in the annual report and on the
PayPoint website, the annual general meeting is an ideal
forum for interaction between the board and investors,
which is strongly encouraged.

During the year under review the chairman wrote to major
shareholders offering to meet with them following the
release of the preliminary results in May 2016. This offer
was very well received by the shareholders contacted and
resulted in subsequent engagement with the Chairman.

Major shareholders were also consulted on the proposed
adjustments to the directors’ remuneration policy. Their
feedback was taken into account and considered responses
provided to the questions they raised.

The executive directors have an ongoing programme of
meetings with institutional investors and analysts twice a
year for two weeks at a time. During the year the meetings
took place in May/June and November and were held in the
UK in: London, Edinburgh and Oxford; and the USA in: New
York, Chicago and Boston, in addition to meetings at the
Company’s premises. The discussions at these meetings
covered a wide range of issues which had previously been
made public including strategy, performance, management
and governance.

The Company held briefings with institutional fund
managers, analysts and other investors following the
announcement of half yearly results and feedback from
these were reported on to the board.

Committees of the board

The Audit, Nomination, Remuneration and Market
Disclosure Committees are the formally constituted
committees of the board which deal with specific aspects
of the Group’s affairs in accordance with the duties and
responsibilities formally delegated to them by the board.
The terms of reference for each of the committees are
available on the Company’s website at www.paypoint.com.
Details of the Market Disclosure Committee are on page 34
and the reports on the Audit, Nomination and Remuneration
Committees are set out on pages 40 to 63.

PayPoint plc Annual Report 2017 39

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSNomination Committee report

Chairman’s statement on the Nomination Committee

I am pleased to report that the general outcome of
the evaluation based on the assessment of committee
members’ was positive with the members agreeing that the
committee worked well together and had the right balance
of skill to be able to discharge its duties effectively.

For the year under review the Nomination Committee
comprised Gill Barr, Neil Carson, Giles Kerr, David Morrison
and myself, Nick Wiles as the committee Chairman.
Subsequently, upon his appointment, Rakesh Sharma
became a member of the committee. Biographies of each
committee member are on page 29.

Nick Wiles
Chairman, Nomination Committee
25 May 2017

Dear Shareholder,

On behalf of the Nomination Committee I am pleased to
present the Nomination Committee report for the year
ended 31 March 2017. The main focus for the committee
during the year was on the processes for the appointment
of new directors to the board. The committee continued
to regularly assess the balance of skills, experience,
independence and knowledge on the board. This regular
assessment enabled the committee to correctly identify key
skills and knowledge that would enhance the composition
of the board, and these were then used in the recruitment
process as key criteria for candidates to possess in order to
be considered for appointment.

The committee carried out an evaluation of its performance
which followed the same process as the board evaluation
set out on page 38. The evaluation questionnaire covered
the areas of:

– Terms of reference and composition of the committee;

– Committee management;

– Committee effectiveness;

– Chair effectiveness; and

– Overall committee performance.

40 PayPoint plc Annual Report 2017

Activities of the committee during 2016/17

Succession planning and board appointments

The committee met four times during the period and the
details of meeting attendance are set out on page 35.
The activities of the committee for the year under review
comprised:

Board
composition:

Succession
planning:

Committee
evaluation:

The committee kept the composition
of the board under constant review
in order to determine the skills,
knowledge and experience required
in light of the various changes to the
board. Details of appointments to
the board are set out opposite.

The committee considered
succession planning for board
directors.

As highlighted in the committee
Chairman’s letter above, the
members of the committee carried
out an internal evaluation of its
performance.

Terms of
reference:

Review of the committee’s terms of
reference.

Diversity policy

The board embraces the supporting principles on diversity
enshrined in the UK Corporate Governance Code relating to
board diversity, including gender.

The board is committed to ensuring an appropriate balance
of skills, knowledge and experience on its board. In full
support of the Department of Business Innovation & Skills
objective for FTSE 350 boards to have an appropriate
female presence, 25% of the board members are women.
Diversity is a vital part of the continued assessment
and enhancement of board composition and the board
recognises the benefits of diversity amongst its members.
The board will take account of all aspects of diversity in its
considerations including, but not limited to gender, industry
experience, background and race.

The Nomination Committee puts particular emphasis
on the importance of sourcing candidates appropriately
widely so that shortlisted candidates reflect the desire for
increased diversity, in line with the board’s objectives as
stated above. In order to assist the board in achieving its
commitment, the Nomination Committee ensures that only
independent executive search firms which subscribe to the
Voluntary Code of Conduct for Executive Search Firms, are
commissioned in respect of board appointments.

All board appointments are made on merit, in the context
of balance of the skills, experience, independence and
knowledge which the board as a whole requires to be
effective, taking account of diversity in the manner
described above.

The terms and conditions of appointment of non-executive
directors are made available for inspection at the annual
general meeting. Further details on diversity throughout
the Group including information about the diversity and
equality policy that applies to PayPoint employees can be
found on pages 25 to 27.

The committee in making recommendations to the board on
the appointments of new directors, adopts a transparent
procedure whereby the required skills, knowledge and
experience are carefully identified in order to complement
and create a balance with the existing skill set on the board.

During the year, George Earle informed the board of his
intention to retire as Finance Director. In light of this
development after careful consideration the Nomination
Committee commissioned an external search, using the
independent executive search firm, Zygos Partnership
(Zygos) which has no other connection with the Company,
to search for a successor to George Earle. In deciding on the
candidate specifications, the committee took into account
the importance of delivery on strategy and therefore made
‘strong competency on strategy’ one of the key skills the
candidates were required to have. The other key attributes
required aside from technical financial competence were:
ability to engage with investors and the market, and strong
commercial knowledge. Based on the agreed required skill
set, Zygos produced a shortlist of suitable candidates. The
committee authorised the Chairman and the Chief Executive
to meet with each of the shortlisted candidates on its behalf.
Rachel Kentleton was identified as the candidate who met all
the criteria, and upon her meeting with each member of the
committee, the committee was unanimous in its decision to
recommend her to the board for appointment as a director
and successor to George Earle.

Neil Carson also informed the board during the year of his
intention to step down as a director before the 2017 annual
general meeting. Again, the committee commissioned
Zygos to search for a non-executive director who would
also act as chair of the Remuneration committee following
Neil Carson’s departure from the board. Zygos was given
the candidate specification which was based on objective
criteria in line with the appropriate guidelines on diversity,
and included a requirement for the proposed candidates
to have competence and experience relevant to the
environment in which PayPoint operates. Zygos submitted
a shortlist of suitable candidates to the committee.
The committee authorised the Chairman and the Chief
Executive to meet with each of the shortlisted candidates
on its behalf. Rakesh Sharma was identified as the best
candidate for the role and was subsequently recommended
to the board by the Nomination Committee on the basis
that he met the desired criteria.

The Chief Executive proactively manages succession
planning for the executive board and senior management and
keeps the board updated on developments as necessary.

The Nomination Committee report was approved by the board
of directors on 25 May 2017 and signed on its behalf by:

Nick Wiles
Chairman, Nomination Committee
25 May 2017

PayPoint plc Annual Report 2017 41

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAudit Committee report

Chairman’s statement on the Audit Committee

Dear Shareholder,

I am pleased to present the Audit Committee report for the
year ended 31 March 2017 which sets out the activities and
focus of the committee for the period.

Corporate transactions
During the year, there were two major corporate
transactions within PayPoint being the sale of the Mobile
payments business and the re-structuring of the Collect+
joint venture agreement. The committee ensured that both
transactions were properly recognised and accounted for.

Risk management
The committee carried on with its robust risk management
process which saw the committee review a different risk
area on the risk register at each committee meeting and
assess the management and mitigation of these risk
areas. A welcome development to the committee’s risk
management process was that, at the invitation of the
committee, the Head of Risk and Compliance has begun
to attend meetings of the committee in order to present
the risk management reports and respond directly to
any queries the committee may have in this respect. This
provides the opportunity for the committee to interact
directly with the employee responsible for risk management
and internal controls at a senior management level, and
thereby gain a better understanding of the risk and internal
control matters reported on.

External auditor
The committee has approved the formal commencement
of an audit tender in the summer of 2017 which will result
in a new audit firm replacing Deloitte LLP (Deloitte) as
external auditor. Further details on the decision to put the
external audit out to tender are on page 43.

Annual report recommendation
The committee assessed and recommended to the board
that, taken as a whole, this 2017 annual report of the
Company is fair, balanced and understandable.

Committee effectiveness
The committee undertook an internally facilitated evaluation
which followed the same process as the previously described
board evaluation (see page 38). The general conclusion of
this evaluation was that the Audit Committee is effective in
carrying out its roles and responsibilities and its members
continue to work well together.

Committee composition and meetings
The Audit Committee comprised myself, Gill Barr, and
Neil Carson. The board considers that I have recent and
relevant financial experience in accordance with the Code.
Full biographical details of each of the committee members,
including relevant financial experience, are set out on page 29.

The committee met six times during the period. The details
of meeting attendance are set out on page 35. By invitation,
during the year, meetings were also attended by the Chairman
of the board and non-executive directors, the Chief Executive,
Finance Director, Business Development Director, the Financial
Controller, and recently the Head of Risk and Compliance.
Our external auditor, Deloitte and internal auditor, Grant
Thornton UK LLP, also attended the committee meetings
as appropriate.

The committee meetings generally take place on the same
day as, but prior to, the Company board meetings. Where
all the board members have not been in attendance at
an Audit Committee meeting, either as a member of the
committee or by invitation, the Chairman of the committee
reports to the board as part of a separate agenda item,
on the activities of the committee.

Key responsibilities
The key responsibilities of the Audit Committee include:

– monitoring the integrity of the Company’s reporting

process and financial management;

– oversight of the internal control and risk management

systems in place;

– in-depth review of the full and half year financial

statements before recommending these to the board
for approval;

– oversight of the internal and external audit processes.

In conclusion, I would like to thank the members of the Audit
Committee for their support throughout the year. I hope this
statement and the report that follows provides insight into the
work of the committee for the year ended 31 March 2017.

Giles Kerr
Chairman, Audit Committee
25 May 2017

42 PayPoint plc Annual Report 2017

Committee activities for 2016/17
In the year under review, the work undertaken by the Audit
Committee was as follows:

Financial reporting:

– Review of the preliminary and interim results

announcement and the annual report.

– Review of significant accounting issues and accounting
for major corporate transactions (as reported below).

– Consideration of the going concern basis for preparation

of the financial statements.

– Consideration of the elements of the viability statement

and the appropriate forward-looking period to be applied.

– Recommendation of the viability statement and going

concern statement to the board.

– Advising the board on whether the annual report

and accounts taken as a whole, is fair, balanced and
understandable.

– Review of the external auditor reports and the outcomes

of the audit process.

External auditor:

– Approval of the commencement of an audit tender.

See details opposite.

– Review and update of the non-audit services policy in line
with changes to the Financial Reporting Council’s (FRC)
Revised Ethical Standard in 2016.

– Assessment of external auditor appointment,

independence and effectiveness for recommendation
to the board.

– Review and approval of audit and non-audit fees.

Internal auditor:

– Review of the internal auditor’s engagement and
agreement for the extension of the engagement.

– Consideration of internal audit reports presented during

the year.

Audit plans:

– Consideration and approval of the internal and external

audit plans.

Risk management and internal controls:

– Review of insurance renewal proposals.

– Confirmation at every meeting of the committee, that

there were no whistleblowing incidents to report.

– Review of reports produced by the Head of Risk and

Compliance on risk management and internal controls
within the Group.

– Review of the six monthly BSI assessment reports.
BSI carry out independent audits of the PayPoint
network operations.

– Review of the principal risks and the mitigation of these

risks as set out on page 20.

– Review of the risk review action register which shows

the actions arising from the group risk review.

Committee governance:

– Review and update of the Audit Committee terms of

reference in accordance with the 2016 version of the UK
Corporate Governance Code.

– Committee evaluation of its performance, which followed
the same format as the internal board evaluation exercise
(see page 38).

The significant issues considered by the committee
in relation to the 2017 accounts, and how these were
addressed, were:

– Accounting for the Collect+ transaction: We have

reviewed the relevant accounting considerations in
connection with the Collect+ transaction and are satisfied
that the position taken is appropriate. In the context of
accounting for the arrangement on a go forward basis,
this has been evaluated against the requirements of
IFRS 11 – Joint Arrangements. We are satisfied that the
arrangement is a joint operation and that the accounting
for the Group’s interest in Collect+ is appropriate.

– Revenue Recognition: We reviewed the recognition of

income to ensure that the approach adopted is accurate
and consistent. The Group relies heavily on its computer
systems to record this data accurately. We have reviewed
the effectiveness of the Group’s system of internal control
and risk management, reviewed the results of internal
audit, and reviewed the results of the auditor’s tests of
general computer controls relating to the applications
that underpin the revenue cycle, which were found to be
effective. We are comfortable with this conclusion.

– Management override of controls: The internal audit

programme will continue to address the effectiveness of
the key controls. The external auditors also test the key
internal financial controls. We have reviewed the results
of internal audit, the external audit and audits by clients,
Link and BSI and we review and challenge management’s
actions to resolve any points arising from these audits
and risk reviews carried out throughout the year. We are
satisfied that adequate controls are in place.

Audit tendering
Deloitte were initially appointed as external auditors
following a formal tender process, for the year ended 31
March 2001. For the two periods prior to this, from the date
of incorporation of the Company, the auditors were Arthur
Andersen. These two periods are required to be included in
the determination of the duration of auditor appointment.
The appointment of Deloitte LLP as external auditor,
including the rotation of the audit partner, is kept under
annual review. Hadleigh Shekle is the current audit partner
and he has completed two years of his five year term.
An annual review of the effectiveness of the external audit
is undertaken by the committee.

In March 2017, the committee, in carrying out its review of
the external auditor’s performance considered whether
to initiate or defer an external audit tender process. It was
noted that under the terms of the transitional provisions
applicable under EU Regulation, PayPoint will be required
to appoint a new auditor for the year ending 31 March
2025. The committee in its consideration also had regard
to the Revised Ethical Standard published by the FRC
in 2016, which incorporated changes relating to auditor
independence, including new prohibitions and restrictions
on non-audit services. In its assessment, the committee
concluded that Deloitte remain independent and their

PayPoint plc Annual Report 2017 43

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSAudit Committee report continued

performance satisfactory. Nevertheless it was decided that
in order to avoid conflict situations pertaining to provision
of non-audit services which could arise in future, it was in
the best interest of shareholders that the external audit be
put out to tender in the summer of 2017. Deloitte will not be
asked to participate in the tender process, however Deloitte
has agreed to be re-appointed as auditor at the 2017 annual
general meeting and will hold office until the new auditor is
appointed following the tender process. The committee will
supervise the tender process including the implementation
of a robust audit tender governance process, to be agreed
on, which would deliver a successful external audit tender
process with minimal disruption to the Group.

Consequently, based on its assessment, the committee
has provided the board with its recommendation to the
shareholders on the re-appointment of Deloitte LLP as
external auditor to hold office until the appointment of
a new external auditor following the conclusion of the
audit tender process. There are no contractual obligations
restricting the committee’s choice of auditor. A resolution
for re-appointment of the auditor will be proposed at the
forthcoming annual general meeting, the notice for which can
be found on pages 95 to 99, to fulfil the legal requirement
for the Group to have an auditor until the conclusion of the
audit tender.

External audit
The effectiveness of the audit process is underpinned by
appropriate audit planning and risk identification at the
outset of the audit cycle. The auditor provides a detailed
audit plan identifying its assessment of the risks and other
key matters for review. For the year ended 31 March 2017,
the primary risks identified were: accounting for the Collect+
transaction, revenue recognition and management override
of controls.

The committee reviews and challenges the work undertaken
by the auditor to test management’s assumptions on these
matters. An assessment of the effectiveness of the audit
process in addressing these items is performed through the
reporting received from the auditor at the half-year and year
end. The committee seeks feedback from management on the
effectiveness of the audit process. No significant issues were
raised with respect to the audit process for the period and the
quality of the audit process was assessed to be good.

The 2016 audit of PayPoint plc was subject to inspection
from the Financial Reporting Council’s Audit Quality Review
team (the AQR team). The review commenced in August
2016 and focused on those matters assessed to be most
significant to the audit, both from a Group perspective and
in reviewing the component work for UK and Ireland. The
PayPoint group audit file was given a Grade 1, by the AQR
team, which means it was rated as good, and there were
no significant areas for improvement identified with regard
to the component audit work. The chairman of the Audit
Committee received a full copy of the findings of the AQR
team and has discussed these with Deloitte. The Audit
Committee is satisfied that there is nothing within the report
which might have a bearing on the audit appointment.

The Audit Committee meets the external auditor without the
executive directors being present and procedures are in place,
which allow access at any time of both external and internal
auditor to the Audit Committee. The Chairman of the
committee reports the outcome of each meeting to the board.

The committee’s assessment of the external auditor’s
performance and independence was found to be
satisfactory and this underpinned its recommendation to
the board to propose to shareholders the re-appointment

44 PayPoint plc Annual Report 2017

of Deloitte LLP as auditor to hold office until the
appointment of a new external auditor following the audit
tender process, details of which are on page 43.

Non-audit services
During the year, the committee considered the nature of
non-audit services and the level of fees for non-audit services
provided by the auditor, in order to satisfy itself that auditor
independence is safeguarded. Under the non-audit services
policy for the Group which was applicable for the whole of the
year under review, the auditor was prohibited from providing
certain services which might impair their independence.
The committee monitored compliance with the policy
throughout the year. The policy also prescribed that any fees
(excluding tax), for non-audit services performed by the
auditor in a particular year, were to be provisionally capped at
an aggregate total equivalent to the level of the annual audit
fee. Any proposal to use the auditor for non-audit services
whereby the fees exceeded the stated cap, was subject to
the prior approval of the Audit Committee.

In determining the most appropriate provider of non-audit
services, the committee considered the knowledge and
expertise of the potential providers and the proposed
costs. Where non-audit services were provided by the
external auditors, it was based on a conclusion by the
committee that they were best placed to provide the
services in view of their knowledge of the business, and
that the provision of the services posed no threat to their
independence. Details of the remuneration paid to the
auditor for the statutory audit and non-audit services,
which normally are limited to assurance and tax advice,
are set out in note 8.

In light of the changes introduced by the FRC to the
Revised Ethical Standard in 2016, the committee reviewed
and updated its policy on auditor independence and the
provision of non-audit services by the external auditor
with effect from 1 April 2017. This policy is a guide on
the types of work that it is acceptable for the external
auditor to undertake, and provides clarity on the process
to be followed for approval of the provision of non-audit
services by the external auditor. The policy also covers the
70% cap on non-audit fees as prescribed by the EU audit
regulation. It states that the fees for permitted non-audit
services provided by the external auditor must not exceed
a specified amount and must have a cumulative annual total
of less than 23% of that year’s audit fee before VAT.

Risk management and internal control
The board is responsible for establishing and maintaining
the Group’s system of internal control, and for regularly
reviewing its effectiveness. The board has carried out a
robust assessment of the principal risks facing the Group,
including those that would threaten its business model,
future performance, solvency or liquidity. These risks are
disclosed on pages 20 to 22 together with how they are
being managed or mitigated. PayPoint has risk management
processes in place, the purpose of which is to identify,
assess, quantify, control, avoid, transfer or accept risk in
order to ensure that the business can maximise and protect
its value. Risk management is embedded in the organisation
and within all projects and operational processes. It is
entrenched in the operation of the business at all levels in
order to drive improvements and prevent non-compliance
in business processes. The risk management system in
place is designed to manage, rather than eliminate, the risk
of failure to achieve business objectives and therefore can
only provide reasonable and not absolute assurance against
material misstatement or loss.

The framework for the risk management process is as
follows:

Head of Risk and Compliance identifies risks through
discussions with executive board members and senior
managers in each business function across PayPoint.

Identified risks are documented in risk registers
associated with business functions. Newly identified
risks are reported to the Audit Committee prior to their
documentation.

The main areas of risk to the Group are recorded in the
Corporate Risk Register (CRR) which contains a high-
level description of risks that fall within seven distinct
areas of the business, being: Cyber, technology &
process; Fraud; Legal, regulatory & compliance; Clients,
agents & other third parties; Economic growth; Product/
project management; and HR/personnel.

Reports on each of the seven risk areas in the CRR
are presented by the Head of Risk and Compliance at
least once per calendar year for review at every Audit
Committee meeting. In addition the Audit Committee
receives regular updates on the on-going risk
management, control systems and processes which are
discussed at its meetings.

The key features of the Group’s internal control systems
that ensure the accuracy and reliability of financial
reporting include: clearly defined lines of accountability
and delegation of authority; policies and procedures that
cover financial planning and reporting; preparation of
monthly management accounts; project governance and
information security; annual certifications from business
managing directors and finance directors; and review of
the disclosures within the annual report and accounts
from functional leads. The reviews by the functional leads
ensure that the disclosures made appropriately reflect the
developments within the Group in the year and meet the
requirement of being fair, balanced and understandable.

All procedures necessary to comply with the FRC’s Internal
Control: Revised Guidance for Directors on the Combined
Code have been in place throughout the period under review
and up to the date of approval of the annual report and
financial statements. The directors have conducted a formal
review of the effectiveness of the Group’s system of internal
control during the year under review and up to the date of
approval of the annual report and accounts. No significant
failings or weaknesses were identified during the review.

Whistleblowing
The Company continuously seeks to prevent malpractice
(including criminal offences or activity, fraud, financial
mismanagement or corruption, health and safety issues,
breach of compliance or legislation, bribery and corruption) in
its business. However, if any malpractice is discovered, there
are whistleblowing processes in place to ensure that this is
properly addressed in accordance with guidance published
by the UK Department for Business Innovation & Skills.

Employees who bring information about malpractice to
the attention of management through the whistleblowing
processes, are protected. In accordance with the policies
in place, the executive board and senior management have
a duty to ensure that they are approachable, welcome
disclosure, value communication and that there is no fear
of reprisal. Under no circumstances would the informant be
subject to victimisation or harassment as a consequence of
their disclosure.

The committee has ‘whistleblowing’ as a standing item
on the agenda of all its meetings, and any instances of
employee disclosures concerning malpractice are reported
to the committee. There were no instances of malpractice
reported to the committee during the year.

Anti-bribery and corruption
The Company operates an anti-bribery and corruption
policy which was put in place in response to the UK Bribery
Act 2010. This policy sets out the responsibilities of
employees of the Group in observing and maintaining the
Group’s position on bribery and corruption, which is that
PayPoint will uphold all laws relevant to countering bribery
and corruption in all the jurisdictions in which it operates.
All employees are required to undertake a Bribery and
Corruption Awareness training programme as part of their
induction process upon joining the Group. Subsequent to
their induction, employees who are deemed to be at risk by
virtue of their roles, are required to attend a tailored anti-
bribery and corruption training course which is organised
internally on a yearly basis.

Internal audit
The committee is responsible for approving a rigorous
internal audit programme (the Programme) covering all
of the Group’s key business areas. The Programme was
approved in March 2014 when the current internal auditors,
Grant Thornton UK LLP (Grant Thornton), were appointed
following a tender process. Each year the Programme is
reviewed during the internal audit planning process, to
ensure that any changes are taken into account. In addition
to reviewing the Programme, Grant Thornton, in forming the
internal audit plan for the year under review, also: consulted
with a number of key stakeholders in the business including
the Audit Committee Chairman, the Finance Director and
the Head of Risk and Compliance and reviewed previous
internal audit and other assurance work. The committee
approved the internal audit plan for the year and reviewed
the audit findings which were presented to it by Grant
Thornton following the internal audit.

During the year, the committee assessed the effectiveness
of Grant Thornton as internal auditors and concluded they
were performing well and had demonstrated continued
improvement.

The Audit Committee report was approved by the board
of directors on 25 May 2017 and signed on its behalf by:

Giles Kerr
Chairman, Audit Committee

PayPoint plc Annual Report 2017 45

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSRemuneration report

Annual Statement by the chair of the Remuneration Committee

Dear Shareholder,

I am pleased to present our Directors’ Remuneration Report,
prepared by the Remuneration Committee and approved by
the board, for the financial year ended 31 March 2017.

