Annual Report 2022 CUT-OUT TO DO PayPoint Group Annual Report 2022 ## Delivering ## innovative ## services ## Making ## people’s ## lives a ## little ## easier ## Who we are ### The PayPoint Group delivers innovative ### services and technology connecting millions ### of consumers online and oine wind offline with over ### 60,000 retailer partner and SME locations. ### Our Group businesses serve a diverse range of ### customers: from leading service organisations ### like EDF and Monzo; retailers and SMEs from ### Asda to the best UK independent stores; parcel ### carriers like Amazon and DPD; to the millions ### of consumers who pay bills, get cash, make ### card payments or pick up parcels every day ### at thousands of locations across the UK. ## Our purpose ### We deliver innovative services that make For more information go to corporate.paypoint.com ### people’s lives a little easier every day. ## easier Strategic report Governance Financial statements Shareholder information 01 # Contents # Strategic report 01 Highlights 02 PayPoint Group at a glance 04 Investment case 06 Our purpose in action 10 Chief Executive's review 12 Year in review 14 Market overview 16 Our business model 18 Our strategy 20 Divisional review 34 Key performance indicators 36 Responsible business 54 Risk management 55 Principal risks and uncertainties 59 Viability statement 60 Financial review # Governance 70 Chairman's statement for governance 72 Board of Directors 74 Executive Board 76 Corporate Governance Report 82 Nomination Committee Report 84 Audit Committee Report 90 Directors' Remuneration Report 102 Directors' Report 104 Statement of Directors' responsibilities # Financial statements 105 Independent Auditor's Report 111 Consolidated statement of profit or loss 111 Consolidated statement of comprehensive income 112 Consolidated statement of financial position 113 Consolidated statement of changes in equity 114 Consolidated statement of cash flows 114 Reconciliation of cash and cash equivalents 115 Company statement of financial position 116 Company statement of changes in equity 116 Company statement of cash flows 117 Notes to the consolidated financial statements # Shareholder information 156 Notice of Annual General Meeting 159 Notes to the Notice of Annual General Meeting 161 Explanatory notes to certain of the resolutions to be proposed at the Annual General Meeting 163 Officers and professional advisors # Financial highlights # Revenue from # continuing operations £145.1m +13.6% (FY21: £127.7m)¹ # Net revenue from # continuing operations² £115.1m +18.5% (FY21: £97.1m)¹ # Profit before tax £78.5m +180.5% (FY21: £28.0m)¹ # Profit before tax from # continuing operations # (excluding exceptional items) £45.6m +25.0% (FY21: £36.5m)¹ # Operating margin from # continuing operations # before exceptional items³ 41.4% +2.4ppts (FY21: 39.0%)¹ # Cash generation⁴ from # continuing operations # excluding exceptional items £53.9m +14.9% (FY21: £46.9m)¹ # Net corporate debt⁵ £43.9m -35.7% (FY21: £68.2m)¹ # Ordinary dividend # paid per share 33.6p +7.7% (FY21: 31.2p) # Ordinary reported # dividend per share 35.0p +8.7% (FY21: 32.2p) # Diluted earnings per share # from continuing operations # excluding exceptional items 52.8p +23.1% (FY21: 42.9p) # Diluted earnings per share 100.2p n/m (FY21: 32.4p)¹ 1. Comparative information has been restated for the retrospective application of the Group's change in accounting policy on intangible assets. Refer to note 1 and note 32. 2. Net revenue is an alternative performance measure. Refer to note 4 to the financial information for a reconciliation to revenue. 3. Operating margin before exceptional items % is an alternative performance measure as explained in note 1 to the Annual Report and is calculated by dividing operating profit before exceptional items from continuing operations by net revenue from continuing operations. 4. Cash generation is an alternative performance measure. Refer to the Financial Review on page 67 - cash flow and liquidity for a reconciliation from profit before tax. 5. Net corporate debt (excluding IFRS 16 liabilities) is an alternative performance measure. Refer to note 1 to the Annual Report for a reconciliation to cash and cash equivalents. PayPoint Plc Annual Report 202202 ## PayPoint Group at a glance ## Delivering ## innovative services ## and technology ### What we do: ### We deliver innovative services and technology connecting millions ### of consumers with over 60,000 retailer partner and SME locations ### Our divisions: ### We operate across three divisions: We provide digital solutions, technology and payment services for SMEs and retailers to deliver vital community services ### How we do it Who we work with ## This has been • Retail services – EPoS, ## Shopping ## another positive FMCG, home delivery, Counter Cash, ATMs ## year for the • Card payments ## PayPoint Group as Read more on page 20 ## we have built on ## the strategic step We provide a technology-based delivery platform to ## change delivered deliver best-in-class customer journeys for e-commerce brands and their customers over the ‘first and last mile’ ## in FY21, opening ### How we do it Who we work with ## up further growth • E-commerce – Collect+ ## E-commerce ## opportunities across (Parcels Send, Pick Up, Drop O) ## the business and ## delivering strong Read more on page 24 ## shareholder returns. We deliver a channel agnostic payment platform that gives clients and consumers choice ### How we do it Who we work with • Digital payments – ## Payments MultiPay and CashOut • Cash through to digital ## & Banking payments – eMoney • Cash payments – bill payments and banking Read more on page 28 Strategic report Governance Financial statements Shareholder information 03 ### PayPoint Group in numbers | PayPoint | Card payment | Parcel | | --- | --- | --- | | sites | sites | transactions | | 28,254 | 32,609 | 33.3m | | Card payment | Retailer partner and | PayPoint Trustpilot | | transactions | SME locations | score | | 369.3m | 63,657 | 4.9/5 | ### Our approach ## Our Purpose Our Vision ## Why we exist What we aim to achieve ### First-time delivery of outstanding technology ### and services to our customers ### We deliver innovative services that ### make millions of people’s lives a little ### Creating a dynamic place to work for our people ### easier every day ### Read more on page 06 Delivering positive outcomes for all our ### stakeholders ## Our values Our strategy ### How we bring our vision to life Embed PayPoint Group at the heart of SME ### and convenience retail businesses ### Become the definitive technology-based ### e-commerce delivery platform for first and last mile ### Ambitious Results focused Accountable customer journeys ### Sustain leadership in ‘pay as you go’ and ### grow digital payments ### Collaborative Can do Good colleague Building a delivery-focused organisation and culture Read more on page 18 ## ESG ## Creating long-term value ## for all our stakeholders ### We are committed to delivering sustainable, essential services that have a positive impact ### on our customers, UK communities and the world we live in Read more on page 36 PayPoint Plc Annual Report 202204 ## Investment case ## PayPoint ## Group ## We create innovative services and ## technology connecting millions of ## consumers with brands, retailers ## and SMEs. ## Enlarged Expanded Delivered ## network and retailer and payment ## consumer consumer channel agnostic ## reach proposition platform | Our enlarged Group now | Our expanded proposition | We have continued our | | --- | --- | --- | | delivers technology and services | helps our retailer partners and | diversification to digital | | to an unparalleled network of | SMEs keep pace with changing | payments, opening up new | | over 60,000 retailer partner | shopper needs, expectations and | sectors like housing and charities | | and SME locations across the | demographics. Our retail services | and helping organisations | | UK, including food service, | platform, PayPoint One, oers | seamlessly and eectively serve | | convenience retail, garages | everything a modern convenience | their customers through all | | and hospitality, serving millions | store needs, including EPoS, | channels. Our market-leading | | of consumers every day | parcel services, card and bill | omnichannel solution – MultiPay – | | | payments, Counter Cash, Home | is an integrated solution oering | | | delivery and digital vouchering | a full suite of digital payments | Strategic report Governance Financial statements Shareholder information 05 ## Excellence Growth- Talented ## in e-commerce focused and committed ## customer deployment team ## experience and  ## technology resources ### We pride ourselves on delivering We remain committed to We have a talented, diverse ### innovative technology platforms maintaining our strong capital and committed team with ### across all our business divisions, discipline and cash flow, whilst years of experience gained ### whether through PayPoint rebalancing our business mix from a wide range of industries ### One, helping our convenience towards growth opportunities and disciplines ### retailer partners digitise their and delivering a significantly ### businesses, to our proprietary enhanced platform with strong ### e-commerce soware solutions shareholder returns ### delivering great consumer ### experiences for the biggest ### online brands PayPoint Plc Annual Report 202206 ## Our purpose in action ## Delivering ## on our ## purpose ## Over the past year, ## the PayPoint Group ## has continued ## to deliver on its ## purpose of making ## people’s lives a little ## easier every day, ## delivering innovative, ## sustainable services ## that make a real ## dierence across ## the UK. Strategic report Governance Financial statements Shareholder information 07 ## Keeping people safe ## at the heart of local ## communities | ln Autumn 2021, we began an initial | Due to the initial success of this rollout, the | To date, well over million travel test kits | | --- | --- | --- | | partnership with Randox Health to support | business demonstrated great agility and | have been processed for consumers and, as | | them in providing Covid-19 travel test kits to | expanded the partnership in early January | government protocols and guidance have | | customers across the UK. Randox had been | 2022, to a further 2,500 Collect+ independent | continued to evolve, we are now supporting | | experiencing logistics challenges in processing | retail stores; this brought the click and collect | Randox in the rollout of non-travel test kits to | | time-sensitive travel test kits, due to the | service to even more consumers, all executed | stores as the free testing service has ceased | | Northern Ireland protocol, and were focused on | in the space of four weeks. In addition to this, | in the UK. | | improving the experience for their customers. | Collect+ were able to mobilise a full stock | | control solution for Randox in mainland UK, | Through our Collect+ network, we initially | including holding and replenishing test kits in | | --- | --- | | rolled out a click and collect solution to | stores and a comprehensive logistics solution, | | 35 major shopping centres across the UK, | leveraging the strength of the existing | | enabling customers to order a test kit online | Collect+ network. | and pick it up the same day from one of those locations. This was then extended to a further 250 smaller stores pre-Christmas as the Omicron variant was becoming dominant and customers were reluctant to visit major cities and centres. PayPoint Plc Annual Report 202208 ## Our purpose in action continued ## Helping SMEs ## recover post- ## pandemic | Handepay, our leading card payments business | In addition, the Business Finance product, | | --- | --- | | serving over 22,000 customers, has long been | oering SMEs short-term business funding | | a champion of small businesses across the UK, | to help invest in and grow their businesses, | | and this has become even more important as | was expanded to the PayPoint retailer partner | | they continue to recover from the pandemic. | universe of over 18,000 customers in July | | With a Trustpilot Excellent rating of 4.9 out | 2021. Delivered in partnership with YouLend, | | of 5, we have always been committed to | an embedded business finance company, and | | delivering fantastic service and value to SMEs | initially launched to Handepay customers | | across a wide range of sectors, including | in January 2020, the product has proved | | hospitality, garages, food service and retail. | invaluable to help support SMEs the expansion | has seen over £8.5 million lent to businesses In October 2021, this commitment was taken across the Handepay and PayPoint universes further by the launch of a new one-month over the past year. rolling contract, designed to give more flexibility, control and value to customers to help them continue to grow as the economy bounced back. The contract was launched to all customers switching their card machine from another provider and was made a permanent part of our proposition aer the end of a successful trial, which was all delivered just in three weeks. Since launch, over 2,300 SMEs have benefited from this new addition to our oer with all the benefits of Handepay without the long-term commitment. 09Shareholder informationFinancial statementsGovernanceStrategic report ## Digitising the ## customer experience ## in the UK Housing ## sector | Since the launch of our digital omnichannel | The Housing sector has long faced a number | MultiPay delivers a solution to all these | | --- | --- | --- | | payments platform, MultiPay, in 2015, PayPoint | of challenges that have never been truly | challenges, providing a channel-agnostic | | has long been helping organisations across | addressed by payments providers. Use of | payments platform that gives clients and | | a wide range of sectors to digitise their | digital channels has been low, with poor choice | consumers choice. It enables transactions | | oering to customers, delivering significant | and legacy infrastructure deployed, giving a | online and through smartphone apps and text | | improvements to customer journeys and | disjointed experience for customers. Similarly, | messages, as well as event payments, over | | realising cost savings and eciencies for | the back-oce experience for clients has | the counter, over the phone and via interactive | | those businesses. | been equally poor, with no cohesion between | voice response (IVR) systems. It also supports | | | systems and a lack of transparent data to help | a full range of Direct Debit options, including | | This success has been driven by working | manage relationships in real-time. Add to that | scheduling collections, as well as new product | | closely in partnership with organisations, | a lack of innovation and choice from payments | developments such as Open Banking, | | building strong relationships, understanding | providers in the market, and the opportunity | PayByLink, recurring payments and Event | | their challenges and developing digital | has become clear for PayPoint to lead the | Streamer. Housing customers benefit from | | payments solutions that help solve those | market and deliver tangible innovation and | real-time visibility of all payments received, | | problems. In particular, our progress in the | benefits for clients. | through one easy-to-use portal that is fully PCI | | UK Housing sector has benefitted from this | | compliant, and allows visibility of all payment | | collaborative approach, securing significant | | channels – including cash. | wins and enhancing the experience for thousands of customers across the UK. Our Our recent partnership with Optus Homes, a first major digital contract in this sector is leading app for tenants to manage their home now live with Optivo, one of the UK’s largest rental account, will help strengthen our oering housing associations, providing our full suite further, with MultiPay positioned as the native of channel-agnostic payment solutions. app payment solution, allowing tenants to pay their rent and manage arrears payments directly in the app, on the phone, or over the counter in 28,000 local retailers across the UK, a network bigger than all banks, supermarkets and Post Oces put together. PayPoint Plc Annual Report 202210 ## Chief Executive’s review ## Delivering a ## significantly ## enhanced platform ## with strong ## shareholder ## returns This has been another ## positive year for the ## PayPoint Group as we have ## built on the last two years ## of transformation, where ## we have strengthened ## our capabilities and ## opened up further growth ## opportunities, delivering ## a broader range of ## innovative services and ## technology connecting ## millions of consumers with ## an expanded universe of ## over 60,000 retailer partner ## and SME locations across ## multiple sectors. ### Nick Wiles ### Chief Executive Strategic report Governance Financial statements Shareholder information 11 | We have delivered a strong financial | their customers. We continue to provide vital | Solutions at Worldpay. In addition, four internal | | --- | --- | --- | | performance for the year against the backdrop | support to local authorities in disbursing cash | promotions were made to the Executive Board | | of uncertainty and disruption in our energy | to consumers, with our Cash Out service and | in January 2022 to recognise their critical roles | | and parcels markets and a rebalancing of | the new Payment Exception Service for the | in delivering our growth agenda: Jo Toolan, | | consumer behaviour as Covid-19 restrictions | Department for Work and Pensions (DWP) | Head of Client Management; Jay Payne, IT | | have eased. Strategically, we have enhanced | launched successfully and has exceeded our | Service and Operations Director; Chris Paul, | | the Group’s capabilities further by completing | expectations, as consumers migrate away from | Head of Corporate Finance; and Steve O’Neill, | | the acquisition of RSM 2000 and making a | Post Oce Card Accounts. Furthermore, we | Corporate Aairs and Marketing Director. | | strategic £6.7m investment in Snappy Group, | enhanced our e-commerce oering further | | | one of the UK’s leading local home delivery | with an expansion of our partnership with | Our Environment, Social and Governance | | and click and collect operators. RSM 2000 | Randox, providing vital Covid-19 testing | (ESG) approach has also developed further | | enhances our digital payments capability, | services throughout our Collect+ and multiple | in the year, as we consider our social | | adding innovative mobile payment products | retailer network, as well as launching new | responsibility and impact as a management | | and enabling reach into new and existing | services for our existing carrier partners and | team and business towards each of these | | sectors, including charities, housing, not-for- | providing industry leadership for driving further | key areas. A core ESG Working Group was | | profit organisations, events and SMEs in the | innovation and prominence for the out of home | formed at the beginning of the financial year | | UK. Our investment in Snappy Group builds | delivery market. | to review policies and approaches across the | | on our previously announced commercial | | Group, analyse cross-industry best practice, | | partnership, enabling the Group and its retailer | Many of these new services launched in | seek feedback from external stakeholders | | partners to respond to consumer demand for | the year have underlined the need to grow | and investors, and recommend workstreams | | rapid, local home delivery and remain at the | further consumer awareness for our expanded | and targets for the business to prioritise. This | | forefront of retail and consumer trends. The | propositions, whether leveraging our own | builds on the work done last year to refresh our | | acquisitions of Handepay/Merchant Rentals | channels or partnering with clients and | purpose, vision and values and now reflects the | | and i-movo in the last financial year are now | carriers on marketing programmes, such as the | expanded universe we now inhabit as well as | | fully integrated and have made important | promising in-store merchandising our digital | reinforcing the vital role that our services and | | contributions to our performance and | voucher category, working with brands like | partners play in communities across the UK. | | growth this year. As previously reported, we | Amazon, Paysafe, PlayStation and Love2Shop. | | | disposed of our Romanian business on 8 April | Equally, we remain focused on ensuring that | On 23 November 2021, Ofgem, the energy | | 2021 with proceeds of £48 million, and at a | we continue to deliver an excellent service for | regulator, published a ‘Notice of Decision to | | £30 million profit. | our consumers, reflected in our high customer | Accept Binding Commitments’, regarding | 1 | | satisfaction score of 89% | , and continue to | commitments proposed by PayPoint to | | --- | --- | --- | --- | | The volume of new initiatives delivered | support them through the current energy | | Ofgem to address the concerns raised in | | across the Group has underlined the need for | crisis and economic challenges. This has | | Ofgem’s Statement of Objections received | | strong execution and leadership to leverage | been backed up by our extensive eorts to | | on 29 September 2020. Ofgem accepted | | these opportunities, particularly where we | strengthen our retailer partner relationships | | those commitments as a resolution of its | | are establishing operations for the first | and drive adoption of these new opportunities | | concerns. PayPoint has been implementing the | | time. We have been relentlessly focused | to earn, including regular ‘cash and carry’ | | commitments in a timetable agreed with Ofgem. | | on operational excellence and the rapid | days, more direct communications and our | | | | delivery of our strategic priorities: embedding | reinvigorated relationships with the key trade | | Outlook and dividend | | PayPoint at the heart of SME and convenience | associations, including the Association of | | The transformation of the business is gathering | | retail businesses; becoming the definitive | Convenience Stores (ACS), the Scottish | | pace, reflecting a rebalancing towards growth | | technology-based e-commerce delivery | Grocers’ Federation (SGF) and the National | | opportunities and delivering improving | | platform for first and last mile customer | Federation of Retail Newsagents (NFRN). The | | returns to our shareholders. We continue | | journeys; sustaining leadership in ‘pay-as-you- | feedback and support received from these | | to demonstrate agility and drive to respond | | go’ and growing digital bill payments; building | organisations has been critical to our continued | | quickly to changing consumer demands | | a delivery focused organisation and culture. | commitment to support our retailer partners | | and new opportunities in our markets. As | | Our retailer partner proposition has been | in delivering vital community service across | | a result, we remain well-placed to support | | enhanced further to help respond to consumer | the UK and responding to changing consumer | | our partners in response to the wider trends | | trends and drive revenue opportunities in | needs in the UK convenience sector. | | that have accelerated through the pandemic, | | a challenging cost environment: our new | | | including the continued shi from cash to | | Counter Cash solution is now live in 2,624 sites, | Like many businesses, we are navigating more | | digital payments, the growing demand for | | providing vital access to cash in communities | challenges from a cost perspective due to | | online shopping fulfilment and the increase in | | across the UK; the home delivery partnership | inflation, particularly in our supplier base and | | shopping local. | | with Snappy Shopper continues to grow with | the increased salary pressures experienced | | | | 269 sites live and positive sales growth; and | in recruiting and retaining talent that we | | The Board has proposed a final dividend | | we’ve continued to improve our engagement | referenced at the half year. We are also mindful | | of 18.0p per share, an increase of 8.4%, | | with retailers and key trade associations to | of the impact of these pressures on the | | consistent with our dividend policy of a target | | work in partnership to make the most of the | consumers, clients and retailers that we serve | | cover range of 1.2 to 1.5 times earnings from | | new opportunities. | and have sought to take action where we | | continuing operations excluding exceptional | | | can to support them, including our decision | | items, which reflects our long-term confidence | | We’ve also diversified our digital payments | to absorb 50% of the annual RPI service fee | | in the business, the strength of our underlying | | client base further with 18 schemes live in | increase for our retailer partners in April 2022. | | cash flow, the mitigation plans in place for | | the year, are developing new opportunities | We have put in place strong mitigation plans | | inflationary pressures and the enhanced | | in Open Banking and have secured our first | to address these challenges. | | growth prospects from the steps we have | | major housing client with Optivo, a leading UK | | | taken in the past year. | | housing association, for our complete digital | The Executive Board has also been | | | | payments solution. This success has been | strengthened in key areas this year to drive | | The Board remains confident in the delivery | | driven by our focused sector approach to | growth and accelerate the pace of delivery | | of further progress in FY23 and meeting | | building strong client relationships, developing | further. Anna Holness, joined the business as | | expectations. | | a deep understanding of their challenges | Sales Director in January 2022, aer three | | | | and helping to solve problems for them and | years as VP, Sales, Merchant International | | | 1. Opinium PayPoint Brand Tracker Sept 2021, 2,000 UK adults. PayPoint Plc Annual Report 202212 ## Year in reviewYear in review ## A positive ## year for the ## PayPoint Group ## Building on the last two years of transformation ## We have strengthened our capabilities and opened up further growth ## opportunities, delivering a broader range of innovative services and ## technology connecting millions of consumers with an expanded ## universe of over 60,000 retailer partner and SME locations. ## 2021 | April | July | October | | --- | --- | --- | | Acquired RSM 2000 | £6.6m investment in | Counter Cash service | | Significantly enhancing digital payments | Snappy Group | launched across UK | capability and diversifying sector reach | | Enables PayPoint and network of convenience | Innovative service providing vital access to | | --- | --- | --- | | | retailer partners to remain at the forefront of | cash and balance enquiries over the counter | | Disposal of Romanian business | retail and consumer trends | | | Completed on 8 April 2021, with proceeds | | PayPoint partnership with | | of £48 million, and at a £30 million profit | Scottish Grocers Federation | YouLend launched to oer | | | partnership announced | retailer partners fast and flexible | | | Focused on supporting convenience retailer | funding options | ## May partners in Scotland, with PayPoint joining Designed to free up funds and allow retailers ### Snappy Shopper home delivery as a corporate member to pay back their finance as they earn from ### partnership launched card sales, enabling them to focus on growth, Enabling retailer partners to oer customers buy stock or simply assist with cash flow ## September a convenient home delivery and click and ### collect option Payment Exception Service ## November ### launched for Department for ### Work and Pensions via i-movo Tyne Tunnel payments service ## June ### Digitising benefit payments and making it launched in North East ### Love2Shop e-gi quicker, simpler and more convenient for Payments can be made up to midnight on ### vouchers launched customers to collect their payments at the day aer someone uses the tunnel, Helping customers shop with high street over 28,000 PayPoint locations and 11,000 paying in cash or card at one of the 28,000 and online brands, including Argos, Halfords, Post Oces PayPoint retailers Marks & Spencer, ASOS, Costa and Uber Eats ### Digital voucher brands partner ### MyStore+ retailer rewards with PayPoint to oer greater ### app launched convenience to local shoppers Delivering rewards and incentives to Successful in-store display trial, partnering retailer partners with major brands to drive greater consumer awareness of cash through to digital category 13Shareholder informationFinancial statementsGovernanceStrategic report ## 2022 | December | January 2022 | March | | --- | --- | --- | | Counter Cash service hits | Randox Covid-19 testing | Optus Homes investment of | | 1,000 store milestone | partnership expanded | £750k announced | | PayPoint was the first of LINK’s Members | Click and collect service rolled out to over | Strengthens MultiPay proposition for the | | to provide the service with over £630,000 | 2,000 stores to help keep people safe in | housing sector, as the Optus Homes’ native | | taken out using the channel so far | communities across the UK | app payment solution, allowing tenants to | pay their rent and manage arrears payments ### Local authorities embrace Retailer winter promotion launched directly in the app, on the phone, or over the Eligible new retailer partners signing up to counter in 28,000 local retailers across the UK, ### PayPoint’s ‘Cash Out’ for PayPoint One entitled to claim three months’ a network bigger than all banks, supermarkets ### support fund payments service fee refund and Post Oces put together Liverpool and Warwickshire join over 96 local authorities and housing associations ## distributing funds to customers real-time February via email, letter or SMS to obtain a cash ### Counter Cash service reaches payment at any of its retailer outlets ### 2,000 store milestone The ‘Cashback Without Purchase’ service ### Collect+ delivers best ever provides a valuable new way to access cash ### Christmas and sector leadership on the high street, allowing consumers to In November and December 2021, overall withdraw cash in convenience stores without parcel volumes were up 11.3% vs 2020, the need to buy anything or pay a fee with over 6.5 million packages handled through the extensive Collect+ network ### Cash Out service supports of over 10,000 stores ### local authorities in distributing | First multi-carrier innovation, trends and | over £166m since April 2020 | | --- | --- | | future opportunities workshop held in | Issued under a range of government | | January 2022 to review best practice and | campaigns, including the Free School Meals | | performance from the successful peak | and Winter Hardship schemes, the vouchers | | 2021 period and agree initiatives to drive | were distributed by local authorities across | | further excellence | the UK and redeemed by consumers | throughout PayPoint’s nationwide network of 28,000 stores PayPoint Plc Annual Report 202214 ## Market overview ## Our markets ## Changing market dynamics are creating significant ## opportunities for the enlarged PayPoint Group, with ## the business uniquely placed to take advantage of ## the continued shi from cash to digital payments, ## the growing demand for online shopping fulfilment ## and the increase in shopping local. ## We equally remain committed to supporting our ## clients, retailer partners and consumers, helping ## them solve problems arising from the current ## Key trends and changes ## macro economic challenges. ## since the end of the FY21 ## financial year in the UK ## markets in which PayPoint ## operates include: Macro economic factors 1 • The Consumer Prices Index (CPI) grew to 7.8% in April 2022, driven by increased transport and energy costs 2 • The GfK UK Consumer Confidence Index fell to -38 in April 2022 (vs -15 in April 2021), with the cost of living crisis hitting UK consumers and the headline confidence score dropping to a near historic low, not seen since the 2008 financial crash and the first few months of the pandemic in 2020 • UK retail sales fell by 1.4% in March 2022, with the proportion of retail sales online falling to 26.0%, continuing a broad downward trend since its peak in February 2021 (37.1%) 3 • The Lumina CTP Price Index , tracking shopper price sensitivity, has grown by 5.4% since last year, indicating consumers have already become more price-led, seeking out budget options and reducing spend 4 • A recent study from Which? has shown that the rising cost of living could mean more people who do not usually use cash turning to it to manage their finances. A fih (20%) of non-regular cash users said they would start using cash if the cost of living gets worse, with over a third (34%) of respondents whose annual income was lower than £20,000 finding cash easier to budget with, on its own or alongside other payment methods. Around 15 million regular cash users say it helps them to keep track of their spending, underlining its importance for those on tight budgets Strategic report Governance Financial statements Shareholder information 15 13 Convenience retail Cash Out • Metapack data shows that 87% of UK • The UK convenience market grew to • Despite the shi from cash usage during consumers have shopped more online 5 | | £43.2 billion | in 2021 as the pandemic- | Covid-19, PayPoint’s Cash Out service has | | during the pandemic, with 71% having | | --- | --- | --- | --- | --- | --- | | | induced boost to market value was retained | | grown significantly year on year, driven by | | returned a product. Delivery preference | | • PayPoint One basket data shows overall | | | ongoing government meal voucher schemes | | is key in the e-commerce journey, with | | | convenience store average basket spend | | and Covid-19 related hardship funds. In | | 56% considering it the most important | | | in the year has reduced year on year to | | addition, the launch of the Payment Exception | | factor when shopping online. Home | | | £8.89 (FY21: £9.86) vs the highs seen | | Service, run for the Department for Work | | delivery is still the preferred channel for | | | during the Covid-19 aected prior year. | | and Pensions via our i-movo business, has | | 82% of consumers, with PUDO at 8% and | | | However, average basket spend has now | | further underlined the continuing importance | | lockers at 2% | | | grown by 9.6% over the past two years | | of delivering cash payments to those | • The Out of Home (OOH) market comprises | | | | (FY20: £8.11), driven by cost inflation and | | without access to a standard bank account | | click and collect, returns and send | | | reinforcing continuing consumer demand | | and replaces the Post Oce Card Account, | | propositions. The click and collect market | | | to shop local aer government restrictions | | which is coming to an end | | is 11% of all volumes with 150 million | 6 have been lied • Latest data from February 2022 showed parcels per year and is expected to double 14 | • Total UK convenience store numbers | | | | LINK’s ATM transactions were 19% higher | | by 2025 | . Returns and send volumes are | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | remained resilient, with marginal growth | | | (117 million transactions) than 2021 during | | estimated at c.185 million and c.380 million | | | | | | 7 | | | | | | 15 | | | of 0.2% to 47,079 | | | lockdowns, but 36% down on 2020, which | | parcels per year respectively | | | | • The sector continues to see consolidation, | | | | was just before the start of the pandemic. | | | | | | | most recently with Morrison’s buying | | | The number of ATMs in the UK reduced by | Bill payments and top-ups | | | | | | the McColl’s Retail Group being put into | | | 1.1% year on year to 52,613 | • The dislocation of the energy market | | | | | | administration in May 2022, maintaining | | • Access to cash remains a key priority in the | | | heightened in September 2021, with | | | | | over 1,000 stores across the UK | | | UK. The Financial Conduct Authority and | | operator insolvencies and pressure from | | | | • Local home delivery and click and collect | | | | Payment Systems Regulator are taking a | | rising wholesale prices. A well-established | | | | | from convenience stores has grown rapidly | | | joint approach to maintaining services for | | Ofgem process to support and transfer | | | | | over the past year, driven by the pandemic. | | | the many people who continue to rely on | | customers to new suppliers was invoked | | | | | Currently, circa 5% of total convenience | | | cash as a vital way of making payments. | | with minimal impact and risk to our business | | | | | purchases are driven through these | | | The Access To Cash Action Group, chaired | | and client base. PayPoint’s focus through | | | | | methods and they attract a younger, more | | | by Natalie Ceeney, has been working on | | the period has been on increased client | | | | | auent consumer, with basket spend being | | | Community Access To Cash pilots, including | | engagement and leveraging the strength | | | 8 | | +128% higher than in-store shoppers | PayPoint’s Counter Cash service, which | | and stability of our network to provide an | | --- | --- | --- | --- | --- | | | | launched in November 2021 oering | | uninterrupted service to consumers | | Card payments | | cashback without purchase and balance | • The price cap for pre-pay customers | | 16 | • Growth has again been driven by the shi | | | enquiries over the counter | increased to £1,309 | for the six months to | | --- | --- | --- | --- | --- | --- | | | from cash to card payments accelerated | | | March 2022, which was 13% higher than | | | | by Covid-19 | Parcels | | the cap of £1,156 in the six months | | | • Forecast growth in UK debit card market | | • Online retail sales in 2021 were down 5.6% | | from April 2021 to September 2021. From | | 9 by 2027 to 19.7 billion payments year on year, according to IMRG’s Online 1 April 2022, the price cap increased by a 12 | • In the financial year, card payment volumes | | | Retail Performance Report 2021 | , vs 2020 | | further 54% to £2,017 for the six months | | --- | --- | --- | --- | --- | --- | --- | | | increased by 3.5% year on year in the | | which was positively impacted by Covid-19. | | | to September 2022 | | | PayPoint business, against strong volumes | • IMRG data shows that click and collect | | | • Non-Big Six energy providers combined | | | | in FY21 due to Covid-19 | | share of the delivery market in November | | | market share increased marginally to | 17 | • Latest UK Finance data shows a 44.1% | | | 2021 to January 2022 dropped year on | | 29.6% | at the end of January 2022 | | --- | --- | --- | --- | --- | --- | --- | | | increase in debit card transactions (January | | year to 18% (vs 20% in the same period | | (29% as of 31 March 2021) | | | | 2022 vs January 2021) with 66.8% of | | last year), but still lower than the high of | • The rollout of smart meters has regained | | | | | transactions now contactless (vs 56.9% in | | 35% seen in 2019 | | pace following the impact of Covid-19 | | | | January 2021) driven by the increase in the | • This contrasts with the strong performance | | | in 2020. 