PayPoint plc Annual Report 2018

FY2018 Annual Report · PayPoint plc

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Embedding PayPoint
at the heart of
convenience retail
Annual Report 2018

Contents

Strategic report
1
3
4
5

Summary results
Chairman’s statement
Our business model
Chief Executive’s review –
Strategic priorities

11 Case studies
15
16
21

Key performance indicators
Financial review
Principal risks and
uncertainties
Environmental matters,
employees, social,
community and human rights

Governance
30 Board of directors
41

Nomination Committee
report

43 Audit Committee report
49 Remuneration Committee

report

66 Directors’ report
69

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

Champions of convenience
At PayPoint, we’re all about
convenience. Through our
network of 50,000 stores
and with a 43% share of
the UK convenience market,
we make life easier for
everyone through pioneering
retail technology, services
and omni-channel payment
solutions serving millions
of customers every day.

Financial statements
76

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
96

Notice of annual general
meeting
Officers & professional
advisers

100

Summary results

Returns to shareholders

Earnings
per share

(2017: 87.5p)

63.0p
(28.0)%

Ordinary dividend
per share

(2017: 45.0p)

45.9p
+2.0%

Continuing retail network highlights¹

Revenue

(2017: £203.4m)

£213.5m
+5.0%

Operating profit

(2017: £53.3m)

£53.5m
+0.4%

Net revenue²

(2017: £117.5m)

£119.6m
+1.8%

Profit before tax

(2017: £53.3m)

£52.9m
(0.8)%

Additional dividend
per share

(2017: 36.7p)

36.6p
(<0.1)%

Gross margin³

(2017: 49.5%)

46.8%
(2.7)ppts

Financial highlights

Revenue

(2017: £211.9m)

£213.5m
+0.8%

Operating profit before
impairments and business disposal

(2017: £52.3m)

£53.5m
+2.3%

Net revenue²

(2017: £123.9m)

£119.6m
(3.5%)

Profit before tax

(2017: £69.1m)

£52.9m
(23.4)%

Gross margin³

(2017: 50.0%)

46.8%
(3.2)ppts

Cash generation4

(2017: £61.1m)

65.1m
+6.5%

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 statement for a reconciliation to revenue.
3. Gross margin % is an alternative performance measure and is calculated by dividing gross profit by revenue.
4. Cash generation is operating cash flows before movements in working capital from note 29 to the financial statements.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Strong breadth and depth in convenience retail
Strong breadth and depth in convenience retail

Leading network

4,200

ATMs

10,000

card payment terminals

49,600

sites

7,400

Collect+ sites

Strong portfolio of clients

644m

transactions

24m

Parcels dropped
off and picked up

£10.5bn

payments
processed

400

clients

PayPoint plc Annual Report 2018Chairman’s statement

The Board is confident in the strong business platform from
which we can resume earnings growth and continue to drive
strong cash flows and shareholder returns. Our additional
dividend programme of £25 million per annum continues
until 2021 alongside our ordinary dividend policy. For both
our ordinary and additional dividend, we will transition
from 1 April 2019 to a programme of four equal dividends
payments in July, September, December and March in order
to more effectively manage working capital.

Our stakeholders
The Board recognises the need for effective engagement with
all stakeholders and we have surveyed our employees, retailers
and shareholders to better understand their perspectives on
PayPoint and its relative strengths and weaknesses. We have
formulated clear action plans to address this feedback. For
employees we will set up an employee forum, chaired by Katy
Wilde, our HR Director, and we have widened the talent pool
within PayPoint to drive greater accountability to the Executive
Board and key operational managers. For retailers we now
have a full programme underway to deepen our interaction and
to improve our retailers’ experience of PayPoint. The Board
is grateful for the feedback our shareholders shared with us
through the independently conducted perception audit.

Board changes
Tim Watkin-Rees, Business Development Director, stepped
down as an executive director of the Company on 31 March
2018. I would like to thank Tim for his dedicated service
on the Board where he has played a significant role in the
development and growth of PayPoint since its inception in
1996. I am also grateful that Tim will continue his services
as a valuable employee taking on the title of Founder,
focusing on driving new product and service innovation.

Conclusion
We are now a significantly more focused and efficient business.
We have a clear roadmap against which to implement our
strategy and a strong and motivated management team. The
Board is confident in the prospects for the business and the
value creation opportunity for all our shareholders.

Nick Wiles,
Chairman
24 May 2018

Delivering our strategy
This year was a successful one for PayPoint in which
we continued to make progress against our strategy of
embedding PayPoint at the heart of convenience retail.

In 2016/17 we simplified our business with the sale of
Mobile and the restructuring of the Collect+ arrangement,
enabling us to drive value from the strength of our
established Retail networks. This positioned us well in
2017/18 to be able to proactively respond to the expected
challenging external factors in UK cash payments and
ATMs whilst continuing to deliver growth in our UK retail
services and Romanian businesses, which included the
Payzone acquisition.

In our last annual report, we set out five priorities for
2017/18 and this report sets out the progress we have
made against each of those priorities. It also sets out
our objectives for the future, building on the platform
we have created from our focus on the simplification and
reshaping of our business to deliver future growth and
returns for shareholders through the continued disciplined
implementation of our PayPoint One, Parcels, Romanian
and MultiPay growth drivers. Considerable progress has
also been made on upgrading the skills within the business,
improving efficiency and the service delivery to our retailers
and we have renewed our financing facility.

Reshaping phases complete, now set for growth

Mobile and Online sale

Launched MultiPay

Launched PayPoint One

Refocus on core markets
of UK and Romania

Parcels agreement
renegotiated

8,500 PayPoint One live

Launched EPoS
Pro and Mobile App

19m transactions
on MultiPay

Payzone Romania
acquired

2015 – 2016
Simplify business

2016 – 2017
Invest for growth

2017 – 2018
Deploy new growth levers

Future

Grow PayPoint One
ecosystem

Launch new parcel carriers

Continued strong cash-
flows from UK bill
payments and top-ups

Integrate Payzone and
grow Romanian business

Future
Sustainable delivery
and growth

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Our business model

Champions of convenience
At PayPoint, we’re all about convenience. Through our network
of 50,000 stores and with a 43% share of the UK convenience
market, we make life easier for everyone through pioneering
retail technology, services and omni-channel payments
solutions serving millions of customers every day.

Growing portfolio

PayPoint One

MultiPay

Parcels

ATMs

OTC bill payments

Top-ups

Popular services for customers, retailers
and clients, which increase engagement

50,000 stores
UK and Romania

Differentiated
& resilient
technology

Retailer
support

Robust
settlement
systems

24/7 Operational
support

Low cost, scalable and
technologically advanced platform

Healthy margins

Strong cash
generation

Investment in
innovation

Attractive
dividends

Consistent value creation
for shareholders

PayPoint plc Annual Report 2018Chief Executive’s review

We have made good progress in the year as we continue
to embed PayPoint at the heart of convenience retail.
Through the deployment of PayPoint One in the UK we are
able, from a single device, to bring together our leadership
in bill payment solutions with a wide range of retail services,
creating an evolving ecosystem which will benefit retailers
and serve millions of consumers in the UK and in time
Romania, whether they are paying a household bill or
collecting a parcel.

Performance over the past year has been good across our
retail businesses with net revenue increasing by £2.1 million
to £119.6 million, up 1.8% from the same period last year,
with underlying net revenue growth of £6.3 million driven by
service fee revenue and Romania with improved margins in
bill payment & top-ups overcoming the reduced transaction
volumes from UK energy and mobile top-ups. Profit
before tax of £52.9 million was delivered slightly ahead of
expectations and there was strong control of costs in the
second half of the year.

The three areas covered in this report are:
A. Our achievements in 2017/18: showing our good

progress against our 2017/18 priorities.

B. Embedding PayPoint in the heart of convenience

retail: covering our business model and the markets
within which we operate.

C. Our strategic roadmap: setting our priorities for

future years.

A. ACHIEVEMENTS IN 2017/18

In our full year results for 2016/17 we set out five priorities
for the year ended 31 March 2018 as follows:

1. Drive profitable growth in UK retail services.

2. Deliver parcels volume growth in the UK.

3. Optimise profits in UK bill payments and top-ups.

4. Drive continued organic growth in Romania.

5. Business optimisation.

We are proud of the progress made against these priorities
despite some challenges faced during the year. We have set
out our progress against each of these below:

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1. Drive profitable growth in UK

retail services

Core to this priority has been the deployment of
PayPoint One, in 8,550 sites at 31 March 2018, an increase
of 4,949 resulting in PayPoint One being the largest EPoS
capable estate in the UK convenience sector. This growing
estate will increasingly be the platform through which we
can drive service fee revenue from EPoS solutions in future
years. In this regard, we are pleased with our launch of EPoS
Pro, providing stock management capability to complete our
product suite, along with our EPoS mobile app which allows
our retailers to manage their EPoS system from any device
anywhere. We have also signed agreements with Booker
and Nisa to integrate EPoS Pro into their fulfilment systems,
enabling their members to benefit from PayPoint One.

Card payments processed across our retail platform have
grown by 4.9% to 94.5 million payments, driven significantly
by contactless. Our card payment rebate net revenue has
increased by 7.4% driven by the increase in transactions and
the full year benefit of improved margins.

We have replaced over 500 legacy ATMs with broadband
connected machines which are faster, more reliable and
improve the consumer experience. Following planned
reductions in the LINK interchange rate, we have adjusted
our network plans to enhance site performance and
maintain revenue levels.

2. Deliver parcels volume growth in the UK

Collect+ remains the clear market leader in parcel shop
services as demonstrated by a Trust Pilot rating of 9.2 and
our network of 7,436 sites remains the largest of its type
outside that of the traditional Post Office. In the year we
processed 23.4 million parcels, an increase of 2.0%. Since
renegotiating our Collect+ arrangements in December 2016
we have been transitioning to a multi-carrier proposition. We
have a strong pipeline of parcel opportunities and contract
discussions underway with the intention to have at least one
live before Christmas, the peak season for parcels.

PayPoint plc Annual Report 2018

GOVERNANCEFINANCIAL STATEMENTS
Chief Executive’s review continued

3. Optimise profits in UK bill payment

5. Business optimisation

and top-ups

UK bill payment and top-up net revenue was slightly ahead
of last year at £70.0 million (2017: £69.3 million) helped by a
combination of cold weather in the final quarter, a delay in the
rollout of smart meters due to the late commissioning by the
Data Communications Company and the lack of deployable
SMETS2 meters. The growth from improvements to client mix,
renegotiation of symbol performance incentives, increased
average top-up values and increased eMoney volumes which
have a higher margin per transaction, was partially offset
by a 9.1% reduction in transaction volume. Our MultiPay
proposition has performed well, with transactions up 88% to
19.4 million, now serving 22 client brands.

We have renewed or extended contracts with eight bill
payment clients, including the BBC and AllPay and launched
Amazon Top Up as Amazon’s exclusive partner in the UK. The
Department of Work and Pensions Simple Payment Service
was extended to 31 March 2018. We have now implemented
a replacement service, albeit at a significantly lower value
than the previous contract. The annual value of the previous
contract was c.£4.0 million net revenue per year.

4. Drive continued organic growth in Romania

Romania has had a good year of organic growth,
supplemented by the acquisition of Payzone in October 2017.

Transaction volume grew by 21.4 million (28.6%) to 96.4
million, with Payzone adding 17.0 million transactions.
Overall net revenue of £11.9 million (2017: £9.2 million)
increased by £2.7 million (29.8%) driven largely by
transaction volume growth. Our integration of Payzone is
progressing with the Payzone people now co-located in
PayPoint’s office and further sustainable cost efficiencies
have been identified. The acquisition has expanded our
client base to more than 160, increased our network to over
20,000 sites and has increased our share of bill payments
issued by our clients to 33% (2017: 23.6%).

Our network in Romania is extensive across cities, towns
and villages from which we will benefit as new services are
demanded in Romania from the government or consumers,
as is the case with card payments, mandated in shops
by government, where we have recently extended a
commercial trial to over 400 sites.

With our focus on driving value to retailers and on providing
them with first class service, there are a number of key actions
we have taken during the course of the year including:

• Delivery of CRM for client management where we have
made good progress in preparing for the deployment
of CRM into our operations and sales functions – this is
essential to provide a single view of the customer.

• Reorganising our technology development structure to

bring our product and development teams closer to each
other in the recently renovated unit 2 building. This will
deliver faster, more agile and efficient innovation.

• Commencing the implementation of an agile development
workstream focusing initially on PayPoint One and MultiPay.

• Launching the ‘Operations Management Group’
consisting of senior functional managers to take
ownership of reviewing and resolving operations
processes to improve effectiveness, efficiency and
customer service.

B. EMBEDDING PAYPOINT IN THE HEART

OF CONVENIENCE RETAIL

PayPoint is well positioned for growth through the
combination of its business model, market opportunity and
the execution of its strategic roadmap.

Business model
We provide a wide range of revenue generative products
and services for consumers, retailers and clients leveraging
our scalable, broadly fixed cost technology platform. This
platform consists of differentiated and resilient technology
that we deploy in stores, such as PayPoint One, combined
with robust financial settlement systems, through which we
process £10 billion per annum, 24/7 operational technology
support and comprehensive support for our retailers, either
through our call centre or via our field sales representatives.
We are able to launch complementary products and
services, such as Parcels and ATMs, that leverage this
platform without the need to create bespoke platforms as
single product competitors do. As a result, our business
model delivers strong margins and is highly cash generative
which allows us to pay a superior dividend and continue to
invest in the business.

Critical to this model is the need to support and provide
excellent customer service to our retailers. Progress in
this is a high priority over the coming years and will attract
significant investment in systems. During the year we paid
£49.1 million in commissions to our retailers.

PayPoint plc Annual Report 2018Market opportunity
Payments & top-up business (Payments) market
Cash bill payments has traditionally been PayPoint’s key
driver for growth for which we have developed a market
leading position in payment collection through our
convenience Retail network. Our UK and Ireland network of
29,000 stores handles over 380 million bill payments and
top-up transactions per annum with a value of £7.3 billion,
whilst our Romanian network of 20,000 stores handles over
95 million transactions with a value of over £1.8 billion.

In the UK, the market is undergoing significant levels of change:

• Cash payments relative to all other payment methods
is in steady decline. In 2006, 62% of all payments were
cash; in 2016 this reduced to 40% and by 2026, it is
predicted this will fall to 21%1.

• Energy transactions which account for 70% of our

bill payment & top-up transactions have also been
impacted by:
– Continuous review of energy prices.
– Improving efficiencies in household energy consumption.
– Rollout of smart meters – smart meters now

represent 20%2 of all domestic energy meters.

– Delays by the Data Communications Company and the

lack of deployable SMETS2 meters.

– Level of switching from the Big Six energy providers

to challenger operators.

In contrast, Romania cash bill payment remains a mass
market proposition with local utility cash offices closing and
the local post office losing its largest clients. We process on
average 33% of our clients’ payments.

Given our strategic focus on our UK and Romanian
operations where we have market leadership, we will be
winding down our small Ireland network of 450 sites.

In the UK and Romania we will continue to sustain our
leadership as a bill payment & top-up service provider with
our comprehensive geographic coverage in convenience
stores. Our MultiPay product is designed to recapture part
of the volume that will likely migrate to digital channels
through the rollout of smart meters.

Retail services business market
In the UK, we operate within a retail sector of approximately
66,000 stores comprising 56,000 convenience retailers
(including forecourts, specialist and Confectionary,
Tobacconist, News (CTN) stores) and 10,000 large format
supermarket sites². Within the convenience retail sector,
independents and symbol groups make up 44,000 stores
with multiples accounting for the remaining share of 12,000.

The convenience market is growing but is also becoming
more competitive:

• Convenience sector sales increased to £40 billion3

in 2017 up 7% in the year and is forecast to grow by
£7 billion by 2022.

• Consumers habits are changing to using smaller local

stores entailing more frequent visits.

• Large multiple brands such as Sainsburys, Tesco and
Co-op are increasing their presence in convenience.

With competition growing, combined with increased
consumer demands, independent retailers must adapt to
remain relevant in this modern age. Our service offering will
help retailers benefit from footfall driven from payments
and parcels. Our retail services, centred on PayPoint One
and its associated EPoS solutions, will enable retailers not
only to become more efficient, but also to transition from
a shopkeeper to a business person, providing solutions to
support consumers in their local communities.

We provide many services in the UK that span many
markets. Key services are:

ATMs – PayPoint is the fourth largest non-bank
ATM provider on the LINK network with approximately
4,200 ATMs:

•

In 2017 LINK’s ATM transactions declined 2.0% from
3,170 million to 3,102 million transactions4.

• LINK’s ATMs sites reduced from 70,020 in 2016 to

•

69,610 in 20174 with non-surcharge machines increasing
their share of all ATMs.
Interchange fee reduction of 5% for the half year from
July 2018 with a further three annual reductions of
5% starting January 2019 affecting non- surcharge
machines – 45% of our estate.

Card payments – We have over 10,000 sites using our card
payments service:

• Contactless payments are growing in importance,

accounting for 38% of volumes in 2017, up from 24%
in 20165. Average transaction values are trending
downwards but are offset by transaction volume growth.

• Highly competitive market with many offers from
merchant acquirers and other intermediaries.

Parcels – Collect+ remains the largest parcel point
network with 7,400 local convenience stores, excluding
the Post Office:

• The UK parcel market is estimated to be 2.5 billion
deliveries per annum, growing strongly by 14.2%6
in the 12 months to February 2018.

EPoS – This solution is highly beneficial for symbol
groups and independent retailers who need a cloud
based EPoS solution:

• The target universe represents approximately 38,000
stores in the UK – equating to 74% of the convenience
market (excluding CTNs and specialist stores).
• Retailers have a low investment base of £6,000 to
£8,000 per annum, with many competing priorities
(fridge, lighting, building maintenance shelving, signage,
etc) creating a barrier for EPoS adoption. Our recurring
service fee, with no up-front cost to the retailer,
eliminates the initial investment barrier.

• Only 30-40% of independents and 60-70% of symbol

group retailers have EPoS3.

1. According to figures from UK Finance.org
2. William Reed IGD – Grocery Retail Structure 2017
3. ACS – The local shop report 2017

4. www.link.co.uk/about/statistics-and-trends
5. UK Finance Card expenditure statistics – October 2017
6. IMRG MetaPack UK Delivery Index Report March 2018

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Strategic focus

Embed PayPoint at the heart of convenience retail

Embed PayPoint at the heart
of convenience retail

Become the definitive
parcel point solution

Sustain leadership in
‘pay-as-you-go’ and grow
digital bill payments

Innovate for future growth
and profits

PayPoint plc Annual Report 2018

C. STRATEGIC ROADMAP

We have a clear roadmap to realise the opportunity
available to PayPoint, built around four key strategic
priorities listed below. These build on last year’s priorities
and are the foundation of our Company plan by which we
will measure our progress over the coming years.

1. Embed PayPoint at the heart of convenience retail

(in the UK and Romania).

2. PayPoint becomes the definitive parcel point solution.

3. Sustain leadership in ‘pay-as-you-go’ and grow

digital bill payments.

4. Innovate for future growth and profits.

Underpinning our four priorities we will continue to develop
and invest in our people and organisation including:

• The successful implementation of Salesforce as our CRM

system and a new billing system.

• Delivering our new agile technology implementation,

working closely with our product organisation.

• Continuing to develop a performance based culture; with

focus on empowerment and customer service.

Romania is a market that is likely to benefit from new
opportunities as consumers seek to align with the rest of
Europe. This will include, over time, growth in eCommerce,
parcel deliveries and card payment solutions all of which
PayPoint with its unique network strength and brand
recognition is ideally placed to deliver. Cash bill payment
remains a mass market proposition and is expected to
be the dominant bill payment method for the medium
term during which time PayPoint Romania will exceed net
revenue of £20 million.

In Romania we intend to launch a new Android terminal,
appropriate for the Romanian market that will in time
replace the existing second generation terminal and provide
an integrated card payments solution to meet the Romanian
government’s requirement for all stores to be able to
transact cards as well as replace the Payzone in-store
technology that will soon be out of support.

We expect to invest in our systems across both countries,
to facilitate first class service to our retailers as well as
improve the efficiency our internal processes to speed
up the administration of retailers, such as when we sign
them up and fulfil products and services to them. We
will continue to reward our retailers for the services they
provide us by way of commission.

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Priority 1: Embed PayPoint at the heart of

convenience retail

Priority 2: PayPoint becomes the definitive
parcel point solution

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Online retail shopping will continue its robust growth,
increasing the demand for convenient delivery solutions
for consumers. Carriers are operating in a low-margin
competitive market with difficulties in the “last mile” of
delivery. With our extensive network covering over 98% of
the UK population, within one mile in urban areas and five
miles in rural, our parcel solution brings carriers and retailers
together for the benefit of their consumers. Our priority
over the coming years is to:

• Grow our parcels business to over 60 million parcels
through the addition of new carriers and partners.
• Extend our network and operational processes to

support multi-carriers in store.

• Maintain a compliance rate of 99% – a measure of the

effectiveness of our service in store.

• Develop a range of service enhancements including

a retailer app allowing them to scan parcels away from
the checkout.

• Work with retailers to enhance the consumer experience

•

to maintain a Trust Pilot score of over 9.0.
Increase the Collect+ network reach driving extra footfall
into our convenience retailers.

In the UK and Romania we will continue to provide and
develop new products and services which enhance the
retailer’s offer to their customers. We will also seek to
support retailers with innovation and first-class customer
service to allow them to evolve their stores to achieve their
full potential.

In the UK, PayPoint One is critical to this evolution and so it
is a strategic priority to embed this technology across our
retail base as a platform to drive value to retailers. We are
very pleased with the speed with which we have been able
to rollout our PayPoint One estate to date and therefore we
intend to grow our estate to 12,400 sites by March 2019.
We consider our T2 (second generation) terminal as legacy
and we will stop supporting it in the UK sometime from
the end of 2019. As the PayPoint One estate continues
to grow we will seek to connect this platform to other
symbol operators and wholesalers and move our retailers
through the EPoS product range to provide them with more
value and increase our average weekly service fee per site.
We believe this platform will provide for further revenue
generative solutions as its ecosystem evolves. ATMs allow
retailers to recycle cash received from bill payments thereby
creating additional revenue and footfall opportunities and
simultaneously reducing retailers’ banking costs. We will
explore with LINK the possibility of adopting an over the
counter cash dispensing model to reduce the amount of
capital required to support cash withdrawals. Our card
payments business will continue to grow with the rollout of
PayPoint One and will additionally benefit from the launch
of net settlement for cards later this year. Our priority is
the continuing development of new products and services
which leverage off the existing services we provide and
building on the existing retail service ecosystem.

PayPoint plc Annual Report 2018

Chief Executive’s review continued

Outlook
There is now strong momentum across PayPoint One,
MultiPay and Romania and a compelling Parcel proposition
refected in a strong pipeline of client deals, all of which will
underpin the future growth of our business. Non-recurring
items which will impact our operating profit performance
in the financial year ending 31 March 2019 include the
closure by the Department for Work and Pensions of their
Simple Payment Service worth c.£4.0 million per annum
in net revenue and the second-year impact of £1.0 million
reduction in net revenue from the agreement to lower
Yodel parcel fees.

Despite these headwinds and whilst the final outturn for
the forthcoming financial year will be influenced by the
timing of and volumes from new parcel contracts, the
Board anticipates a progression in profit before tax in
this financial year as the growth drivers in our business
continue to develop.

Dominic Taylor
Chief Executive
24 May 2018

Priority 3: Sustain leadership in ‘pay-as-
you-go’ and grow digital bill
payments

The slowdown in the energy sector and mobile top-ups
together with the general decline in cash as a payment
method in the UK economy means that we anticipate
reducing transaction volumes. However, cash payments
will remain a mainstay of the UK economy for many years
to come and we will continue to retain our leadership in this
market. This business is highly cash generative and enables
us to invest in future growth and innovation.

With our MultiPay product, we will remain a key service
provider to our clients as the digital payment world grows.
We intend to evolve the product to include a Direct Debit
payment solution as well as provide an ability to integrate
to other Payment Service Providers, for resilience and
commercial flexibility. We believe this will not only make our
proposition more attractive in our current markets,
but also allow us to extend our offer into new sectors.
We will continue to be very focused on the challenger
energy providers and we intend to win at least one
additional Big Six client.

Priority 4: Innovate for future growth and profits

Innovation has been a key to our success since the Company
started over 20 years ago and we will continue to innovate
to maintain our competitive advantage, drive new products
and services, improve our retailer experience and increase
efficiency. In the near term we will focus on the following:

• A new Android retail terminal to service the Romanian

market, leveraging our retail platform.

• Launch of a new data analytics capability in support of

the PayPoint One eco system, providing value to retailers
and the supply chain.

• Trialling in association with LINK a new ability for the

consumer to withdraw cash from a shopkeeper rather
than from a physical ATM, thereby reducing the capital
required to support declining cash volumes.

PayPoint plc Annual Report 2018

Case studies

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V
E
R
N
A
N
C
E

F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S

Muhammad Rana
Premier Poplar Stores, Huddersfield

Speed of service is critical, so the fact that
PayPoint One has fully integrated card
payments has helped me improve my customer
experience and reduce our time to serve.
If customers see queues, they leave or go
elsewhere so this has really helped us maintain
an advantage.

PayPoint One is the easiest system
I’ve ever used and I like the fact that it
is Android based and always evolving.

It’s saved me time, money and space so I can
now spend more time on my business and with
my family.”

“ I’ve owned my store in Huddersfield for the past
two years, but I’ve worked in retail for 10 years
now and my family has a thirty-year history in
the sector. I studied for a pharmaceutical degree,
but I prefer retail as it is much more hands on.

I’m always looking for innovative solutions for
my store and I chose PayPoint One EPoS Pro
as the features were good and it has saved me
time and money. My two favourite things are
that it is an all-in-one system and the mobile
app. The fact I have the flexibility to access my
information anywhere in the cloud has freed up
my time by about 25-30% since I’ve had it in
store. I’ve even stopped using a pen and paper
for my cash and carry shopping list and I now
use the mobile app to manage it.

Real-time access to my sales data is great –
I only have to click once and I can see how
things are going, what stock is selling and what
I should be ordering. I’ve used PayPoint One to
analyse my range and improve margins – I used
to stock high, mid and value range coffees but,
after analysing my data, I saw that the mid-
range wasn’t selling. I removed that range and
my sales have improved and margins have
gone up from 18% to 32%.

PayPoint plc Annual Report 2018

Case studies

As the world of retail keeps changing I think it’s
extremely important to offer a full range of
services in-store, as it’s those services that
appeal to new and existing customers.
Convenience retail is especially challenging so
offering variety is key to retaining customers and
with any additional service, if it’s relevant to your
customers, it makes sense to have. The bottom
line is that you must be able to offer various
services to appeal and stand out from similar
businesses – and Collect+ does just that.

Services alone won’t transform your sales and
repeat custom – that’s down to the retailer and
their store. Customers want to come into a nice,
clean store with a good product range, friendly
staff and enticing offers. If you’ve got those
things covered, and can offer services that can’t
be found everywhere else, you’re likely to be
more successful.