Pay and performance
Executive director salaries were adjusted from 1 April
2016, broadly in line with those for the general employee
population. No salary increases are planned for 2017.

As set out in the Strategic report, the year ended 31 March
2017 has seen the strong delivery of some key milestones
in the development of the Company’s strategy. It is against
this backdrop that the committee assessed the performance
of the variable incentive plans, which for this year included
the 2016/17 annual bonus, the 2014 Deferred Share Bonus
(DSB) award and the 2014 Long Term Incentive Plan (LTIP)
award.

Annual bonuses for the year under review were 64.8% of
maximum, reflecting growth in economic profit of 19.6%,
with 25% deferred into shares vesting after three years,
subject to continued employment.

Based on our three year adjusted earnings per share growth
to 31 March 2017 of 21.6%, the 2014 DSB awards will vest
in full. 2014 LTIP awards will be performance-tested in May
2017 and, based on TSR performance to date relative to
FTSE 250 index constituents (excluding investment trusts),
we expect these awards to lapse.

The committee is comfortable that the Executive Director
rewards for the year ended 31 March 2017 are appropriately
aligned to the Company’s performance that has been
delivered over the one and three year performance periods
of the annual bonus and LTIP respectively.

Total Shareholder Return performance and the Chief
Executive Officer’s reward over the last eight years,
rebased to 100, can be seen on the graph opposite.

FTSE 250 Index (excluding ITs)

PayPoint plc

CEO Single Figure

500

400

300

200

100

01 March
2009

Policy renewal at the 2017 annual general meeting
As a result of the three year Remuneration Policy reaching
the end of its life in 2017, the Remuneration Committee
undertook a review of the policy at the end of 2016 in light
of the Group’s strategy and the developing views of our
major investors. As part of the review, I wrote to the top
circa 14 shareholders and main representative bodies.

The main conclusion in respect of the review was that the
current Directors’ Remuneration Policy, originally approved
at the 2014 annual general meeting with significant levels of
support, remains fit for purpose and no material amendments
should be made at the present time. That said, the
committee will continue to monitor market and best practice
developments (including the Executive Remuneration
Working Group’s proposals on the simplification of pay and
any outcomes from the UK Government’s Green Paper on
Corporate Governance Reform).

46 PayPoint plc Annual Report 2017

However, the Remuneration Committee is aware that best
practice has evolved in a number of areas over the last
circa three years and, as such, a number of areas of the
Remuneration Policy will be updated to reflect this, namely:

– The introduction of a formal base salary cap. Whilst our
default approach will remain that any salary increases
are aligned with those in line with the wider workforce,
this will be limited to no more than 15% a year, unless
there is an exceptional change in the size or structure
of the business, which materially changes the scope of
responsibilities. There will be no cap on salary levels for
new recruits or promotions to the board, or promotions
within the board.

– The current malus (aka withholding) provisions will be
strengthened and clawback provisions (aka recovery)
will be introduced on a consistent basis across both the
annual bonus and LTIP rules.

– Shareholding guidelines will be increased from 100%

of salary to 200% of salary for the Chief Executive and
150% of salary for the Finance Director and Business
Development Director.

– A two year post-vesting holding period will be applied to LTIP
awards granted to executive directors from 2017 onwards.
The holding period will continue to apply post-cessation.

The Remuneration Committee will therefore be seeking
shareholder approval at the 2017 annual general meeting
to roll over the existing policy, albeit with the updated
shareholder protections presented above.

Implementation of the Remuneration Policy for 2017/18
Following the consultation exercise with the Company’s
largest investors in connection to the Remuneration
Policy approval, the Remuneration Committee intends
to make a number of changes to the way it operates the
Remuneration Policy for the year ending 31 March 2018.
The committee spent a significant time considering and
debating these proposals in the context of transition in the
Company’s strategy, the impact of recent board changes,
the need to support future talent management and
succession planning activities and with reference to the pay
arrangements proposed for other senior executives.

Details of how the policy will be implemented and the
changes from the prior year are set out on page 48 although
the main changes are the introduction of EPS performance
targets for half of LTIP awards (the other half will continue
to be measured on relative TSR, which previously operated
as the sole performance measure for the LTIP awards)
and the Chief Executive’s incentive provision. In respect
of the latter, the Chief Executive’s incentive potential has
been increased (albeit still within the existing shareholder
approved policy) as a result of the Committee wishing to
incentivise and reward the Chief Executive for the delivery
of key strategic goals over the next 3 to 5 years, which
is considered to be a crucial period in the Company’s
development. While annual bonus provision and LTIP
awards have been increased, the performance targets
(and vesting scales in respect of LTIP awards) have been
made tougher and level of bonus deferral has been doubled
(in addition to the extra shareholder protections which
have been introduced as detailed above).

The committee is satisfied that the changes proposed
are appropriate, as any additional incentive potential can
only be realised for the delivery of broader and tougher
performance metrics, and with a longer time horizon,
to ensure performance is sustainable and aligned with
shareholders.

Looking forward
In 2016, our Remuneration Report received the support
of 96.23% of shareholders. The committee would like to
thank shareholders for their continued support and I hope
that you will support the 2017 annual general meeting
resolutions.

On the basis that I will be stepping down as a non-executive
director shortly before the forthcoming annual general
meeting, as previously stated on page 32, Rakesh Sharma
will succeed me as a non-executive director and as
Chairman of the Remuneration Committee. I would like to
wish him and the Group continued success.

Neil Carson
Chairman, Remuneration Committee
25 May 2017

PayPoint plc Annual Report 2017 47

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSRemuneration report continued

Policy implementation for 2017/18:
– There will be no base salary increases to executive directors for the year ended 31 March 2018. The Remuneration

Committee will move the normal salary review date for future reviews, from 1 April to 1 July, so that it is aligned with the
general workforce review date.

– Pension provision, capped at 20% of salary under the existing and proposed Remuneration Policy will remain unchanged
at 16% of salary for the Chief Executive and 15% of salary for the other executive directors. No changes will be made to
benefit provisions.

– Annual bonus provision, capped at 150% of salary under the existing and proposed Remuneration Policy will be set at

150% of salary for the Chief Executive and 106% of salary for the other directors. Strategic measures will be introduced
for a minority of bonus potential. Reflecting the Chief Executive’s increased bonus potential, the proportion of his bonus
deferred will be increased from 25% to 50%, which will result in his cash bonus potential decreasing. For any bonus to be
paid under the strategic targets, a threshold economic profit target must be achieved.

– LTIP awards, capped at 200% of salary under the existing and proposed Remuneration Policy, will be 50% based on

EPS growth targets and 50% based on relative TSR to reflect the committee’s desire for more balanced performance
metrics. The Chief Executive’s LTIP award will be set at 175% of salary, although to reflect the increase in the Chief
Executive’s award level, his vesting schedule and the TSR targets will be toughened. LTIP awards for the other executive
directors will remain at 125% of salary (with 25% of awards continuing to vest at threshold and full vesting for upper
quartile TSR). Assuming the new policy is approved at the 2017 annual general meeting, these awards will be subject to
the new two year holding period which continues to apply post-cessation

Policy scope
The Policy applies to the Chairman, executive directors and non-executive directors.

Policy duration
The new Directors’ Remuneration Policy will be put to a binding shareholder vote at the annual general meeting on 26 July
2017 and, subject to receiving majority shareholder support, the Policy will apply from the date of approval and is intended
to remain in place for a maximum of three years.

Changes from 2014 Remuneration Policy
The main changes from the 2014 Remuneration Policy are summarised below:

– The introduction of a formal salary cap. Salary increases will be limited to no more than 15% a year, unless there is an

exceptional change in the size or structure of the business which materially changes the scope of responsibilities (there
will be no cap on salary levels for new recruits or promotions to the board, or promotions within the board).

– The current malus (aka withholding) provisions will be strengthened and clawback provisions (aka recovery) will be

introduced on a consistent basis across both the annual and long-term incentive plan (LTIP) rules.

– Shareholding guidelines will be increased from 100% of salary to 200% of salary for the Chief Executive and 150% of

salary for the Finance Director and Business Development Director.

– A two year post-vesting holding period will be applied to LTIP awards granted to executive directors from 2017 onwards.

The holding period will continue to apply post-cessation of employment.

To aid the administration and clarity of its operation, a number of minor changes have also been made to the wording of the
Remuneration Policy where appropriate.

Consideration of conditions elsewhere in the Company
When making decisions on executive director remuneration, the committee considers pay and conditions across PayPoint.
In particular, it is anticipated that salary increases for senior executives will have regard to those of salaried employees as a
whole.

Consideration of shareholder views
The Remuneration Committee maintains a regular dialogue with its major shareholders and when determining
remuneration, takes into account the guidelines of investor bodies and shareholder views. The committee continues to
monitor trends and developments in corporate governance and market practice to ensure the structure of the executive
remuneration remains appropriate and commits to undergo a shareholder consultation in advance of any material changes
to remuneration policy.

48 PayPoint plc Annual Report 2017

Executive directors’ remuneration
The table below summarises our policy on each element of the remuneration package for executive directors.

Element and
link to strategy

Base salary
Takes account of
personal
contribution and
performance
against Company
strategy

d
e
x
F

Pension
Provides market
appropriate
benefits

Benefits
Provides
appropriate
market benefits

Operation

Opportunity

Performance metrics

The salary review takes into
account individual and Company
performance.

Reviewed annually, with account
taken of responsibility and skills,
the individual director’s
performance and experience, pay
for comparable roles and pay and
conditions throughout the
Company.

Any base salary increases are
applied in line with the outcome
of the annual review and normal
salary increases will have regard
to those of salaried employees as
a whole.

Salary increases will be limited to
no more than 15% a year, unless
there is an exceptional change in
the size or structure of the
business which materially
changes the scope of
responsibilities (there will be no
cap on salary levels for new
recruits or promotions to the
board, or promotions within the
board).

None

The Company makes
contributions to personal pension
plans or cash allowance in lieu of
pension.

Executive directors may receive a
contribution and/or a cash
allowance in lieu of pension, up to
20% of salary.

Benefits may include, but are not
limited to, car allowance, health
insurance and employee share
plans.

In certain circumstances, the
committee may also approve the
provision of additional allowances
relating to the relocation of an
executive director and other
expatriate benefits to perform his
or her role.

All reasonable business related
expenses will be reimbursed
(including any tax due thereon).

Benefits vary by role and
individual circumstances and are
reviewed periodically. Benefits
will not normally exceed 15% of
salary.

The committee retains discretion
to approve a higher cost in
exceptional circumstances (e.g.
relocation) or in circumstances
where factors outside the
Company’s control have changed
materially (e.g. increases in
insurance premiums).

PayPoint plc Annual Report 2017 49

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSRemuneration report continued

Element and
link to strategy

Annual bonus
and Deferred
Annual Bonus
Scheme (DABS)
Rewards delivery
of the Group’s
annual financial
and strategic
goals and
supports
retention

Long Term
Incentive Plan
(LTIP)
Drives sustained
long term
performance, aids
retention and
aligns the
interests of
executive
directors with
shareholders

e
b
a

i
r
a
V

Operation

Opportunity

Performance metrics

150% of salary.

A minority of the bonus would be
payable for achieving threshold
performance. Where appropriate
a sliding scale between threshold
and maximum performance will be
used to determine the payout
under each metric.

Annual awards of performance
shares of up to 200% of salary for
executive directors.

Achievement of threshold level of
performance results in no more
than 25% of maximum vesting.

Where appropriate a sliding scale
between threshold and maximum
performance will be used to
determine the payout under each
metric.

The Remuneration Committee
reviews and agrees measures,
targets and weightings at the
beginning of each financial year.

At the end of the year, the
Remuneration Committee
determines the extent to which
targets have been achieved.

Under the DABS at least 25% of
any annual bonus award is
deferred into conditional share
awards, deferred cash or nil-cost
options for at least three years,
subject to continued
employment.

Dividends accrue on deferred
awards as additional share
entitlements over the deferral
period but would only vest on
awards that vest.

Awards are subject to clawback
and malus provisions (see notes
to table)

Annual awards of conditional
share awards or nil-cost options
vesting subject to performance
and continued employment over
at least three years.

Subject to shareholder approval,
awards granted from 2017
onwards will be subject to a two
year holding period, which will
continue to apply post-cessation.

Award levels and performance
conditions are reviewed by the
committee in advance of grant to
ensure they remain appropriate.

Awards are subject to clawback
and malus provisions (see notes
to table). Dividends accrue as
additional share entitlements
over the vesting period but would
only be paid on awards that vest.

The majority of the award will be
based on financial targets.

A minority of the award may be
based on strategic/personal
targets.

The Remuneration Committee
reviews and agrees targets at the
beginning of each financial year
and may subsequently adjust
those targets as detailed in the
notes to this table.

The Remuneration Committee
also has the discretion to adjust
the formulaic bonus outcomes
both upwards (within the plan
limits) and downwards, to ensure
that payments are a true
reflection of performance of the
Company over the performance
period, e.g. in the event of
unforeseen circumstances
outside of management control.
Any use of discretion will be
explained in the respective
Annual Report on Remuneration.

Financial performance metrics
(e.g. Earnings Per Share) and/or
share price related metrics (e.g.
Total Shareholder Return).

Where TSR is operated, the
Remuneration Committee will
satisfy itself that the recorded
TSR is a genuine reflection of the
underlying financial performance
of the Company.

In addition:

– The Remuneration Committee
has the discretion to adjust the
formulaic outcomes to ensure
alignment of pay with
performance, i.e. to ensure the
outcome is a true reflection of
the performance of the
Company, e.g. in the event of
unforeseen circumstances
outside of management
control.

– If events occur which cause the
committee to consider that
these performance
requirements have become
unfair or impractical, it may, in
its discretion, amend the
performance requirements so
that they are no more or less
difficult to satisfy than when it
was originally set.

Shareholding
guidelines
Encourages a
long-term focus
and aligns the
interests of
executive
directors with
shareholders

All employee
share plans
Encourage share
ownership across
all employees

Shareholding guidelines require
executive directors to acquire a
specified shareholding.

Executive directors are required
to retain 50% of any LTIP and
deferred bonus shares acquired
on vesting (net of tax) until the
guideline level is achieved.
Acquired holdings may be held by
spouses or dependent family
members.

Operation of an HMRC favoured
all-employee share plan (currently
a SIP).

Executive directors may
participate on the same basis as
all other eligible employees.

Chief Executive: 200% of salary.

None

Other Directors: 150% of salary.

Up to the prevailing HMRC
approved limits.

None

50 PayPoint plc Annual Report 2017

Notes to the policy table

Payments from previous awards
The Company will honour any commitments entered into prior to the approval and implementation of the new
Remuneration Policy as detailed in this report, and executive directors will be eligible to receive payment from any
historical share awards made.

Clawback (aka recovery) and malus (aka withholding) provisions
From FY17/18, all incentive awards, including the cash and deferred element of the annual bonus and the LTIP, will be
subject to consistent clawback and malus provisions. The committee will be entitled to enact these provisions in the
following circumstances:

– misconduct;

– material misstatement;

– error in calculation; and

– serious reputational damage to the Company.

These provisions will be in operation for a period of up to 3 years post payment/vesting.

Use of discretion
The Remuneration Committee may exercise discretion in two broad areas for each element of remuneration:

– To ensure fairness and align executive director remuneration with underlying individual and Company performance, the

committee may adjust upwards or downwards the outcome of any short- or long-term incentive plan payment within the
limits of the relevant plan rules. Any adjustments in light of corporate events will be made on a neutral basis, i.e. the
intention of any adjustment will be that the event is not to the benefit or detriment of participants. Adjustments to
underlying performance may be made in exceptional circumstances to ensure outcomes are fair both to shareholders
and participants.

– In the case of a non-regular event occurring, the committee may apply its discretion to ensure fairness and seek
alignment with business objectives. Non-regular events in this context include, but are not limited to: corporate
transactions, changes in the Company’s accounting policies, minor or administrative matters, internal promotions,
external recruitment and terminations.

Any use of discretion by the committee during the financial year will be detailed in the relevant annual report on
remuneration.

Performance measure selection
Economic profit has been selected as the primary financial measure for the annual bonus plan, as it captures growth,
returns and risk. Economic profit is defined as operating profit after deducting the actual tax charge and a capital charge
based on the weighted average cost of capital applied to the average capital employed. The operating profit is the profit
before any goodwill impairment, interest and tax. Average capital employed is based on a 12 month average starting on
1 April including cumulative goodwill but excluding net cash/indebtedness. At the sole discretion of the Remuneration
Committee, exceptional items may be removed from operating profit where the inclusion of such items would be
inconsistent with fair measurement, and actual tax may be adjusted to normalised rates if they are considered
unsustainable. Performance targets relating to the annual bonus plan are set from the Company’s annual budget, which is
reviewed and signed off by the board prior to the start of each financial year. The target is based on a number of internal
and external relevance points. The target is set to be stretching but achievable, with regard to the particular strategic
priorities and economic environment in a given year.

Strategic targets for the annual bonus may be set each year based on the Company’s prevailing strategic objectives at that
time. Targets will be set on a measurable, quantifiable basis where possible, but due to the nature of the objective, may
require some subjective assessment.

Absolute EPS and relative TSR have been selected as the current measures for the LTIP as EPS is considered to be an all-
encompassing measure of long-term financial performance while TSR is considered the best measure of long-term share
price performance for PayPoint, being directly aligned with shareholder interests and rewards management for
outperformance of the Company’s peers. TSR is calculated using the three month average share price preceding the start
and end of the performance period.

The committee retains the discretion to alter the weighting, substitute or use new performance measures for future
incentive awards, if they are felt to better support the strategy of the business at that time.

Remuneration policy for other employees
PayPoint’s approach to annual salary reviews is consistent across the Group, with consideration given to the level of
experience, responsibility, individual performance and salary levels in comparable companies. All UK employees are eligible
to participate in the Company’s SIP and senior managers participate in the annual bonus scheme with the same measure at
the appropriate business level as is set for the executive directors at Group level, but each with personal targets in
addition. Members of the executive board and senior managers (circa 25 individuals) are eligible to participate in the LTIP.
Performance conditions are consistent for all participants, while award sizes vary by organisational level.

PayPoint plc Annual Report 2017 51

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Remuneration report continued

Non-executive director remuneration

The remuneration of the non-executive directors is within the limits set by the articles of association. Non-executive
directors do not participate in any bonus plan or share incentive programme operated by the Company and are not
entitled to pension contributions or other benefits provided by the Company.

Details of the policy on fees paid to our non-executive directors are set out in the table below:

Performance
metrics
Continued
strong and
objective
contribution

Element and link to
strategy
Fees
To attract and retain
non-executive
directors of the
highest calibre with
broad commercial
and other experience
relevant to the
Company

Operation
Fee levels are normally reviewed annually.

The remuneration of the non-executive
directors is determined by the board based
upon recommendations from the Chairman
and Chief Executive (or, in the case of the
Chairman, based on recommendations of
the committee).

Additional fees are payable for roles with
additional responsibilities including, but not
limited to, the SID and the chairs of the
Audit and Remuneration Committees.

Fee levels are benchmarked against sector
comparators and companies of similar size
and complexity. Time commitment and
responsibility are taken into account when
reviewing fee levels.

All reasonable business related expenses
may be reimbursed (including any tax due
thereon).

Opportunity
Non-executive director fee increases are
applied in line with the outcome of the
annual fee review. Fees paid in respect of
the year under review (and for the
following year) are disclosed in the annual
report on remuneration.

It is expected that non-executive director
fee levels will generally be positioned
around median but may fall within the
second and third quartiles, and any
increases will also have regard to general
increases in non-executive directors’ fees
across the market. In the event that there
is a material misalignment with the market
or a change in the complexity,
responsibility or time commitment
required to fulfil a non-executive director
role, or specific recruitment needs, the
board has discretion to make an
appropriate adjustment to fee levels.

Aggregate fees are also limited by the cap
contained in the Company’s articles of
association.

52 PayPoint plc Annual Report 2017

Pay scenario charts

The charts below provide an illustration of the potential future reward opportunities for the executive directors, and the
potential split between the different elements of remuneration under three different performance scenarios: minimum, target
and maximum. Potential reward opportunities are based on PayPoint’s remuneration policy, applied to base salaries as at
1 April 2017. For the annual bonus, the amounts illustrated are those potentially receivable in respect of performance based
on the maximum bonus opportunity of 150% of salary for the Chief Executive and 106% of salary for the other directors.
For the LTIP, the award opportunities are based on LTIP awards of 175% of salary for the Chief Executive and 125% of salary
for other executive directors. Note that LTIP awards granted in the year do not normally vest until the third anniversary of the
date of grant, and the projected value is based on the face value at award rather than vesting (i.e. the scenarios exclude the
impact of any share price movement over the period). For simplicity, the value of any SIP awards are excluded.

2,500

2,000

1,500

1,000

500

£2,185,900

39%

34%

£1,288,220

13%

41%

£593,400

100%

46%

27%

Fixed Pay

Annual Bonus

LTIP

£707,610
13%
34%

£374,200

100%

53%

£1,085,680

36%

30%

34%

£747,112
13%
34%

£394,548

100%

53%

£1,146,901

36%

30%

34%

£000s

Minimum

On-target

Maximum

£000s

Minimum

On-target

Maximum

£000s

Minimum

On-target

Maximum

Chief Executive

Finance Director

Business Development Director

In illustrating potential reward opportunities, the following assumptions have been made:

Fixed

Component
Base salary
Pension
Other benefits

Target

Minimum
Salary as at 1 April 2017
Current contribution rate applied to latest known salary
Estimated value for year ending 31 March 2018

Maximum

Annual bonus
(Maximum opportunity of 150% of salary for the
Chief Executive and 106% of salary for the
other directors)

No bonus payable

LTIP
(Awards of 175% of salary for the Chief Executive and
125% of salary for the other directors)

No LTIP vesting

Target bonus:
80% of max for financial
targets, 50% of max for
strategic/personal
targets
Threshold vesting
25% of max
(20% of max for the
Chief Executive)

Maximum bonus

Maximum vesting

PayPoint plc Annual Report 2017 53

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSRemuneration report continued

Approach to recruitment remuneration

External appointment
In the cases of hiring or appointing a new executive director from outside the Company, the Remuneration Committee may
make use of all the existing components of remuneration, as follows:

Component
Base salary

Pension
Benefits

SIP
Annual bonus

LTIP

Approach
The base salaries of new appointees will be determined by reference to similar positions with
comparative status, responsibility and skills in parallel with the individual director’s performance,
experience and responsibilities, and pay conditions throughout the Company. Where new
appointees have initial basic salaries set below market, any shortfall may be managed with phased
increases over a period of two to three years subject to the individual’s development in the role.
New appointees will receive contributions to personal pension plans in line with existing policy.
New appointees will be eligible to receive benefits in line with existing policy. Reasonable relocation
support may be provided if necessary.
New appointees will be eligible to participate in the SIP in line with existing policy.
The structure described in the policy table will apply to new appointees with the relevant maximum
being pro-rated to reflect the proportion of employment over the year. Depending on the timing of
the appointment, it may be appropriate to operate different performance measures for the
remainder of that initial bonus period.
New appointees will be granted awards under the LTIP on the same terms as other executives, as
described in the policy table. The normal limit of 200% of salary will apply, save in exceptional
circumstances when awards of up to 300% of salary may be made.

Maximum
N/A

150% of
salary

300% of
salary

In determining appropriate remuneration, the Remuneration Committee will take into consideration all relevant factors
(including quantum, nature of remuneration and the jurisdiction from which the candidate was recruited) to ensure
that arrangements are in the best interests of both PayPoint and its shareholders. In addition to the above elements of
remuneration, the committee may consider it appropriate to grant an award under a different structure in order to facilitate
the recruitment of an individual, exercising the discretion available under the relevant Listing Rule (LR 9.4.2 R) to replace
incentive arrangements forfeited on leaving a previous employer. Such buyout awards would have a fair value no higher
than that of the awards forfeited. In doing so, the committee will consider relevant factors including any performance
conditions attached to these awards, the likelihood of those conditions being met and the proportion of the vesting period
remaining.