4.5m meters were installed in | | 18 | | contactless limit to £100 in October 2021 | seen in the Collect+ network in FY22 as | | 2021 | versus 3.2m in 2020. The deadline | | --- | --- | --- | --- | --- | --- | | • In the SME markets that our Handepay | | transactions were +25.2% vs the prior year, | | for completion of the rollout has now been | | | | business serves, businesses employing | outperforming the overall online retail sales | | extended to 30 June 2025 | | | | 0-49 people, account for 99.2% (5.5 | market and driven by a resurgence in the | • PayPoint data shows average transaction | | | | | million) of the total UK business population, | clothing and footwear categories, which | | values for dual-fuel had grown to £15.66 | | | | with 75% (4.2 million) having no employees | performed poorly in 2020, and the strength | | in March 2022, from £14.10 in the previous | | | | and a further 20% (1.1 million) classed as | and breadth of carrier relationships and | | year, aecting frequency of visits and | | 10 micro-businesses with 0-9 employees . categories handled across the network transaction volumes Retail, auto trade and hospitality businesses of over 10,000 locations • The number of mobile subscribers declined 11 make up circa 14% of the SME sector to 21.5 million subscribers in April 2022, from 22.2 million in April 2021 1. https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/ 10. https://www.fsb.org.uk/uk-small-business-statistics.html consumerpriceinflation/april2022 11. https://www.gov.uk/government/statistics/business-population-estimates-2021 2. https://www.gfk.com/en-gb/press/uk-consumer-confidence-in-freefall-as- 12. IMRG Online Retail Performance Report 2021 index-crashes-in-april-to-36 13. Metapack E-Commerce Delivery Benchmark Report 2021 3. Lumina Intelligence Convenience Strategy Forum March 2022 14. https://www.imrg.org/uploads/media 4. Macro economic factors’. https://press.which.co.uk/whichpressreleases/cash- default/0001/08/2477f50ad2fee946cdf5ed23ebb8df21f2489d09.pdf?st. a-lifeline-for-keeping-track-of-spending-for-15-million-people-amid-cost-of- 15. OC&C analysis living-crisis-which-research-reveals/ 16. https://www.ofgem.gov.uk/energy-policy-and-regulation/policy-and-regulatory- 5. Lumina Intelligence Convenience Market Report July 2021 programmes/default-tari-cap#:~:text=The%20Prepayment%20Meter%20 6. PayPoint One Basket Data – April 2019 – March 2022 Price%20Cap%20came%20into%20force,Price%20Cap%20expires%20at%20 7. ACS Local Shop Report 2021 the%20end%20of%202020 8. Lumina Intelligence Convenience Market Report July 2021 17. https://www.ofgem.gov.uk/data-portal/retail-market-indicators 9. https://www.ukfinance.org.uk/system/files/Summary-UK-Payment- 18. https://www.gov.uk/government/statistics/smart-meters-in-great-britain- Markets-2018.pdf quarterly-update-december-2021 PayPoint Plc Annual Report 202216 ## Our business model ## How we deliver ## innovative services ### What makes our model work How we create value ## Unparalleled network of retailer Our three business ## partners and SMEs divisions driving • the enlarged PayPoint Group now delivers technology and services ## growth in the UK: to a universe of over 60,000 SME and retailer partner locations across multiple sectors, including food services, convenience retail, garages and hospitality ## A diverse range of clients and brands ## Shopping • our Shopping division serves the best SMEs and retailers in the UK, delivering digital solutions and essential services from large retailers, like Asda, The Co-operative Group and EG Group, to the best independent store owners across the country • our E-commerce division enables the delivery of best-in-class customer journeys for e-commerce brands over the first and last mile, including Amazon, eBay, Yodel, FedEx, DPD, DHL, HubBox, Randox Read more on page 20 and Parcel2Go • our Payments & Banking division delivers digital payment solutions to clients across diverse sectors, including energy, housing, local authorities and a growing portfolio of digital brands such as Amazon, PlayStation, Xbox and Love2Shop ## E-commerce ## Cutting-edge technology • we pride ourselves on delivering innovative technology and services across all our business divisions, whether through PayPoint One, helping our convenience retailer partners run their businesses more eciently, or our proprietary e-commerce soware solutions that have a singular focus on the delivery of great consumer experiences Read more on page 24 and confidence in the crucial first and last mile of parcel journeys ## Talented and committed people ## Payments • we have a talented, diverse and committed workforce with years of experience from a wide range of industries ## & Banking Read more on page 28 Strategic report Governance Financial statements Shareholder information 17 ## Our purpose is to deliver ## innovative services that ## make millions of people’s ## lives a little easier every day ### The value we createHow we create value ## Connecting millions of ## consumers with over ## 60,000 retailer partner ## and SME locations: ### Consumers Transactions per year ### Creating a better We serve millions of consumers every ### in-store experience day, online and in-store, helping them | We provide digital solutions to help our retailer | make payments and send/pick up parcels | 645.6m | | --- | --- | --- | | and SME partners keep pace with changing | through our digital payments platforms | | | shopper needs, service expectations and | and extensive retailer partner network | | demographics, oering everything a modern business needs, including EPoS, parcel services, Counter Cash, card and bill payments, ### home delivery and digital vouchering Retailer and SME locations ### Retailers and SMEs We enhance the retailer proposition and consumer experience, driving footfall, ## new commission opportunities and better 63,657 store management tools for thousands of SMEs and retailers across the UK ### Delivering great ### customer journeys We enable the delivery of best-in-class ### Employees No. of employees customer journeys for e-commerce brands over the first and last mile in c.10,000 We create a dynamic and innovative locations through our Collect+ brand, helping place to work for our employees consumers pick up and drop o online ## across the PayPoint Group 670 shopping or send parcels across the UK ### Investors Dividends paid per share We aim to deliver a sustainable and rewarding business model and superior ## Delivering a channel- returns for our investors 33.6p ### agnostic payment platform We have continued our diversification to digital payments, helping organisations ### Local communities Population within one mile seamlessly and eectively serve their customers. Our market-leading omnichannel We provide essential services to solution – MultiPay – is an integrated solution hundreds of communities across the UK, oering a full suite of digital payments ## at over 28,000 locations, with 99.2% 99.2% of the population living within one mile of a PayPoint location in urban areas 18 PayPoint Plc Annual Report 2022 # Our strategy # Our strategic framework Strategic priorities FY22 progress # Shopping Division 1. Embed PayPoint Group at the heart of SME and convenience retail businesses - Counter Cash live in 2,624 sites, offering vital access to cash over the counter and complementing existing ATM estate - SME proposition enhanced, including Handepay one-month rolling contract launched successfully to over 2,300 SMEs, business finance via YouLand with over £8.5m lent across PayPoint and Handepay, and new technology developed - Snappy Shopper live in 269 sites, helping retailer partners offer local home delivery and click and collect - Strong sales team delivery across PayPoint and Handepay, with over 6,900 installs across both businesses, increased engagement, visits, training and support for retailers and SMEs and uniting under new Sales Director # E-commerce Division 2. Become the definitive technology-based e-commerce delivery platform for first and last mile customer journeys - Parcel transaction growth of +25.2% year on year vs FY21, driven by best ever peak Christmas performance, strong Q4 with transactions +38.8% year on year driven by a resurgence in the clothing and footwear categories and continued improvements to the consumer in-store experience, particularly through our investment in 'print in store' technology - New partnership launched with Randox, enabling consumers to order tests online for click-and-collect at over 2,000 Collect+ sites - Expanding services to existing clients with DHL in-store returns and Amazon returns, enabled by further Zebra label printer rollout - First multi-carrier innovation, trends and future opportunities workshop held in January 2022 to review best practice and performance from the successful peak 2021 period and agree initiatives to drive further excellence # Payments & Banking Division 3. Sustain leadership in 'pay-as-you-go' and grow digital payments - Continued diversification from cash to digital with 28 new client services now live, 19 coming from non-energy sectors and 18 taking digital payments solutions, supported by development of additional capabilities, including Open Banking and new Direct Debit platform - New Payment Exception Service launched via i-movo for DWP, contributing £1.6m of net revenue - First major digital contract now live with Optivo, one of the UK's largest housing associations - Acquisition of RSM 2000 completed on 12 April 2021 – positive contribution of £1.1m net revenue with charity and housing sector action plan underway to expand digital payments services to new and existing clients # PayPoint Group 4. Building a delivery focused organisation and culture - Anna Holness joined the Executive Board as Sales Director in January 2022, leading the retail and card services sales teams across PayPoint and Handepay - Four internal promotions made to the Executive Board in January 2022, recognising their critical roles in delivering our growth agenda: Jo Toolan, Head of Client Management; Jay Payne, IT Service and Operations Director; Chris Paul, Head of Corporate Finance; and Steve O'Neill, Corporate Affairs and Marketing Director - Integration work now complete for acquisitions of Handepay/Merchant Rentals, RSM 2000 and i-movo - Further development of our ESG approach, with core ESG Working Group formed to analyse cross-industry best practice, seek feedback from external stakeholders and investors, and recommend workstreams and targets for the business to prioritise Strategic report Governance Financial statements Shareholder information 19 ### Link to principal risks | 1 | Competition and Markets | 5 | Legal and Regulator | 8 | Business Interruption | | --- | --- | --- | --- | --- | --- | | 2 | Emerging Technology | 6 | People | 9 | Credit and Operational | | 3 | Transformation | 7 | Cyber Security | 10 | Operational Delivery | | 4 | Operating Model | | | | | ### FY23 priorities KPIs Risks ### PayPoint One sites • Bring all new card payments business across PayPoint retail and Handepay 1 2 3 under a single acquiring service provider • Expand Counter Cash service across UK retail network 4 5 6 ## 18,120 • Build on our reinvigorated retailer engagement programme to drive further (FY21: 17,462) 7 8 9 consumer and retailer awareness and adoption of new services • Grow SME and retailer partner lending proposition, developing new commercial 10 ### partnerships and building on success of YouLend Card payment transactions • Deliver further enhancements to our retailer proposition, including refreshed third-party EPoS strategy ## 369.3m • Deliver broader SME proposition across Handepay customer base via rollout (FY21: 225.0m – two months only of new Android terminal of Handepay/Merchant Rentals) ### • Deliver Universal Returns proposition for carrier partners to all Collect+ locations Parcel transactions 1 2 3 • Expand successful ‘in-flight divert’ service to more carriers, where parcels are automatically diverted to the nearest pick up point aer initial unsuccessful 4 5 6 ## 33.3m delivery attempt at home (FY21: 26.6m) 7 8 9 • Explore additional opportunities to expand carrier proposition, including trial of parcel lockers 10 • Continue to drive leadership for in-store technology and consumer experience ### Parcel net revenue within the sector, supporting carrier partners with data, insights and opportunities to expand their customer oering ## £4.9m (FY21: £3.6m) ### • Create payment channel-agnostic platform, including Open Banking, Direct Digital transactions 1 2 3 Debit, card processing and real-time cash, creating a strong set of capabilities for each target vertical, particularly housing and charities 4 5 6 ## 34.2m • Continue to invest in new verticals and deliver new business wins, particularly (FY21: 27.2m) 7 8 9 within the housing, newspaper, charity and not-for-profit sectors • Reinforce PayPoint’s position as the leader for ‘cash out’ services for local 10 authorities and housing associations, supporting them in digitally disbursing ### Digital transaction value vital funds to customers in cash • Grow cash through to digital category further, partnering with major brands to drive greater consumer awareness ## £756.6m (FY21: £545.7m) • Deliver further growth opportunities and synergies from our acquisitions over ### Employee engagement – 1 2 3 the past two years ### collaboration score • Embed our ESG approach across the business to deliver responsible and 4 5 6 sustainable value for shareholders ## • Expand our ‘Welcoming Everyone’ programme to build on our commitments to 70 7 8 9 diversity, equity and inclusion and support our vision to create a dynamic place (FY21: 62) 10 to work • Invest to build further resilience into our service delivery, including improving quality and speed of agile delivery, reviewing ‘heritage’ systems and settlement infrastructure and enhancing customer support and collaboration PayPoint Plc Annual Report 202220 ## Divisional review ## Shopping We provide digital solutions, technology and payment services for SMEs and retailers to deliver vital ## Priority 1: community services. ## Embed the Retail services – we help our retailer and SME partners keep pace with changing shopper needs, service ## PayPoint Group expectations and demographics. Our retail services platform, PayPoint One, is live in over 18,120 stores ## at the heart across the UK and oers everything a modern convenience store needs, including EPoS, parcel services, card and bill payments, home delivery and digital vouchering. This empowers our retailer partners to grow ## of SME and their businesses profitably, achieving higher footfall and increased spend. We also provide access to cash solutions via our network of 3,686 ATMs and our pioneering Counter Cash service, oering cashback ## convenience without purchase and balance enquiries over the counter, is now live in 2,624 sites. ## retail businesses Card payments – we provide card payments services for over 30,000 SMEs and convenience retailers across the hospitality, convenience retail, auto trade, clothing and household goods sectors via our PayPoint, Handepay, Merchant Rentals and RSM 2000 brands. • Counter Cash live in 2,624 sites, oering vital access to cash over the counter and complementing ## FY22 Progress existing ATM estate • SME proposition enhanced, including Handepay one-month rolling contract launched successfully to over 2,300 SMEs, business finance via YouLend with over £8.5m lent across PayPoint and Handepay, and new technology developed • Snappy Shopper live in 269 sites, helping retailer partners oer local home delivery and click and collect • Strong sales team delivery across PayPoint and Handepay, with over 6,900 installs across both businesses, increased engagement, visits, training and support for retailers and SMEs and coming together under new Sales Director • Bring all new card payments business across PayPoint retail and Handepay under a single acquiring ## FY23 Priorities service provider • Expand Counter Cash service across UK retail network • Build on our reinvigorated retailer engagement programme to drive further consumer and retailer awareness and adoption of new services • Grow SME and retailer partner lending proposition, developing new commercial partnerships and building on success of YouLend • Deliver further enhancements to our retailer proposition, including refreshed third-party EPoS strategy • Deliver broader SME proposition across Handepay customer base via rollout of new Android terminal Strategic report Governance Financial statements Shareholder information 21 ### PayPoint One Sites ## 18,120 ## The transformation of the PayPoint Group over the ## last two years has driven new growth opportunities ### Given Covid-19 disrupted FY21, we have provided comparisons below with FY20 to demonstrate this ### shi across the Group. ### FY20 FY22 Key drivers • Growth in PayPoint One rollout and service fee ### Net revenue Net revenue • Growth in card payments and acquisition of Handepay/Merchant Rentals • Enhancement of retailer proposition and engagement, ## £35.4m £58.7m inc. Counter Cash, Snappy Shopper, MyStore+ +66.3% ### How we deliver | Percentage | Percentage | | | | | | --- | --- | --- | --- | --- | --- | | of Group | of Group | | | | | | | | Retail Service | | Card payments | | | | | • PayPoint One, EPoS, Counter | | • PayPoint & Handepay/ | | | 33.1% | 51.0% | | | | | | | | | Cash, Home Delivery, FMCG, | | Merchant Rentals & RSM 2000 | ATMs, Business Finance ### Sub-division Performance ### Retail Service Cards ### FY20 FY20FY22 FY22 ### Net revenue Net revenue Net revenue Net revenue ## £26.6m £28.3m £8.7m £30.4m +6.4% +249.4% | Percentage | Percentage | Percentage | Percentage | | --- | --- | --- | --- | | of Group | of Group | of Group | of Group | | 24.9% | 24.6% | 8.2% | 26.4% | PayPoint Plc Annual Report 202222 ## Divisional review continued ## Shopping ## Enhancing ## the retailer ## proposition proposition ## & consumer & consumer ## experienceexperience Strategic report Governance Financial statements Shareholder information 23 ## Q&A with ## Anna Holness ### Sales Director What have your impressions been of the A great example is our Counter Cash service – business since you joined in January? as well as providing vital Access to Cash at the The breadth and scale of what we do is heart of communities across the UK, the rollout enormous, playing a vital role in the lives of our has allowed us to spend more valuable time consumers, retailer partners and clients every engaging our retailer partners, understanding day. There is a great responsibility that comes their challenges and seeing how we can with what we do and I’ve been impressed leverage the full range of opportunities we by how dedicated and focused the whole can oer to help them. business is to delivering for communities across the UK as well as putting our retailer What’s the one big future opportunity partners at the heart of what we do. that you’re working on? Segmenting and profiling our retailers will be What opportunities are you most excited key to better targeting our propositions, how about for your retailer partners? we serve them and set them up for success. We have done a lot of work to enhance The PayPoint Group universe is no longer a our retailer proposition over the past two ‘one size fits all’ solution so it’s important years, bringing more opportunities to earn that we continue to listen to what they and and helping them support the communities their customers need and our retailer partner they serve through the sheer diversity of network. What’s right for an urban store in what we oer. There are many challenges in central London will be dierent to what works convenience retail and the broader economy in a rural store in Wales, and we’re focused on that our retailer partners are facing right now maximising the opportunity for them and for and we’re committed to working together with us so that we continue to oer vital services them to help solve the problems that they and to millions of consumers every day. their customers are facing. PayPoint Plc Annual Report 202224 ## Divisional review continued ## E-commerce We provide a technology-based platform to deliver best-in-class customer journeys for e-commerce ## Priority 2: brands and their customers over the ‘first and last mile’, leveraging our proprietary soware capability and ## Become the expertise with continuous investment and innovation in the in-store experience. ##  We deliver all of this in over 10,000 locations through our Collect+ brand, helping consumers pick up and ## technology-based drop o online shopping or send parcels across the UK. We work with a comprehensive range of partners, including Amazon, eBay, Yodel, Fedex, DPD, DHL, HubBox, Parcels2Go and Randox. Our proprietary PUDO ## e-commerce soware solutions are built in-house, with a singular focus on the delivery of great consumer experiences and confidence in the crucial first and last mile of parcel journeys. These solutions are easily deployable in ## delivery platform thousands of diverse locations across multiple sectors through the PayPoint Group. Our unique blend of  in-depth parcel operations experience, consumer interaction and agile IT development capability has been built over years of delivering best-in-class customer experiences. ## mile customer ## journeys • Parcel transaction growth of +25.2% year on year vs FY21, driven by best ever Peak Christmas ## FY22 Progress performance, strong Q4 with transactions +38.8% year on year driven by a resurgence in the clothing and footwear categories and continued improvements to the consumer in-store experience, particularly through our investment in ‘print in store’ technology • New partnership launched with Randox, enabling consumers to order tests online for click-and-collect at over 2,000 Collect+ sites • Expanding services to existing clients with DHL in-store returns and Amazon returns, enabled by further Zebra label printer rollout • First multi-carrier innovation, trends and future opportunities workshop held in January 2022 to review best practice and performance from the successful peak 2021 period and agree initiatives to drive further excellence • Deliver Universal Returns proposition for carrier partners to all Collect+ locations ## FY23 Priorities • Expand successful ‘in-flight divert’ service to more carriers, where parcels are automatically diverted to the nearest pick-up point aer initial unsuccessful delivery attempt at home • Explore additional opportunities to expand carrier proposition, including trial of parcel lockers • Continue to drive leadership for in-store technology and consumer experience within the sector, supporting carrier partners with data, insights and opportunities to expand their customer oering Strategic report Governance Financial statements Shareholder information 25 ### Parcel Parcel ### transactions net revenue ## 33.3m £4.9m ## Collect+ is our technology-based platform to deliver ## best-in-class customer journeys for e-commerce ## brands and their customers over the ‘first and last mile’ ### FY20 FY22 Key drivers • Development of e-commerce delivery platform yielding strong year ### Net revenue Net revenue on year transaction growth • Continued investment in technology and in-store experience, inc. label printers and app ## £4.1m £4.9m • Reshaped carrier relationships, expansion of brand portfolio and service provision +19.5% ### How we deliver ### Percentage Percentage ### of Group of Group • Consumer parcel send, pick up and drop o • No.1 carrier-agnostic Out Of Home (OOH) network, with best-in-class ## 3.8% 4.3% technology and consumer experience • Leadership in consumer data and insights to drive sector innovation ### Our partners PayPoint Plc Annual Report 202226 ## Divisional review continued ## E-commerce ## Providing ## best-in-class ## e-commerce ## journeys Strategic report Governance Financial statements Shareholder information 27 ## Q&A with ## David Wild Richard Gill and ### Retail Distribution Manager Parcels Key Account Manager | What was the key to the success of the | What impact do you think the service had | What’s the reaction been from Randox? | | --- | --- | --- | | Randox Covid-19 travel test kit rollout? | on customers around the country? | The reaction from the Randox team has been | | The big factor here was the speed and agility | This was all about making it easier and more | very positive – we’ve worked very closely with | | demonstrated by the whole business to | convenient to access travel test kits, by | them to improve their customer experience, | | mobilise and solve a client and consumer | enabling people to order a Randox test online | solve logistics challenges and deliver cost | | problem in the space of three weeks. Given | for click and collect at a local store within the | savings and eciencies for their operations. | | the constant changes in government guidance, | Collect+ network. With well over million travel | The relationship we’ve built is strong and, as | | this was a time-limited opportunity which | test kits processed to date for consumers, it’s | government protocols and guidance have | | needed a will and determination to make it | clear that this was a vital additional service | continued to evolve, we are now supporting | | happen, particularly in establishing third party | enabling them to access low-cost Covid-19 | Randox in the rollout of non-travel test kits | | logistics operations for the first time and | travel tests on their doorstep. | to stores as the free testing service has been | | supporting our retailer partners in delivering a | | ceased in the UK. | new service for Randox and their customers. It was also a fantastic example of leveraging the strength of our network and the flexibility of our technology platform to help solve a logistics and customer experience problem for our client and to ultimately help keep people safe in communities across the UK. PayPoint Plc Annual Report 202228 ## Divisional review continued ## Payments ## & Banking We deliver a channel-agnostic payment platform we launched the new Payment Exception Service ## Priority 3: that gives clients and consumers choice. via i-movo for the Department of Work and ## Sustain Pensions, digitising benefit payments and replacing Digital – we have continued our diversification to the Post Oce Card Account which is closing. ## leadership in digital payments, helping organisations seamlessly ## ‘pay-as-you-go’ and eectively serve their customers. Our market- Cash through to digital – we enable consumers leading omnichannel solution – MultiPay – is an to access digital brands and services through a ## and grow digital integrated solution oering a full suite of digital comprehensive portfolio of giing, e-banking payments. It enables transactions online and and gaming partners, including Amazon, Xbox, ## payments through smartphone apps and text messages, as PlayStation, Paysafe, Monzo and the Appreciate well as event payments, over the counter, over the Group. Consumers simply pay for a ‘pin on receipt’ phone and via interactive voice response (IVR) code in cash in any of our 28,254 retail locations systems. It also supports a full range of Direct and then can use that value online with the digital Debit options, including scheduling collections, brand or service chosen. For our challenger bank as well as new product developments such as partners, consumers can deposit cash into their Open Banking and PayByLink. MultiPay customers accounts across our extensive retail network. benefit from real-time visibility of all payments received, through one easy-to-use portal that Cash – we provide vital access to cash payment is fully PCI compliant, and allows visibility of all services across the UK by helping millions of payment channels – including cash. The platform is people every week control their household used by a growing number of organisations across finances, make essential payments and access the UK, including many housing associations, local in-store services. Our UK retail network of government authorities and utility providers. Our more than 28,000 stores is bigger than all Cash Out service also enables the rapid dispersal banks, supermarkets and Post Oces put of funds through secure digital channels and is together, putting us at the heart of communities actively used by local authorities and charities nationwide. to distribute emergency funds. In August 2021, • Continued diversification from cash to digital with 28 new client services now live, 19 coming from ## FY22 Progress non-energy sectors and 18 taking digital payments solutions, supported by the development of additional capabilities, including Open Banking and new Direct Debit platform • New Payment Exception Service launched via i-movo for DWP, contributing £1.6m of net revenue • First major digital contract now live with Optivo, one of the UK’s largest housing associations • Acquisition of RSM 2000 completed on 12 April 2021 – a positive contribution of £1.1m net revenue with a charity and housing sector action plan underway to expand digital payments services to new and existing clients • Create payment channel-agnostic platform, including Open Banking, Direct Debit, card ## FY23 Priorities processing and real-time cash, creating a strong set of capabilities for each target vertical, particularly housing and charities • Continue to invest in new verticals and deliver new business wins, particularly within the housing, newspaper, charity and not-for-profit sectors • Reinforce PayPoint’s position as the leader for ‘cash out’ services for local authorities and housing associations, supporting them in digitally disbursing vital funds to customers in cash • Grow cash through to digital category further, partnering with major brands to drive greater consumer awareness Strategic report Governance Financial statements Shareholder information 29 ### Digital transactions ## 34.2m ### Key drivers ## We deliver a channel- • Built payment channel agnostic platform, supporting diversification ## agnostic payment to digital • Investment in capabilities to secure business in new sectors, including ## platform that gives clients government, newspapers, housing and charities • Accelerated decline of cash in legacy business ## and consumers choice ### Sub-division performance ### Digital | FY20 FY22 | | | FY20 FY22 | | | | --- | --- | --- | --- | --- | --- | | Net revenue | | Net revenue | Net revenue | | Net revenue | | £67.4m | | £51.5m | £5.5m | | £7.8m | | | -23.6% | | | +41.8% | | | Percentage | | Percentage | Percentage | | Percentage | | of Group | | of Group | of Group | | of Group | | 63.1% | | 44.7% | 5.1% | | 6.8% | ### Sub-division performance ### Cash through to digital Cash | FY20 | | FY20FY22 FY22 | | | --- | --- | --- | --- | | Net revenue | Net revenue | Net revenue | Net revenue | | £6.9m | £8.2m | £55.0m | £35.5m | +18.8% -35.5% | Percentage | Percentage | Percentage | Percentage | | --- | --- | --- | --- | | of Group | of Group | of Group | of Group | | 6.5% | 7.1% | 51.5% | 30.8% | PayPoint Plc Annual Report 202230 ## Divisional review continued ## Payments & Banking ## Creating a ## payment channel ## agnostic ## platform Strategic report Governance Financial statements Shareholder information 31 ## Q&A with ## Vicky Lynch ### Business Development Manager What has driven PayPoint’s progress The opportunity here has been to help them and success in the housing sector? improve the platforms they have, creating The key here has been about forging strong one place for their customers to manage their relationships with our clients and actively relationship with the organisation, and giving listening to the challenges facing them and greater visibility to help deliver an improved their customers. From there, we have worked customer experience. collaboratively with those clients and our product teams to ensure that insight has been Most of their customers are regular users embedded into the product development of well-established digital brands, like roadmap, ensuring that all our digital payments Apple or Amazon, and with that comes high solutions hit the mark. expectations of a slick, simple user experience, all of which we can help deliver with MultiPay. What are the big challenges housing clients are facing right now? What’s the one big future opportunity The single biggest challenge is around digital that you’re working on? transformation and managing the increasing Open Banking will make a big dierence to our digital expectations of the customers they clients, either through the additional customer serve. Use of digital channels in the Housing experience improvements it will deliver, making sector has historically been low, with poor it easier for organisations to access data for choice and legacy infrastructure deployed, the benefit of their customers, or the additional giving a disjointed experience for customers. cost-saving opportunities it will create. PayPoint Plc Annual Report 202232 ## Divisional review continued ## PayPoint ## Group Underpinning the PayPoint Group’s future success is the continued development and investment in our ## Priority 4: people, systems and organisation. We aim to create a dynamic place to work for our people, enabling us to deliver for our customers by collaborating and being good colleagues to each other, creating a positive ## Building a and inclusive environment where everyone can learn, grow and shine. ## delivery-focused ## organisation ## and culture • Anna Holness joined the Executive Board as Sales Director in January 2022, leading the retail and card ## FY22 Progress services sales teams across PayPoint and Handepay • Four internal promotions made to the Executive Board in January 2022, recognising their critical roles in delivering our growth agenda: Jo Toolan, Head of Client Management; Jay Payne, IT Service and Operations Director; Chris Paul, Head of Corporate Finance; and Steve O’Neill, Corporate Aairs and Marketing Director • Integration work now complete for acquisitions of Handepay/Merchant Rentals, RSM 2000 and i-movo • Further development of our ESG approach, with core ESG Working Group formed to analyse cross- industry best practice, seek feedback from external stakeholders and investors, and recommend workstreams and targets for the business to prioritise • Deliver further growth opportunities and synergies from our acquisitions over the past two years ## FY23 Priorities • Embed our ESG approach across the business to deliver responsible and sustainable value for shareholders • Expand our ‘Welcoming Everyone’ programme to build on our commitments to diversity, equity and inclusion and support our vision to create a dynamic place to work • Invest to build further resilience into our service delivery, including improving quality and speed of agile delivery, reviewing ‘heritage’ systems and settlement infrastructure and enhancing customer support and collaboration Strategic report Governance Financial statements Shareholder information 33 ### Employee engagement ### collaboration score ## 70 ## Eective collaboration ## has been important as we ## have transitioned to new ## hybrid working patterns ## across the Group PayPoint Plc Annual Report 202234 ## Key performance indicators ## The PayPoint Group has ##  ## to measure progress of ## business performance: ## Financial ### Net revenue from continuing Profit before tax from continuing Operating margin from continuing ### operations (£ million) (UK) operations excluding exceptional operations before exceptional ### items (£ million) (UK) items (%) (UK) | £115.1m | | | | £45.6m | | | | 41.4% | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 18.5% | | | | 25.0% | | | | 2.4ppts | | | | | FY22 115.1 | | | | FY22 45.6 | | | | FY22 | | 41.4 | | | | 1 | | | | 1 | | | | 1 | | | | FY21 | | 97.1 | | FY21 | | 36.5 | | FY21 | | 39.0 | | | | 2 | | | | 2 | | | | 2 | | | | | | | 106.8FY20 | | | | 50.0FY20 | | | | 47.2FY20 | | Description and purpose: Revenue from continuing | | | | Description and purpose: Profit before tax from | | | | Description and purpose: Operating profit from | | | | | operations less commissions paid to retailers, and the | | | | continuing operations excluding exceptional items, | | | | continuing operations before exceptional items as a | | | | | cost of mobile top-ups and SIM cards where PayPoint | | | | provides a measure of the performance of the Group | | | | percentage of net revenue. Operating margin provides | | | | | is the principal. This reflects the benefit attributable | | | | over the past few years. This reflects the rebalancing | | | | a broad overview of the ecient and eective | | | | | to PayPoint’s performance eliminating pass-through | | | | of the business towards growth opportunities, the | | | | management of the cost base enabling shareholder | | | | | costs and is an important measure of the overall | | | | shi away from our legacy cash payments business | | | | returns and investment in the business. | | | | | success of our strategy. | | | | and is an important measure of the overall success | | | | | | | | of our strategy. See Financial Review – See Financial Review – See Financial Review – ‘Overview’ on page 61 ‘Overview’ on page 61 ‘Operating margin’ on page 66 ### Cash generation from continuing Diluted earnings per share from Dividends paid per share ### operations excluding exceptional continuing operations excluding (pence) (Group) ### items (£ million) (UK) exceptional items (pence) (UK) ## £53.9m | | | | | 52.8p | | | | | 33.6p | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 14.9% | | | | 23.1% | | | | | 7.7% | | | | FY22 53.9 | | | | FY22 | | | 52.8 | | FY22 33.6 | | | | | 1 | | | | 1 | | | | | | | | FY21 | | 46.9 | | FY21 | | 42.9 | | | FY21 | 31.2 | | | | 2 | | | | 2 | | | | | | | | | | | 57.9FY20 | | | | | 58.1FY20 | | | 84.0FY20 | | Description and purpose: Earnings from continuing | | | | Description and purpose: Diluted earnings from | | | | | Description and purpose: Dividends (ordinary and | | | | operations before exceptional items, tax, depreciation | | | | continuing operations before exceptional items | | | | | additional) paid during the financial year divided by | | | | and amortisation adjusted for corporate working | | | | divided by the weighted average number of ordinary | | | | | number of ordinary shares in issue at reporting date. | | | | capital movements (excludes movement in clients’ | | | | shares in issue during the year (including potentially | | | | | Dividends paid per share provides a measure of the | | | | funds and retailers’ deposits). This represents the | | | | dilutive ordinary shares). Earnings per share is a | | | | | return to shareholders. | | | | cash generated by operations which is available | | | | measure of the profit attributable to each share. | | | | | | | | for capex, taxation and dividend payments. See Financial Review – See note 10 to the financial statements See Financial Review – ‘Group cash flow and liquidity’ on page 67 on page 132 ‘Dividends’ on page 68 1. Comparative information has been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. 2. Comparative KPIs have been restated for the discontinued operation. Strategic report Governance Financial statements Shareholder information 35 ##  ### Network stability one-mile urban Network stability five-mile rural ### population cover (%) population cover (%) (UK) | 99.2% | | 98.2% | | | --- | --- | --- | --- | | (0.2)ppts | | (0.1)ppts | | | FY22 99.2 | | FY22 98.2 | | | FY21 | 99.4 | FY21 | 98.3 | | | 99.5FY20 | | 98.3FY20 | | Description and purpose: Total urban population | | Description and purpose: Total rural population | | | covered within a one-mile radius of a PayPoint site. | | covered within a five-mile radius of a PayPoint site. | | | This is monitored to ensure PayPoint is above our | | This is monitored to ensure PayPoint is above our | | | minimum service level agreement of 95%. | | minimum service level agreement of 95%. | | ### Retailer partner site churn Employee engagement ### (%) (UK) (%) (UK) | 5.3% | | | 72.0% | | | | --- | --- | --- | --- | --- | --- | | (4.8)ppts | | | (5.0)ppts | | | | FY22 5.3 | | | FY22 72.0 | | | | FY21 | 3.6 | | FY21 | | 77.0 | | | | 8.4FY20 | | 68.0FY20 | | | Description and purpose: The percentage of the | | | Description and purpose: Measures the overall | | | | retailer partner network that on an annual basis exits | | | employee engagement of our UK population, | | | | PayPoint. This is calculated by taking the number | | | calculated by our survey provider. The survey provides | | | | of retailers which exited PayPoint in the period | | | insight into the health of our organisation, enabling | | | | (excluding suspended sites), divided by the average | | | the identification of what is important to our people | | | | number of total UK retailer partner sites for the | | | so that appropriate action can be taken. | | | period. This tracks the movement in total UK retailer partner sites. PayPoint Plc Annual Report 202236 ## Responsible business ## How we operate ## eciently and responsibly The PayPoint Group has always had ESG at This has been driven by a core ESG Working ## We hold ourselves its core, particularly given the diverse range of Group, formed at the beginning of the financial stakeholders and customers that we serve, as year to review policies and approaches ## accountable for well as the important role that we play at the across the Group, analyse cross-industry heart of communities across the UK. Central best practice, seek feedback from external ## delivering positive to this is our purpose of ‘making people’s lives stakeholders and investors, and recommend a little easier’ and how we deliver innovative, workstreams and targets for the business to ## outcomes for all of our sustainable services and value for all our prioritise for the coming year. stakeholders. ## stakeholders through All of our environmental commitments are now We have built on the important work done in aligned with the Task Force on Climate-related ## the implementation the last financial year to develop our strategy, Financial Disclosures (TCFD) framework. ## of a meaningful ESG approach and targets to embed ESG in everything that we do, which now reflects ## strategy and measures. the expanded universe across our Group businesses. Natural Waste resources management Climate Innovation change ## Environment ## ESG Our peopleTransparency Anti-bribery Diversity & & corruption inclusion ## SocialGovernance Regulation Partners SocietyRisk management Strategic report Governance Financial statements Shareholder information 37 ## Our commitments and targets The PayPoint Group is a low impact, low carbon intensive business. We remain committed to improving what we do, including achieving Net-zero in our own operations by 2030 and Net-zero across our entire value chain by 2040¹. | We commit to: | By | | --- | --- | | **1** Achieve Net-zero in our own operations (scope 1 and 2 emissions) by 2030 | - Moving to carbon-neutral gas and electricity contracts in Haydock at contract renewal in 2024 (already achieved in Welwyn Garden City) - Retiring diesel company cars, introducing an electric company car option in addition to hybrid model in FY23 and stopping ordering new hybrid models by the end of 2025, subject to the required charging infrastructure being in place - Assessing options to reduce company car mileage | | **2** Achieve a 30% reduction in emissions generated by use of sold products by 2030 | - Replacing PayPoint One devices with alternatives that are more energy efficient - Considering energy consumption in product design - Encouraging retailer partners to use renewable energy and minimise consumption | | **3** Support a reduction in employee commuting emissions by encouraging the transition to electric vehicles | - Charging points to be installed at office locations in FY23 - Electric car leasing scheme to be considered for introduction in FY23 - Relaunching our cycle-to-work scheme with an enhanced purchase limit in FY23 - Continue hybrid working policy delivered in 2021 - 'Think before you travel' guidance to be developed and issued | | **4** Engage and educate our people on ESG matters to drive engagement and build ESG considerations into our every day | - Regular programme of communication and training to be implemented | | **5** Achieve Net-zero across our entire value chain by 2040 | - Achieving the targets set out above - Identifying additional actions to reduce emissions as our strategy evolves and we benefit from advancements in technology and the transition to renewable energy more generally | | **6** Ensure all of our employees are paid a minimum of the Real Living Wage from July 2022 | - Increasing salaries at pay review in July 2022 and reviewing annually thereafter | | **7** Continue to develop an inclusive culture | - Embedding of 'Welcoming Everyone' approach to inclusion (see page 45) | 1. Our goal of achieving net zero in our own operations by 2030, and across our entire value chain by 2040, will be achieved by eliminating where possible GHG emissions as calculated under GHG Protocol emission factors, and offsetting residual GHG emissions that cannot be eliminated. PayPoint Plc Annual Report 202238 ## Responsible business continued ## Environment Year ended Year ended ## PayPoint is a 31 March 31 March GHG emissions Units 2022 2021 ## low-impact, low- Scope 1 (fuel combustion) tonnes CO₂e 151 60 ## carbon-intensive Scope 2 (purchased electricity) tonnes CO₂e 293 320 Total scope 1 & 2 tonnes CO₂e 444 380 ## business that No. of employees on 31 March 2022 670 519 ## aims to reduce its Total scope 1 & 2 per employee tonnes CO₂e 0.66 0.73 Scope 3 tonnes CO₂e 9,104 4,740 ## environmental impact Total scope 1,2 & 3 per employee tonnes CO₂e 14.25 9.87 ## by reducing carbon NB. Comparative information has been restated for the disposal of the Romanian business. Data for the year ended 31 March 2022 now includes a full year of Handepay/Merchant Rentals post acquisition. ## emissions, waste ## and considering Climate change However, there was an overall decrease in ## environmental and We aim to reduce emissions and maximise the emissions from business journeys as new resource eciencies of our operations. We company cars are hybrid, and replace journeys ## sustainability issues. have moved to a new hybrid way of working, that would otherwise have been made in reducing commuting journeys and engaging petrol and diesel cars. In addition, we will soon with our people to encourage sustainability be oering electric company cars which will at home as well as in the oce. During the further reduce overall emissions from business year we published guidance to our employees journeys that may have otherwise been made to help them consider how to reduce energy with petrol, diesel and hybrid cars. consumption at home. Tonnes CO e per employee across our entire 2 | Our GHG emissions | value chain (scope 1, 2 and 3) increased | | | --- | --- | --- | | In this section we report on all required GHG | during the year from 9.87 to 14.25 tonnes | | | emissions in accordance with the Companies | CO | e per employee which is driven by two | 2 | Act 2006 (Strategic Report and Directors’ | primary factors: | | | | --- | --- | --- | --- | | Report) Regulations 2013. The Streamlined | (a) This year there was a full year of Handepay | | | | Energy & Carbon Reporting (‘SECR’) | | and Merchant Rentals metrics, as | | | regulations came into eect on 1 April 2019 | | opposed to only two months last year | | | and we follow the guidelines to