Raj Aggarwal
Spar, Sheffield

“ My Spar store employs 18 members of staff
who are all trained to carry out every service
and aspect of the day-to-day running of the
store. We have been offering the Collect+
parcel service for over two and a half years
now and both my team and I have found it
very easy to run since it launched.

As one of the biggest PayPoint sites in the
local area, it made sense to add the Collect+
parcel service to my offering and it was
absolutely the right decision. It is one of
the only Collect+ locations in the area which
means I offer something unique to the local
community and makes my store an attractive
place to shop.

More and more
customers are now
shopping online,
so Collect+ is a great
way to tap into this
mass market.

PayPoint plc Annual Report 2018

Case studies

S
T
R
A
T
E
G
C
R
E
P
O
R
T

Ana Macovei
Ana Minimarket, Bucharest

“ I have been working in retail for 16 years now
and have been managing Ana Minimarket store
since 2008. This is a family business and we are
open 7 days a week with long opening hours.
Despite growing competition and the expansion
of modern retailers, we are one urban store that
has managed to keep a loyal customer base
through diversification and the services/
products we offer.

I have been working with PayPoint for ten years,
since 2008, the year they launched the bill
payment service in Romania. We started this
partnership by collecting a few types of bills
(the ones available on the terminal at that time)
and offering top-up services. I now have an
extremely broad portfolio of services through
PayPoint, including money transfer, parcels,
road tax and card payments.

My customers really appreciate the
availability of PayPoint in store because
they can save time and pay their bills
while doing their shopping, without
having to go far from their house or wait
in long queues.

I am happy with the partnership I have with
PayPoint: it offers me the opportunity to make
existing customers even more loyal and to
attract new customers to my store, thanks
to the convenience of the service. What I
appreciate the most in my relationship with
PayPoint is the diversity it brings in terms
of customers: I had the opportunity to meet
so many different people.

I am confident about the future of this
partnership and the fact that PayPoint will
prove to be, as always, extremely dedicated
in partnering with customers.”

PayPoint plc Annual Report 2018

GOVERNANCEFINANCIAL STATEMENTS

Retailer pledge

We will:

4 support and respect you and
deliver first class service

4 listen and communicate openly so
we can understand and respond
to your needs

4 always innovate to improve our

products and services and the value
we bring to your business
4 champion the importance of
convenience retailers and the
challenges you face

Case studies

Retailer Engagement

Our national retailer forum brings together
influential retailers from across the country three
times a year. The forum members are a cross
section of symbol and independent retailers
drawn from different trade associations, such
as the Association of Convenience Stores and
the National Federation of Retail Newsagents.

Each forum provides an opportunity to update
retailers on business priorities, gain feedback
on new product developments, collaborate
on initiatives that make it easier to do business
with us and to meet members of our
management team.

Our current forum members are:

Dee Sedani
One Stop Franchise, Etwall and Derby
Steve Bassett
Londis, Weymouth
Raj Aggarwal
Spar, Wigston and Sheffield
Bay Bashir
Lifestyle Express, Middlebrough
Muhammad Rana
Premier, Huddersfield
Linda Sood
Premier, Portsmouth
Sunder Sandher
One Stop Franchise, Leamington Spa
Ken Singh
Mill Hill Store, Pontefract
Ray Monelle
Orchard News, Weston-super-mare
Ralph Patel
Look In News, Woodmansterne
John McGowan
Icon Stores, Aberdeen

In addition to our national forum, we are now
rolling out a regular series of regional forums
to provide an informal opportunity to engage
with more retailers and showcase PayPoint One,
as well as active participation at symbol trade
shows, trade association meetings and
industry events to stay close to our retailers
and their needs.

PayPoint plc Annual Report 2018

Key performance indicators (KPIs)

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 are consistent with prior year. 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

Earnings per
share (Retail
networks)1

Retail network earnings (see note 4) 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 continuing
business attributable to each share.

Reported
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 net cash or net debt, based upon the Group’s cost
of capital.
Economic profit provides a consistent measure of the profit
aligned to the remuneration of management.

Embed
PayPoint at
the heart of
convenience
retail

and

sustain
leadership
in ‘pay-as-
you-go’
and grow
digital bill
payments

Retail networks’
transactions

Number of transactions processed in the year on our MultiPay
platform, terminals (including card payments) 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 where PayPoint also provides the collection and
settlement of funds.
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

Retail networks’
operating
margin1

and

innovation

Return
on capital
employed1

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.

Operating profit before impairments and business disposal
including our share of joint venture result 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.

2018

2017

63.0p

64.3p

45.9p

45.0p

£38.8
million

£39.2
million

643.5
million

654.8
million

£10.5
billion

£10.4
billion

£119.6
million

£117.5
million

8,550

3,601

44.3%

45.3%

178.9% 184.3%

(Decline)/
growth in Retail
networks yield
per site1

(Decline)/growth 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.

(10.0)%

2.2%

People

Labour turnover Number of permanent employees who left during the year

26.8%

29.0%

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.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Financial review

Overview
Our profit before tax of £52.9 million reflects the successful
execution of our strategy. In December 2016, we completed
the simplification of our business with the sale of the
mobile payments business and the Collect+ reorganisation.
Consequently the prior year comparatives where profit
before tax was £69.1 million included £15.6 million profit on
the disposal of the Mobile and Drop and Collect businesses.
Excluding the impact of last year’s simplification, and
looking exclusively at our continuing Retail networks, prior
year profits were £53.5 million.

The results ended 31 March 2018 reflect the investments
we have made in reshaping the business for future
profitable growth including:

• The successful Payzone Romania acquisition (for a net
consideration of £2.5 million) which contributed £0.3m
to profit before tax in the year.

• The second-year impact from the Yodel renegotiation
allowing us to extend the network to other carriers and
partners. Net revenue from parcels reduced by £1.8
million due to the revised commercial terms.

• The rollout of PayPoint One, which at 31 March 2018 was

in 8,550 sites.

Looking at the underlying trading performance, UK bill
payments and top-up businesses delivered increased net
revenue of £0.7 million to reach £70.0 million (2017: £69.3
million). The expected decline in transaction volumes was
mitigated by improved margins as a result of client mix
(increase in smaller but higher yielding clients) and the full
year impact of renegotiations of performance incentives
with symbol groups. MultiPay continued to grow robustly,
with transactions increasing 88% to 19.4 million.

UK retail services delivered a good performance with
underlying net revenue growth of £2.9 million (8.3%) to
£37.7 million after adjustment of £1.8 million impact in the
current year from the Yodel renegotiation and the one-off
benefit of £2.4 million in relation to the change in VAT
treatment of card revenue rebate included in prior year
results. The growth was driven by increased service fee
revenue following the successful rollout of PayPoint One
to a further 4,949 sites.

Romania transaction volume grew by 21.4 million (28.6%)
to 96.4 million, of which Payzone added 17.0 million
transactions, leading to net revenue growth of 29.8%
to reach £11.9 million (2017: £9.2 million). Organic net
revenue growth was £1.0 million (11.5%) with Payzone
adding £1.7 million for the six months since its acquisition.

The investment from prior years in MultiPay and
PayPoint One development and the rollout of
PayPoint One has increased our depreciation and
amortisation charges in the current year by £2.3 million.
We also undertook a review of the useful lives of some
of our intangible assets in the current year which has
increased amortisation by a further £0.8 million.

We were also successful at tribunal with our challenge to
an HMRC VAT ruling issued in 2015. The ruling required
certain revenue streams to be treated as VAT exempt
which reduced VAT recovery and increased our cost base.
Following the tribunal outcome, we have commenced with
recovery of the VAT element of invoices previously issued to
clients and reviewing our input VAT recovery, the finalisation
of which will be concluded in the first quarter of the
2018/19 financial year. As a consequence, included in the
current year cost base is an estimated benefit (reduction of
costs) of £2.4 million of which £1.5 million relates to years
prior to 2017/18. The final recovery is subject to finalisation
of a notification to the HMRC and their agreement, however
we do not expect the recovery to be less than the amount
already included in our results.

Costs increased by £2.4 million to £66.6 million due to
acquisition of Payzone increasing costs by £1.2 million,
underlying costs increasing by £3.4 million reflecting
investments in CRM Salesforce and PayPoint One, one-off
reorganisation and asset useful life adjustments of £1.2
million, offset by the VAT tribunal result described above
and £0.7 million of sustainable cost efficiencies.

We continued to have strong cash generation¹, which
increased by £4.0 million from 2016/17 to £65.1 million.
Working capital improved by £3.4 million but includes a
temporary benefit of £3.6 million from the VAT tribunal ruling
for receipts from clients being received in advance of the net
payment to HMRC. This will reverse in 2018/19.

Finally, we also secured a new financing facility for £75
million with an accordion of £20 million at margin rates
lower than the previous £45 million facility. The new facility
expires in March 2023 and provides PayPoint with the
necessary financial headroom required to execute our
strategy. During the year we utilised the previous facility to
fund short term financing needs and together with costs of
renewing the facility our net financing costs increased to
£0.5 million (2017: £ nil).

Sector analysis
This year we have enhanced our disclosure by extending
each of our sectors to show UK and Ireland separately
from Romania and provide further detail on net revenue
for each of our key UK retail services, a key growth area
for our business. As in prior years, we have disclosed the
transaction volumes, transaction values, revenue and net
revenue which are briefly described below.

Transaction volumes: The number of transactions
processed through our MultiPay platform, terminals
(including card payments) and ATMs. Transaction volume
provide a measure of the source of revenue where it is
earned on a per transaction basis.

Transaction value: The value of transactions processed
via our network and where PayPoint also provides the
collection and settlement of funds. Transaction value
provides a measure of the source of revenue where it is
earned on a percentage of the transaction value.

1. Cash generation is operating cash flows before movements in working capital from note 29 to the financial statements.

PayPoint plc Annual Report 2018
Revenue: The value of services and goods delivered or
sold to clients and retailers.

Net revenue: An alternative performance measure reflecting
the benefit attributable to our performance eliminating
pass-through and retailer commission costs. This assists
with comparability of performance where we act as a
principal for some clients and as an agent for others.
A reconciliation from revenue to net revenue is presented
in note 3 to the financial statements.

Network sites: A retailer site which has a PayPoint terminal
and provides bill payment services.

Retail network sites1

UK & Ireland Retail
network

PayPoint One2
Legacy terminal
PPoS3

Romania Retail network
Total sites

UK retail service sites

PayPoint One
Collect+
Card payments
ATM

Year ended
31 March
2018

29,114
8,550
11,980
8,584
20,514
49,628

Year ended
31 March
2018
8,550
7,436
10,252
4,146

Year ended
31 March
2017

29,176
3,601
17,088
8,487
11,302
40,478

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

Change
%

(0.2)
137.4
(29.9)
1.1
81.5
22.6

Change
%
>100
20.6
(2.3)
(0.5)

We have established retail networks in the UK, Ireland and
Romania which grew by 22.6% to 49,628 sites. In Ireland we
have a network of 450 sites. Given our strategic focus on
our UK and Romanian operations, we have decided to wind-
down the bill payment services in Ireland, which generates
c.£0.5 million net revenue per annum.

In the UK the network size was broadly level at 28,664 sites
with focus on deploying PayPoint One into our existing
network. New retailer sites acquired in the second half of
the year offset the expected small churn of 1.9% following
the implementation of a standardised service fee for legacy
terminals in the first half of the year.

In Romania, sites increased by 9,212 in the year, this
includes 8,376 Payzone sites. We have assessed the
performance of the Payzone network and have already
commenced a rationalisation to reduce overlap between
the existing network and unprofitable sites.

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. PayPoint One will replace the legacy terminal and is the platform from which
we can grow our retail services by offering additional products and services.
3. PPoS is a plug-in device and virtual PayPoint terminal used on larger retailers’

own EPoS systems who still want to use PayPoint services.

Retail networks’ overall trading performance

Total
Transactions (millions)
Transaction value (£m)
Revenue (£m)
Net revenue (£m)
UK and Ireland
Transactions (millions)
Transaction value (£m)
Revenue (£m)
Net revenue (£m)
Romania
Transactions (millions)
Transaction value (£m)
Revenue (£m)
Net revenue (£m)

Year ended
31 March
2018

Year ended
31 March
2017

Change
%

643.5
10,450.3
213.5
119.6

654.8
10,409.6
203.4
117.5

547.1
8,537.4
155.9
107.7

96.4
1,912.9
57.6
11.9

579.8
8,993.6
163.7
108.3

75.0
1,416.0
39.7
9.2

(1.7)
0.4
5.0
1.8

(5.6)
(5.1)
(4.7)
(0.6)

28.6
35.1
45.3
29.8

Retail networks’ net revenue increased £2.1 million from
£117.5 million to £119.6 million driven by £2.7 million growth in
Romania which includes six months of Payzone (contributing
net revenue of £1.7 million), underlying growth in UK retail
services driven from delivering our strategy to drive PayPoint
One into our UK Retail network and maintaining net revenue
in UK bill payments and top-ups despite the decline in
transaction volumes. Included in net revenue in the current
year is the impact of the new commercial terms with Yodel of
£1.8 million and last year’s net revenue included a one-off VAT
recovery of £2.4 million. Excluding these two items, like-for-
like net revenue increased by £6.3 million.

Overall Retail networks transaction volume reduced, as
expected, by 1.7% to 643.5 million transactions due to
lower UK bill and general volumes partially offset by strong
volume growth in Romania.

Revenue increased disproportionally to transactions as
Payzone’s revenue mix is weighted towards mobile top-ups
where it acts as principal.

Retail networks’ trading performance by sector

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

Year ended
31 March
2018

Year ended
31 March
2017

Change
%

419.5
8,502.9
82.5
60.0

334.2
6,717.6
70.9
52.3

85.3
1,785.3
11.5
7.7

430.5
8,489.9
82.5
58.5

363.3
7,165.2
73.6
52.4

67.2
1,324.7
8.9
6.1

(2.6)
0.2
(0.1)
2.5

(8.0)
(6.2)
(3.7)
(0.1)

26.9
34.8
28.3
26.8

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018

Financial review continued

UK bill and general net revenue £52.3 million was broadly
flat as an improved mix of smaller but higher yielding clients
continues to offset the expected reduction in transaction
volumes. MultiPay continued to grow robustly with
transactions increasing 88% to 19.4 million and net revenue
by £1.2 million to £2.4 million. Included in net revenue is
c.£4.0 million (2017: c.£2.0 million) from Department for
Work and Pensions Simple Payment Service which ended
in March 2018.

In Romania, cash bill payments remains a mass market
proposition and the acquisition of Payzone created a step
change for our Romanian business. Net revenue grew
by £1.6 million (28.3%). Total transactions increased by
18.1 million to 85.3 million with our current share of the
bill payments issued by our clients increased to 33%
(2017: 23.6%).

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.

Year ended
31 March
2018

Year ended
31 March
2017

62.6
698.3
75.3
20.8

52.2
639.1
30.8
17.7

10.4
59.2
44.5
3.1

68.9
731.6
63.6
19.1

61.6
689.4
34.0
16.9

7.3
42.2
29.6
2.2

Change
%

(9.1)
(4.5)
18.5
8.9

(15.3)
(7.3)
(9.4)
4.6

42.8
40.3
50.5
41.9

UK top-ups continued to be affected by market trends
whereby UK prepay mobile transactions are being
displaced by Direct Debit pay monthly options. UK top-up
transactions reduced by 9.4 million to 52.2 million. Despite
this however, net revenue increased £0.8 million following
the full year impact of our renegotiations of performance
incentives with symbol groups completed in the second half
of last year and increased average top-up values. We also
achieved 6.8% growth in eMoney transactions where the
net revenue rate per transaction is substantially higher than
for mobile top-up transactions.

In Romania the increase in transactions was driven by the
acquisition of Payzone where its revenue mix was weighted
more towards top-ups.

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

Year ended
31 March
2018

Year ended
31 March
2017

Change
%

Total
Transactions (millions)
Transaction value (£m)
Revenue (£m)
Net revenue (£m)
UK and Ireland
Transactions (millions)
Transaction value (£m)
Revenue (£m)
Net revenue (£m)

Services fees (£m)
ATM (£m)
Card payments
rebate (£m)
Parcels and other (£m)

Romania
Transactions (millions)
Transaction value (£m)
Revenue (£m)
Net revenue (£m)

161.4
1,249.1
55.7
38.8

160.7
1,180.7
54.1
37.7
7.7
12.8

7.5
9.7

0.7
68.4
1.6
1.1

155.4
1,188.1
57.3
39.9

154.9
1,139.0
56.1
39.0
4.0
13.1

7.0
14.9

0.5
49.1
1.2
0.9

3.9
5.1
(2.8)
(3.0)

3.7
3.7
(3.6)
(3.5)
89.5
(2.0)

7.4
(35.0)

50.5
39.2
25.3
31.6

UK retail services net revenue decreased by £1.3 million
reflecting the revised commercial terms with Yodel and the
card payments £2.4 million VAT recovery included in the
prior year. Excluding these items, underlying net revenue
increased £2.9 million. In the current year we have extended
our disclosure to include the net revenue of each of our key
products. Each is addressed below:

Service fees: Service fees comprise the fees earned
from PayPoint One and our legacy terminal. This is a core
growth area and as we continue to execute our strategy
of deploying PayPoint One into our existing network this
will become a significant revenue item. In the current year
service fee revenue increased £3.7 million to £7.7 million
driven by rollout of PayPoint One which was in 8,550 sites
at 31 March 2018. The average weekly fee per site improved
to £14.68 up c.70 pence from 31 March 2017. Our EPoS Pro
solution, launched in January 2018, was in 154 sites as
at 31 March 2018.

ATMs: Transactions increased by 2.9% however net revenue in
ATMs reduced by £0.3 million to £12.8 million in part driven by
an increased share of non-surcharge machines in our estate
from which there is a lower net revenue rate per transaction.
Considering LINK’s proposals to reduce the interchange rate,
we have commenced an initiative to reallocate a portion of
our ATM estate to better performing locations.

Card payments rebate: Card payments transaction
volumes grew by 4.9%. The increase in transactions
together with the full year impact of margin improvement
achieved in the second half of last year resulted in net
revenue increasing 7.4% to £7.5 million. Excluding the
margin improvements, net revenue growth was in line with
transaction volume growth.

PayPoint plc Annual Report 2018

Parcels and other: Collect+ parcel service volumes grew
by 2.0% to 23.4 million parcels. However, the strong
growth experienced in the first half of the year was offset
by reduced volumes in the second half. This highlights the
importance of our strategy to expand the parcel service
to other carriers and partners, which we did with the
Yodel renegotiation. The impact of Yodel renegotiation
in the current year was £1.8 million, which after excluding
net revenue growth was in line with transaction growth.
Collect+ was in c. 7,400 sites.

Other services provided include SIMs, money transfer
services and other adhoc items. Prior year includes the card
payments £2.4 million VAT recovery.

Gross profit margin and network yield
Retail networks’ gross margin reduced 2.7 ppts from 49.5%
to 46.8% driven by:

•

Inclusion of the Payzone acquisition which has a very low
gross margin due to its high level of top-up business.
• Prior year including £2.4 million VAT rebate following the

•

change in VAT treatment on card payments.
Increased depreciation and amortisation charge of
£3.0 million in the current year driven by our investments
in the growth drivers of MultiPay and PayPoint One and
reassessment of the useful lives of some intangible assets.

The inclusion of Payzone has also resulted in our average
yield per site (calculated as net revenue from Retail
networks divided by the average number of sites in the
year) reducing by 10% for the year ended 31 March 2018.

Network costs
Network costs of £66.6 million1 were £5.0 million lower than
last year of £71.6 million2 as a result a £7.3 million reduction
in costs following the sale of the mobile payments business
offset partially by increased Retail networks’ costs of
£2.4 million.

Retail networks’ costs increased £2.4 million from
£64.2 million in 2016/17 to £66.6 million in 2017/18 driven
by our strategic objectives to invest in profitable growth
and improve our systems and processes to enhance our
services provided to retailers specifically:

• Additional costs of £1.2 million from the acquisition and

•

integration of Payzone Romania.
Increased depreciation and amortisation of £2.2 million
primarily from prior year investments in PayPoint One
and MultiPay.

• PayPoint One deployment costs of £0.4 million.
• CRM Salesforce development costs of £0.8 million.
• Reorganisation costs of £0.4 million following our
restructure of the development team in order to
implement the new agile development process.

Other cost increases include:
•

•

Increased amortisation of £0.8 million from a reassessment
of the useful lives of some intangible assets.
Increased net financing costs of £0.5 million from
utilisation of the finance facility and its renewal
on 29 March 2018.

Offsetting the above increases include:
• A £2.4 million benefit relating to a net VAT adjustment
from the tribunal overturning the HMRC’s ruling, £1.5
million relates to years prior to 2017/18.

• Sustainable cost efficiencies of £1.2 million allowing
for the reduction of third party expenditure including
signage and facilities costs.

Adjusted operating margin3
Adjusted operating margin of 44.4% improved 2.2ppts
(2017: 42.2%) primarily as a result of no longer including
Mobile’s losses.

Retail networks’ operating margin has reduced by 0.6 ppts
to 44.7% (2017: 45.3%) because of increased costs of
£2.4 million exceeding net revenue growth of £2.0 million.

Payzone acquisition
Payzone SA in Romania was successfully acquired in
October 2017 for an initial cash consideration of £1.4 million
for the entire share capital and £0.9 million for an existing
shareholder loan. This presents a step change opportunity
for the Romanian business where both businesses can
leverage from each other clients and integrate which
will generate operational efficiencies. The integration is
progressing with the Payzone employees operating from the
Romanian head office and the data centre has been migrated
with merging of the networks underway.

Following the fair value assessment of Payzone assets
and liabilities, a net liability of £1.7 million was acquired
and as a result, goodwill of £3.9 million was recognised.
For the period since its acquisition to 31 March 2018
Payzone contributed £13.7 million revenue, £1.7 million net
revenue and profit before tax of £0.3 million to the Group’s
results. Details of the acquisition are included in note 9
to the financial statements.

Profit before tax and taxation
The tax charge of £10.0 million (2017: £9.5 million) on profit
before tax of £52.9 million (2017: £69.1 million) represents
an effective tax rate4 of 18.9% (2017: 17.8%). This is
marginally lower than the UK statutory rate due to overseas
profits being taxed at local rates which are lower than
the UK rate offset marginally by adjustment in relation to
estimates made in prior years and disallowable expenditure.
In the current year the statutory tax rate is the same as the
effective tax rate at 18.9%. Last year’s statutory tax rate
was 13.8% with the profit on disposal of businesses not
being taxable.

Statement of financial position and capital expenditure
Non-current assets of £54.2 million (2017: £47.6 million)
increased by £6.6 million from last year driven by capital
expenditure (£13.4 million) and the Payzone acquisition
goodwill of £3.9 million. Current assets increased to
£208.3 million from £152.2 million due to funds in the
course of collection increasing £59.3 million due to year
end falling over Easter weekend adding an extra two days
of funds held by retailers. There is a corresponding increase
in trade and other payables.

1. Comprising of £19.6 million other costs of revenue (see note 5 to the financial statements), administrative expenses £46.5 million and net financing costs of £0.5 million.
2. Comprising of £17.9 million other costs of revenue and administrative expenses £53.7 million.
3. Adjusted operating margin is calculated by dividing operating profits by the net revenue.
4. Effective tax rate is the tax cost as a percentage of operating profit before impairments and profits and losses on business disposals.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Dividend
We propose to pay a final dividend of 30.6p per share
on 30 July 2018 (2017: 30.0p) to shareholders on the
register on 22 June 2018, 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 15.3p (2017: 15.0p) was paid on 21 December
2017, making a total ordinary dividend for the year of 45.9p
per share (2017: 45.0p), up 2.0%. Dividends are paid from
the standalone balance sheet of the Company which, as
at 31 March 2018, had approximately £80.0 million of
distributable reserves.

The current dividend payment profile of a one third payment
in January and the final two thirds payment in July creates
undue fluctuations of net cash balances during the year and
so to more efficiently manage our working capital we will
transition from 1 April 2019 to a programme of four equal
dividends payable in July, September, December and March.
This change will not alter the quantum of dividend that will be
paid to shareholders within a financial year.

Rachel Kentleton
Finance Director
24 May 2018

Financial review continued

Cash flow and liquidity
Cash generated by operations1 before working capital
movements was £65.1 million (2017: £61.1 million),
reflecting strong conversion of profit to cash.

Net movement of working capital was an inflow of £8.8 million
made up as follows:

• £5.4 million inflow from increased client funds.
• £3.6 million from the VAT tribunal ruling for receipts from
clients being received in advance of the net payment to
HMRC, this will reverse in the 2018/19 year.

• Underlying working capital in UK and Romania broadly flat.

Corporation tax of £10.3 million (2017: £8.6 million)
represents payments on account and is in line with our
current tax charge for the year. Capital expenditure of
£13.4 million (2017: £17.5 million) consists of PayPoint One
terminals, ATMs, EPoS, MultiPay and CRM developments.

Share incentive schemes which vested during the year
absorbed £0.3 million (2017: £0.4 million). Dividends paid
were £55.9 million (2017: £78.5 million) details of which are
included in note 24 to the financial statements.

We have cash of £46.0 million (2017: £53.1 million) of which
£27.5 million (2017: £20.2 million) is client cash. PayPoint
successfully renewed its financing facility and increased
it to £75 million which will expire on 29 March 2023. The
facility was unutilised at year end.

The additional dividend and final dividend, if approved by
shareholders, will utilise £37.5 million cash. The financial
statements have been prepared on a going concern basis
having regard to the identified risks and viability statement
on pages 21 and 23. The Group’s cash and borrowing
capacity provides 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 10% capital charge
on capital employed, excluding net cash or net debt), was
£38.8 million (2017: £39.2 million).

1. Cash generation is operating cash flows before movements in working capital in note 29 to the financial statements

PayPoint plc Annual Report 2018Principal risks and uncertainties

Since publication of the annual report last year, the Executive team has completed a thorough review of the key risks
that could prevent PayPoint meeting its strategic objectives, its risk appetite, the risk management framework and the
format for managing these risks and reporting to the Board. The Group’s level of risk remains broadly the same as last year
however, PayPoint’s business, financial condition or operations could be materially and adversely affected by the risks
summarised in the sections below.

Risk area

Potential impact

Mitigation strategies

Business

Innovation and market
changes

Culture

Dependence on key clients
and retailers

The Group could fail to adapt to changes in
consumer behaviour or to commercialise and
develop innovation that is scalable and meets
the requirements of clients and retailers. The
inability to implement new products and
services effectively may impact PayPoint’s
ability to drive growth and profitability.

The strategic objectives and values of the
Group are focused on retailer and consumer-
centric products and services. If employees
are not aligned with these objectives or
empowered to realise opportunities, deliver
performance or mitigate risks this could lead
to poor service quality, a loss in revenue,
increased cost or failure by employees to
escalate concerns or issues to senior
management and the Executive Board.