Internal appointment
In cases of appointing a new executive director by way of internal promotion, the Remuneration Committee and board will
be consistent with the policy for external appointees detailed above. Where an individual has contractual commitments
made prior to their promotion to the board, the Company will continue to honour these arrangements.

Non-executive directors
In recruiting a new non-executive director, the Remuneration Committee will utilise the policy as set out in the table on
page 49.

Service contracts and exit policy

Executive directors
Executive director service contracts, including arrangements for early termination, are carefully considered by the
committee. In accordance with general market practice, each of the executive directors has a rolling service contract
requiring 12 months’ notice of termination on either side. Executive director service contracts are available to view at the
Company’s registered office. Details of the service contracts of the executive directors of the Company are as follows:

Name
D Taylor
R Kentleton
T Watkin-Rees

Company notice period
12 months
12 months
12 months

Contract date
13 September 2004
15 July 2016
13 September 2004

There are no special provisions in service contracts relating to cessation of employment or change of control. The policy
on termination is that the Company does not make payments beyond its contractual obligations and executive directors
will be expected to mitigate their loss. In addition, the Remuneration Committee ensures that there are no unjustified
payments for failure. Under normal circumstances, executive directors may receive termination payments in lieu of notice
equal to pay and benefits for the length of their contractual notice period.

When considering exit payments, the committee reviews all potential incentive outcomes to ensure they are fair to both
shareholders and participants. The table below summarises how the awards under the annual bonus and LTIP are typically
treated in specific circumstances. Whilst the committee retains overall discretion on determining good leaver status, it
typically defines a good leaver in circumstances such as death, ill health, injury or disability, retirement with the Company’s
consent, redundancy or any other reason that the committee determines. Bad leavers include those leaving employment
due to resignation or misconduct, and retirement without agreement of the Company. Final treatment is subject to the
committee’s discretion:

54 PayPoint plc Annual Report 2017

Event
Annual bonus

Good leaver

Timing/vesting of award

Calculation of vesting/payment

Paid at the same time as continuing
employees

Eligible for an award to the extent that performance targets are
satisfied and the award is pro-rated for the proportion of the financial
year served.

Bad leaver

No annual bonus payable

Not applicable

Change of control

Paid immediately on the effective
date of change of control

Eligible for an award to the extent that performance targets are
satisfied up to the change of control and the award is pro-rated for the
proportion of the financial year served to the effective date of change
of control.

DABS

Good leaver

Continue until the normal vesting
date. In the event of death of a
participant, the award would vest
immediately

Outstanding awards normally vest in full at the normal vesting date on
a time pro-rated basis to reflect the length of the vesting period served
unless the board decides otherwise. The decision in respect of time
pro-rating of deferred bonuses earned will be based on the specific
nature of the departure of the executive director.

Bad leaver

Outstanding awards lapse

Not applicable

Change of control

Paid immediately on the effective
date of change of control

Eligible for an award pro-rated for the proportion of the financial year
served to the effective date of change of control, unless the board
decides otherwise.

LTIP

Good leaver

Continue until the normal vesting
date or vest immediately, at the
discretion of the committee.

Outstanding awards vest to the extent the performance conditions are
satisfied and the awards are pro-rated to reflect the length of the
vesting period served unless the board decides otherwise.

Bad leaver

Outstanding awards lapse

Not applicable

Change of control

Vest immediately on the effective
date of change of control

Outstanding awards vest subject to the satisfaction of performance
conditions as at the effective date of change of control, and the award
is pro-rated for the proportion of the vesting period served to the
effective date of change of control unless the board decides otherwise.

Outstanding matching awards under the 2009 DSB Plan will be treated in the same way as awards under the LTIP.
Mandatorily deferred (and voluntarily invested) shares under this plan are simply held on trust for participants and
therefore would be released immediately on cessation or a change of control.

Non-executive directors
The non-executive directors do not have service contracts, rather they have letters of appointment which are subject
to a three year term. Details of the terms of appointment of the non-executive directors are set out in the table below:

Name
D Morrison
N Wiles¹
N Carson
G Barr
G Kerr
R Sharma²

Effective date of letter
10 August 2016
8 May 2015
23 July 2014
1 June 2015
20 November 2015
12 May 2017

Unexpired term as at 31
March 2017
117 days
482 days
117 days
482 days
482 days
1,173 days

Date of appointment
12 January 1999
22 October 2009
23 July 2015
1 June 2016
20 November 2016
12 May 2017

Notice period
1 month
1 month
1 month
1 month
1 month
1 month

1. Neil Carson is due to step down as a director on 26 May 2017
2. Rakesh Sharma was appointed as a director on 12 May 2017 after the 2016/17 year end.

Under the Company’s articles of association, all directors are required to submit themselves for re-election every three
years. However, in order to comply with the Code, all directors will be subject to annual re-election. Non-executive
directors’ letters of appointment are available to view at the Company’s registered office.

PayPoint plc Annual Report 2017 55

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSRemuneration report continued

The following section provides details of how PayPoint’s remuneration policy will be implemented for the year ending
31 March 2018 and how it was implemented during the financial year ended 31 March 2017. The following pages contain
information that is required to be audited in compliance with the Directors’ Remuneration requirements of the Companies
Act 2006. All narrative and quantitative tables are unaudited unless otherwise stated.

Implementation of remuneration policy for 2017/2018

Base salary
The Remuneration Committee has determined that there will no base salary increases for 2017/18. In order to align
executive director base salary review date with that for the general workforce, the normal executive director base salary
review date for future years will be moved from 1 April to 1 July (i.e. the next review date will be 1 July 2018).

Dominic Taylor
Rachel Kentleton
Tim Watkin-Rees

1. Or date of appointment if later.

From
1 April 20161
£490,000
£308,000
£325,694

From
1 April 2017
£490,000
£308,000
£325,694

From
1 July 2017
£490,000
£308,000
£325,694

Pension (Policy Limit: 20% of salary)
Pension contributions will remain unchanged with Dominic Taylor’s at 16% of salary, and 15% of salary for the other
executive directors.

Annual bonus (Policy Limit: 150% of salary)
The Chief Executive’s annual bonus potential for the year ending 31 March 2018 will be set at 150% of salary with 106%
of salary continuing to be based on economic profit targets and the balance based on stretching strategic targets. The
targets themselves are considered commercially sensitive at this stage but will be based on the successful roll out of
PayPoint One, as determined by the number of terminals introduced, the timely and successful implementation of a new
Customer Relationship Management (CRM) system to improve service delivery and achievement of further benefits once
in place and the approval of a comprehensive succession plan, aligned to wider talent management activities with clear
milestones to be achieved. Reflecting the increased potential from previous years (106% of salary), the Chief Executive’s
bonus deferral will be doubled from the current 25% to 50% of the bonus over a three year period (so the cash bonus
potential decreases from 79.5% of salary to 75% of salary).

Bonus potential for the other executive directors will remain at 106% of salary with 25% deferred. However, to promote
a collegiate approach across the executive team, 26% of salary will be subject to the PayPoint One and CRM strategic
targets set out above, with the remaining 80% of salary continuing to be assessed based on economic profit.

No payments will be made under the strategic bonus targets unless the threshold economic profit target has been achieved.

As is currently the case, full details of the annual bonus targets (both financial and non-financial for the 2017/18 financial
year onwards) and performance against the targets will be disclosed in next year’s Annual Report on Remuneration.

LTIP (Policy Limit: 200% of salary)
For past awards up to and including the 2016 grant, 100% of LTIP awards were based on relative Total Shareholder Return
(TSR) against the constituents of the FTSE 250. However, for 2017 awards onwards, reflecting the committee’s desire
for more balanced performance metrics, Earnings Per Share (EPS) will also be used as a performance measure for 50% of
the awards. Relative TSR, will continue to be measured against the constituents of the FTSE 250 (albeit the committee
may exclude less relevant sectors for performance comparison – e.g. Oil & Gas companies, Basic Materials and Utilities) for
50% of LTIP awards, with threshold vesting for achieving a median ranking, rising on a straight-line basis to full vesting for
achieving an upper quartile ranking or better.

The Chief Executive’s annual LTIP award will be set at 175% of salary from 2017 onwards (as permitted under the current
and proposed policy). Reflecting the increase in the award level, the vesting schedule will be amended and the TSR targets
will be toughened. Rather than 25% of awards vesting for threshold performance, 20% will vest at threshold for both the
EPS and TSR part of the Chief Executive’s awards. In addition, rather than 100% of the TSR part of the Chief Executive’s
award vesting at upper quartile (75th percentile), this will be increased to upper quintile (80th percentile). LTIP awards for
the other executive directors will remain at 125% of salary (with 25% of awards continuing to vest at threshold and full
vesting for upper quartile TSR).

The performance targets, metrics and vesting for the LTIP awards to be granted in 2017 and which are expected to vest in
2020 will be as follows:

EPS
For 50% of awards

TSR
For 50% of awards

Below Threshold
Threshold

Maximum

0%
25%
(20% for the CEO)
100%

Below 5% p.a.
5% p.a.

12% p.a.

0%
25%
(20% for the CEO)
100%

Below median
Median

Upper quartile
(Upper quintile for the CEO)

56 PayPoint plc Annual Report 2017

When setting the performance targets for the EPS awards the committee considered a number of reference points,
including internal financial planning forecasts, external market consensus and a broader view of market conditions. They
were also set in compliance with the Company’s overall risk profile. The committee views this target range as realistic at the
lower end, but with significant challenge to achieve full vesting.

Additionally, the committee must satisfy itself that the recorded TSR is a genuine reflection of the underlying financial
performance of the Company for this part of the award to vest.

If approved by shareholders, these awards will be subject to a two year holding period after vesting (for the net of tax
shares), which will continue to apply post-cessation.

Non-executive director fees
In March 2017, the board undertook its annual review of non-executive directors’ fees. Following consideration of general
non-executive director fee increases across the market and the competitiveness of current market fee levels, the board
determined that there would be no fee increases awarded from 1 April 2017.

Base fees
Non-executive director
Additional fees
Chairman, Audit Committee
Chairman, Remuneration Committee
Senior Independent Director

From 1 April 2016

From 1 April 2017

£46,625

£8,700
£8,700
£5,100

The Chairman’s fee in the current year remains unchanged at £165,000.

Remuneration Committee membership in 2016/2017

The Remuneration Committee is responsible for developing policy on remuneration for executive directors, the executive
board and senior managers, and for determining specific remuneration packages for each of the executive directors.
The committee members, excluding the board Chairman, are all independent directors. Neil Carson is currently Chairman
of the committee, with Gill Barr, Giles Kerr and Nick Wiles as members. Rakesh Sharma joined the board and the
Remuneration Committee subsequent to the year ended 31 March 2017, and he will take over as Chairman of the
committee upon Neil Carson stepping down from the board. The Remuneration Committee is formally constituted with
written terms of reference which set out the full remit of the committee. The terms of reference are also available on the
Company’s website at www.paypoint.com. The Remuneration Committee met seven times during the year. The details
of meeting attendance are set out on page 35.

During the year, the committee sought internal support from the Chief Executive and the Human Resource Director, who
attended committee meetings by invitation from the Chairman, to advise on specific questions raised by the committee
and on matters relating to the performance and remuneration of the executive board and senior managers. Neither was
present for any discussions that related directly to their own remuneration. The Company Secretary attended each
meeting as Secretary to the committee.

In undertaking its responsibilities, the committee seeks independent external advice as necessary. To this end, FIT
Remuneration Consultants LLP (FIT) replaced Kepler as the principal external advisers to the committee during the
financial year, following a competitive tender process overseen by the committee. The committee is comfortable that the
FIT team provide independent remuneration advice to the committee and do not have any other connections with PayPoint
that may impair their independence. FIT is a founding member and signatory of the Code of Conduct for Remuneration
Consultants, details of which can be found at www.remunerationconsultantsgroup.com. During the year, FIT provided
independent advice on a wide range of remuneration matters including the Remuneration Policy review and the board
changes. FIT provides no other services to the Company. The fees paid to FIT (on the basis of time and materials) in respect
of work carried out for the year under review were £42,895. Fees paid in year to Kepler were £89,079.

Summary of shareholder voting at the 2016 annual general meeting
The following table shows the results of the binding vote on the Remuneration Policy Report at the 23 July 2014 annual
general meeting (the last time the policy was put to vote) and the shareholder advisory vote on the 2016 Annual Report
on Remuneration at the 28 July 2016 annual general meeting:

For (including discretionary)
Against
Total votes cast (excluding withheld votes)
Total votes withheld1
Total votes cast (including withheld votes)

2014 annual general meeting
Remuneration Policy

2016 annual general meeting
Remuneration Report

Total number
of votes
58,346,532
1,380,271
59,726,803
93,453
59,820,256

% of
votes cast
97.7%
2.3%

Total number
of votes
58,677,492
1,510,760
60,188,252
2,210
60,190,462

% of
votes cast
97.5%
2.5%

1. A withheld vote is not a vote in law and is not counted in the calculation of the proportion of votes cast for and against a resolution.

PayPoint plc Annual Report 2017 57

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Remuneration report continued

Single total figure of remuneration for executive directors (audited)

The table below sets out a single figure for the total remuneration received by each executive director for the year ended
31 March 2017 and the prior year:

Base salary
Taxable benefits1
Pension2
Annual bonus3
Long-term incentives4
Other5
Total

Dominic Taylor
£000

George Earle
£000

Rachel Kentleton
£0006,7

Tim Watkin-Rees
£000

2017

2016

2017

2016

2017

2016

2017

2016

490
25
78
337
181
10
1,121

473
25
76
155
179
3
911

346
23
98
239
136
8
850

338
23
96
111
136
3
707

76
4
11
51
0
1
143

-
-
-
-
-
-
-

325
22
48
224
128
10
757

318
22
48
105
125
3
621

1. Taxable value of benefits received in the year by executives includes car allowance of £17,500 (2016: £17,500) for Dominic Taylor, £3,266.15 (2016: n/a) for Rachel Kentleton and £15,000

(2016: £15,000) for George Earle and Tim Watkin-Rees, petrol, medical insurance, life assurance and permanent health insurance.

2. Pension during the year, the Company made contributions of 16% of salary to Dominic Taylor and 15% of salary to the other executive directors (the Remuneration Committee has agreed

that George Earle’s pension contributions will be paid direct to him, grossed up for tax as in previous years although this policy has ended on his retirement from the board).

3. Annual bonus: this is the total bonus earned in respect of performance during the relevant year, including deferred amounts. 25% of the annual bonus is mandatorily deferred in shares

under the DABS although reflecting George Earle’s retirement from the board, his 2017 annual bonus was paid in cash. Further details of annual bonus awards for 2017 can be found in the
Annual Report on Remuneration on page 59.

4. Long-term incentives: for 2017, this is the market value of matching DSB shares granted on 2 June 2014 based on performance to 31 March 2017 and which will vest on 2 June 2017.

The share price used to calculate market value is the trailing three month average on 31 March 2017 of 984p. Further details can be found in the Annual Report on Remuneration on page 59.
For 2016, the long-term incentive figures have been re-stated based on the value at vesting (as opposed to the estimated value used in last year’s report) of LTIP and DSB awards granted
in 2013 and vesting in 2016.

5. SIP matching and dividend shares awarded in the period valued at the average share price calculated over three months to 31 March 2017 of £9.84 (2016: £7.86). The SIP is an HMRC

approved plan that allows participants to purchase shares using gross salary and receive matching award from the Company. There are no performance conditions.

6. Rachel Kentleton was appointed as an executive director on 3 January 2017.
7. In addition, in the year to 31 March 2017, Rachel Kentleton received fees of £69,290 for her service as a non-executive director of Persimmon plc.

Single total figure of remuneration for non-executive directors (audited)
The table below sets out a single figure for the total remuneration received by each non-executive director for the year
ended 31 March 2017 and the prior year:

Base fee
£000

Committee Chair fees
£000

Senior Independent
Director fees
£000

Chairman fees
£000

Total
£000

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016

Chairman
Nick Wiles
Non-executive directors
Gill Barr
Neil Carson
Giles Kerr
David Morrison
Former directors
Stephen Rowley
Warren Tucker
Eric Anstee
Total

47
47
47
47

-
-
-
188

38
46
17
46

39
-
17
203

-
9
9
-

-
-
-
18

-
8
3
-

-
-
-
11

-
5
-
-

-
-
-
5

-
4
-
-

-
-
-
4

165

153

165

153

-
-
-
-

-
-
-
165

-
-
-
-

-
20
-
173

47
61
56
47

-
-
-
376

38
58
20
46

39
20
17
391

58 PayPoint plc Annual Report 2017

Incentive outcomes for the year ended 31 March 2017

Annual bonus in respect of 2016/17 performance
The annual bonus for the year ended 31 March 2017 was based on economic profit (Group operating profit including
PayPoint’s share of the results of Collect+ after tax and after deducting a charge for capital employed based on the
Company’s cost of capital). Based upon the actual results for the year, 64.8% of the maximum bonus was payable.

Further details, including the targets set and performance against these, are provided the table below:

Measure
Group economic profit

Weighting
100%

Annual bonus (% of max)
Annual bonus (% of salary)
Total Annual bonus (£)
Cash Bonus (£)
Deferred Bonus (£)2

Threshold
(20% of
maximum)
£000
36,244
(90%
of plan)

Target
(80% of
maximum)
£000
40,271
(100%
of plan)

Stretch
(100% of
maximum)
£000
44,298
(110%
of plan)

Actual
achieved
£000
39,249

Bonus earned

Dominic
Taylor

George
Earle

Rachel
Kentleton1

Tim
Watkin-Rees

64.8%
68.85%

64.8%
68.85%
£337,365 £238,707
£253,024 £238,707
–

£84,341

64.8%
64.8%
68.85%
68.85%
£51,126 £224,240
£38,344 £168,180
£56,060
£12,782

1. Rachel Kentleton’s bonus is pre-rated to reflect her period of employment
2. 25% of the bonus earned was mandatorily deferred into shares vesting after three years subject to continued employment. As noted on page 60 the annual bonus for George Earle will be

paid in cash on the normal payment date. 25% of the bonus will remain subject to the same clawback provisions as apply to the DAB for other participants.

The committee considers that the outcomes indicated are reflective of the performance delivered over the year and
therefore has not used any discretion to alter the final bonuses paid.

2014 DSB vesting
With respect to the DSB matching awards granted on 2 June 2014, vesting was based on earnings per share growth.
The three year performance period for these awards ended on 31 March 2017 with vesting on the third anniversary
of the date of grant. Further details relating to these awards are provided in the table below:

Measure
EPS

Total DSB vesting

Weighting
100%

Targets
0% vesting below RPI+3% p.a.
100% vesting at RPI+3% p.a.

Outcome1
EPS growth of 21.6%
Target: 14.3%

% vest
100%

100%

1. Based on 2017 adjusted EPS of 64.3p, 2014 EPS of 52.9p and RPI growth over the three year period of 5.3%.

Further details of the vesting for each individual director are as follows:

Director
Dominic Taylor
George Earle
Tim Watkin-Rees

Interests held
18,417
13,867
13,000

Vesting %
100%

100%

Number of shares vesting
18,417

13,867

13,000

Date of vesting
2 June 2017
2 June 2017
2 June 2017

Market price
on vesting1
£9.84

£9.84

Value
£000
181

136

128

1. As the price on the date of vesting is unknown, the value of an award is calculated by multiplying the number of shares, which vested by the average share price calculated over three

months to 31 March 2017 of £9.84.

2014 LTIP vesting
With respect to the LTIP awards granted on 2 June 2014, vesting is based 100% on TSR. The three year performance
period for these awards will end on 2 June 2017 with vesting on the third anniversary of the date of grant. Further details
relating to these awards are provided in the table below:

Measure
Relative TSR vs FTSE 250 index
(excluding investment trusts)

Weighting
100%

Targets
0% vesting below median
25% vesting at median
100% vesting at upper quartile
Straight-line vesting between these points

Total LTIP vesting

Further details of the vesting for each individual director are as follows:

Outcome
(to 30 April 2017)
117th position out of 186
companies equating to
37.3% centile

Implied %
vesting
0%

Director
Dominic Taylor

George Earle

Tim Watkin-Rees

Interests held
61,848
39,099
36,729

Implied % vesting
0%

Number of shares vesting
0

Date of vesting
2 June 2017
2 June 2017
2 June 2017

Market price on vesting
N/A

N/A

Value
£000
0

PayPoint plc Annual Report 2017 59

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSRemuneration report continued

Board changes

Departure of George Earle
As announced on 5 July 2016 and subsequently updated, George Earle stepped down from his role as Finance Director on
10 February 2017 and stepped down from the board on 31 March 2017. He will remain an employee for a number of months
during 2017/18 to provide assistance with the completion of a number of outstanding projects. No termination payments
have been or will be made.

George will continue to receive fixed pay on a monthly basis during his limited period of employment although he will not
be eligible for an annual bonus in respect of 2017/18 or future LTIP awards. Details of his annual bonus for the year ended
31 March 2017 are presented in the single figure table and notes above.

Unvested deferred share bonus and LTIP awards will continue to vest at the normal vesting date subject to time pro-rating
and, where relevant, the extent to which the performance targets are met. The time pro-rating calculation will be based on
the period of the respective vesting periods he served as an executive director (i.e. until 31 March 2017, so no time pro-
rating credit will be given for the subsequent employment period).

Appointment of Rachel Kentleton
Consistent with the July 2016 announcement, Rachel Kentleton joined the PayPoint board in January 2017 and was
appointed Finance Director on 10 February 2017. A summary of her remuneration arrangements, which are consistent
with the existing Remuneration Policy, is as follows:

– Base salary £308,000 p.a.

– 15% of salary pension p.a.

– Maximum bonus of 106% of salary p.a.

– Annual LTIP award of 125% of salary p.a. (with the first award being granted in summer 2017).

In addition, again in line with the Remuneration Policy, she received:

– A one-off award over 6,049 shares in PayPoint plc equal to the value of the cash annual bonus that she would have

received in December 2016 had she remained with her previous employer. No compensation has been paid for associated
deferred annual bonus shares that were forfeited. 50% of the award will vest after two years and 50% will vest after
three years, subject to continued employment; and

– A one-off award over 4,692 shares in PayPoint plc which equated to the expected value of share awards (after factoring
in the value of the underlying shares in her previous employer and current estimated and expected performance against
the targets) forfeited upon cessation of her previous employment. 50% of the award will vest after two years and 50%
will vest after three years, subject to continued employment.

Further details of the share award are presented below.

Scheme interests awarded in the year ended 31 March 2017

LTIP
In the year under review, LTIP awards were granted with a face value of 145% of salary for the Chief Executive and 125%
of salary for other executive directors. The awards will vest on the third anniversary of the date of grant, 2 June 2019.
The performance condition is based 100% on relative TSR vs. the FTSE 250 index (excluding investment trusts). The three
year performance period, over which TSR performance will be measured began on the grant date of 2 June 2016
and will end on 1 June 2019.

Executive director

Basis of award

Number of shares

Face value1

Dominic Taylor

George Earle

Tim Watkin-Rees

145% of
salary

125% of
salary

75,585

£710,499

46,104

£433,378

43,310

£407,114

Potential award
for minimum
performance

End of
performance
period

Performance measures

25% of face
value

1 June 2019

(3 years from
grant)

100% on TSR relative vs. FTSE 250
(excluding investment trusts):
– 0% vesting below median
– 25% vesting at median
– 100% vesting at upper quartile
– Straight-line vesting in between

1. Face value is based on the middle market quotation of a share in the capital of the Company on the preceding dealing day of award, 2 June 2016, of £9.40.

Listing Rule 9.4.2 award granted to Rachel Kentleton

Executive director

Date of grant

Basis of award

Number of shares

Vesting date

Vesting conditions

Rachel Kentleton

2 February
2017

10,741 shares vesting 50% after 2 years
and 50% after 3 years1

5,371

5,370

2 February
2019

2 February
2020

Continued
service

1. 6,049 shares reflect the value of the cash annual bonus that Rachel Kentleton would have received in December 2016 had she remained with her previous employer, while 4,692 shares

equated to the expected value of share awards (after factoring in the value of the underlying shares in her previous employer and current estimated and expected performance against the
targets) forfeited upon cessation of her previous employment.