comply with | | following the acquisitions. Handepay | | | these new regulations. | | and Merchant Rentals have higher CO | e | 2 per employee due to the number of card We report using a financial-control approach terminals in operation at merchants and to define our organisational boundary. A range the business model of a large proportion of approaches can be taken to determine the of employees being in field sales incurring boundaries of an organisation for the purposes business journeys. of GHG reporting, including financial control, (b) An increase in the purchase of operational control or equity share. manufactured goods including ATM’s, terminals and IT equipment. We In line with our climate strategy, tonnes CO e recognise emissions on the purchase of 2 | per employee in our own operations (scope | | manufactured goods, upon receipt of | | --- | --- | --- | | 1 and 2) reduced during the year from 0.73 | | goods, and as we enter into a period of | | to 0.66 tonnes CO | e per employee. This | updating our terminal estate, we will see | 2 | reflects energy-saving initiatives in our oces | higher emissions in this category in the | | --- | --- | | and switching energy contracts for our head | short term. However our terminals typically | | oce to carbon-neutral. Scope 1 emissions | have a long lifespan so the increase in | | increased during the year as business journey | emissions over the coming years will be | | emissions transitioned to scope 1 from scope | oset when purchases will be significantly | | 3, as more business journeys were made in | lower. Replacement terminals are smaller | | company cars rather than employee owned cars. | than legacy terminals resulting in less | Strategic report Governance Financial statements Shareholder information 39 | | emissions from manufacturing and they | | Natural resources | Innovation | | | --- | --- | --- | --- | --- | --- | | | are much more energy ecient, reducing | | Water | Our innovative digital solutions support | | | | emissions when deployed at retailers and | | We use water for domestic purposes such as | a reduction in our environmental impact. | | | | merchants. Additionally, there will be less | | washroom facilities. Our current measures to | Recent examples include: | | | | waste on disposal when they eventually | | reduce usage include time-controlled taps and | • the acquisition of i-movo, the UK’s leading | | | | reach their end-of-life. | | dishwashers and reduced-flush toilets. With | | secure digital vouchering system, enables | | | | | the transition to hybrid working, we expect our | | us to oer an alternative to paper vouchers | | For scope 2, kilowatts per hour (KWh) | | | water consumption will not revert to previous | | thereby reducing paper usage | | increased to 1.38 million in the year | | | levels and we will be actively working with our | • our pioneering Counter Cash Service, a | | | (FY21: 1.24 million) due to a full year of | | | people to reduce their water usage at home. | | ‘cashback without purchase’ solution, | | Handepay and Merchant Rentals metrics. | | | | | enables cash withdrawals without the need | | | | | Waste management | | for ATMs. Energy consumption is thereby | | We signed a new energy contract for Welwyn | | | We recycle wherever possible, including paper, | | reduced together with our need for the | | Garden City in October 2021 which means | | | cans, plastic, cardboard, computer equipment | | supply and distribution of ATMs | | that all gas and electricity used in the oces | | | and PayPoint terminals. New recycling | • our parcels service enables carriers to | | | is now carbon-neutral, and are committed to | | | bins have been implemented in our oces | | reduce their journeys by delivering multiple | | implementing this in our Haydock oce at | | | to make this as simple as possible for our | | parcels to a single store for collection | | contract renewal in 2024. We have made some | | | people. Plans are to be resurrected to recycle | | | | changes to the cars that we provide for our | | | batteries, glasses, specialised clothing and | Our Green Team of volunteers works with | | | sales force, oering hybrid options only, and | | | mobile phones. | us to identify opportunities and implement | | | will introduce an electric option this year. We | | | | sustainability initiatives in our oces. Their | | | are encouraging the use of electric vehicles | | | Redundant equipment is recycled by ISO | input has led to the introduction of new | | | throughout the workforce by implementing | | | 27001 accredited firms which are certified by | recycling bins that make it easier for our people | | | electric charging points and introducing | | | the Asset Disposal and Information Security | to recycle items, the relaunch of our cycle-to | | | an electric car leasing scheme. We are also | | | Alliance (‘ADISA’). ADISA recycles as much of | -work scheme, the introduction of electric | | | relaunching our cycle-to-work scheme. Our | | | the equipment as possible. Any parts which | charging points, the electric vehicle leasing | | | Salesforce platform already optimises the | | | are not recyclable are disposed of in line with | scheme and the introduction of a new milk | | | journeys of our field team and we continue | | | the Waste Electric and Electronic Equipment | supplier, providing milk in glass bottles which | | | to seek options to reduce their CO | | emissions | Regulations 2013 (‘WEEE’). ATMs which have | are collected and reused. | | 2 even further. reached the end of their life are disposed of via Cennox. All surrounding materials are Being a responsible business means that segregated into four key material types: metal; we need to be mindful of our environmental circuitry boards; wires; and WEEE. Cennox impact beyond our own operations. We have operates an internal recycling process for all of implemented an ESG questionnaire into our these materials with the exception of WEEE procurement process to ensure that ESG waste which is collected by their licensed matters are considered in decision-making and waste carrier. to ensure that our existing suppliers are aligned with our ESG policies and commitments. Our next phase 2 Energy Saving Opportunity Scheme assessment is due in December 2023 (the last assessment was completed in November 2019). PayPoint Plc Annual Report 202240 ## Responsible business continued ## TCFD ## For our TCFD disclosures, we are reporting in line with the FCA listing ## rule for premium listed companies LR 9.8.6(8), which requires us to ## report on a ‘comply or explain’ basis against the TCFD Recommended ## Disclosures for the year ended 31 March 2022. We consider our climate-related financial disclosures to be consistent with all of the TCFD Recommendations and Recommended Disclosures and are therefore compliant with the requirements of Listing Rule 9.8.6(8). Although this is our first year of disclosing in compliance with the listing rule, our disclosures build on previous years. In preparing them we have made several judgements, and while we are satisfied that they are consistent with the Recommendations and Recommended Disclosures, we will continue to evaluate our options for future TCFD disclosures. In addition to developing and embedding our broader ESG strategy across the business, we have complied with the Task Force on Climate-related Financial Disclosures ‘TCFD’ framework, with the exception of additional climate-related scenarios to be developed in the coming year and the year-on-year comparatives for GHG emissions being impacted by a full year of data for businesses acquired. PayPoint supports the TCFD recommendations and is committed to implementing them, providing stakeholders with information on our exposure to climate-related risks and opportunities, helping them make informed decisions. The TCFD framework is as below: ## Governance Describe the Board’s oversight The Board sets the Group’s overall strategy and risk appetite including in relation to sustainability, the environment of climate-related risks and and carbon emissions. The Executive Board sets PayPoint’s climate and TCFD responsibility agendas and opportunities recommends strategy to the Board. An ESG Working Group was formed during the year which oversees PayPoint’s environment, climate and TCFD matters and provides regular updates to the Board and ESG considerations are embedded into strategic decision-making. See the corporate governance organisation chart on page 77 for more details. Describe management’s role The CEO and the Executive Board have overall accountability for PayPoint’s sustainability, environment and in assessing and managing carbon- emission strategy. During the year the Executive Board implemented an ESG Working Group comprising climate-related risks and Executive Board members and other key stakeholders, which is responsible for overseeing implementation of opportunities PayPoint’s sustainability, environment and carbon-emission strategies working directly with management and functions across the Group. See the corporate governance organisation chart on page 77 for more details. ## Strategy Describe the climate-related PayPoint has undertaken a comprehensive assessment of its business activities to identify climate-related physical risks and opportunities the and transition risks and opportunities over the short, medium, and long term. For the assessment, we considered the organisation has identified short term to be 0-5 years, the medium term 5-15 years and the long term 15-30 years. over the short, medium, and For the risks and opportunities identified we have assessed the impact on our carbon emissions and how these long term impact our Net-zero target by 2040 and also the potential financial impacts see table on pages 42 to 43. Describe the impact of Our business is a low-carbon-intensive business particularly in our own operations, but even across our entire value climate-related risks and chain our absolute carbon emissions and our intensity measure per employee are relatively low. Physical climate opportunities on the related risk is also considered low. Therefore, our assessment of business activities did not identify significant climate organisation’s businesses, related risks, but did identify potential risks and opportunities as the UK moves towards a Net-zero target by 2050. Accordingly, climate risk is considered an emerging risk rather than a principal risk as detailed on page 58 of the risk strategy, and financial planning management section. Climate and carbon emissions form part of our financial and strategic planning and decision- making process. All new major initiatives are assessed from a climate and carbon emissions perspective so we fully understand the impact on our carbon emission targets. Describe the resilience of As a low-carbon-intensive business, we consider our organisation to be resilient and have assessed a climate- the organisation’s strategy, related scenario of up to 2°C in the current financial year. We will be assessing further scenarios this year to evolve taking into consideration this analysis further. Whilst we recognise climate creates some risks and uncertainties for our business i.e. we have dierent climate-related a number of clients in the energy sector who may be impacted with potential knock-on impacts for PayPoint, we consider the risk is low as there would be sucient time to evolve our business model and activities to mitigate scenarios, including a 2°C the risks. or lower scenario Strategic report Governance Financial statements Shareholder information 41 ## Risk management Describe the organisation’s PayPoint recognises the impact climate change is having globally and that it presents a risk and uncertainty to our processes for identifying and business. As last year, we still consider climate change as an emerging risk to our business rather an immediate assessing climate-related risks principal risk. Risk management is an integral part of our governance and we focus on key risks which could impact achieving our strategic goals and business performance. We identify and assess climate-related risks and opportunities as part of our financial planning processes, business cases and as part of our overall risk identification and management framework. Describe the organisation’s We have an established risk management framework in place to help us capture, document and manage risks facing processes for managing our business and the Audit Committee oversees the eectiveness of risk management throughout the organisation. climate-related risks See our risk management framework on page 54. We work towards a medium to low risk profile, ensuring we have mitigating controls to bring each risk within the risk appetite set by the Board. The Board are updated on climate risks and set targets to reduce carbon emissions in alignment with perceived risks. Describe how processes for We are embedding into our culture the consideration of climate and environmental risks and opportunities as part of identifying, assessing, and all business decisions. Risks presented by climate change have been embedded into our risk management framework managing climate-related with risks detailed on corporate risk and control registers, and material business cases including an assessment of risks are integrated into the climate-related risks and opportunities. Annual financial plan and strategic review processes include assessments of the impact climate transition and physical risks are expected to have on costs and revenue, and scope 1, 2 and 3 organisation’s overall risk carbon emission reduction targets are set by the Board. management ## Metrics and targets Disclose the metrics used The primary metric we have used to assess climate related risks and opportunities across our value chain is tonnes by the organisation to of carbon emitted. During the year we conducted a comprehensive review of carbon emissions emitted across our assess climate-related risks value chain, in line with the GHG Protocol. We identified all relevant Scope 3 categories and established appropriate and opportunities in line methodologies and assumptions to calculate emissions. We use third party sustainability soware to accurately calculate carbon emissions based on input metrics collected from across the Group. In addition to carbon emission with its strategy and risk metrics, we also use monetary metrics in our financial and strategic planning where climate risk and opportunities management process across our revenue, costs and balance sheet are attributed with a £ figure. Disclose scope 1, scope 2 Scope 1, 2 and 3 carbon emissions are detailed in the table on page 38. Following an in-depth analysis of our scope 3 and, if appropriate, scope emissions, we now have a much better understanding of the emissions across our value chain in alignment with GHG 3 greenhouse gas (GHG) Protocol scope 3 emission areas. The largest scope 3 areas are Purchased Goods & Services covering terminal and emissions and the related risks IT purchases and Use of Sold Products covering electricity used by our terminals while at retailers and merchants. Describe the targets used PayPoint set targets during the year to manage climate-related risks and opportunities which were approved by the by the organisation to Board. The targets include reducing carbon emissions in our own business, scope 1 and 2, and across our value chain manage climate-related with the target of being fully Net-zero by 2040. We have also set more detailed targets of how we plan to achieve risks and opportunities and our Net zero aims and these are detailed on page 37. The ESG Working Group monitors performance against targets throughout the year and reports performance to the Executive Board and Board. performance against targets PayPoint Plc Annual Report 202242 ## Responsible business continued ## Strategy As a responsible business we consider climate-related risks and opportunities across our organisation and embed these into the strategy set by the Board. We identify risks and opportunities over short term (0-5 years), medium term (5-15 years) and long term (15+years) horizons and incorporate these into our strategy to ensure we operate responsibly and reinforce our commitment to building sustainable growth. Our responsible business strategy is supported by several policies including our Environmental and Sustainability Policy. | Short term (0-5 years) | Medium term (5-15 years) | Long term (over 15 years) | | --- | --- | --- | | In the short term, we will continue to take a | Over the medium term, we are focused | For the long term, we consider various scenarios | | proactive approach in minimising climate-related | on identifying and further managing financial | across physical climate conditions, market trends | | risks and maximising opportunities. | risks associated with climate change as well | and government policy to ensure we provide a | | | as monitoring opportunities. We continually | resilient and sustainable investment choice for | These are shaping the way we manage our assess market trends and investment the future. business and minimise our contribution to opportunities to ensure our business model is climate change, including: • Shi in market trends and customer behaviour sustainable into the future. • Impact warmer average temperatures will have • Increase in climate related regulations i.e. TCFD • Regulatory Net-zero carbon requirements on our products • Switch to carbon-neutral energy contracts for • Increased terminal costs • Government commitment to UK Net-zero our oces • Carbon pricing by 2050 and potential changes to the • Oce space utilisation and employee commuting • Shi in customer preferences regulatory landscape • More energy-ecient terminals • New markets • The impact of the UKs Net- zero commitment • Market changes on our customers and stakeholders ## Risk management We have conducted a comprehensive assessment of climate-related risks and opportunities, including any potential financial impact. The table below lists our most material risks and opportunities. ## Risks ## Transition risks Risk Potential impact Mitigation strategy Governance Non-compliance with Potential impact on business • Annual review of legislative landscape and regulatory increased emissions operations, revenue, costs or assets • Integration of legislative compliance costs into reporting obligations to comply with reporting obligations business plans • Implementation of reporting structures and procedures to manage compliance risk • Quarterly review of energy and emissions data Technology Substitution of existing Costs to adopt and implement new • Roll out of more energy ecient terminals products and services with products and processes lower emissions options Market Changes to markets and Some of PayPoint’s retailer partners • Ongoing review of our retailer network with new consumer trends are large forecourt operators and the retailers contracted outside the forecourt sector transition to electric cars may impact • Ongoing review of our client portfolio with new these retailers and PayPoint’s revenue clients contracted outside the energy sector Approximately 17% of PayPoint’s revenue is from energy clients and the transition to carbon neutral energy may impact these clients and PayPoint’s revenue Increased manufacturing Increased cost of purchasing • Ongoing review of terminal and physical asset requirements costs terminals and other physical assets • Transition to smaller terminals and new products like Counter Cash with reduced manufacturing Increased energy prices Increased operating costs • We keep the amount of oce space utilised under close review and close sections of the oce where feasible, to reduce heating and cooling requirements • Ongoing assessment of oce gas and electricity usage to identify reduction opportunities • Ongoing assessment of business travel requirements to minimise car journeys and identify reduction opportunities Reputation Lost business opportunities if Reduction in revenue • Environmental policy continually assessed and updated unable to meet customer and to ensure PayPoint meets customer and partner climate partner climate requirements requirements Increased concern from Reduction in capital availability • Transparency through our annual participation in CDP and shareholders and other TCFD disclosures in the Annual Report stakeholders Strategic report Governance Financial statements Shareholder information 43 ## Physical Risks Risk Potential Impact Mitigation Strategy Weather Changes in precipitation Increased costs from damage • On-going improvement of our buildings patterns and extreme to buildings variability in weather patterns Rising temperatures Increased cooling costs • Switch to renewable electricity contract at our main oce • Assessing air conditioning requirements for our oces ## Opportunities The table below details the main climate-related opportunities and their potential impact on our business, along with the current status. Opportunity Potential impact Status Resource Data storage Reduced electricity consumption • We plan to review the amount and type of electronic data eciency stored and make reductions in order to reduce data centre energy consumption Recycling Reduced construction costs • We engage with our electrical waste suppliers to ensure there is a high component of reuse and recycling of our retired terminal and IT equipment Oce space kept Reduced oce costs • We keep the amount of oce space utilised under close under review review and close sections of the oce where feasible to reduce heating and cooling requirements Reduced water consumption Reduced oce costs • We keep the amount of water used at our oces under close review and have fitted timed flow taps to ensure taps are not le running Terminal economic life Reduced manufacture, • Our terminals have a long economic life and are used logistics and disposal costs for many years, some for over ten years, which reduced manufacturing requirements, transport and disposal costs • We refurbish all our terminal models to ensure their economic life is maximised Energy source Use of lower-emission Increased reputational benefits • We have already switched our electricity and gas energy sources contracts to carbon neutral contracts for our head oce and plan to do the same for our Haydock oce Use of new technologies Increased reputational benefits • We encourage the use of more ecient modes of transport through the installation of Electric Vehicle ‘EV’ charging stations at our oces and oering electric cars as a company car option • We will keep under close review the heating and cooling systems used in our oces Products Development and migration Increased revenue through demand • Our new Counter Cash product enables cash withdrawals and services to lower emission products for lower emissions products and through card payment terminals which use far less energy and services services than ATMs. This product also reduces the level of ATM manufacturing required in the future • Our latest terminals are far more energy ecient than older terminals • Our expanding digital proposition enables transactions without the need for physical terminals which require manufacturing, transporting and disposal which all impact the environment • Ongoing review of our client portfolio with new clients contracted outside the energy sector Data Storage Reduced electricity Reduced operating costs • We plan to review the amount and type of electronic data consumption stored and make reductions in order to reduce data centre energy consumption PayPoint Plc Annual Report 202244 ## Responsible business continued ## Social ## We hold ourselves accountable for delivering ## positive and inclusive outcomes for society ## including our people, retailer and client ## partners, consumers and the wider community. ### People and culture Our people Each team is responsible for developing and We aim to create a dynamic environment for implementing actions that are relevant to them our people where we deliver for our customers and at a Group level plans are developed in Gender balance as at 31 March 2022 | | | | | by collaborating and being good colleagues | conjunction with our employee forum. During | | --- | --- | --- | --- | --- | --- | | | | | | to each other, creating a positive and inclusive | the year we have invested in our oces | | Board | | Executive Board | | | | | | | | | environment where everyone can learn, grow | in Welwyn Garden City to create a more | | | | | | and shine. The make-up of our population has | welcoming space for people that reflects our | | | | | | remained relatively unchanged year-on-year | updated purpose and values. We continued to | | | | | | and we employed 670 people on 31 March | support people from a wellbeing perspective | | | | | | 2022. Employee turnover increased during the | and created our return-to-oce approach | | | | | | year, in line with general market conditions, | with feedback from the forum. Once Covid-19 | | | | | | with people leaving to pursue dierent | restrictions were lied we held events for our | | | | | | careers and opportunities as the Covid-19 | people to enable them to connect informally | | | | | | pandemic receded. Our recruitment teams | face to face with old colleagues and make | | | Female 29% | | Female 31% | | | | | | | | have worked tirelessly to attract new talent | new connections and will be holding regular | | | Male 71% | | Male 69% | | | | | | | | to the Group and over the course of the year | face to face events over the coming year. We | | | | | | we have welcomed over 150 new employees. | continue to hold monthly all employee briefings | | | | | | We also welcomed 17 people who transferred | for our people to update on business priorities | All employees to PayPoint during the year following the and performance as well as recognise and acquisition of RSM 2000. celebrate the success of employees who have demonstrated our values. During the year we continued to support our | people to work from home during the Covid-19 | Our employee forum held three formal meetings | | --- | --- | | pandemic and transitioned to new hybrid | during the year to discuss topics including the | | working patterns in September 2021. We | employee survey, return-to-oce and ESG. | | believe that everyone needs to spend some | The forum consists of 17 representatives | | time in the oce to build relationships and | from around the business, including five | Female 41% collaborate with colleagues. The majority of representatives from Handepay and Merchant Male 59% our people now work two to three days in the Rentals. The forum is chaired by our HR Director, oce, with some of our people, predominantly and Gill Barr, who represents the Board, attends from our IT teams, working mainly from home. the meetings. The purpose of the employee forum is to give feedback to the Board and | Engagement | Executive Board about how it feels to work in | | --- | --- | | The last 12 months has been a period of | the business, what is working well and ideas for | | significant transition for our people as we | change, to ensure that the employee voice is | | have integrated the Handepay, Merchant | considered in decision making. The forum also | | Rentals, i-movo and RSM 2000 businesses and | meets informally and provides feedback on and | | transitioned to new ways of working, all during | suggestions for employee-related activities | | the latter stages of the Covid-19 pandemic. | and events. | The engagement of our people during this | time has been a priority and we conducted | Our engagement work has been recognised | | --- | --- | | two employee surveys during the period with a | by LinkedIn who named us as the winner of the | | particular focus on ways of working, including | Employee Engagement Champion category for | | collaboration, connection and work life balance. | employers with fewer than 1,000 employees | | Our key measure for these surveys was | at the LinkedIn Talent Awards 2021. The award | | collaboration, and during the period our score | recognises companies who create a culture of | | increased to 70, which is ahead of the external | continuous feedback and growth to improve | | benchmark for the survey that we participate | employee engagement and wellbeing. | in (Glint), and significantly higher than when we first ran the survey in 2019, reflecting the work that we have done to support our people to work eectively throughout the pandemic and during the transition to new working patterns. We continue to achieve a strong response rate to our surveys with 78% of the population participating in our last survey which took place in November 2021. Strategic report Governance Financial statements Shareholder information 45 | We continue to see a high level of participation | Supporting human rights | | We communicated our ‘Welcoming Everyone’ | | --- | --- | --- | --- | | in our share incentive plan with a 37% | PayPoint supports fundamental human | | approach in January 2022 and since then we | | participation rate across the Group. We also | rights, such as the right to privacy, safety | | have launched an LGBTQ+ forum to provide a | | continued to operate a discretionary all- | and to be treated fairly, with dignity and | | safe space for people to share experiences and | | employee bonus scheme in order to engage | respect. Our employment standard sets | | suggest and discuss ideas to enhance inclusivity | | all of our people in delivering our objectives | out our commitment to good employment | | at the PayPoint Group for those in the LGBTQ+ | | for the year. We were delighted to pay the | practices and the principles to govern the | | community. We celebrated both International | | maximum bonus of £500 to our people for | practices adopted in each of our businesses. | | Men’s Day and International Women’s Day | | the year ended March 2022, recognising their | All employees have a right to safe working | | with virtual events attended by employees | | support and commitment to the delivery of | conditions, consideration of their welfare, fair | | from across the Group. We will also be rolling | | our performance during the period. | terms of employment, reward and treatment, | | out training to all of our people to support the | | | clarity and openness about what is expected. | | development of a truly inclusive culture within | | Promoting mental health and wellbeing | We have a zero-tolerance approach to | | the business. | | We continue to support the wellbeing of our | modern slavery and we are committed to | | | | people with a particular focus on wellbeing | acting ethically and with integrity in all of our | | The overall gender balance across all employees | | support during the Covid-19 pandemic and the | business dealings and relationships. PayPoint’s | | within the business on 31 March 2022 was 41% | | transition to new working patterns during the | statement on modern slavery can be found on | | female and 59% male. We recently published | | year. Our wellbeing strategy provides support | our website¹. | | our fih gender pay gap report, which can be | | for physical health, mental health, financial | | | found on our website². Over the last few years | | health and work-life balance and we update | Diversity and inclusion | | we have implemented a number of initiatives to | | people regularly with useful resources and | At PayPoint we are committed to building a | | address our gender balance. However, a pay gap | | awareness events. This included the setting | diverse and inclusive business where all of | | continues to exist in the organisation driven by | | up of a menopause support group, following | our people are treated fairly and with respect, | | the fact that we have more men than women | | an event that we ran during Menopause | and where the contributions of everyone are | | in higher paid roles such as roles in IT, sales and | | Awareness month in October 2021 to raise | recognised and valued. This commitment is | | senior management positions. We are working | | awareness and start an open dialogue with | captured in our vision to create a dynamic | | with our sales teams to take actions to attract | | our people regarding the menopause. Where | place to work, with a positive and inclusive | | more females into our sales positions and will | | possible we are linking wellbeing with charity | environment where everyone can learn, grow | | continue to look at what further actions we can | | initiatives including Move For Mind in January | and shine. Everyone who works at the PayPoint | | take to ensure we attract more female candidates | | 2022, where we encouraged all of our | Group should feel respected and able to | | for all of our roles, as well as supporting | | employees to get outside and be active to | give their best, and we embrace people with | | development plans for identified talent. | | raise money for Charity. Our people covered a | dierent backgrounds and identities, valuing | | | | distance of 2,000 miles resulting in a donation | their contribution to achieving our strategic | | PayPoint is committed to treating applicants | | of £2,000 to Mind. During the year we also | priorities. At the PayPoint Group, we call this | | with disabilities equally and supporting people | | invested in refresher training for our mental | ‘Welcoming Everyone’. | | who become disabled during their career with | | health first-aiders who provide confidential | | | the Company. This includes making reasonable | | advice, support and guidance to our people. | We aim to achieve our vision by taking | | adjustments both to the recruitment process | | | three clear actions: | | for applicants and to the working environment, | | Developing our people | | | including oering appropriate training, in order | | We continue to be committed to supporting | 1 | Ensuring that all of our people understand | that disabled employees can achieve their | | the development of our people through a | | what we mean by diversity, equity and | full potential. | | combination of online courses, apprenticeships, | | inclusion, are supported with training to | | | further education and in-house and external | | develop inclusive behaviours and feel | Principles | | courses based on business and individual | | confident to challenge any behaviours | Our success is built on a reputation for high | | need. We currently have ten apprentices | | that they see in the workplace that are | standards in all areas of business which we | | studying programmes including Team Leading, | | not in alignment with this. | achieve by working in accordance with our | | Data Science, CIMA and a Senior People | | | ethical principles. These principles apply | | Professional degree. During the period, five of | 2 | Supporting the creation and development | throughout the PayPoint Group and are used | | our people completed programmes including | | of forums for people from under- | to define the standards and working practices | | MBAs, AAT and Project Management. Focus | | represented communities, enabling them | that we adopt. | | for the coming year will be on developing our | | to discuss shared challenges, help educate | | | management capability and raising awareness | | and raise awareness in the business of | They guide our day to-day actions and give our | | about diversity and inclusion. | | issues relevant to the community and | people clarity on acceptable behaviour. Our | | | | implement appropriate actions to increase | statements on ethical principles and modern | 3 | We run a Board mentoring programme to | equity, inclusion and allyship around | slavery can be found on our website | . Our 2022 | | --- | --- | --- | --- | | support the career development of our senior | the business. | modern slavery statement will be available on | | | management population. During the year 20% | | our website in September 2022. | | of PayPoint vacancies were filled internally and ### 3 Building inclusion into our every day by we continue to focus on ensuring that we have We operate an anti-bribery and corruption ensuring that we listen to diverse voices good development plans in place for our people policy which was put in place in response to and consider diversity, equity and inclusion to create a strong pipeline of internal talent. the UK Bribery Act 2010. Further information with regards to our policies and practises, regarding this can be found on page 84 in the both internally and externally, including the Audit Committee report. employee lifecycle, product and service design and marketing. 1. https://www.paypoint.com/modern-slavery-act. 2. https://corporate.paypoint.com/downloads/csr/gender_pay_report_2020.pdf. 3. https://corporate.paypoint.com/downloads/investorcentre/ethical-principles-2020.pdf. PayPoint Plc Annual Report 202246 ## Responsible business continued ## Social ## A strong and supportive ## proposition for retailer ## partners and SMEs We provide a leading and dierentiated set Our card payment services have been ## We provide a of services, through highly reliable technology enhanced with the launch of one-month rolling that enables our retailer partners to run contracts rolled out for Handepay customers ## broad range of their businesses more eciently as well switching from other providers from October as generating consumer footfall from their 2021, faster settlement solutions enabled for ## innovative services surrounding communities. The breadth of all existing and new EVO-acquired customers products and services oered by PayPoint is and successful pilot and roll-out completed of ## and technology, greater than any other provider. the new Castles range of terminals. ## connecting millions Our retailer partner proposition has been Enabling clients to provide vital services enhanced further during the year to help in the community ## of consumers with | | respond to consumer trends and drive revenue | We partner with over 270 clients in the UK, | | --- | --- | --- | | over 60,000 retailer | opportunities in a challenging cost environment: | providing omnichannel payment solutions that | | | our new Counter Cash solution is now live in | enable them to seamlessly and eectively | | partner and SME | 2,624 sites, providing vital access to cash in | serve their customers however they wish to | | | communities across the UK; the home delivery | pay. Our contracts with clients contain clear | | locations across | partnership with Snappy Shopper continues | obligations with respect to the services being | | | to grow with 269 sites live and positive sales | provided, underpinned by measurable service | | multiple sectors. | growth; and we’ve continued to improve our | levels which are set to ensure a high standard | | | engagement with our retailer partners and | of delivery across key elements, including | | | key trade associations to work in partnership | system and service availability, file delivery | | | to make the most of the new opportunities. | and funds settlement. | Additional new services added during the year include our retailer rewards app partnership with We enable the delivery of best-in-class McCurrach, a leading field marketing agency, with customer journeys for e-commerce brands PayPoint’s retailer partners now able to access over the first and last mile in c.10,000 locations | exclusive rewards as part of their package on the | through our Collect+ brand, helping consumers | | --- | --- | | MyStore+ app; Love2Shop e-gi cards launched | pick up and drop o online shopping or send | | in June 2021 oering richer retailer commission; | parcels across the UK. | PayPoint Business Finance launched in July 2021; FMCG marketing and data has been introduced During the reporting period, 28 new client as a proposition with strong early interest from services went live, with 19 coming from non- brands and retail groups and several campaigns energy sectors and 18 taking digital payments delivered for FMCG brands, and the provision of solutions, supported by the development of vital Covid-19 test kits throughout our multiple additional capabilities, including Open Banking retailer network. and a new Direct Debit platform. In August 2021, we launched the Payment Exception Service via This has been backed up by our extensive i-movo for the Department of Work and Pensions, eorts to strengthen our retailer partner digitising benefit payments and replacing the Post relationships and to drive adoption of Oce Card Account which is closing. these new opportunities to earn, including regular ‘cash and carry’ days, more direct We have continued our diversification to communications, and our reinvigorated digital payments, helping organisations relationships with the key trade associations, seamlessly and eectively serve their including the Association of Convenience customers. Our market-leading omnichannel Stores ‘ACS’ the Scottish Grocers’ Federation, solution – MultiPay – is an integrated solution ‘SGF’ and the National Federation of Retail oering a full suite of digital payments. It Newsagents ‘NFRN’. The feedback and support enables transactions online and through received from these organisations has been smartphone apps and text messages, as well critical to our continued commitment to as event payments, over the counter, over the support our retailer partners in delivering vital phone and via interactive voice response ‘IVR’ community service across the UK and our ability systems. It also supports a full range of Direct to respond to changing consumer needs in the Debit options, including scheduling collections, UK convenience sector. We continue to oer as well as new product developments such free ACS membership to PayPoint One retailer as PayByLink, recurring payments and Event partners, providing access to industry events, Streamer. MultiPay customers benefit from advice and best practice. Strategic report Governance Financial statements Shareholder information 47 | real-time visibility of all payments received, | Oce Card Account, which is coming | In total over £13,000 | | --- | --- | --- | | through one easy-to-use portal that is fully PCI | to an end. The PayPoint Counter Cash service, | was donated to local | | compliant, and allows visibility of all payment | oering cashback without purchase and | and national charities of which | | channels – including cash. The platform is | balance enquiries over the counter, | £10,000 was funded by the Company. | | used by a growing number of organisations | is now live in over 2,624 stores, with over | | | across the UK, including many housing | £5 million withdrawn since launch. The launch in | Additionally, our people in Welwyn Garden | | associations, local government authorities and | November 2021 was widely covered in national | City supported our Christmas foodbank | | utility providers. Our Cash Out service also | and regional media, supported by key members | campaign, donating over £700 to provide food | | enables the rapid dispersal of funds through | of the Cash Action Group, LINK and John Glen | to local foodbanks in Stevenage and Welwyn | | secure digital channels and is actively used | MP, Economic Secretary to the Treasury, and | Garden City. | | by local authorities and charities to distribute | supports the FCA and PSR’s Access to Cash | | | emergency funds. | initiative to maintain services for the many | We continue to oer our network to collect | | | people who continue to rely on cash as a vital | for the BBC’s Children in Need telethon free | | Furthermore, we enhanced our e-commerce | way of making payments. | of charge. | oering further with an expansion of our | partnership