The consolidation of major clients or multiple
retailers could adversely affect revenue.
Insolvency, liquidation, administration or
receivership of retailers could lead to PayPoint
being unable to recover some or all of the client
monies processed by the retailer. PayPoint
would be liable to account to those clients
where PayPoint bears the risk of collection.

Partners & suppliers

Reliance on third parties for the provision
of key parts of the PayPoint services
(e.g. Payment Service Providers) could lead to
extended outages if the supplier fails to meet
required SLAs or goes into administration.

The Group monitors external technological
and consumer trends through its monthly
strategy committee and twice yearly Board
strategy reviews. The Group is committed to
continued research and investment in
technology and products to support its
continued growth. Our product portfolio and
the progress of new initiatives are reviewed at
the monthly product committee that contains
representatives from commercial, product,
technology, finance and legal.

The PayPoint strategic objectives and values
are defined and advocated by the Executive
Board. These values are linked to strategic,
team and individual employee objectives and
performance appraisals. The Group’s ethical
principles are published on its website and
intranet. A whistleblowing policy and procedures
are published and a third-party service if
available for employees to report wrongdoing.
The Retailer Pledge is published and all
employees made aware of its requirements.

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. All major clients are covered by
specific contracts or agreements. Contract
end dates and start of notice periods are
scheduled and regularly reviewed by client
management teams. Retail teams maintain and
develop the relationship with retailers.

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.
Specifically, for our MultiPay product we are
adding a second payment service provider
which will enhance the resilience of the
service. Controls are regularly reviewed and
improved to minimise risk of retailer churn
caused by financial loss to retailers through
fraudulent third-party activity. Suppliers are
selected on merit following tendering,
procurement and due diligence processes.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Principal risks and uncertainties continued

Risk area

Potential impact

Mitigation strategies

Interruptions in processes
and systems

Financial

Liquidity & funding

Operational

Legislation or regulatory
reforms and risk of
non-compliance

Cyber security, data
protection, resilience and
business continuity

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.

Resilience is built into systems and
contingency plans are in place should systems
fail. These plans are exercised regularly.
Programmes are in place to remove technical
debt and to automate manual processes.
Payment files are automatically imported into
settlement systems. All payments are
checked / authorised by nominated
signatories. There is segregation of duties
maintained between settlement & corporate
accounts. Invoices are recorded and approved
by authorised managers. Daily reconciliation
of client settlement accounts and weekly
reconciliation of PayPoint corporate accounts
is carried out. Audited controls for supplier
and client account set-up are in place.

Capital might be required to finance
investment, fixed assets, working capital,
acquisitions or losses. If PayPoint does not
perform to expectation or finance is not
available from the market it may be necessary
to reduce the scope of the Group’s operations
or anticipated expansion.

PayPoint is required to comply with relevant
legal and regulatory requirements. Any breach
of these obligations could lead to costly and
damaging legal or corrective actions to return
to compliance e.g. Health & Safety at Work
Act, Data Protection Act / GDPR, Stock
Market listing rules, Financial Conduct
Authority requirements, anti-money
laundering legislation, employment law etc. It
could also lead to the prosecution of
individual company officers or employees.

System or network interruptions, recovery
from fraud or cyber security incidents or
poorly implemented change 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.
PayPoint’s ability to provide reliable and
secure services largely depends on the
availability and uninterrupted operation of its
network of retailer terminals, computer
systems, financial settlement and key
business processes.

The Finance and Treasury policy sets
borrowing limits with headroom allowed. A
five-year revolving credit facility is in place.
Cash resources are available but will be
depleted by additional annual dividends of
£25 million for five years. The ability to raise
new funding is available via the stock market.
Investor relations programme communicates
company strategy, opportunities and results
to the market and investors. Monthly business
reviews and quarterly forecasts highlight any
change in cash requirements. Cash flow
reporting has been improved.

The Group’s legal department works closely
with senior managers 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. A central compliance
department co-ordinates all compliance
monitoring and reporting. Subsidiary
managing and finance directors are required
to sign annual compliance statements. A plan
is in place to ensure that the Group is
compliant with the requirements of the
General Data Protection Regulations prior to
the 25 May 2018 deadline.

Service delivery is constantly monitored with
technical support teams in place to address
service outages or errors. Contact Centre,
Service Management and Technical Services
Helpdesk are in place to assist with and resolve
issues. Client Management and Retail
Management teams are in place to interface
with clients and retailers. Resilient systems are
in place across the Group. Disaster recovery
and business continuity plans are maintained
and exercised regularly to ensure contingencies
are in place in the case of failure.

PayPoint plc Annual Report 2018

Risk area

Potential impact

Mitigation strategies

Attracting and retaining
key talent

Brexit

Future success is substantially dependent on
the continued services and performance of
executive directors, senior management,
competent and qualified personnel. The
failure to attract the right candidates, loss of
key personnel or failure to adequately train
employees could damage the Group’s
business or lead to non-compliance with legal
and regulatory requirements.

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 reviewed regularly.

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.
Where issues are identified appropriate
mitigations are being put in place.

S
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Viability and going concern statements
As part of the risk monitoring programme the directors consider, annually, the Group’s viability over a three-year period.
The three-year period aligns with the Group’s financial planning cycle and considering dynamics of the markets in which the
business operates is an appropriate time horizon to use. The business activities, its performance, future development and
market conditions described in the Chief Executive’s review on pages 5 to 7 together with the principal risks set out above
are considered in determining the Group’s viability. The Group’s viability is based on business plans with several different,
but plausible, principal risks crystallising. These include:

• Business risk: Dependence on key clients and retailers – of the loss of large clients and retailers.
• Business risk: Innovation and market changes – slower than anticipated growth in retail services and a quicker than

expected decline in the cash payments business.

• Operational risk: Impact of a technical event resulting in the temporary disturbance of usual operations.
• Financial: Liquidity & funding – impact on cash or financing facilities as a result of viability assessment scenarios.

In making the assessment, the directors have also considered the Group’s robust capital position, its cash-generative
nature and mitigating actions in the unlikely event of the above scenario materialising.

From this assessment, the directors have concluded the Company is a viable operation and therefore have prepared the
financial statements on a going concern basis and they have a reasonable expectation that the Group will remain viable
over the assessment period.

PayPoint plc Annual Report 2018

Environmental and social review

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

Customer
focussed

Team player

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.

Beth Hamilton
& Reza Hotee

Louise Pugh

Beth and Reza were joint winners in
July 2017, nominated for the Customer
Focussed value for their work on
the Amazon Top-Up project. Both
received glowing feedback from the
customer and internal colleagues.
Beth for her management of the
project where she ensured that the
customer’s requirements were at
the heart of all decisions taken (and
that any issues encountered along
the way were quickly resolved and
clearly communicated). Reza for his
solutions-based approach which
enabled him to clearly understand
and navigate the customer’s technical
requirements (and quickly built trust
as a technical partner).

Louise won in October 2017 and
was nominated for the Team Player,
Customer Focussed and Passionate
values. Louise works in our parcels
team and played a key role locating
expired parcels for our clients. She is
a positive role model to colleagues,
ensuring that everyone is aware of
correct procedures and encouraging
everyone in the team to recover as
many parcels as possible. She always
tries to deliver her best and is a great
asset to the team.

PayPoint plc Annual Report 2018

As the UK’s leading bill payments and retail service provider we are aware of the impact we can
have in society and on the environment. Our actions are guided by our six values which remind us
of the positive impact we can have on retailer’s clients, employees and wider society by being
“customer focussed” and “accountable” for our actions. We are committed to dealing fairly and
with a high level of integrity with all our employees, retailers, clients, stakeholders and local
communities This report sets out our approach and the way we measure our success in dealing
with each group of stakeholders.

Our employees
PayPoint employed, on average, 638 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 in the UK continued to
decrease year on year as changes implemented in previous
years were embedded. Turnover in Romania increased in the
year, reflecting local market conditions and the evolution of
the business following the acquisition of Payzone. Actions
have been implemented to reduce regretted attrition.

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.

Culture
PayPoint’s culture of openness, honesty and accountability
is an essential part of our success. Our values 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 case study on page 24.

Engagement
PayPoint recognises that all our employees play a part
in delivering the Group’s performance. We are paying a
one-off employee bonus in June 2018 in order to show
appreciation for our employee’s efforts over the last year.

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 2018
% of PayPoint plc directors
Number of men employed at
31 March 2018
% of PayPoint plc directors

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

Ethnic minorities2
% of all employees
% of management grades

We keep our people informed of company performance
and new developments via formal business update
meetings, staff briefings, regular team meetings and
company newsletters. All employees are invited to
participate in two meetings a year where the directors
present the performance of the group. We are also
establishing an employee forum to provide a communication
platform for consultation on relevant business related
issues and selected Board matters.

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
2018

Year
ended
31 March
2017

Year
ended
31 March
2018

Year
ended
31 March
2017

176

469

462

191
5 years 5 years 4 years 4 years
27%
2.0%
6%

23%
2.01%
9.25%

47%
1.5%
12%

29%
2.5%
10%

183
40%
279
60%

2
29%

5
71%

3
43%
4
57%

198
42%
271
58%

2
22%

7
78%

94
53%
83
47%

—
0%

87
46%
104
54%

—
0%

2
27%
6

—
0%
1
73% 100% 100%

—
0%
1

31%
21%

31%
18%

N/A
N/A

11%
5%

51
78
262
71

47
79
269
74

20
26
122
8

22
28
133
9

PayPoint invites 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. 88% of UK employees
participated in the 2017 survey and we achieved an overall
engagement score of 67%, compared with 68% in 2016,
a solid result as we continue to transform our business.

1. Senior management includes the Group Executives and Managing Director, PayPoint Romania
2. Data not recorded by Romanian business

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018

Environmental and social review continued

We are currently upgrading our buildings in Welwyn to
provide better facilities, including quiet spaces and the
gym, to improve productivity and wellbeing, addressing
feedback received in the survey. Romania employees did
not participate in the survey in 2017 due to the timing of
the Payzone acquisition.

PayPoint operates a Share Incentive Plan to enable all UK
employees to share in the success of the Company. 43% of
employees actively participate in this plan, an increase from
40% in the prior year.

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 2017 we supplemented this with change
management training to support managers as we continue
to transform the business. 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 and increased the
number of apprentices in our IT function during the 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.

43% of our employees are female and the representation
on the Executive Board is 43% with three women on a
board of seven members. We published our first gender
pay report in March which can be found on our website
www.corporate.paypoint.com1

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.

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.

Whistleblowing
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.

1. http://corporate.paypoint.com/investor-centre/csr/about-our-people

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 meet 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.

Our retailer and consumers
We have approximately 50,000 retailers in UK, Ireland and
Romania and provide a service to millions of consumers.

We seek to provide an unparalleled service to our retailers
and consumers which is achieved by the use of our stable,
reliable technology and the broad range of services to help
retailers run their businesses more efficiently and generate
consumer footfall in communities they serve

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. We also carry out regular surveys with our
retailers, via a third party to understand how we can
improve our service and hold regular forums with our
independent retailers on a national and regional level several
times a year. Major multiple retailers have regular review
meetings with dedicated account managers.

Our clients
We have over 400 end user clients including those via
reselling arrangements.

We can assist clients by providing convenient services for
consumer payments with a high standard of service and
open communication. Our contracts with client contain clear
obligations with respect to the services being provided
underpinned by measurable service levels which are set
to ensure a high standard of service provision. Specific
performance is measured for key elements, including system
and service availability, file delivery and funds settlement.

We have dedicated account managers for major clients who
undertake regular review meetings.

Local communities
We support the communities where our employees live and
work by providing them with the financial support they need
to serve their causes.

PayPoint has a charity committee made up of employee
volunteers which provides support, funded by the
Company, to fundraising activities carried out by our
employees for charities which are important to them. During
the year, PayPoint donated £16,000 to over 20 local and
national charities, which was supplemented by funds raised
by employees themselves.

PayPoint plc Annual Report 2018PayPoint is an Enterprise Advisor to a local secondary
school to support their students with the transition from
school to the workplace. During the year we supported
a number of activities including interview practise, career
fairs and work shadowing.

We offer our network to collect for certain charities free
of charge, including the BBC’s Children in Need telethon.
85% of PayPoint’s ATM network is ‘speech-enabled’, the
largest proportion of an independent network in the UK.

Shareholders
We had 622 shareholders as at 31 March 2018. We aim to
maximise shareholder return by setting the appropriate
internal targets for management which is to focus on
maximising economic profit.

We publish results twice each year and provide two interim
management statements, complying with reporting and
disclosure obligations. 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.

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

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
energy consumption and business travel. 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 but aim to avoid unnecessary travel.
Energy consumption arises from our offices in the UK and
Romania. We have a cycle to work scheme to encourage
less motor vehicles and encourage electronic documents
to reduce unnecessary printing, including our board papers.

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.

GHG emissions and waste
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
Global GHG emissions in the year reduced to 1,884 tCO2
from 2,173 tCO2 in 2017/18. Key drivers of the reduction:

• Mobile business greenhouse gas emission no longer part

of the Group, offset by including Payzone.

• Transition of our Hatfield and head office data centres to

hosted sites.

• The initiatives described above (LED lighting and drinks

vending machines).

Units

tonnes
CO2e

Impact
Scope 1 (direct
emissions from fuel
combustion)
Scope 2 (indirect
emissions from
purchased electricity,
heat and cooling)
Scope 3 (business
travel, waste2 and
water)
Total
Intensity measurement:
Total tonnes of CO2e
per employee1

Year ended
31 March
2018

Year ended
31 March
2017

435

373

922

1,120

527
1,884

680
2,173

3.0

3.3

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

1. We have used the average number of employees to calculate our intensity measure as

most of our emissions are directly related to business travel and energy consumption at
our head office locations.

2. Includes waste from UK and Ireland. Romania does not track waste.

We have also improved our approach to waste management
with the following initiatives undertaken during the year:

•

Installation of LED lights throughout our head office
which will reduce energy consumption.

• The replacement of drink vending machines from all sites
which has eliminated a significant portion of single-use
plastic cups waste. These were replaced with efficient
hot water fountains and reusable cups, mugs and
drinking glasses.

• Reducing waste to landfill with more office mixed recycle
collection points throughout the offices. extending our
recycling to include waste food and improved signage
around collection points to encourage better recycling.

Waste
Landfill
Recycled
Total
% recycled

Year ended
31 March
2018
(tonnes)
21.6
21.1
42.7
49.5%

Year ended
31 March
2017
(tonnes)
23.0
17.4
40.4
43.1%

Renovation of our unit 2 building has increased our overall
waste tonnage however internal initiatives have improved
our ratio of recycled to landfill waste.

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

Dominic Taylor
Chief Executive
24 May 2018

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Corporate governance report

Chairman’s statement on governance

The Board welcomes meaningful engagement with
shareholders, and throughout the year receives reports
and feedback on investor roadshows carried out by the
executive directors (see page 40 for details of such
activities). Furthermore, a perception survey of investors
was recently commissioned to enhance the Board’s
understanding of shareholder sentiment and feedback.

The Board remains fully aligned to ongoing engagement
with shareholders and other stakeholders and
acknowledges the importance of such engagement in
ensuring stakeholder views and perspectives are properly
understood and taken into consideration in board decisions.
This will continue to be a key focus for the Board in the new
financial year.

Evaluation
In accordance with the provisions of the UK Corporate
Governance Code (the Code), an externally facilitated
evaluation of the Board and its formal committees was
undertaken in the year. In summary the outcome of the
evaluation was positive, with the Board and its committees
shown to be operating effectively. There were some areas
for improvement highlighted in the evaluation report which
the Board discussed and agreed on the actions to be taken.
Details of the evaluation are on page 39.

Board changes
Tim Watkin-Rees retired as Business Development Director
and board member at the end of the financial year under
review. Tim was a founder director of PayPoint and joined
the board of PayPoint plc in 1998. He was responsible for
business development throughout the history of PayPoint.
Having stepped down from the Board, Tim will remain as
an employee and will continue to play an important role
in the activities of the Group in the role of Founder. On
behalf of the Board, I thank Tim for his dedicated service,
and the Board is grateful for the continued benefit of Tim’s
expertise in his ongoing role.

As was reported in last year’s annual report, Neil Carson and
David Morrison stepped down from the Board and Rakesh
Sharma joined the Board during the year. Details of the
comprehensive induction program undertaken by Rakesh
in the weeks following his appointment to the Board are on
page 38.

Dear Shareholder,

Overview
During the year one of the key priorities of the Board
was to monitor progress made in reshaping the PayPoint
business to focus on growth opportunities in retail services.
The aim was to ensure that in accordance with the Board
approved restructuring programme, the agreed strategic
objectives remained on course for delivery. This effective
and coordinated oversight of the strategic direction of
the business is made possible by the high standard of
governance applied by the Board in this area and in all
aspects of its remit, and which in turn is embedded across
the PayPoint organisation. Therefore I am pleased to
present this corporate governance report on behalf of the
Board which describes the Board’s activities during the year
and shows how it remains committed to good governance
that enhances performance and protects shareholders
and other stakeholders.

Stakeholders
We as a board are aware and are in support of the FRC’s
proposed refresh of the UK Corporate Governance
Code around improved stakeholder engagement,
and the Board continually seeks to foster a corporate
culture within PayPoint that positively impacts on its
stakeholders. An example of this is the system put in place
by management to measure retailer sentiment in order
to create a customer-centric environment and better
engage with retailers. In recognising that the retailers
are key stakeholders of PayPoint, the Board at its recent
strategy session endorsed the programme of engagement
with retailers and the defined actions for improvement of
retailer relationships.

Employees are at the ‘heart’ of the business in the role
they play in delivering the Group’s performance, and
the Board oversees the continuous drive towards a
positive working environment that is free from all forms
of discrimination and in which diversity is valued. In
accordance with regulatory requirements, the Gender
Pay Gap Report for PayPoint was recently published. The
report identified a pay gap which in itself is reflective
of the technology industry and highlights that there are
more men than women in higher paid roles across the
organisation. Nevertheless commitments have been
made and actions will be taken, as set out in the report, to
reduce the pay gap in the short term and ultimately close
the gap over time. (The full PayPoint Gender Pay Gap
report is available on the PayPoint corporate website –
www.corporate.paypoint.com¹).

1. http://corporate.paypoint.com/downloads/csr/gender_pay_report.pdf

PayPoint plc Annual Report 2018It is acknowledged that in the period between Neil Carson
stepping down from the Board in May 2017 and David
Morrison’s retirement in July 2017, the composition of
the Board was not compliant with the letter of the Code
because the independent non-executive directors made up
less than half of the Board. However subsequent to David’s
retirement the composition of the Board till date remains
compliant with the provisions of the Code.

Conclusion
The Corporate Governance Report, the Remuneration
Report and the Directors’ Report have been written with
the aim of providing shareholders with a comprehensive
understanding of how the Board and its main committees
operate within the governance framework of the
organisation, and how the requirements of the Code have
been met.

Taking the various changes to the Board’s composition
during the year into consideration, the Board has determined
that the balance of skills, knowledge and experience on the
Board are appropriate for the size of the business.

The Board remains committed to maintaining open
dialogue with shareholders and we look forward to
meeting with shareholders who are able to attend our
forthcoming annual general meeting.

Nick Wiles
Chairman
24 May 2018

Board committees
This corporate governance report includes reports of the
nomination and audit committees on pages 41 and 43.
The report of the Remuneration Committee is set out in the
remuneration report on page 49. In accordance with the
Code, the Board delegates certain roles and responsibilities
to these committees as defined in their terms of reference,
but continues to retain overall responsibility for these
delegated authorities. One of the key areas considered
during the year by the Audit Committee under the auspices
of the Board, were the risks associated with cyber
security.The in depth discussions around these risks led
to the establishment of a Cyber Security and Information
Technology sub-committee of the Audit Committee.
Details of the purpose and responsibilities of this
sub-committee are on page 45.

Other key activities of the committees during the year
as detailed in the individual committee reports include:
Audit Committee – risk management and internal
controls, and the audit tender and appointment process
(see page 44); Nomination Committee – succession
planning (see page 42); and Remuneration Committee
– application of the shareholder approved remuneration
policy for the year under review (see page 58).

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Corporate governance report continued

Board of directors

PayPoint plc Annual Report 20181. Nick Wiles
Non-executive Chairman
Appointed to the board 22 October 2009
Appointed as Chairman 8 May 2015
Experience
Nick retired as Chairman of UK Investment banking at Nomura
in 2012 after more than 25 years in investment management
and banking. His career started as an analyst and fund
manager at Mercury Asset Management before moving to
Cazenove, where he spent the majority of his career and was
a partner prior to incorporation and a vice chairman of JP
Morgan Cazenove. He was a non-executive director of Strutt
& Parker from 2003-2014, and is currently Senior Independent
Director at Primary Health Properties plc.
Key skills and competencies
Investment banking, Corporate Finance, Equity Markets,
Investor Sentiment

2. Dominic Taylor
Chief Executive
Appointed 4 August 1998
Experience
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.
Key skills and competencies
Strategy, Business Development, Leadership

3. Gill Barr
Independent non-executive director
Appointed 1 June 2015
Experience
Gill has held senior strategy, marketing and business
development 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 non-executive director on the boards of N Brown Group
plc and Wincanton plc. In addition, she is a Trustee Director
for Willis Towers Watson’s master trust, LifeSight Ltd. She
is the Chair of the Customer Challenge Group for Severn
Trent Water plc.
Key skills and competencies
Marketing, Strategy, Retail

4. Rakesh Sharma OBE CPhys FREng MInstP
Independent non-executive director
Appointed 12 May 2017
Experience
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 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 held
until 2017.
Key skills and competencies
Cyber Security, Information Technology,
Executive Management

5. Giles Kerr
Senior Independent director
Appointed 20 November 2015
Experience
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 and board
member. Giles is Director of Finance of Oxford University
and is a non-executive director of BTG plc, Senior plc,
Adaptimune Therapeutics plc and Arix Bioscience plc.
Key skills and competencies
Corporate Finance, Accounting, Risk Management

6. Rachel Kentleton
Finance Director
Appointed 3 January 2017
Experience
Rachel is a qualified accountant and has held a number of
finance and investor relations roles at Unilever, NatWest,
Diageo and SABMiller. Prior to joining PayPoint, Rachel was
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.
Key skills and competencies
Finance, Strategy, Investor Relations, Risk Management

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Corporate governance report continued

Leadership team

PayPoint plc Annual Report 20181. 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.

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.

2. Tim Watkin-Rees
Founder
Tim was a founder director of PayPoint in 1996 and recently
stepped down from the plc Board after 22 years as Business
Development Director. He continues to drive innovation in
PayPoint in his new role as Founder. 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.

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.

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.

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.

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.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Corporate governance report continued

Compliance statement
The Board considers that throughout the year under review,
it has complied with the principles and provisions of the
April 2016 version of the UK Corporate Governance Code
(the Code) as issued by the Financial Reporting Council, with
the exception of the period between May 2017 and July 2017
where less than half of the Board, excluding the Chairman
comprised independent non-executive directors. The reason
for the deviation from Code provision B1.2 for the short
period during the year under review is as explained on
page 29. A copy of the Code can be found at www.frc.org.uk1

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

Leadership

Corporate governance structure
The Board provides effective leadership to the Group
within a wider corporate governance framework with
clearly defined roles and responsibilities as illustrated in
the chart below. The governance framework supports the
rigorous challenge by the Board of strategy, performance
and accountability, which encourages the proper
implementation of the strategic aims of the Company.
This results in the growth of the business, and protection
of the interests of shareholders and wider stakeholders.

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 Board delegates certain roles and
responsibilities to board committees and to the Chief Executive

but still retains overall responsibility. It 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 www.paypoint.com2

Audit Committee
- Assists the Board in
oversight of financial
results, internal control
and management of risk
and compliance.

- Maintains an appropriate

relationship with
the external and
internal auditors.
Read more on page 43.

Nomination Committee
- Reviews structure, size
and composition of the
Board and oversees
succession planning
for the Board.

- Identifies and nominates
candidates to the Board
taking into account
experience, diversity
and expertise.

Read more on page 49.

Market Disclosure
Committee
Oversees the disclosure
of information by the
Company to ensure that it
meets its obligations under
the Market Abuse
Regulations. 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 on page 37.

Cyber Security
and IT sub-committee
Established during the year
as a sub-committee of the
Audit Committee. It oversees
cyber security and
information technology
matters pertaining to the
Group, and reports to the
Audit Committee. Its
membership comprises two
non-executive directors, the
Finance Director and the
Chief Information Officer.
Read more on page 45.

PayPoint Romania
PayPoint Romania is headed
by a 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, Chief Information Officer,
Commercial Director, HR Director, Company Secretary/Head of
Legal and Founder. The Executive Board is responsible for the
day-to-day management of the Group’s operations (excluding
PayPoint Romania and PayPoint Payment Services Limited).
Matters overseen by the Executive Board include: risk
management; annual budget for the business; strategy
proposals and the implementation of 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 cash-out
services) under the Payment
Service Regulation 2009.
The Managing Director of
PPSL reports to the
Chief Executive.

1. https://www.frc.org.uk/Our-Work/Codes-Standards/Corporate-governance/UK-Corporate-Governance-Code.aspx
2. https://paypoint.com/documents/20170726-delegation-of-authority-v2.pdf

PayPoint plc Annual Report 2018Meetings
The Board and its committees meet regularly throughout
the year with meetings scheduled around key dates in the
Company’s corporate calendar, and where necessary to
consider key corporate transactions or events that may
arise. There were eight scheduled meetings during the year
under review, six of which were full board meetings and two
were held by telephone conference. The meetings held by
telephone conference were to consider and approve trading
update statements.

In addition, the Board held two strategy sessions during
the year. The first was a two-day strategy session which
was combined with scheduled board and board committee
meetings in September 2017 and held at the PayPoint offices
in Romania. Aside from the in depth consideration and

debate of the strategy which was the purpose of this two
day session, it was an opportunity for the Board to visit the
business in Romania, and to interact with the executive board
and senior management who were involved in presenting the
strategy. The second strategy session was a half day update
session, held in February 2018, and was also combined with
scheduled board and committee meetings. The purpose of
this session was for the Board to be updated on strategy and
to monitor progress against the strategy.

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
2017/18

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 Carson1
Giles Kerr
David Morrison2
Rakesh Sharma3
Nick Wiles
Executive Directors
Rachel Kentleton
Dominic Taylor
Tim Watkin-Rees4

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

8
1
8
2
7
8

8
8
8

8
1
8
3
8
8

8
8
8

6
1
6
1*
5
6*

6*
6*
6*

6
1
6
1*
6
6*

6*
6*
6*

2
—
2
—
2
2

—
2*
—

2
—
2
—
2
2

—
2*
—

2
1
2
1*
2
2

—
2*
—

2
1
2
1*
2
2

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

1. Neil Carson stepped down from the Board on 26 May 2017.
2. David Morrison stepped down from the Board on 26 July 2017. He was unable to attend a meeting of the Board at which the first quarter trading update was considered.
3. Rakesh Sharma was unable to attend one board meeting and one meeting of the Audit Committee.
4. Tim Watkin-Rees stepped down from the Board on 31 March 2018.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018

Corporate governance report continued

The Chairman sets the agenda for the Board and ensures that adequate time is available for discussion of all agenda items,
including strategic issues. 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 with external advisers are held when
necessary to aid the Board’s decision making process. The table below shows the key areas of board activity during the year.