60 PayPoint plc Annual Report 2017

Payments to past directors

No such payments were made during the year under review.

Percentage change in Chief Executive remuneration

The table below shows the percentage change in the Chief Executive’s remuneration, comprising salary, taxable benefits
and annual bonus, and comparable data for the average of all employees within the Company.

Salary
Taxable benefits
Annual bonus
Total

Change in remuneration from 2015 to 2016

Chief Executive

2017
£000
490
25
337
852

2016
£000
473
25
155
653

% change
3.6%
0.4%
117%
30%

Average % change
for other employees1
5.1%
7%
130%2

1. Increase in salary is for UK based employees who were employed by PayPoint for the entirety of both financial years, but excludes those who were promoted to a new role.
2. Increase is for UK based employees who earned a bonus pay out in both financial years.

Relative importance of spend on pay
The table below shows the Company’s actual expenditure on shareholder distributions (including dividends and share
buybacks) and total employee pay expenditure for the financial years ended 31 March 2016 and ended 31 March 2017.

2017
2016
% change

Total employee
pay expenditure
£000
33,630
33,903
1%

Distributions
to shareholders
£000
78,543
27,436
186%

Pay for performance
The graph below compares the value of £100 invested in PayPoint shares, including re-invested dividends, with the FTSE
250 index (excluding investment trusts) over the last eight years. This index was selected because it is considered to be
the most appropriate index against which the total shareholder return of PayPoint could be measured.

FTSE 250 Index (excluding Investment trusts)

PayPoint plc

500

400

300

200

100

n
r
u
t
e
r

r
e
d
o
h
e
r
a
h
s

a
t
o
T

)
0
0
1
o
t
d
e
s
a
b
e
r
(

0
01 March
2009

01 March
2010

01 March
2011

01 March
2012

01 March
2013

01 March
2014

01 March
2015

01 March
2016

01 March
2017

Chief Executive single figure
of remuneration (£000)
Annual bonus pay-out
(as % of maximum)
LTIP vesting
(as % of maximum)

2010
637

2011
677

2012
1,067

2013
2,639

2014
2,247

2015
1,215

2016
911

2017
1,121

84.50%

80.90%

88.70%

86.20%

91.43%

88.11%

30.98%

64.8%

0.00%

40.10%

100.00%

0.00%

PayPoint plc Annual Report 2017 61

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS

Remuneration report continued

Directors’ shareholdings (audited)
The shareholdings of the directors and their connected persons in the ordinary shares of the Company against their
respective shareholding requirement as at 31 March 2017:

Shares held

Shareholding Guidelines5

Unvested and
subject to
holding period
16,708
12,481
10,892
11,961

Unvested and
subject to
performance
conditions
228,273
141,391
-
132,795

Current
shareholding4
1,842,073
339,006
151
545,752

% of salary
100%
100%
100%
100%

Shares
49,797
35,234
31,301
33,099

Met?
Yes
Yes6
No6
Yes

Dominic Taylor
George Earle1
Rachel Kentleton
Tim Watkin-Rees2
Gill Barr
Neil Carson
Giles Kerr
David Morrison3
Nick Wiles

Owned
outright
or vested4
1,842,073
339,006
151
545,752
2,595
30,000
7,500
35,000
35,000

1. Includes 324,033 shares held by a Person Closely Associated with George Earle.
2. Includes 317,894 shares held by Persons Closely Associated with Tim Watkin-Rees.
3. Held by Prospect Investment Management Limited, which is wholly owned by David Morrison and his connected persons.
4. Current shareholding includes DABS and DSB bonus and SIP shares other than SIP matching shares and SIP dividend shares subject to a holding period.
5. Executive directors are required to hold shares of a value equivalent to 100% of their salaries as at 1 April 2017 (expected to increase to 200% of salary for the Chief Executive and 150%
of salary for the other executive directors from the 2017 annual general meeting). An average three month share price to 31 March 2017 of £9.84 has been used to calculate this guideline.

6. George Earle stepped down from the board on 31 March 2017 and Rachel Kentleton joined the board on 3 January 2017.

The market price of the Company’s shares on 31 March 2017 was £10.25 (31 March 2016: £7.48) per share and the low
and high share prices during the period were £7.49 and £11.68 respectively.

Directors’ interests in shares in PayPoint long-term incentive plans and all-employee plans

Long Term Incentive Awards (audited)

D Taylor

G Earle

R Kentleton
T Watkin-Rees

Type of
awards
LTIP1
LTIP2
LTIP2
LTIP2
LTIP1
LTIP2
LTIP2
LTIP2
9.4.27
LTIP1
LTIP2
LTIP2
LTIP2

Number of
shares at
31 March 2016
52,5773
61,8484
72,4235
-
32,9893
39,0994
44,6945
-
-
30,9273
36,7294
41,9855
-

Number of
shares awarded
during the period3
-
-
-
75,5856
-
-
-
46,1046
10,7417
-
-
-
43,3106

Number of shares
released during
the period
-
-
-
-
-
-
-
-
-
-
-
-
-

Number of shares
lapsed during
the period
(52,577)
-
-
-
(32,989)
-
-
-
-
(30,927)
-
-
-

Number of
shares at 31
March 2017
-
61,848
72,423
75,585
-
39,099
44,694
46,104
10,741
-
36,729
41,985
43,310

Value of
shares
awarded
£509,997
£652,496
£685,122
£710,499
£319,993
£412,494
£422,805
£433,378
£110,0957
£299,992
£387,491
£397,178
£407,114

Date of grant
31.05.13
02.06.14
01.06.15
02.06.16
31.05.13
02.06.14
01.06.15
02.06.16
02.02.17
31.05.13
02.06.14
01.06.15
02.06.16

Release date
31.05.16
02.06.17
01.06.18
02.06.19
31.05.16
02.06.17
01.06.18
02.06.19
02.02.19-20
31.05.16
02.06.17
01.06.18
02.06.19

1. These LTIP awards would only vest if the Company’s comparative TSR performance had been equal to or greater than the median level of performance over the three year holding period,

at which point 30% of awards would have vest, with full vesting occurring for upper quartile performance (proportionate vesting between points).

2. These LTIP awards will only vest if the Company’s comparative TSR performance is equal to or greater than the median level of performance over the three year holding period, at which

point 25% of awards will vest, with full vesting occurring for upper quartile performance (proportionate vesting between points). Awards were granted at the following closing prices on the
preceding day:
3. £9.70 per share.
4. £10.55 per share.
5. £9.46 per share (being the mid-market share price on the dealing day preceding the date of grant).
6. £9.40 per share (being the mid-market share price on the dealing day preceding the date of grant).
7. Rachel Kentleton’s buyout joining award granted under Listing Rule 9.4.2. See Scheme Interests awarded in the year ended 31 March 2017 and board changes section above. The share

price on 3 January 2017 of £10.25 has been used to calculate the value of the shares awarded to Rachel Kentleton.

62 PayPoint plc Annual Report 2017

Deferred Share Bonus Plan (audited)

Number of
bonus shares
purchased
at 31 March
20161
9,7194
9,7615
7,3664
7,3495
6,7484
6,8905

Number of
matching
shares
awarded at
31 March 20162
18,3384
18,4175
13,8984
13,8675
12,7334
13,0005

Number of
bonus shares
(released)/
purchased
during the
period
(9,719)

Number of
matching shares
awarded during
the period
(18,338)

Number of
matching
shares
(lapsed)
during the
period

(7,366)

(13,898)

(6,748)

(12,733)

D Taylor

G Earle

T Watkin-Rees

Number of
bonus shares
purchased at
31 March
2017
-

Number of
matching
shares
awarded at
31 March
2017
-
9,7615 18,4175
-
7,3495 13,8675
-
6,8905 13,0005

Value of
matching
shares
awarded
£176,201
£194,299
£133,539
£146,297
£122,345
£137,150

Date lapsed/
release date3
Date of grant
06.06.13 06.06.16
02.06.14 02.06.17
06.06.13 06.06.16
02.06.14 02.06.17
06.06.13 06.06.16
02.06.14 02.06.17

1. Bonus Shares are purchased with the bonus deferred after the deduction of tax.
2. Matching Shares are awarded based on the value of the gross bonus deferred.
3. No Matching Shares will be released unless the Company’s earnings per share growth is 3% p.a. in excess of the Retail Prices Index over the three year holding period. The bonus shares

were purchased and the matching share awarded at share prices of:

4. £9.61 per share.
5. £10.55 per share.

Deferred Annual Bonus Scheme (DABS)1 (audited)

D Taylor

G Earle

T Watkin-Rees

Number of
shares at
31 March
2016
11,137
-
8,167
-
7,672
-

Number of
shares
awarded
during
the period
-
3,9212
-
2,8062
-
2,6362

Number of
shares
released
during the
period
-
-
-
-
-
-

Number of
shares
lapsed
during the
period
-
-
-
-
-
-

Number of
shares at
31 March
2017
11,137
3,921
8,167
2,806
7,672
2,636

Value of
shares
awarded
£105,356
£38,857
£77,260
£27,807
£72,577
£26,123

Date of grant
01.06.15
07.06.16
01.06.15
07.06.16
01.06.15
07.06.16

Release date
01.06.18
07.06.19
01.06.18
07.06.19
01.06.18
07.06.19

1. The release of shares is dependent upon continuous employment for a period of three years from the date of grant.
2. £9.91 per share.

Share Incentive Plan (audited)

Number of
Partnership
Shares
purchased at
31 March
2016
3,204
3,227
-
3,227

Number of
Matching
Shares
awarded at
31 March
2016
3,204
3,227
-
3,227

Number of
Free Shares1
awarded at
31 March
2016
1,562
-
-
1,562

Dividend
Shares2
acquired at
31 March
2016
2,091
1,625
-
2,097

Number of
Partnership
Shares3
purchased
during the
period
153
153
151
153

Total
shares at
31 March
2016
10,061
8,079
-
10,113

Matching
Shares4
awarded
during the
period
153
153
151
153

Dividend
Shares
acquired
during the
period
888
747
-
892

D Taylor
G Earle
R Kentleton
T Watkin-Rees

Dates of release of
Matching and Free
Dividend Shares5
22.04.19-22.03.20
22.04.19-22.03.20
22.02.19-22.03.20
22.04.19-22.03.20

Total shares
at 31 March
2017
11,255
9,132
302
11,311

1. Free Shares are ordinary shares of the Company awarded conditionally on 24 September 2004 based on the share price on admission of £1.92.
2. Dividend Shares are ordinary shares of the Company purchased with the value of dividends paid in respect of all other shares held in the plan.
3. Partnership Shares are ordinary shares of the Company purchased on a monthly basis during the period (at prices from £8.605 to £10.82).
4. Matching Shares are ordinary shares of the Company awarded conditionally on a monthly basis during the period (at prices from £8.605 to £10.82) in conjunction with two share purchases.
5. The dates used are based on the earliest allocation of the Matching Shares.

This report covers the remuneration of all directors that served during the period.

This report was approved by the Remuneration Committee on 25 May 2017 and signed on its behalf by:

Neil Carson
Chairman, Remuneration Committee

PayPoint plc Annual Report 2017 63

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Directors’ report

The directors present their annual report on the affairs of
the Company and of the Group, together with the financial
statements and independent auditor’s report, for the year
ended 31 March 2017.

Prior to the sale of the Mobile payments business, it entered
into contracts with parking authorities to provide services
enabling the payment of parking charges via mobile phones
in the UK, USA, Canada, France and Switzerland.

PayPoint has a 50% interest in Collect+ Holdings Limited,
in a joint venture with Yodel. Collect+ Brand Limited, which
owns the Collect+ brand, is a wholly owned subsidiary
of Collect+ Holdings Limited. The Collect+ network
offers parcel collection and return services in over 6,000
convenient outlets.

Substantial shareholdings
The Company had been notified of the following
disclosable interests in the voting rights of the Company
as required by provision 5.1.2 of the FCA’s Disclosure
and Transparency Rules.

As at 31 March 2017:

Name of holder
Woodford Investment Management
Liontrust Asset Management plc
Capital Research & Management
Mawer Investment Management
Neptune Investment Management
Standard Life Investments Limited
Schroder Investment Management
Wise Investments Limited

No. of
ordinary
shares
12,681,121
7,688,001
5,919,900
4,745,952
4,673,431
3,805,010
3,665,252
2,432,719

Percentage
of issued
capital
18.61
11.28
8.69
6.97
6.86
5.59
5.38
3.57

As at 25 May 2017:

No. of
ordinary
shares
13,619,871
7,802,333
5,919,900
4,745,952
3,396,744
3,805,010
3,661,962
2,432,719

Percentage
of issued
capital
19.99
11.45
8.69
6.97
4.99
5.58
5.37
3.57

This annual report has been prepared for, and only for the
members of the Company, as a body, and no other persons.
The Company, its directors, employees, agents or advisers
do not accept or assume responsibility to any other person
to whom this document is shown or into whose hands it
may come and any such responsibility or liability is expressly
disclaimed. By their nature, the statements concerning the
risks and uncertainties facing the Company and the Group
in this annual report involve uncertainty, since future events
and circumstances can cause results and developments
to differ materially from those anticipated. The forward-
looking statements reflect knowledge and information
available at the date of preparation of this annual report
and the Company undertakes no obligation to update these
forward-looking statements. Nothing in this annual report
should be construed as a profit forecast.

Strategic report
The strategic report is on pages 1 to 27. The Company
has chosen to set out certain matters in this strategic
report that would otherwise be required to be disclosed
in the directors’ report. These matters include disclosures
concerning: greenhouse gas emissions (page 24); use of
financial instruments (pages 19 and 93); credit risk and
price risk (page 93); employment of disabled persons
(page 27); employee involvement (pages 25 and 26);
diversity (page 25) and likely future developments in the
business (page 14).

Principal activity
The Company is a holding company and its subsidiaries
are engaged in providing clients with specialist consumer
payment and other services and products, transaction
processing and settlement.

PayPoint UK and Ireland processes transactions for
payment products and services and collects payments on
behalf of the UK and Ireland’s leading utility and customer
service organisations in convenience retail outlets using
PayPoint’s terminals. On average, over 10 million consumer
transactions were processed weekly by PayPoint UK and
Ireland. At a PayPoint outlet, consumers are provided with a
one stop shop for making cash payments for the wide range
of PayPoint’s clients. In addition, PayPoint provides other
services to retail outlets.

PayPoint offers clients streamlined consumer payment
processing and transaction routing in one, seamlessly
integrated solution, through its MultiPay offering. 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.

PayPoint Romania provides electronic mobile top-ups,
scratch cards, money transfer, road tax payment and a bill
payment service to consumers.

64 PayPoint plc Annual Report 2017

Qualifying third party indemnity provisions for the
benefits of directors
Under sections 236 (1) (a) and (b) of the Companies Act
2006, companies are obliged to disclose any indemnities
which are in force in favour of their directors. The current
articles of association of the Company contain an indemnity
in favour of the directors of the Company which indemnifies
them in respect of certain liabilities and costs that they
might incur in the execution of duties as directors. Copies
of the articles of association can be obtained from
Companies House or by writing to the Company Secretary
and will be available at the venue of the annual general
meeting from 15 minutes before the meeting until it ends.

Change of control
All of the Company’s share schemes contain provisions
relating to a change of control. Outstanding options and
awards would be pro-rated for time and normally vest
on a change of control, subject to the satisfaction of any
performance conditions at that time.

The Company has a revolving term credit facility for £45 million
with a remaining term of over two years. The terms of the
facility allow for termination on a change of control, subject
to certain conditions. The British Gas contract for payments
is subject to termination rights for change of control in very
limited circumstances. The Simple Payment service contract
allowed for termination on change of control however a recent
decision by the Department of Work and Pensions would see
the discontinuance of this scheme from summer 2017 (see
page 10). There are no other significant contracts in place that
would take effect, alter or terminate on the change of control
of the Company, including compensation for loss of office as
a result of a takeover bid.

Suppliers payment policy
Terms of payment are agreed with individual suppliers prior
to supply. The Group aims to pay its creditors promptly, in
accordance with terms agreed for payment, provided the
supplier has provided the goods or services in accordance
with the agreed terms and conditions. The Group had 27
days’ purchases outstanding at 31 March 2017 (2016:
27 days), based on the average daily amount invoiced by
suppliers during the year.

Share capital
As at the date of this report, 68,135,252 ordinary shares
of 1/3p each have been issued and fully paid up and are
quoted on the London Stock Exchange. During the year
ended 31 March 2017, 46,130 ordinary shares were issued
under the Company’s share schemes. The rights and
obligations attaching to the Company’s ordinary shares, as
well as the powers of the Company’s directors are set out
in the Company’s articles of association, copies of which
can be obtained from Companies House or by writing to the
Company Secretary.

There are no restrictions on the voting rights attaching
to the ordinary shares or on the transfer of securities in
the Company. No person holds securities in the Company
carrying special rights with regard to control of the
Company. The Company is not aware of any agreements
between holders of securities that may result in restrictions
on the transfer of securities or on voting rights. Unless
expressly specified to the contrary in the articles of
association of the Company, the Company’s articles of
association may be amended by a special resolution of
the Company’s shareholders.

At the annual general meeting on 28 July 2016, the
directors were given authority to purchase 10% of its
issued share capital, allot relevant securities up to an
aggregate nominal amount of £75,659 and to dis-apply
pre-emption rights in respect of allotments of relevant
securities up to an aggregate nominal amount of £11,349.
Resolutions to renew these authorities will be proposed at
the 2017 annual general meeting, details of which are set
out in the notice of meeting on pages 95 to 99.

The Company’s issued share capital as at 31 March 2017,
together with details of purchases of own shares during
the year, are set out in note 23.

Directors
The names of the directors at the date of this report and
their biographical details are given on page 29 and their
interests in the ordinary shares of the Company are given
on page 62.

Results for the year
The consolidated income statement, statement of financial
position and cash flow statement for the year ended
31 March 2017 are set out on pages 73 to 76. An analysis of
risk is set out on pages 20 and 22 and of risk management
on page 44. The statement of financial position and cash
flow statement of the holding company for the year ended
31 March 2017 are set out on pages 77 and 78. Since
1 April 2017, there have been no material events likely to
impact the future development of the Company.

PayPoint plc Annual Report 2017 65

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSCorporate governance statement
The information that fulfils the requirements of the
corporate governance statement for the purposes of the
FCA’s Disclosure and Transparency Rules can be found in
this Directors’ report and in the governance section on
pages 32 to 45 (which is incorporated into this Directors’
report by reference).

Statement as to disclosure of information to auditor
Each of the persons who is a director at the date of
approval of this report confirms that:

1. so far as the director is aware, there is no relevant audit
information of which the Company’s auditor is unaware;
and

2. the director has taken all the steps that he/she ought

reasonably to have taken as a director in order to make
himself aware of any relevant audit information and to
establish that the Company’s auditor are aware of that
information.

This confirmation is given and should be interpreted
in accordance with the provisions of section 418 of
the Companies Act 2006.

Annual general meeting
The annual general meeting will be held at the offices of
Canaccord Genuity, 88 Wood Street, EC2V 7QR on 26 July
2017. The notice of meeting and explanatory information on
the resolutions to be passed at the annual general meeting
can be found on pages 95 to 99 of the annual report.

The Directors’ report was approved by the board of
directors on 25 May 2017 and signed on its behalf by:

Susan Court
Company Secretary
25 May 2017

Directors’ report continued

Charitable and political donations
The Group made no political donations during the year
(2016: £nil). Details of the charitable donations policy can
be found within the strategic report on page 23.

Employee matters and environmental issues
Employee matters and environmental issues are discussed
in the strategic report on pages 23 to 27.

Related party transactions
Related party transactions that took place during the year
can be found in note 27.

Future developments
An indication of likely future developments in the business
of the Company and details of research and development
activities are included in the strategic report on pages 3
to 27.

Dividends
The directors recommend the payment of a final dividend
of 30p (2016: 28.2p) per ordinary share, amounting to
£20,435,531 (2016: £19,198,610) to be paid on 31 July
2017 to members on the register on 23 June 2017. An
interim dividend was declared and paid during the period
of 15p per share (2016: 14.2p per share) amounting to
£10,218,825 (2016: £9,667,385). There was an additional
dividend declared and paid during the period of 12.2p per
share (2016: nil) amounting to £8,333,000. This additional
dividend was one third of the first £25 million per annum
of additional dividends as previously announced by the
Company. The dividend policy including all the dividends
declared during the year are set out in the strategic report
on page 19.

Going concern
At the end of the year, the Group had cash of £53.0 million,
and an undrawn £45.0 million revolving term credit facility
expiring in May 2019. The Company’s cash and borrowing
capacity is adequate to meet the foreseeable needs of the
Group, taking into account any reasonably forseeable risks
(see pages 20 to 22). The directors are satisfied that the
Group has adequate resources to continue in operational
existence for the foreseeable future, a period of not less
than 12 months from the date of this report. Therefore,
the financial statements have been prepared on a going
concern basis.

The Group’s liquidity review and commentary on the current
economic climate are shown on page 19 of the strategic
report and commentary on financial risk management is
shown in note 26.

Independent auditor
Deloitte LLP has expressed its willingness to continue as
the Company’s auditor until the appointment of a new
external auditor following a tender process (please refer
to page 43 of the Audit Committee report for details).
A resolution for its re-appointment will be proposed at
the forthcoming annual general meeting. The notice of the
annual general meeting can be found on pages 95 to 99.

66 PayPoint plc Annual Report 2017

Statement of directors’ responsibilities

Responsibility statement
We confirm that to the best of our 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;

– 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

– 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.

This responsibility statement was approved by the board
of directors on 25 May 2017 and signed on its behalf by:

Dominic Taylor
Chief Executive
25 May 2017

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 (EU) and Article 4 of the International Accounting
Standard (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.

PayPoint plc Annual Report 2017 67

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSIndependent auditor’s report to the members of PayPoint plc

Opinion on financial statements of PayPoint plc

In our opinion:

– the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs

as at 31 March 2017 and of the group’s profit for the year then ended;

– the group financial statements have been properly prepared in accordance with International Financial Reporting

Standards (IFRSs) as adopted by the European Union;

– the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by

the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

– the financial statements have been prepared in accordance with the requirements of the Companies Act 2006

and, as regards the group financial statements, Article 4 of the IAS Regulation.

The financial statements that we have audited comprise:

– the Consolidated Income Statement;

– the Consolidated Statement of Comprehensive Income;

– the Consolidated and Company Balance Sheets;

– the Consolidated and Company Cash Flow Statements;

– the Consolidated and Company Statements of Changes in Equity;

– the related notes to the Consolidated financial statements 1 to 29; and

– the related notes to the Parent financial statements 1 to 10.

The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the
European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of
the Companies Act 2006.

Summary of our audit approach

Key risks
The key risks that we identified in the current year were:

– Accounting for the Collect+ restructure; and

– Revenue recognition.

Within this report, any new risks are identified with  and any risks which are the same as the prior year identified with .

Materiality
The materiality that we used in the current year was £2.5 million which was determined on the basis of 5% of profit before
tax, adjusted to exclude the profit arising on disposal of the Mobile Payments business.

Scoping
Our group audit scope included 12 (2016: 12) entities.

Significant changes in our approach
Our audit approach has changed in response to the principal corporate transactions that have resulted in changes to the
Group’s structure:

– the disposal of the mobile payments business resulted in prior year risks on valuation and classification as held for sale

no longer being relevant;

– the sale of the Group’s interest in Drop and Collect Limited has resulted in the the prior year identified risk of impairment

no longer being relevant; and

– the new joint arrangements with Yodel Delivery Network Limited have given rise to a new risk relating to the

determination of the nature of the arrangement, whether it is a joint venture or a joint operation, and therefore the
accounting policy to be applied.

Going concern and the directors’ assessment of the principal risks that would threaten the
solvency or liquidity of the group

As required by the Listing Rules we have reviewed the directors’ statement regarding the appropriateness of the going
concern basis of accounting contained within note 1 to the financial statements and the directors’ statement on the
longer-term viability of the group on page 22.