with Randox, providing vital | Our retailer partner proposition has been | Championing the employability of | | --- | --- | --- | | Covid-19 test kits through our Collect+ | enhanced further during the year in response | young people | | network, as well as launching new services | to consumer trends, and in addition to our new | Externally we continue to support young | | for our existing carrier partners and providing | Counter Cash solution, consumers are also | people in our community with a commitment to | | industry leadership for driving further | able to benefit from new services including | the local schools community and the continued | | innovation and prominence for the out-of- | the home delivery partnership with Snappy | development of young talent. PayPoint | | home delivery market. | Shopper and Love2Shop e-gi cards. | started to work as an enterprise advisor to a | local secondary school in 2016, supporting | We continue to have a dedicated Client | Our MultiPay platform is designed to provide | students with the transition from school to the | | --- | --- | --- | | Management team, enhancing our engagement | a simpler and more convenient way for | workplace. Our support has since expanded to | | with clients to ensure we are able to align our | consumers to pay essential bills such as gas, | other schools in the community and in the last | | strategy and roadmaps to the needs of the | electricity and rent. We are uniquely placed to | year we provided support with a number of | | clients we partner with. | be able to provide consumers with complete | virtual careers fairs and interview skills events. | | | flexibility to choose to pay using whichever | Following the liing of Covid-19 restrictions | | Enabling consumers, including some of | method is most convenient for them. | we held an event onsite for year 11 students, | | the most vulnerable in society, to access | | introducing them to PayPoint and some of | | the services they need | Over 85% of our ATM network is ‘speech | our people to talk about career options and | | Open early until late seven days a week, we | enabled’, enabling people with visual | development. PayPoint has also signed The | | serve millions of consumers every day, helping | impairments to withdraw cash independently. | Tech She Can Charter which is a PwC initiative | | them to make and receive payments and | | designed to encourage more girls to study IT | | access parcel services conveniently through | Supporting the communities where we live | and view it as a career choice. | | our retailer partner network and omnichannel | and work | | | payments solutions. | We support the communities where our people | | live and work by providing them with financial | Our UK retail network of more than 28,000 | support to serve their causes. PayPoint has | | --- | --- | | stores is bigger than all banks, supermarkets | a charity committee made up of volunteers | | and post oces together, putting us at the | which leads and provides support to | | heart of communities nationwide. Our cash | fundraising activities carried out by our people | | bill payment solutions enable less privileged | for charities which are important to them. | people to access services that may otherwise | be unavailable to them and our CashOut | Fundraising activity continued to be impacted | | --- | --- | | service enables the rapid dispersal of funds | by the Covid-19 pandemic with reduced | | through secure digital channels and is actively | opportunity for face-to-face events. However, | | used by local authorities and charities to | the Committee organised a number of | | distribute emergency funds. The recent launch | company-wide events including Move for Mind, | | of the Payment Exception Service, run for | making and selling roses to raise money for the | | the Department for Work and Pensions via | British Heart Foundation, Christmas Jumper | | our i-movo business, has further underlined | appeal for Save the Children, and a number of | | the continuing importance of delivering | events to raise money for Children in Need. | | cash payments to those without access to a | The Committee also continued to support | | standard bank account and replaces the Post | our people with their own fundraising eorts. | PayPoint Plc Annual Report 202248 ## Responsible business continued ## Social ## Purpose, vision ## and values We actively engage with our people to bring ## In delivering our our values to life in the work that we do. Our values are incorporated into our recruitment ## purpose we hold and induction processes, and demonstration of the values forms a key element of our ## ourselves accountable performance reviews. People who role model our values are recognised via our values ## for delivering positive award programme. ## outcomes for all our Value award winner: Chris Lambell Chris Lambell, Retail Standards Manager, ## stakeholders through received multiple nominations from colleagues ## the implementation around the business for the support that he gave to the launch of Counter Cash to our ## of a meaningful retailer partners. Within just a few days Chris designed and delivered training to a team of ## ESG strategy and new starters and subsequently led the team to deliver excellent training to our retailer ## measures. Further partners. The team received 45 5* Trustpilot reviews in their first week which is a testament ## information can to Chris’s training and leadership. Chris has an amazing ‘can do’ approach as well as being ## be found in the ‘results focused’ in everything that he does. ## Responsible Business Value award winner: Kelly Coleman Kelly Coleman, Customer Support Team ## section on page 36. Leader, received a values award for her ‘can do’ approach. Kelly is highly praised by her colleagues as someone who is always looking for solutions for both employees and customers. She stepped up into a Team Leader role in November 2021, and with the absence of a Senior Manager has led the customer support and amendments team throughout that period of time. She has embraced the Delivering Brilliant Results programme and has led from the front in motivating and engaging her team. Strategic report Governance Financial statements Shareholder information 49 ### Case Study – Cash Out technology and payment infrastructure ## Delivering vital ## financial support ## at the heart of ## UK communities | PayPoint’s Cash Out technology and payment | Over 99% of urban households are within | The highest redemption rates were on the | | --- | --- | --- | | infrastructure oers a solution enabling local | one mile of a PayPoint location, which | weekend, where 60% of transactions took | | authorities to disburse cash via digital or | includes Sainsburys, Asda, the Co-op, Spar, | place outside typical working hours on | | physical vouchers to their customers, helping | and One-Stop, and 98.2% of rural households | Saturday and 100% on Sunday. From Monday | | deliver urgent and much needed support to | are within five miles. | to Friday, the rates of redemption outside | | individuals across the extensive retail network | | of normal hours sat between 28% and 30%. | | of over 28,000 stores, more than all banks, | Those eligible for this support also benefitted | | | supermarkets and post oces put together. | from the convenience provided by PayPoint’s | | retailer network and Cash Out’s capabilities. | Over the past 12 months, PayPoint has aided | Crucially, they found that PayPoint partnered | | --- | --- | | local government in its support of vulnerable | stores are open longer than other redemption | | people by dispensing more than 1.9 million | locations, both weekdays and weekends. In | | vouchers, worth over £97million. Issued under | total, 36% of all vouchers redeemed in the last | | a range of government campaigns, including | twelve months through Cash Out were outside | | the Free School Meals and Winter Hardship | typical working hours, demonstrating the | | schemes, the vouchers were distributed | success of the service in providing convenient | | by local authorities across the UK and | and immediate financial support. | redeemed by consumers using PayPoint’s Cash Out solution. ## PayPoint stepped in to ## deliver an instant solution ## when we urgently needed ##  ## 80% redemption rate, but ## this grew to an average ## of 91% following further ## communication from the ## council. To this day, ## PayPoint’s Cash Out ## remains a vital service ## for our residents. ### Stephen Pendrich ### Benefits and Revenue Advisor ### for South Lanarkshire Council PayPoint Plc Annual Report 202250 ## Responsible business continued ## Governance The framework through which PayPoint As part of our ESG journey over the past year, ## The Executive Board, provides transparency on how it operates we also participated in the CDP survey for its business, which is in line with current the second time, developed and launched an ## as PayPoint’s team regulations, is set out in the Corporate Environmental policy, and implemented an Governance Report on pages 76 to 81 and ESG questionnaire as part of our procurement ## with responsibility in the Risk Management Report, on pages process to assess environmental, social and 54 to 58. In addition, our anti-bribery and governance risks within our supply chain. ## for the day-to- corruption policy is set out in the Audit Compliance with current mandatory disclosures Committee Report on page 84. for our greenhouse gas emissions are detailed ## day operational on page 43. PayPoint recognises that driving better ## management of the | | corporate behaviours provides improved | PayPoint Plc, and certain of its subsidiaries, | | --- | --- | --- | | Group, is accountable | returns over the longer-term and ESG is | are signatories to the Prompt Payment Code, | | | therefore a key focus of our Board. We have | a voluntary code of practice for payment | | for the ESG strategy | agreed ESG commitments and metrics which | practices whereby signatories undertake to | | | can be found on page 37. | pay 95% of their supplier invoices within 60 | | to help drive | | days. Our payment practices are reported on | | | Over the last year we have developed our | a six-monthly basis and details can be found | | change and a more | approach to climate-related risks in terms of | at www.gov.uk/check-when-businesses- | | | governance, strategy and risk management and | pay-invoices. | ## sustainable future prepared disclosure in accordance with TCFD, which can be found on pages 40 to 43. Finally, the following table sets out our Group ## for PayPoint. Non-Financial Information statement, prepared in order to comply with sections 414C and 414CB of the Companies Act 2006. A description of our business model and strategy, as well as the non-financial KPIs relevant to our business, can be found on pages 16 to 35. Reporting requirement Where to find further information Page Relevant policies if applicable Environmental Responsible business 38 to 43 Environmental matters | Employees Responsible business | | 44 to 45 | Diversity | | --- | --- | --- | --- | | | Principal risks | 57 | Recruitment and Selection | | | Audit Committee Report | 89 | Health and Safety | Whistleblowing Code of Ethics Society and Responsible Business 47 Charitable donations communities Respect for Responsible business and 45 Modern Slavery Statement human rights https://www.paypoint.com/ – Human Rights modern-slavery-act Anti-bribery Audit Committee Report 89 Anti-bribery and Corruption and corruption Strategic report Governance Financial statements Shareholder information 51 ## Section 172(1) ## Statement | Board decision-making | | By considering the Company’s purpose, | During the year under review the Executive | | --- | --- | --- | --- | | Section 172 of the Companies Act 2006 | | vision and values together with its strategic | Board, through the ESG Working Group, | | requires a director of a company to act in | | priorities and having a process in place for | sought feedback and input from a wide | | the way he or she considers, in good faith, | | decision making, we aim to make sure that our | range of stakeholders into the development | | would most likely promote the success of the | | decisions are consistent and appropriate in all | of the Group’s ESG strategy. This included | | company for the benefit of its members as | | circumstances. | engagement with investors, clients and | | a whole. In doing this, section 172 requires | | | employees to ensure that the strategy | | directors to have regard to, amongst other | | We delegate authority for day-to-day | balances the needs of all stakeholders. As an | | matters, the: | | management of the Company to the Executive | example, the ESG working group engaged | | • likely consequences of any decisions | | Board and then engage management in setting, | with the employee forum and a number of | | | in the long-term | approving and overseeing execution of the | suggestions made by the forum, including | | • interests of the company’s employees | | business strategy and related policies. Board | the introduction of an electric vehicle leasing | | • need to foster the company’s business | | meetings are held periodically at which the | scheme and the installation of electric | | | relationships with suppliers, customers | Directors consider the Company’s activities | charging points at our oce locations, have | | | and others | and make decisions. For example, each year | been incorporated into our commitments. | | • impact of the company’s operations on | | we make an assessment of the strength of the | Feedback from stakeholders was included | | | the community and environment | Company’s balance sheet and future prospects | in a paper that was presented to the Board | | • desirability of the company maintaining | | relative to market uncertainties and make | for consideration as part of the decision- | | | a reputation for high standards of | decisions about the payment of dividends. | making process to agree the Group’s ESG | | | business conduct | For the year ended 31 March 2022, we are | commitments and targets. Further information | | • need to act fairly as between members | | recommending a final dividend of 18 pence | about how the Company engages with all of its | | | of the company | per share. | stakeholders can be found on pages 52 and 53 | of this report. | In discharging our section 172 duties, we have | How we consider our stakeholders | | | --- | --- | --- | | regard to the factors set out above. In addition, | Engaging regularly with our stakeholders | The Strategic Report was approved by the | | we also have regard to other factors which we | is fundamental to the way we do business, | Board of Directors and signed on its behalf by: | | consider relevant to the decisions being made. | enabling us to consider their needs, concerns | | | Those factors, for example, include the interest | and the potential impact on stakeholders when | | ### Nick Wiles and views of our clients; our retailer partners; making decisions in the Boardroom. ### Chief Executive regulatory bodies; and our relationship with ### our lenders. 17 June 2022 PayPoint Plc Annual Report 202252 ## Responsible business continued ## Engaging with our ## stakeholders ### Our stakeholders How we engage Key topics discussed How the Board engages/ Key outcomes in 2022 ### is kept informed Our employee forum is a communication platform attended by The employee forum discusses the issues Gill Barr, the Board representative of the The employee forum has helped shape survey ## People | | employee representatives elected by their colleagues. In addition, | raised by the engagement survey and any | Employee Forum, facilitates the flow of | actions and ensured that our return-to-oce | | --- | --- | --- | --- | --- | | We have a talented, diverse and committed workforce with experience | we hold regular sta briefings and functions hold their own team | business-related issues. | communication between the forum and | plans have taken into account feedback | | from a wide range of industries. | meetings and engagement forums (see page 44 for more information | | the Board. | from around the business. The forum also | | | on how we engage with our people). | The impacts of the pandemic continued to | | contributed suggestions that have been | | | | be discussed throughout the year. Other | The HR Director updates the Board on results | incorporated into our ESG strategy including | | | | key topics included the results of employee | of engagement surveys and people matters | the electric vehicle leasing scheme. | | | | surveys, return to oce following the | generally in a formal presentation to the Board | | | | | Covid-19 pandemic and ESG. | each January and as required throughout | | the year. Through our investor relations programme, our Annual Report and Financial performance, strategy and The Chief Executive updates the Board on any We have taken important steps to strengthen our ## Shareholders Accounts and our annual general meeting, we ensure shareholder business model, dividend policy and ESG. shareholder feedback received and on investor operating model and organisational structure and We aim to deliver a sustainable and rewarding business model. views are brought into our Boardroom and considered in our sentiment following each roadshow. The to identify and support growth opportunities in our decision-making. approach to ongoing shareholder engagement core UK business. is agreed by the Board. All members of the Board are available for questions by the A final dividend of 18 pence per share has been shareholders at the annual general meeting and declared for approval by shareholders. Giles Kerr has held several investor meetings. An account management team develops our relationships with Performance reviews, market trends and The Executive Board keeps the Board Significant improvements have been made to ## Convenience retailer partners multiple retailer partners, whilst our Retail Services Hub and Retail insights, sharing best practice, new clients informed of our relationships with the retailer proposition over the year with the Our retailer partners oer their consumers one or more PayPoint Relationship Management team supports independent retailer and product development. convenience retailer partners throughout introduction of new services including Counter services. Ranging from independent retailer partners with one partners. Independent retailers are also represented by a retailer the year. Cash, Snappy Shopper and digital vouchers. store to large multiple retailer partners. partner forum, which has regular meetings across the year. In addition we actively engage with trade bodies including the Association of Reinvigorated relationships with key trade Convenience Stores ‘ACS’, Scottish Grocers Federation ‘SGF’ and associations, working together to engage our National Federation of Retail Newsagents ‘NFRN’. retailer partner community. Our field team is always available to support and engage with Performance, support, pricing and service Updates on enhancements to current and Maintaining an excellent Trustpilot score. ## SMEs business owners across all the sectors we serve. We use a range of enhancements. future services for SMEs are provided to We provide card payments services for over 30,000 SMEs across channels and methods to communicate with and seek feedback from the Board by the Executive Board. Introduction of one-month rolling contracts various sectors. new and existing customers including social media, customer referrals in response to customer feedback. and case studies. Our communication platforms provide the environment for us to Services and partnerships, performance, The Executive Board provides updates to Our retailer proposition has been enhanced to ## Consumers engage with consumers. Through our Retail Services Hub we inform, network expansions, product portfolio, the Board on the levels of transactions, respond to consumer trends, including home We serve millions of consumers every day, helping them to make update and quickly resolve issues with consumers at first-point-of- systems and support on customer performance and overall services provided delivery, Counter Cash, digital vouchers and payments and collect parcels conveniently through our retailer contact where possible. Feedback, queries and data gathered from complaints. to our consumers. CashOut services. partner network and omnichannel payments solutions. surveys are all collated to improve the consumer experience. Dedicated Account Managers have client review meetings throughout Service and performance versus key The Executive Board provides updates to the Several MultiPay product portfolio ## Clients the year to discuss performance and future innovations. We also have performance indicators, business Board when required. enhancements launched in year. Our client base operates across a broad and diverse range of sectors daily operational contact where required to resolve business as usual challenges where we may be able to including commercial, not-for-profit and the public sector. They are queries. For the larger strategic accounts, we will hold a mixture of provide support, short and long-term Delivery of new client services, including the critical to our business. Understanding their needs and requirements operational, tactical, and strategic meetings throughout the year. strategic goals to drive alignment, and Payment Exception Service for the DWP. is essential to retention and development. PayPoint service evolution to enhance our clients’ own service performance to Continued diversification to digital and new their end users. clients secured, including the first major digital contract now live with Optivo. We support fundraising events by providing financial support to Our Charity Committee agrees The HR Director updates the Board via Page 47 details our charitable work and support ## Local communities causes that are important to employees. We act as an enterprise which charities we should support. a formal presentation each January. provided for young people in the community. Our network places us at the heart of local communities. advisor to a local secondary school, supporting the transition between school and the workplace. Strategic report Governance Financial statements Shareholder information 53 ## By understanding our stakeholders we can consider their needs, ## concerns and the potential impact on stakeholders when making ## decisions in the Boardroom. ### Our stakeholders How we engage Key topics discussed How the Board engages/ Key outcomes in 2022 ### is kept informed Our employee forum is a communication platform attended by The employee forum discusses the issues Gill Barr, the Board representative of the The employee forum has helped shape survey ## People | | employee representatives elected by their colleagues. In addition, | raised by the engagement survey and any | Employee Forum, facilitates the flow of | actions and ensured that our return-to-oce | | --- | --- | --- | --- | --- | | We have a talented, diverse and committed workforce with experience | we hold regular sta briefings and functions hold their own team | business-related issues. | communication between the forum and | plans have taken into account feedback | | from a wide range of industries. | meetings and engagement forums (see page 44 for more information | | the Board. | from around the business. The forum also | | | on how we engage with our people). | The impacts of the pandemic continued to | | contributed suggestions that have been | | | | be discussed throughout the year. Other | The HR Director updates the Board on results | incorporated into our ESG strategy including | | | | key topics included the results of employee | of engagement surveys and people matters | the electric vehicle leasing scheme. | | | | surveys, return to oce following the | generally in a formal presentation to the Board | | | | | Covid-19 pandemic and ESG. | each January and as required throughout | | the year. Through our investor relations programme, our Annual Report and Financial performance, strategy and The Chief Executive updates the Board on any We have taken important steps to strengthen our ## Shareholders Accounts and our annual general meeting, we ensure shareholder business model, dividend policy and ESG. shareholder feedback received and on investor operating model and organisational structure and We aim to deliver a sustainable and rewarding business model. views are brought into our Boardroom and considered in our sentiment following each roadshow. The to identify and support growth opportunities in our decision-making. approach to ongoing shareholder engagement core UK business. is agreed by the Board. All members of the Board are available for questions by the A final dividend of 18 pence per share has been shareholders at the annual general meeting and declared for approval by shareholders. Giles Kerr has held several investor meetings. An account management team develops our relationships with Performance reviews, market trends and The Executive Board keeps the Board Significant improvements have been made to ## Convenience retailer partners multiple retailer partners, whilst our Retail Services Hub and Retail insights, sharing best practice, new clients informed of our relationships with the retailer proposition over the year with the Our retailer partners oer their consumers one or more PayPoint Relationship Management team supports independent retailer and product development. convenience retailer partners throughout introduction of new services including Counter services. Ranging from independent retailer partners with one partners. Independent retailers are also represented by a retailer the year. Cash, Snappy Shopper and digital vouchers. store to large multiple retailer partners. partner forum, which has regular meetings across the year. In addition we actively engage with trade bodies including the Association of Reinvigorated relationships with key trade Convenience Stores ‘ACS’, Scottish Grocers Federation ‘SGF’ and associations, working together to engage our National Federation of Retail Newsagents ‘NFRN’. retailer partner community. Our field team is always available to support and engage with Performance, support, pricing and service Updates on enhancements to current and Maintaining an excellent Trustpilot score. ## SMEs business owners across all the sectors we serve. We use a range of enhancements. future services for SMEs are provided to We provide card payments services for over 30,000 SMEs across channels and methods to communicate with and seek feedback from the Board by the Executive Board. Introduction of one-month rolling contracts various sectors. new and existing customers including social media, customer referrals in response to customer feedback. and case studies. Our communication platforms provide the environment for us to Services and partnerships, performance, The Executive Board provides updates to Our retailer proposition has been enhanced to ## Consumers engage with consumers. Through our Retail Services Hub we inform, network expansions, product portfolio, the Board on the levels of transactions, respond to consumer trends, including home We serve millions of consumers every day, helping them to make update and quickly resolve issues with consumers at first-point-of- systems and support on customer performance and overall services provided delivery, Counter Cash, digital vouchers and payments and collect parcels conveniently through our retailer contact where possible. Feedback, queries and data gathered from complaints. to our consumers. CashOut services. partner network and omnichannel payments solutions. surveys are all collated to improve the consumer experience. Dedicated Account Managers have client review meetings throughout Service and performance versus key The Executive Board provides updates to the Several MultiPay product portfolio ## Clients the year to discuss performance and future innovations. We also have performance indicators, business Board when required. enhancements launched in year. Our client base operates across a broad and diverse range of sectors daily operational contact where required to resolve business as usual challenges where we may be able to including commercial, not-for-profit and the public sector. They are queries. For the larger strategic accounts, we will hold a mixture of provide support, short and long-term Delivery of new client services, including the critical to our business. Understanding their needs and requirements operational, tactical, and strategic meetings throughout the year. strategic goals to drive alignment, and Payment Exception Service for the DWP. is essential to retention and development. PayPoint service evolution to enhance our clients’ own service performance to Continued diversification to digital and new their end users. clients secured, including the first major digital contract now live with Optivo. We support fundraising events by providing financial support to Our Charity Committee agrees The HR Director updates the Board via Page 47 details our charitable work and support ## Local communities causes that are important to employees. We act as an enterprise which charities we should support. a formal presentation each January. provided for young people in the community. Our network places us at the heart of local communities. advisor to a local secondary school, supporting the transition between school and the workplace. PayPoint Plc Annual Report 202254 ## Risk management ## Robust approach ## to managing risk Strategy Risk appetite Executive Board members and discussed with Strategic and operational benefits of PayPoint’s risk appetite is set by the Board and the Head of Risk and Internal Audit. Risk and proactively managing risk are achieved when aligns the level of risk considered acceptable control registers contain risk descriptions, Enterprise Risk Management is aligned with in achieving strategic objectives, increasing assessment of materiality, probability, the strategic and operational goals of the financial returns and adhering with statutory mitigating controls, residual risk and risk organisation, and our process and governance requirements. The Board and the Executive owners. At least annually, risks identified structure achieve this. Risks are assessed Board have key roles in ensuring the internal through the top down and bottom up risk through PayPoint’s risk management and control framework maintains risk within the assessment process are agreed with Executive internal control framework which are designed appetite set. Internal controls are embedded Board members to determine principal and to identify and manage risk. Processes apply across the Group’s core processes including emerging risks. The Audit Committee receives throughout the Group and are designed policies and procedures, delegated authorities, and reviews information on the risk framework to mitigate rather than eliminate risk, and PayPoint values and training. and principal and emerging risks and advises provide assurance to stakeholders regarding the Board on risks. PayPoint’s ability to deliver its objectives and Risk identification and management manage risks. The Board is responsible for The risk management process assesses overseeing risk management and approves strategic, financial, IT, regulatory and ###  levels of acceptable risk. The Board is also operational risk across all areas of the business. responsible for maintaining an appropriate PayPoint’s risk framework includes a bottom- Identifying risks which may impede internal control environment to manage risk up risk assessment managed through risk achieving objectives eectively. The Audit Committee supports and control registers, and a top-down risk the Board in reviewing the eectiveness of assessment and horizon scanning process risk management and internal controls and to identify emerging risks. Functional and performs an annual assessment. The results entity risk and control registers are maintained ### 2. Inherent risk assessment of this years assessment are detailed on and form an important component of our page 85 Audit Committee section. governance framework. Risks and controls Assessing the level of inherent risk are determined by senior management and The Board Oversees risk management, sets the risk appetite and maintains a ### control environment to 3. Control assessment eectively manage risk Assessing the existence and strength of controls to mitigate risks Risk Appetite ### 4. Residual risk assessment Executive Board The Audit Committee Risk Monitors key risks Risk Oversees the risk Assessing the level of residual risk aer Monitoring facing the business and Oversight framework and & Control mitigation from controls agrees internal controls monitors assurance ## Risk activity and internal control eectiveness ## Framework ### 5. Risk reporting Reporting the status of the most Risk Risk significant risks to the Executive Board and Identification Assessment & Mitigation Audit Committee Management Risk & Internal Audit ### 6. Monitoring and review Responsible for identifying Manages the risk framework and managing risks and and assesses internal Monitoring of risks and controls by the ensuring the eective control eectiveness operation of Executive Board and Audit Committee internal controls who advise the Board Strategic report Governance Financial statements Shareholder information 55 ## Principal risks and uncertainties ## Mitigating risks ## eectively Receding risks ### Changes to principal risks ## Like all businesses, Government Policy – Government policy was previously considered an emerging risk due New risks and disclosures ## we face a number of to changes in government policy potentially This year Operational Delivery has been leading to adverse impacts on our proposition elevated to a separate principal risk. Previously ## risks and uncertainties and markets. However policy outcomes it formed part of our Transformation principal during the year including the Access to Cash risk but now Operational Delivery is considered ## and successful Review and the Payment Systems Regulator a principal risk in its own right, in support Market review into the supply of card acquiring ## management of of Transformation. This year we have also services have reduced this as a standalone disclosed Board risk appetite for each principal risk and remaining risks are included under ## existing and emerging risk. Our risk appetite is defined as: the Legal & Regulatory principal risk. ## risks is critical to Risk appetite Impact on profit before tax Climate Risk – PayPoint recognises the impact Low Under £2 million ## the achievement of climate change is having globally and that it Medium Under £5 million presents a risk and uncertainty to our business. ## strategic objectives High Over £5 million As last year, we still consider climate change to be an emerging risk rather an immediate ## and to the long- principal risk. During the year we launched Changing risks People & Culture – This risk has been renamed our net zero carbon strategy with the goal of ## term success of any as People as culture is no longer considered a becoming net zero in our own operations by principal risk following successful integration 2030 and fully net zero by 2040. Details of how ## business. Therefore, of the acquisitions made in 2020 and 2021 we plan to achieve this can be found on page and the switch to hybrid working. Remaining 37. We also implemented The Task Force on ## risk management is culture risks are included under the People Climate-related Financial Disclosures (TCFD) principal risk. which provides companies with a framework ## an integral part of to improve reporting on climate-related Transformation & Acquisition Integration – risks and opportunities. Risks presented by ## PayPoint’s Corporate Acquisition Integration is no longer considered climate change have been embedded into a principal risk following successful integration our enterprise risk management framework ## Governance. | of the acquisitions made in 2020 and 2021. | including financial planning processes, business | | --- | --- | | Remaining risks are included under the | cases and our overall risk identification and | | Transformation principal risk. | management processes detailed on page 58. | | Cyber Security & Data Protection – This | The table on pages 56 to 58 sets out our | | risk has been renamed as cyber security as | principal and emerging risks including details of | | data protection is now recognised as a key | the potential impact, mitigation strategies and | | component of cyber security risk. Regulatory | status. The table also details risk movement | | risk in relation to data protection is included in | during the year and risk appetite. They do not | | the Legal & Regulatory principal risk. | comprise all risks faced by the Group and are | not set out in order of priority. PayPoint Plc Annual Report 202256 ## Principal risks and uncertainties continued Change in status and trend ## Principal risks Increased Unchanged Decreased ## Market Potential impact Mitigation strategies Status Change PayPoint’s markets and competitors The Executive Board regularly Risk is considered increasing as ### 1. continue to evolve, and failure to reviews markets, competitor activity, competition is increasing across Competition deliver eective strategies to respond trading opportunities and potential our business but particularly in bill to market and competitor changes acquisitions, and the Board oversees payment and top up markets which ### and markets | will reduce market share, revenue and | and challenges strategic direction. | are seeing downward pressure | Risk | | --- | --- | --- | --- | | profits. The decline in cash usage, | We closely monitor consumer and | on margins due to competition. | appetite | | accelerated by Covid-19, is expected | technological trends and engage with | However, recent acquisitions have | | | to continue impacting some of our | clients, retailers and other stakeholders | diversified our business into new | Medium | | markets, and further lockdowns would | to improve our proposition. We | markets and strengthened our card | | | also have an impact. Our business may | continually develop products, services | and digital payment businesses as | | | also be impacted by changing consumer | and systems to adapt to changes in | we transition away from cash with | | | trends, competitor activity and new and | consumer trends and technology, and | our digital proposition. | | | alternative payment solutions. | make strategic acquisitions where | | | appropriate. New and emerging technologies are We continually develop products Risk is stable as recent acquisitions ### 2. changing the way consumers pay for with the latest technology and evolve have accelerated our ability to ### Emerging goods and services, impacting our them to take advantage of new and mitigate the impact of emerging products and markets. For many years expanding markets. The Executive technologies and the re-platforming ### technology cash was the principal method for topping Board closely monitors emerging of our digital proposition will Risk up gas and electricity; however this is technologies and the impact they better enable us to expand our appetite changing and PayPoint needs to evolve may have on PayPoint, and mitigating presence in digital payment its proposition to capitalise on new strategies are implemented where markets. We are engaged in various Medium technology and payment methods. New possible. Emerging technology is a key government schemes involving disruptive fintech products, and large component of our acquisition strategy new technology such as our new tech companies who are increasingly with recent acquisitions focusing on Department for Work and Pensions advancing into payment solutions, have digital products. Cash Out product, as well as other the potential to significantly impact our technological product advances. business. Covid-19 accelerated global digital transformation. There is risk to our business if our digital transformation fails to keep pace and we do not exploit new technologies and markets to evolve our proposition. ## Strategic Potential impact Mitigation strategies Status Change Our business relies on continued The Executive Board assesses Risk is considered stable as recent ### 3. innovation and implementations and transformation as part of the strategic acquisitions have significantly Transformation failure to eectively manage our transition planning process and the Board rebalanced our business away from from cash to digital would impede oversee and challenge strategic cash to digital channels. Numerous business performance and our ability to direction. PayPoint is committed to IT infrastructure improvement Risk achieve strategic goals. Continued system its transition from cash to digital and programmes are underway following appetite infrastructure improvements are essential we continue to innovate our legacy recent architecture reviews, in providing great products and customer products. Product and infrastructure including migration to the cloud. Medium service, and a lack of investment would reviews are regularly conducted to Re-platforming of our digital impact our business. identify improvements in processes, proposition is underway with some systems and products. elements ready to go live. Strategic report Governance Financial statements Shareholder information 57 ## Business Potential impact Mitigation strategies Status Change It is important we have a diversified PayPoint builds strategic relationships with Risk is considered stable as recent ### 4. and varied operating model so we are key clients and retailers and we continually acquisitions have diversified our ### Operating not overly exposed to any particular seek to improve service levels through business and we continue to renew markets, clients, suppliers or partners. new initiatives, products and technology. contracts and onboard new retailers, ### model Our core business relies on an We monitor performance through regular clients and merchants in line with Risk appropriate mix of clients and retailers retailer engagement and surveys and expectations. Our acquisition of appetite and failure to maintain attractive are proactive in addressing areas for Handepay and Merchant Rentals client and retailer propositions may improvement. New clients, retailers and increased our card acquirer partnerships Medium cause attrition adversely impacting merchants are routinely onboarded, and we are expanding our relationship our business. Business areas such as ensuring a sustainable customer base with LINK through the launch of the new card payments and ATM rely on key across a diversified range of sectors. Where Counter Cash product. We continue partner relationships and it is important products rely on key partners including to focus on retailer engagement and strong relationships are maintained our ATM and card payment businesses, we enhance our proposition with new and to ensure a resilient and sustainable invest in relationships and propositions to varied initiatives such as Randox. operating model. ensure sustainable partnerships. PayPoint is required to comply with Our Legal and Compliance Teams work Risk is considered stable as recently ### 5. numerous contractual, legal and closely with management on all legal and acquired regulated companies have been ### Legal and regulatory requirements and failure to regulatory matters, and adopt