Strategy

• Two strategy sessions were held in the year:

– A two-day session was held at PayPoint in Romania in September 2017 at which members of the

Executive Board and senior UK management team gave presentations to the Board on the following
key topics and areas of strategy: 5 year summary plan, cash & energy, retail landscape and Retail
Services, PayPoint One and card payments, parcels, innovations, leadership, IT strategy, organisation
design and financial resources.

– A half-year strategy update session was held in February 2018 at which the Board received updates
on the progress made in implementation of the strategy including consideration of the outcome of
a retailer survey that had been carried out since the last session.

At both sessions sufficient time was allocated for challenge and debate of the strategy by the Board.

Internal
Control
and Risk
Management

• Established a Cyber Security and Information Technology sub-committee of the Audit Committee.
• Approved the renewal of insurance policies for the Group.
Risk management and oversight of internal controls are delegated by the Board to the Audit Committee
which reports regularly on its activities to the Board (please refer to the Audit Committee report on
page 43 for more on the committees’ activities on risk management and internal controls).

Business
performance
and
Financial
Reporting

• Approved the annual report and preliminary results announcement.
• Approved the half year financial report.
• Discussed the 1st and 3rd quarter trading updates and approved these updates for release to the market.
• Reviewed management presentations to analysts for the full and half year results.
• Received and discussed proposals for a move to quarterly dividend payments.
• Considered and approved the plan for financial year 2018/19.
• Reviewed Group forecasts which were updated for every quarter of the year and scrutinised the risks

and opportunities built into these forecasts.

• Received monthly management accounts ahead of every full board meeting.
• Received management reports from the Chief Executive at every full board meeting, on general

business operations and key strategic progress updates including areas such as: parcels, PayPoint One,
client contracts and contract renegotiations, progress updates on the integration of a CRM system and
general business trading updates for PayPoint UK & Ireland and Romania.

• Received updates on the Group’s Information Technology systems.

Governance • Received board committee reports on the committee meetings which were usually held prior to the

Board meetings, and included updates and recommendations on matters that had been delegated to
the committees, some of which required board approval.

• Considered and recommended the final dividend for shareholder approval at the annual general meeting.
• Approved the notice of annual general meeting.
• Discussed and approved a new revolving credit facility for the Group of up to £75 million with additional

£20 million accordion option.

• Considered and approved updates to the Board’s delegated authorities.
• Considered the recommendation from the Audit Committee to appoint KPMG as external auditors. See
page 45 of the Audit Committee report for details of the audit tender and subsequent appointment.

• Reviewed investor feedback from the full and half year roadshows.
• Approved the Slavery and Human Trafficking statement of the Board for 2017.
• Reviewed the directors’ conflicts of interest register.
• Appointed an independent external board evaluator to carry out an evaluation of the Board and its main

committees, and subsequently reviewed the evaluation report.

• Received updated shareholder analysis summary reports ahead of every full board meeting.

People

• Reviewed the Group health and safety report at each full board meeting which covered any health and

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

• Received and discussed a report on staff turnover across.
• Approved Rakesh Sharma’s appointment to the Board and accepted Neil Carson’s and David Morrison’s

resignations from the Board.

• Considered and approved Tim Watkin-Rees’ stepping down from the Board including his continued

employment with the Company in the role of Founder.

• Reviewed the PayPoint Gender Pay Gap report and approved the commitments and actions therein,

prior to publication of the report.

PayPoint plc Annual Report 2018Division of roles and responsibilities
There is clear and effective division of roles and responsibilities on the Board as shown below.

Board Leadership

Chairman – Nick Wiles
Nick Wiles 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. On
his appointment, he was considered by the Board to be independent in character and judgment in accordance with the
Code. 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 on the Group’s performance and operations.

• Ensuring 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 to retain and build an

effective and complementary board, and to facilitate the appointment of effective and suitable members and chairs of
board committees.

• Ensuring effective communication with shareholders led by the Chief Executive and Finance Director, and ensuring

that members of the Board develop an understanding of the views of major investors.

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

Running the Business

Chief Executive – Dominic Taylor
Dominic Taylor is responsible for running the Group’s
business, and for 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.
Implementing the agreed strategy with the support
of the Executive Board.

•

• 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.
Finance Director – Rachel Kentleton
Rachel Kentleton is responsible for all financial reporting, tax
and financial control aspects of the Group. As a member of
the executive board she also provides support to the Chief
Executive in the development and implementation of the
strategy, and in the wider activities of the Group, as required.

Constructive Challenge & Independent Oversight
Senior Independent Director – Giles Kerr
Giles Kerr supports the Chairman in his role by acting as a
sounding board for the Chairman and a trusted intermediary
for other directors in resolution of any significant issues
that may arise. His other main responsibilities include:
• 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 – Gill Barr, Rakesh Sharma
The Non-Executive Directors bring a strong independent
element to the Board, and provide constructive challenge
and support to strategic and other matters addressed by
the Board. They are expected to attend all scheduled board
and committee meetings, and to devote such time as is
necessary for the proper performance of their duties.
During the year, the Chairman held meetings with the
non-executive directors without the presence of the
executive directors. These meetings were held immediately
following a full board meeting. There were no unresolved
concerns about the running of the Company.

Board Support

Company Secretary & Head of Legal – Susan Court
Susan Court is the secretary to the Board and all its committees. She provides advice and assistance to the Board on
corporate governance practices and development, as well as guidance on the legal and regulatory obligations of the
Group. Her other responsibilities include:
• Supporting the Board and committee Chairs in annual agenda plan setting.
• Ensuring information is made available to the Board members in a timely fashion.
• Coordinating training requirements for the non-executive directors.
• Organising internal board and committee evaluations at the request of the Chairman.
• Membership of the Market Disclosure committee of the Board.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Corporate governance report continued

Effectiveness

Composition
The Board is composed of three non-executive directors,
two executive directors and a non-executive Chairman.
The directors have a broad range of skills, competencies
and experience which gives them an understanding of
the market in which PayPoint operates and enables them
collectively, as a board, to discharge their responsibilities
effectively. This balance of skill and independence on
the Board creates an environment that encourages the
effective challenge and development of the strategic aims
of the Company. The biographies, including the key skills
and competencies, of each of the directors can be found
on page 31.

During the year under review, Rakesh Sharma joined
the Board on 12 May 2017, and the following directors
resigned from the Board: Neil Carson on 26 May 2017,
David Morrison on 26 July 2017 and Tim Watkin-Rees
on 31 March 2018. Further information on directors’
appointment and resignations can be found in the
Nomination Committee report on page 41.

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
made 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.

Independence statement
The Board considers its non-executive directors who are
identified on page 31 to be independent. The Board has
determined that each is independent in character and
judgement, and is free from any business or other relationship
which could affect the exercise of his/her judgement.

Induction
On joining the Board, all new directors receive a
full, formal and tailored induction. Shortly after his
appointment, Rakesh Sharma was given a corporate
governance pack containing: the corporate structure of
PayPoint, delegation of authorities and terms of reference,
relevant PayPoint policies and procedures, and access
to previous board minutes. Subsequently he received a
comprehensive induction the purpose of which was to
increase his knowledge of the Group’s strategy, business,
processes, people and financial control environment.

The induction involved meeting with members of the
Executive Board and members of the senior management
team in relevant functions across the business as follows:

Function

Purpose

Finance and Risk

Business Development

Commercial

Human Resources (HR)

IT and Retail Operations

Finance overview and
introduction to the teams.

Overview of PayPoint’s
Products and introduction to
the Product team.

Overview of the Client, Retail,
Sales and New Business
functions and introductions
to the teams.

HR overview and introduction
to the team.

Overview of IT & Retail
Operations and introductions
to the teams.

As part of the induction programme, Rakesh Sharma visited
a local retailer who is part of the PayPoint network. He also
visited PayPoint Romania during the two-day board strategy
session, where he was given a tour of the business and met
with members of staff. He met with shareholders at the
annual general meeting following his appointment.

Training and support
Directors are provided with clear and accurate information
on 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 addition to board meetings, directors
held board dinners during the year at which relevant items
were identified beforehand and discussed in detail.

In 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 or its
committees on technical subject matters. For instance, the
Remuneration Committee received a tailored briefing from
its remuneration adviser, on the proposed changes to the UK
Corporate Governance Code with reference to the possible
impact on remuneration matters. The Company Secretary
also provided updates to the Board and its committees on
other governance matters, including regular updates on the
processes put in place across the business for compliance
with the General Data Protection Regulations.

The non-executive directors are provided with schedules
of relevant training by external providers which they are
encouraged to attend at their convenience.

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.

PayPoint plc Annual Report 2018Board evaluation
The Board carries out an evaluation of its performance and
that of its committees every year and the evaluation is carried
out by an external provider every third year in compliance with
the Code. The actions from the last internal evaluation and the
steps taken against the actions are set out below.

Outcome of the external evaluation of the board

In the evaluation report, Mr Edis-Bates found that the Board
is operating effectively. The report highlighted the areas of
strength for the Board as being:

• The quality, format and regularity of the financial reports

Actions from 2016/17
internal evaluation of
the board

• Proposed non-

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

Progress/Achievements

• A non-executive directors’
only lunch was held during
the year following a full board
meeting in November. Also,
the Chairman met with only
the non-executive directors
after every full board meeting,
to discuss any pertinent
issues that had arisen from
the meeting or otherwise.

•

Increased oversight
of the performance
of members of the
Executive Board to
ensure that they are
equipped to deliver
on the strategic plan.

• The strategy sessions held

during the year provided the
Board with the opportunity
to interact with and review
the progress made by the
Executive Board in strategy
implementation.

In the year, following a market review, Jon Edis-Bates of
Edis-Bates Associates Limited was appointed to carry out
an independent evaluation of the Board and its committees.
Neither Mr Edis-Bates nor Edis-Bates Associates has any
other connection with PayPoint.

Process for the 2017/18 external evaluation of the Board

Preparation:
Mr Edis-Bates held discussions with the Chairman and
the Company Secretary to agree on the scope of the
evaluation and the timetable of activities. Mr Edis-Bates
was given access to board and committee minutes and
papers as preparatory work for the evaluation.

Interviews:
Mr Edis-Bates conducted comprehensive interviews with
each board director between December 2017 and January
2018. Each director had been sent a detailed questionnaire
which they were requested to consider ahead of their
interview session. The Company Secretary was also
interviewed to gain a broader perspective.

Review:
An initial report on the output of the evaluation was
prepared by Mr Edis-Bates and discussed with the
Chairman and the Company Secretary.

Subsequently a report containing the outcome of the
evaluation including observations and recommendations
was prepared by Mr Edis-Bates and was presented to the
Board by the Chairman at its meeting in March 2018. The
Board considered and discussed the report. Prior to the
Board’s discussion of the report, the Chairman met with
the executive directors and the non-executive directors
separately to discuss the outcomes of the evaluation.

Separate reports were compiled by Mr Edis-Bates for
individual participants.

to the Board;

• The Board’s clear strategy for the Group for the next

three financial years;

• The time allocated for board discussion of the strategy,

including the quality of the debate;

• The culture of openness and debate at board meetings

which allowed for ideas, comments or concerns
to be expressed freely by the directors to the board
or management;

• The induction given to new board directors;
• The Board’s familiarity with the Group’s activities;
• The Chairman’s handling of the Board agenda and the
effectiveness of the company secretarial team; and

• The diversity on the Board.

The observations in the report on the areas for
improvement included:

• Need for increased oversight by the Board of the

implementation of the strategy;

• Greater involvement by the Board in setting the

•

corporate culture and values; and
Improvement in the quality of training information and
opportunities for non-executive directors.

Actions

Following the Board discussions around the 2017/18
external evaluation report, the actions below were agreed
by the Board based on the identified areas for improvement
and the observations of Mr Edis-Bates:

Strategy:
• Continued update and development of the financial

reporting information received by the Board, including
further improvement of the consistency and quality of
board strategy papers.

•

Improvement of the process for monitoring, by the Board,
of strategic implementation during the year, as well as a
more detailed assessment along product/business lines
such that the Board can clearly identify: performance/
delivery against the plan, and the delivery of a greater level
of executive ownership and accountability.

Board process:
• Encouragement of greater challenge and openness

of board debate, including;
– more discussions around potential alternative strategies;
– devotion of greater board time to strategy

discussions; and

– allocation of time to broaden board discussions.

• Addition of one more full board meeting to the Board
calendar, in January, to address the specific issues of:
– business values, diversity and cultural change;
– executive team development; and
– formal update of NED training opportunities.

Board engagement:
•

Increase in availability of opportunities for the Board
to engage with management across the business.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018

Corporate governance report continued

The outcome of the external evaluation of the main
committees of the Board and the agreed actions are set out
in the individual committee reports on pages 41, 43 and 49.

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 re-election of each director can be found in the
notice of meeting on pages 96 to 100.

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 69 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 68 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 43.

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 23 and 25, and a statement on how
the directors have assessed the prospects of the Group
taking into account the current position and principal
risks is on page 21.

Remuneration

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 49 to 65.

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. Major
shareholders were consulted on the tender process for
the appointment of new auditors. Further details are in the
Audit Committee report on page 43.

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 shareholders
and this interaction is strongly encouraged.

As done annually, the executive directors held ‘roadshows’
for institutional investors and analysts twice in the year for
two weeks at a time following the release of the full and the
half year results. These roadshows took place in May/June
and November and were held in: London, Edinburgh and
Oxford. This year the shareholder engagement programme
was also extended such that the executive directors
met regularly with investors and analysts outside of the
roadshows throughout the year. The meetings included:
executive directors attendance of investor conferences
at which they had one-to-one meetings with investors;
and a capital markets morning held for investors on the
topic of convenience retail, at which presentations were
given by members of the Company’s senior management
team and by PayPoint retailers. The discussions at the
roadshows and meetings covered a wide range of issues
which had previously been made public including the full/
half year results, strategy, performance, management
and governance. Feedback from analysts and investors
following these meetings were reported 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.corporate.paypoint.com1. Details of the Market
Disclosure committee are on page 34 and the reports
of the Audit, Nomination and Remuneration Committees
are set out on pages 41 to 65.

1. http://corporate.paypoint.com/

PayPoint plc Annual Report 2018Nomination Committee report

Chairman’s statement on the Nomination Committee

Dear Shareholder,

On behalf of the Nomination Committee I am pleased to
present the Nomination Committee report for the year
ended 31 March 2018. In light of the changes to the Board’s
composition during the year, one of the main areas of focus
for the committee was the assessment of the balance of
skills, experience, independence and knowledge on the
Board. This assessment was to ensure that the Board
remained effective and of a sufficient size to meet the
requirements of the business without undue disruption.

The committee considered succession and role
reorganisation with particular reference to the resignation
of Tim Watkin-Rees from the Board and the changes to his
role as an employee.

An external evaluation of the committee was carried out
by Jon Edis-Bates and the overall assessment of the
committee was that it continued to operate effectively.
Details of the outcome and actions are set out in the
committee’s report below.

The Nomination Committee comprised Gill Barr, Giles Kerr,
Rakesh Sharma and myself, as the committee Chairman.
Prior to their resignation from the Board, Neil Carson and
David Morrison also served on the committee during the
year. The biographies of each committee member is on
page 31.

Nick Wiles
Chairman, Nomination Committee
24 May 2018

Responsibilities
The committee is responsible for the regular review of
the structure, size and composition (including the skills,
knowledge and experience) of the Board and it makes
recommendations to the Board with regard to any changes.
The committee also gives full consideration to succession
planning for directors and the Executive Board in the
course of its work, taking into account the challenges and
opportunities facing the skills and expertise required.
Further details of its responsibilities can be found in the
committee’s terms of reference, on the Company’s website
www.corporate.paypoint.com1

Meetings
Meetings of the committee are generally held around the
time of scheduled board meetings. The Committee met
twice during the year. Details of meeting attendance are
set out on page 35.

Activities during 2017/18
The activities of the committee for the year under
review comprised:

Assessment of board composition:
There were changes to the Board composition during
the course of the year with the appointment of Rakesh
Sharma to the Board, and the stepping down from the
Board of Neil Carson, David Morrison and Tim Watkin-Rees
at different times in the year. With these changes, the
committee considered the composition of the Board
by reviewing its structure and size as well as the skills,
knowledge, experience and diversity of the directors.
It was determined that no further appointment would be
required to be made following the changes, because the
balance of skills, knowledge and experience on the Board
would remain appropriate for the size of the Company.
A recommendation was made to the Board accordingly.

1. http://corporate.paypoint.com/investor-centre

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Nomination Committee report continued

Succession planning:
The committee reviewed succession plans for Executive
Board roles and the progress of action plans to address
any gaps. The Chief Executive proactively manages
succession planning for the Executive Board and
senior management and keeps the Board updated on
developments as necessary.

When Tim Watkin-Rees informed the Board of his intention
to retire from the Board and to continue as an employee of
the Company in a part-time role, the committee considered
executive succession and reviewed the revisions to the
organisation structure, as presented by the Chief Executive.
The purpose of this succession plan was to ensure that there
was sufficient business continuity and that knowledge in the
business was not lost. The committee will continue to review
progress against this plan on a regular basis.

Prior to Rakesh Sharma’s appointment to the Board in
May 2017, the committee evaluated the balance of skills,
knowledge and experience on the Board. Details of the
appointment process for Rakesh Sharma were set out in the
Nomination Committee report of the 2017 annual report.

Committee evaluation:
As highlighted in the committee chairman’s statement,
an external evaluation of the committee was carried out
during the year by Jon Edis-Bates. The process for the
evaluation was as set out on page 39.

Outcome of the external evaluation of the committee

In the evaluation report, Mr Edis-Bates found that the
Nomination Committee is operating effectively. The report
highlighted the areas of strength for the committee as being:

• The balance of skill and knowledge on the committee

was appropriate.

• All committee members devote sufficient time and

energy to the committee’s role and work.

The observation in the report on the area for improvement
was the irregular circulation of meeting papers to
members ahead of committee meetings.

Actions

The actions below were agreed by the committee
based on the identified areas for improvement and the
observations of Mr Edis-Bates:

• Summary and documentation of the overall board

succession plan by the Nomination Committee chair,
and institution of a more formal Nomination Committee
process which would include improving on the
regularity of committee meeting papers.

• Regular review of the engagement of the non-executive
directors with the business in order to maximise access
to their skills and experience.

Diversity
Policy

The diversity policy applied to the Board is the PayPoint
Diversity and Equality Policy. The Board has overall
responsibility for the effective operation of the policy
and for ensuring compliance with the relevant statutory
framework. The Board has delegated day-to-day
responsibility to the HR Director for operating the policy
across the rest of the Group and ensuring its maintenance
and review.

Statement on diversity

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. 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.

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.

Progress made against the diversity policy

In compliance with the recommended target set by the
Hampton-Alexander Review on Improving gender balance in
FTSE leadership, the proportion of female members of the
board is currently 33% (i.e. two of the six directors are female).

The committee recognises that diversity is more than just
gender-based, and will continue to apply rigorous recruiting
practices to ensure the best candidates are nominated for
appointment to the Board, based on objective requirements
and assessments whilst taking a broad perspective of
diversity into account.

The 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.

The terms and conditions of appointment of non-executive
directors and service contracts of executive directors are
made available for inspection at the annual general meeting.
Further details on diversity throughout the Group including
further information on the diversity and equality policy can
be found on page 26.

The Nomination Committee report was approved by the
Board on 24 May 2018 and signed on its behalf by:

Nick Wiles
Chairman, Nomination Committee

PayPoint plc Annual Report 2018Audit 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 2018 which sets out the activities and
focus of the committee for the period.

During the year the Audit Committee continued in its key
role of robust risk management, monitoring the integrity of
PayPoint’s published financial information, assessing the
effectiveness of its internal controls and ensuring that a high
quality audit was delivered.

As was notified in the last annual report, an audit tender
was carried out in 2017 to appoint a new external auditor.
Following the successful conclusion of the tender, the Board
approved the appointment of KPMG LLP as the external
auditor for the financial year ending 31 March 2018,
to succeed Deloitte LLP. I would like to thank the audit
firms for their professionalism and work in the audit tender
process, and also the team at Deloitte who have worked

Annual report recommendation
The committee assessed the 2018 annual report of
the Company and the processes followed in preparing
the accounts, and recommended to the Board that,
taken as a whole, the annual report is fair, balanced and
understandable, and provides sufficient information
to enable the shareholders to assess the Group’s
performance, business model and strategy. In it’s
assessment the committee considered the audit findings
and auditor’s report including the significant judgements
and issues identified in those reports. The committee
also took into consideration the following which had been
presented to the Board during the year:

• a clear strategy of the Group and the progress

updates thereof;

• the Group’s monthly management accounts;
• the budget plan for the financial year including

the identified risks and opportunities; and

• the quarterly Group forecasts.

Committee composition and meetings
The Audit Committee comprises Gill Barr, Rakesh Sharma
and Giles Kerr, as Chairman. The Board considers that
Giles Kerr has recent and relevant financial experience in
accordance with the Code. Full biographical details of each
of the committee members, including their relevant financial
experience, are set out on page 31.

The committee met six times during the financial year.
The details of meeting attendance are set out on page 35.
By invitation, during the year, meetings were also attended

closely with the committee for many years. Further details
of the tender process are on page 45.

The committee was evaluated during the year by an
external independent assessor, as described on page 39.
The outcome of the evaluation is set out on page 45.

The following Audit Committee report gives an insight into
the activities undertaken or overseen by the committee.

Giles Kerr
Chairman, Audit Committee
24 May 2018

by the Chairman of the Board, the Chief Executive, the
Finance Director, the Business Development Director, and
the Head of Risk and Compliance. The external auditor
and internal auditor, also attended committee meetings as
appropriate.

The committee meetings generally take place on the same
day as, but prior to, the Company full 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, including the financial statements of the Company
and any formal announcements relating to the Company’s
financial performance and financial management;

• oversight and monitoring of the effectiveness of the

•

internal control and risk management systems in place;
in depth review of the full and half year financial
statements including key judgements therein, before
recommending these to the Board for approval; and
• oversight of the internal and external audit processes,
including auditor independence, appointment and
effectiveness, as well as the policy on non-audit services.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Audit Committee report continued

Committee activities for 2017/18
In the year under review the work undertaken by the Audit Committee was as follows:

Financial reporting:

• Review of the preliminary and interim results announcements.
• Review of the annual report with particular reference to the significant risks, the Audit Committee report, disclosures

relating to performance, business model and strategy and consideration as to whether the annual report is fair,
balanced and understandable.

• Recommendation to the Board that the annual report and accounts taken as a whole, is fair balanced and understandable.
• Review of significant accounting judgements (as reported on page 45).
• Consideration of the going concern basis for preparation of the financial statements.
• Consideration of the viability statement. In doing so the committee had regard to an assessment which modelled the
possible occurrence of significant risks and events, and which showed that PayPoint would continue to be viable and
profitable over the three year period.

• Recommendation of the viability statement and going concern statement to the Board.
• Review of the external auditor reports and the outcomes of the audit process.

External auditor:

• Assessment of external auditor appointment, independence and effectiveness for recommendation to the Board.
• Recommendation of the appointment of KPMG LLP as external auditor following a tender process. See page 45 for

details of tender process.

• Review and approval of auditor remuneration.

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.
•

In depth consideration and review of the comprehensive reports produced by the Head of Risk and Compliance on risk
management and internal controls within the Group. These reports are presented by the Head of Risk and Compliance
at all committee meetings and over the course of the year, covered the following areas:
– for each risk on the corporate risk register, key findings from risk review that may have been carried out since the last

committee meeting, the updated risk register and outstanding risk reviews and audit actions;

– details of the internal audit plan;
– fraud monitoring and reporting;
– report and update on the strategic management risk review (see page 48 for further details on this review);
– newly identified risks;
– risk review of PayPoint Romania;
– report on the transactions and settlements in PayPoint Payment Services Limited; and
– reports on audits of the business carried out by PayPoint clients.

• Review of BSI assessment reports. BSI carry out independent audits of the PayPoint network operations.
• Review of the corporate risk review register which shows the actions arising from the Group risk review. The corporate
risk register comprises seven sections identifying the key risks, and each section was reviewed by the committee at its
meetings during the year.

PayPoint plc Annual Report 2018Committee governance:

• Review of reports from the Cyber Security & Information Technology sub-committee. This sub-committee was

established during the year, and the details of its purpose and composition are set out below.

External evaluation:
As highlighted in the committee chairman’s statement, an external evaluation of the committee was carried out during
the year by Jon Edis-Bates. The process for the evaluation is as set out on page 39.

Outcome of the external evaluation of the committee
In the evaluation report, Mr Edis-Bates found that the Audit Committee is operating effectively. In its key findings, the
report highlighted the commitment of committee members as the area of strength for the committee. It was found that
all committee members devote sufficient time and energy to the committee’s role and work.

The area for improvement identified related to the internal audit engagement.

Actions
The actions below were agreed by the committee based on the identified area for improvement and the observations
of Mr Edis-Bates:

• Re-invigoration of the internal audit function and its engagement with the committee and the Board.
• Oversight of the implementation plans put in place by management to ensure compliance with the General Data

Protection Regulations (GDPR).

Training:

• The committee received a ‘teach-in’ on transaction and settlement processing within PayPoint, given by the Group

Head of Settlement and the Head of UK Finance, who are members of the senior management team.

Significant judgements
The significant issues considered by the committee
in relation to the 2018 accounts, and how these were
addressed, were:

• Critical estimate: Useful economic lives – 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.
• Revenue recognition: The Committee continued to focus
on Revenue recognition during the year due to the level
of transactions and the complexity of the systems. The
Committee was pleased to note that no errors were found
as a result of the auditor’s work in this area.

Cyber Security & Information Technology sub-committee
In July 2017, the Board resolved to establish a Cyber
Security & Information Technology sub-committee of the
Audit Committee. The establishment of the sub-committee
was in recognition by the Board of the significance of cyber
security and information technology (IT) risks to PayPoint,
and the need for increased focus and a structured approach
to the oversight of these matters.

The purpose of the sub-committee is to oversee cyber
security and IT matters pertaining to the Group in order to
report to the Audit Committee. Its key responsibilities include:

• Advice the Audit Committee on current cyber and
information security risk exposure of the Group;
• Review the Group’s policies established to assess,
monitor and mitigate the significant cyber and
information security risk exposures;

• Review reports on the Group’s cyber and information

security breach response plan;
• Review cyber incident reports; and
• Assess the adequacy of the Group‘s cyber and
information security related insurance cover.

The composition of the sub-committee is: two non-
executive directors – Rakesh Sharma and Giles Kerr, as
Chairman of the sub-committee, the Finance Director, and
the Chief Information Officer, Jon Marchant, who is also
on the Executive Board (see page 33 for Jon’s biography
details). The Company Secretary is the secretary to the
sub-committee.

The sub-committee met twice during the year and all its
members and the secretary were in attendance. The Head of
Risk and Compliance attended both meetings by invitation.