We are required to state whether we have anything material to add or draw attention to in relation to:

– the directors’ confirmation on page 20 that they have carried out a robust assessment of the principal risks facing the

group, including those that would threaten its business model, future performance, solvency or liquidity;

68 PayPoint plc Annual Report 2017

– the disclosures on pages 20-22 that describe those risks and explain how they are being managed or mitigated;

– the directors’ statement in note 1 to the financial statements about whether they considered it appropriate to adopt the
going concern basis of accounting in preparing them and their identification of any material uncertainties to the group’s
ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;
and

– the directors’ explanation on page 22 as to how they have assessed the prospects of the group, over what period

they have done so and why they consider that period to be appropriate, and their statement as to whether they have a
reasonable expectation that the group will be able to continue in operation and meet its liabilities as they fall due over
the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or
assumptions.

We confirm that we have nothing material to add or draw attention to in respect of these matters.

We agreed with the directors’ adoption of the going concern basis of accounting and we did not identify any such
material uncertainties. However, because not all future events or conditions can be predicted, this statement is
not a guarantee as to the group’s ability to continue as a going concern.

Independence

We are required to comply with the Financial Reporting Council’s Ethical Standards for Auditors and confirm that we are
independent of the group and we have fulfilled our other ethical responsibilities in accordance with those standards.

We confirm that we are independent of the group and we have fulfilled our other ethical responsibilities in
accordance with those standards. We also confirm we have not provided any of the prohibited non-audit services
referred to in those standards.

Our assessment of risks of material misstatement

The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy,
the allocation of resources in the audit and directing the efforts of the engagement team.

Accounting for the joint arrangements in Collect+ 

Risk description

As described in note 17 and as discussed by the Audit Committee on page 43, in December 2016 the Group announced the
sale of its 50% interest in Drop and Collect Limited, which trades as Collect+, to its joint venture partner, Yodel Delivery
Network Limited (“Yodel”), in exchange for a 50% stake in a newly incorporated entity Collect+ Holdings Limited which
holds, via its wholly-owned subsidiary, Collect+ Brand Limited, the Collect+ brand. Collect+ Brand Limited has entered into
agreements to licence the brand to PayPoint and Yodel in return for royalties for each parcel introduced to Collect+.
The accounting for this transaction is complex, requiring an evaluation of the arrangements entered into to determine the
disposal accounting for the Group’s interest in Drop and Collect Limited and the accounting for the new arrangements with
Collect+ Holdings Limited in determining whether the arrangement represents a joint venture or a joint operation. This
determination affects the presentation in the Group’s financial statements as the former requires the use of equity
accounting whilst the latter requires the use of proportionate consolidation. As management expect that the parcel delivery
service provided by Collect+ will continue to grow, the determination of the accounting presentation is considered a critical
judgement. Management has determined that the arrangement represents a joint operation.

How the scope
of our audit
responded to
the risk

We considered management’s assessment of accounting for the new arrangements by inspecting the agreements signed
relating to the transaction including:
– the shareholders’ agreement between PayPoint and Yodel;
– the services agreement between PayPoint and Drop and Collect Limited; and
– the brand licence agreement between PayPoint and Collect+ Brand Limited.
We have reviewed the Group’s accounting analysis of the transaction and the agreement. We evaluated the accounting
against the requirements of IFRS 11 – Joint Arrangements. We considered the rights and obligations of each party to the
arrangement in the normal course of business based on the agreements and through discussion with management.
We have tested the loss on disposal calculation, including performing substantive analytical review procedures on the
results of Drop and Collect Limited up to the date of disposal.

Key
observations

Based on our audit procedures, we are satisfied that the accounting for the new joint arrangement as a joint operation and
the impact on the financial statements, including from the disposal of the Group’s interest in Drop and Collect Limited, is
appropriate and in accordance with IFRS.

PayPoint plc Annual Report 2017 69

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSIndependent auditor’s report to the members of PayPoint plc continued

Revenue Recognition 

Risk description

How the scope
of our audit
responded to
the risk

Revenues of £212 million, primarily comprising commission and fees receivable from clients and retailers and the Group’s share
of royalty income from the Collect+ joint operation, as well as revenues from the disposed Mobile payments business.
The Group’s accounting policy for the recognition of revenue is described in note 1 to the financial statements and further
information is included in note 3 to the financial statements and in the report of the Audit Committee on page 43. The majority
of the Group’s revenue is driven by high volume, low value transactions and the Group relies heavily on its computer systems to
record this data accurately. Automated controls in the computer systems are supported by business process controls
designed to ensure completeness and accuracy of recording of the transactions processed across the Group’s retail network.
There is an inherent risk around the revenue recorded given the complexity of systems and the large number of schemes
operated by the Group, particularly where there are manual interventions such as in processing changes to fee structures.

With the assistance of our IT specialists, we tested the effectiveness of the controls over the IT environment in which
transaction polling, billing and rating reside, including the change control procedures in place over systems that bill material
revenue streams.
We tested controls over end-to-end reconciliations from transaction polling from terminals, to billing and rating, to the
general ledger, including interface controls designed to determine completeness of recording of all revenue transactions.
We also tested controls over manual adjustments to transaction-based invoices.
In addition to this controls work, we have performed the following:
– substantive testing on the fee rates input into the computer systems;
– for all material revenue streams, analytical procedures were undertaken; and
– any material non-routine revenue streams were also substantively tested and the revenue recognition policies assessed

against the criteria of IAS 18.

Key
observations

Based on our audit procedures, we identified no matters to report to the Audit Committee.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.

Our application of materiality

We define materiality as the magnitude of misstatement
in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person
would be changed or influenced. We use materiality both in
planning the scope of our audit work and in evaluating the
results of our work.

Based on our professional judgement, we determined
materiality for the financial statements as a whole as follows:

Group materiality
£2.5 million (2016: £2.5 million)

Basis for determining materiality
5% of pre-tax profit adjusted to exclude the gain arising on
disposal of the Mobile Payments businesses and the loss
on disposal of the Group’s 50% interest in Drop and Collect
Limited.

Rationale for the benchmark applied
A profit measure is considered most relevant to users of
the accounts; and an adjusted measure has been used
to exclude the gain on disposal of the Mobile Payments
business and the loss on disposal of the Group’s 50%
interest in Drop and Collect Limited as these transactions
are non-recurring in nature.

We agreed with the Audit Committee that we would
report to the committee all audit differences in excess of
£125,000 (2016: £125,000), as well as differences below
that threshold that, in our view, warranted reporting on
qualitative grounds. We also report to the Audit Committee
on disclosure matters that we identified when assessing the
overall presentation of the financial statements.

70 PayPoint plc Annual Report 2017

Adjusted PBT
£53.3m

Component materiality range
£0.1m to £1.25m

Group materiality
£2.5m

Audit Committee reporting threshold
£0.125m

An overview of the scope of our audit

Our group audit scope focused primarily on the audit work of 12 legal entities (2016: 12 legal entities). Of those:

– 7 (2016: 8) were subject to a full audit. These audits were performed by the Group audit team without the assistance
of a component auditor and represent 77% of the Group’s revenue, 93% of profit before tax and 93% of net assets.

– 1 (PayPoint Romania) was subject to a statutory audit to 31 December 2016 followed by 3 months roll forward through

specific audit procedures, it represents 19% of revenue, 6% of profit before tax and 7% of net assets; and

– 4 entities (including Drop and Collect Limited) which were disposed of during the year were subject to analytical review

procedures by the Group audit team for the period during which they were under PayPoint’s control.

The extent of our testing was based on our assessment of the risks of material misstatement and of the materiality of
the group’s business operations at those locations. These 12 entities represent the principal business units within the
group and account for 100% (2016: 100%) of the group’s net assets, 100% (2016: 100%) of the group’s revenue and
100% (2016: 100%) of the group’s adjusted profit before tax. They were also selected to provide an appropriate basis for
undertaking audit work to address the risks of material misstatement identified above. Our audit work on the 12 entities
was executed at levels of materiality applicable to each individual entity which were lower than group materiality. The
highest materiality applied to an individual trading component was £1.25 million (2016: £1.4 million).

At the parent entity level we also tested the consolidation process and carried out analytical procedures.

The group audit team, including the Senior Statutory Auditor or another senior member of the engagement team, visits
PayPoint Romania (the only location where a component auditor assists with the audit work) every year.

Revenue

Proﬁt
before tax

Net assets

Full audit scope – 77%

Speciﬁed audit procedures – 19%

Review at group level – 4%

Full audit scope – 93%

Speciﬁed audit procedures – 6%

Review at group level – 1%

Full audit scope – 93%

Speciﬁed audit procedures – 7%

Review at group level – 0%

Opinion on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

– the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the

Companies Act 2006;

– the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial

statements are prepared is consistent with the financial statements; and

– the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit,
we have not identified any material misstatements in the Strategic Report and the Directors’ Report.

Matters on which we are required to report by exception

Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:

– we have not received all the information and explanations we require for our audit; or

– adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not

been received from branches not visited by us; or

– the parent company financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

PayPoint plc Annual Report 2017 71

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSIndependent auditor’s report to the members of PayPoint plc continued

Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’
remuneration have not been made or the part of the Directors’ Remuneration Report to be audited is not in agreement
with the accounting records and returns.

We have nothing to report arising from these matters.

Corporate Governance Statement
Under the Listing Rules we are also required to review part of the Corporate Governance Statement relating to the
company’s compliance with certain provisions of the UK Corporate Governance Code.

We have nothing to report arising from our review.

Our duty to read other information in the Annual Report
Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion, information
in the annual report is:

– materially inconsistent with the information in the audited financial statements; or

– apparently materially incorrect based on, or materially inconsistent with, our knowledge of the group acquired in the

course of performing our audit; or

– otherwise misleading.

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired
during the audit and the directors’ statement that they consider the annual report is fair, balanced and understandable and
whether the annual report appropriately discloses those matters that we communicated to the Audit Committee which we
consider should have been disclosed.

We confirm that we have not identified any such inconsistencies or misleading statements.

Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express
an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and
Ireland). We also comply with International Standard on Quality Control 1 (UK and Ireland). Our audit methodology and
tools aim to ensure that our quality control procedures are effective, understood and applied. Our quality controls and
systems include our dedicated professional standards review team and independent partner reviews.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.

Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the parent company’s
circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting
estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the
financial and non-financial information in the annual report to identify material inconsistencies with the audited financial
statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our report.

Hadleigh Shekle FCA (Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, UK
25 May 2017

72 PayPoint plc Annual Report 2017

Consolidated income statement

Continuing operations
Revenue
Cost of revenue
Gross profit
Administrative expenses
Operating profit before impairments and business disposals
Impairments
Disposal of businesses
Operating profit after impairments and business disposals
Share of joint venture result
Investment income
Finance costs
Profit before tax
Tax
Profit/(loss) for the year

Attributable to:
Equity holders of the parent
Non-controlling interest

Earnings/(loss) per share
Basic
Diluted

Year ended
31 March 2017
£000

Year ended
31 March 2016
£000

Note

2
5

9
9

211,924
(106,008)
105,916
(53,640)
52,276
-
15,660
67,936
1,193
132
(120)
69,141
(9,508)
59,633

212,556
(106,539)
106,017
(55,689)
50,328
(48,986)
7,014
8,356
(224)
123
(103)
8,152
(10,247)
(2,095)

59,622
11
59,633

(2,111)
16
(2,095)

11
11

87.5p
87.2p

(3.1)p
(3.1)p

Consolidated statement of comprehensive income

Items that may subsequently be reclassified to the consolidated income
statement:
Exchange differences on translation of foreign operations
Accumulated foreign exchange translation recycled to the income
statement (net of nil tax)
Other comprehensive income for the year
Profit/(loss) for the year
Total comprehensive income/(expense) for the year
Attributable to:
Equity holders of the parent
Non-controlling interest

Year ended
31 March 2017
£000

Year ended
31 March 2016
£000

Note

675
2,047

2,722
59,633
62,355

62,344
11
62,355

968
-

968
(2,095)
(1,127)

(1,143)
16
(1,127)

PayPoint plc Annual Report 2017 73

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS

Consolidated statement of financial position

Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investment in joint venture
Deferred tax asset

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets held for sale

Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Liabilities directly associated with assets classified as held for sale

Non-current liabilities
Trade and other payables
Deferred tax liability

Total liabilities
Net assets
Equity
Share capital
Share premium
Share-based payment reserve
Translation reserve
Retained earnings
Total equity attributable to equity holders of the parent
Non-controlling interest
Total equity

Note

12
13
14
15
17

18
20

21
17

Year ended
31 March 2017
£000

Year ended
31 March 2016
£000

8,236
11,867
27,168
-
354
47,625

357
98,771
53,080
-
152,208
199,833

121,603
4,548
-
126,151

537
-
537
126,688
73,145

227
2,633
4,404
(316)
66,197
73,145
-
73,145

8,068
8,038
21,452
1,629
-
39,187

523
109,247
80,831
4,794
195,395
234,582

140,095
3,487
3,070
146,652

-
67
67
146,719
87,863

227
2,365
3,956
(3,038)
84,467
87,977
(114)
87,863

These financial statements were approved by the board of directors and authorised for issue on 25 May 2017 and signed
on behalf of the board of directors.

Dominic Taylor
Chief Executive
25 May 2017

74 PayPoint plc Annual Report 2017

Consolidated statement of changes in equity

Opening equity 1 April 2015
(Loss)/profit for the year
Exchange differences on
translation of foreign operations
Equity-settled share-based
payment expense
Vesting of share scheme
Dividends
Closing equity 31 March 2016
Profit for the year
Exchange differences on
translation of foreign operations
Exchange differences transferred
to income statement on sale of
business
Equity-settled share-based
payment expense
Vesting of share scheme
Deferred tax on share-based
payments
Dividends
Closing equity 31 March 2017

Note

23
24

Share
premium
£000
1,977
-
-

Share-based
payment
reserve
£000
3,926
-
-

Retained
earnings
£000

Translation
reserve
£000

Total equity
attributable to
equity holders
of the parent
£000
(4,006) 113,348 115,472
(2,111)
(2,111)
968
-

-
968

Non-
controlling
interest
£000

Total
equity
£000
(130) 115,342
(2,095)
968

16
-

1,660

388
-
2,365
-
-

(1,630)
-
3,956
-
-

-
-

666
(27,436)
(3,038) 84,467
59,622
-

-
675

(576)
(27,436)
87,977
59,622
675

-
-
(114)
11
-

(576)
(27,436)
87,863
59,633
675

2,047

103

2,150

2,047

1,552

268
-

(1,329)
225

-
-

651
-

1,552

(410)
225

Share
capital
£000
227
-
-

-
-
227
-
-

-
-

-
227

-
2,633

-
4,404

(78,543)
(316) 66,197

(78,543)
73,145

-
-

1,552

(410)
225

(78,543)
73,145

PayPoint plc Annual Report 2017 75

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSConsolidated statement of cash flows

Net cash inflow from operating activities
Investing activities
Investment income
Purchases of property, plant and equipment
Purchases of intangible assets
Net proceeds on disposal of businesses
Net cash from investing activities
Financing activities
Cash-settled share-based remuneration
Dividends paid
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year

Reconciliation of cash and cash equivalents

Corporate cash
Client cash
Cash and cash equivalents on the statement of financial position
Cash and cash equivalents included in assets held for sale
Cash and cash equivalents on the statement of cash flows

Year ended
31 March 2017
£000
42,217

Year ended
31 March 2016
£000
59,014

Note
28

132
(12,116)
(5,335)
22,674
5,355

(410)
(78,543)
(78,953)
(31,381)
83,221
1,240
53,080

123
(4,633)
(3,586)
11,966
3,870

(576)
(27,436)
(28,012)
34,872
47,198
1,151
83,221

Year ended
31 March 2017
£000
32,876
20,204
53,080
-
53,080

Year ended
31 March 2016
£000
50,665
30,166
80,831
2,390
83,221

76 PayPoint plc Annual Report 2017

Company statement of financial position

Non-current assets
Investments

Current assets
Trade and other receivables
Cash and cash equivalents

Total assets

Current liabilities
Trade and other payables

Non-current liabilities
Trade and other payables
Deferred tax
Total liabilities

Net assets

Equity
Share capital
Share premium
Share-based payment reserve
Retained earnings
Total equity

Note

Year ended
31 March 2017
£000

Year ended
31 March 2016
£000

60,149
60,149

22,032
1,409
23,441
83,590

61,743
61,743

41,181
12,337
53,518
115,261

6,611

429

-
70
6,681

25,901
-
26,330

76,909

88,931

227
2,633
4,179
69,870
76,909

227
2,365
3,956
82,383
88,931

PayPoint plc’s profit for the year was £65.4 million (2016: £52.5 million).

The financial statements of PayPoint plc (registered number 03581541) were approved by the board of directors and
authorised for issue on 25 May 2017 and signed on behalf of the board of directors.

Dominic Taylor
Chief Executive
25 May 2017

PayPoint plc Annual Report 2017 77

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSCompany statement of changes in equity

Opening equity 1 April 2015
Profit for the year
Equity-settled share-based payment expense
Vesting of share scheme
Dividends paid
Closing equity 31 March 2016
Profit for the year
Equity-settled share-based payment expense
Vesting of share scheme
Dividends
Closing equity 31 March 2017

Note

6
23
23
24

Share
capital
£000
227
-
-
-
-
227
-
-
-
-
227

Share
premium
£000
1,977
-
-
388
-
2,365
-
-
268
-
2,633

Share-based
payment reserve
£000
3,926
-
1,660
(1,630)
-
3,956
-
1,552
(1,329)
-
4,179

Retained
earnings
£000
56,636
52,517
-
666
(27,436)
82,383
65,379
-
651
(78,543)
69,870

Total
equity
£000
62,766
52,517
1,660
(576)
(27,436)
88,931
65,379
1,552
(410)
(78,543)
76,909

Company statement of cash flows

Net cash movement from operating activities

Investing activities
Dividends and interest received
Proceeds on disposal of investments
Investment in group companies
Net cash from investing activities
Financing activities
Dividends paid
Net cash used in financing activities

Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

Year ended
31 March 2017
£000
(2,374)

Year ended
31 March 2016
£000
30,460

Note
28

46,021
24,808
(840)
69,989

-
12,300
(3,369)
8,931

(78,543)
(78,543)

(27,436)
(27,436)

(10,928)
12,337
1,409

11,955
382
12,337

78 PayPoint plc Annual Report 2017

Notes to the consolidated financial statements

1. Accounting policies

Statement of compliance with IFRS and basis of
preparation
PayPoint plc is a public limited company and is incorporated
in the United Kingdom under the Companies Act. The
Company’s ordinary shares are traded on the London Stock
Exchange. The Group’s financial statements have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union and as
such comply with Article 4 of the EU IAS regulation.

These financial statements are presented in pounds sterling
rounded to thousands (£000). The pound sterling is the
currency of the primary economic environment in which the
Group operates.

Adoption of new and revised standards
In the current year, a number of amendments to IFRS issued
by the International Accounting Standards Board (IASB)
became mandatorily effective for accounting periods
beginning on or after 1 April 2016. Their adoption has
not had any material impact on the disclosures or on the
amounts reported in these financial statements.

–

2012-2014 Cycle of annual improvements to IFRS

IFRS 10, IFRS 12 and IAS 28 (amended) Investment
entities: applying the consolidation exception

IFRS 11 (amended) Accounting for acquisitions of
interests in joint operations

IAS 1 (amended) Disclosure initiative

IAS 27 (amended) Equity method in separate financial
statements

IAS 16 and IAS 38 (amended) Clarification of acceptable
methods of depreciation and amortisation

–

IAS 16 and IAS 41 (amended) Agriculture bearer plants

At the date of authorisation of these financial statements,
new and revised IFRS issued, but not yet effective, are set
out below. The directors anticipate that the adoption of
these Standards and Interpretations in future periods will
have no material impact on the financial statements of the
Group.

These have not been adopted in the Group accounting
policies:

–

2014-2016 Cycle of annual improvements to IFRS

IFRS 2 (amended) Classification and measurement of
share-based payment transactions

IFRS 10 and IAS 28 (amended) Sale or contribution of
assets between an investor and its associate or joint
venture

IFRIC 22 Foreign currency transactions and advance
consideration

IAS 7 (amended) Disclosure initiative

IAS 12 (amended) Recognition of deferred tax assets
for unrealised losses

IAS 40 (amended) Transfers of investment property

IFRS 9 Financial instruments

IFRS 14 Regulatory deferral accounts

Furthermore:

IFRS 15 is a new standard and is effective for accounting

periods commencing on or after 1 January 2018. It is based
on a five step model framework, which replaces all existing
revenue standards. The principles of the standard are that
revenue is recognised as the Group fulfils its performance
obligations. The Group has performed an initial impact
assessment of IFRS 15 taking into account the current
revenue recognition policies set out on page 81. The
revenue recognition for SIMs is the only area where the
revenue recognition will change although this is not material
to the overall Group revenue. Revenue recognition for other
products and services is unlikely to change significantly
from the current recognition policy.

IFRS 16 ‘Leases’ is effective for annual periods beginning
on or after 1 January 2019 subject to EU endorsement.
IFRS 16 provides a single lessee accounting model, requiring
lessees to recognise right of use assets and lease liabilities
for all applicable leases. On adoption of IFRS 16 the Group
will recognise on the balance sheet a right to use an asset
and lease liability for all leases under which it is a lessee. In
the income statement depreciation of the asset and interest
expense arising from the lease liability will be recognised
in place of the operating lease rental expense. This will
result in an increase in cost of revenue, finance costs and a
decrease in administrative expenses. The standard will also
impact a number of statutory measures such as operating
profit and alternative performance measures used by the
Group. The impact of IFRS 16 on implementation may
change as a result of alterations to existing lease contracts
terms or new contracts entered into before the standard’s
implementation. If the standard was adopted in the current
financial year the right to use the asset would increase gross
assets by £1.6 million and lease liabilities increasing total
liabilities by £1.6 million. However, the overall impact on
earnings would not be significant, as total operating lease
charges would broadly be similar to the depreciation and
finance costs recognised. The Group does not have any
leases where it is a lessor.

Alternative performance measures
Non-IFRS measures or alternative performance measures
are used by the directors and management for performance
analysis, planning, reporting and incentive setting purposes
and have remained consistent with the prior year. These
measures are included in these financial statements to
provide additional useful information on performance and
trends to shareholders.

These measures are not defined terms under IFRS and
therefore they may not be comparable with similarly
titled measures reported by other companies. They are
not intended to be a substitute for, or superior to, IFRS
measures. These measures include net revenue, Retail
networks earnings per share and effective tax rate.

PayPoint plc Annual Report 2017 79

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSNotes to the consolidated financial statements continued

Net revenue (Non-IFRS measure)
Net revenue is revenue less the cost of mobile top-ups
(where PayPoint is principal), SIM cards and other costs
incurred by PayPoint which are recharged to clients and
merchants. These costs include retail agent commission,
card payment merchant service charges and costs for the
provision of call centres for PayByPhone clients.

Net revenue reflects the benefit attributable to PayPoint’s
performance eliminating pass-through costs and further
assists with comparability of performance where PayPoint
acts as a principal for some clients and as an agent for
others. Net revenue is a reliable indication of contribution
on a business sector and product basis and is shown in the
operating and financial review. A reconciliation from revenue
to net revenue is included in note 3.

Retail networks and ongoing business (Non-IFRS
measure)
Following the sale of Mobile and Online, the ongoing
business of the Group is Retail networks. In order to
aid users’ understanding of the results for the year a
reconciliation has been presented of the Group’s results
for the year to that of Retail networks in note 4.

Effective tax rate (non-IFRS measure)
Effective tax rate is the tax cost as a percentage of the net
profit before tax excluding significant items including profit
or loss on business disposals and impairments. Effective
tax is a better reflection of the tax cost because it excludes
the effects of significant items and better reflects the
underlying tax rate.

Significant accounting policies
The accounting policies adopted by the Group are
consistent with prior years.