strategies to integrated into the PayPoint Group, with meet obligations may result in fines, ensure PayPoint is appropriately protected regulatory compliance requirements ### regulatory | penalties, prosecution and reputational | and complies with regulatory requirements. | harmonised where appropriate. In | Risk | | --- | --- | --- | --- | | damage. Recent acquisitions have | The Teams engage on all key contracts | November 2021, Ofgem accepted | appetite | | increased the number of regulated | and legal matters and oversee regulatory | PayPoint’s commitments to address the | | | entities and as regulatory landscapes | compliance, monitoring and reporting. | concerns raised in Ofgem’s Statement | Low | | evolve, there is a risk that changes | Emerging regulations are incorporated | of Objections received in September | | | may adversely impact our business. In | into strategic planning and we engage with | 2020. PayPoint is implementing the | | | November 2021 Ofgem published its | regulators to ensure our frameworks are | commitments in line with the timetable | | | decision to accept the commitments | appropriate to support new products and | agreed with Ofgem. No other significant | | | proposed by PayPoint to address | initiatives. External counsel is engaged | legal or regulatory matters occurred | | | Ofgem’s competition law concerns in | where required and we respond promptly | during the year. The Payment System | | | relation to our pre-payment energy | and comprehensively to all regulatory | Regulator Card Acquiring Market Review | | | business. The commitments are being | enquiries. | presents some regulatory risk to our | | | implemented in line with the timetable | | card business but this is not expected to | | | agreed with Ofgem and PayPoint | | be significant. | | provides Ofgem with regular updates on progress. Failure to retain and attract key talent The Executive Board define and advocate The UK recruitment market is extremely ### 6. | | impacts many areas of our business | PayPoint’s purpose, vision and values and | competitive at present impacting retention | | | --- | --- | --- | --- | --- | | People | including service delivery and achieving | an employee forum comprising employees | and recruitment. PayPoint’s sta turnover | | | | strategic objectives. Maintaining a | from across the business engages directly | increased during the year and although | | | | strong culture of ethical behaviours | with the Board on employee matters. We | retention plans were implemented and | Risk | | | and employee wellbeing is also vital | continue to invest in, and support our | vacancies continue to be recruited, | appetite | | | in ensuring our business, people, | people, particularly through Covid-19 | risk is considered increasing due to | | | | customers and other stakeholders are | where numerous steps have been taken to | the market conditions. During the year | | | | safeguarded. Our transition to a new | ensure employee wellbeing. We have well | employees from recent acquisitions were | Low | | | hybrid working model with increased | established processes for retaining and | successfully integrated and hybrid working | | | | home working increases the importance | recruiting key talent and developing our | embedded. We followed all government | | | | of supporting and engaging our people | people, and there is continued focus on | guidance on Covid-19 working practices | | | | to ensure business objectives are met. | culture, ethics and diversity. | and implemented numerous initiatives | | to protect our people and ensure their wellbeing. Employee engagement surveys continue to be positive and the Employee Forum continues to play an active role in employee engagement. ## Operational Potential impact Mitigation strategies Status Change Cyber attacks may significantly The Executive Board assesses PayPoint’s PayPoint has not experienced any ### 7. impact service delivery and data cyber security and data protection material attacks or data breaches ### Cyber protection causing harm to PayPoint, framework and the Cyber Security and IT during the year but cyber security our customers and other stakeholders. Sub-Committee of the Audit Committee continues to be a key focus and risk is ### Security | Globally, criminals continue to exploit | maintain oversight. Our IT security | considered increasing because of the | Risk | | --- | --- | --- | --- | | vulnerabilities, and recent acquisitions | framework is comprehensive with multiple | external threat, which has potentially | appetite | | have increased the number of IT | security systems and controls deployed | increased due to the crisis in Ukraine. | | | environments, products and systems | across the Group. We are ISO27001 and | Group security standards and systems | Low | | we need to protect. Although | PCI DSS Level 1 certified and systems | have been applied to acquisition IT | | | PayPoint has multiple cyber security | are constantly monitored for attacks with | environments and we continue to | | | systems, capabilities and controls, | response plans implemented and tested. | enhance our architecture, systems, | | | ransomware attacks remain a constant | Employees receive regular cyber security | processes and cyber monitoring and | | | threat. Failure to safeguard systems, | training, and awareness is promoted through | response capabilities. We regularly | | | networks and data and comply with | phishing simulations and other initiatives. We | engage third parties to assess and assist | | | data protection requirements may | engage with stakeholders on cyber-crime | on our cyber defences and strengthen | | | result in significant financial loss and | and proactively manage adherence with data | our controls. | | | reputational damage. | protection requirements. | | | PayPoint Plc Annual Report 202258 ## Principal risks and uncertainties continued Change in status and trend Increased Unchanged Decreased ## Operational continued Potential impact Mitigation strategies Status Change Our customers and stakeholders rely The Executive Board reviews PayPoint’s Although we have not suered any ### 8. on our systems, products and services business continuity framework and the significant outages during the year, ### Business being resilient, with continued service Cyber Security and IT Sub-Committee risk is considered increasing as we do delivery. Failure to maintain resilience of the Audit Committee maintains experience small business interruption ### interruption or promptly recover services following oversight. Business continuity, disaster events due to supplier performance Risk an outage may result in financial recovery and major incident response and internal processes. The crisis in appetite loss, reputational harm and potential plans are maintained and tested with Ukraine also has the potential to cause regulatory scrutiny. Changes to our failover capabilities across third party disruption to our services, suppliers and Low infrastructure as we transform our data centres and the cloud. Systems are partners. Although system disruption business from cash to digital and routinely upgraded with numerous change is an inherent business risk, our incident transition to the cloud increases the management processes deployed and monitoring and response processes are risk of disruptive events, and eective resilience embedded where possible. regularly reviewed and enhanced and we IT change processes and controls Supplier failure can disrupt PayPoint’s continue to enhance our infrastructure are vital to avoid disruption. Our service delivery and risk is managed and processes to strengthen infrastructure and service delivery through contractual arrangements, continuity controls. is supported by multiple suppliers alternative supplier arrangements and and poor supplier performance or business continuity plans. supplier failure may adversely impact our business. PayPoint has material credit PayPoint has eective credit and Although credit losses remain low, risk to ### 9. | | exposures with large retailers and | operational processes and controls. | credit exposures is increasing following | | --- | --- | --- | --- | | Credit and | other counterparties and significant | | the government ending business support | | | financial loss may result, in the event | Retailers and counterparties are subject to | for Covid-19, and other impacts on the UK | ### operational of a default. We process large volumes ongoing credit reviews, and eective debt economy from increasing energy prices Risk of payments daily therefore eective management processes are implemented. and inflation. We continue to review and appetite operational controls are essential to Settlement systems and controls are enhance our operational processes and ensure funds are settled accurately, continually assessed and enhanced with controls and have made good progress Low securely and timely. Absent or new systems and technology implemented. during the year aligning processes and ineective processes and controls We have eective governance with controls for the recent acquisitions. could result in fraud, liquidity risk, oversight committees, delegated No material processing errors or frauds reputational damage or other authorities and policies for key processes. occurred during the year and the risk financial loss. Segregation of duties and approvals are profile of our business operations implemented for all areas where fraud or remains stable. material error may occur. Eective operational delivery of key The Executive Board has overall Risk is considered to be increasing as ### 10. initiatives and strategic objectives is responsibility for delivering key initiatives we are at an important stage in our Operational central to achieving our transformation and ensuring eective governance. Larger transformation, and have a number aims. Poor delivery would impede our initiatives have steering groups and of key initiatives underway to ensure ### delivery business performance and impact project teams with representatives from sustainable revenue and growth into Risk our stakeholders. Additionally, poor across the business to ensure all business the future. During the year we appetite planning and forecasting of business considerations are included in planning and successfully delivered our new Counter initiatives may impede financial targets delivery. We regularly liaise with third party Cash product and Zebra printer roll-out Low and business performance. stakeholders throughout implementation to parcel retailers as well as other new to agree and revise objectives and targets initiatives and products. as projects progress. Finance teams are actively involved in key projects to ensure cost and revenue considerations are continually reviewed and post project assessments are made to establish lessons for future deliveries. ## Emerging risks Potential impact Mitigation strategies Status Focus on environmental, social and The CEO and the Executive Board have During the year we implemented an ESG Working ### ESG and | | governance matters continues to | overall accountability for PayPoint’s | Group comprising Executive Board members and | | --- | --- | --- | --- | | Climate | increase and our business needs to | climate and social responsibility agendas | other key stakeholders, which is responsible for | | | be environmentally responsible and | and recommends strategy to the Board. | overseeing ESG and climate matters and updating | | | create shared value for all stakeholders | We align our business with reducing carbon | the Executive Board. We implemented the new | | | to ensure sustainability and reinforce | emissions, and continually assess our | Task Force on Climate-related Financial Disclosures | | | our values and brand. Climate risk is | approach to environmental risk and social | (TCFD), and comprehensively assessed carbon | | | a key priority for governments and | responsibility which are embedded in | emissions across our value chain. In doing so, we | | | organisations globally, and PayPoint | our decision-making processes. We have | have been able to set net zero targets and make | | | needs to play its part in reducing | multiple policies and processes governing | various carbon emission reductions – see page 37 | | | carbon emissions and its environmental | our social responsibility strategy and we | for more details. We have reviewed and updated | | | impact. Approximately 17% of our | continually assess and evolve our strategy | many of our environmental and social responsibility | | | revenue is derived from energy and fuel | and working practices to ensure the | policies, which are approved by the Board. ESG | | | markets and as the UK transitions to | best outcomes for stakeholders and the | and climate were also embedded into our risk | | | Net zero carbon emission economy by | environment. | management framework. | 2050, we need to closely monitor the impacts on our business to ensure our revenue streams remain sustainable. Strategic report Governance Financial statements Shareholder information 59 ## Viability statement | In accordance with the 2018 UK Corporate | All principal risks identified (which are set | Financing facilities | | --- | --- | --- | | Governance Code, the Directors have assessed | out on pages 56 to 58), including ESG, could | The impacts of these scenarios were then | | the viability of the Group over a three-year | have an impact on the Group’s performance. | reviewed against the Group’s current and | | period, taking account of the Group’s current | However, the main risks which could potentially | projected future net cash/debt and liquidity | | financial and trading position, the principal | and materially impact the Group together with | position. The Group closed the financial year | | risks and uncertainties (as set out on pages | the related scenario assumption are: | with net debt of £43.9m of which £21.7m | | 56 to 58) and the strategic plans that are | | is an amortising loan (repayable in quarterly | | reviewed at least annually by the Board. | Principal risk 1: competition and markets: | instalments of c.£3m). | • Failure to maintain significant client | The Directors have determined that the | | contracts resulting in 20% to 40% | The Group had £48m of committed and | | --- | --- | --- | --- | | Group’s strategic planning period of three | | reduction in transaction volumes depending | unutilised debt facilities, consisting of a | | years remains an appropriate time frame over | | on the nature of the clients’ contract | revolving credit facility syndicated across three | | which to assess viability. This broadly aligns | • Inadequate recruitment or excessive churn | | banks. The Revolving Credit Facility (RCF) has | | to average client renewal terms, new client | | in the retail network and merchant estate | two financial covenants, relating to interest | | prospecting and onboarding cycles and the | | resulting in a net annual churn of 10% in | cover and leverage (EBITDA to Net debt). | | development-through-to-maturity evolution | | the estate (impacting service fees and card | The RCF expires in February 2025, with the | | of new products and service lines. | | acquiring revenues). | assumption we will successfully refinance in | advance of that date. | The starting point for the viability assessment | Principal risks 3 and 10: transformation | | | | --- | --- | --- | --- | | is the strategic and financial plan which | and operational delivery: | | Result of stress tests | | makes assumptions relating to the economic | • New products or services do not perform | | In the unusual set of circumstances of all the | | climate, market growth, cost inflation, the | | as anticipated and/or execution in their | above significant scenarios occurring together, | | prospects of new products and services and | | delivery limits contribution to 10% of | the Group, with no cost mitigations, would | | past performance. This plan is then subject to | | expectations. | still deliver positive EBITDA and remain within | | a series of stress scenarios using inputs from | | | its financing facility covenants. The viability | | business functions based on the potential | Principal risk 5: legal and regulatory: | | scenario also factors in reductions of taxation | | materialisation of certain principal risks. | • Fines/reputational damage amounting to | | and dividends following the payment of the | | | | £24 million (being 15% of turnover for | final dividend of 18.0p declared in respect | | | | violation of market abuse regulations). | of the financial year ended 31 March 2022. | | | Principal risks 6 and 7: cyber security | | Under a viability scenario the Group would | | | and business interruption: | | create a committee with a focus to actively | | | • The financial impact of technical failure from | | preserve viability through containing and | | | | cyber-attacks resulting in a network outage | limiting further exposure. This committee | | | | and loss of revenue for up to seven days. | would engage with key partners and suppliers | to ensure continued support of key activities | Principal risk 8: Credit and Operational: | | as well as to reduce operational activity and | | --- | --- | --- | | • Multiple retailer groups entering receivership | | related costs to ensure the longer-term | | | assuming a 20% loss of client funds, where | viability of the business. | PayPoint is liable. Conclusion Taking these results into account together with the Group’s current position, the Group’s experience of managing adverse conditions in the past and mitigating actions available to the Group, the Directors confirm that they have a reasonable expectation that the Group will be able to continue its operations, remain solvent and meet its liabilities as they fall due over the three-year viability period. PayPoint Plc Annual Report 202260 ## Financial review ## A positive, ## resilient ## performance ## The Group has delivered ## a profit before tax from ## continuing operations ## excluding exceptional ## items of £45.6 million, ## up 25.0% vs FY21, ## reflecting a rebalancing ## of the business mix ## towards growth ## opportunities and a ## positive contribution ## from the acquisitions ## of Handepay/Merchant ## Rentals, i-movo and ## RSM 2000. ### Alan Dale ### Finance Director Strategic report Governance Financial statements Shareholder information 61 Overview of continuing operations Last year we saw the impact of the Covid-19 pandemic aect a number of our business lines and sectors which drove significant variances. In the current year a number of variances are driven by the impact of our acquisitions as well as a number of those business lines and sectors that have partially recovered. Given the disposal of the Romanian business on 8 April 2021 the focus of this review is primarily on the continuing operations of the Group, the results of Romania have been classified as a discontinued operation and are provided below. 1 Restated | | Year ended | | Year ended | | | | | --- | --- | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | Change | | | £m | | 2022 | | 2021 | | % | Revenue Revenue from continuing operations 145.1 127.7 13.6% 2 Net revenue Continuing operations Shopping 58.7 40.2 46.2% E-commerce 4.9 3.6 36.2% Payments & Banking 51.5 53.3 (3.6%) Total net revenue 115.1 97.1 18.5% 3 Total costs from continuing operations (excluding exceptional items) (69.5) (60.6) 14.7% Profit before tax from continuing operations (excluding exceptional items) 45.6 36.5 25.0% Exceptional items 2.9 (16.1) n/m Profit before tax from continuing operations 48.5 20.4 137. 3% Profit before tax from discontinued operations 30.0 7.6 n/m Profit before tax 78.5 28.0 180.5% Cash generation from continuing operations excluding exceptional items 53.9 46.9 14.9% 4 Net corporate debt (43.9) (68.2) (35.7%) 1. Comparative information has been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. 2. Net revenue is an alternative performance measure. Refer to note 4 to the financial information for a reconciliation to revenue. 3. Total costs is an alternative performance measure as explained in note 1 to the financial information, a reconciliation to costs is included in the Financial review on page 66. 4. Net corporate debt (excluding IFRS 16 liabilities) is an alternative performance measure. Refer to note 1 to the financial information for a reconciliation to cash and cash equivalents. The above results for continuing operations reflect a number of corporate changes within the Group and the impact of exceptional items. The results of last year’s acquisitions, i-movo in December 2020 and Handepay/Merchant Rentals in February 2021, are included for the full year as is the acquisition of RSM 2000 which completed in April 2021. Profit before tax from continuing operations of £48.5 million (2021: £20.4 million) increased by £28.1 million (137.3%). The current year reflects exceptional income of £2.9 million whilst the prior year reflects exceptional costs of £16.1 million which includes the £12.5 million provision made in relation to the Ofgem Statement of Objections. The profit before tax from continuing operations excluding exceptional items, the underlying profit, increased by £9.1 million (25.0%) to £45.6 million (2021: £36.5 million). Revenue from continuing operations increased by £17.4 million (13.6%) to £145.1 million (2021: £127.7 million). Net revenue from continuing operations increased by £18.0 million (18.5%) to £115.1 million (2021: £97.1 million). Handepay and Merchant Rentals contributed additional £16.1 million net revenue from a full year compared to two months in 2021. Growth in service fees from additional sites and growth in e-commerce as it recovers from Covid-19 have been partially oset by the headwinds of structural changes and margin pressure on UK bill payments and a continued decline in cash use on UK bill payments, top ups and ATMs. Shopping net revenue increased by £18.5 million (46.2%) to £58.7 million (2021: £40.2 million). Service fees net revenue increased by £1.9 million (13.1%) driven by additional PayPoint One sites and implementing the annual RPI increase. ATM net revenue decreased by 0.1% due to a reduction in transactions driven by the continuing trend of reduced demand for cash across the economy. Handepay/Merchant Rentals net revenue increased by £16.1 million (658.4%) as both entities were owned for a full financial year compared to the previous year where they were owned for two months. PayPoint card payments net revenue decreased by £1.1 million (9.4%), maintaining strong transaction volumes seen in prior year but at a lower average transaction value. E-commerce net revenue increased by £1.3 million (36.2%) to £4.9 million (2021: £3.6 million), driven by strong growth in total transactions which increased by 25.3% with the easing of Covid-19 restrictions in the current year. This facilitated increased Pick Up/Drop O activity combined with growth in volumes following our investment in thermal instore Zebra printers. During the year a new partnership was launched with Randox providing their Covid-19 testing service in our parcel network, this contributed £0.5 million of revenue (2021: £nil). PayPoint Plc Annual Report 202262 ## Financial review continued Payments & Banking net revenue decreased by £1.8 million (3.6%) to £51.5 million (2021: £53.3 million). Cash bill payments net revenue decreased by £2.3 million (8.1%) to £26.7 million, as a result of a decrease in bill payment transactions from the continued switch to digital payment methods along with the continuing impacts of Covid-19 where consumers are making larger payments, less frequently. Cash top-ups net revenue decreased by £0.5 million (6.2%) to £7.8 million with volumes down 12.6% driven by the continuing structural declines in the prepaid mobile sector. Digital net revenue increased by £1.6 million (27.1%) to £7.7 million driven by the £1.1 million net revenue contribution from RSM 2000 in the year. MultiPay net revenue decreased by £0.9 million to £3.3 million (2021: £4.2 million) and transactions increased 6.7% as a result of more clients taking the digital services and contribution from the new functionalities of Direct Debit and PayByLink although at a lower net revenue per transaction. This has been partially oset by Cash Out net revenue which increased by 75.6%, driven by the new DWP Payment Exception Service launched by the i-movo acquisition. Existing Cashout vouchers decreased by £0.1 million (4.7%) to £1.6 million (2021: £1.7 million) as the demand from local authorities to disperse Covid-19 support schemes has reduced. eMoney net revenue decreased by £0.5 million (5.6%) to £8.2 million (2021: £8.7 million), as a result of a 6.9% decrease in transactions reflecting these schemes delivering lower volumes following the strong performance seen during Covid-19 period. Total costs from continuing operations excluding exceptional costs increased by £8.9 million to £69.5 million (2021 restated: £60.6 million). The increase in costs was driven by the £12.2m additional cost base in relation to the newly acquired businesses partially oset by £3.3m reduction in operational costs. Prior year costs have been restated and reduced by £1.0 million by the retrospective application of the change in accounting policy on intangible assets following the April 2021 IFRIC agenda decision on costs incurred in implementing cloud computing SaaS arrangements. Reconciliation from profit before tax from continuing operations to underlying profit before tax from continuing operations 1 Restated | | Year ended | | | Year ended | | | --- | --- | --- | --- | --- | --- | | 31 March 2022 | | | 31 March 2021 | | | | | | £m | | | £m | Profit before tax from continuing operations 48.5 20.4 Adjusted for: Current year exceptional costs – administrative expenses (2.9) – Prior year exceptional costs – administrative expenses – 3.1 Prior year exceptional costs – finance costs – 0.5 Prior year provision in relation to the Ofgem Statement of Objections – 12.5 Underlying profit before tax from continuing operations 45.6 36.5 1. Comparative information has been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. Current year exceptional item is a £2.9 million revaluation gain of the i-movo deferred, contingent consideration liability. Prior year exceptional costs of £16.1 million were one-o acquisition and refinancing expenses and a £12.5 million provision in relation to Ofgem’s Statement of Objections. Cash generation from continuing operations excluding exceptional items remained strong with £53.9 million (2021: £46.9 million) delivered from profit before tax excluding exceptional items of £45.6 million (2021: £36.5 million). There was a net working capital outflow of £3.2 million, primarily the VAT deferral oered by HMRC being repaid in the period. Net corporate debt decreased by £24.3 million to £43.9 million (2021: £68.2 million) due to the benefit from the disposal of the Romanian business partially oset by current year investments in Snappy Shopper and RSM 2000. At 31 March 2022 loans and borrowings were £51.5 million (2021: £86.6 million) which included £2.9 million of asset financing in the Merchant Rentals acquisition. Strategic report Governance Financial statements Shareholder information 63 ## Sector analysis ## Shopping Shopping consists of services PayPoint provides to retailer partners, which form part of PayPoint’s network, and SME partners. Services include providing the PayPoint One platform (which has a basic till application), EPoS, card payments, ATMs, Counter Cash and terminal leasing. | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | Net revenue (£m) | | 2022 | | 2021 Change % | Service fees 16.6 14.6 13.1% Card payments – PayPoint 11.0 12.1 (9.4%) Card payments – Handepay (two months in 20/21) 12.8 1.5 n/m Card payments – RSM 2000 0.9 – n/m Card terminal leases – Merchant Rentals (two months in 20/21) 5.7 1.0 n/m ATMs 9.7 9.7 – Other shopping 2.0 1.3 56.4% Total net revenue (£m) 58.7 40.2 46.2% Net revenue increased by £18.5 million (46.2%) to £58.7 million (2021: £40.2 million) primarily due to the inclusion of Handepay and Merchant Rentals revenues for the full year. The net revenue of each of our key products is separately addressed below. | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | Service fees from terminals | | 2022 | | 2021 Change % | Net Revenue (£m) 16.6 14.6 13.1% PayPoint terminal sites (No.) PayPoint One Base 7,392 7, 915 (6.6%) PayPoint One EPoS Core 9,639 8,307 16.0% PayPoint One EPoS Pro 1,089 1,240 (12.2%) Total PayPoint One – revenue generating 18,120 17,462 3.8% PayPoint One Base non-revenue generating 671 343 95.6% Total PayPoint One 18,791 17,805 5.5% Legacy (T2) 214 1,441 (85.1%) PPoS 9,249 8,821 4.9% Total terminal sites in PayPoint network 28,254 28,067 0.7% PayPoint One average weekly service fee per site (£) 17.0 16.3 4.3% As at 31 March 2022, PayPoint had a live terminal in 28,254 UK sites, an increase of 0.7% primarily as a result of new sales. PayPoint One sites increased by 5.5% to 18,791 sites due to new sales and the continued migration from the legacy T2 terminal. Service fees: This is a core growth area and consists of service fees from PayPoint One and our legacy terminals. Service fee net revenue increased by £2.0 million (13.1%) to £16.6 million driven by the additional 658 PayPoint One revenue generating sites compared to 2021. The higher price point EPoS Core sites increased by 1,332 due to new sales and upselling whilst EPOS Pro sites decreased by 151 compared to 2021, which had benefited from our three month try before you buy EPoS Pro oering. The PayPoint One average weekly service fee per site increased by 4.3% to £17.0, benefiting from the increase in EPoS Core sites which are charged at a higher rate and the annual RPI increase. Retailers taking the Core version of the product represent 51.3% (2021: 46.7%) of all PayPoint One sites and the Pro version represent 5.8% (2021: 7.0%). Legacy terminals now just remain in a few of our multiple retailer partners but are being replaced. PayPoint Plc Annual Report 202264 ## Financial review continued | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | Card payments and leases | | 2022 | | 2021 Change % | Net Revenue (£m) Card payments – Handepay (two months in 20/21) 12.8 1.5 n/m Card terminal lessees – Merchant Rentals (two months in 20/21) 5.7 1.0 n/m Card payments – PayPoint 11.0 12.1 (9.4%) Card payments – RSM 2000 0.9 – n/m Services in Live sites (No.) Card payments – Handepay 22,796 18,805 21.2% Card terminal lessees – Merchant Rentals 35,403 26,017 36.1% Card payments – PayPoint 9,666 9,930 (2.7%) Card payments – RSM 2000 147 – n/m Transactions (Millions) Card payments – Handepay (two months in 20/21) 145.0 14.6 n/m Card payments – PayPoint 217. 8 210.4 3.5% Card payments – RSM 2000 6.5 – n/m Card payments: Handepay and Merchant Rentals generated £18.5 million net revenue in the year. Handepay contributed £12.8 million card payments net revenue and 145.0 million transactions, benefiting from the reopening of SMEs across key sectors with the easing of government restrictions. Handepay card payment services were live in 22,796 sites at 31 March 2022, an increase of 3,991 sites (21.2%) since 31 March 2021. Merchant Rentals contributed £5.7 million terminal leasing net revenue. PayPoint card payments transactions increased by 3.5% to 217.8 million and net revenue decreased by 9.4% to £11.0 million maintaining strong transaction volumes seen in FY21 but at a lower average transaction value £11.27 (FY21: £12.40). Across our network there were 9,666 PayPoint card payments sites, a decrease of 264 sites (2.7%) since 31 March 2021. RSM 2000 card payments reflects a full year’s transactions from the new acquisition. | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | ATMs | | 2022 | | 2021 Change % | Net Revenue (£m) 9.7 9.7 – Services in Live sites (No.) 3,686 3,626 1.7% Transactions (Millions) 30.4 30.6 (0.8%) ATMs: Net revenue remained flat at £9.7 million although transactions reduced by 0.8% to 30.4 million. This is attributable to the continued reduced demand for cash across the economy, accentuated by the Covid-19 preference for card use. Sites increased 1.7% to 3,686 and PayPoint continued to optimise its ATM network by relocating existing machines to better performing locations. Other: Other shopping services increased by £0.7 million (56.4%) to £2.0 million (2021: £1.3 million) this includes the launch of the partnership with Snappy Shopper and the new PayPoint Counter Cash service which was live in 2,624 sites. ## E-commerce | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | Parcels | | 2022 | | 2021 Change % | Net Revenue (£m) 4.9 3.6 36.2% Services in Live sites (No.) 10,049 10,509 (4.4%) Transactions (Millions) 33.3 26.6 25.2% E-commerce net revenue increased by £1.3 million (36.2%) to £4.9 million due to the increase in total parcels transactions by 25.2% to 33.3 million with the easing of Covid-19 restrictions in the current period facilitating increased Out of Home activity. The prior period transactions were impacted by Covid-19 restrictions with consumers staying at home. Parcel sites decreased by 4.4% to 10,049 sites due to stores being removed from our network. Strategic report Governance Financial statements Shareholder information 65 ## Payments & Banking | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | Net revenue (£m) | | 2022 | | 2021 Change % | Cash – bill payments 26.7 29.0 (8.1%) Cash – top-ups 7.8 8.3 (6.2%) Digital 7.8 6.1 27.1% Cash through to digital 8.2 8.7 (5.6%) Other payments and banking 1.0 1.2 (16.4%) Total net revenue (£m) 51.5 53.3 (3.6%) Payments & Banking divisional net revenue decreased by 3.6% to £51.5 million, as a result of fewer cash bill payments and top up transactions, and margin erosion from client contract renewals but partly oset by continued growth in digital transactions. | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | Cash – bill payments | | 2022 | | 2021 Change % | Net revenue (£m) 26.7 29.0 (8.1%) Transactions (millions) 157. 2 168.3 (6.6%) Transaction value (£m) 3,932.3 4,210.1 (6.6%) Average transaction value (£) 25.0 25.0 – Net revenue per transaction (pence) 17.0 17.2 (1.4%) Cash – bill payments net revenue decreased by £2.3 million (8.1%) to £26.7 million primarily as a result of the continued switch to digital payment methods and consumers are continuing to make larger payments, less frequently. Cash bill payments transactions decreased by 11.1 million (6.6%) to 157.2 million. Cash bill payments net revenue per transaction decreased by 0.2 pence (1.4%) due to margin erosion from client contract renewals. | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | Cash – top-ups | | 2022 | | 2021 Change % | Net revenue (£m) 7.8 8.3 (6.2%) Transactions (millions) 21.2 24.3 (12.6%) Transaction value (£m) 257.6 289.1 (10.9%) Average transaction value (£) 12.1 11.9 1.9% Net revenue per transaction (pence) 36.8 34.2 7.7% Cash – top-ups net revenue decreased by £0.5 million (6.2%) to £7.8 million. Cash top-ups transactions decreased by 3.1 million (12.6%) to 21.2 million due to further market declines in the prepaid mobile sector whereby UK direct debit pay monthly options displace UK prepay mobile and Covid-19 impacts where consumers are making larger payments and less frequently. | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | Digital | | 2022 | | 2021 Change % | Net revenue (£m) 7.8 6.1 27.1% Transactions (millions) 34.2 27.2 25.6% Transaction value (£m) 756.6 545.7 38.6% Average transaction value (£) 22.2 20.1 10.3% Net revenue per transaction (pence) 22.5 22.4 0.4% Digital (MultiPay, Cash Out and RSM 2000) net revenue increased by £1.7 million (27.1%) to £7.8 million and digital transactions increased by 7.0 million (25.6%) to 34.2 million driven by the £1.1 million contribution of RSM 2000 to this sector. MultiPay net revenue decreased by £0.9 million to £3.3 million (2021: £4.2 million), this was due to the expected volume reduction from Utilita moving customers to their in-house solutions. This was partially oset by the new DWP Payment Exception Service which contributed £1.6 million net revenue in the period partially oset by Cash Out net revenue which decreased by £0.1 million (4.7%), driven by reduced demand from local authorities seeking to digitise their payments oering and despite Covid-19 meal voucher schemes winding down. PayPoint Plc Annual Report 202266 ## Financial review continued | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | Cash through to digital | | 2022 | | 2021 Change % | Net revenue (£m) 8.2 8.7 (5.6%) Transactions (millions) 10.6 11.4 (6.9%) Transaction value (£m) 505.2 475.0 6.4% Average transaction value (£) 47.5 41.6 14.3% Net revenue per transaction (pence) 77.4 76.3 1.4% Cash through to digital (eMoney) net revenue decreased by £0.5 million (5.6%) to £8.2 million (2021: £8.7 million) and transactions decreased by 0.8 million (6.9%) to 10.6 million (2021: 11.4 million) reflecting these schemes delivering lower volumes following the strong performance seen during Covid-19 period. eMoney transactions derive a substantially higher fee per transaction than traditional top-up transactions. Other payments & banking net revenue includes SIM sales and other ad-hoc items which contributed £1.0 million (2021: £1.2 million) net revenue. The decrease reflects the continuing decline in SIM sales, accentuated by the impact of Covid-19 on tourism. ## Total costs 1 Restated | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 Change % | Continuing operations excluding exceptional items (£m) Other costs of revenue 11.0 7.0 57.1% Depreciation and amortisation (costs of revenue) 7.6 7.8 (2.6%) Depreciation and amortisation (administrative expenses) 2.9 0.9 222.2% Other administrative costs (administrative expenses) 46.0 43.6 5.7% Net finance costs 2.0 1.3 53.8% Total costs from continuing operations excluding exceptional items 69.5 60.6 14.7% Total costs from continuing operations increased by £8.9 million (14.7%) to £69.5 million. Prior year costs have been restated and reduced by £1.0 million by the retrospective application of the change in accounting policy on intangible assets following the April 2021 IFRIC agenda decision on costs incurred in implementing cloud computing SaaS arrangements. This is the net impact of reversing amortisation of previously capitalised intangible assets and expensing rather than capitalising SaaS type expenditure in the year. The increase in costs from continuing operations was primarily driven by the cost base in relation to the newly acquired businesses of £12.2 million, included within this balance is £2.4 million for amortisation on acquired intangibles shown in administrative expenses. This was partially oset by operational cost reductions made in the group of £3.3 million. This included lower people costs of £1.2 million primarily as a result of higher vacancies this year compared to last year, lower depreciation and amortisation with some legacy assets coming to the end of their life. 2 ## Operating margin before exceptional items Operating margin from continuing operations before exceptional items of 41.4% (2021: 39.0%) increased by 2.4 ppts due to increases in our shopping sector which carries a higher operating margin. ##  The tax charge for continuing operations of £9.0 million (2021: £4.5 million) on profit before tax from continuing operations of £48.5 million 3 (2021: £20.4 million) represents an eective tax rate of 18.5% (2021: 22.3%). 3.8ppts lower than prior year due to a decrease in disallowable expenses associated with the one-o acquisition and disposal costs and expenditure qualifying for the capital allowances super deduction and non-taxable items, partially oset by the impact of revaluing the deferred tax liability following the enactment of the increased main rate of UK corporation tax from 19% to 25% with eect from 1 April 2023. 1. Comparative information has been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. 2. Operating margin before exceptional items % is an alternative performance measure and is calculated by dividing operating profit before exceptional items by net revenue. 3. Eective tax rate is the tax cost as a percentage of profit before tax. Strategic report Governance Financial statements Shareholder information 67 ## Discontinued operation – Romania | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 Change % | Revenue from discontinued operation 1.3 67.7 n/m Net profit from discontinued operation 0.1 7.6 n/m Profit on disposal of discontinued operation 29.9 – – Total profit before tax from discontinued operation 30.0 7.6 n/m The revenues and net profit from the discontinued operation in the current year represents the revenue and costs from the Romanian between 1 and 8 April 2021 prior to disposal completion. ##  Net assets of £83.3 million (2021: £33.3 million) increased by £50.0 million. Current assets decreased by £64.4 million to £104.8 million (2021: £169.8 million) with no assets held for sale in the current financial period following the sale of the Romanian business in April 2021. Non-current assets of £127.3 million (2021: £115.7 million) increased by £11.6 million mainly due to the additional investments made in RSM 2000 and Snappy Shopper Limited. Current liabilities reduced £88.0 million due to no liabilities relating to assets held for sale, £24.0 million reduction in loans and borrowings from using part of the Romania disposal proceeds and payment in relation to Ofgem. Non-current liabilities of £15.7 million (2021: £30.5 million) decreased mainly by the non-current portion of the 3 year term loan. ##  The following table summarises the cash flow movements during the year. 1 Restated | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 Change % | Profit before tax from continuing and discontinued operations 78.5 28.0 180.4% Ofgem provision – cash payment/provision reversal (12.5) 12.5 – Other exceptional items (2.9) – – Gain on disposal of investments Romania (30.0) – n/m Depreciation and amortisation 10.6 9.1 16.5% VAT and other non-cash items – 0.1 – Share-based payments and other items 0.9 0.9 – Working capital changes (corporate) (3.2) 0.8 n/m Cash generation 41.4 51.4 (19.5%) Taxation payments (9.2) (8.4) 9.5% Capital expenditure (10.8) (5.2) (107.7%) Acquisition of Collect+ brand – (6.0) – Acquisitions of subsidiaries net of cash acquired (4.5) (60.8) 92.6% Contingent consideration cash paid (2.0) – – Purchase of investment in associate (6.7) – – Purchase of convertible loan note (0.8) – – Disposals of business net of cash disposed 20.2 – – Movement in loans and borrowings (35.0) 11.3 (409.7%) Lease payments (0.2) (0.2) – Dividends paid (23.1) (21.4) 7.9% Net decrease in corporate cash and cash equivalents (30.7) (39.3) (21.9%) Net change in clients’ funds and retailers’ deposits (9.7) 11.9 (181.5%) Net decrease in cash and cash equivalents (40.4) (27.4) 47.4% Cash and cash equivalents at the beginning of year 64.8 93.8 (30.9%) Eect of foreign exchange rate changes – (1.6) – Cash and cash equivalents at the end of year 24.4 64.8 (62.3%) Comprising: Corporate cash 7.7 18.3 (57.9%) Clients’ funds and retailers’ deposits 16.7 46.5 (64.3%) 1. Comparative information has been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. PayPoint Plc Annual Report 202268 ## Financial review continued The following table summarises the cash generation from continuing operations excluding exceptional items: 1 Restated | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 Change % | Profit before tax from continuing operations 48.5 20.4 137.7% Provision in relation to the Ofgem Statement of Objections – 12.5 – Other exceptional items (2.9) 3.6 n/m Profit before tax from continuing operations excluding exceptional items 45.6 36.5 25.0% Depreciation and amortisation 10.6 8.7 21.8% VAT and other non-cash items – 0.1 – Share-based payments and other items 0.9 0.9 – Working capital changes (corporate) (3.2) 0.7 n/m Cash generation from continuing operations excluding exceptional items 53.9 46.9 14.9% 1. Comparative information has been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. Cash generation remained strong with £41.4 million (2021: £51.4 million) delivered from profit before tax from continuing and discontinued operations of £78.5 million (2021: £28.0 million). Current year cash generation was impacted by the £12.5 million payment in relation to the Ofgem Statement of Objections. Adjusting for exceptional items, cash generation from continuing operations improved by 14.9% to £53.9 million. There was a net working capital outflow of £3.2 million primarily from the VAT deferral oered by HMRC now being repaid. The current period benefited from the £47.6 million cash proceeds received on sale of the Romanian business, net of transaction costs. Taxation payments on account of £9.2 million (2021: £8.4 million) are higher compared to the prior period due to the increased taxable profits earned in the period compared to the prior year. Dividend payments were higher compared to the prior period due to the increase in the interim and final ordinary dividend paid per share compared to the prior year ended 31 March 2021. Capital expenditure of £10.8 million (2021: £5.2 million) was £5.6 million higher than the prior year. Capital expenditure primarily consists of IT hardware, PayPoint One terminals, EPoS development and the enhancement to the Direct Debit platform. The increase in capital expenditure is primarily driven by the enhancement to the Direct Debit platform. At 31 March 2022 net corporate debt was £43.9 million (2021: £68.2 million) and has decreased by £24.3 million from the prior year end position. Total loans and borrowings of £51.6 million which have decreased by £35.0 million consisted of a £21.7 million amortising term loan, £27.0 million drawdown of the £75.0 million revolving credit facility and £2.9 million of asset financing balances (2021: £49.5 million drawdown from the revolving credit facility, £32.5 million amortising term loan and £4.6 million of asset financing balances). The cash proceeds received on sale of the Romanian business in April 2021 were partly used to reduce the revolving credit facility. ## Dividends | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 Change % | Ordinary reported dividends per share (pence) Interim (paid) 17.0 15.6 9.0% Final (proposed) 18.0 16.6 8.4% Total reported dividend per share (pence) 35.0 32.2 8.7% Total dividends paid per share 33.6 31.2 7.7% Total dividends paid in year (£m) 23.1 21.4 7. 