External audit tender and appointment of auditor
Deloitte had been the auditor of the Group since their
appointment following a formal tender process, for the year
ended 31 March 2001. As was stated in the 2017 annual
report the committee decided to put the external audit
for the Group out to tender with a view that the appointed
firm would carry out the audit for the year ended 31 March
2018. Deloitte were not asked to participate in the tender
process. However Deloitte were re-appointed as auditor at
the 2017 annual general meeting, and held office until the
new auditors were appointed.

The tender process was overseen by the Audit Committee
and the management of the process was delegated to
the Chairman of the committee and the Finance Director.
The key objective was to deliver a fair, transparent and
successful tender process with minimum disruption to the
business. PWC, KPMG and Ernst & Young were approached
to tender and were informed that in compliance with Ethics
Standards the basis for the appointment of a new external
auditor would be that the main focus of their remit would be
the provision of audit services.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Audit Committee report continued

The committee recommended to the board that KPMG be
selected as the Group’s external auditor for the remainder
of the year ending 31 March 2018. A resolution to appoint
KPMG as auditor will be put to shareholders at the annual
general meeting on 26 July 2018.

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 2018,
the primary risk identified was: Critical estimate – useful
economic lives and Revenue recognition. As part of the
audit planning process, the auditor provided a statement of
confirmation of independence to the Board and the Audit
Committee, which confirmed that in their professional
judgment KPMG was independent within the meaning of
regulatory and professional requirements and the objectivity
of the partner and audit staff remained unimpaired.

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 based on the auditor’s
reports for 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 Audit Committee meets the external auditor without
the executive directors being present. Procedures are
in place, which allow access at any time to the Audit
Committee by both external and internal auditor.

In accordance with its policy on auditor independence
and the provision of non-audit services by the external
auditor, the committee reviews and monitors the auditor’s
independence and objectivity. This is done by considering
the auditor’s statement of confirmation of independence,
and discussing any identified threats to independence
and the safeguards applied to mitigate those threats.
The committee also considers all relationships between
the Company and the audit firm, including their network
firms and whether those relationships appear to impair the
auditor’s independence and objectivity.

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 appointment of KPMG
as external auditor for the year ending 31 March 2019. There
are no contractual obligations restricting the committee’s
choice of auditor. The notice of the annual general meeting
at which a resolution for appointment of the auditor will be
proposed, can be found on pages 96 to 100.

The timetable for the audit tender process was as follows:

Review of CVs and meetings held
by the committee Chairman and the
Finance Director with prospective
audit partners.

The interested firms put forward
their prospective wider audit teams
for consideration and selection.

Requests for Proposals were issued
to the interested firms setting out the
Company’s scope and requirements
for the audit appointment.

The committee Chairman wrote to
major shareholders of the Company
informing them of the tender
process, inviting any questions and
perspectives on the process that
they wished for the Audit Committee
to consider in the appointment of a
new auditor. There were no questions
or concerns raised by the major
shareholders contacted.

The interested firms visited the
PayPoint businesses in the UK and
in Romania and met with members
of the Executive Board and
members of the local finance teams
with the aim of understanding
the requirements of the role and
the complexities of the business.
They were also given access to
relevant PayPoint information to
assist with the preparation of their
final proposals.

The interested firms submitted their
proposals which they presented
to the committee Chairman, the
Executive Board and members of
the senior management team.
As a result of the presentations,
two of the firms were shortlisted.

The shortlisted firms gave
presentations of their final
proposals to the Audit Committee.

The criteria considered by the
committee in the evaluation of
the firms included: experience
of the audit team, approach to
audit and transition management.
The committee also noted the
references that had been taken for
each firm by the Finance Director.

The committee concluded that
KPMG LLP (KPMG) was the
preferred firm to conduct the
audit engagement because their
proposals and presentation had
highlighted their capabilities
which were better suited to the
requirements of the Group.

April/May 2017

May 2017

June 2017

July 2017

26 July 2017

PayPoint plc Annual Report 2018Non-audit services
In accordance with the FRC Revised Ethical Standard
2016, the committee has a policy on auditor independence
and the provision of non-audit services by the external
auditor. This policy is a guide to 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
years audit fee before VAT.

The ratio of non-audit fees to audit fees paid to the auditor
for the year was 0.2:1, with non-audit services limited to
assurance services for the half year review. Details of the
auditor’s remuneration for the statutory audit and non-
audit services, are set out in note 8.

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 21 to 23 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 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 applied
during the year was 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: 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 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; and review of the disclosures within
the annual report and accounts from functional leads to
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.

During the year the committee carried on with its robust
management of risk whereby it reviewed a different risk
area on the risk register at each committee meeting and
assessed the management and mitigation of these risk
areas. The Head of Risk and Compliance attended all
meetings of the committee to present the risk management
reports and respond directly to any queries the committee
had on the report.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Audit Committee report continued

A strategic risk review workshop organised by the Head of
Risk and Compliance was held for the Executive Board and
facilitated by the internal auditor, Grant Thornton UK LLP
(Grant Thornton). The objectives of the workshop were:

• Overhaul of risk management and reporting
•

Identification of an active set of strategic risks owned by
the Executive Board

• Review of risk appetite and mitigating controls
• Overhaul of the risk registers to categorise risks into the

following tiers:
– Tier 1 – Strategic risk register – Executive Board /

Audit Committee

– Tier 2 – Corporate risk register – appointed

senior managers

– Tier 3 – Department, product & project risk registers –
individual line managers, product or project managers

• Review of outstanding risk review actions to justify, close
out or remove as signed off by Executive Board owner.

A progress report on the objectives and timetable of
actions was given to the Audit Committee at its meeting
in March 2018. The committee noted that fulfilment of the
objectives and completion of the actions will occur in the
2018/19 financial year. These will be reported on in the
2019 annual report.

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 & safety issues, breach
of compliance or legislation, bribery or 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 & Skill.

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 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 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
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. The areas covered by
the internal audit in the year included:

• Project assurance – Review of the CRM project.
• Project assurance – Implementation of Navision
(a financial accounting platform) in Romania.

• Anti-Money Laundering controls in PayPoint Payment

Services Limited.

• Readiness for the General Data Protection Regulations

(GDPR) in the Group.

There were changes made to the Grant Thornton
supervisory internal audit teams during the year which
improved effectiveness and engagement in relation to
internal audit. The committee assessed the effectiveness
of the Grant Thornton as internal auditors and based on the
changes made, concluded they were performing well and
were demonstrating continued improvement.

The Audit Committee report was approved on 24 May 2018
and signed on its behalf by:

Giles Kerr
Chairman, Audit Committee

PayPoint plc Annual Report 2018Remuneration Committee report

Annual Statement by the chairman 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 2018. This is my first report as the Committee
Chairman and I would like to thank Neil Carson, the previous
Remuneration Committee Chairman, for his work.

The report has been prepared in accordance with Schedule 8
of the Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013,
the Listing Rules of the UK Listing Authority and the UK
Corporate Governance Code (the “Code”). The report is split
into two sections being:

• The Remuneration Policy – which provides a summary

of the Remuneration Policy for which shareholder
approval was obtained at the 2017 annual general
meeting and which will continue to apply without
amendment for the forthcoming year; and

• The Annual Report on Remuneration – which discloses
the implementation of our Remuneration Policy for the
year ended 31 March 2018 and how the policy will be
implemented for the year ending 31 March 2019.

As no changes are proposed to the existing policy
given that the Remuneration Committee believes that
it continues to promote the long-term success of the
Company, only one remuneration resolution will be tabled
at the 2018 annual general meeting – i.e. the advisory
shareholder vote on the Annual Report on Remuneration.

Work of the Committee during the year
The committee met twice during 2017/2018 and details
of members’ attendance at meetings are provided on
page 35. The main committee activities during the year
(full details of which are set out in the relevant sections
of this report) included:

• agreeing the changes to the Remuneration Policy

in advance of the 2017 annual general meeting and
consulting on the changes with our largest investors
and representative bodies;

• agreeing Executive Director base salary increases from
1 April 2017 and aligning future salary review dates with
that for the broader workforce;

• agreeing the performance against the targets and
pay-out for the 2016/17 annual bonus awards;
• setting the performance targets for the 2017/18

annual bonus;

• approving the changes to the formal shareholding

guidelines in line with the new Remuneration Policy;
• approving the changes to the Long-Term Incentive Plan
(LTIP) rules in respect of the introduction of a two-
year post vesting period; the introduction of clawback
provisions; and strengthening existing malus provisions;

• approving the changes to the Deferred Bonus Plan
rules in respect of aligning the malus and clawback
provisions with the LTIP rules;

• agreeing the award levels and performance targets for
the 2017 LTIP awards (which were delayed so that they
could be granted under the new Remuneration Policy
and therefore updated plan rules); and

• considering the results and implications and required

disclosures of the Gender Pay Gap Reporting.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Remuneration Committee report continued

External evaluation
An external evaluation of the committee was carried out
during the year and followed the same process and time
frame as the Board evaluation detailed on page 39.
The overall outcome of the committee evaluation was
positive with the committee shown to be operating
effectively. There were no areas for improvement
highlighted, and the appointment of the new chairman
during the year was welcomed as a positive development
by the members of the committee.

Pay & Performance
In accordance with its terms of reference the committee
continues to ensure the clear linkage of executive
directors’ pay and performance to the strategy and
enhancement of shareholder value.

In assessing the performance of the 2017/18 annual bonus
and the 2015 LTIP award, the committee considered the
financial and operational performance of the Group as well
as the progress made in the ongoing delivery of Strategy.

Annual bonuses for the year under review ranged from
62% to 67% of maximum, reflecting economic profit of
£38.8 million and the partial achievement of the strategic
targets. 50% of the Chief Executive’s bonus and 25% of
the Finance Director’s bonus will be deferred into shares
which will vest after three years from grant, subject to
continued employment.

The LTIP awards granted in 2015 will be performance-
tested at the end of May 2018 and, based on TSR
performance to date relative to FTSE 250 index
constituents (excluding investment trusts), we expect
partial vesting of these awards.

Finally, the deferred annual bonus awards which were
granted in 2015 in respect of the 2014/15 annual bonus
awards will vest in June 2018.

The committee is comfortable that the Executive
Director rewards for the year ended 31 March 2018 are
appropriately aligned to the Company’s performance that
has been delivered over the one year performance period of
the annual bonus and three year performance period for the
DABS and LTIP awards.

Total Shareholder Return performance and the Chief
Executive’s reward over the last nine years, rebased to
100, can be seen below.

FTSE 250 Index (excluding ITs)

PayPoint TSR

CEO Single Figure

Board changes
As announced on 22 March 2018, Tim Watkin-Rees,
Business Development Director, stepped down as an
executive director of the Company on 31 March 2018.
No payments for loss of office were or will be made in this
regard. As a founding director of PayPoint and having
been responsible for group business development, Tim will
continue to play a key role in the activities of the Company.

Implementing the Remuneration Policy for 2018/19
The Remuneration Committee intends to operate the
Remuneration Policy for executive directors for 2018/19
as follows:

• The Chief Executive’s salary will be increased by 2.5%
to £502,250 and the Finance Director’s salary will be
increased by 2.5% to £315,700. The salary increases will
be broadly in line with the average increase proposed for
the general workforce. As disclosed in last year’s Annual
Report on Remuneration, in order to align the Executive
Director salary review date with that for the general
workforce, the increases will be effective from 1 July 2018
(rather than the 1 April 2018) and annually thereafter;
• Annual bonus provision will remain at 150% of salary for
the Chief Executive and 106% of salary for the Finance
Director and targets will continue to measure economic
profit and stretching strategic targets. No changes
will be made to the deferral, whereby 50% of the Chief
Executive’s bonus and 25% of the Finance Director’s
bonus will be deferred in shares for three years; and

• LTIP awards will be granted in 2018 at 175% of salary for
the Chief Executive and 125% of salary for the Finance
Director. Targets will continue to measure absolute EPS
growth and relative Total Shareholder Return. A two-year
post-vesting holding period will apply.

Further details on the implementation of the Remuneration
Policy are set out in the Annual Report on Remuneration.

Concluding remarks
I am pleased to state that at our 2017 annual general
meeting, our Remuneration Policy and Annual Report on
Remuneration received the support of 96.12% and 96.10%
of shareholders respectively.

On behalf of the committee I thank shareholders for their
continued support and we welcome all shareholder feedback
on this report and the Remuneration Policy more generally.

Rakesh Sharma
Chairman, Remuneration Committee
24 May 2018

500

400

300

200

100

03 March
2009

PayPoint plc Annual Report 2018Remuneration Policy

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

Policy Duration
This Directors’ Remuneration Policy was put to a binding shareholder vote at the annual general meeting on 26 July 2017 and
received majority shareholder support. This Policy is intended to remain in place for a maximum of three years from approval.

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.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018
Remuneration Committee report continued

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

Element and
link to strategy

Operation

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

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.

Opportunity

Performance metrics

The salary review takes into
account individual and
Company performance.

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).

d
e
x
F

Pension
Provides market
appropriate
benefits

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
Provides
appropriate
market benefits

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).

None.

PayPoint plc Annual Report 2018Element and
link to strategy

Operation

Opportunity

Performance metrics

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

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
the policy 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
the policy table). Dividends accrue
as additional share entitlements
over the vesting period but would
only be paid on awards that vest.

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 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

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.

All employee
share plans
Encourage share
ownership across
all employees

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.
Other Directors: 150% of salary.

N/A

Up to the prevailing HMRC
approved limits.

None.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Remuneration Committee report continued

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 the year ended 31 March 2018, all incentive awards, including the cash and deferred element of the annual bonus and
the LTIP, are 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
• Serious reputational damage to the Company

These provisions are relevant for a period of up to three 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 (c.15 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 2018Non-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.

Operation

Opportunity

Fee levels are normally reviewed annually.

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

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).

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.

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.

Performance
metrics
Continued
strong and
objective
contribution

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.

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).

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.

2500000

2000000

1500000

1000000

500000

£000s

£1,321,801
13%

41%

46%

£609,610

100%

£2,241,923

39%

34%

27%

1200000

1000000

800000

600000

400000

£384,055

200000

100%

£1,113,322

36%

30%

34%

£725,800

14%

33%

53%

Minimum

On-target

Maximum

£000s

Minimum

On-target

Maximum

Chief Executive

Finance Director

Fixed Pay

Annual Bonus

LTIP

Fixed Pay

Annual Bonus

LTIP

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

Fixed

Component
Base salary
Pension
Other benefits

Target

Minimum
Proposed salary levels effective 1 July 2018
Current contribution rate applied to relevant 1 July 2018 salary levels
Estimated value for year ending 31 March 2019

Maximum

Annual bonus
(Maximum opportunity of 150% of salary
for the CEO and 106% of salary for the
Finance Director)

No bonus payable

LTIP
(Awards of 175% of salary for the Chief Executive
and 125% of salary for the Finance Director)

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
CEO)

Maximum bonus

Maximum vesting

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.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Remuneration Committee 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

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.

Maximum
N/A

Pension

Benefits

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.

SIP

New appointees will be eligible to participate in the SIP in line with existing policy.

Annual bonus

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.

LTIP

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.

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
pages 52 and 53.

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

Dominic Taylor

Rachel Kentleton

Company notice period

Contract date

12 months

13 September 2004

15 July 2016

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:

PayPoint plc Annual Report 2018Event
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

Nick Wiles

Gill Barr

Giles Kerr

Effective date of letter

Unexpired term as at
31 March 2018

Date of appointment Notice period

08 May 2015

01 June 2015

117 days

22 October 2009

1 month

01 June 2015

1 month

20 November 2015

117 days

20 November 2015

1 month

Rakesh Sharma

12 May 2017

848 days

12 May 2017

1 month

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.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Remuneration Committee report continued

Annual report on remuneration
The following section provides details of how PayPoint’s Remuneration Policy was implemented during the financial year
ended 31 March 2018 and how it will be implemented for the year ending 31 March 2019. 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 2018/2019

Base salary
The Remuneration Committee has determined that the executive directors will receive the following salary increases with
effect from 1 July 2018. The proposed increases are in line with the proposed average workforce increase. In order to align
executive director base salary review date with that of the general workforce, the executive director base salary review
was moved from 1 April 2018 to 1 July 2018 and annually thereafter.

Dominic Taylor
Rachel Kentleton

From
1 April 2018
£490,000
£308,000

From
1 July 2018
£502,250
£315,700

% increase
2.5%
2.5%

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

Annual bonus (Policy Limit: 150% of salary)
The Chief Executive’s annual bonus potential for the year ending 31 March 2019 will continue to 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 strategic targets will continue to be based on the successful roll out of PayPoint One, as determined by the number
of terminals introduced and revenue generated, 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 delivery
of an agreed succession plan, aligned to wider talent management activities with clear milestones to be achieved. 50% of
the Chief Executive’s bonus will be deferred into shares for three years.

Bonus potential for the Finance Director will remain at 106% of salary with 25% deferred and to ensure 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.

In the event that the threshold Economic Profit target is not achieved, the Remuneration Committee may, at its discretion,
adjust the payment of bonus related to strategic targets downwards (including to zero), in order to reflect the underlying
performance of the business.

Full details of the annual bonus targets for the 2018/19 financial year and performance against the targets will be disclosed in
next year’s Annual Report on Remuneration.

LTIP (Policy Limit: 200% of salary)
As per 2017, LTIP awards will be granted in 2018 at 175% of salary for the Chief Executive and 125% of salary for the
Finance Director. Targets will continue to measure absolute EPS growth and relative Total Shareholder Return.

The performance targets, metrics and vesting for the LTIP awards to be granted in 2018 and which are expected to vest in
2021 will be as follows:

EPS
For 50% of awards

Relative TSR*
For 50% of awards

Below Threshold

Threshold

Maximum

0%
25%
(20% for the CEO)

100%

Below 4% p.a.

4% p.a.

10% p.a.

0%
25%
(20% for the CEO)

100%

Below median

Median

Upper quartile
(Upper quintile for the CEO)

*Constituents of the FTSE 250 excluding Oil & Gas companies, Mining and Utilities.
In setting the performance targets for the EPS part of the 2018 LTIP awards, the committee considered a number of
reference points, including internal financial planning forecasts, external market consensus and a broader view of market
conditions. The proposed targets were also set in compliance with the Company’s overall risk profile. Notwithstanding the
reduction in the targets from the 2017 awards, the committee views this EPS 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.

In addition, the 2018 LTIP 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.

PayPoint plc Annual Report 2018Non-executive director fees
Current non-executive director fees, which remain unchanged from the prior year, are set out below.

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

From 1 April
2017

From 1 April

2018

£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 2017/2018
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. Rakesh Sharma 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 on 12 May 2017. He took over as Chairman of the committee upon Neil Carson stepping down from the Board
on 26 May 2017. 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.corporate.paypoint.com.

During the year, the committee sought internal support from the Chief Executive and the Human Resources 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, the
committee continued to retain the services of FIT Remuneration Consultants LLP as the principal external advisers to the
committee during the financial year. The committee is comfortable that the FIT team provides 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 implementation, the Board changes and remuneration
benchmarking. 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 £39,922 (excluding VAT).

Summary of shareholder voting at the 2017 annual general meeting
The following table shows the results of the binding vote on the Remuneration Policy Report and the shareholder
advisory vote on the 2017 Annual Report on Remuneration at the 26 July 2017 annual general meeting:

2017 annual general meeting

Remuneration Policy

Remuneration Report

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

Total number
of votes
56,250,235
2,269,240
58,519,475
787,946
59,307,421

3.88%

% of
votes cast

Total number
of votes
96.12% 56,746,603
2,304,030
59,050,633
256,788
59,307,421

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.

% of
votes cast
96.10%
3.90%

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Remuneration Committee 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 2018 and the prior period:

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

Dominic Taylor
£000

Rachel Kentleton
£0006

2018

2017

2018

490
27
78
490
185
10
1,280

490
25
78
337
181
10
1,121

308
21
46
204
—
2
581

2017
76
4
11
51
—
1
143

Tim Watkin-Rees
£0007

2018

2017

326
23
49
216
107
11
731

325
22
48
224
128
10
757

1. Taxable value of benefits received in the year by executives relates to a car allowance of £17,500 (2017: £17,500) for Dominic Taylor, £13,200 (2017: £3,226) for Rachel Kentleton and

£15,000 (2017: £15,000) for Tim Watkin-Rees, petrol, medical insurance, life assurance and private 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.
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 (50% for the Chief Executive) is

mandatorily deferred in shares under the DABS. Further details of annual bonus awards for 2018 can be found in the Annual Report on Remuneration on pages 60 and 61.

4. Long-term incentives: For 2018, this is the value of LTIP awards granted on 1 June 2015 based on interim performance to 30 April 2018 and which will vest on 1 June 2018. The share

price used to calculate the estimated market value is based on the three month average price to 31 March 2018 of 853p. Further details can be found on page 62. For 2017, 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 DABS awards which were granted in 2014 and which
vest in 2017 (the 2014 LTIP awards lapsed in full).

5. SIP matching and dividend shares awarded in the period valued at the average share price calculated over three months to 31 March 2018 of £8.53 (2016: £9.84). 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. In the year to 31 March 2018 and not included in the table above, Rachel Kentleton also received fees of £75,000 for her service as a non-executive director of Persimmon plc.
7. Tim Watkin-Rees retired from the Board on 31 March 2018.

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 2018 and the prior year:

Base fee
£000

Committee Chair fees
£000

Senior Independent
Director fees
£000

Chairman fees
£000

Total
£000

2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

Chairman
Nick Wiles
—
Non-Executive Directors
47
Gill Barr
47
Giles Kerr
Rakesh Sharma
41
Former Directors
Neil Carson
David Morrison
Total

7
15
157

—

47
47
—

47
47
188

—

—
9
8

1
—
18

—

—
9
—

9
—
18

—

—
4
—

1
—
5

—

—
—
—

5
—
5

165

—
—
—

—
—
165

—
—
—

—
—
165

47
60
48

9
14
343

47
56
—

61
47
376

Incentive outcomes for the year ended 31 March 2018

Annual bonus in respect of 2017/18 performance
The annual bonus for the year ended 31 March 2018 was based on economic profit and strategic targets.

Details of the performance against the economic profit and strategic targets are set out below:

Economic Profit Targets:

Measure

Group economic profit

Maximum
Value
106% of salary
(Chief Executive),
80% other
directors

Threshold
(20% of
maximum)
£000

34,564
(90%
of plan)

Target
(80% of
maximum)
£000

38,404
(100%
of plan)

Stretch
(100% of
maximum)
£000

42,244
(110%
of plan)

Actual
achieved
£000

38,781

Bonus earned

Dominic
Taylor
82%
of max
87% of
salary

Rachel
Kentleton
82%
of max
65% of
salary

Tim
Watkin-Rees
82%
of max
65% of
salary

PayPoint plc Annual Report 2018Strategic Targets:
Stretching Strategic targets were set by the Remuneration Committee to reflect the increase in the Chief Executive’s
bonus potential and encourage performance ahead of expectations.

Target
Successful roll out
of PayPoint One

Implementation of a
Customer Relationship
Management (RM) system

Introduction of a comprehensive
succession plan (target only applies
to the Chief Executive)

Chief Executive
14.6% of salary

Performance and bonus earned
Finance Director
13% of salary

Business Development Director
13% of salary

Threshold: 8,000 total sites (pay-out 8% of maximum for achievement at threshold
and between threshold and maximum)
Target: 8,906 total sites generating revenue target by 31 March 2018 (pay-out 80% of maximum)
Maximum: 8,906 total sites generating stretch revenue target by 31 March 2018
(pay-out 100% of maximum)
Actual: While management achieved 8,550 total sites, which was 550 sites ahead of the externally
committed target, this resulted in a pay-out of 8% of maximum which reflects the toughness of
the target.

14.6% of salary

13% of salary

14.6% of salary

Threshold: n/a
Target: Delivery within budget by 31 March 2018 (pay-out 80% of maximum)
Maximum: Delivery within budget by 24 December 2017 and planned cost driven benefits
realised by 31 March 2018 (pay-out 100% of maximum)
Actual: Delivery of CRM for client management and good progress was made in preparing for the
deployment of CRM into operations and sales functions. However, full delivery was not achieved
resulting in nil pay-out for this part of the bonus.
n/a
The succession plan objectives set for the Chief Executive for 2017/18 were in respect of the:
Successful transition of Tim Watkin-Rees following his decision to step down from the Board,
albeit continuing as an employee
Identification of potential internal succession candidates and implementation of agreed
development plans
Design and implementation of comprehensive Executive Board development programme,
including team building and individual coaching
Actual: Following a review of the Chief Executive’s progress in respect of developing and
implementing the comprehensive succession plan, the Remuneration Committee awarded
a pay-out of 80% of maximum of this part of the bonus award

n/a

Maximum Value
% of potential award
% of salary award

44% of salary
29% of max
13% of salary

26% of salary
4% of max
1% of salary

Total Bonus Awards:
The above performance resulted in the following bonus awards for the year:

Financial – % of award
(% of salary)
Strategic – % of award
(% of salary)
Total
(% of salary)
Total
(% of max)

Maximum

Outcomes

Chief Executive
71%
(106%)
29%
(44%)
100%
(150%)

Finance Director/Business
Development Director
75%
(80%)
25%
(26%)
100%
(106%)

Chief Executive
82% of max
87% of salary
29% of max
13% of salary

Finance Director/Business
Development Director
82% of max
65% of salary
4% of max
1% of salary

100% of salary

66% of salary

67% of maximum

62% of maximum

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

50% of the Chief Executive’s bonus and 25% of the other directors’ bonuses will be deferred into PayPoint shares for three years.

2015 Deferred Annual Bonus Scheme (DABS) vesting
With respect to the deferred bonus awards granted on 1 June 2015 under the DABS, vesting was based on continued
service only. Further details of the expected vesting for each individual director are as follows:

Director
Dominic Taylor
Tim Watkin-Rees

Interests held
11,137
7,672

Expected vesting %
100%
100%

Number of shares vesting
11,137
7,672

Date of vesting
1 June 2018
1 June 2018

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Remuneration Committee report continued

2015 LTIP vesting
With respect to the LTIP awards granted on 1 June 2015, vesting is based 100% on TSR. The three-year performance
period for these awards will end on 31 May 2018 with vesting on the third anniversary of the date of grant. Further details
relating to these awards are provided in the table below, based on TSR calculations ran to 30 April 2018:

Measure

Weighting

Targets

Outcome
(to 30 April 2018)

Estimated %
vesting

Relative TSR vs FTSE 250 index
(excluding investment trusts)

100%

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

Just above median

30%

Total LTIP vesting

30%

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

Director
Dominic Taylor
Tim Watkin-Rees

Interests held
72,423
41,985

Implied % vesting
30%
30%

Number of shares
vesting
21,727
12,596

Date of vesting
1 June 2018
1 June 2018

Value
£000¹
£185,331
£107,444

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 three month share price to 31 March

2017 of £8.53.