Basis of consolidation
PayPoint plc (the Company) acts as a holding company. The
Group accounts consolidate the accounts of the Company
and entities controlled by the Company (its subsidiaries).
Control is achieved when the Company has the power over
an entity, is exposed, or has rights, to variable return from
its involvement with it, and has the ability to use its powers
to affect its returns. The Company reassesses its control in
an entity if facts and circumstances indicate that there is a
change to any of the three elements of control listed above.

The results of subsidiaries acquired or sold are consolidated
for the periods from or to the date on which control changed.
All intergroup transactions, balances, income and expenses
are eliminated on consolidation except for joint ventures.

All the subsidiaries of the Group, a list of which are provided
in note 16 to the financial statements, apply accounting
policies which are consistent with those of the Group.

Business combinations
The acquisition of subsidiaries is accounted for using the
acquisition method. Acquisition-related costs are recognised
in profit or loss as incurred. The cost of the acquisition is
measured at the aggregate of the fair values, at the date of
exchange, of assets given, liabilities incurred or assumed,
and equity instruments issued by the Group in exchange for
control of the acquiree. The acquired identifiable assets,
liabilities and contingent liabilities that meet the conditions
for recognition under IFRS 3 Business Combinations are
recognised at their fair value at the acquisition date, except
for non-current assets that are classified as held for resale
in accordance with IFRS 5 Non-Current Assets Held for Sale
and Discontinued Operations, which are recognised and
measured at fair value less costs to sell.

80 PayPoint plc Annual Report 2017

Goodwill
Goodwill arising on consolidation represents the excess of
the cost of acquisition over the Group’s interest in the fair
value of the identifiable assets and liabilities of a subsidiary
at the date of acquisition. Goodwill is not amortised and
is measured at the amount initially recognised less any
accumulated impairment losses.

For the purpose of impairment testing, goodwill is allocated
to each of the Group’s subsidiaries (cash-generating
units). The cash generating units to which goodwill has
been allocated are tested for impairment annually, or more
frequently when there is an indication of impairment. This
is done by determining the recoverable amount. If the
recoverable amount of the cash-generating unit is less than
the carrying amount, an impairment loss is recognised by
first allocating the impairment to goodwill and then to the
other assets on a pro-rata basis of the carrying amount of
each asset in the unit. Any impairment loss for goodwill is
recognised immediately in profit or loss and is not reversed
in subsequent years.

On disposal of a cash generating unit, the related goodwill
is included in the determination of the profit or loss on
disposal.

Impairment of property, plant and equipment and other
intangible assets
At each balance sheet date, the Group reviews the
carrying amounts of its property, plant and equipment
and intangible assets to determine whether there is any
indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount
of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does not
generate cash flows that are independent from other
assets, the Group estimates the recoverable amount of
the cash-generating unit to which the asset belongs. An
intangible asset with an indefinite useful life and intangible
assets not available for use are tested for impairment
annually and whenever there is an indication that the asset
may be impaired.

Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash
flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating
unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash-generating unit) is
reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately.

The reversal of any impairment loss is limited by the net
book value to which the relevant asset would have been
reduced, had no impairment occurred. A reversal of an
impairment loss is recognised as income.

Assets held for sale and discontinued operations
Where the sale of a component of the Group is considered
highly probable and the business is available for immediate
sale in its present condition, it is classified as held for sale.
Assets and liabilities held for sale are measured at the lower
of carrying amount and fair value less costs to sell.

A discontinued operation is a component of the Group
which represents a separate major line of business or a
geographical area of operations, which has been sold
or classified as an asset held for sale. The Group has no
discontinued operations.

Revenue
Revenue represents the value of services and goods
delivered or sold to clients and retailers which is measured
using the fair value of the consideration received or
receivable, net of value added tax.

Revenue from bill and general payments comprises
commissions from clients for processing transactions
and providing an over-the-counter payments service.
Revenue is recognised at the point in time each transaction
is processed. Dependent on the contracted terms,
management fees, set-up fees or cash rebates are deferred
and recognised on a straight-line basis over the contracted
period with the client.

Top-up revenue comprises revenue from top ups for mobile
phones, e-vouchers, prepaid debit cards and lottery tickets.
Revenue is recognised at the point in time each top-up
is sold. In the UK, PayPoint is contracted as agent in the
supply of mobile top-ups and accordingly the commission
earned from mobile operators is recognised. In Ireland
and Romania, PayPoint contracts as principal and revenue
is recognised at the gross sale price and cost of revenue
includes the related cost.

Retail services revenue comprises:

–

services fees from retailers (ATM, card payment,
broadband, PayPoint One and EPoS services) and is
recognised as the services are provided

commissions, rebates and fees from card payment
processing, parcel and money transfer transactions are
recognised when the transactions are processed

commissions from sale of SIM cards is primarily earned
from the mobile operators based on activations and
the value of top-ups after the initial sale. This revenue
is contingent on the customer actions and is recognised
once the customer activates and uses the SIM

fees for receipt advertising and failed direct debits
are recognised at the time the transaction occurs

the Group’s share of royalty income from the Collect+
joint operation (see accounting policy on joint
arrangements on page 83)

Cost of revenue
In the current year ‘cost of sales’ was renamed to ‘cost of
revenue’ to better reflect the nature of the costs included
in this category. The costs allocated to this category are
consistent with prior year’s allocations and policy.

Cost of revenue primarily consists of expenses related
to delivering our services and products. These include
commissions payable to retailers, cost of mobile top-ups
and SIM cards (where PayPoint is principal), card scheme
sponsors’ charges, transaction costs, terminal and ATM
maintenance costs, telecommunications costs, field service
costs, depreciation and amortisation.

Foreign currency
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing at
the dates of the transaction. At each balance sheet date,
monetary assets and liabilities that are denominated in
foreign currencies are retranslated at the rates prevailing on
the balance sheet date. Non-monetary assets and liabilities
carried at fair value that are denominated in foreign
currency are translated at the rates prevailing at the date
when fair value was determined. Gains and losses arising on
retranslation are included in net profit or loss for the year.

The assets and liabilities of the Group’s overseas operations
are translated at exchange rates prevailing on the balance
sheet date. Cash flows, profit and loss items are translated
at the average exchange rates for the year unless exchange
rates fluctuate significantly. Exchange differences arising
on consolidation are recorded in a separate component of
equity titled the translation reserve.

On the disposal of a foreign operation accumulated
exchange differences in respect of that operation are
reclassified to profit or loss.

Pension costs
The Group makes payments to a number of defined
contribution pension schemes. Pension costs are recognised
as an expense when employees have rendered services
entitling them to the contributions. Differences between
contributions payable in the year and contributions actually
paid are shown as either accruals or prepayments in the
statement of financial position.

Share-based payments
Share based payment arrangements are either cash
settled or equity settled at the Group’s option. The Group
determines whether it has incurred a present obligation
to settle in cash and, if there is no present obligation,
treats the options as equity-settled. If the Group then
elects to settle in cash, the cash payment is accounted for
as a deduction from equity. Equity-settled share-based
payments are measured at fair value at the date of grant.
The fair value determined at the grant date of the equity-
settled share-based payments is expensed on a straight
line basis over the vesting period, based upon independent
advice that the shares will eventually vest. Fair value is
measured by use of either a Monte Carlo simulation or
Black Scholes model depending upon the scheme. The
expected life used in the model has been adjusted for the
effects of non-transferability, exercise restrictions and
behavioural considerations.

Investment income
Investment income comprises of bank deposit interest
received on cash and cash equivalents held at financial
institutions. Interest is recognised as earned which reflects
the effective interest rate method.

PayPoint plc Annual Report 2017 81

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSNotes to the consolidated financial statements continued

Taxation
The Group operates in three different tax jurisdictions
which leads to some complexity in tax matters. This requires
a degree of estimation of liabilities and delays resolution
of issues. The final resolution of tax issues may give rise to
variances in profit or loss and cash. The Group’s policy is
to pay tax when due but to minimise tax payments where
practically possible, without engaging in aggressive tax
schemes.

The tax expense represents the amount payable in respect
of the year under review based on the taxable profit for the
year and deferred tax. Taxable profit differs from net profit
as reported in the income statement because it excludes
items of income or expense that are taxable or deductible
in other years and items that are not taxable or deductible.

The Group’s liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by
the balance sheet date.

Deferred tax is provided in full on taxable temporary
differences between the tax bases of assets and liabilities
and their carrying amounts. Deferred tax is calculated using
tax rates that have been substantively enacted by the
balance sheet date. Deferred tax assets are recognised on
deductible temporary differences to the extent that it is
probable that future taxable profit will be available against
which the tax will be realised.

Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and
interests in joint ventures, except where the Group is able
to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in
the foreseeable future.

The carrying amount of deferred tax assets is reviewed at
each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is charged or credited in the statement of
profit or loss, except when it relates to items charged or
credited directly to equity, in which case the deferred tax
is recorded in equity.

Intangible assets
Recognised on acquisition
The Group has recognised intangible assets at their fair
values in accordance with IFRS 3 Business combinations.
These assets included merchant contract and acquired
systems. These intangible assets were amortised over their
estimated useful lives of one to five years for merchant
contracts and ten years for acquired systems.

Development expenditure
The Group develops computer software and other
intangible assets for internal use. Development expenditure
on large projects is recognised as an intangible asset if it
is probable that the asset will generate future economic
benefits. The costs that are capitalised are the directly
attributable costs necessary to create and prepare the
asset for operations. Development costs recognised as an
intangible asset are amortised on a straight-line basis over
its useful life, which is between five and ten years. Other
software costs are recognised in administrative expenses
when incurred.

Property, plant and equipment
Property, plant and equipment are carried at cost less
accumulated depreciation and impairment. Depreciation
is provided at rates calculated to write off the cost, less
estimated residual value, of each asset on a straight-line
basis over its expected useful life. The estimated useful
lives are as follows and are reviewed on an annual basis:

–

freehold building – 50 years

leasehold improvements – over the life of the lease

PayPoint One terminals - seven years

other terminals – five years

automatic teller machines (ATMs) – five years

other classes of assets – three to five years

The gain or loss arising on the disposal or retirement of
an asset is determined as the difference between the sale
proceeds and the carrying amount of the asset and is
recognised in profit or loss.

Investments
Investments in subsidiaries and joint arrangement are
stated at cost less accumulated impairments.

Inventories
Inventories comprises stocks of e-vouchers, scratch cards
and SIM cards. These are stated at the lower of cost or net
realisable value.

In Ireland and Romania, PayPoint trades as principal for
the processing and sale of mobile phone top-ups and the
cost of these e-vouchers is included in inventories. Where
PayPoint acts as an agent, the cost of the e-vouchers is
not included in inventories.

Trade and other receivables
Trade receivables are initially recorded at fair value and
represent the amount of commission due from clients for
which payment has not been received, less an allowance for
doubtful accounts that is estimated based on factors such
as the credit rating of the customer, historical trends, the
current economic environment and other information.

Items in the course of collection represent gross
transaction values received by retail agents that have
not yet been collected by PayPoint, less an allowance
for doubtful recovery.

Trade and other payables
Trade payables are initially recorded at fair value and
represent the amount of invoices received from suppliers
for purchases of goods and services for which payment
has not been made.

Settlement payables represent gross transaction values
received by retail agents that have not yet been settled
to clients.

Provisions
Provisions are recognised when the Group has a present
legal or constructive obligation as a result of a past event,
it is probable that an outflow of resources will be required
to settle the obligation and the amount can be reliably
estimated.

82 PayPoint plc Annual Report 2017

Joint arrangements
A joint arrangement is an arrangement in which two or more
parties have contractually agreed to sharing of control of
an arrangement which requires the unanimous consent
when making decisions about the relevant activities.

Dividends
Final dividends on ordinary shares are recognised in
equity in the year in which they are approved by the
Company’s shareholders. Interim dividends are recognised
when declared.

In the company accounts, dividend income from
investments is recognised when the shareholders’
rights to receive payment have been established.

Critical accounting judgements and key sources
of estimation uncertainty
In the application of the Group’s accounting policies, the
directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources.
The estimates and associated assumptions are based on
historical experience and other factors that are considered
to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on
an on-going basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised
if the revision affects only that period, or in the period of
the revision and future periods if the revision affects both
current and future periods.

The critical accounting judgement at the balance sheet date
that has a significant risk of causing a material adjustment
to the carrying amount of assets and liabilities within the
next year is the capitalised development expenditure shown
in intangible assets of £11.9 million (2016: £8.0 million).

Key source of estimated uncertainty
The useful life used to amortise intangible assets relates
to the expected future performance of the assets and
management’s judgement of the period over which economic
benefit will be derived from the asset. For development costs,
the Group has determined the useful life based on historical
experience with similar products and platforms controlled by
the Group as well as anticipation of future events which may
impact their life such as changes in technology. Historically,
changes in useful lives have not resulted in material changes
to the Group’s amortisation charge.

Joint arrangements are classified as either:

–

a joint venture whereby the Group has the right to net
assets through joint control with third parties; or

a joint operation whereby the Group has rights to the
assets and obligations for the liabilities relating to the
arrangement.

Joint ventures are accounted for using the equity method,
whereby the investment is initially recognised at cost and
adjusted thereafter for the post-acquisition change in the
investor’s share of the investee’s net assets.

Joint operations are accounted for by recognising, in
relation to the interest in the joint operation:

–

the assets, including its share of any assets held jointly;

the liabilities, including its share of any liabilities incurred
jointly;

the revenue from the sale of its share of the output
arising from the joint operation;

the share of the revenue from the sale of the output
by the joint operation; and

the expenses, including its share of any expenses
incurred jointly.

The Group accounts for the assets, liabilities, revenues
and expenses relating to its interest in a joint operation
in accordance with the IFRSs applicable to the particular
assets, liabilities, revenues and expenses.

Leases
The Group has no finance leases. Rentals under operating
leases are charged on a straight-line basis over the lease
term, even if the payments are not made on such a basis.
Benefits received and receivable as an incentive to sign an
operating lease are similarly spread on a straight line basis
over the lease term.

Bank and other loans
Bank and other loans are initially measured at fair value, net
of any attributable transaction costs and are subsequently
measured at amortised cost using the effective interest
rate method.

Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash
equivalents comprise cash at bank and in hand and short-term
deposits with original maturity of less than three months and
are subject to insignificant risk of changes in value.

Cash consists of corporate cash and client funds.

Corporate cash consists of cash available to PayPoint for
its daily operations. Client funds consists of cash collected
on behalf of clients from retailers not yet transferred to
clients but is held in PayPoint bank accounts. Corporate
cash and client funds are included in the cash and cash
equivalents on the statement of financial position and
statement of cash flows.

PayPoint plc Annual Report 2017 83

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSNotes to the consolidated financial statements continued

984

52,276

Less
Mobile and
Online
£000
(8,495)
3,348
(5,147)
6,131

Statutory
result
£000
211,924
(106,008)
105,916
(53,640)

For the year ended
31 March 2017
Revenue
Cost of revenue
Gross profit
Administrative
expenses
Operating profit
before
impairments and
business disposals
Impairments
Profit on disposals
of business
Operating profit
after impairments
and business
disposals
Share of joint
venture result
-
Investment income
11
Finance costs
69,141 (18,508)
Profit before tax
Tax
-
(9,508)
Profit for the year 59,633 (18,508)

-
15,660 (19,503)

67,936 (18,519)

132
(120)

1,193

Less
Collect+
£000

Retail
networks
£000
- 203,429
- (102,660)
- 100,769
(47,509)
-

- 53,260

-
3,843

-
-

3,843 53,260

(1,193)

-
-

132
(109)
2,650 53,283
(9,508)
43,775

-
2,650

Less
Collect+
£000

Retail
networks
£000
- 196,396
- (101,698)
- 94,698
(41,935)
-

For the year ended
31 March 2016
Revenue
Cost of revenue
Gross profit
Administrative
expenses
Operating profit
before
impairments and
business disposals
Impairments
Profit on disposals
of business
Operating profit
after impairments
and business
disposals
Share of joint
venture result
Investment income
Finance costs
Profit before tax
Tax
Profit for the year

Statutory
result
£000

Less
Mobile and
Online
£000
212,556 (16,160)
4,841
(106,539)
106,017 (11,319)
(55,689) 13,754

50,328

2,435

52,763

(48,986) 48,986
(7,014)

7,014

8,356 44,407

-
-

52,763

(224)

224

123
(103)

-
23
8,152 44,430
(10,247)
-
(2,095) 44,430

-
-

123
(80)
224 52,806
(10,247)
224 42,559

2. Segment reporting

(i) Segment information
PayPoint is a service provider for consumer transactions
through various distribution channels, involving the processing
of high volume transactions, the management of retailers and
clients, the settlement of funds (collection and transmission)
and transmission of data in a secure environment, by the
application of technology.

The application of technology is directed on a Group basis by
the Group’s Executive Board to develop products across the
business, prioritised on an economic value basis (generally by
product), rather than on a subsidiary by subsidiary basis and
therefore the Group has only one operating segment.

Geographical information

Revenue
UK
Ireland
Romania
North America
France
Total

Year ended
31 March 2017
£000

Year ended
31 March 2016
£000

161,664
5,110
39,765
4,459
926
211,924

168,172
6,371
31,956
5,303
754
212,556

Non-current assets (excluding deferred tax)

Revenue
UK
Romania
Total

Year ended
31 March 2017
£000

Year ended
31 March 2016
£000

38,164
9,107
47,271

31,119
8,068
39,187

Net revenue (alternative performance
measure)

Service revenue
Sale of goods
Royalties
Total revenue
less:
Retail agent commissions
Cost of mobile top-ups and SIM
cards as principal
Card scheme sponsors’ charges
Net revenue

Year ended

31 March 2017
£000
173,880
37,695
349
211,924

Year ended
31 March 2016
£000
179,723
32,833
0
212,556

(53,645)
(32,296)

(57,650)
(28,082)

(2,130)
123,853

(3,191)
123,633

Reconciliation from the Group statutory
income statement to Retail networks

Following the sale of Mobile and Online, the ongoing business
of the Group is Retail networks. In order to assist users, a
reconciliation has been presented of the Group’s results for
the year from Group’s statutory income statement to Retail
networks to aid with the users’ understanding of the results
for the year. Neither Mobile nor Online met the definition of a
discontinued operation set out in IFRS 5 Non-current assets
held for sale and discontinued operations as each did not
constitute a separate major line of business.

84 PayPoint plc Annual Report 2017

5. Cost of revenue

8. Profit/(loss) for the year

In the current year ‘cost of sales’ was renamed to ‘cost of
revenue’ to better reflect the nature of the costs included
in this category. The costs allocated to this category are
consistent with prior year’s allocations.

Commission payable to retail
agents
Cost of mobile top-ups and SIM
cards as principal
Card scheme sponsors’ charges
Depreciation and amortisation
Other
Total cost of revenue

Year ended

31 March 2017
£000
53,645

Year ended
31 March 2016
£000
57,650

32,296

28,082

2,130
7,473
10,464
106,008

3,191
5,784
11,832
106,539

6. Profit of parent company

The Company has taken advantage of the exemption under
S.408 of the Companies Act 2006 and consequently the
income statement of the parent company is not presented
as part of these financial statements. The profit of the
parent company for the financial year amounted to £65.4
million (2016: £52.5 million).

7. Employee information

Average number of persons
employed
Sales, distribution and marketing
Operations and administration

Staff costs during the year
(including directors)
Wages and salaries
Social security costs
Pension costs (note 25)

Year ended

31 March 2017

Year ended
31 March 2016

190
471
661

195
519
714

£000

26,715
2,728
1,310
30,753

28,924
2,904
1,146
32,974

Redundancy and termination costs were £0.6 million
(2016: £0.9 million).

Directors’ emoluments, pension contributions and share
options are disclosed in the Remuneration Committee
report on pages 46 to 63. Included within staff costs is
a share-based payment charge (note 23) of £1.6 million
(2016: £1.7 million).

Profit/(loss) is
after charging/(crediting):
Inventory expensed – cost of
mobile top-ups and SIM cards as
principal
Write downs of inventories
recognised as an expense
Depreciation on property, plant
and equipment
Amortisation of intangible assets
Loss on disposal of property,
plant and equipment
Foreign exchange gains/(losses)
Operating leases
Impairment of goodwill
Profit on disposal of business
(note 9)
Research and development costs
Staff costs (note 7)

Auditor’s remuneration:
Fees payable to the Company’s
auditor for the audit of the
Company’s annual accounts
Fees payable to the Company’s
auditor for the audit of the
Company’s subsidiaries
Total audit fees
Other audit-related services
Fees payable to the Group’s
auditor for the review of the
interim results
Audit-related assurance
services
Fees payable to the Group’s
auditor and its associates for
other services to the Group:
Corporate finance services
Tax compliance services
Tax advisory services
Total other services
Total auditor’s remuneration

Year ended
31 March 2017
£000

Year ended
31 March 2016
£000

32,182

28,082

114

5,302

4,698

2,171
414

-
63
-
(15,660)

2,500
30,753

1,086
25

10
153
48,986
(7,014)

2,800
32,974

Year ended
31 March 2017
£000

Year ended
31 March 2016
£000

155

133

190
28
24

166
-
28

300
53
132
485
727

300
86
297
683
877

Fees payable to Deloitte LLP and its associates for non-
audit services to the Company are not required to be
disclosed because the consolidated financial statements
are required to disclose such fees on a consolidated basis.
A description of the work of the Audit Committee is set
out on pages 42 to 45 and includes an explanation of how
auditor independence is safeguarded where non-audit
services are provided by the auditor.

PayPoint plc Annual Report 2017 85

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSNotes to the consolidated financial statements continued

Impairments and disposal of businesses

In the current year (23 December 2016) the Group disposed of
its interest in the mobile payments business which comprised
of PayByPhone Technologies Inc., PayByPhone Limited,
Mobile Payment Services SAS and Adaptis Solutions Limited.
Included in the Group’s results in the current year was a net
loss of £1.0 million (2016: £2.2 million) related to Mobile’s
operations up to the date of its sale.

In the prior year (8 January 2016) the Group disposed of
the online payments business. Included in the Group’s results
in the prior year was a net loss from the online business of
£0.2 million.

The profit on disposal of these businesses is set out as follows:

Other intangible assets
Property plant and equipment
Deferred tax asset
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Net carrying value
of disposed business
Exchange differences
recognised in equity
Non-controlling interests
Gain on disposal
Total consideration
Satisfied by:
Gross consideration
Disposal costs

Net cash inflow arising on disposal:
Gross consideration received
Less: disposal costs paid
Less: cash and cash
equivalents disposed of

Year ended
31 March 2017
£000
-
614
-
2,830
1,959
(3,063)
2,340

Year ended
31 March 2016
£000
4,258
178
43
1,313
334
(840)
5,286

2,047

103
19,503
23,993

26,500
(2,507)
23,993

26,500
(1,596)
(1,959)

-
7,014
12,300

14,300
(2,000)
12,300

14,300
(2,000)
(334)

22,945

11,966

Profit/(loss) on disposal
Together with the loss on disposal of Drop and Collect
Limited (note 15), the profit/(loss) resulting from the
disposal of businesses is shown below:

Disposal of Online
Disposal of Mobile
Disposal of Drop and Collect
Limited (note 15)

Year ended
31 March 2017
£000
-
19,503
(3,843)

Year ended
31 March 2016
£000
7,014
-
-

15,660

7,014

Impairments
In the year no goodwill impairments were recognised.
In the prior year the carrying value of the Mobile and
Online assets were tested for impairment with impairments
recorded as follows:

Online
Mobile

10. Tax

Current tax
Charge for current year
Adjustment in respect
of prior years
Current tax charge

Deferred tax
Charge for current year
Adjustment in respect
of prior years
Deferred tax charge

Total income tax
Income tax charge

Year ended
31 March 2017
£000
-
-
-

Year ended
31 March 2016
£000
18,207
30,779
48,986

Year ended
31 March 2017
£000

Year ended
31 March 2016
£000

10,596
(892)

9,909
(860)

9,704

9,049

-
(196)

420
778

(196)

1,198

9,508

10,247

The income tax charge is based on the United Kingdom
statutory rate of corporation tax for the year of 20% (2016:
20%). The charge for the year is reconciled below to the profit
before tax as set out in the consolidated income statement.