9 % We have declared an increase of 8.4% in the final dividend of 18.0 pence per share (2021: 16.6 pence per share) payable in equal instalments of 9.0 pence per share (2021: 8.3 pence per share) on 25 July 2022 and 30 September 2022 to shareholders on the register on 10 June 2022 and 2 September 2022 respectively. The final dividend is subject to the approval of the shareholders at the annual general meeting on 20 July 2022. The final dividends will result in £12.4 million (2021: £11.4 million) being paid to shareholders from the standalone statement of financial position of the Company which, as at 31 March 2022, had approximately £67.9 million (2021: £58.1 million) of distributable reserves. Strategic report Governance Financial statements Shareholder information 69 ## Capital allocation The Board’s immediate priority is to continue to preserve PayPoint’s balance sheet strength. The Group maintains a capital structure appropriate for current and prospective trading over the medium term that allows a healthy mix of dividends and cash for investment through capital expenditure and acquisitions. The Board’s approach to the setting of the ordinary dividend has not materially changed since the prior year end and follows the following capital allocation priorities: • Investment in the business through capital expenditure in innovation to drive future revenue streams and improve the resilience and eciency of our operations; • Investment in opportunities such as the acquisitions of i-movo, Handepay/Merchant Rentals and RSM 2000 in November 2020, February 2021 and April 2021 respectively and investment in Snappy Shopper in April 2021; 1 • Progressive ordinary dividends targeting a cover ratio of 1.2 to 1.5 times continuing operations earnings excluding exceptional items. ## Going concern The financial statements have been prepared on a going concern basis having regard to the identified principal risks and uncertainties and viability statement on pages 54 to 59. Our cash and borrowing capacity provides sucient funds to meet the foreseeable needs of the Group including dividends. ### Alan Dale ### Finance Director ### 17 June 2022 1. Dividend cover represents profit aer tax divided by reported dividends. PayPoint Plc Annual Report 202270 ## Chairman’s statement for governance Dear Shareholders, This has been another positive year for the PayPoint Group as the business has built on the transformation and strategic step change delivered last year. Over the last two years, the Group has undergone material change and diversified away from legacy business lines, with growth in Payments and Banking, E-commerce and Shopping o- setting the decline in cash payments. I am delighted with the way the management team, led by Nick Wiles, and all the employees of the Group have responded to the continuing challenges in our markets, enabling us to report a positive financial performance, opening up further growth opportunities across the business and delivering further progress against our strategic objectives. ### Giles Kerr Chairman Governance I am pleased to report that for the year under review, we have consistently applied the Principles of Good Governance contained in the 2018 UK Corporate Governance Code. The Board has completed a review of the disclosures and management of climate related risks for the Task Force on climate related Financial Disclosures. Disclosure is provided in our 2022 Annual Report, along with the further progress made on developing our broader ESG strategy. Executive Board The Executive Board has also been strengthened in key areas this year to drive growth and accelerate the pace of delivery further. Anna Holness, joined the business as Sales Director in January 2022, aer three years as VP, Sales, Merchant International Solutions at Worldpay. In ## This has been another addition, four internal promotions were made to the Executive Board in January 2022 to recognise their critical roles in delivering our growth ## positive year for the agenda: Jo Toolan, Head of Client Management; Jay Payne, IT Service ## PayPoint Group as the and Operations Director; Chris Paul, Head of Corporate Finance; and Steve O’Neill, Corporate Aairs and Marketing Director. ## business has built on the Board Evaluation ## transformation and Following last year’s triennial external evaluation, we have this year ## strategic step change conducted an internal evaluation of the Board, its Committees and individual Directors, which confirmed that our Board and Committees ## delivered last year. continue to operate eectively. More information on the process and results of that evaluation can be found on page 71. Ofgem On 23 November 2021, Ofgem, the energy regulator, published a ‘Notice of Decision to Accept Binding Commitments’, regarding commitments proposed by PayPoint to Ofgem to address the concerns raised in Ofgem’s Statement of Objections received on 29 September 2020. Ofgem accepted those commitments as a resolution of its concerns. PayPoint has been implementing the commitments in a timetable agreed with Ofgem, including a £12.5 million donation to Ofgem’s Energy Industry Voluntary Redress Scheme (currently administered on Ofgem’s behalf by the Energy Saving Trust). Annual General Meeting The Company’s Annual General Meeting will be held at PayPoint’s registered oce on 20 July 2022 where you will have the opportunity to meet the Board and members of the Executive Board. The matters to be approved by shareholders are set out in our Notice of Annual General Meeting which will be mailed to shareholders towards the end of June. If you wish to discuss any aspect of our governance arrangements, please contact me via our Company Secretary, Brian McLelland, via email at brianmclelland@paypoint.com. ### Giles Kerr ### Chairman ### 17 June 2022 Financial statements Shareholder information 71Strategic report Governance ## Performance evaluation of the PayPoint Board and its Committees In accordance with the Code, the Board and its Committees undertake an external evaluation every three years, with internal evaluations being undertaken in the intervening years. The last such external evaluation was carried out in 2021. 2022 internal evaluation process and output The Chairman, supported by the Company Secretary, circulated a questionnaire to each Director for their views on the performance of the Board and its Committees which covered: delivery and implementation of strategic plan; integration of newly acquired businesses; approach to ESG; performance of management; and the composition, quality and processes of the Board and its Committees. The Chairman presented the findings of the evaluation at the February 2022 Board meeting and the following actions were agreed: | 1) Presentation | | 2) Engagement with | | 3) Extend the employee | | 4) ESG: 5) Deep dives: | | | --- | --- | --- | --- | --- | --- | --- | --- | | | of risk: | | stakeholders: | | forum for the NEDs: | | | | The work on risk was | | The Chairman acknowledged it was important | | It was thought beneficial | | Further actions on ESG | It was agreed that | | felt to be good with a | | to engage with stakeholders. | | for the NEDs to attend | | reporting and monitoring | deep dives of various | | high level of diligence | | | | some employee fora | | would continue in | business sectors | We have made eorts to strengthen our retailer but it was considered to engage one-to-one. 2022/23 including should occur. A partner relationships and drive adoption of new that the presentations Gill Barr continued monitoring initiatives in deep dive into the opportunities to earn, including regular ‘cash to the Board could be her attendance of the equality, diversity and Housing Associations and carry’ days, more direct communications snappier with greater quarterly meetings as she inclusion, the gender sector was held at and more regular meetings with the key trade focus on four or five has done for the last three pay gap, the structure the November 2021 associations, including the Association of key issues which could years and invitations have of rewards, recruitment Board meeting and Convenience Stores (ACS), the Scottish be pre-agreed with the been extended to other and retention, corporate for the Charities and Grocers’ Federation (SGF) and the National Audit Committee Chair/ NEDs to attend in future. actions on culture and Newspapers sectors Federation of Retail Newsagents (NFRN). | Finance Director prior to | | Rakesh Sharma attended a | engagement, monitoring | reviews were held | | --- | --- | --- | --- | --- | | the meeting. | Additionally, the Chairman of the Board and the | meeting of the employee | and assessing climate | at the March 2022 | | | CEO engaged with key shareholders throughout | forum last year to | risk and issues relating | Board meeting. | | | the year and reported to the Board on issues | describe the remuneration | to integration of the | | | | discussed. The Remuneration Committee Chair | arrangements. | businesses acquired | | | | also engages with shareholders on matters | | during the financial year. | | pertaining to Board and Executive pay. 2021 external evaluation process and output The following areas were proposed and agreed for focus over the next In 2020, PayPoint engaged Lintstock to facilitate an external evaluation. 12 months: Lintstock is an advisory firm that specialises in Board reviews and Area Board discussion Agreed action provides no other services to the Company. Strategy The integration of The Board would continue to be the newly acquired provided with regular updates on The first stage of the review involved Lintstock engaging with the businesses was key. these integrations. This occurred Chairman and Company Secretary to set the context for the evaluation throughout the year. and to tailor the survey content to the specific circumstances of PayPoint. Stakeholders The Board would Management would provide a All Board members were then invited to complete surveys addressing benefit from detailed review of the ongoing the performance of the Board, each of the Board Committees and the greater exposure to relationships with and experiences Chairman. The anonymity of the respondents was ensured throughout client and retailer of these stakeholders to include site the process in order to promote open and candid feedback. engagement. visits as appropriate. Board members attended client and retailer site visits The exercise was designed to cover core aspects of Board regularly. performance, and had a particular focus on the following themes: Diversity The Board The Board agreed to appoint an • the quality of the relationship developing between the Board and acknowledged that additional female Non-Executive the new Chief Executive, and the top priorities for the new Chief the gender balance Director to the Board in Q4 FY22-23. Executive over the coming year within the Board Once appointed the gender balance • the adjustment in the Board’s focus in response to Covid-19, and the had fallen from 33% would represent 37.5%. eectiveness of meetings conducted remotely during the pandemic to 28.5%. • the level of the Board’s focus on risk, including how well the organisation’s risk management arrangements have coped with the The following actions were agreed in respect of the evaluations of each challenges associated with Covid-19 of the Committees of the Board: • the size of the Board, the range of skills and the level of diversity Committee Discussion Agreed action amongst members, as well as key changes that should be made to the Board’s composition over the coming years Audit The Committee External providers would be • the knowledge of the views of employees, the monitoring of the agreed that training contacted and training arranged. culture throughout PayPoint, and the quality of insight that the on specific areas The MD of the Payment Systems Board gains through the employee forum would be of benefit Regulator was to be contacted and to the members. training arranged. Cyber security risk • the Board’s understanding of other key stakeholder groups, was presented. including our people, shareholders, convenience retailer partners, | | SMEs, consumers and clients | Nomination The Committee was | | No specific actions required. | | --- | --- | --- | --- | --- | | • the clarity and achievability of PayPoint’s strategic plan, and | | | working eectively. | The Committee was fit for purpose. | | | the Board’s understanding of the organisation’s strengths and | Remuneration Keeping abreast of | | The remuneration consultants would | | | weaknesses relative to key competitors | | the views of investors | provide an update to the Committee. | | | | | and proxy advisors | This occurred at the March 2022 | | The observations and recommendations resulting from the review were | | | was essential. | Committee meeting. | considered at subsequent Board and Committee meetings. 72 PayPoint Plc Annual Report 2022 # Board of Directors ![img-0.jpeg](img-0.jpeg) # Giles Kerr (ACA) Chairman Appointed to the Board in November 2015 as an Independent Non-Executive Director and Chairman of the Audit Committee. Assumed the role of Senior Independent Director in May 2017 and became Chairman in May 2020. # Career Giles' former roles include chief financial officer at the University of Oxford, Group finance director at Amersham plc and Arthur Andersen & Co and non-executive director roles at BTG plc, Victrex plc, Elan Corporation Inc and Adaphimune Therapeutics plc. # Board skills and experience Corporate finance, accounting, risk management. # Other principal roles Non-executive director of Senior plc, Abcam plc and Aris Bioscience plc. # Committee memberships Chairman of the Nomination Committee and a member of the Remuneration Committee. ![img-1.jpeg](img-1.jpeg) # Nick Wiles Chief Executive Appointed to the Board in October 2009, Chairman in May 2015, Executive Chairman in December 2019 and Chief Executive in May 2020. # Career Nick retired as chairman of 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 becoming a vice chairman of JP Morgan Cazenove. He was previously a non-executive director of Strutt & Parker and Picton Property Income Ltd and senior independent director at Primary Health Properties plc, prior to its merger with MedXplc. # Board skills and experience Investment banking, corporate finance, equity markets, investor sentiment and relations. # Other principal roles Director Snappy Shopper. # Committee memberships Member of the Market Disclosure Committee. ![img-2.jpeg](img-2.jpeg) # Alan Dale (ACA) Finance Director Appointed to the Board as Finance Director in November 2020 having acted as Interim Finance Director since July 2020. He joined PayPoint in August 2017 as Head of UK Finance. # Career Alan is a chartered accountant with over 30 years' experience in the financial services sector. Prior to joining PayPoint he held a number of senior finance roles with financial institutions including GE Capital. # Board skills and experience Corporate finance, accounting, risk management. # Other principal roles None. # Committee memberships Member of the Market Disclosure Committee, the Cyber Security & Information Technology Sub-Committee and ESG Working Group. ![img-3.jpeg](img-3.jpeg) # Gill Barr Independent Non-Executive Director Appointed to the Board in June 2015. # Career Gill has held senior strategy, marketing and business development positions at the Co-operative Group, John Lewis, Kingfisher, Mastercard and KPMG. She was previously a non-executive director of Morgan Sindall plc and McCarthy & Stone plc. # Board skills and experience Gill brings her extensive experience as a retailer and offers a strategic perspective on drivers of growth. As a Non-Executive Director she is able to provide remuneration expertise owing to her chairmanship of the remuneration committees of the companies detailed below. # Other principal roles Senior independent director of N Brown Group plc and non-executive director of Wincanton plc. # Committee memberships Member of the Audit, Nomination and Remuneration Committees. Board representative for the employee forum. Financial statements Shareholder information 73Strategic report Governance ### Rakesh Sharma Ben Wishart OBE FREng CPhys MInstP Independent Non-Executive Senior Independent Director Director Appointed to the Board in May 2017 becoming Senior Independent Appointed to the Board in November 2019. Director in May 2020. Career Career Ben has previously served as chief information ocer (C.I.O) of Morrisons plc Rakesh started his career as an electronic design engineer at Marconi in 1983 and Whitbread plc and has held various senior information technology roles before moving to Dowty as chief engineer in 1989. He was chief executive of at Tesco plc. He is currently global CIO of Ahold Delhaize. Ultra Electronics Holdings Plc (‘Ultra’) having previously held several senior and management positions within Ultra and has managed businesses and divisions across Board skills and experience the full range of that company’s wide portfolio including in the B2B fintech sector. Ben brings a deep understanding of technology to the Board. He has proven leadership and governance skills on technology matters within a Board skills and experience global business. Rakesh brings executive management and cultural change experience to the Board. Additionally, his long association in the global security sector brings Other principal roles skills in cyber security and information technology. Rakesh also supports the Global CIO Ahold Delhaize. younger generation though his pro bono activities for a multi academy trust and Riverbank Academy, a special educational needs school. In addition, Committee memberships Rakesh mentors young start-ups and is a motivational speaker. Member of the Audit, Nomination and Remuneration Committees. Chair of the Cyber Security & Information Technology Sub-Committee. Other principal roles Chairman of Kromek Group plc. Committee memberships Chairman of the Remuneration Committee and a member of the Audit, Nomination Committees and Cyber Security & Information Technology Sub-Committee. ### Rosie Shapland Board experience (FCA) Independent Non-Executive Director ### Cyber security and IT Operational ## 29% 29% ### Finance Risk management Appointed to the Board in October 2020. ## 57% 57% Career Rosie is a chartered accountant and was a former audit partner at PwC. She has over 30 years of audit experience across multiple sectors. Board skills and experience Rosie brings extensive knowledge of accounting, financial reporting, ### risk management and governance. Board diversity Other principal roles Non-executive director and audit committee chair of Foxtons Group plc and Gender Workspace Group Plc. Committee memberships Chair of the Audit Committee and a member of the Remuneration and Nomination Committees. Female 29% Male 71% PayPoint Plc Annual Report 202274 ## Executive Board ### Nick Wiles Alan Dale Simon Coles Danny Vant Katy Wilde Ben Ford Tanya Murphy Chief Executive Finance Director Chief Technology Ocer Client Services Director HR Director Customer Experience Director General Counsel and Head of Compliance | See Board of Directors for biography. See Board of Directors for biography. Simon joined the Executive Board in | | Danny joined the business in 2019 | Katy joined PayPoint as HR Director | Ben Ford joined the Executive Board | Tanya joined PayPoint as General | | --- | --- | --- | --- | --- | --- | | | April 2021. He was appointed as Chief | and was appointed to his current role | in 2012 with responsibility for the | in July 2020 as Retail Services | Counsel and Head of Compliance in | | | Technology Ocer in May 2017, having | of Client Services Director in 2020, | development and implementation | Director and transitioned to the role | September 2020 and leads PayPoint’s | | | previously managed the IT team at | leading the commercial and strategic | of our people agenda. | of Customer Experience Director in | Legal and Compliance teams advising | | | PayPoint’s Mobile and Online subsidiary | development of the client portfolio | | October 2021 following the acquisition | all companies across the PayPoint | | | prior to its sale. | and managing relationships with the | Prior to joining PayPoint, Katy worked | of Handepay and Merchant Rentals. | Group on legal and regulatory matters | | | | multiple retailers. | for RSA Insurance Group where she | Ben is responsible for ensuring that | relating to their businesses. | | | Simon has worked in both the | | held a number of senior business | our proposition is underpinned by | | | | payments and retail wealth | Before joining PayPoint Danny worked | partnering roles in the UK and latterly in | the delivery of excellent customer | Prior to joining PayPoint, Tanya | | | management sectors for over 30 years | for Mitie plc in the FM sector managing | the emerging markets business where | service to our retailers, merchants | worked at Zurich Insurance for 11 years | | | as an engineer, manager, consultant | a number of businesses, predominantly | she was responsible for ensuring the | and consumers. | where she held a number of roles | | | and IT executive. He has launched and | within the security sector. Danny also | delivery of the HR agenda across 22 | | including Head of the UK Corporate | | | managed card processing systems | worked in consultancy for Newton | countries in Central and Eastern Europe, | Ben was previously at Addison Lee | & Commercial Legal team. | | | for several banks and consulted on | Europe specialising in process | Asia, the Middle East and Latin America. | where he was head of Global Customer | | | | payments in the UK, USA and Australia. | eciency improvements across a | Prior to that Katy spent seven years | Experience and Operations responsible | Tanya qualified as a solicitor in 1996 | | | | diverse range of sectors, including | at General Electric where she held HR | for global service delivery of customers, | at the international law firm Lovell | | | Prior to joining PayPoint, Simon was | healthcare and defence. | roles in both its consumer finance and | clients, drivers, and fleet. Prior to joining | White Durrant, now Hogan Lovells LLP, | | | a management consultant for several | | insurance businesses. Katy has a degree | Addison Lee Ben worked in similar roles | where she worked as a solicitor for | | | years and has delivered significant IT | Prior to this Danny started his career | in International Business and Modern | for companies including Premier Inn, | 12 years specialising in corporate and | | | programmes for several banks, wealth | as a graduate in the logistics industry, | Languages from Aston University and | Danone, Joules and Boden. | commercial law across a number of | | | managers and insurance firms. | spending six years working in the parcel | is a Chartered Member of the CIPD. | | business sectors. | carrier industry for Target Express. Katy is a member of the ESG Working Group and chairs the Employee Forum. | | | Mark Latham | | | Anna Holness | | | Steve 0’Neill | | | Chris Paul | | | Jay Payne | | Jo Toolan | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Banking Services Director | | | | | Sales Director | | Corporate Aairs and | | Head of Corporate | | | IT Service & Operations Director | | | Head of Client | | | | | | | | | | Marketing Director | | | | Finance | | | | Management | | Mark joined the Executive Board in | | | Anna joined PayPoint as Sales Director in | | | | Steve joined PayPoint originally in | | Chris joined PayPoint in 2016 and | | | | Jay joined PayPoint in January 2019 as | | Jo joined PayPoint in 2011 and is | | | February 2021 following the acquisition | | | | January 2022 with responsibility for new | | | 2014, and then again in 2020 as | | is Head of Corporate Development, | | | | IT Service and Operations Director and | | currently Head of Client Management, | | | of Handepay and Merchant Rentals | | | | business generation for all our products | | | Corporate Aairs and Marketing | | leading the organisation’s growth and | | | | leads the delivery of IT services across | | responsible for the strategic | | | and was appointed Banking Services | | | | and services and also relationship | | | Director, leading our marketing, PR and | | development activities and overseeing | | | | the PayPoint group. | | management of major accounts | | | Director in October 2021 in recognition | | | | management across the current | | | investor relations eorts for the Group. | | treasury strategy. | | | | | | and expanding our digital payments | | | of our growing banking proposition | | | | PayPoint estate. Prior to joining PayPoint, | | | | | | | | | With over 25 years’ experience, Jay | | solutions into new and existing clients, | | | including ATMs and Counter Cash and | | | | Anna worked for Worldpay from FIS, | | | He has spent over 20 years in | | Prior to joining PayPoint, Chris | | | | has been responsible for delivery | | including BBC, Paysafe, Monzo and the | | | he retains his responsibility for our | | | | where as VP of SME sales Anna was | | | marketing and PR leadership roles | | worked at LMAX as Head of Financial | | | | and design of services supporting | | major Utility providers. | | | cards business. Prior to this, Mark was | | | | responsible for new business generation | | | for large consumer organisations in | | Reporting, where he was responsible | | | | card issuing, merchant acquiring and | | | | | chief commercial ocer at Handepay | | | | across SME and mid market sectors. | | | the UK and Europe, across the retail, | | for developing the finance function | | | | specialist subscription billing for clients | | Prior to PayPoint, she supported | | | from 2013 where he developed the | | | | | | | telecommunications and financial | | following its MBO from Betfair. | | | | across all industries. | | bluechip organisations with their CSR | | | market-leading customer proposition | | | | Before moving into Payments, Anna spent | | | services sectors. Aer starting his | | | | | | | | programmes in schools, including | | | and led the marketing and customer | | | | over 20 years in the telecommunications | | | career at the John Lewis Partnership | | He is a qualified accountant with 20 | | | | Previous positions have included | | developing programmes for BT and | | | management teams. | | | | sector, predominantly at Telefonica/ | | | on their graduate scheme, Steve | | years’ experience in senior finance | | | | responsibility for the delivery of | | Grant Thornton, following her early | | | | | | | O2 where Anna held a number of senior | | | has worked for Orange, Carphone | | positions in financial services, telecoms | | | | payment optimisation consultancy for | | career in the education sector. | | | Mark has previously held international | | | | positions across both B2B and B2C | | | Warehouse, HSBC and Amigo. | | and gaming sectors, including TalkTalk | | | | clients in publishing and broadcasting | | | | | product management positions with | | | | (Retail), including head of franchising, | | | | | and Tsogo Sun Gaming. | | | | with a focus on subscription | | | | | global payment processor Elavon, | | | | head of stores, head of global sales. | | | Steve is also a member of the ESG | | | | | | churn reduction. | | | | | where he was responsible for mobile | | | | Anna has a broad experience; from | | | Working Group. | | | | | | | | | | | payment, currency conversion and | | | | leading stores teams of up to 800 | | | | | | | | | Prior to commencing his career in | | | | | gi card solutions. Mark began his | | | | in retail and managing relationships | | | | | | | | | payments, Jay spent eight years | | | | | career in the payment industry in 2002, | | | | with some of the world’s largest | | | | | | | | | serving with the Royal Navy. | | | | | supporting major acquiring and retail | | | | organisations across multiple global | | | | | | | | | | | | | | customers for Ingenico. | | | | locations, from her time in global sales. | | | | | | | | | | | | | Financial statements Shareholder information 75Strategic report Governance ### Nick Wiles Alan Dale Simon Coles Danny Vant Katy Wilde Ben Ford Tanya Murphy Chief Executive Finance Director Chief Technology Ocer Client Services Director HR Director Customer Experience Director General Counsel and Head of Compliance | See Board of Directors for biography. See Board of Directors for biography. Simon joined the Executive Board in | | Danny joined the business in 2019 | Katy joined PayPoint as HR Director | Ben Ford joined the Executive Board | Tanya joined PayPoint as General | | --- | --- | --- | --- | --- | --- | | | April 2021. He was appointed as Chief | and was appointed to his current role | in 2012 with responsibility for the | in July 2020 as Retail Services | Counsel and Head of Compliance in | | | Technology Ocer in May 2017, having | of Client Services Director in 2020, | development and implementation | Director and transitioned to the role | September 2020 and leads PayPoint’s | | | previously managed the IT team at | leading the commercial and strategic | of our people agenda. | of Customer Experience Director in | Legal and Compliance teams advising | | | PayPoint’s Mobile and Online subsidiary | development of the client portfolio | | October 2021 following the acquisition | all companies across the PayPoint | | | prior to its sale. | and managing relationships with the | Prior to joining PayPoint, Katy worked | of Handepay and Merchant Rentals. | Group on legal and regulatory matters | | | | multiple retailers. | for RSA Insurance Group where she | Ben is responsible for ensuring that | relating to their businesses. | | | Simon has worked in both the | | held a number of senior business | our proposition is underpinned by | | | | payments and retail wealth | Before joining PayPoint Danny worked | partnering roles in the UK and latterly in | the delivery of excellent customer | Prior to joining PayPoint, Tanya | | | management sectors for over 30 years | for Mitie plc in the FM sector managing | the emerging markets business where | service to our retailers, merchants | worked at Zurich Insurance for 11 years | | | as an engineer, manager, consultant | a number of businesses, predominantly | she was responsible for ensuring the | and consumers. | where she held a number of roles | | | and IT executive. He has launched and | within the security sector. Danny also | delivery of the HR agenda across 22 | | including Head of the UK Corporate | | | managed card processing systems | worked in consultancy for Newton | countries in Central and Eastern Europe, | Ben was previously at Addison Lee | & Commercial Legal team. | | | for several banks and consulted on | Europe specialising in process | Asia, the Middle East and Latin America. | where he was head of Global Customer | | | | payments in the UK, USA and Australia. | eciency improvements across a | Prior to that Katy spent seven years | Experience and Operations responsible | Tanya qualified as a solicitor in 1996 | | | | diverse range of sectors, including | at General Electric where she held HR | for global service delivery of customers, | at the international law firm Lovell | | | Prior to joining PayPoint, Simon was | healthcare and defence. | roles in both its consumer finance and | clients, drivers, and fleet. Prior to joining | White Durrant, now Hogan Lovells LLP, | | | a management consultant for several | | insurance businesses. Katy has a degree | Addison Lee Ben worked in similar roles | where she worked as a solicitor for | | | years and has delivered significant IT | Prior to this Danny started his career | in International Business and Modern | for companies including Premier Inn, | 12 years specialising in corporate and | | | programmes for several banks, wealth | as a graduate in the logistics industry, | Languages from Aston University and | Danone, Joules and Boden. | commercial law across a number of | | | managers and insurance firms. | spending six years working in the parcel | is a Chartered Member of the CIPD. | | business sectors. | carrier industry for Target Express. Katy is a member of the ESG Working Group and chairs the Employee Forum. | | | Mark Latham | | | Anna Holness | | | Steve 0’Neill | | | Chris Paul | | | Jay Payne | | Jo Toolan | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Banking Services Director | | | | | Sales Director | | Corporate Aairs and | | Head of Corporate | | | IT Service & Operations Director | | | Head of Client | | | | | | | | | | Marketing Director | | | | Finance | | | | Management | | Mark joined the Executive Board in | | | Anna joined PayPoint as Sales Director in | | | | Steve joined PayPoint originally in | | Chris joined PayPoint in 2016 and | | | | Jay joined PayPoint in January 2019 as | | Jo joined PayPoint in 2011 and is | | | February 2021 following the acquisition | | | | January 2022 with responsibility for new | | | 2014, and then again in 2020 as | | is Head of Corporate Development, | | | | IT Service and Operations Director and | | currently Head of Client Management, | | | of Handepay and Merchant Rentals | | | | business generation for all our products | | | Corporate Aairs and Marketing | | leading the organisation’s growth and | | | | leads the delivery of IT services across | | responsible for the strategic | | | and was appointed Banking Services | | | | and services and also relationship | | | Director, leading our marketing, PR and | | development activities and overseeing | | | | the PayPoint group. | | management of major accounts | | | Director in October 2021 in recognition | | | | management across the current | | | investor relations eorts for the Group. | | treasury strategy. | | | | | | and expanding our digital payments | | | of our growing banking proposition | | | | PayPoint estate. Prior to joining PayPoint, | | | | | | | | | With over 25 years’ experience, Jay | | solutions into new and existing clients, | | | including ATMs and Counter Cash and | | | | Anna worked for Worldpay from FIS, | | | He has spent over 20 years in | | Prior to joining PayPoint, Chris | | | | has been responsible for delivery | | including BBC, Paysafe, Monzo and the | | | he retains his responsibility for our | | | | where as VP of SME sales Anna was | | | marketing and PR leadership roles | | worked at LMAX as Head of Financial | | | | and design of services supporting | | major Utility providers. | | | cards business. Prior to this, Mark was | | | | responsible for new business generation | | | for large consumer organisations in | | Reporting, where he was responsible | | | | card issuing, merchant acquiring and | | | | | chief commercial ocer at Handepay | | | | across SME and mid market sectors. | | | the UK and Europe, across the retail, | | for developing the finance function | | | | specialist subscription billing for clients | | Prior to PayPoint, she supported | | | from 2013 where he developed the | | | | | | | telecommunications and financial | | following its MBO from Betfair. | | | | across all industries. | | bluechip organisations with their CSR | | | market-leading customer proposition | | | | Before moving into Payments, Anna spent | | | services sectors. Aer starting his | | | | | | | | programmes in schools, including | | | and led the marketing and customer | | | | over 20 years in the telecommunications | | | career at the John Lewis Partnership | | He is a qualified accountant with 20 | | | | Previous positions have included | | developing programmes for BT and | | | management teams. | | | | sector, predominantly at Telefonica/ | | | on their graduate scheme, Steve | | years’ experience in senior finance | | | | responsibility for the delivery of | | Grant Thornton, following her early | | | | | | | O2 where Anna held a number of senior | | | has worked for Orange, Carphone | | positions in financial services, telecoms | | | | payment optimisation consultancy for | | career in the education sector. | | | Mark has previously held international | | | | positions across both B2B and B2C | | | Warehouse, HSBC and Amigo. | | and gaming sectors, including TalkTalk | | | | clients in publishing and broadcasting | | | | | product management positions with | | | | (Retail), including head of franchising, | | | | | and Tsogo Sun Gaming. | | | | with a focus on subscription | | | | | global payment processor Elavon, | | | | head of stores, head of global sales. | | | Steve is also a member of the ESG | | | | | | churn reduction. | | | | | where he was responsible for mobile | | | | Anna has a broad experience; from | | | Working Group. | | | | | | | | | | | payment, currency conversion and | | | | leading stores teams of up to 800 | | | | | | | | | Prior to commencing his career in | | | | | gi card solutions. Mark began his | | | | in retail and managing relationships | | | | | | | | | payments, Jay spent eight years | | | | | career in the payment industry in 2002, | | | | with some of the world’s largest | | | | | | | | | serving with the Royal Navy. | | | | | supporting major acquiring and retail | | | | organisations across multiple global | | | | | | | | | | | | | | customers for Ingenico. | | | | locations, from her time in global sales. | | | | | | | | | | | | | PayPoint Plc Annual Report 202276 ## Corporate Governance Report The Board considers that throughout the year under review it has Board composition complied with the provisions of the UK Corporate Governance Code At the date of this report, the Board comprises seven Directors: the (the ‘Code’) as published by the Financial Reporting Council in Chairman; the Chief Executive; the Finance Director; the Senior July 2018. Independent Director; and three Independent Non-Executive Directors. The size of our Board allows time for full discussion and debate of This report describes how the provisions of the Code have been applied matters and enables all Directors’ views to be heard. The Non-Executive by the Company. Directors have a broad range of skills and experience bringing balance and diversity to the Board. The biographies, skills and competences of Membership and attendance at scheduled Board meetings held each of our Directors are set out on pages 72 to 73. during the year The table below shows Directors’ attendance of the scheduled Board The composition of the Board is subject to ongoing review and a key meetings held during the year. consideration for any new Board appointment will be the additional breadth a new Director could bring. Attendance at scheduled meetings The terms and conditions of appointment of the Non-Executive Directors during the year and the Executive Directors’ service contracts are available for inspection Eligible to at the Company’s registered oce during normal business hours and at Current members Role attend Attended the annual general meeting. In accordance with the provisions of the Code Executive Directors all Directors submit themselves for election or reelection at each annual Nick Wiles Chief Executive 7 7 general meeting. The Board’s recommendations in respect of the election/ re-election of each Director can be found in the Notice of Annual General Alan Dale Finance Director 7 7 Meeting on page 156. Non-Executive Directors Giles Kerr Chairman 7 7 The Directors have disclosed all their significant external commitments Gill Barr Independent which the Board has considered and the Board is satisfied that all the 1 Non-Executive Director 7 6 Directors are able to allocate sucient time to the Company to discharge Rosie Shapland Independent their responsibilities eectively. Non-Executive Director 7 7 Rakesh Sharma Senior Independent Director 7 7 Ben Wishart Independent Under 12 months 0 Non-Executive Director 7 7 1 to 3 years 3 4 years+ 4 1. Gill Barr was unable to attend the meeting held in March 2022 due to a family bereavement. In addition to the seven scheduled meetings, the Board met a further 12 times during the year under review to give consideration to and approval of adhoc matters in accordance with the schedule of matters reserved to the Board. Corporate governance framework Independence statement The Board provides eective leadership to the Group within a wider The Board considers its Non-Executive Directors to be independent. corporate governance framework with clearly defined roles and The Board has determined that each is independent in character and responsibilities as illustrated in the chart opposite. The governance judgement, and is free from any business or other relationship which framework supports the rigorous challenge by the Board of strategy, could aect the exercise of his/her judgement. 