Scheme interests awarded in the year ended 31 March 2018

LTIP
In the year under review, LTIP awards were granted under the Remuneration Policy approved by shareholders at the 2017
annual general meeting. The LTIP awards were granted with a face value of 175% 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, 26 July
2020, and will be subject to a holding period which will end on the fifth anniversary of the date of grant, being 26 July 2022.
One half of each award is subject to a performance condition based on relative TSR vs. the FTSE 250 index (excluding
companies in the Oil & Gas, Mining and Utilities sectors). The other half of each award is subject to three year EPS growth
targets. Details of the awards granted are as follows:

Executive director

Basis
of award

Number of
shares

Face value1

Potential award
for minimum
performance

Performance
period

Dominic
Taylor

175%
of salary

99,7092

£857,497

Rachel
Kentleton

44,767

£384,996

25% of face
value

125%
of salary

Tim Watkin-
Rees

47,339

£407,115

TSR: 26 July
2017 to 25
July 2020

EPS: 1 April
2017 to 31
March 2020

50% on EPS
– 0% vesting at less

than 5% p.a.

– 25% vesting at 5% p.a.
(20% for the Chief
Executive)

– 100% vesting at 12%

p.a. or more

– Straight line vesting

between these points.

Performance measures
50% on TSR relative vs.
FTSE 250 index
(excluding companies in
the Oil & Gas, Mining and
Utilities sectors):
– 0% vesting below

median

– 25% vesting at median
(20% for the Chief
Executive)

– 100% vesting at upper
quartile (upper quintile
for the Chief Executive)
– Straight-line vesting in
between these points

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 25 July 2017, of £8.60.
2. The LTIP award granted to Dominic Taylor in July 2017 was incorrectly stated as 82,616 shares in the regulatory information service announcement released on 26 July 2017. The correct

number of shares awarded is 99,709 shares (based on a 175% of salary award, a salary of £490,000 and a grant share price of £8.60) as shown in the table above.

Payments to past directors (audited)

As disclosed in last year’s Annual Report on Remuneration, George Earle stepped down from the Board on 31 March 2017
although remained an employee for eight (8) months to complete a number of outstanding projects. No termination
payments were made. In his capacity as a below Board employee, George Earle received £295,056 in respect of fixed pay
and he received £238,707 in respect of his annual bonus for the year ended 31 March 2017. Full disclosure of the annual
bonus was set out on page 59 of last year’s annual report. His 2014 LTIPs which were due to vest on a pro-rated basis in
2017 lapsed as a result of three-year relative TSR being below median of the comparator group. Details in respect of his
2015 and 2016 LTIP awards will be disclosed in future Annual Reports on Remuneration.

As announced on 22 March 2018, Tim Watkin-Rees stepped down from his role as Business Development Director and
from the Board on 31 March 2018. Tim will remain as an employee of PayPoint and, as a founding director of PayPoint and
having been responsible for group business development, will continue to play a key role in the activities of the Company.
No termination payments have been or will be made. Tim will receive fixed pay on a monthly basis during his period of
employment although he will not be eligible for an annual bonus in respect of 2018/19 or future LTIP awards. Details of
his annual bonus for the year ended 31 March 2018 are presented in the single figure table and notes above. Assuming
continued employment, unvested deferred share bonus and LTIP awards will continue to vest at the normal vesting date
and, where relevant, the extent to which the performance targets are met.

PayPoint plc Annual Report 2018Percentage 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 2017 to 2018

Chief Executive

2018
£000
490
27
490
1,007

2017
£000
490
25
337
852

% change
0%
4.9%
45.4%
18.08%

Average % change
for other employees1
3.7%
3.2%
17.4%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 2017 and ended 31 March 2018.

2018
2017
% change

Total employee
pay expenditure
£000
26,683
30,753
(13.3)%

Distributions
to shareholders
£000
55,898
78,543
(28.8)%

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 nine 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

01 March
2018

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

2018
1,280

84.50%

80.90%

88.70%

86.20%

91.43%

88.11%

30.98%

64.8%

66.7%

40.10% 100.00% 100.00%

30%

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018

Remuneration Committee 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 2018:

Shares held

Unvested and
subject to
holding period
26,732
12,450
18,942

Unvested and
subject to
performance
conditions
230,624
44,767
132,634

Current
shareholding
1,852,296
1,561
553,103

Shareholding Guidelines2

% of salary
200%
150%
150%

Shares
114,916
54,174
57,287

Met?
Yes
No
Yes

Dominic Taylor
Rachel Kentleton
Tim Watkin-Rees3
Gill Barr
Giles Kerr
Rakesh Sharma
Nick Wiles

Owned
outright
or vested1
1,852,296
1,561
553,103
2,595
7,500
2,232
35,000

1. Current shareholding includes SIP shares other than SIP matching shares and SIP dividend shares subject to a holding period.
2. Executive directors are required to hold shares of a value equivalent to 150% of their salaries (200% of salary for the Chief Executive) as at 1 April 2018. An average three month share

price to 31 March 2018 of £8.53 has been used to calculate this guideline.

3. Includes 332,174 shares held by Persons Closely Associated with Tim Watkin-Rees.

The market price of the Company’s shares on 31 March 2018 was £8.07 (31 March 2017: £10.25) per share and the low and
high share prices during the period were £7.90 and £10.88 respectively.

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

Long Term Incentive Awards (audited)

Dominic Taylor

Rachel Kentleton

Tim Watkin-Rees

Type of
Awards
LTIP1
LTIP1
LTIP1
LTIP2
9.4.27
LTIP2
LTIP1
LTIP1
LTIP1
LTIP2

Number of
shares at
31 March 2017
61,8484
72,4235
75,5856

10,7417

36,7294
41,9855
43,3106

Number of
shares awarded
during the period3
—
—
—
99,709
—
44,767
—
—
—
47,339

Number of shares
released during
the period
—
—
—

Number of shares
lapsed during
the period
(61,848)
—
—

—

—
—
—

—

(36,729)
—
—

Number of
shares at
31 March 2018
—
72,423
75,585
99,709
10,741
44,767
—
41,985
43,310
47,339

Value of
shares
awarded
£nil
£685,122
£710,499
£857,497
£110,0957
£384,996
£nil
£397,178
£407,114
£407,115

Lapse/Release
date
Date of grant
02.06.17
02.06.14
01.06.18
01.06.15
02.06.19
02.06.16
26.07.20
26.07.17
02.02.17 02.02.19-20
26.07.20
26.07.17
02.06.17
02.06.14
01.06.18
01.06.15
02.06.19
02.06.16
26.07.20
26.07.17

1. 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 performance period, at which

point 25% of awards will vest, with full vesting occurring for upper quartile performance with pro-rata vesting between points.

2. 50% of 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 performance period, at

which point 25% of awards will vest (20% for the Chief Executive’s awards), with full vesting occurring for upper quartile (upper quintile for the Chief Executive’s awards) performance with
pro-rata vesting between points. 50% of LTIP awards will only vest if the Company’s EPS grows by 5% p.a., at which point 25% of awards will vest (20% for the Chief Executive’s awards),
with full vesting occurring for EPS growth of 12% p.a. with pro-rata vesting between points.

Awards were granted at the following share prices on the preceding day of grant:
3. £8.60 per share.
4. £10.55 per share.
5. £9.46 per share.
6. £9.40 per share.
7. Rachel Kentleton’s buyout award was granted under Listing Rule 9.4.2. The share price on 3 January 2017 of £10.25 has been used to calculate the value of the shares awarded to

Rachel Kentleton.

PayPoint plc Annual Report 2018Deferred Share Bonus Plan (audited)
Number of
bonus
shares
held at
31 March
20171
9,7614
6,8904

Number of
matching
shares
awarded at
31 March
20172
18,4174
13,0004

Dominic Taylor
Tim Watkin-Rees

Number of
bonus shares
(released)/
purchased
during the
period
9,761
(6,890)

Number of
matching
shares
awarded
during the
period
(18,417)
(13,000)

Number of
matching
shares
(lapsed)
during the
period

Number of
bonus shares
purchased at
31 March
2018
—
—

Number of
matching
shares
awarded at
31 March
2018

Value of
matching
shares
awarded
— £194,299
— £137,150

Date of
grant
02.06.14
02.06.14

Date lapsed/
release date3
02.06.17
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 were released unless the Company’s earnings per share growth was 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. £10.55 per share.

Deferred Annual Bonus Scheme (DABS)1 (audited)

Dominic Taylor

Rachel Kentleton
Tim Watkin-Rees

Number of
shares at
31 March
2017
11,137
3,9212
—
—
7,672
2,6362
—

Number of
shares
awarded
during
the period
—
—
9,0933
1,3783
—
—
6,0443

Number of
shares
released
during the
period
—
—
—
—
—
—
—

Number of
shares
lapsed
during the
period
—
—
—
—
—
—
—

Number of
shares at
31 March

2018
11,137
3,921
9,093
1,378
7,672
2,636
6,044

Value of
shares
awarded
£105,356
£38,857
£84,341
£12,782
£72,577
£26,123
£56,060

Date of grant
01.06.15
07.06.16
05.06.17
05.06.17
01.06.15
07.06.16
05.06.17

Release date
01.06.18
07.06.19
05.06.20
05.06.20
01.06.18
07.06.19
05.06.20

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.
3. £9.27 per share.

Share Incentive Plan (audited)

Number of
Partnership
Shares
purchased
at 31 March
2017
3,357

Number of
Matching
Shares
awarded
at 31 March
2017
3,357

Number of
Free Shares1
awarded
at 31 March
2017
1,562

Dividend
Shares2
acquired
at 31 March
2017
2,979

Total shares
at 31 March
2017
11,255

Number of
Partnership
Shares3
purchased
during the
period
165

Matching
Shares4
awarded
during the
period
165

Dividend
Shares
acquired
during the
period
1,063

Dominic Taylor

Rachel Kentleton

151

302

Tim Watkin-Rees

3,380

1,562

2,989

11,311

165

1,068

Dates of release of
Matching and Free
Dividend Shares5
21 Apr 2020
– 22 Mar 2021
21 Apr 2020
– 22 Mar 2021
21 Apr 2020
– 22 Mar 2021

Total shares
at 31 March
2018
12,648

669

12,709

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 £8.15 to £10.11).
4. Matching Shares are ordinary shares of the Company awarded conditionally on a monthly basis during the period (at prices from £8.15 to £10.11) 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 24 May 2018 and signed on its behalf by:

Rakesh Sharma
Chairman, Remuneration Committee

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018PayPoint has a 50% interest in Collect+ Holdings Limited,
a joint arrangement 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 7,400 retailer’s outlets.

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

As at 31 March 2018:

Number of
ordinary
Name of holder
shares
Woodford Investment Management 13,704,871
8,787,518
Liontrust Investment Partners LLP
6,814,635
Fidelity International Limited
5,603,400
Capital Research & Management
3,126,897
Wise Investments Limited
3,124,940
Neptune Investment Management
2,793,203
Standard Life Aberdeen
2,639,230
Schroders Plc
2,186,239
Mawer Investment Management

As at 24 May 2018:

Number of
ordinary
Name of holder
shares
Woodford Investment Management 13,704,871
8,787,558
Liontrust Investment Partners LLP
6,677,013
Fidelity International Limited
5,399,900
Capital Research & Management
3,126,897
Wise Investments Limited
2,793,203
Standard Life Aberdeen
2,647,592
Schroders Plc
2,363,840
Neptune Investment Management
2,177,563
Mawer Investment Management

Percentage of
issued capital
20.10
12.89
10.00
8.22
4.59
4.58
4.10
3.87
3.21

Percentage of
issued capital
20.10
12.89
9.79
7.92
4.59
4.10
3.88
3.47
3.19

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 2018.

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 3 to 27, and it is
incorporated into this directors’ report by reference.
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 27); use of financial instruments (pages 19 and 94);
credit risk and price risk (page 94); employment of disabled
persons (page 26); employee involvement (pages 25
and 26); diversity (page 26) and likely future developments
in the business (pages 9 and 10).

Principal activity
The Company is a holding company and its subsidiaries
are engaged in providing clients with specialist consumer
payment services which includes transaction processing
and settlement through an established network of
retailers. It also provides an array of services essential to
convenience retail.

PayPoint UK and Ireland process 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 also offers clients, through its MultiPay product,
streamlined consumer payment processing and transaction
routing in one seamlessly integrated solution for digital
payments. 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 provides its retailer network with services
including card payments, EPoS solutions, ATMs and other
value add services. It also provides access to a parcel
solution generating footfall.

PayPoint Romania including Payzone Romania, acquired
on 12 October 2017, provide similar payment product and
collection services as PayPoint UK and Ireland but in the
Romanian territory.

PayPoint plc Annual Report 2018Share capital
As at the date of this report, 68,181,656 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 2018, 46,934 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 26 July 2017, the
directors were given authority to purchase 10% of its
issued share capital, allot relevant securities up to an
aggregate nominal amount of £22,712 and to dis-apply
pre-emption rights in respect of allotments of relevant
securities up to an aggregate nominal amount of £11,356.
Resolutions to renew these authorities will be proposed
at the 2018 annual general meeting, details of which are
set out in the notice of meeting on pages 96 to 100.

The Company’s issued share capital as at 31 March 2018,
together with details of purchases of own shares during
the year, are set out in note 22.

Directors
The names of the directors at the date of this report
and their biographical details are on page 33. Their
interests in the ordinary shares of the Company are on
page 64. During financial year, Neil Carson, David Morrison
and Tim Watkin-Rees stepped down from the Board.
See page 28 for further information on board changes
in the year.

Results for the year
The consolidated income statement, statement of financial
position and statement of cash flow for the year ended
31 March 2018 are set out on pages 76 to 79. An analysis
of risk is set out on pages 21 to 23 and of risk management
on page 47. The statement of financial position and
statement of cash flow of the holding company for the year
ended 31 March 2018 are set out on pages 80 and 81. Since
1 April 2018, there have been no post balance sheet events
that would impact the Company.

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 prorated 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 £75
million with a remaining term of over five 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. 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 23
days’ purchases outstanding at 31 March 2018 (2017:
22 days), based on the average daily amount invoiced by
suppliers during the year.

Charitable and political donations
The Group made no political donations during the year
(2017: nil). Details of the charitable donations policy can
be found within the strategic report on page 26.

Employee matters and environmental issues
Employee matters and environmental issues are set out
in the strategic report on pages 24 to 27.

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

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Directors’ report continued

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 10.

Dividends
The directors recommend the payment of a final ordinary
dividend of 30.6p (2017: 30p) per ordinary share amounting
to £20.9 million (2017: £20.4 million) and a final additional
dividend of 24.5p (2017: 24.5p) per ordinary share
amounting to £16.7 million (2017: £16.6 million) both to
be paid, if approved, on 30 July 2018 to members on the
register on 22 June 2018.

During the period an interim ordinary dividend of 15.3p
per share (2017: 15p per share) amounting to £10.4 million
(2017: £10.2 million) and an additional interim dividend of
12.2p (2017: 12.2p) per ordinary share amounting to £8.3
million (2017: £8.3 million) were declared and paid.

The dividend policy including all the dividends declared
during the year are set out in the strategic report on page 20.

Going concern
At the end of the year, the Group had cash of £46.0 million,
and an undrawn £75.0 million revolving term credit facility
with accordion option of £20 million, expiring in March 2023.
The Company’s cash and borrowing capacity is adequate
to meet the foreseeable needs of the Group, taking into
account any risks (see pages 21 to 23). 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 20 of the strategic
report and commentary on financial risk management is
shown in note 26.

Independent auditor
Following an audit tender process, KPMG LLP was
appointed as auditor during the year (see page 45 for
details of the tender process). KPMG LLP has expressed
its willingness to continue as the Company’s auditor and 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 96 to 100.

Corporate governance statement
The information that fulfils the requirements of the corporate
governance statement for the purposes of the FCA’s
Disclosure Guidance and Transparency Rules can be found
in this Directors’ report and in the corporate governance
section on pages 28 to 48 (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 S.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
2018. The notice of meeting and explanatory information on
the resolutions to be passed at the annual general meeting
can be found on pages 96 to 100 of the annual report.

The Directors’ report was approved by the Board and
signed on its behalf by:

Susan Court
Company Secretary
24 May 2018

PayPoint plc Annual Report 2018

Statement of Directors’ responsibilities
in respect of the Annual Report and the Financial Statements

Responsibility statement of the directors in respect of
the annual financial report

We confirm that to the best of our knowledge:

• The financial statements, prepared in accordance with
the applicable set of accounting standards, 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; and

• the directors’ report which also incorporates

the strategic report includes a fair review of the
development and performance of the business and the
position of the issuer and the undertakings included
in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that
they face.

We consider the annual report and accounts, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s
position and performance, business model and strategy.

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Dominic Taylor
Chief Executive
24 May 2018

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The directors are responsible for preparing the Annual Report
and the Group and parent Company financial statements in
accordance with applicable law and regulations.

Company law requires the directors to prepare Group and
parent Company financial statements for each financial
year. Under that law they are required to prepare the Group
financial statements in accordance with International
Financial Reporting Standards as adopted by the European
Union (IFRSs as adopted by the EU) and applicable law
and have elected to prepare the parent Company financial
statements on the same basis.

Under company law the directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
parent Company and of their profit or loss for that period.
In preparing each of the Group and parent Company
financial statements, the directors are required to:

• select suitable accounting policies and then apply

them consistently;

• make judgements and estimates that are reasonable,

relevant and reliable;

• state whether they have been prepared in accordance

with IFRSs as adopted by the EU;

• assess the Group and parent Company’s ability to

continue as a going concern, disclosing, as applicable,
matters related to going concern; and

• use the going concern basis of accounting unless

they either intend to liquidate the Group or the parent
Company or to cease operations, or have no realistic
alternative but to do so.

The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the parent Company’s transactions and disclose with
reasonable accuracy at any time the financial position of the
parent Company and enable them to ensure that its financial
statements comply with the Companies Act 2006. They are
responsible for such internal control as they determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking
such steps as are reasonably open to them to safeguard the
assets of the Group and to prevent and detect fraud and
other irregularities.

Under applicable law and regulations, the directors are also
responsible for preparing a Strategic Report, Directors’
Report, Directors’ Remuneration Report and Corporate
Governance Statement that complies with that law and
those regulations.

The directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the UK governing
the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.

PayPoint plc Annual Report 2018

Independent
auditor’s report

to the members of PayPoint plc

1. Our opinion is unmodified

Basis for opinion

We have audited the financial statements of
PayPoint plc (“the Company”) for the year ended
31 March 2018 which comprise the 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, and the related
notes, including the accounting policies in note 1.

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 2018
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 as
adopted by the European Union (IFRSs as
adopted by the EU);

— the parent Company financial statements have
been properly prepared in accordance with
IFRSs as adopted by the EU 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.

We conducted our audit in accordance with
International Standards on Auditing (UK) (“ISAs
(UK)”) and applicable law. Our responsibilities are
described below. We believe that the audit
evidence we have obtained is a sufficient and
appropriate basis for our opinion. Our audit opinion
is consistent with our report to the audit
committee.

We were appointed as auditor by the directors on 15
August 2017. The period of total uninterrupted
engagement is for the one financial year ended 31
March 2018. We have fulfilled our ethical
responsibilities under, and we remain independent of
the Group in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to listed
public interest entities. No non-audit services
prohibited by that standard were provided.

Overview

Materiality:
group financial
statements as a
whole

£2.5m

4.7% of profit before tax

Coverage

99% of group profit before tax

Risks of material misstatement

Recurring risks

Revenue recognition

Recoverability of parent
company’s investment in
subsidiaries (Parent)

PayPoint plc Annual Report 2018

Independent

auditor’s report

to the members of PayPoint plc

1. Our opinion is unmodified

Basis for opinion

We have audited the financial statements of

PayPoint plc (“the Company”) for the year ended

31 March 2018 which comprise the 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, and the related

notes, including the accounting policies in note 1.

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 2018

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 as

adopted by the European Union (IFRSs as

adopted by the EU);

— the parent Company financial statements have

been properly prepared in accordance with

IFRSs as adopted by the EU 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.

We conducted our audit in accordance with

International Standards on Auditing (UK) (“ISAs

(UK)”) and applicable law. Our responsibilities are

described below. We believe that the audit

evidence we have obtained is a sufficient and

appropriate basis for our opinion. Our audit opinion

is consistent with our report to the audit

committee.

We were appointed as auditor by the directors on 15

August 2017. The period of total uninterrupted

engagement is for the one financial year ended 31

March 2018. We have fulfilled our ethical

responsibilities under, and we remain independent of

the Group in accordance with, UK ethical requirements

including the FRC Ethical Standard as applied to listed

public interest entities. No non-audit services

prohibited by that standard were provided.

Overview

Materiality:

group financial

statements as a

whole

£2.5m

4.7% of profit before tax

Coverage

99% of group profit before tax

Risks of material misstatement

Recurring risks

Revenue recognition

Recoverability of parent

company’s investment in

subsidiaries (Parent)

2. Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We summarise below the key audit matters, in decreasing order of audit
significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as
required for public interest entities, our results from those procedures. These matters were addressed, and our results are
based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a
whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate
opinion on these matters.

Revenue recognition

Data Capture and Processing Error

Our procedures included:

The risk

Our response

Refer to page 45 (Audit
Committee Report), page 84
(accounting policy) and page 86
(financial disclosures).

The risk is that revenue is misstated due
to inherent complexities involved in
capturing and processing the high
volume of low value transactions
generated across the company’s off-site
terminal network. IT systems may not
be configured appropriately such that
fees and commissions are calculated
incorrectly and that data does not
correctly flow through the IT systems.

— Control operation: Testing controls over
the general IT environment, with the
support of IT specialists to assess whether
the polling, billing and general ledger
systems are appropriately controlled. These
procedures included testing access to
programs and data, program change and
development to address the risk of
unauthorised changes being made to the
operation of IT application controls.

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— Control operation: Testing key automated
(with the support of IT specialists) and
manual controls, including controls that are
designed to ensure correct rates are
assigned to each customer based on
contract terms, reconciliations are
performed between invoicing and system
reports and systems are configured
correctly so that revenue transactions are
recorded and recognised in accordance with
the Group’s accounting policies;

— Tests of details: Performing sampling over
contract master data, including transaction
rates and agree this data to supporting
customer contracts

— Analytical sampling: Using data analytical
tools to test that the other side of revenue
journals was not posted to inappropriate
accounts;

— Expectation vs outcome: Perform

analytical procedures to set an expectation
of revenue of transaction linked revenue
streams, based on prior year rates per
stream, increases in transaction price per
tested contracts and current year
transactions and compare to the actual
revenue.

Our results

— The results of our procedures were

satisfactory and we considered the amount
of revenue to be acceptable.

PayPoint plc Annual Report 2018

2. Key audit matters: our assessment of risks of material misstatement (Continued)

4. We have nothing to report on going concern

Disclosures of principal risks and longer-term viability

We are required to report to you if:

The risk

Our response

Low risk, high value:

Our procedures included:

Recoverability of Parent
Company’s investment in
subsidiaries

(£60.2 million; 2017: £60.1 million)

Refer to page 85 (accounting
policy) and page 91 (financial
disclosures).

The carrying amount of the Parent
Company’s investments in subsidiaries
represents 61.8% (2017: 72.0%) of the
company’s total assets. Their
recoverability is not at a high risk of
significant misstatement or subject to
significant judgement. However, due to
their materiality in the context of the
parent company financial statements,
this is considered to be the area that had
the greatest effect on our overall Parent
Company audit.

— Tests of detail: Comparing the carrying
amount of material investments with the
relevant subsidiaries’ draft balance sheet to
identify whether their net assets, being an
approximation of their minimum recoverable
amount, were in excess of their carrying
amount and assessing whether those
subsidiaries have historically been profit
making;

— we have anything material to add or draw attention to in
relation to the directors’ statement in note 68 to the
financial statements on the use of the going concern
basis of accounting with no material uncertainties that
may cast significant doubt over the Group and
Company’s use of that basis for a period of at least
twelve months from the date of approval of the financial
statements; or

— the related statement under the Listing Rules set out on

page 23 is materially inconsistent with our audit
knowledge.

We have nothing to report in these respects.

— Assessing subsidiary audits: Assessing

5. We have nothing to report on the other information in

the work performed by the subsidiary audit
teams of those subsidiaries where audits
are performed and considering the results of
that work on those subsidiaries’ profits and
net assets; and

the Annual Report

— Our sector experience: For the

investments where the carrying amount
exceeded the net asset value, comparing
the carrying amount of the investment with
the expected value of the business based
upon a discounted cash flow model.

Our results

— The results of our procedures were

satisfactory and we found the estimated
recoverable amount of investments to be
acceptable.

The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated
below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial
statements audit work, the information therein is materially
misstated or inconsistent with the financial statements or
our audit knowledge. Based solely on that work we have
not identified material misstatements in the other
information.

Strategic report and directors’ report

Based solely on our work on the other information:

— we have not identified material misstatements in the

strategic report and the directors’ report;

— in our opinion the information given in those reports for

the financial year is consistent with the financial
statements; and

— in our opinion those reports have been prepared in

accordance with the Companies Act 2006.

Directors’ remuneration report

In our opinion the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.

PayPoint plc Annual Report 2018

Based on the knowledge we acquired during our financial

statements audit, we have nothing material to add or draw

attention to in relation to:

— the directors’ confirmation within the viability statement

on page 23 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 and liquidity;

— the Principal Risks disclosures describing these risks

and explaining how they are being managed and

mitigated; and

— the directors’ explanation in the viability statement of

how they have assessed the prospects of the Group,

over what period they have done so and why they

considered 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.

Under the Listing Rules we are required to review the

viability statement. We have nothing to report in this

respect.

Corporate governance disclosures

We are required to report to you if:

— we have identified material inconsistencies between the

knowledge we acquired during our financial statements

audit and the directors’ statement that they consider

that the annual report and financial statements taken as

a whole is fair, balanced and understandable and

provides the information necessary for shareholders to

assess the Group’s position and performance, business

model and strategy; or

— the section of the annual report describing the work of

the Audit Committee does not appropriately address

matters communicated by us to the Audit Committee.

We are required to report to you if the Corporate

Governance Statement does not properly disclose a

departure from the eleven provisions of the UK Corporate

Governance Code specified by the Listing Rules for our

review.

We have nothing to report in these respects.

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3. Our application of materiality and an overview

of the scope of our audit

Profit before tax
£52.9m (2017: £69.1m)

Group Materiality
£2.5m

Materiality for the group financial statements as a
whole was set at £2.5m, determined with
reference to a benchmark of group profit before tax
of £52.9m.

Materiality for the parent company financial
statements as a whole was set at £2.0m,
determined with reference to a benchmark of
company total assets, of which it represents 2.1%.

We agreed to report to the Audit Committee any
corrected or uncorrected identified misstatements
exceeding £125k, in addition to other identified
misstatements that warranted reporting on
qualitative grounds.

Of the Group’s ten reporting components, we
subjected eight to full scope audits for group
purposes and one to statutory audit to 31
December 2017 and specified audit procedures for
roll forward. The components within the scope of
our work accounted for the percentages illustrated
opposite. For the residual component, we
performed analysis at an aggregated group level to
re-examine our assessment that there were no
significant risks of material misstatement within
this entity.

