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PayPoint shores up investor sentiment with five-year shareholder return

The payment services specialist is engaged in a lengthy transitional phase, but a slowdown in its 'bill and general' transactions gives us cause for concern
May 26, 2016

PayPoint's (PAY) chief executive, Dominic Taylor, says the payment services specialist is going through a "transitional phase", with the focus on simplifying the business and reducing capital requirements. It may be too early to determine whether the group is successfully moving towards "putting the retailer at the heart of [the group's] service offering", particularly as its new terminal - PayPoint One - is now entering commercial trials. Nobody could ever accuse management of complacency, but the drawn-out negotiations with joint venture partner Yodel about the future structure of Collect+ suggests that change won't be achieved overnight.

IC TIP: Sell at 895p

There wasn't anything particularly telling in the group's full-year figures through to March. The top line contracted slightly, but gross profits of £106m were slightly up on last year. Earnings slipped into negative territory due to £49m in impairments, including a prudential charge of £30.8m linked to its inability, thus far, to offload its mobile payments business. On the distribution front, a double-digit hike in the annual dividend was complemented by plans to return surplus capital to punters at a rate of £25m per year over a period of five years.

Liberum expects adjusted profits of £54.3m for the March 2017 year-end, leading to EPS of 64.2p, up from £50m and 58.3p in 2016.

PAYPOINT (PAY)
ORD PRICE:895pMARKET VALUE:£609m
TOUCH:893p-896p12M HIGH / LOW:1,111p709p
DIVIDEND YIELD:4.7%PE RATIO:NA
NET ASSET VALUE:129p*NET CASH:£80.8m

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201220037.239.826.5
201320941.345.730.4 †
201421246.052.935.3
201521849.657.638.5
20162138.2-3.142.4
% change-3-84-+10

Ex-div: 30 Jun

Payment: 29 Jul

*Includes intangible assets of £16.1m, or 24p a share †Excludes special dividend of 15p.