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. Tenure of Board Financial statements Shareholder information 77Strategic report Governance ## Corporate ## Governance ## Framework ### The Board The Board is collectively responsible for the long-term success of the strategic goals the Board has set. The Nomination, Audit and the Group and is accountable to the shareholders of the Group. The Remuneration Committees support the Board in carrying out its Board provides eective leadership by setting the strategic aims of role, which is formally set out in ‘the Matters Reserved to the Board’, the Group and overseeing the ecient implementation of these aims full details of which can be found on the Company’s website in order to achieve sustainable growth of the business. It monitors www.corporate.paypoint.com. The details of the roles of each of operational and financial performance against agreed goals and those Committees can be found on pages 82 to 101. In addition, the objectives whilst ensuring that the appropriate controls and systems Executive Board carries out strategic objectives delegated to it by exist to manage risk. The Board ensures that there are the necessary the Board and the roles of each member of the Executive Board are financial resources and people with the necessary skills to achieve set out on pages 74 to 75. | Audit Committee | Nomination Committee | Remuneration Committee | Market Disclosure Committee | | --- | --- | --- | --- | | The key role of this Committee | The Nomination Committee is | The Committee’s key | This Committee oversees the | | is to ensure the integrity of the | responsible for reviewing the | responsibility is to determine | disclosure of information by | | Company’s financial reporting | composition of the Board to | and apply the Remuneration | the Company to ensure that | | to shareholders. Read more on | ensure its members have the | Policy to ensure it promotes | it meets its obligations under | | pages 84 to 89. | right skills and experience to | the delivery of the Group’s | the Market Abuse Regulations. | | | implement the strategy of the | strategy. Read more on pages | Its members are the Chief | | | Company. Read more on pages | 90 to 101. | Executive, Finance Director, | | | 82 to 83. | | Company Secretary and the | General Counsel and Head of Compliance. Cyber Security & Information Executive Board Technology Sub-Committee The Executive Board is led by the Chief Executive and comprises: the Finance Director, HR Director, Client This is a sub-committee of the Services Director, Customer Experience Director, Banking Services Director, General Counsel and Head of Audit Committee. The role of Compliance; Chief Technology Ocer; Sales Director; IT Service & Operations Director; Head of Client the Committee is to oversee Management; Corporate Aairs & Marketing Director and Head of Corporate Finance. The Executive Board Group cyber-security and is responsible for the day-to-day operational management of the Group and supports the Chief Executive IT matters. in implementing the Group’s strategic aims. The Board oversees the activities of the Executive Board. Regulated entities within the Group ESG Working Group The Group has five regulated entities as detailed below. The Managing Directors of Concerning ESG the Board of Directors retains oversight each of these regulated entities report to the Chief Executive: on all issues of ESG including setting strategy and 1 • PayPoint Payment Services Limited meaningful targets, reporting on TCFD and engagement 2 • i-movo Limited with key stakeholders. 3 • Handepay Limited 4 • Merchant Rentals Limited The Executive Board has overall day to day control on • RSM 2000 Limited⁵ ESG and hears progress reports from the ESG Working Group (a working party of the Executive Board 1. This an authorised payment institution regulated by the FCA with permission to provide comprising the Finance Director, the HR Director, the regulated payment services (including certain CashOut services) under the Payment Services Regulations 2017. Head of Risk and Internal Audit, the Corporate Aairs 2. This is a small payment institution regulated by the FCA with money remittance permissions and Marketing Director and the Company Secretary to under the Payment Services Regulations 2017. progress ESG matters and TCFD Reporting through 3. This is an authorised Consumer Credit (Consumer Hire) company regulated by the FCA with regular meetings. The Group met throughout 2021-22 credit broking permissions under the Consumer Credit Act. This is a Limited Permission and progressed various aspects on TCFD and ESG that Consumer Credit firm. were considered and approved by the Executive Board 4. This is an authorised Consumer Credit (Consumer Hire) company regulated by the FCA with and Plc Board. The ESG Working Group monitors permission to enter into Regulated Consumer Hire Agreements as owner and to exercise or have the right to exercise the owner’s rights and duties under regulated Consumer Hire performance against targets throughout the year and Agreement permissions. This is a Limited Permission Consumer Credit firm. reports performance to the Executive Board and Board. 5. This is an authorised Consumer Credit company regulated by the FCA with permissions for credit broking, debt collecting, debt administration, entering into Regulated Consumer Hire Agreements as owner and exercising or having the right to exercise the owner’s rights and duties under a regulated Consumer Hire Agreement. This is a Full Permission Consumer Credit Firm and also an authorised payment institution regulated by the FCA with permission to provide regulated payment services under the Payment Services Regulations 2017. PayPoint Plc Annual Report 202278 ## Corporate Governance Report continued Induction Conflicts of interest On joining the Board, all new Directors receive a full, formal and tailored Under the Articles of Association, the Board has authority to approve induction. One-to-one meetings are held with each member of the any conflicts or potential conflicts of interest that are declared by Executive Board and other senior management in the business and individual Directors prior to and during appointment. Conditions may be external advisors as appropriate. The induction includes the provision of attached to such approvals and Directors will generally not be entitled to relevant current and historical information about the Company together participate in discussions or vote on matters in which they have or may with applicable business policies. The Company Secretary assists have a conflict of interest. in the induction of new Directors and undertakes a review with new Directors post induction to consider any initiatives which would improve A register of conflicts of interest is maintained by the Company the process. Secretary. No material conflicts were reported by the Directors during the year. Training and support Directors are provided with clear and accurate information on matters Meetings to be considered at the Board and its Committee meetings. This The Board and its Committees meet regularly throughout the year with information is provided in a timely manner to ensure an appropriate meetings scheduled around key dates in the Company’s corporate level of review by each Director ahead of the meetings. calendar, and when necessary to consider key corporate transactions or events that may arise. In the course of the year, the Board is briefed on any significant changes in the law, regulations, governance, best practice or developments Two strategy sessions are also held each year, the first in September within PayPoint which aect their roles both on the Board and on the followed by a session in February. The Board is updated on progress Board Committees. Experts and advisors are brought in as necessary against the strategic plan and any new initiatives to grow and develop to present to the Board or its Committees on technical subject matters. the PayPoint Group. The Non-Executive Directors are provided with schedules of relevant The Chairman sets the agenda for the Board and ensures that adequate training by external providers which they are encouraged to attend at time is available for discussion of all agenda items. He ensures informed their convenience. decisions are reached in an eective manner by facilitating open discussion and debate of agenda items by Board members. The Non- The Directors have access to the Company Secretary as well as Executive Directors meet ahead of each Board meeting to discuss the members of the Executive Board and senior management, and they can business of the meeting and any related issues. Consultations with also seek independent professional advice if this is deemed necessary management and with external advisors are held when necessary to aid for the proper performance of their duties. the Board’s decision-making process. The table opposite shows the key areas of Board activity during the year ended 31 March 2022. Insurance The Company maintains appropriate insurance cover in respect of legal action against the Directors. Financial statements Shareholder information 79Strategic report Governance ## Strategy and business review • two scheduled strategy sessions followed by progress reviews throughout the year • regular business and performance updates across all divisions • further to Covid-19, implementing an operating model to minimise disruption of service and support to clients and retailer network whilst ensuring the safety of all employees • investment in Snappy Shopper and Optus Homes ## Internal control and risk management • considered the continuing impact of Covid-19 for the Group • assessed the IT infrastructure and cyber risks generally and specifically • assessed the eectiveness of the internal controls and risk management process within the Group • approved the renewal of insurance policies for the Group • carried out a robust assessment of the nature and extent of emerging and principal risks and uncertainties facing the Group and how these risks could aect the business, financial condition or operations of the Group ## Financial • approved half-year and full-year financial statements and quarterly trading updates • approved dividends paid to shareholders during the financial year ended 31 March 2022 • reviewed management presentations to analysts for the full and half-year results • considered and approved the plan for the financial year ending 31 March 2023 • reviewed Group forecasts and scrutinised the built-in risks and opportunities • received monthly management accounts • received management reports ## Governance • approved the Notice of Annual General Meeting • reviewed and approved the Board policy on Diversity and Inclusion • reviewed investor feedback from the full and half-year roadshows • approved the Modern Slavery Statement • approved scope 1, 2 & 3 GHG reduction targets • approved Net zero targets • considered the feedback received from the employee forum when making decisions regarding working patterns, engagement surveys and ESG • carried out an internal performance evaluation of the Board and its Committees • approved revisions to the terms of reference of the Audit, Remuneration and Nomination Committees • approved revisions to various policies and the Board’s delegated authority in accordance with the Matters Reserved for the Board • considered shareholder analysis summary reports ## People • reviewed the Group health and safety reports • received regular updates on the employee forum from Gill Barr, Non-Executive Director, the appointed Board representative for the employee forum • reviewed the PayPoint Gender Pay Gap report and approved the commitments and actions therein, prior to publication of the report • continued the monitoring of working practices for all our people to safeguard employees in light of Covid-19 • discussed the composition of the Executive Board and reviewed succession planning PayPoint Plc Annual Report 202280 ## Corporate Governance Report continued Division of roles and responsibilities There is clear and eective division of roles and responsibilities of the Board as shown below: ### Board leadership Chairman – Giles Kerr Giles Kerr is responsible for the eective leadership, operation and governance of the Board and its Committees. He ensures that the Board as a whole plays a full and constructive part in the development and determination of the Group’s strategy and overall commercial objectives. His current 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 sucient time and consideration are 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 eective and complementary Board, and to facilitate the appointment of eective and suitable members and Chairs of Board Committees • ensuring eective 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 • meeting a number of key investors • promoting the highest standards of integrity, probity and corporate governance at Board level and throughout the Group ### Running the business Chief Executive – Nick Wiles Finance Director – Alan Dale Nick Wiles is responsible for running the Group’s business and for Alan Dale is responsible for all financial reporting, investor relations, tax, proposing and developing the Group’s strategy and overall commercial treasury and financial control aspects of the Group. As a member of objectives. He leads the Executive Board, the responsibilities of which the Executive Board he also provides support to the Chief Executive in are set out on page 77. His other main responsibilities include: the development and implementation of the strategy, and in the wider • providing input to the Board’s agenda and ensuring that the activities of the Group as required. Alan is also a Chair and Director Executive Board gives appropriate priority to providing timely of various subsidiaries of the Group and a member of the ESG 1 reports to the Board containing clear and accurate information Working Group . • implementing the agreed strategy with the support of the Executive Board • ensuring that the Chairman is alerted to forthcoming complex, contentious or sensitive issues aecting the Group • providing information and advice to the Chairman in respect of succession planning for membership of the Executive Board • leading the communication programme with shareholders • acting as Director of various subsidiaries of the Group ### Constructive challenge and independent oversight Senior Independent Director – Rakesh Sharma Independent Non-Executive Directors – Gill Barr, Rosie Shapland Rakesh Sharma supports the Chairman in his role by acting as a and Ben Wishart sounding board for the Chairman and a trusted intermediary for The Independent Non-Executive Directors bring a strong independent other Directors in resolution of any significant issues that may arise. element to the Board, and provide constructive challenge and support His other main responsibilities include: to strategic and other matters addressed by the Board. They are • chairing the Nomination Committee when it is considering expected to attend all scheduled Board and Committee meetings, and succession to the role of Chairman of the Board to devote such time as is necessary for the proper performance of • chairing the Remuneration Committee their duties. • meeting with the Non-Executive Directors at least once a year to appraise the Chairman’s performance and on such other occasions During the year, the Chairman held meetings with the Non-Executive as are deemed appropriate Directors without the presence of the Executive Directors. There were • being available to shareholders if they have concerns which no unresolved concerns about the running of the Company. contact through the normal channels of the Chief Executive or Finance Director has failed to resolve or for which such contact is inappropriate • having sucient contact with major shareholders to obtain a balanced understanding of the issues and concerns of such shareholders ### Board support Company Secretary – Brian McLelland • supporting the Board and Committee Chairs in setting the agendas Brian replaced Sarah Carne as Interim Company Secretary to the and ensuring information is made available to the Board members in Board and all its Committees in January 2022. He provides advice a timely fashion and assistance to the Board to ensure good governance practices • arranging the induction of new Directors and coordinating training and compliance with company law, Listing Rules, Disclosure requirements for the Non-Executive Directors as required Guidance and Transparency Rules and the Market Abuse • organising internal and external Board and Committee evaluations Regulations. His other responsibilities include: at the request of the Chairman • membership of the Market Disclosure Committee of the Board • acting as secretary to the subsidiaries of the Group • membership of the ESG Working Group 1. Dividend cover represents profit aer tax divided by reported dividends. Financial statements Shareholder information 81Strategic report Governance Accountability Engagement with stakeholders Financial and business reporting In its decision-making, the Board has regard to each Director’s duty to Please refer to the following pages of this annual report for information promote the success of the Company on behalf of the Company’s on how the Board has carried out the financial and business reporting stakeholders, to foster the Company’s relationships with its people, obligations as stipulated under the Code: shareholders, convenience retailer partners, SMEs, consumers, clients • page 104 for the Board’s responsibility statement setting out the and local communities and to consider the eect of the principal steps taken to present a fair, balanced and understandable decisions taken by the Company during the financial year on the assessment of the Company’s position and prospects Company’s stakeholders. For more information see pages 52 to 53. • pages 02 to 33 for the strategy and business model which explains how the Company generates and preserves value over the longer Engagement with and feedback from our people across the business is term and the strategy for delivering the objectives of the Company vital. This year the employee forum continued to provide feedback on • page 103 for the statement that the financial statements have been changing working patterns due to Covid-19, general engagement and prepared on a going concern basis input into our ESG strategy. Gill Barr, our Board representative for the employee forum, feeds back issues raised by the members of the forum Risk management and internal control for consideration by the Board. The Board has overall responsibility for establishing and maintaining sound risk management and internal control systems and the monitoring Shareholder relations of these systems to ensure that they are eective and fit for purpose. The Directors consider that the annual report and accounts play an The Audit Committee provides support to the Board in this regard and important role in providing shareholders with an evaluation of the oversees the monitoring process. Further information on the risk Company’s position and prospects. The Board aims to achieve clear management and internal control system is set out in the Risk reporting of its financial performance to all shareholders. Management Report on page 54. The PayPoint website provides comprehensive information for current The Board has carried out a robust assessment of the nature and extent and potential shareholders and the annual general meeting is an ideal of the emerging and principal risks facing the Group and how these risks forum for interaction between the Board and shareholders. In addition, could aect the business, financial condition or operations of the Group. the Company maintains a full investor relations programme, including The explanation of these principal risks including how they are being formal roadshows following the full and half-year results and regular mitigated can be found on pages 56 to 58, and a statement on how the one-to-one meetings with current and potential investors. Directors have assessed the prospects of the Group taking into account the current position and principal risks is on page 59. The Board acknowledges the importance of an open dialogue with its institutional shareholders and welcomes correspondence from private Remuneration investors. Meetings are held with investors throughout the year both Details of how the provisions of the Code have been applied in respect at their oces and in the form of site visits to PayPoint’s operations. of Directors’ remuneration are set out in the Remuneration Committee The Senior Independent Director is available to address any unresolved Report on pages 90 to 101. shareholder concerns. ### Brian McLelland ### Company Secretary ### 17 June 2022 82 PayPoint Plc Annual Report 2022 # Nomination Committee Report ![img-4.jpeg](img-4.jpeg) Giles Kerr Chairman, Nomination Committee A key area of focus has been on succession planning for the Board, Executive Board and management to ensure we have the right pipeline of talent coming through the business. Membership and attendance Attendance at meetings during the year | Current members | Date appointed as member | Eligible to attend | Attended | | --- | --- | --- | --- | | Giles Kerr (Chairman) | 20 November 2015, assuming chairmanship in May 2020 | 3 | 3 | | Gill Barr | 1 June 2015 | 3 | 2^{1} | | Rakesh Sharma | 12 May 2017 | 3 | 3 | | Rosie Shapland | 2 October 2020 | 3 | 3 | | Ben Wishart | 14 November 2019 | 3 | 2^{2} | 1. Gill Barr was unable to attend the meeting held in March 2022 due to a family bereavement. 2. Ben Wishart was unable to attend the meeting held in May 2021 due to an unscheduled Arnold Delhaize management meeting. Nomination Committee responsibilities The Committee's key role is to ensure that the Board has the appropriate skills, knowledge and experience to operate effectively and deliver our strategy. It is responsible for regularly reviewing the size, structure and composition of both the Board and its Committees taking into account the challenges and opportunities facing the Company. The Committee identifies and recommends to the Board candidates to fill Board vacancies based on merit and objective criteria, and ensures that appointment processes are formal, rigorous and transparent. The Committee also oversees the development of a diverse pipeline for succession. The Chairman invites the Chief Executive to attend its meetings and the HR Director as and when required. The Company Secretary acts as secretary to the Committee. Further details of the Committee's responsibilities can be found in its terms of reference, on the Company's website www.corporate.paypoint.com. Dear Shareholders, On behalf of the members of the Nomination Committee, I am pleased to present the Nomination Committee Report for the year ended 31 March 2022. The Committee met three times during the year. The key areas of focus included the: - review of the structure and development of the Board and the Executive Board - review of the result of the 2021 external performance evaluation - approval of the report of the Committee for inclusion in the 2022 annual report and accounts - organisational development - review of the Board's policy on diversity, equity and inclusion - annual review of the Directors' length of service - annual review of the Directors' conflicts of interest register and number of external directorships held - annual review of its terms of reference During the year, a review of the progress of the NED mentoring programme and succession planning were covered at a meeting of the Board of Directors. Following each Committee meeting, a summary of the Committee's activity is provided to the Board together with any recommendations. Financial statements Shareholder information 83Strategic report Governance Succession planning Directors’ time commitment and length of service In addition to having succession planning in place for the Board and All Directors are aware of the need to allocate sucient time to PayPoint Executive Board, we also focus on the succession plans for key Plc in order to discharge their responsibilities eectively. The Nomination management to ensure we have the right pipeline of talent coming Committee monitors attendance, Committee composition, length of through the business to support the future needs of the Group. service and the extent of the Directors’ external commitments on an ongoing basis. Diversity The Board’s policy on diversity, equity and inclusion, which is reviewed Giles Kerr’s second three-year term expired on 20 November 2021. annually by the Committee, sits alongside PayPoint’s employee policy, Following Giles’s agreement, the Committee recommended to the which sets out the Company’s commitments to create a positive and Board that he be reappointed for a further three years. inclusive environment where everyone can learn, grow and shine. The Board policy addresses the specific requirements of the UK Corporate All Directors, in accordance with the Code, will be oering themselves Governance Code in relation to the Board and the recommended targets for reelection at the annual general meeting on 20 July 2022. set out in the reports on diversity of Sir Philip Hampton and Dame Helen Alexander, and of Sir John Parker. The terms and conditions of appointment of Non-Executive Directors and the service contracts of Executive Directors are made available for In accordance with the Policy Statement on,“Diversity and Inclusion inspection at the annual general meeting. on company boards and executive management” published by the FCA April 2022, which propose changes to the Listing Rules in order Directors’ conflicts of interest to provide disclosure of certain diversity targets on a comply or explain The Nomination Committee annually reviews and considers the interests basis. The targets are: and other external appointments held by the members of the Board. • at least 40% are women Conflicts declared are recorded in our register of conflicts of interest • at least one of the senior Board positions (Chair, Chief Executive and this was reviewed and approved by the Committee at its meeting Ocer (‘CEO’), Senior Independent Director (‘SID’) or Chief in March 2022. The Directors have a continuing duty to inform the Board Financial Ocer (‘CFO’) is a woman of any potential conflicts immediately so that such conflicts may be • at least one member of the Board is from a minority ethnic considered and, if authorised, included within the register of conflicts background (which is defined by reference to categories of interest. We recognise that the Non-Executive Directors have other recommended by the Oce for National Statistics (‘ONS’) excluding business interests outside of PayPoint Plc and that other directorships those listed, by the ONS, as coming from a white ethnic background bring significant benefits to the Board. All key external roles are given within the Director biographies on pages 72 to 73. Non-Executive All Board appointments are made on merit, in the context of the balance Directors are required to obtain the approval of the Chairman before of skills, experience, independence and knowledge which the Board as a accepting any further appointments. whole requires to be eective, taking account of diversity in the manner described above. Responsibility has been delegated to our HR Director A register of related parties is also maintained and updated by the for the operation of the diversity and inclusion policy across the rest of Company Secretary in order that any related party transactions are the Group and ensuring its maintenance and review. Eorts to increase identified and the necessary disclosures made. diversity in the senior management pipeline towards Executive Board positions continues to be supported, and the development of diversity The Nomination Committee Report was approved by the Board on in senior management roles within the Group is encouraged. 17 June 2022. As at the date of this report, PayPoint Plc continues to have two female ### Giles Kerr members on the Board who represent 28.5% of the Board members. The ### Board has approved the appointment of a further female Non-Executive Chairman, Director to the Board in FY 22-23 and will engage with executive search ### Nomination Committee firms in a manner which enhances opportunities for diverse candidates ### 17 June 2022 to be considered for appointment. The Board will also consider female appointments to the senior Board positions identified by the FCA above, at the next available opportunity. Additionally PayPoint Plc meets the targets set out in the Parker Review and the FCA in respect of ethnic diversity on UK boards. For more information on our diversity, equity and inclusion policy please refer to page 45. 84 PayPoint Plc Annual Report 2022 # Audit Committee Report ![img-5.jpeg](img-5.jpeg) Rosie Shapland Chair, Audit Committee We have sought to ensure the annual report is fair, balanced and understandable to provide the information necessary for shareholders to assess the Company's performance, business model and strategy. Membership and attendance¹ Attendance at meetings during the year | Current members | Date appointed as member | Eligible to attend | Attended | | --- | --- | --- | --- | | Rosie Shapland (Chair) | 2 October 2020, becoming Chair in December 2020 | 4 | 4 | | Gill Barr | 1 June 2015 | 4 | 3² | | Rakesh Sharma | 12 May 2017 | 4 | 4 | | Ben Wishart | 14 November 2019 | 4 | 4 | 1. The Audit Committee invites the Head of Risk and Internal Audit to attend and provide updates to the Committee at each meeting covering the matters set out in the risk management section of this report. The external auditors KPMG are also in attendance at each meeting along with the Chief Executive, Finance Director and Chairman. Other members of management attend as and when requested. The Company Secretary acts as secretary to the Committee. 2. Gill Barr was unable to attend the meeting held in March 2022 due to a family bereavement. The Committee has satisfied itself that the PayPoint Plc 2022 annual report and accounts is fair and balanced. We have sought to make the annual report as clear, understandable and informative as possible to provide the information necessary for shareholders to assess the Company's performance, business model and strategy. The Committee therefore supports the Board in making its formal statement on page 104. # Audit Committee responsibilities The Committee's key role is to support the Board in fulfilling its oversight responsibilities by reviewing and monitoring the integrity of the Company's financial reporting to shareholders and any formal announcements relating to the Company's financial performance. The Committee also supports the Board in matters relating to the relationship with the external auditor and in respect of the internal control and risk management systems of the business. Significant financial reporting issues and judgements, together with any changes in accounting principles, are reviewed by the Committee and reported through to the Board. As requested by the Board, the Committee reviews the content of the annual report and accounts and advises the Board on whether, taken as a whole, it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy. Further details of the Committee's responsibilities can be found in its terms of reference, on the Company's website www.corporate.paypoint.com. # Dear Shareholders, As Chair of the Audit Committee (the 'Committee') I am pleased to present the Audit Committee Report for the year ended 31 March 2022. The report sets out the remit of the Committee, its areas of focus for this financial year and the Company's relationship with its external auditors, KPMG LLP. The Committee met four times during the year, with meetings timed to coincide with the financial and reporting cycles of the Company. We also met on 19 May 2022 to review the 31 March 2022 annual Report and accounts and the findings of the external auditor. In addition, the Committee met with both the Company's external auditor and Head of Risk and Internal Audit during the year without management being present. Financial statements Shareholder information 85Strategic report Governance In the year under review the work undertaken by the Audit Committee Governance was as follows: • considered quarterly updates from the Head of Risk and Internal Audit on the Group risks Financial reporting • carried out an annual review of the Committee’s terms of reference • reviewed the annual and interim financial statements • carried out reviews of the Board Delegated Authority • considered significant accounting policies, financial reporting • received reports from the Chairman of the Cyber Security and issues, judgements and estimates, most notably in relation to recent Information Technology Sub-Committee. See page 88 for details acquisitions on the role of the Sub-Committee • considered the provision in relation to the Ofgem Statement of Objections and the commitments volunteered by the Company The Audit Committee and Cyber and IT Sub-Committee support the which were formally accepted on 23 November 2021 Board with monitoring risk management and internal control systems • considered findings as set out in the reports from the external auditors and reviewing their eectiveness. Internal controls are used to mitigate • considered and recommended to the Board the going concern basis risks faced by the Group within the risk appetite set by the Board in for preparation of the financial statements order to safeguard shareholders’ investments and Group assets. The • considered and recommended to the Board the viability statement Audit Committee reviews eectiveness of the risk management and and the period over which the Company’s viability is measured. internal control framework by receiving regular and comprehensive In doing so the Committee had regard to an assessment which reports and information from Risk and Compliance teams. The Board modelled the possible occurrence of significant risks and events, has defined its risk appetite for all principal risks which are categorised and which showed that the Company would continue to be viable under market, strategic, business and operational risk. A standard risk and profitable over the three-year period assessment methodology is applied across the Group to evaluate gross • reviewed PayPoint’s treasury policy and residual risk and comparing residual risk against risk appetite. • approved PayPoint’s annual tax strategy • the Committee continued to focus on revenue recognition during As required by the Code, the Board via the Audit Committee, has carried the year due to the level of transactions and the complexity of the out a robust assessment of the principal and emerging risks facing the systems. We have enhanced the accounting policy and revenue Group, including those that could threaten its business model, future note disclosures to aid understanding of this important area. performance, solvency or liquidity. This is more fully described on pages 56 to 58. The following key procedures and monitoring processes are in Internal audit place to provide eective internal control: • approved the annual audit plan • the Board approves key Group policies and authorities delegated to • monitored progress against the approved audit plan the Executive Board and senior management. Internal Audits assess • received copies of audit reports and assessed key findings and adherence and exceptions are reported in Internal Audit reports implementation of recommendations which are made available to the Audit Committee • assessed the audit universe and audit cycle • there is an ongoing process to identify, evaluate and manage risks via • monitored resource requirements for internal audit and approved functional and entity Risk and Control registers and significant risks the annual internal audit budget are reported to the Board and Audit Committee • carried out an annual review of and approved the internal audit charter • the Group’s Risk and Compliance teams continuously review processes that have been correctly followed across the Group and Risk management and internal controls exceptions are reported to the Audit Committee and Cyber and • carried out a review of the Group’s insurance coverage Information Technology Sub-Committee • approved various policies including whistleblowing and anti-bribery • on behalf of the Board, the Audit Committee reviews fraud, anti- and corruption bribery and whistleblowing – there were no instances of fraud, • considered any reported frauds and any concerns raised via the whistleblowing or identified instances of bribery or corruption during Company’s whistleblowing process the year • reviewed the Company’s risk framework and any changes thereto • during the year the Environmental, Social and Governance prior to approving the principal and emerging risks for inclusion in the (‘ESG’) Working Group was implemented to oversee the Group’s annual report environmental and social related risks and to make recommendations • approved the UK SOX proposed project plan to ensure it to the Board, as well as reviewing the TCFD disclosures in the 2022 incorporates appropriate processes and controls annual report and accounts • considered quarterly updates from the Group’s Compliance Ocer • Executive and Finance management annually attest that to their which provide an overview of compliance within the Group’s knowledge they and their teams adhered with Group policies, regulated entities delegated authorities and year-end procedures; and that relevant Risk and Controls registers are a fair representation of risks, and the controls listed operated eectively during the year. Attestation details are reported to the Audit Committee • the Audit Committee reviews risk appetite for principal risks and compliance with risk appetite is monitored through the Group’s risk assessment processes 86 PayPoint Plc Annual Report 2022 # Audit Committee Report continued - the Audit Committee reviews key risks presented by the Head of Risk and Internal Audit at each meeting to ensure management effectively implements preventative and detective controls to monitor and mitigate risk - the Cyber and Information Technology Sub-Committee reviews key IT and cyber risks to ensure the Group's IT function effectively implements preventative and detective controls to monitor and mitigate risk On the basis of the above procedures and monitoring processes, the Board, supported by the Audit Committee, has reviewed the effectiveness of the risk management and internal control systems. No significant control failings or weaknesses were identified during the period under review. The Directors confirm that the processes described above have been in place during the financial year and up to the date of the approval of the Annual Report and Accounts. # External audit - agreed the scope of the 2022 audit together with the fees and terms of engagement. Details of the amounts paid to the external auditors for the audit services for 2022 are given on page 131, note 8 to the financial statements - received the external auditor's plan for the financial year, reviewing materiality thresholds and areas of risk where the auditor would focus their work - reviewed the effectiveness of the external audit process, by discussing the results of the auditor's work and their views on material accounting issues and key judgements and estimates - reviewed the robustness of the audit process and reviewed the 2021 Audit Quality Review Report, regarding the overall quality of audit work provided by KPMG for listed companies - reviewed and monitored the independence of the external auditor and approved their provision of non-audit services - recommended KPMG for reappointment at the 2022 annual general meeting - considered the regulations contained within the Competition and Markets Authority Audit Order to ensure that the Company carries out specific functions in relation to audit services # Significant judgements and critical estimates in relation to the financial statements In preparing the financial statements for 2022, there were several areas requiring the exercise by management of judgement or a high degree of estimation. Throughout the year, the finance team worked closely with the external auditor to ensure the Company provides the required level of disclosure. The tables below outline the significant areas of judgement and estimation together with other financial reporting matters that have been considered by the Committee in discussion with management and the external auditor. # Significant financial judgements and critical estimates for the year ended 31 March 2022 # Business combinations: recognition of goodwill and intangible assets and creation of cash generating unit (critical estimate and significant judgement) During the year PayPoint acquired RSM 2000. Accounting for the acquisition requires an assessment of the existence, fair value and expected useful economic lives of separable intangible assets such as customer relationships and regulatory licences at the date of acquisition. The fair value attributed to intangible assets arising on acquisition is recognised in accordance with IAS 38 Intangible Assets and is based on a number of estimates, including the long-term revenue growth rate of the related business and discount rate. PayPoint acquired RSM 2000 as part of its digital strategy and this now forms a key part of PayPoint's new Digital Cash Generating Unit ("CGU"). As part of this strategy Paypoint's MultiPay business has been brought together with the RSM 2000 business to form this new CGU. This will be used to provide a seamless digital proposition to clients going forward into existing and growing markets such as housing and charities. # How the Audit Committee addressed these significant financial judgements and critical estimates The Committee reviewed and approved management's paper on the acquisition supported by a report from a third-party valuation specialist. The Committee reviewed the valuation methodology for the acquired assets, with particular focus on the goodwill and intangible assets, and is satisfied that the acquisition accounting and related disclosures are appropriate. The Committee has challenged management on the key assumptions that drive the valuation of acquired assets; the costs to recreate the regulatory licences; and for customer relationships, the expected future income streams and discount rate. The Committee reviewed, discussed and approved a further management paper setting out the rationale and background to the formation of the Digital CGU. The paper summarised the background to the CGU and the constituent elements that make up the relevant income and cost elements that will form the basis for the value-in-use calculation. The Committee also gave further consideration to the implication of the new Digital CGU on the recognition of operating segments for the Group and agreed that no changes were required. # Valuation of the goodwill relating to cash generating unit (critical estimate) In the current and prior year Paypoint has acquired four subsidiaries. An annual impairment review is required on the carrying value of goodwill relating to each of the resulting four cash generating units that have been identified. These are i-movo, Handepay and Merchant Rentals and RSM 2000. The first three subsidiaries were acquired in the prior year and are distinct CGUs whilst RSM 2000 was acquired in the current year and is now part of the Digital CGU. Impairment models have been built which consider future