The Group team instructed the component auditor
as to the significant areas to be covered, including
the relevant risks detailed above and the
information to be reported back. The Group team
approved the component materialities, which
ranged from £2.0m to £1,000, having regard to the
mix of size and risk profile of the Group across the
components. The work on one of the nine
components was performed by component auditor
and the rest, including the audit of the parent
company, was performed by the Group team.

The Group team visited the overseas component
location in Romania on two occasions, to assess
the audit risk and strategy and to assess the audit
work performed. At this visit and meetings, the
findings reported to the Group team were
discussed in more detail, and any further work
required by the Group team was then performed by
the component auditor.

£2.5m
Whole financial
statements materiality

£2.0m
Range of materiality at nine
components (£2.0m-£1.0k)

Profit before tax
Group materiality

£125k
Misstatements reported to the
audit committee

Group revenue

Group profit before tax

99%

94%

Group total assets

96%

Key:

Full scope for group audit purposes 2018

Specified risk-focused audit procedures 2018

Residual components

PayPoint plc Annual Report 2018

4. We have nothing to report on going concern

Disclosures of principal risks and longer-term viability

4. We have nothing to report on going concern

Disclosures of principal risks and longer-term viability

We are required to report to you if:

Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw
attention to in relation to:

— the directors’ confirmation within the viability statement

on page 23 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 and liquidity;

— the Principal Risks disclosures describing these risks
and explaining how they are being managed and
mitigated; and

— the related statement under the Listing Rules set out on

page 23 is materially inconsistent with our audit
knowledge.

We have nothing to report in these respects.

5. We have nothing to report on the other information in

the Annual Report

— the directors’ explanation in the viability statement of
how they have assessed the prospects of the Group,
over what period they have done so and why they
considered 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.

Under the Listing Rules we are required to review the
viability statement. We have nothing to report in this
respect.

Corporate governance disclosures

We are required to report to you if:

— we have identified material inconsistencies between the
knowledge we acquired during our financial statements
audit and the directors’ statement that they consider
that the annual report and financial statements taken as
a whole is fair, balanced and understandable and
provides the information necessary for shareholders to
assess the Group’s position and performance, business
model and strategy; or

— the section of the annual report describing the work of
the Audit Committee does not appropriately address
matters communicated by us to the Audit Committee.

We are required to report to you if the Corporate
Governance Statement does not properly disclose a
departure from the eleven provisions of the UK Corporate
Governance Code specified by the Listing Rules for our
review.

We have nothing to report in these respects.

Strategic report and directors’ report

Based solely on our work on the other information:

— we have not identified material misstatements in the

strategic report and the directors’ report;

— in our opinion the information given in those reports for

the financial year is consistent with the financial
statements; and

— in our opinion those reports have been prepared in

accordance with the Companies Act 2006.

Directors’ remuneration report

In our opinion the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.

Based on the knowledge we acquired during our financial

statements audit, we have nothing material to add or draw

attention to in relation to:

— the directors’ confirmation within the viability statement

on page 23 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 and liquidity;

— the Principal Risks disclosures describing these risks

and explaining how they are being managed and

mitigated; and

— the directors’ explanation in the viability statement of

how they have assessed the prospects of the Group,

over what period they have done so and why they

considered 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.

Under the Listing Rules we are required to review the

viability statement. We have nothing to report in this

respect.

Corporate governance disclosures

We are required to report to you if:

— we have identified material inconsistencies between the

knowledge we acquired during our financial statements

audit and the directors’ statement that they consider

that the annual report and financial statements taken as

a whole is fair, balanced and understandable and

provides the information necessary for shareholders to

assess the Group’s position and performance, business

model and strategy; or

— the section of the annual report describing the work of

the Audit Committee does not appropriately address

matters communicated by us to the Audit Committee.

We are required to report to you if the Corporate

Governance Statement does not properly disclose a

departure from the eleven provisions of the UK Corporate

Governance Code specified by the Listing Rules for our

review.

We have nothing to report in these respects.

We are required to report to you if:

— the related statement under the Listing Rules set out on

page 23 is materially inconsistent with our audit
knowledge.

We have nothing to report in these respects.

5. We have nothing to report on the other information in

the Annual Report

Strategic report and directors’ report

Based solely on our work on the other information:

— we have not identified material misstatements in the

strategic report and the directors’ report;

— in our opinion the information given in those reports for

the financial year is consistent with the financial
statements; and

— in our opinion those reports have been prepared in

accordance with the Companies Act 2006.

Directors’ remuneration report

In our opinion the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.

PayPoint plc Annual Report 2018

4. We have nothing to report on going concern

Disclosures of principal risks and longer-term viability

We are required to report to you if:

— we have anything material to add or draw attention to in

relation to the directors’ statement in note 68 to the

Based on the knowledge we acquired during our financial

statements audit, we have nothing material to add or draw

attention to in relation to:

financial statements on the use of the going concern

— the directors’ confirmation within the viability statement

basis of accounting with no material uncertainties that

on page 23 that they have carried out a robust

may cast significant doubt over the Group and

Company’s use of that basis for a period of at least

assessment of the principal risks facing the Group,

including those that would threaten its business model,

twelve months from the date of approval of the financial

future performance, solvency and liquidity;

— the related statement under the Listing Rules set out on

and explaining how they are being managed and

page 23 is materially inconsistent with our audit

mitigated; and

— the Principal Risks disclosures describing these risks

statements; or

knowledge.

We have nothing to report in these respects.

5. We have nothing to report on the other information in

the Annual Report

The directors are responsible for the other information

presented in the Annual Report together with the financial

statements. Our opinion on the financial statements does

not cover the other information and, accordingly, we do not

express an audit opinion or, except as explicitly stated

below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in

doing so, consider whether, based on our financial

statements audit work, the information therein is materially

misstated or inconsistent with the financial statements or

our audit knowledge. Based solely on that work we have

not identified material misstatements in the other

information.

Strategic report and directors’ report

Based solely on our work on the other information:

— we have not identified material misstatements in the

strategic report and the directors’ report;

— in our opinion the information given in those reports for

the financial year is consistent with the financial

statements; and

— in our opinion those reports have been prepared in

accordance with the Companies Act 2006.

Directors’ remuneration report

In our opinion the part of the Directors’ Remuneration

Report to be audited has been properly prepared in

accordance with the Companies Act 2006.

— the directors’ explanation in the viability statement of

how they have assessed the prospects of the Group,

over what period they have done so and why they

considered 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.

Under the Listing Rules we are required to review the

viability statement. We have nothing to report in this

respect.

Corporate governance disclosures

We are required to report to you if:

— we have identified material inconsistencies between the

knowledge we acquired during our financial statements

audit and the directors’ statement that they consider

that the annual report and financial statements taken as

a whole is fair, balanced and understandable and

provides the information necessary for shareholders to

assess the Group’s position and performance, business

model and strategy; or

— the section of the annual report describing the work of

the Audit Committee does not appropriately address

matters communicated by us to the Audit Committee.

We are required to report to you if the Corporate

Governance Statement does not properly disclose a

departure from the eleven provisions of the UK Corporate

Governance Code specified by the Listing Rules for our

review.

We have nothing to report in these respects.

6. We have nothing to report on the other matters on

which we are required to report by exception

A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.

Under the Companies Act 2006, we are required to report
to you if, in our opinion:

— 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 and the part of
the Directors’ Remuneration Report to be audited are
not in agreement with the accounting records and
returns; or

— certain disclosures of directors’ remuneration specified

by law are not made; or

— we have not received all the information and

explanations we require for our audit.

We have nothing to report in these respects.

7. Respective responsibilities

Directors’ responsibilities

As explained more fully in their statement set out on page
69, the directors are responsible for: the preparation of the
financial statements including being satisfied that they give
a true and fair view; such internal control as they determine
is necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error; assessing the Group and
parent Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and using the going concern basis of accounting unless
they either intend to liquidate the Group or the parent
Company or to cease operations, or have no realistic
alternative but to do so.

Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or other
irregularities (see below), or error, and to issue our opinion
in an auditor’s report. Reasonable assurance is a high level
of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can
arise from fraud, other irregularities or error and are
considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.

Irregularities – ability to detect

We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the
financial statements from our sector experience, and
through discussion with the directors and other
management (as required by auditing standards), and from
inspection of the group’s legal correspondence.

We had regard to laws and regulations in areas that directly
affect the financial statements including financial reporting
(including related company legislation) and taxation
legislation. We considered the extent of compliance with
those laws and regulations as part of our procedures on the
related financial statement items.

We communicated identified laws and regulations
throughout our team and remained alert to any indications
of non-compliance throughout the audit. This included
communication from the group to component audit teams
of relevant laws and regulations identified at group level,
with a request to report on any indications of potential
existence of non-compliance with relevant laws and
regulations (irregularities) in these areas, or other areas
directly identified by the component team.

As with any audit, there remained a higher risk of non-
detection of non-compliance with relevant laws and
regulations (irregularities)/irregularities, as these may
involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls.

8. The purpose of our audit work and to whom we owe

our responsibilities

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.

Michael Harper (Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

15 Canada Square, Canary Wharf, E14 5GL

24 May 2018

PayPoint plc Annual Report 2018

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S

Consolidated income statement

Continuing operations1
Revenue
Cost of revenue
Gross profit
Administrative expenses
Operating profit before business disposal
Disposal of businesses
Operating profit after business disposal
Share of joint venture result
Investment income
Finance costs
Profit before tax
Tax
Profit for the year

Attributable to:
Equity holders of the parent
Non-controlling interests

Earnings per share
Basic
Diluted

Note

2
5

Year
ended
31 March
2018
£000

Year
ended
31 March
2017
£000

213,515
(113,565)
99,950
(46,489)
53,461
—
53,461
—
95
(609)
52,947
(10,012)
42,935

211,924
(106,008)
105,916
(53,640)
52,276
15,660
67,936
1,193
132
(120)
69,141
(9,508)
59,633

42,935
—
42,935

59,622
11
59,633

11
11

63.0p
62.7p

87.5p
87.2p

Consolidated income 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 for the year
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
Non-controlling interests

Year
ended
31 March
2018
£000

Year
ended
31 March
2017
£000

675

—
67
42,935
43,002

43,002
—
43,002

2,047
2,722
59,633
62,355

62,344
11
62,355

1. The mobile payments business, which was sold in December 2016 and is therefore included in prior year comparatives, did not meet the definition of a discontinued operation set out in

IFRS 5 Non-current assets held for sale and discontinued operations as it did not constitute a separate major line of business.

PayPoint plc Annual Report 2018

Consolidated statement of financial position

Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax asset

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents

Total assets
Current liabilities
Trade and other payables
Current tax liabilities

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
17

18
19

20
17

31 March
2018
£000

31 March
2017
£000

12,171
13,586
28,047
414
54,218

279
161,987
46,040
208,306
262,524

196,562
4,213
200,775

390
66
456
201,231
61,293

227
2,907
2,771
(249)
55,637
61,293
—
61,293

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

These financial statements were approved by the Board of Directors and authorised for issue on 24 May 2018 and were
signed on behalf of the Board of Directors.

Dominic Taylor
Chief Executive
24 May 2018

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018

Consolidated statement of changes in equity

Share
premium
£000
2,365
—

Share based
payment
reserve
£000
3,956
—

Translation
reserve
£000

Retained
earnings
£000
(3,038) 84,467
— 59,622

Total equity
attributable
to equity
holders of
the parent
£000
87,977
59,622

Non-
controlling
interest
£000

Total
equity
£000
(114) 87,863
59,633

—
—

675
2,047

—
268

1,552
(1,329)

—
—

—
651

675
2,047

1,552
(410)

—
—
2,633
—

225
—
4,404
—

—
225
—
— (78,543) (78,543)
(316) 66,197 73,145
42,935

— 42,935

—
103

—
—

675
2,150

1,552
(410)

—
225
— (78,543)
— 73,145
— 42,935

—

— 1,567
(2,999)

274

—
—

—

— 1,567
(322)

2,403

— 1,567
(322)
—

Share
capital
£000
227
—

—
—

—
—
227
—

—

—
—

—
—
227

—
—
2,907

(201)
—
2,771

—
(201)
—
— (55,898) (55,898)
(249) 55,637 61,293

—
(201)
— (55,898)
— 61,293

Opening equity 1 April 2016
Profit for the year
Exchange differences on
translation of foreign operations
FX and 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
Profit for the year
Exchange differences on
translation of foreign operations
Equity-settled share-based
payment expense
Vesting of share scheme
Deferred tax on share-based
payments
Dividends
Closing equity 31 March 2018

Note

23
23

17
24

23
23

17
24

PayPoint plc Annual Report 2018Consolidated statement of cash flows

Net cash flow from operating activities

Investing activities
Investment income
Purchases of property, plant and equipment
Purchases of intangible assets
Acquisition of subsidiary
Acquisition of subsidiary – client cash
Net proceeds on disposal of subsidiary
Net cash (used) / generated in investing activities

Financing activities
Dividends paid
Net cash used in financing activities

Net decrease 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

Note
29

9
9

Year
ended
31 March
2018
£000
62,990

Year
ended
31 March
2017¹
£000
41,807

95
(7,112)
(6,258)
(2,480)
1,554
—
(14,201)

132
(12,116)
(5,335)
—
—
22,674
5,355

(55,898)
(55,898)

(78,543)
(78,543)

(7,109)
53,080
69
46,040

(31,381)
83,221
1,240
53,080

Year
ended
31 March
2018
£000
18,547
27,493
46,040

Year
ended
31 March
2017
£000
32,876
20,204
53,080

1. 31 March 2017 figures have been restated for the reclassification of the cash settled share based payment from financing activities to operating activities.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018

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
Current tax liability

Non-current liabilities
Deferred tax
Total liabilities

Net assets

Equity
Share capital
Share premium
Share-based payment reserve
Retained earnings
Total equity

Note

18
19

31 March
2018
£000

31 March
2017
£000

60,170
60,170

36,116
1,064
37,180
97,350

12,191
296
12,487

60,149
60,149

22,032
1,409
23,441
83,590

6,611
—
6,611

—
12,487

70
6,681

84,863

76,909

227
2,907
2,747
78,982
84,863

227
2,633
4,179
69,870
76,909

The financial statements of PayPoint plc (registered number 03581541) were approved by the Board of Directors and
authorised for issue on 24 May 2018 and signed on behalf of the Board of Directors.

Dominic Taylor
Chief Executive
24 May 2018

PayPoint plc Annual Report 2018
Company statement of changes in equity

Opening equity 1 April 2016
Profit for the period
Equity-settled share-based payment
expense
Vesting of share scheme
Dividends paid
Closing equity 31 March 2017
Profit for the period
Equity-settled share-based payment
expense
Vesting of share scheme
Dividends paid
Closing equity 31 March 2018

Note

23
23
24

Share
capital
£000
227
—

—
—
—
227
—

—
—
—
227

Share
premium
£000
2,365
—

—
268
—
2,633
—

—
274
—
2,907

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 in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

Share-based
payment
reserve
£000
3,956
—

1,552
(1,329)
—
4,179
—

1,567
(2,999)
—
2,747

Note
29

Retained
earnings
£000
82,383
65,379

—
651
(78,543)
69,870
62,607

—
2,403
(55,898)
78,982

Total
equity
£000
88,931
65,379

1,552
(410)
(78,543)
76,909
62,607

1,567
(322)
(55,898)
84,863

Year ended
31 March
2018
£000
(7,065)

62,639
—
(21)
62,618

Year ended
31 March
2017
£000
(2,374)

46,021
24,808
(840)
69,989

(55,898)
(55,898)

(78,543)
(78,543)

(345)
1,409
1,064

(10,928)
12,337
1,409

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018

Notes to the consolidated financial statements

1. Accounting policies

Statement of compliance with IFRSs
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 and Company’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, several amendments to IFRS issued
by the International Accounting Standards Board (IASB)
became mandatorily effective for accounting periods
beginning on or after 1 April 2017. Their adoption has not had
any material impact on the disclosures or on the amounts
reported in these financial statements, these include:

•
•

IAS 7 (amended) Disclosure initiative
IAS 12 (amended) Recognition of deferred tax assets for
unrealised losses

At the date of authorisation of these financial statements new
and revised statements issued but not yet effective are set
out below. Except for IFRS 15 and 16 separately addressed
below, it is anticipated 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:

Effective from 1 April 2018:

• 2014-2016 Cycle of annual improvements to IFRS
•

IFRS 2: (amended) Classification and measurement of
share-based payment transactions
IFRS 9: Financial instruments

•

Effective from 1 April 2019:

IFRIC 23 Uncertainty over Income Tax Treatments

•
• Amendments to IFRS 9 Financial instruments
• Amendments to IAS 28 Investments in Associates and

Joint Ventures

Effective from 1 April 2021:

•

IFRS 17: Insurance contracts

IFRS 15
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
impact assessment of IFRS 15 considering the current
revenue recognition policies set out on page 84. The impact
assessment and implementation of IFRS 15 identified key
areas of change including:

1. Deferral of setup and development revenue
Current revenue recognition for setup and development
revenue is dependent on contracted terms resulting in
certain fees being recognised as contractually earned.
Under IFRS 15, fees earned in advance of the provided
services will initially be deferred and subsequently
recognised as the performance obligations are satisfied.

2. Deferral of costs associated to setting up clients and

retailers on PayPoint’s network

Costs for setting up client and retailers, to the extent
they were not capitalised under other accounting
policies, are expensed as incurred. The setup costs
directly attributable to contracts with clients and
retailers incurred prior to providing the services
(satisfying the performance obligations) will be
capitalised and recognised as an expense as the
performance obligation is satisfied.

3. Contracts with tiered pricing structures
Certain contracts contain tiered pricing structures

where either the transaction fees vary over the term of
the contract or vary after achieving volume thresholds.
Under the current accounting policy, the transaction
fees are recognised as the transaction is processed at
the fee attributable to those transactions. Under IFRS
15, an estimate will be made of the average transaction
fee over the life of the contract and revenue recognised
according to that average transaction fee. The rate will
be subsequently revised for updated estimates at each
reporting period.

If the standard had been adopted in the 31 March 2018
financial year, it is estimated deferred costs would increase
gross assets by £3.0 million and deferred income would
increase total liabilities by £2.0 million. The overall impact
on earnings for the 2017 financial year would not be
significant, as revenue which would have been deferred by
an estimated £1.0 million is broadly similar to deferred costs
of £1.0 million.

On transition, the Group plans to adopt IFRS 15 using
the cumulative effect method, with the effect of initially
applying this standard recognised at the date of initial
application (i.e. 1 April 2018). As a result, the Group will
not apply the requirements of IFRS 15 to the comparative
period presented.

IFRS 16
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 £1.1 million and lease liabilities increasing

PayPoint plc Annual Report 2018total liabilities by £1.1 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, effective tax rate, reported
dividends and cash generation.

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
the mobile phone business 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 ongoing tax cost as a percentage of
the net profit before tax excluding significant items including
profit or loss on business disposals and impairments.

Reported dividends (Non-IFRS measure)
Reported dividends are based on a financial year’s results
from which the dividend is declared and consist of an
interim and final dividend. This is different to statutory
dividends as the final dividend on ordinary shares is
recognised in the following year when they are approved by
the Company’s shareholders.

Cash Generation (non-IFRS measure)
Cash generation reflects operating cash flows before
movements in working capital as detailed in note 29 to the
financial statements.

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 of 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.

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

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Notes to the consolidated financial statements continued

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.

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. Other than as described below, PayPoint is contracted
as agent in the supply of top-ups and accordingly the
commission earned from clients is recognised as revenue.
In Ireland and Romania, PayPoint contracts as principal for
mobile top-ups 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 that use our technology
to facilitate card payments, PayPoint One and legacy
terminals and EPoS, all of which are charged for on a
weekly or monthly basis, and recognised on a straight-
line basis over the period of the contract.

• Commissions, rebates and fees from card payment, ATM
transaction fees, parcel and money transfer transactions
are recognised when each transaction is processed.
• Commissions from sale of SIM cards is primarily earned

from the mobile operators based on the value of top-ups
after the initial activation. This revenue is contingent on
the customer actions and is recognised as the consumer
top ups the SIM card.

• 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 85).

Cost of revenue
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 separate component of
equity titled the translation reserve.

Exchange rates used for
conversion
Romania Leu – average
Romania Leu – year end
Euro – average
Euro – year end

31 March
2018
£000
5.2118
5.2852
1.1340
1.1366

31 March
2017
£000
5.3485
5.3147
1.1904
1.1689

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
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
adjusted for non-market conditions where they will not vest
(i.e. leavers). Fair value for LTIP schemes is measured by use
of a Monte Carlo simulation. The fair value of other equity-
settled share-based payments where no market vesting
conditions exist are based on the share price at the date of
the grant.

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 (based on past practice and stated policy)
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.

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 2018Taxation
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 include brand assets. These intangible assets are
amortised over their estimated useful lives of five years.

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 – 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 arrangements 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 or
fees from retailers 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 value 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.

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. Joint
arrangements are classified as either as 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. Our investment in Collect+
Holdings Limited is accounted for as a joint operation and is
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

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Notes to the consolidated financial statements continued

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
At the inception of finance leases, the leased asset and
the corresponding lease liability (net of finance charges) is
recognised on the statement of financial position based on
the lower of the fair value of the leased asset and the present
value of the minimum lease payments. Lease payments are
apportioned between the finance expense and the reduction
of the outstanding lease liability. The finance expense is
recognised in profit or loss on a basis that reflects a constant
periodic rate of interest on the finance lease liability.

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 statement of cash flows and statement
of financial position, 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 both
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.

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 judgements and estimates
In the application of the Group’s accounting policies, the
directors are required to make judgements, estimates and
assumptions about the recognition and measures of revenue,
costs, assets and liabilities. 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 following are the critical judgements and estimates with
the most significant effect on the amounts recognised and
presented in the financial statements.

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 judgements at the balance sheet date
that have a significant risk of causing a material adjustment to
the carrying amount of assets and liabilities within the next year
and key sources of estimation uncertainty in the business is the
evaluation of capitalised development expenditure shown in
intangible assets of £13.6 million (2017: £11.9 million).

Critical estimate: useful economic lives and intangible assets
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.

2. Segment reporting

Segment information
The Group provides a number of different services and
products, however these do not meet the definition of
different segments under IFRS 8 and the Group has only one
operating segment.

Geographical information

Year ended
31 March
2018
£000

Year ended
31 March
2017
£000

Revenue
UK
Ireland
Romania
North America
France
Total

152,225
3,727
57,563
—
—
213,515

Non-current assets (excluding deferred tax)
31 March
2018
£000
39,997
13,807
53,804

UK
Romania
Total

161,664
5,110
39,765
4,459
926
211,924

31 March
2017
£000
38,164
9,107
47,271

3. Net revenue (alternative performance measure)

Service revenue
Sale of goods
Royalties
Revenue
less:
Retail agent commissions
Cost of mobile top-ups and SIM
cards as principal
Card scheme sponsors’ charges
(Mobile business)
Net revenue

Year ended
31 March
2018
£000
164,519
47,809
1,187
213,515

Year ended
31 March
2017
£000
173,880
37,695
349
211,924

(49,100)

(53,645)

(44,844)

(32,296)

—
119,571

(2,130)
123,853

PayPoint plc Annual Report 2018
4. Reconciliation from the Group statutory
income statement to Retail networks

7. Employee information

3,843

—

8. Profit for the year

PayByPhone, our mobile payment business and Drop and
Collect were sold in December 2016 and are included in
last year’s reported statutory results making this year’s
performance not directly comparable. To make a clear
comparison of the ongoing financial performance of
retail networks business the reconciliation from reported
statutory income statement for 2016/17 to retail networks
performance is shown below.

Less
Collect
Plus
£000

Retail
networks
£000
— 203,429
— (102,660)
— 100,769

— (47,509)

— 53,260

6,131

52,276

(53,640)

Less
Mobile and
Online
£000
(8,495)
3,348
(5,147)

Statutory
result
£000
211,924
(106,008)
105,916

For the year ended
31 March 2017
Revenue
Cost of revenue
Gross profit
Administrative
expenses
Operating profit
before
impairments and
business disposal
Profit on disposal
of business
Operating profit
after impairments
and business
disposal
Share of joint
venture result
Investment income
Finance costs
Profit before tax
Tax
Profit for the year 59,633 (18,508)

15,660 (19,503)

67,936 (18,519)

984

3,843

53,260

1,193
132
(120)

— (1,193)
—
—
—
11
69,141 (18,508)
2,650
(9,508)

—

—
132
(109)
53,283
— (9,508)
43,775

2,650

5. Cost of revenue

Commission payable to retail
agents
Cost of mobile top-ups and
SIM cards as principal
Card scheme sponsors’ charges
Cost of revenue deducted
for net revenue
Depreciation and amortisation
Other
Other cost of revenue
Total cost of revenue

Year ended
31 March
2018
£000

Year ended
31 March
2017
£000

49,100

53,645

44,844
—

32,296
2,130

93,944
10,195
9,426
19,621
113,565

88,071
7,473
10,464
17,937
106,008

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
£62.6 million (2017: £65.4 million).

Average number of employees
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
2018
£000

Year ended
31 March
2017
£000

174
464
638

22,985
2,285
1,413
26,683

190
471
661

26,715
2,728
1,310
30,753

Redundancy and termination costs were £0.4 million
(2017: £0.6 million).

Directors’ emoluments, pension contributions and share
options are disclosed in the Remuneration Committee
report on pages 49 to 65. Included within staff costs is
a share-based payment charge (note 23) of £1.6 million
(2017: £1.6 million).

Profit 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
Operating leases
Profit on disposal of business
Research and development costs

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
Corporate finance services
Tax compliance services
Tax advisory services
Total other services
Total auditor’s remuneration

Year ended
31 March
2018
£000

Year ended
31 March
2017
£000

44,844

32,182

—

114

6,362
4,155

52
67
—
2,100

Year ended
31 March
2018
£000

5,302
2,171

414
63
(15,660)
2,500

Year ended
31 March
2017
£000

139
174
—

35
35
—
—
—
—
209

105
190
28

24
52
300
53
132
485
727

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018Notes to the consolidated financial statements continued

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

Profit before tax
Profit on disposals
Profit before tax for purposes of
calculating the effective tax rate

Year ended
31 March
2018
£000

10,224
62
10,286

Year ended
31 March
2017
£000

10,596
(892)
9,704

(262)
(12)
(274)

—
(196)
(196)

10,012

9,508

Year ended
31 March
2018
£000
52,947
—

Year ended
31 March
2017
£000
69,141
(15,660)

52,947

53,481

The income tax charge is based primarily on the United Kingdom
statutory rate of corporation tax for the year of 19% (2017:
20%). The charge for the year is reconciled below the profit
before tax as set out in the consolidated income statement.
In the current year, the main rate of UK corporation tax
was 19% (2017: 20%). Reductions in the main rate of UK
corporation tax 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.