Profit before tax
Tax at the UK corporation tax
rate of 20% (2016: 20%)
Tax effects of:
Losses in countries where the tax
rate is different to the UK
Disallowable expenses/
non-taxable income
Utilisation of tax losses not
previously recognised
Losses in companies where a
deferred tax asset was not
recognised
Adjustments in respect
of prior years
Tax impact of share-based
payments
Revaluation of deferred tax asset
due to change in tax rate
Disallowable loss on Collect+
arrangement
Disallowable impairments and
profit on disposal
Actual amount of tax charge

Year ended
31 March 2017
£000
69,141
13,828

Year ended
31 March 2016
£000
8,152
1,630

(213)

(228)

107

(1,088)

(10)

769

(52)

(38)

459

(43)

208

(25)

(3,901)

8,336

9,508

10,247

86 PayPoint plc Annual Report 2017

Profit before tax for purposes of calculating the effective
tax rate is as follows:

12. Goodwill

Goodwill arose on the acquisition of PayPoint Romania.

The Group tests goodwill annually for impairment as set
out in the accounting policy note on page 80.

The Group prepares cash flow forecasts derived from the
most recent financial budgets approved by management for
the next four years and extends cash flows to perpetuity.
Terminal values are based on nominal growth rates that do
not exceed 2% (2016: 3%). The post-tax rates used of 12.5%
(2016: 12.5%) to discount the forecast cash flows are based
on the Group’s estimated weighted average cost of capital,
adjusted for tax, country or business specific risk premiums.

Cost
At 31 March 2015
Exchange rate adjustment
At 31 March 2016

Exchange rate adjustment
At 31 March 2017

Total
£000

7,694
374
8,068

168
8,236

Profit before tax
Impairments
Profit on disposal
Profit before tax for purposes
of calculating the effective
tax rate

Year ended
31 March 2017
£000
69,141
-
(15,660)
53,481

Year ended
31 March 2016
£000
8,152
48,986
(7,014)
50,124

11. Earnings/(loss) per share

Basic and diluted earnings per share are calculated on the
following profit/(loss) and number of shares.

Year ended
31 March 2017
£000
59,622

Year ended
31 March 2016
£000
(2,111)

(18,508)

44,430

11
2,650

16
224

43,775

42,559

31 March 2017
Number
of shares

31 March 2016
Number
of shares
68,118,438 68,080,179

190,484
59,725
373

-
147,156
-
68,369,020 68,227,335

Profit/(loss) for statutory
basic and diluted earnings
per share is the net profit/
(loss) attributable to equity
holders of the parent
Adjustments:
-(Profit)/loss related to Mobile
and Online (note 4)
-Non-controlling interest
-Loss related to Collect+
(note 4)
Profit for the purpose of
basic and diluted earnings
per share (Retail networks)

Weighted average number of
ordinary shares in issue (for
statutory and Retail networks
basic earnings per share)
Potential dilutive
ordinary shares:
Long-term incentive plan
Deferred share bonus
SIP and other
Weighted average number of
ordinary shares in issue (for
statutory and Retail networks
diluted earnings per share)

PayPoint plc Annual Report 2017 87

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the consolidated financial statements continued

13. Other intangible assets

14. Property, plant and equipment

Development
costs
£000

10,328
6,000
-
16,328

Acquired
contracts
with
merchants
£000

Total
£000

801
-
(801)

11,129
6,000
(801)
- 16,328

2,290
2,171
-
4,461

801
-
(801)
-

3,091
2,171
(801)
4,461

11,867
8,038

- 11,867
8,038
-

Acquired
systems
£000

Development
costs
£000

Acquired
contracts
with
merchants
£000

Total
£000

1,800
-
(1,800)

7,352
2,976
-
- 10,328

2,052
-
(1,251)

11,204
2,976
(3,051)
801 11,129

1,505
135
(1,640)
-

1,204
1,086
-
2,290

2,052
-
(1,251)
801

4,761
1,221
(2,891)
3,091

-
295

8,038
6,148

-
-

8,038
6,443

Cost
At 31 March 2016
Additions
Disposals
At 31 March 2017

Accumulated
amortisation
At 31 March 2016
Charge for the year
Disposals
At 31 March 2017

Carrying amount
At 31 March 2017
At 31 March 2016

Cost
At 31 March 2015
Additions
Disposals
At 31 March 2016

Accumulated
amortisation
At 31 March 2015
Charge for the year
Disposals
At 31 March 2016

Carrying amount
At 31 March 2016
At 31 March 2015

The acquired systems were disposed of with the sale of
the Online business. In the current year, the fully amortised
contract with customers were derecognised as those
contracts no longer exist. There are no other intangible
assets remaining from acquisitions. At 31 March 2017,
the Group had not entered into any material contractual
commitments for other intangible assets.

Terminals
and ATMs
£000

Fixtures,
fittings and
equipment
£000

Land and
buildings
£000

Total
£000

Cost
At 31 March 2016
Additions
Disposals
Exchange rate
adjustment
At 31 March 2017 61,462

55,041
7,322
(1,116)
215

Accumulated
depreciation
At 31 March 2016
Charge for the year
Disposals
Exchange rate
adjustment
At 31 March 2017 45,726

41,840
4,406
(702)
182

3,949
87
(108)
54

6,412 65,402
3,978 11,387
(1,224)
269

-
-

3,982 10,390 75,834

1,471
583
(108)
42

639 43,950
313
5,302
-
(810)
-
224

1,988

952 48,666

Carrying amount
At 31 March 2017 15,736
13,201
At 31 March 2016

1,994
2,478

9,438
5,773

27,168
21,452

At 31 March 2017, the Group had entered into contractual
commitments for the acquisition of terminals and ATMs
amounting to £2.8 million (2016: £2.9 million).

Terminals
and ATMs
£000

Fixtures,
fittings and
equipment
£000

Land and
buildings
£000

Total
£000

Cost
At 31 March 2015
Additions
Disposals
Exchange rate
adjustment
At 31 March 2016 55,041

50,951
4,595
(709)
204

Accumulated
depreciation
At 31 March 2015
Charge for the year
Disposals
Exchange rate
adjustment
At 31 March 2016 41,840

37,944
4,399
(684)
181

3,870
39
(15)
55

6,412 61,233
4,634
(724)
259

-
-
-

3,949

6,412 65,402

1,233
211
(15)
42

551
88
-
-

39,728
4,698
(699)
223

1,471

639 43,950

Carrying amount
At 31 March 2016
At 31 March 2015

13,201
13,007

2,478
2,637

5,773
5,861

21,452
21,505

88 PayPoint plc Annual Report 2017

15. Investment in joint arrangements

16. Investments

The Company, a holding company, has investments (directly
or indirectly) in the following undertakings which are wholly
owned unless otherwise stated:

Company name
PayPoint
Network
Limited

PayPoint
Collections
Limited

PayPoint Retail
Solutions
Limited

PayPoint Ireland
Limited
PayPoint
Network Ireland
Limited
PayPoint
Collections
Ireland Limited
PayPoint
Services SRL

Metacharge
(Australia) Pty
Limited

PaybyPhone
(Australia) Pty
Limited

PayPoint
Payment
Services
Limited

Collect+
Holdings
Limited1
Collect+ Brand
Limited 1

PayPoint Trust
Managers
Limited

Principal activity (registered address)
Management of an electronic
payment service
(1 The Boulevard, Shire Park,
Welwyn Garden City,
Hertfordshire, AL7 1EL)
Provision of a payment
collection service
(1 The Boulevard, Shire Park,
Welwyn Garden City,
Hertfordshire, AL7 1EL)
Provision of retail services
(1 The Boulevard, Shire Park,
Welwyn Garden City,
Hertfordshire, AL7 1EL)
Holding company
(29 Earlsfort Terrace Dublin 2)
Management of an electronic
payment service
(29 Earlsfort Terrace Dublin 2)
Provision of a payment
collection service
(29 Earlsfort Terrace Dublin 2)
Management of an electronic
payment and collection service
(Charles de Gaulle Square, 15
floor 8, sector 1, Bucharest,
Romania)
Provision of an online payment
service
(Level 12, 60 Carrington Street,
Sydney NSW 2000)
Provision of an online payment
service
(Level 12, 60 Carrington Street,
Sydney NSW 2000)
Provision of regulated
payments services
(1 The Boulevard, Shire Park,
Welwyn Garden City,
Hertfordshire, AL7 1EL)
Holding company
(20-22 Wenlock Road, London
N1 7GU)
Holder of Collect+ brand
(20-22 Wenlock Road,
London N1 7GU)
Provision of employee benefit
trust services
(1 The Boulevard, Shire Park,
Welwyn Garden City,
Hertfordshire, AL7 1EL)

Country of
registration
England and
Wales

England and
Wales

Ireland

Romania

Australia

England and
Wales

1. The Group holds a 50% interest in Collect+ Holdings Limited. The Group has licensed the

Collect+ brand from Collect+ Limited but no royalty charges have been paid or are payable.

Joint Venture
On 15 December 2016, PayPoint entered into an
arrangement with Yodel Delivery Network Limited (Yodel)
regarding its investment in Drop and Collect Limited.
The arrangement included the formation of the Collect+
Group consisting of Collect+ Holdings Limited, held 50:50
by PayPoint and Yodel, and its wholly owned subsidiary
Collect+ Brand Limited. Yodel and PayPoint sold their
respective investments in Drop and Collect Limited
to Collect+ Holdings Limited. The Collect+ brand was
transferred from Drop and Collect Limited to Collect+
Brand Limited. Drop and Collect Limited was then sold to
Yodel. This resulted in PayPoint retaining its 50% share
in the Collect+ brand but disposing of its share in the
remaining operations and assets of Drop and Collect
Limited. The result of the Group’s share of Drop and
Collect Limited up to the date of disposal is as follows:

Revenues
Result for year

Opening balance
Result for the year
Carrying value derecognised
at the date of sale
Closing balance

Year ended
31 March 2017
£000
21,393
1,193

Year ended
31 March 2016
£000
24,794
(224)

31 March 2017
£000
1,629
1,193
(2,822)

31 March 2016
£000
1,853
(224)
-

1,629

The loss recognised relating to the sale of Drop and Collect
Limited was as follows:

Net carrying value of Drop and
Collect Limited prior to disposal
Disposal costs
Loss on disposal
Gross cash inflow arising on disposal
Less disposal costs paid
Net cash outflow from Collect+
arrangement

Year ended
31 March 2017
£000
2,822

1,021
3,843
-
(271)
(271)

Joint operation
The new joint operation, the Collect+ Group, has licensed
the use of the Collect+ brand to both Drop and Collect
Limited (now a wholly owned subsidiary of Yodel) and
PayPoint. In consideration, PayPoint and Drop and Collect
Limited will pay royalties to the joint operation for each
parcel they introduce to the Collect+ network. The royalties
in the arrangement will then be distributed equally to Yodel
and PayPoint on a regular basis.

The only source of revenue for the Collect+ Group is the
royalty income received from licencing the brand to Drop
and Collect Limited. The Group’s share of £0.3 million has
been included in revenue and there were no operating costs
incurred by the arrangement.

PayPoint plc Annual Report 2017 89

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSNotes to the consolidated financial statements continued

Movement in investments held by the Company are detailed
below:

Cost
Balance at the beginning
of the year
Additions
Disposals
Balance at the end of the year

Accumulated impairments
Balance at the beginning
of the year
Recognised during the year
Disposals
Balance at the end of the year

31 March 2017
£000

31 March 2016
£000

108,800

127,512

840
(49,491)
60,149

2,943
(21,655)
108,800

47,057

-
(47,057)
-

68,712
(21,655)
47,057

Net book value

60,149

61,743

17. Deferred tax asset/(liability)

Property, plant and
equipment
Intangible assets
Share-based
payments
Short-term
temporary
differences
Total

31 March
2016
£000
708

Charge to
income
statement
£000
28

Credit/
(debit) to
equity
£000
-

31 March
2017
£000
736

(936)
161

3
206

-
225

(933)
592

(41)

(67)

196

225

354

Property, plant and
equipment
Intangible assets
Share-based payments
Short-term temporary
differences
Total

31 March
2015
£000
1,564

(680)
235
12

Charge to
income
statement
£000
(856)

31 March
2016
£000
708

(256)
(74)
(12)

(936)
161
-

1,131

(1,198)

(67)

In the current year, the main rate of UK corporation tax
was 20% (2016: 20%). Reductions in the main rate of UK
corporation tax from 20% to 19% for the year beginning
1 April 2017 and from 19% to 17% for the year beginning
1 April 2020 have been substantively enacted at the
balance sheet date. Temporary differences have been
measured using the enacted tax rates that are expected
to apply when the liability is settled or the asset realised.

18. Trade and other receivables

Group
Trade receivables1
Items in the course of collection2
Revenue allowance2

Other receivables
Prepayments and accrued income

31 March 2017
£000
14,743
78,340
(3,640)
89,443
1,161
8,167
98,771

31 March 2016
£000
18,645
83,252
(2,803)
99,094
1,071
9,082
109,247

1
2

The average credit period on the sale of goods is 25 days (2016: 33 days).
Items in the course of collection represent amounts collected for clients by retail agents.
PayPoint bears credit risk and will have title to the cash collected on only £13.5 million of
this balance at 31 March 2017 (2016: £17.8 million). Credit risk is mitigated by daily direct
debiting and the suspension of terminals where direct debits fail. At the date of this report,
all but £47,300 has been collected from retailers.

The Group’s exposure to the credit risk inherent in its trade
receivables is discussed in note 26. The concentration of
credit risk is limited due to the spread of the retail agent
and client bases. Clients and retailers are credit checked
to mitigate credit risk and in all new client contracts, the
Group have the right of set-off of funds collected against
monies due.

The historical level of customer default is low, and as a
result the credit quality of period end trade receivables is
considered to be high. The Group reviews trade receivables
past due but not impaired on a regular basis and in
determining the recoverability of the trade receivables,
the Group considers any change in the credit quality of the
trade receivables from the date credit was initially granted
up to the reporting date.

Included in the Group’s trade receivable balance are debtors
with a carrying amount of £4.4 million, (2016: £1.9 million),
which are past due, for which the Group has not provided as
there has not been a significant change in credit quality and
the Group believes that the amounts are still recoverable.
The aging of the trade receivables past due is as follows:

At the balance sheet date, the Group had no unused tax
losses (2016: £10.4 million). Prior year losses were held by
companies within the mobile payments business which were
sold during the year (note 9).

No deferred tax liability has been recognised in respect
of temporary differences associated with investments in
subsidiaries because the Group is in a position to control
the timing of the reversal of the temporary differences
and it is probable that such differences will not reverse in
the foreseeable future. The aggregate amount of these
differences is not material at the balance sheet date.

Carrying value
at 31 March
2017
Carrying value
at 31 March
2016

Less than 1
month
£000
3,938

1-2
months
£000
314

2-3
months
£000
15

More
than 3
months
Total
£000
£000
86 4,353

1,055

218

500 1,868

90 PayPoint plc Annual Report 2017

Movement in the revenue allowance:

21. Trade and other payables

Balance at the beginning
of the year
Amounts utilised in the year
Increase in allowance
Foreign exchange adjustment
Balance at end of the year

Age of revenue allowance:

31 March 2017
£000
2,803

31 March 2016
£000
2,795

(78)
858
57
3,640

(116)
124
-
2,803

Less than 1
month
£000

1-2
months
£000

2-3
months
£000

More
than 3
months
£000
3,485

Total
£000
3,640

922

954

Carrying value
at 31 March
2017
Carrying value
at 31 March
2016

Company
Amounts owed by
Group companies
Other receivables
Prepayments and accrued income

31 March 2017
£000
21,949

31 March 2016
£000
41,164

83
-
22,032

15
2
41,181

19. Operating lease receivables

Amounts receivable under
operating leases:
Within one year
Within two to five years

31 March 2017
£000

31 March 2016
£000

56
33
89

122
89
211

In prior years the Group entered into operating leases
with its retail agents for the supply of ATMs. The average
term of each lease entered into is five years. Most of these
operating leases are nearing the end of their contracts.

20. Cash and cash equivalents

The Group operates cash pooling amongst its various bank
accounts in the UK and therefore individual accounts can be
overdrawn without penalties being incurred so long as the
overall position is in credit.

Included within Group cash and cash equivalents are balances
relating to funds collected on behalf of clients where PayPoint
has title to the funds (client cash). An equivalent balance is
included within trade payables (note 21).

Group

Amounts owed in respect of
client cash1
Settlement payables2
Client payables
Trade payables3
Other taxes and social security
Other payables
Accruals
Deferred income

Current
Non-current
Total

31 March 2017
£000
20,204

31 March 2016
£000
21,539

78,340
98,544
6,019
2,406
2,047
12,383
741
122,140

121,603
537
122,140

83,252
104,791
22,920
1,540
1,867
8,058
919
140,095

140,095
-
140,095

1 Relates to monies collected on behalf of clients where the Group has title to the funds

(client cash). An equivalent balance is included within cash and cash equivalents.

2 Payable in respect of amounts collected for clients by retail agents.
3 The Group aims to pay its creditors promptly, in accordance with terms agreed for

payment. The Group had 22 days purchases outstanding at 31 March 2017 (2016: 27
days) based on the average daily amount invoiced by suppliers during the year.

Company

Amounts owned by
Group companies
Other payables
Accruals

Disclosed as
Current
Non-current

31 March 2017
£000
4,181

31 March 2016
£000
25,901

468
1,962
6,611

6,611
-
6,611

82
347
26,330

429
25,901
26,330

22. Financial commitments

Operating lease commitments for land and buildings are
as follows:

Amounts payable under
operating leases:
Within one year
Within two to five years
After five years

31 March 2017
£000

31 March 2016
£000

316
924
404
1,644

439
826
-
1,265

The increase in the current year is a result of a new seven
year lease of office space in Romania.

PayPoint plc Annual Report 2017 91

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSNotes to the consolidated financial statements continued

23. Share-based payments and equity

LTIP and DSB equity settled share scheme
The Group’s share schemes are described in the
Remuneration Committee report on pages 46 to 63.
The vesting period for all awards is three years, and they
are forfeited if the employee leaves the Group before
shares vest. The amount charged to the income statement
in the year was £1.4 million (2016: £1.7 million).

Details of the share awards outstanding during the year
are as follows:

Outstanding at
the beginning of the year
Granted
Lapsed
Forfeited
Exercised
Outstanding at end of the year

Number
of shares
2017
865,131

Number
of shares
2016
992,732

258,386
(221,978)
(170,688)
(61,023)
669,828

269,851
(397,452)
-
-
865,131

Awards granted

Number of
shares
2 June 2014 276,720
LTIP
2 June 2014
82,643
DSB
1 June 2015 269,851
LTIP
247,645
2 June 2016
LTIP
Restricted 3 January 2017

Vesting date
2 June 2017
2 June 2017
1 June 2018
2 June 2019
10,741 3 January 2019 and
3 January 2020

All options granted are for free shares and therefore the
weighted average exercise price for all outstanding options
is £nil.

The long term incentive plan tranche did not vest in June
2016. Under IFRS 2, the fair value charges of £1.1 million
relating to this tranche, which had been previously charged
to the income statement, have been reclassified to retained
earnings. The deferred share bonus fully vested in June
2016 and accordingly the fair value charge of £0.2 million
was also reclassified to retained earnings.

The inputs into the Black Scholes model for the DSB and
Monte Carlo model for LTIP and DSB awards during the year
are as follows:

Weighted average
share price (£)
Expected volatility1
Expected life
Risk-free rate
Expected dividend yield

2017
LTIP
5.91

27%
3 years
0.4%
4.25%

2016
LTIP
5.75

28%
3 years
0.7%
3.75%

2016
DSB
5.99

28%
3 years
0.8%
3.79%

1. The expected volatility for PayPoint has been calculated using historical daily data over a

term equal to the expected life of each conditional award.

92 PayPoint plc Annual Report 2017

Share incentive plan
The employee Share Incentive Plan is open to all employees
of PayPoint Network, PayPoint Collections, PayPoint
Retail Solutions and provides for a purchase price equal to
the market price on the date of purchase. The shares are
purchased each month (or employees can opt to purchase
12 months at the start of each year) and are placed in
the employee share savings plan for a three year period.
For each share purchased by the employee the Company
issues a free matching share which will vest subject to the
employee remaining employed with the Group for three
years from the date each share was purchased by the
employee. The amount charged to the income statement
in the year was £0.2 million.

Authorised share capital
4,365,352,200 ordinary shares
of 1/3p each (2016:
4,365,352,200 ordinary shares
of 1/3p each)

Called up, allotted and fully
paid share capital
68,133,611 ordinary
shares of 1/3p each (2016:
68,087,481 ordinary shares
of 1/3p each)

31 March 2017
£000

31 March 2016
£000

14,551

227

24. Dividends on equity shares

Equity dividends on ordinary
shares:
Interim ordinary dividend paid of
15.0p (2016: 14.2p) per share
Proposed final ordinary dividend
of 30.0p (2016: 28.2p) per share
Interim additional dividend paid
12.2p per share
Additional final dividend 24.5p
per share
Disposal dividends 38.9p (2016:
21.0p) per share
Total dividends paid and
recommended

Amounts distributed to equity
holders in the year:
Final dividend ordinary for the
prior year
Interim ordinary dividend for the
current year
Interim additional dividend for
the current year
Disposal dividends

Year ended
31 March 2017
£000
10,218

Year ended
31 March 2016
£000
9,667

20,436

19,199

8,333

16,667

26,493

14,300

82,147

43,166

19,199

17,769

10,218

9,667

8,333

40,793
78,543

-
27,436

The proposed final ordinary dividend is subject to approval
by shareholders at the annual general meeting and has not
been included as a liability in these financial statements.

25. Pension arrangements

The Group administers a non-contributory defined
contribution scheme for executive directors and employees.
The amount charged in the consolidated income statement
for the year for pension costs of the Group under the
scheme was £1.3 million (2016: £1.1 million). There is no
accrual for pension contributions at the balance sheet date
(2016: £nil).

26. Derivatives and other financial instruments

The Group’s financial instruments comprise cash and
various items such as trade receivables, trade payables,
other payables, bank loans and accruals, which arise directly
from the Group’s operations. The Group’s policy is not to
undertake speculative trading in financial instruments.

The main risks arising from the Group’s financial instruments
are interest rate, liquidity risk and foreign exchange. The
directors review and agree policies for managing each of
these risks which are summarised below. These policies
have remained unchanged during the year. The Group has
not used derivative instruments to manage its foreign
exchange exposure.

(a) Interest rate risk
The Group had no interest bearing financial assets at
31 March 2017 other than the cash and cash equivalents
of £53.1 million (2016: £83.2 million).

All funds earn interest at the prevailing rate. The funds
are deposited on short-term deposits (normally weekly
or monthly) or held in current accounts in cash. The
Group seeks to maximise interest receipts within these
parameters.

(b) Liquidity risk
The Group’s policy throughout the year ended 31 March
2017 regarding liquidity has been to maximise the return on
funds placed on deposit whilst minimising the associated
risk.

The Group had no financial liabilities at 31 March 2017
other than short-term payables such as trade payables and
accruals.

(c) Foreign exchange risk
To date, the Group has not engaged in an active programme
of foreign exchange risk management. Given the size and
nature of the Group’s non-sterling denominated balances,
the directors do not consider hedging necessary.

The Group’s currency exposures comprise those
transactional exposures that give rise to the net currency
gains and losses recognised in the income statement. Such
exposures comprise the monetary assets and monetary
liabilities of the Group that are not denominated in the
operating (or functional) currency of the operating unit
involved. At 31 March 2017, these exposures were £nil
(2016: £nil).

(d) Borrowing facilities
At the period end, the Group had an undrawn, unsecured
£45 million revolving loan facility expiring in May 2019.

(e) Fair value of financial assets and liabilities
The directors consider there to be no material difference
between the book value and the fair value of the Group’s
financial instruments at 31 March 2017, or 31 March 2016.

(f) Market price risk
The Group’s exposure to market price risk comprises interest
rate exposure. Group funds are invested in money market
cash deposits with the objective of maintaining a balance
between accessibility of funds and competitive rates of
return. In practice, this has meant that no deposits were
made with a maturity greater than 30 days during the year.

