After negotiating what management calls “a transitional period of low growth”, PayPoint (PAY) has delivered sufficient revenue and pre-tax profit growth in its first half to continue its generous dividend payout.
The closure of the Department of Work and Pensions’ ‘Simple Payment Service’, which used to earn the company £4m a year, hit revenues to the tune of £2m for the first half. The UK and Ireland business saw revenues drop 8 per cent. But the domestic division’s prospects are bright. PayPoint is trialling a cashback system with Link, the UK's largest cash machine network, according to chief executive officer Dominic Taylor. For now, it's Link’s sole testing partner, he adds.
PayPoint has paid a special dividend since 2017. This stayed at 12.2p for the first half, and broker Canaccord Genuity guides for a combined payout of 83.42p for FY2019, giving an effective dividend yield of around 10 per cent. Special dividends are not unusual in this sector – Worldpay (WPY), which listed on the LSE until January 2018, signed off with a 4.2p special dividend.
Canaccord Genuity gives adjusted pre-tax profit of £54m for the March 2019 year-end, leading to EPS of 63.1p, up from £52.3m and 62.7p in FY2018.
| PAYPOINT (PAY) | ||||
| ORD PRICE: | 838p | MARKET VALUE: | £571m | |
| TOUCH: | 838-845p | 12-MONTH HIGH: | 1,049p | LOW: 739p |
| DIVIDEND YIELD: | 5.5% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 67p | NET CASH | £39.4m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 97.6 | 24.4 | 29.1 | 27.5 |
| 2018 | 106 | 25.3 | 30.1 | 27.8 |
| % change | +9 | +4 | +3 | +1 |
| Ex-div: | 6 Dec | |||
| Payment: | 11 Jan |