The tax charge of £10.0 million (2017: £9.5 million) on profit
before tax of £52.9 million (2017: £69.1 million) represents an
effective tax rate¹ of 18.9% (2017: 17.8%). This is marginally
lower than the UK statutory rate due to overseas profits
being taxed at local rates which are lower than the UK rate
offset marginally by adjustments in relation to estimates
made in prior years and disallowable expenditure. In the
current year the reported tax rate is the same as the effective
tax rate at 18.9%. Last year’s reported tax rate was 13.8%
with the profit on disposal of businesses not being taxable.
The charge for the year is reconciled below to the profit
before tax as set out in the consolidated income statement.

A description of the work of the Audit Committee is set
out on pages 43 to 48 and includes an explanation of
how auditor independence is safeguarded by limitation
of non-audit services.

Current year audit fee payments relate to KPMG LLP
whilst prior year are in respect to Deloitte LLP.

9. Business Acquisition

On 12 October 2017 the Group acquired the entire share
capital of Payzone SA in Romania for an initial consideration
of £1.4 million and £0.9 million for an existing shareholder
loan. Prior to the acquisition, Payzone SA operated a network
of 10,000 retailers offering similar services to our existing
Romanian business of bill payment, mobile top-up services
and money transfer services. The Payzone acquisition is a
step change in the Romanian business where synergies and
opportunities can be leveraged from enhanced cross selling
of services between clients and retailers together with
migrating the Payzone network, operations and office into
PayPoint Romania’s existing operations.

The allocation of the purchase price to the fair value of the
assets and liabilities, determined provisionally, was as follows:

Goodwill
Trademark
Property plant and equipment
Trade and other receivables
Inventory
Cash and cash equivalents – client funds
Deferred tax liability
Overdraft
Current tax liability
Trade and other payables
Net fair value of business acquired

Total consideration
Satisfied by:
Gross consideration shares
Gross consideration – shareholder loan
Total consideration paid
Net overdraft acquired

12 October

2017
£000
3,947
314
384
5,075
61
1,554
(79)
(216)
(27)
(8,749)
2,264

2,264

1,381
883
2,264
216
2,480

As part of the acquisition, £0.4 million of the consideration
was deferred and is subject to recovery of trade receivable
balances. Trade receivables balances were reduced to
fair value as amounts are highly unlikely to be recovered.
Consequently the deferred consideration liability has not
been recognised.

Since its acquisition Payzone generated revenue of
£1.7 million and profits of £0.3 million. Had Payzone
been acquired on 1 April 2017 it would have contributed
£3.4 million to revenue and £0.5 million to profits.

Acquisition related costs of £0.2 million related to
professional and legal fees have been included in
administrative expenses in the income statement.

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 2018

Year ended
31 March
2018
£000
52,947

Year ended
31 March
2017
£000
69,141

10,059

13,828

(130)
49

(213)
107

12. Goodwill

Cost
At 31 March 2016
Exchange rate adjustment
At 31 March 2017
Acquisition
Exchange rate adjustment
At 31 March 2018

Total
£000

8,068
168
8,236
3,947
(12)
12,171

—

Goodwill arose on the acquisition of PayPoint Romania and
Payzone Romania.

Profit before tax
Tax at the UK corporation tax
rate of 19% (2017: 20%)
Tax effects of:
Effect of tax rates in other countries
where the rate is different to the UK
Disallowable expenses
Losses in companies where a
deferred tax asset is not
recognised
Adjustments in respect of prior
years
Tax impact of share-based
payments
Revaluation of deferred tax asset
Disallowable loss on Collect+
arrangement
Disallowable goodwill impairment
and non-taxable profit on
disposal of subsidiary
Actual amount of tax charge

(22)
2

—

(1,088)

(10)
16

769

—
10,012

(3,901)
9,508

11. Earnings per share

Basic and diluted earnings per share are calculated on the
following profit and number of shares.

Profit for basic and diluted
earnings per share is the net
profit attributable to equity
holders of the parent
Adjustments:
– Profit related to Mobile
‒ Non-controlling interest
– Loss related to Collect+
Profit for the purpose of basic
and diluted earnings per share
(Retail networks)

Year ended
31 March
2018
£000

Year ended
31 March
2017
£000

42,935

59,622

—
—
—

(18,508)
11
2,650

42,935

43,775

31 March
2018
Number

of shares

31 March
2017
Number
of shares

Weighted average number of
ordinary shares in issue (for basic
earnings per share)
Potential dilutive ordinary
shares:
LTIP
DABS / DSB
SIP and other
Weighted average number of
ordinary shares in issue (for
reported and Retail networks
diluted earnings per share)

68,112,815 68,118,438

260,078
47,795
28,719

190,484
59,725
373

68,449,407 68,369,020

The Group tests goodwill annually for impairment as set
out in the accounting policy note on page 83. 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 3%
(2017: 2%). The post-tax rates used of 13.1% (2017: 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.

13. Other intangible assets

Development
costs
£000

Trademark
£000

Total
£000

Cost
At 31 March 2017
Additions
Disposals
Acquisitions
Exchange rate
adjustment
At 31 March 2018

16,328
5,564
(1,034)
44

—
20,902

Accumulated amortisation
At 31 March 2017
Charge for the year
Disposals
At 31 March 2018

4,461
4,128
(1,034)
7,555

—
—
—
270

16,328
5,564
(1,034)
314

(4)
266

(4)
21,168

—
27
—
27

4,461
4,155
(1,034)
7,582

Carrying amount
At 31 March 2018
At 31 March 2017

Cost
At 31 March 2016
Additions
Disposals
At 31 March 2017

13,347
11,867

239
—

13,586
11,867

Development
costs
£000

Acquired
contracts with
merchants

£000

10,328
6,000
—
16,328

801
—
(801)
—

Total
£000

11,129
6,000
(801)
16,328

Earnings per share
Basic
Diluted

63.0p
62.7p

87.5p
87.2p

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018

Notes to the consolidated financial statements continued

Accumulated amortisation
At 31 March 2016
Charge for the year
Disposals
At 31 March 2017

2,290
2,171
—
4,461

801
—
(801)
—

3,091
2,171
(801)
4,461

At 31 March 2018, the Group had entered into contractual
commitments for the acquisition of terminals and ATMs
amounting to £1.7 million (2018: £2.8 million).

Terminals
and
ATMs
£000

Fixtures,
fittings and
equipment
£000

Land
and
buildings
£000

Total
£000

Carrying amount
At 31 March 2017
At 31 March 2016

11,867
8,038

—
—

11,867
8,038

At 31 March 2018, the Group had not entered into any material
contractual commitments for other intangible assets.

14. Property, plant and equipment

Terminals
and
ATMs
£000

Fixtures,
fittings and
equipment
£000

Land
and
buildings
£000

Total
£000

Cost
At 31 March 2017
Additions
Disposals
Acquisitions
Exchange rate
adjustment
(13)
At 31 March 2018 67,733

61,462
6,402
(399)
281

3,982
207
(372)
103

10,390
291
—
—

75,834
6,900
(771)
384

—

(13)
3,920 10,681 82,334

—

Cost
At 31 March 2016
Additions
Disposals
Exchange rate
adjustment
215
At 31 March 2017 61,462

55,041
7,322
(1,116)

Accumulated
depreciation
At 31 March 2016
Charge for the year
Disposals
Exchange rate
adjustment
182
At 31 March 2017 45,726

41,840
4,406
(702)

3,949
87
(108)

6,412
3,978

65,402
11,387
— (1,224)

269
3,982 10,390 75,834

—

1,471
583
(108)

639
313
—

43,950
5,302
(810)

42
1,988

—

224
952 48,666

Net book value
At 31 March 2017 15,736
13,201
At 31 March 2016

1,994
2,478

9,438
5,773

27,168
21,452

Terminals
and
ATMs
£000

Fixtures,
fittings and
equipment
£000

Land
and
buildings
£000

Total
£000

15. Joint Operation

Accumulated
depreciation
At 31 March 2017
Charge for the year
Disposals
Exchange rate
(12)
adjustment
At 31 March 2018 51,280

45,726
5,924
(358)

1,988
248
(372)

952
190
—

48,666
6,362
(730)

1
1,865

—

(11)
1,142 54,287

Carrying amount
At 31 March 2018 16,453
15,736
At 31 March 2017

2,055
1,994

9,539 28,047
27,168
9,438

The joint operation with the Collect+ Group, has licenced
the use of the Collect+ brand to both Drop and Collect
Limited (a wholly owned subsidiary of Yodel) and PayPoint.
In consideration, PayPoint and Drop and Collect Limited
pay royalties to the joint operation for each parcel they
introduce to the Collect+ network. The royalties in the
arrangement are then distributed equally to Yodel and
PayPoint on a regular basis.

The only source of revenue for the Collect+ Group in the period
was the royalty income received from licencing the brand to
Drop and Collect Limited. The Group’s share of £1.2 million
(2017: £0.3 million) has been included in revenue. There were
insignificant operating costs incurred by the arrangement.

PayPoint plc Annual Report 2018

16. Investments

Movement of investments

The Company, a holding company, has investments (directly
or indirectly) in the following undertakings which are wholly
owned unless otherwise stated:

Company name

Principal activity (registered address)

PayPoint
Network
Limited

Management of an electronic
payment service
(1 The Boulevard, Shire Park, Welwyn
Garden City, Hertfordshire, AL7 1EL)

Country of
registration

England
and Wales

PayPoint
Collections
Limited

Provision of a payment collection
service
(1 The Boulevard, Shire Park, Welwyn
Garden City, Hertfordshire, AL7 1EL)

England
and Wales

PayPoint
Retail Solutions
Limited

Provision of retail services
(1 The Boulevard, Shire Park, Welwyn
Garden City, Hertfordshire, AL7 1EL)

England
and Wales

PayPoint
Ireland Limited

Holding company
(29 Earlsfort Terrace Dublin 2)

PayPoint
Network
Ireland Limited

Management of an electronic
payment service
(29 Earlsfort Terrace Dublin 2)

PayPoint
Collections
Ireland Limited

Provision of a payment collection
service
(29 Earlsfort Terrace Dublin 2)

Ireland

PayPoint
Services SRL

Management of an electronic
payment and collection service
(Charles de Gaulle Square, 15th Floor 8,
sector 1, Bucharest, Romania)

Romania

Payzone S.A

Management of an electronic
payment service
(71-73 Nicolae Caramfil Street, 4th
Floor, District 1, Bucharest Romania)

Romania

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
Disposals
Balance at the end of the year

31 March
2018
£000

31 March 2017
£000

60,149
21
—
60,170

108,800
840
(49,491)
60,149

—
—
—

47,057
(47,057)
—

Net book value

60,170

60,149

17. Deferred tax asset and liability

31 March
2017
£000

Credit to
income
statement
£000

Charge
to equity
£000

Acquisition
£000

31 March
2018
£000

736

113

(933)

—

(38)

811

(41)

(968)

592

(201)

— 441

(41)

354

105

274

—

(201)

(79)

348

Property, plant
and equipment

Intangible assets
Share-based
payments
Short-term
temporary
differences

Total

SC P.P.
Network
Progresimo
SRL

PayPoint
Payment
Services
Limited

Collect+
Holdings
Limited1

Holding Company
(Charles de Gaulle Square, 15th Floor 8,
sector 1, Bucharest, Romania)

Romania

Disclosed as:

Non-current asset

Non-current liability

Provision of regulated payments
services
(1 The Boulevard, Shire Park, Welwyn
Garden City, Hertfordshire, AL7 1EL)

England
and Wales

Holding company
(20-22 Wenlock Road, London N1 7GU)

England
and Wales

Collect+
Brand Limited1

Holder of Collect+ brand
(20-22 Wenlock Road, London N1 7GU)

England
and Wales

PayPoint Trust
Managers
Limited

Provision of employee benefit trust
services
(1 The Boulevard, Shire Park, Welwyn
Garden City, Hertfordshire, AL7 1EL)

England
and Wales

1 The Group holds a 50% interest in Collect+ Holdings Limited and Collect+ Brand Limited.
The Group has licenced the Collect+ Brand from Collect+ Limited but no royalty charges
have been paid or are payable.

414

(66)

348

Credit/
(Charge) to
income
statement
£000

31 March
2016
£000

Credit to
equity
£000

31 March
2017
£000

708

(936)

—

736

— (933)

161

206

225

592

—

(41)

—

(41)

(67)

196

225

354

Property, plant and
equipment

Intangible assets

Share-based payments
Short-term temporary
differences

Total

At the balance sheet date and in the prior year, the Group
had no unused tax losses.

No deferred tax liability has been recognised in respect
of temporary differences associated with investments
in subsidiaries because the Group is able 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.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018

Notes to the consolidated financial statements continued

18. Trade and other receivables

Group
Trade receivables1
Items in the course of collection2
Revenue allowance

Other receivables
Prepayments and accrued
income

31 March
2018
£000
18,425
139,666
(3,862)
154,229
1,208

6,550
161,987

31 March
2017
£000
14,743
78,340
(3,640)
89,443
1,161

8,167
98,771

1. The average credit period on the sale of goods is 26 days (2017: 25 days).
2. 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 £27.5 million
of this balance at 31 March 2018 (2017: £13.5 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 £38,000 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 has the
right of set-off of monies due against funds collected.

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 £11.6 million (2017: £4.4 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:

Less than 1
month
£000

1-2
months
£000

2-3
months
£000

More than 3
months
£000

Total
£000

Carrying value at
31 March 2018
Carrying value at
31 March 2017

9,564 1,048 1,010

17 11,639

3,938

314

86 4,353

Movement in the revenue allowance

Balance at the beginning
of the year
Amounts utilised in the year
Increase in allowance
Foreign exchange
Balance at end of the year

31 March
2018
£000

3,640
(1,209)
1,424
7
3,862

31 March
2017
£000

2,803
(78)
858
57
3,640

Age of revenue allowance
Less than 1
month
£000

1-2
months
£000

2-3
months
£000

More than 3
months
£000

Total
£000

Carrying value at
31 March 2018
Carrying value at
31 March 2017

Company
Amounts owed by
Group companies
Other receivables

— 3,798 3,862

72 3,485 3,640

31 March
2018
£000

31 March
2017
£000

36,023
93
36,116

21,949
83
22,032

19. 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 20).

20. Trade and other payables

Group
Amounts owed in
respect of client cash1
Settlement payables2
Client payables
Trade payables3
Other taxes and social security
Other payables
Accruals
Deferred income

Disclosed as:
Current
Non-current
Total

31 March
2018
£000

31 March
2017
£000

27,493
139,666
167,159
8,010
7,286
2,823
10,953
721
196,952

196,562
390
196,952

20,204
78,340
98,544
6,019
2,406
2,047
12,383
741
122,140

121,603
537
122,140

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 23 days purchases outstanding at 31 March 2018 (2017: 22
days) based on the average daily amount invoiced by suppliers during the year.

Company
Amounts owned by Group
companies
Other payables
Accruals

31 March
2018
£000

10,187
70
1,934
12,191

31 March
2017
£000

4,181
468
1,962
6,611

PayPoint plc Annual Report 2018The LTIP granted in 2014 did not vest in June 2017 whereas
the DSB granted in June 2014 fully vested in June 2017.
Therefore, £2.8 million (2017: £1.4 million) which had been
previously charged to the income statement for both
schemes has been reclassified to retained earnings.

The inputs into the Monte Carlo model for LTIP awards
during the year are as follows:

Weighted average share price (£)
Expected volatility1
Expected life
Risk-free rate
Fair Value of award

2017
LTIP
TSR
8.43
28%
3 years
0.25%
498p

2017
LTIP
EPS
8.43
28%
3 years
0.25%
843p

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.

Restricted shares and DABS issued during the year have a fair
value of 843p being the share price on the date of the grant.

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 purchase by the employee. The amount
charged to the income statement in the year was £0.1 million.
(2017: £0.2 million). For shares that have vested, £0.2 million
which had been previously charged to the income statement,
has been reclassified to retained earnings.

21. Financial commitments

Operating lease commitments for land and buildings
is as follows:

Amounts payable under
operating leases:
Within one year
Within two to five years
After five years

22. Share capital

Authorised share capital
4,365,352,200 ordinary
shares of 1/3p each
(2017: 4,365,352,200 ordinary
shares of 1/3p each)

Called up, allotted and fully
paid share capital
68,180,545 ordinary
shares of 1/3p each
(2017: 68,133,611 ordinary
shares of 1/3p each)

31 March
2018
£000

31 March
2017
£000

237
947
197
1,381

316
924
404
1,644

31 March
2018
£000

31 March
2017
£000

14,551
14,551

227
227

23. Share-based payments

LTIP, DSB, DABS and restricted schemes
The Group’s share schemes are described in the Remuneration
Committee report on pages 49 to 65 and include LTIP, DSB,
DABS and restricted share equity settled share schemes.
The vesting period for all awards is three years, apart from
10,741 2-year restricted shares, and they are forfeited if the
employee leaves the Group before shares vest. The amount
charged to the income statement in the year was £1.5 million
(2017: £1.4 million).

Share awards movement during the year

Outstanding at the beginning of
the year
Granted
Lapsed
Forfeited
Exercised
Outstanding at end of the year

Awards granted
LTIP
26 July 2017
Restricted 26 July 2017
5 June 2017
DABS

Number
of shares
2018

Number
of shares
2017

669,828
320,714
(207,123)
(4,861)
(63,030)
715,528

865,131
258,386
(221,978)
(170,688)
(61,023)
669,828

Number of
shares

Vesting date
237,070 25 July 2020
11,620 25 July 2020
72,024 4 June 2020

All awards granted are for free shares and therefore
the weighted average exercise price for all outstanding
schemes is £nil.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018

Notes to the consolidated financial statements continued

(a) 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 monies due against funds collected. The Group’s
maximum exposure, at 31 March 2018, was £64.3 million
(2017: £38.5 million).

The Company, PayPoint plc has issued parental guarantees
in favour of clients of its subsidiaries under which it has
guaranteed amounts due to clients, by the subsidiaries,
for settlement of funds collected by retailers. PayPoint plc
has also issued guarantees in favour of Romanian banks
amounting to £6.0 million for guarantee facilities used by
Romanian subsidiaries also to guarantee settlement of
client funds.

(b) Liquidity risk
The Group’s policy throughout the year ended 31 March 2018
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 2018 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 2018, these exposures were £nil
(2017: £nil).

(d) Interest rate risk
The Group had no interest bearing financial assets at
31 March 2018 other than the cash and cash equivalents of
£46.0 million (2017: £53.1 million). The Group is also exposed
to interest rate risk through use of its financing facility which
incurs interest charges based on Libor plus a margin.

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. The Group seeks to
maximise interest receipts within these parameters. The
Group also minimises interest cost by effective central
management of cash resources to minimise the need for
utilisation of the financing facility.

(e) Borrowing facilities
At year end, the Group had an undrawn, unsecured
£75 million revolving loan facility with a £20 million
accordion expiring in March 2023.

(f) 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 2018, or 31 March 2017.

24. Dividends on equity shares

Reported dividends on ordinary
shares:
Interim ordinary dividend of
15.3p (2017: 15.0p) per share
Proposed final ordinary dividend
of 30.6p (2017: 30.0p) per share
Interim additional dividend of
12.2p (2017: 12.2p) per share
Proposed additional final
dividend 24.5p (2017: 25.5p)
per share
Disposal dividend 38.9p
per share
Total reported dividends
(Non-IFRS measure)

Amounts distributed to equity
holders in the year:
Final ordinary dividend for
the prior year
Interim ordinary dividend for
the current year
Final additional dividend for
the prior year
Interim additional dividend
for the current year
Disposal dividend
Total dividends paid

Year
ended
31 March
2018
£000

Year
ended
31 March
2017
£000

10,431

10,218

20,863

20,436

8,316

8,333

16,636

16,667

—

26,493

56,246

82,147

20,450

19,199

10,431

10,218

16,701

—

8,316
—
55,898

8,333
40,793
78,543

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 £1.4 million (2017: £1.3 million). There is no
accrual for pension contributions at the balance sheet date
(2017: £nil).

26.

Financial instruments and risk

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 credit risk, 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.

PayPoint plc Annual Report 2018(g) 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.

(h) 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
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.

(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
2018
£000
2,579
234
445
29
3,287

Year ended
31 March
2017
£000
2,162
235
445
29
2,871

1. Includes salary, fees, benefits in kind and annual bonus.
2. Defined contribution pension scheme.
3. Long term incentives: includes the value of 2015 LTIP and DABS expected to vest after

the year end (2017: 2014 DSB and LTIP awards).
4. SIP matching and dividend shares awarded in the year.

Amounts received from Drop and Collect Limited during
the year totalled £15.1 million (2017: £17.8 million) and
PayPoint held a trade debtor at year end of £0.4 million
(2017: £0.6 million).

Directors’ remuneration is disclosed on page 60 as part
of the Annual Report on Remuneration.

28. Company related party transaction

The following transactions occurred between the Group
and its wholly owned subsidiaries

Amounts owed by subsidiaries
Amounts owed to subsidiaries
Interest paid to subsidiaries
Interest received from subsidiaries

Year ended
31 March
2018
£000
36,023
10,187
546
698

Year ended
31 March
2017
£000
21,949
4,181
661
859

29. Notes to the cash flow statement

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
Profit on disposal of investments
Loss on disposal of fixed assets
Net interest income
Share-based payment charge
Cash-settled share-based
remuneration
Operating cash flows before
movements in working capital1
Movement in inventories
Movement in receivables
Movement in payables
– client cash
– other payables
Cash generated by operations
Corporation tax paid
Financial costs paid
Net cash from operating
activities

Year ended
31 March
2018
£000
52,947

Year ended
31 March
2017¹
£000
69,141

6,362
4,155
—

(166)
—
52
514
1,567

5,302
2,171
(1,193)

(171)
(15,660)
414
(12)
1,552

(322)

(410)

65,109
148
(424)

5,401
3,650
73,884
(10,285)
(609)

61,134
196
(338)

(11,641)
1,219
50,570
(8,643)
(120)

62,990

41,807

1. Items in the course of collection and settlement payables are included in this

reconciliation on a net basis through the client cash line. The directors have included these
items on a net basis to best reflect the operating cash flows of the business.

Company
Profit before tax
Adjustments for:
Profit on sale of investments
Dividends from subsidiaries
Net interest income
Share-based payment charge
Cash-settled share-based
remuneration
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
2018
£000
62,831

—
(62,639)
(32)
1,567

Year ended
31 March
2017
£000
65,449

(20,440)
(46,010)
187
1,552

(322)

—

1,405
(13,385)
5,035

738
19,654
(22,766)

(6,945)
—
(120)

(2,374)
—
—

(7,065)

(2,374)

1. 31 March 2017 figures have been restated for the classification of the cash-settled share-based payment from financing activities to operating activities.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018
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 2018 annual general meeting of PayPoint plc (the Company) will be held at the offices of
Canaccord Genuity, 88 Wood Street, London EC2V 7QR, on Thursday 26 July at 12.00 noon. You will be asked to consider
and pass the resolutions below. Resolutions 13, 14 and 15 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 2018.

To approve the directors’ remuneration report (excluding the directors’ remuneration policy on pages 51 to 57),
as set out in the Company’s annual report and accounts for the financial year ended 31 March 2018.

To declare a final dividend of 30.6 pence per ordinary share of the Company for the year ended 31 March 2018.

To re-elect Ms Gill Barr as a director.

To re-elect Ms Rachel Kentleton as a director.

To re-elect Mr Giles Kerr as a director.

To re-elect Mr Rakesh Sharma as a director.

To re-elect Mr Dominic Taylor as a director.

To re-elect Mr Nick Wiles as a director.

10. To re-appoint KPMG LLP as auditor of the Company until the conclusion of the next annual general meeting of the

Company at which the accounts are laid.

11. To authorise the directors to determine the auditor’s remuneration.

Special business
12. 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 £75,757 provided that this authority shall expire on
the conclusion of the annual general meeting of the Company to be held in 2019 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).

PayPoint plc Annual Report 201813. 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 12 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

the allotment (otherwise than under sub-paragraph (a) above) to any person or persons of equity securities up to
an aggregate nominal amount of £11,364.

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.

14. 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 6,818,166;

(b)

(c)

(d)

(e)

the minimum price (exclusive of expenses) which may be paid for an ordinary share is the nominal value of
such share;

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;

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

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.

15. 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
24 May 2018

Registered Office:

1 The Boulevard
Shire Park
Welwyn Garden City
Hertfordshire
United Kingdom
AL7 1EL

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018

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, Link 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, Link 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 person 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 procedure 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 2018 (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 31 of the 2018 annual report.

PayPoint plc Annual Report 20189.

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

(c)

it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.

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 24 May 2018 was 68,181,656 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 24 May 2018 is 68,181,656.

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

To further reduce the environmental impact, we will be removing paper from the voting process for future meetings
in favour of a quicker and more secure method of voting online via our registrars’ website. However you will be able to
request a paper proxy if you wish from our registrars at the appropriate time.

Recommendation and voting intentions
With respect to resolutions 4 to 9 (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 31 of the 2018 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.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSPayPoint plc Annual Report 2018

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 49 to 65 other than the part
containing the Directors’ Remuneration Policy, of the 2018 annual report and accounts. This vote is advisory, and the
directors’ entitlement to remuneration is not conditional on it.

Resolution 3: Declaration of final dividend
Shareholders are being asked to approve a final dividend of 30.6p per ordinary share for the year ended 31 March 2018.
Subject to approval, the dividend will be paid on 30 July 2018 to the holders of ordinary shares whose names are recorded
on the register of members at the close of business on 22 June 2018.

Resolutions 10 and 11: Re-appointment and remuneration of auditor
Following a tender process in the summer of 2017, KPMG LLP was selected as the external auditor of the Company and its
subsidiaries. Details of the tender process are on page 45 of the 2018 annual report.

In light of the successful tender and following the audit for the year ended 31 March 2018, the assessment of KPMG’s
performance and independence was found to be satisfactory. The Board therefore recommends to shareholders that
KPMG be re-appointed as auditor and that the board be authorised to determine the auditor’s remuneration.

Resolution 12: 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 12
authorises the directors to make allotments of up to 22,727,219 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 2019, whichever is the sooner.

Resolution 13: 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 13 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 3,409,083
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 13.

Resolution 14: 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 14, 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 6,818,166, being 10 per cent 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 per cent 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 2019, whichever is the sooner.

Resolution 15: 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 15 as a special resolution to approve 14 days as the minimum period of notice for
all general meetings of the Company other than annual general meetings. The approval of this resolution will be effective until
the end of the 2019 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.

100

PayPoint plc Annual Report 2018Officers and professional advisers

Directors
G Barr*
G Kerr*
R Kentleton
R Sharma*
D Taylor
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
Company number 03581541

Independent auditor
KPMG LLP
15 Canada Square
London, E14 5GL
United Kingdom

Brokers
Canaccord Genuity
88 Wood Street
London, EC2V 7QR
United Kingdom

J.P. Morgan Cazenove
25 Bank Street
London, E14 5JP
United Kingdom

Jefferies/Hoare Govett
Vintners Place
68 Upper Thames Street
London, EC4V 3BJ
United Kingdom

Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent, BR3 4TU
United Kingdom

With thanks to:
Chris Paul
Chisom Onita
Hannah Poulton
Jinit Shah
Stacey Wells
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