(g) Capital risk management
The Group’s objectives when managing capital (the
definition of which is consistent with prior year and is
the Group’s assets and liabilities including cash) are to
safeguard the Group’s ability to continue as a going concern
in order to provide returns for shareholders and benefits
for other stakeholders. The Group manages its capital by
continued focus on free cash flow generation and managing
the level of capital investment in the business.

(h) Credit risk
The Group’s financial assets are cash, trade and other
receivables and investments. The Group’s credit risk is
primarily attributable to its trade receivables and retailer
debt to the extent that PayPoint bears the credit risk.
Clients and retailers are credit checked to mitigate credit
risk and in all new client contracts, we have the right of
set-off of funds collected against monies due. The Group’s
maximum exposure, at 31 March 2017, was £38.5 million
(2016: £37.5 million).

(i) Financial instrument sensitivities
Financial instruments affected by market risk include
deposits, trade receivables and trade payables. Any
changes in market variables (exchange rates and interest
rates) will have an immaterial effect on these instruments.

27. Related party transactions

Remuneration of the directors, who are the key
management of the Group, was as follows during the year:

Short term benefits and bonus1
Pension costs2
Long term incentives3
Other4
Total

Year ended
31 March 2017
£000
2,162
235
445
29
2,871

Year ended
31 March 2016
£000
1,570
219
353
9
2,151

Includes salary, fees, benefits in kind and annual bonus.

1
2 Defined contribution pension scheme, of which two current directors are members.
3 Long term incentives: includes the value of 2014 DSB award expected to vest after the

period end (2017: 2014 DSB and LTIP awards).

4 SIP Matching and Dividend Shares awarded in the year.
The remuneration of directors and key executives is
determined by the Remuneration Committee having regard
to the performance of individuals and market trends. The
directors’ remuneration is disclosed in the Remuneration
Committee Report on pages 46 to 63.

Amounts received from Drop and Collect Limited during
the year totalled £17.8 million (2016: £13.3 million) and
PayPoint held a trade debtor at year end for Drop and
Collect Limited of £0.6 million (2016: £0.5 million).

PayPoint plc Annual Report 2017 93

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSNotes to the consolidated financial statements continued

28. Notes to the statement of cash flows

Group
Profit before tax
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Share of joint venture result
Research and development credit
Impairments
Profit on disposal of businesses
Loss on disposal of fixed assets
Net interest income
Share-based payment charge
Operating cash flows before movements in working capital
Movement in inventories
Movement in receivables
Movement in payables
– client cash
– other payables
Cash generated by operations
Corporation tax paid
Bank charges paid
Net cash from operating activities

Year ended
31 March 2017
£000
69,141

Year ended
31 March 2016
£000
8,152

5,302
2,171
(1,193)
(171)
-
(15,660)
414
(12)
1,552
61,544
196
(338)

(11,641)
1,219
50,980
(8,643)
(120)
42,217

4,698
1,086
224
(522)
48,986
(7,014)
25
(20)
1,442
57,057
193
(1,500)

17,762
(4,516)
68,996
(9,877)
(105)
59,014

Movements in items in the course of collection (see note 18) and settlement payables (see note 21) have not been included
in this reconciliation as the directors do not consider them to be operating working capital balances.

Company
Profit before tax
Adjustments for:
Impairments
Profit on sale of investments
Dividends from subsidiaries
Net interest income
Share-based payment charge
Operating cash movement before movements in working capital
Movement in receivables
Movement in payables
Cash movement from operations
Corporation tax paid
Interest and bank charges paid
Net cash movement from operating activities

Year ended
31 March 2017
£000
65,449

Year ended
31 March 2016
£000
52,517

-
(20,440)
(46,010)
187
1,552
738
19,654
(22,766)
(2,374)
-
-
(2,374)

68,712
(12,300)
(110,000)
(1,626)
1,442
(1,255)
82,167
(50,452)
30,460
-
-
30,460

94 PayPoint plc Annual Report 2017

Notice of annual general meeting

This notice of meeting is important and requires your
immediate attention

If you are in any doubt as to any aspect of the proposals referred to in this notice of meeting or as to the action you
should take, you should seek your own advice from a stockbroker, bank manager, solicitor, tax adviser, accountant or other
independent professional adviser.

If you have recently sold or otherwise transferred all of your ordinary shares in PayPoint plc, please pass this notice of
meeting together with the accompanying documents to the purchaser or transferee, or to the person who arranged the
sale or transfer, so that they can pass these documents to the person who now holds the shares as soon as possible.

PayPoint plc

Notice of annual general meeting

Notice is hereby given that the 2017 annual general meeting of PayPoint plc (the Company) will be held at the offices of
Canaccord Genuity, 88 Wood Street, EC2V 7QR, on Wednesday 26 July at 12.00 noon. You will be asked to consider and
pass the resolutions below. Resolutions 15, 16 and 17 will be proposed as special resolutions. All other resolutions will be
proposed as ordinary resolutions.

Ordinary business
1

To receive the annual report and accounts for the financial year ended 31 March 2017.

To approve the directors’ remuneration report (excluding the directors’ remuneration policy on pages 48 to 57),
as set out in the Company’s annual report and accounts for the financial year ended 31 March 2017.

To approve the directors’ remuneration policy, as set out on pages 48 to 57 of the directors’ remuneration report,
which takes effect immediately after the end of the annual general meeting.

4. To declare a final dividend of 30.0 pence per ordinary share of the Company for the year ended 31 March 2017.

5. To re-elect Ms Gill Barr as a director.

6. To re-elect Mr Giles Kerr as a director.

7. To re-elect Mr Dominic Taylor as a director.

8. To re-elect Mr Tim Watkin-Rees as a director.

9. To re-elect Mr Nick Wiles as a director.

10. To elect Ms Rachel Kentleton as a director who, having been appointed since the last annual general meeting

of the Company, offers herself for election in accordance with the Company’s articles of association.

11. To elect Mr Rakesh Sharma as a director who, having been appointed since the last annual general meeting of the

Company, offers himself for election in accordance with the Company’s articles of association.

12. To re-appoint Deloitte LLP as auditor of the Company until the conclusion of the next annual general meeting

of the Company at which the accounts are laid.

13. To authorise the directors to determine the auditor’s remuneration.

PayPoint plc Annual Report 2017 95

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSNotice of annual general meeting continued

Special business
14. That the directors are authorised in accordance with section 551 of the Companies Act 2006 (the Act), to exercise all the
powers of the Company to allot shares in the Company or grant rights to subscribe for, or convert any security into, shares
in the Company up to an aggregate nominal amount of £75,706 provided that this authority shall expire on the conclusion
of the annual general meeting of the Company to be held in 2018 or, on a date which is 15 months from the date of this
resolution, whichever is earlier, save that the Company shall be entitled to make offers or agreements before the expiry of
such authority which would or might require shares to be allotted or rights to be granted after such expiry and the directors
shall be entitled to allot shares or grant rights pursuant to any such offer or agreement as if this authority had not expired;
and all unexercised authorities previously granted to the directors under section 551 of the Act are revoked (save to the
extent that the same are exercisable pursuant to section 551(7) of the Act by reason of any offer or agreement made prior
to the date of this resolution which would or might require shares to be allotted or rights to be granted on or after that date).

15. That the directors are empowered in accordance with sections 570 and 573 of the Act to allot equity securities (as defined in
section 560 of the Act) for cash (under the authority conferred by resolution 14 above) or by way of a sale of treasury shares
as if section 561(1) of the Act did not apply to any such allotment, provided that this power shall be limited to:

(a) the allotment of equity securities in connection with a rights issue, open offer or other offer of securities to or in

favour of (i) the holders of ordinary shares on the register of members at such record date(s) as the directors may
determine where the equity securities respectively attributable to the interests of the ordinary shareholders are
proportionate (as nearly as may be) to the respective numbers of ordinary shares held by them on any such record
date(s), and (ii) the holders of other equity securities if this is required by the rights of those securities or, if the
directors consider it necessary, as permitted by the rights of those securities and subject to such exclusions or
other arrangements as the directors may deem necessary or expedient to deal with fractional entitlements or legal
or practical problems arising under the laws of any overseas territory or the requirements of any regulatory body or
stock exchange or by virtue of shares being represented by depositary receipts or any other matter whatever; and

(b) the allotment (otherwise than under sub-paragraph (a) above) to any person or persons of equity securities up to

an aggregate nominal amount of £11,356.

and shall expire upon the expiry of the general authority conferred by resolution 14 above, save that the Company
shall be entitled to make offers or agreements before the expiry of such power which would or might require equity
securities to be allotted after such expiry and the directors shall be entitled to allot equity securities pursuant to any
such offer or agreement as if the power conferred hereby had not expired.

16. That subject to, and in accordance with the Company’s articles of association and pursuant to section 701 of the Act,
the Company is authorised to make market purchases (within the meaning of section 693(4) of the Act) of ordinary
shares of ⅓ of one penny of the Company (ordinary shares) provided that:

(a) the maximum number of ordinary shares that may be purchased under this authority is 6,813,525;

(b) the minimum price (exclusive of expenses) which may be paid for an ordinary share is the nominal value of such

share;

(c) the maximum price (exclusive of expenses) which may be paid for an ordinary share shall not be more than the higher
of: (i) 105 percent of the average of the middle market quotations for an ordinary share taken from and calculated by
reference to the London Stock Exchange Daily Official List for the five business days immediately preceding the day
on which the ordinary share is purchased; and (ii) the higher of the price of the last independent trade and the highest
current independent bid for an ordinary share in the Company on the trading venue where the purchase is carried out;

(d) this authority shall expire on the conclusion of the annual general meeting of the Company to be held in 2018 or on

a date which is 15 months from the date of this resolution, whichever is earlier; and

(e) the Company may make any purchase of its ordinary shares under a contract concluded before this authority

expires and which will or may be executed wholly or partly after the expiry of such authority.

All shares purchased shall either: (i) be cancelled immediately on completion of the purchase; or (ii) be held, sold,
transferred or otherwise dealt with as treasury shares in accordance with the provisions of the Act.

17. That any general meeting of the Company that is not an annual general meeting may be called on not less than 14 clear

days’ notice.

By Order Of The Board

Susan Court
Company Secretary
25 May 2017

Registered Office:
1 The Boulevard
Shire Park
Welwyn Garden City
Hertfordshire
AL7 1EL

96 PayPoint plc Annual Report 2017

Notes to the notice of annual general meeting

A form of proxy accompanies this notice for use by shareholders. To be valid, a proxy must be received by the
Company’s registrar, Capita Asset Services, PXS 1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF not less than 48
hours before the time of the annual general meeting. Completion and return of a form of proxy does not preclude a
shareholder from attending the annual general meeting and voting in person.

A member entitled to attend, speak and vote at the annual general meeting may appoint a proxy (who need not be
a member of the Company) to exercise all or any of his or her rights to attend and to speak and vote on his or her
behalf. A member may appoint more than one proxy in relation to a meeting provided that each proxy is appointed to
exercise the rights attached to a different share or shares held by him or her. To appoint more than one proxy you may
photocopy the proxy form. Please indicate the proxy holder’s name and the number of shares in relation to which they
are authorised to act as your proxy (which, in aggregate, should not exceed the number of shares held by you). Please
also indicate if the proxy instruction is one of multiple instructions being given. All forms must be signed and should
be returned together in the same envelope. In order to be valid, an appointment of proxy must be returned by one
of the following methods: in hard copy form by post, by courier or by hand to the Company’s registrar, Capita Asset
Services, PXS 1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF; or – in the case of CREST members, by utilising the
CREST electronic proxy appointment service in accordance with the procedures set out below, and in each case must
be received by the Company not less than 48 hours before the time of the meeting. You must inform the Company’s
registrar in writing of any termination of the authorities of a proxy.

Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to
enjoy information rights (a Nominated Person) may, under an agreement between him/her and the shareholder by whom
he/she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the annual
general meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she
may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights.

The statement of the rights of shareholders to appoint a proxy in paragraphs one and two above does not apply to
Nominated Persons. The rights described in these paragraphs can only be exercised by shareholders of the Company.
Nominated Persons are reminded that they should contact the registered holder of their shares (and not the Company)
on matters relating to their investments in the Company.

CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service
may do so for the annual general meeting and any adjournment thereof by using the procedures described in the
CREST manual. CREST personal members or other CREST sponsored members, and those CREST members who have
appointed a voting service provider(s) should refer to their CREST sponsor or voting service provider(s), who will be
able to take the appropriate action on their behalf. In order for a proxy appointment, or instruction, made by means of
CREST to be valid, the appropriate CREST message (a CREST proxy instruction) must be properly authenticated in
accordance with Euroclear UK & Ireland Limited’s (EUI) specifications and must contain the information required for
such instructions, as described in the CREST manual. The message, regardless of whether it relates to the appointment
of a proxy or to an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be
transmitted so as to be received by the issuer’s agent (ID RA10) by the latest time(s) for receipt of proxy appointments
specified in the notice of annual general meeting. For this purpose, the time of receipt will be taken to be the time (as
determined by the timestamp applied to the message by the CREST applications host) from which the issuer’s agent
is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. The Company may treat as
invalid a CREST proxy instruction in the circumstances set out in Regulation 35(5) of the Uncertificated Securities
Regulations 2001. CREST members and, where applicable, their CREST sponsors or voting service providers should
note that EUI does not make available special procedures in CREST for any particular messages. Normal system timings
and limitations will therefore apply in relation to the input of CREST proxy instructions. It is therefore the responsibility
of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member
or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s))
such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any
particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service
providers are referred, in particular, to those sections of the CREST manual concerning practical limitations of the
CREST system and timings.

Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf
all of its powers as a member provided that they do not do so in relation to the same shares.

To be entitled to attend and vote at the annual general meeting or any adjournment thereof (and also for the purpose of
calculating how many votes a person may cast), a person must have his/her name entered on the register of members
of the Company by close of business on 24 July 2017 (or by close of business on the date being two days before any
adjourned meeting). Changes to entries on the register of members after this time shall be disregarded in determining
the rights of any person to attend or vote at the meeting.

Biographical details of the directors of the Company are shown on page 29 of the 2017 annual report.

PayPoint plc Annual Report 2017 97

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Notes to the notice of annual general meeting continued

Each member attending the meeting has the right to ask questions relating to the business being dealt with at
the meeting which, in accordance with section 319A of the Companies Act 2006 and subject to some exceptions,
the Company must cause such questions to be answered. However no such answer need be given if:

(a) to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information;

(b) the answer has already been given on a website in the form of an answer to a question; or

10. Information relating to the meeting which the Company is required by section 311A of the Companies Act 2006 to
publish on a website in advance of the meeting may be viewed at www.paypoint.com. A member may not use any
electronic address provided by the Company in this document or with any proxy appointment form or in any website
for communicating with the Company for any purpose in relation to the meeting other than as expressly stated in it.

11. It is possible that, pursuant to members’ requests made in accordance with section 527 of the Companies Act 2006,
the Company will be required to publish on a website a statement in accordance with section 528 of that Act setting
out any matter that the members concerned propose to raise at the meeting relating to: (i) the audit of the Company’s
accounts (including the auditor’s report and the conduct of the audit) that are to be laid before the annual general
meeting; or (ii) any circumstances connected with an auditor of the Company ceasing to hold office since the previous
meeting at which annual accounts and reports were laid. The Company cannot require the members concerned to pay
its expenses in complying with those sections. The Company must forward any such statement to its auditor by the
time it makes the statement available on the website. The business which may be dealt with at the meeting includes
any such statement.

12. The issued share capital of the Company as at 25 May 2017 was 68,135,252 ordinary shares of ⅓ pence each, carrying

one vote each. The Company holds no treasury shares or unallocated shares for the purpose of employee share
schemes, therefore, the total number of voting rights in the Company on 25 May 2017 is 68,135,252.

13. The directors’ service agreements and letters of appointment are available for inspection at the registered office of the
Company during normal business hours on any weekday and will be available at the place of the annual general meeting
from 15 minutes before the meeting until it ends.

Recommendation and voting intentions
With respect to resolutions 5 to 11 (inclusive), the Chairman confirms that, based on the performance evaluation
undertaken during the period, each of the retiring director’s performance continues to be effective and to demonstrate
commitment to the role. The board has considered this and recommends that each director who wishes to serve again
be proposed for re-election. This opinion is based on an assessment of each director’s relevant knowledge and experience
and the conclusion that, in each case, their informed opinions are of significant value and contribute greatly to board
discussions. The directors’ biographies can be found on page 29 of the 2017 annual report.

The directors consider that all the resolutions to be put to the meeting are in the best interests of the Company and its
shareholders as a whole and most likely to promote the success of the Company for the benefit of those shareholders. Those
directors who are shareholders will be voting in favour of the resolutions and unanimously recommend that you do so as well.

Explanatory notes to certain of the resolutions to be
proposed at the annual general meeting

Resolution 2: Directors’ remuneration report
Shareholders are asked to approve the Directors’ Remuneration Report that appears on pages 46 to 63 other than the
part containing the Directors’ Remuneration Policy, of the 2017 annual report and accounts. This vote is advisory, and the
directors’ entitlement to remuneration is not conditional on it.

Resolution 3: Directors’ remuneration policy
The Company is required to seek shareholders’ approval of its policy on remuneration of directors (the “Directors’
Remuneration Policy”) at least every three years (or when the policy changes). This vote is binding. As the current
Directors’ Remuneration Policy was approved at the 2014 annual general meeting, a resolution is proposed this year in
connection with approving the new Directors’ Remuneration Policy set out on pages 48 to 57 of the annual report and
accounts. Subject to shareholder approval, the policy would take effect from the close of the annual general meeting on
26 July 2017, and has been developed taking into account the principles of the UK Corporate Governance Code and the
views of our major shareholders.

Resolution 4: Declaration of final dividend
Shareholders are being asked to approve a final dividend of 30.0pence per ordinary share for the year ended 31 March
2017. Subject to approval, the dividend will be paid on 31 July 2017 to the holders of ordinary shares whose names are
recorded on the register of members at the close of business on 23 June 2017.

Resolution 12 and 13: Re-appointment and remuneration of auditor
The Audit Committee of the board of PayPoint will be undertaking a formal audit tender exercise during the summer of 2017,
the outcome of which will be announced later this year (please refer to page 43 of the annual report for further details). In the
meantime the Audit Committee has recommended that Deloitte LLP (Deloitte) be re-appointed as auditor of the Company.

98 PayPoint plc Annual Report 2017

The board intends to implement this recommendation and this proposal is set out in resolution 12. Resolution 13 proposes that
the directors be authorised to set the auditors remuneration.

Resolution 14: Directors’ authority to allot shares
By virtue of section 551 of the Companies Act 2006 (the Act), the directors require the authority of shareholders of
the Company to allot shares or grant rights to subscribe for or convert any security into shares. The resolution numbered
14 authorises the directors to make allotments of up to 22,711,751 ordinary shares, representing approximately one-third
of the issued share capital of the Company (excluding treasury shares) as at the date of this document. If approved at the
forthcoming annual general meeting, the authority will expire no later than 15 months from the date on which the resolution
is passed, or on the conclusion of the annual general meeting of the Company to be held in 2018, whichever is the sooner.
The directors have no present intention of exercising the authority proposed to be conferred pursuant to resolution 14.

Resolution 15: Authority for disapplication of statutory pre-emption rights
By virtue of section 561 of the Act, any issue by the Company of equity capital for cash made otherwise than to existing
shareholders on a proportional basis requires the consent of shareholders of the Company unless the Company has
obtained their authority under sections 570 and 573 of the Act. The resolution numbered 15 is for that purpose. It
authorises the directors to allot shares by way of rights issue or pursuant to an open offer or otherwise than strictly pro
rata when the directors consider that it is expedient to do so and also allows them to issue for cash up to 3,406,763
ordinary shares (representing approximately five per cent) of the issued share capital of the Company (excluding treasury
shares) as at the date of this document other than on a pre-emptive basis. If approved at the forthcoming annual general
meeting, the authority will expire no later than 15 months from the date on which the resolution is passed or on the
conclusion of the annual general meeting of the Company to be held in 2018, whichever is the sooner. The directors have
no present intention of exercising the authority proposed to be conferred pursuant to resolution 15.

Resolution 16: Authority to make market purchases of ordinary shares
By virtue of section 701 of the Act, the Company may make market purchases of its own ordinary shares if authorised
to do so by shareholders. Under resolution 16, the directors seek to renew an annual authority to make market purchases
of shares: each year the directors will seek to further renew this authority at the Company’s annual general meeting.
Any ordinary shares purchased under this authority would either be (i) cancelled immediately on completion of the
purchase and the number of ordinary shares in issue reduced accordingly; (ii) held, sold, transferred or otherwise dealt
with as treasury shares in accordance with the provisions of the Act; or (iii) transferred to an employee benefit trust for
the satisfaction of awards under the Company’s existing share schemes.

The maximum number of ordinary shares which could be purchased under this authority is 6,813,525, being 10% of the
issued share capital of the Company (excluding treasury shares) as at the date of this document. Any repurchase of
ordinary shares carried out by the Company would be at a maximum price per ordinary share of 105% of the average middle
market price of such a share for the five business days immediately preceding the date of the purchase, the price equal
to the last independent trade or the highest current independent bid and at a minimum price equal to the nominal value.
The authority to repurchase ordinary shares will, if approved by shareholders, only be exercised after careful consideration
by the directors and if such exercise would result in an increase in earnings per share and be in the best interests of
shareholders generally. If approved at the forthcoming annual general meeting, the authority will expire no later than
15 months from the date on which the resolution is passed, or on the conclusion of the annual general meeting of the
Company to be held in 2018, whichever is the sooner.

Resolution 17: Authority to allow any general meeting of the Company that is not an annual general meeting to be
called on not less than 14 clear days’ notice
The minimum notice period for general meetings of listed companies is 21 days, but companies may reduce this period to
14 days (other than for annual general meetings) provided that:

(a) the Company offers a facility for shareholders to vote by electronic means. This condition is met if the Company has

a facility enabling all shareholders to appoint a proxy by means of a website; and

(b) on an annual basis, a shareholders’ resolution approving the reduction of the minimum notice period from 21 days to 14

days is passed.

The board is therefore proposing resolution 17 for a special resolution to approve 14 days as the minimum period of notice
for all general meetings of the Company other than for annual general meetings. The approval of this resolution will be
effective until the end of the 2018 annual general meeting of the Company, when it is intended that the approval will be
renewed. The board intends that the shorter notice period will only be used in limited exceptional circumstances which are
time-sensitive, rather than as a matter of routine, and only where the flexibility is merited by the business of the meeting and
is thought to be in the interests of shareholders as a whole. The directors do not have any current intention to exercise this
authority but consider it appropriate to ensure that the Company has the necessary flexibility to respond to all eventualities.

PayPoint plc Annual Report 2017 99

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOfficers and professional advisers

Directors
G Barr*
N Carson*
G Kerr*
R Kentleton
D Morrison*
R Sharma*
D Taylor
T Watkin-Rees
N Wiles (Chairman)*

* Non-executive directors

Company Secretary
S Court

Registered office
1 The Boulevard
Shire Park
Welwyn Garden City
Hertfordshire, AL7 1EL
United Kingdom

Registered in England and Wales
number 03581541

Independent auditor
Deloitte LLP
2 New Street Square
London, EC4A 3BZ
United Kingdom

Brokers
J.P. Morgan Cazenove
25 Bank Street
London, E14 5JP
United Kingdom

Canaccord Genuity
88 Wood Street
London, EC2V 7QR
United Kingdom

Jefferies/Hoare Govett
Vintners Place
68 Upper Thames Street
London, EC4V 3BJ
United Kingdom

Registrar
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent, BR3 4TU

100 PayPoint plc Annual Report 2017

With thanks to:
Chris Paul
Lauren Menck
Chisom Onita
Marketing team
Finance team
HR team
Risk and compliance team
Product team
Commercial team
Leadership team

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PayPoint plc
1 The Boulevard, Shire Park
Welwyn Garden City
Hertfordshire AL7 1EL
United Kingdom

Tel +44 (0)1707 600 300
Fax +44 (0)1707 600 333
www.paypoint.com