cash flows based on the Board-approved plan and these are discounted to a net present value for comparison to the carrying value. The Board approved plan forecasts cash flows for the initial three years and then appropriate assumptions are applied to forecast a further two years, before prudent long-term growth rates are applied to the fifth year to calculate terminal values. Sensitivity analysis has been applied to determine the impacts of reasonably possible changes in the assumptions used for the value-in-use calculations. The Committee reviewed and approved a paper setting out management's impairment assessments for the carrying values of goodwill, acquired intangible assets and investments associated with the relevant acquisitions. The Committee reviewed the methodology and assumptions set out in the paper for the impairment tests and is satisfied that the valuation, headroom and related disclosures are appropriate. The Committee has challenged the key assumptions that drive each of the models for the impairment tests including specific growth drivers for each business, discount rates applied and long-term growth rates. Financial statements Shareholder information 87Strategic report Governance Significant financial judgements and critical estimates How the Audit Committee addressed these significant for the year ended 31 March 2022 financial judgements and critical estimates Recognition of cash and cash equivalents (Significant judgement) The nature of bill payments and Direct-Debit services means that The Committee reviewed and approved the accounting policy on cash PayPoint collects and holds funds on behalf of clients as those and cash equivalents and considers the treatment of transactions with funds pass through the settlement process and also retains retailer management. partners’ deposits as security for some of those collections. The Group continues not to recognise clients’ funds and retailer A critical judgement in this area is whether clients’ funds and retailer partners’ deposits on the statement of financial position where there partners’ deposits are recognised in the statement of financial is a binding agreement specifying that PayPoint holds the cash in trust position. This includes evaluating: accounts on behalf of clients or retailer partners (i.e. acting in the (a) the existence of a binding agreement clearly identifying the capacity of a trustee) and that is separately identified as belonging to beneficiary of the funds that beneficiary. (b) the identification, ability to allocate and separability of funds The Audit Committee considered the impacts of the April 2022 IFRIC (c) the identification of the holder of those funds at any point in time agenda decision on demand deposits with restrictions on use arising (d) whether PayPoint bears the credit risk from a contract with a third party and is satisfied with management’s Where there is a binding agreement specifying that PayPoint holds funds conclusion that the IFRIC does not result in any changes to the Group’s on behalf of the client (i.e. acting in the capacity of a trustee) and those existing accounting policy for cash and cash equivalents. funds have been separately identified as belonging to that beneficiary, the cash and the related liability are not included in the statement of financial position. In all other situations the cash and corresponding liability are recognised on the statement of financial position. Other financial reporting matters for the year ended How the Audit Committee addressed these financial 31 March 2022 reporting matters i-movo deferred consideration During the year management have considered the accounting for The Committee reviewed and approved a paper supporting the i-movo deferred consideration which is contingent on future management’s decision to release the remaining element of the performance over the 29-month earnout period from acquisition. deferred contingent consideration not yet paid. It is linked to four revenue growth targets on two potential key This involved reviewing the background to the deferred contingent revenue streams. consideration and the revenue targets and dates set out in the As a result of the actual performance compared to the targets set purchase agreement, the actual performance to date against out in the purchase agreement, two of the targets were met and targets and the forecast performance included in the latest Board consideration was paid in the year. approved plan. Management have reviewed the Board approved plans which The Committee agreed with management’s conclusion that the indicate the remaining two revenue targets are unlikely to be met remaining provision for deferred contingent consideration should by the dates specified in the purchase agreement and as a result be released. the remaining provision for deferred contingent consideration was released in the year. Viability and going concern Each year the Directors consider the Group’s viability over a three-year The Committee reviewed management’s assessment of going concern period. This is consistent with the Group’s strategic planning period. and the viability statement. For the purposes of assessing the going concern assumption cash The review included consideration of forecast cash flows, relevant flow forecast scenarios have been prepared for a period of at least sensitives and the impacts of these on the Group’s cash position over 12 months from the date of approval of these financial statements, the 12-month forecast period. taking into account the Group’s current financial and trading position, The Group’s viability has been further tested by applying a number of the principal risks and uncertainties and the strategic plans. severe but plausible downside scenarios and considering mitigating Additionally, the Directors have carried out an assessment of the actions and the impact of such scenarios on the Group’s future principal risks and uncertainties and applied several severe but financial position. The Committee reviewed and discussed these and plausible scenarios to further test the Group viability. the potential mitigations. Based on a satisfactory assessment the Directors conclude that it is appropriate to prepare the financial statements on a going concern basis. PayPoint Plc Annual Report 202288 ## Audit Committee Report continued Cyber Security & Information Technology Sub-Committee External audit The Cyber Security & Information Technology Sub-Committee The eectiveness of the audit process is underpinned by appropriate (‘Sub-Committee’) is a sub-committee of the Audit Committee audit planning and risk identification at the outset of the audit cycle. overseeing Group cyber security and IT matters. The auditor provides a detailed audit plan identifying their assessment of the risks and other key matters for review. For the year ended Its key responsibilities include to: 31 March 2022, the significant audit risks identified were: RSM 2000 • advise the Audit Committee on cyber and information security acquisition accounting; valuation of i-movo contingent consideration; risks faced by the Group recoverability of i-movo goodwill; and management override of controls • assess the adequacy of policies, resources and funding for cyber and recoverability of parent company’s investments in subsidiaries. and information security • review the Group’s cyber and information security breach The Committee reviews and challenges the work undertaken by the response plan auditor to test management’s assumptions on these matters. An • review cyber incident reports and assess the adequacy of assessment of the eectiveness of the audit process in addressing proposed actions these items is based on the auditor’s reports for the half-year and • ensure eective business continuity plans full year. The Chair of the Committee meets regularly with the auditor • oversee cyber security training and awareness throughout the audit process and during the year, the auditor attends all Committee meetings to present their audit plan and the results of The Sub-Committee comprises two Non-Executive Directors: Rakesh their work, and the Committee seeks feedback from management on the Sharma and Ben Wishart as Chairman of the Sub-Committee; the Finance eectiveness of the audit process. No significant issues were raised with Director, the Chief Technology Ocer (who is a member of the Executive respect to the audit process for the period and the quality of the audit Board) and the IT & Service Operations Director (who joined the Executive process was assessed to be good. Board in the year). The Company Secretary is the secretary to the Sub-Committee. In accordance with its policy on auditor independence and the provision of non-audit services by the external auditor, the Committee During the year the Sub-Committee held two meetings at which the reviews and monitors the auditor’s independence and objectivity. This Head of IT Risk, the Head of Risk and Internal Audit and the Chair of the is done by considering the auditor’s statement of confirmation of Audit Committee were also in attendance by invitation. The matters independence, and discussing any identified threats to independence considered by the Sub-Committee during the year included: the monitoring and the safeguards applied to mitigate those threats. The Committee of cyber security issues and vulnerabilities and implementing remediation also considers all relationships between the Company and the audit firm, and improvements as required; assessing the Company’s security controls including their network firms and whether those relationships appear to and overall IT governance & control framework; results of IT audits impair the auditor’s independence and objectivity. As part of the audit carried out by Internal Audit and implementing improvements that were planning process, the auditor provided a statement of confirmation of recommended; and the annual review of both the cyber security policy independence to the Board and the Audit Committee, which confirmed and the Sub-Committee’s terms of reference and membership. that in their professional judgement KPMG was independent within the meaning of regulatory and professional requirements and the objectivity of the partner and audit sta remained unimpaired. KPMG was appointed as the Company’s auditor on 15 August 2017 following a formal audit tender process. The lead audit partner, James Tracey replaced Michael Harper in September 2021. The Committee considers that it would be appropriate to conduct an external audit tender by no later than the year ending 2028. During the year the Committee reviewed KPMG’s scores following their inspection by the AQR for audit engagements during FY2021; 59% of KPMG’s audits were rated ‘good or limited improvements required’, while one required significant improvements. The Committee recommends that KPMG be reappointed as the Company’s statutory auditor for the year ending 31 March 2023. It believes the independence and objectivity of the external auditor and the eectiveness of the audit process are safeguarded and remain strong. There are no contractual obligations restricting the Committee’s choice of auditor. The Notice of Annual General Meeting at which a resolution for reappointment of the auditor will be proposed, can be found on pages 156 to 162. Financial statements Shareholder information 89Strategic report Governance Non-audit services Whistleblowing In accordance with the FRC Revised Ethical Standard 2019, the Committee PayPoint continuously seeks to prevent malpractice in its business. has a policy on auditor independence and the provision of non-audit However, if it occurs, whistleblowing processes have been implemented services by the external auditor. This policy is a guide to the types of work to provide employees with guidance and ensure concerns raised are that are acceptable for the external auditor to undertake, and provides appropriately addressed. Our whistleblowing policy ensures colleagues clarity on the process to be followed for approval of the provision of non- are encouraged to raise concerns about the conduct of others, breaches audit services by the external auditor. The policy also covers the 70% cap and irregularities, without fear of reprisal. Whistleblowing is discussed on non-audit fees as prescribed by the FRC Revised Ethical Standard 2019. at each Committee meeting and all whistleblowing occurrences are It states that subject to prior approval by the Finance Director, the fees for reported to the Committee together with details of investigations and permitted non-audit services provided by the external auditor must not any corrective action necessary. exceed a specified amount and must have a cumulative annual total of less than 70% of the average audit fee over the three proceeding years. Anti-bribery and corruption PayPoint has a zero-tolerance approach to bribery and has an anti- The ratio of non-audit fees to audit fees paid to the auditor for the year bribery and corruption policy detailing employee responsibilities to was 7.5%, with non-audit services limited to assurance services for the ensure the Group’s employees remain compliant with anti-bribery half year review. Details of the auditor’s remuneration for the statutory audit and corruption laws. All employees undertake anti-bribery and and non-audit services are set out in note 8 to the financial statements. corruption training at induction and ongoing role-based training is provided. Anti-bribery and corruption risk management is discussed Risk management and internal control at Committee meetings. The Board is responsible for establishing and maintaining the Group’s internal control framework and regularly reviewing its eectiveness. The Audit Committee Report was approved by the Board on The Board has delegated responsibility for reviewing the eectiveness 17 June 2022. of risk management and internal controls to the Committee. The Committee performs robust assessments of the risks which could ### Rosie Shapland significantly impact the Group’s performance, future prospects and ### Chair, reputation. ### Audit Committee The Company’s management of risks and its internal control framework ### 17 June 2022 are detailed on page 54. Internal audit Internal audit is an independent assurance function providing services to the Committee and all levels of management. Internal audit helps the Group accomplish its objectives by bringing a systematic, disciplined approach to risk management. Its remit is to provide independent and objective assurance, assist management in implementing eective controls and help protect the Group. Internal audit’s responsibilities include delivering the annual audit plan, driving remediation of audit issues, assessing eectiveness of internal controls, the prevention and detection of fraud, and supporting management in assessing and mitigating risks. The Committee is responsible for ensuring the Group has a rigorous internal audit programme covering all business areas and risks. 90 PayPoint Plc Annual Report 2022 # Directors' Remuneration Report ![img-6.jpeg](img-6.jpeg) Rakesh Sharma Chairman, Remuneration Committee The Committee continues to ensure the clear linkage of Executive Directors' pay and performance to the strategy and enhancement of shareholder value. Membership and attendance Attendance at meetings during the year | Current members | Date appointed as member | Eligible to attend | Attended | | --- | --- | --- | --- | | Rakesh Sharma (Chairman) | 12 May 2017 | 2 | 2 | | Gill Barr | 1 June 2015 | 2 | 1^{1} | | Giles Kerr | 20 November 2015 | 2 | 2 | | Rosie Shepland | 2 October 2020 | 2 | 2 | | Ben Wishart | 14 November 2019 | 2 | 1^{1} | 1. Gill was unable to make the meeting held in March 2022 due to a family bereavement. 2. Ben was unable to attend the meeting held in May 2021 due to an unscheduled Ahold Delhaize management meeting. The members of the Committee and their attendance at meetings are set out in the table above. In addition to the members of the Committee, the HR Director and the Company's independent advisor from FIT Remuneration Consultants LLP ("FIT"), may attend and receive papers for each meeting. The Company Secretary acts as secretary of the Committee. After each meeting, the Chairman of the Committee reports to the Board on the matters discussed and recommendations and/or actions to be taken. Remuneration Committee responsibilities The Committee's key roles are to ensure that the Remuneration Policy and practices of the Company are aligned with the Company's purpose and business strategy, promote long-term sustainable success and reward fairly and responsibly with a clear link to corporate and individual performance. The Committee's decision-making process takes account of legislation, regulation, corporate governance standards, guidance issued by regulators, shareholders and shareholder representative bodies and has access to the advice of independent remuneration consultants. To avoid conflicts of interest, no Committee member or attendee is present when matters relating to his or her own remuneration are discussed. Full terms of reference for the Committee are available on the Company's website. Dear Shareholders, I am pleased to present our Directors' Remuneration Report for the financial year ended 31 March 2022 which 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 prevailing UK Corporate Governance Code (the 'Code'). The Directors' Remuneration Report will be subject to an advisory shareholder vote at the annual general meeting on 20 July 2022. The report is divided into three sections: - this Annual Statement of the Remuneration Committee Chairman for the year ended 31 March 2022, which summarises remuneration outcomes for the year ended 31 March 2022 - the Directors' Remuneration Policy – at a glance, which sets out the key elements of our Remuneration Policy which was approved by shareholders at the 2020 annual general meeting. Full details of our current policy can be found within our 2020 annual report on our website - the Annual Report on Remuneration, which provides further detail on how the Remuneration Policy was implemented in the year ended 31 March 2022 and how it will be implemented in the year ending 31 March 2023 Committee activities during the year The Committee met twice during 2021/22. The main Committee activities during the year (full details of which are set out in the relevant sections of this report) included: - approving the 2020/21 Directors' Remuneration Report - setting the performance targets for the 2021/22 annual bonus and bonus deferral levels - approving the release of the 2018 deferred bonus awards - confirming the lapse of the 2018 Long-Term Incentive Plan ("LTI") awards due to the respective performance conditions not being met - approving the vesting of the 2018 restricted share plan awards (granted below Board level) - agreeing the 2021 Restricted Share Plan (annual and ad hoc) awards Strategic report Governance Financial statements Shareholder information 91 - agreeing not to award salary increases to the Executive Directors in July 2021 given that they were set at appointment during the year ended 31 March 2021 - reviewing and agreeing the salary review applied to the workforce below Board level including the increases applied to the Executive Board - carrying out an internal evaluation of its performance and reviewing its terms of reference # Pay and 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 2021/22 annual bonus, the Committee considered the financial and operational performance of the Group as well as the progress made in the continuing delivery of the strategy. Annual bonuses for the year have been awarded at 76% of maximum, reflecting the delivery of a strong financial performance for the year against the backdrop of growing macroeconomic uncertainty in the wider economy, disruption in energy markets and an acceleration of cost pressures through the year. The Executive Team continues to build on the strategic step change they have been managing in the business to deliver a significantly enhanced platform with strong shareholder returns, including opening up further growth opportunities across the business and delivering a broader range of innovative services and technology. Group profit before tax of £45.6 million was ahead of target and all strategic targets were achieved. Net revenue from continuing operations increased by £18 million to £115.1 million, a strong performance against the backdrop of growing uncertainty in the wider economy and disruption in our energy markets, but below the stretching targets that were set for bonus purposes. The deferred annual bonus awards which were granted in 2019 in respect of the 2018/19 annual bonus awards will vest in June 2022. The LTIP awards granted in 2019 will be performance-tested in July 2022 but the current indication, based on a review of the formulaic outcome of the performance conditions, is that these awards are unlikely to vest. # Discretion No discretion has been exercised in the year ended 31 March 2022. Over the last two years the Committee has exercised restraint with regards to pay and bonus awards in response to the Covid-19 pandemic and continued cost pressures within the business. PayPoint remained fully operational throughout the Covid-19 pandemic, did not request or receive any government support, did not furlough any of its employees or make any redundancies as a result of Covid-19. Dividends have continued to be paid. A summary of the discretion exercised and decisions made is set out in the following table: | **Financial year ended 31 March 2020** | The Committee chose to exercise discretion by accepting the proposal of the Executive Board to waive their entitlement to bonuses for the year ended 31 March 2020 | | --- | --- | | **Financial year ended 31 March 2021** | The Committee chose to exercise discretion by accepting the proposal of the Executive Board to waive their entitlement to salary review in July 2020 and the proposal of the Chief Executive to reduce his base salary by 20% for a period of three months with effect from 1 April 2020 | | **Financial year ended 31 March 2022** | The Committee did not increase the base salary levels of the Chief Executive and Finance Director in July 2021 when increases were applied to the general workforce | In addition to the above it should be noted that Non-Executive Director fees have remained flat since April 2019. A 3% increase will be applied in July 2022, in alignment with the minimum increase that will be applied to the general workforce. # Policy implementation for the year ending 31 March 2023 A summary of the proposed approach to the implementation of the Policy is as follows: - the salaries of the Chief Executive and Finance Director will be increased by 3% to £484,100 and £309,000 respectively in July 2022, in line with the minimum increase that will be applied to the general workforce - the annual bonus potential for the year to 31 March 2023 will remain at 106% of base salary and the performance targets will continue to be based on profit before tax, net revenue and stretching strategic targets. 25% of any bonus will continue to be deferred in shares for three years - Restricted Share Awards ('RSAs') to be granted in 2022 will: - be set at 75% of salary for the Chief Executive and 62.5% of salary for the Finance Director - vest 50% after three years from grant, 25% after four years from grant and 25% after five years from grant, subject to continued employment, satisfactory individual performance and a positive assessment of performance against an underpin. No shares can be sold until at least five years from grant, other than those required to settle any taxes # Conclusion 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 and is comfortable that remuneration for the year ended 31 March 2022 is appropriately aligned to the Company's performance. **Rakesh Sharma** Chairman, Remuneration Committee 92 PayPoint Plc Annual Report 2022 # Directors' Remuneration Report continued ## Directors' Remuneration Policy – At a glance Our Remuneration Policy, for which shareholder approval was obtained at the 2020 annual general meeting, will continue to apply without amendment for the forthcoming year. The Policy applies to the Chairman, Executive Directors and Non-Executive Directors and full details of this Policy can be found in the 2020 annual report which is on the Company's website. ### Executive Directors' remuneration The table below gives an overview of the remuneration package for Executive Directors: | Fixed pay | Short-term incentives | Long-term incentives | | --- | --- | --- | | Base salary – normal salary increases should be broadly in line with general workforce | Annual Bonus and Deferred Annual Bonus Scheme ('DABS') – maximum opportunity 150% of salary – 25% of any bonus is deferred into shares for three years | Restricted Share Awards ('RSAs') – maximum opportunity 75% of salary | | Benefits – maximum 15% of salary | | Shareholding guidelines – 200% of salary | | Pension – aligned with general workforce as a % of salary | | All-employee share plans – HMRC approved | ### Non-Executive Directors' remuneration Remuneration is set within the limits set by the Articles of Association. Non-Executive Directors are not entitled to pension contributions or other benefits provided by the Company and do not participate in any bonus plan or receive share awards. A Non-Executive Director base fee is paid with additional fees payable for roles with additional responsibilities. ### Pay scenario charts The charts below provide an illustration of the potential reward opportunities for the Executive Directors, and the potential split between the different elements of remuneration under four different performance scenarios: minimum, target, maximum and maximum with share price growth. ![img-7.jpeg](img-7.jpeg) In illustrating potential reward opportunities, the following assumptions have been made for each Executive Director: - salary effective 1 July 2022 - an approximated annual value of benefits - 5% of salary pension provision - a 106% of salary maximum annual bonus (with target assumed to be 80% of the maximum) - a 75% of salary RSA for the Chief Executive and a 62.5% of salary RSA for the Finance Director. These awards vest over five years with 50% vesting after three years and 25% after four and five years. Awards vest subject to continued service, satisfactory performance and a positive assessment of performance against an underpin - share appreciation of 50% for the RSA. Awards vest subject to continued service, satisfactory performance and a positive assessment of performance against an underpin - for simplicity, the value of any SIP awards are excluded Strategic report Governance Financial statements Shareholder information 93 ## Annual report on remuneration The following section provides details of how PayPoint's Remuneration Policy was implemented during the financial year ended 31 March 2022 and how it will be implemented for the year ending 31 March 2023. 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. ### Role of the Remuneration Committee 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 also reviews workforce remuneration and related policies and the alignment of incentives and rewards with culture. 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 HR 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. None of the above were 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 advisors to the Committee during the financial year. The Committee is comfortable that the FIT team provide independent remuneration advice to the Committee and do not have any other connections with PayPoint that may impair their independence. FIT is a founding member and signatory of the Code of Conduct for Remuneration Consultants, details of which can be found at www.remunerationconsultantsgroup.com. During the year, FIT provided independent advice on a range of remuneration matters including 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 £15,577 (excluding VAT). ### Summary of shareholder voting The following table shows the results of the binding vote on the Remuneration Policy Report at the 24 July 2020 annual general meeting and the advisory vote on the 2021 Annual Report on Remuneration at the 21 July 2021 annual general meeting: | | Remuneration Policy | | Remuneration Report | | | --- | --- | --- | --- | --- | | | Total number of votes | % of votes cast | Total number of votes | % of votes cast | | For (including discretionary) | 45,225,049 | 87.32% | 44,941,726 | 96.77% | | Against | 6,565,202 | 12.68% | 1,498,626 | 3.23% | | Total votes cast (excluding withheld votes) | 51,790,251 | | 46,440,352 | | | Total votes withheld^{1} | 315,310 | | 2,785,736 | | | Total votes cast (including withheld votes) | 52,105,561 | | 49,226,088 | | 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. ### 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 2022 and the prior year: | | Nick Wiles^{2} | | Alan Dale^{2} | | | --- | --- | --- | --- | --- | | | £'000 | | £'000 | | | | 2022 | 2021 | 2022 | 2021 | | Base salary earned | 470 | 447 | 300 | 109 | | Taxable benefits^{3} | 36 | 35 | 15 | 5 | | Pension^{4} | 23 | 19 | 15 | 5 | | Total fixed pay | 529 | 501 | 330 | 119 | | Annual bonus^{5} | 380 | 499 | 242 | 115 | | Long-term incentives^{6} | - | - | - | - | | Other^{7} | 2 | 1 | 2 | 1 | | Total variable pay | 382 | 500 | 244 | 116 | | Total remuneration | 911 | 1001 | 574 | 235 | 1. No pay increase was awarded to the Chief Executive during the year ended 31 March 2022. Nick Wiles took a voluntary 20% reduction in pay from April-June 2020, this is reflected in the 2021 base salary figure. Nick Wiles is a Board member of Snappy Shopper Limited although he receives no fees for this. 2. No pay increase was awarded to the Finance Director during the year ended 31 March 2022. Alan Dale was promoted to Finance Director in November 2020. The 2021 figures reflected a partial year in role. 3. Taxable value of benefits received in the year by Executive Directors relates to a benefits allowance and hotel costs (Chief Executive), car allowance, petrol, medical insurance, life assurance and permanent health insurance (Finance Director). 4. Pension during the year: the pension rate for Executive Directors was 5% of base salary, in line with the rate offered to the wider workforce. 5. Annual bonus: this is the total bonus earned in respect of performance during the relevant year, including any deferred amounts. 25% of the annual bonus is normally deferred in shares under the DABS. 6. Long-term incentives: for 2022 no values have been included for the 2019 LTIP award vesting as, based on interim performance measured to 31 March 2022, these awards are unlikely to vest. 7. SIP matching and dividend shares awarded in the period raised at the average share price calculated over three months to 31 March 2022 of £6.35 (2021, £6.07). The SIP is an HMRC-approved plan that allows participants to purchase shares using gross salary and receive matching awards from the Company. There are no performance conditions. PayPoint Plc Annual Report 202294 ## Directors’ Remuneration Report continued Single total figure of remuneration for the Chairman and Non-Executive Directors (audited) The table below sets out a single figure for the total remuneration received by the Chairman and each Non-Executive Director for the year ended 31 March 2022 and the prior year: | | Committee | Senior Independent | | | | | Total fixed | Total Variable | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Base fee | Chair fees | | Director fees | | Chairman fees | | remuneration | Remuneration | | | £’000 | £’000 | | | £’000 | | £’000 | £’000 | | £’000 | 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Chairman Giles Kerr¹ – – – – – – 165 143 165 143 – – Non-Executive Directors Gill Barr 49 49 – – – – – – 49 49 – – Giles Kerr – 6 – 1 – 1 – – – 8 – – Rakesh Sharma² 49 49 9 9 6 5 – – 64 63 – – Ben Wishart 49 49 – – – – – – 49 49 – – Rosie Shapland³ 49 25 9 2 – – – – 58 27 – – Total 196 178 18 12 6 6 165 143 385 339 – – 1. Giles Kerr was appointed Chairman from May 2020. 2. Rakesh Sharma was appointed Senior Independent Director in May 2020. 3. Rosie Shapland joined the Board as an Independent Non Executive Director eective 2 October 2020 and as Chair of the Audit Committee eective 1 December 2020. Non-Executive Directors do not receive any variable remuneration. No changes to the fees paid to Non-Executive Directors were made during the period. Changes in total fixed remuneration reflect changes in roles and responsibilities and appointments made during the year ended 31 March 2021. Shareholding guidelines PayPoint’s shareholding guidelines encourage a long-term focus and align the interests of Executive Directors with Shareholders. Executive Directors are required to build up a shareholding in the Company equal in value to 200% of their base salary. In employment they are required to retain 50% of any share award acquired on vesting (net of tax) until the guideline is achieved. Post-employment they are required to retain shares equal to 100% of the shareholding guideline up until the first anniversary of cessation. Between the first and second anniversary of cessation they will need to retain shares equal to 50% of the guideline. Executive Directors leaving the employment of PayPoint would be required to self-certify annually in writing post-cessation that they still hold the required shares as part of their termination agreement. Incentive outcomes for the year ended 31 March 2022 Annual bonus in respect of 2021/2022 performance (audited) The annual bonus for the year ended 31 March 2022 was based on a combination of Group profit before tax excluding exceptional items (‘PBT’), net revenue and strategic targets. Details of the performance against the Group profit before tax, net revenue and strategic targets are set out below. Profit before tax and net revenue targets: | | | | Threshold | | | Target | | Stretch | | Actual | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | (20% of maximum) | | | (80% of maximum) | | (100% of maximum) | | achieved | | | | Measure Maximum value | | | | £’000 | | £’000 | | £’000 | | £’000 Nick Wiles Alan Dale | | | Group profit | 64% of salary 42,500 | | | | | 44,000 | | 45,500 | 45,600¹ 64% of salary | | 64% of salary | 1 | before tax | (96.5% of target) | (100% of target) | | (103.4% of target) | | | (100 % of max) | (100% of max) | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Net revenue 21% of salary 119,600 | | | 123,900 | | 128,200 | 115,100 0% of salary 0% of salary | | | | | (96.5% of target) | (100% of target) | | (103.4% of target) | | | | | 1. The Group profit before tax value stated above excludes exceptional items which do not reflect underlying performance. Strategic report**Governance**^{}[] Financial statements^{}[] Shareholder information 95 # **Strategic targets:** Strategic targets for the annual bonus are set each year based on the Company's prevailing strategic objectives at that time. Targets are set on a measurable, quantifiable basis where possible, but due to the nature of the objective, may require some subjective assessment. | Target | Performance and bonus earned | | --- | --- | | Integration of acquisitions | Deliver synergies and growth opportunities through integrating acquisitions of Handepay, Merchant Rentals, i-movo and RSM 2000. | | Maximum value 5.3% of salary | Delivered: Integration work for acquisitions of Handepay, Merchant Rentals, RSM 2000 and i-movo completed, including a united sales team under a new Sales Director. YouLend business finance product offered to PayPoint retailers. Card switching proposition launched in PayPoint. | | | Assessment: Achieved at target. Payout 4.3% of salary (80% of maximum). | | Systems resiliency | Invest to further improve systems resiliency and application code quality. | | Maximum value 5.3% of salary | Delivered: New IT organisation and strategy implemented including two appointments to the Executive Board and new role leading settlement and billing engineering. Tooling implemented to manage code quality and third party library risks. | | | Assessment: Achieved at target. Payout 4.3% of salary (80% of maximum). | | Retailer proposition | Deliver further enhancements to our retailer proposition. | | Maximum value 5.3% of salary | Delivered: Proposition significantly enhanced with launch of new products including Counter Cash live in 2,624 sites, YouLend business finance product launched to PayPoint retailers, in excess of 1500 retailer leads introduced to Snappy Shopper of which 269 sites are live, enhanced e-commerce offering including Randox Covid-19 test kits and in-store merchandising of digital voucher category including Love2Shop. PMCG proposition launched with Blakemore (SPAR), initial campaign successful. | | | Assessment: Achieved at target. Payout 4.3% of salary (80% of maximum). | | Digital payments platform | Launch new digital payments platform. | | Maximum value 5.3% of salary | Delivered: Enhanced Direct Debit platform developed and live with Optivo. Strong pipeline of housing clients and charity team hired to build charity sector pipeline. MultiPay new product developments launched including next generation PayByLink service offering more payment and message options, app balance enquiries, recurring payments and low balance notifications via text rolled out. PayByLink and card payments integration complete with Northgate. | | | Assessment: Achieved at target. Payout 4.3% of salary (80% of maximum). | | Maximum value | 21% of salary. | | % of potential award | 80% of maximum. | | % of salary award | 17% of salary. | The above objectives have been assessed as achieved and the Remuneration Committee approved a payout of 80% of maximum of this part of the bonus award. # **Total bonus awards** The above performance resulted in the following bonus awards for the year: | | % of award | Maximum | Actual | | --- | --- | --- | --- | | PBT | 60% | 64% of salary | 64% of salary | | Net revenue | 20% | 21% of salary | 0% of salary | | Strategic targets | 20% | 21% of salary | 17% of salary | | Total | 100% | 106% of salary | 81% of salary | | | | | (76% of maximum) | The Committee considers that the outcomes indicated above are reflective of the performance delivered over the year. 25% of the total bonus awarded to the Executive Directors will be deferred into shares which will vest after three years from grant, subject to continued employment. PayPoint Plc Annual Report 202296 ## Directors’ Remuneration Report continued 2019 LTIP vesting (audited) With respect to the LTIP awards granted on 10 June 2019, vesting is based 50% on TSR and 50% on earnings per share (‘EPS’). The three-year performance period for these awards ends on 10 June 2022 for the TSR element and ended on 31 March 2022 for the EPS element 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 run to 31 March 2022: Outcome to | Measure Weighting Targets | | | | 31 March 2022¹ % vesting¹ | | --- | --- | --- | --- | --- | | Relative TSR vs FTSE 250 Index | 50% 0% vesting below median | | Below threshold 0% | | | (excluding companies in the oil and gas, | | 25% vesting at median | | | | mining and utilities sectors) | | 100% vesting at upper quartile | | | Straight-line vesting between these points EPS 50% 0% vesting at less than 5% p.a. Below threshold 0% 25% vesting at 5% p.a. 100% vesting at 12% p.a. or more Straight-line vesting between these points Total LTIP vesting 0% 1. Estimate based on an assessment of performance measured to 31 March 2022. Alan Dale is the only current Executive Director for whom any awards may vest as follows: Number Interests Implied % of shares Date of Value Director held vesting vesting vesting £’000 Alan Dale 4,502 0% 0 10 June 2022 0 Scheme interests awarded in the year ended 31 March 2022 (audited) RSAs In the year under review, RSAs were granted with a face value of 75% of salary for the Chief Executive and 62.5% of salary for the Finance Director. The RSAs made to Executive Directors once vested may not be sold until at least five years from grant date other than to settle any tax due. | Executive | Basis of | | | | | | --- | --- | --- | --- | --- | --- | | Director | award Number of shares Face value¹ Vesting profile Performance measures | | | | | | Nick Wiles 75% | | 55,863 £352,495 50% aer three years | | (a) continued service; | | | | of salary | | from grant, 25% aer | (b) satisfactory individual performance: and | | | | | | four years from grant | (c) a positive assessment of performance against | | | | | | and 25% aer five | | an underpin. | | | | | years from grant | Underpin: the Committee must be satisfied that | | PayPoint’s underlying performance and delivery Alan Dale 62.5% 29,714 £187,495 50% aer three years against its strategy and plans are sucient to of salary from grant, 25% aer justify the level of vesting, having regard to four years from grant such factors as the Committee considers to and 25% aer five be appropriate in the round (including revenue, years from grant earnings and share price performance) and the shareholder experience more generally (including the risk of windfall gains). 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, 12 August 2021, of £6.31. Financial statements Shareholder information 97Strategic report Governance Payments for loss of oce and to past Directors (audited) • There were no payments for loss of oce in the year ended 31 March 2022. • Rachel Kentleton stepped down from her position as Finance Director in June 2020 and details of final payments were noted in last year’s report. On 4 June 2021 her deferred annual bonus awards granted in 2018 vested and she received 6,720 shares with a gross value of £40,387. Her LTIP award granted in 2018 did not vest as the threshold performance conditions were not met. • Dominic Taylor stepped down as a Director with eect from 1 April 2019. On 4 June 2021 his deferred annual bonus awards granted in 2018 vested and he received 32,210 shares with a gross value of £193,582. His LTIP award granted in 2018 did not vest as the threshold performance conditions were not met. • Tim Watkin-Rees stepped down as a Director with eect from 31 March 2018. On 4 June 2021 his deferred annual bonus awards granted in 2018 vested and he received 7,107 shares with a gross value of £42,713. CEO pay ratio The data shows how the Chief Executive’s single figure remuneration for the year ended 31 March 2022 (as taken from the single figure remuneration table) compares to the equivalent single figure remuneration for full-time equivalent UK employees, on a Group basis, ranked at the 25th, 50th and 75th percentiles. The reduction in the pay ratio since 2021 is driven by the fact that no pay increase was awarded to the Chief Executive during the period and the bonus award made to the Chief Executive in respect of the year ended 31 March 2022 was lower than the award made in respect of the prior year. CEO single figure: £910,644 25th percentile 75th percentile Year Method pay ratio Median pay ratio pay ratio 2022 Option A 34:1 23:1 15:1 2021 Option A 42:1 29:1 17:1 No components of pay and benefits have been omitted for the purpose of the above calculations. Option A was selected given that this method of calculation was considered to be the robust approach in respect of gathering the required data. The underlying quartiles for salary and total remuneration numbers for full-time equivalent UK employees are set out below. Salary Total pay and benefits Year 25th percentile Median 75th percentile 25th percentile Median 75th percentile 2022 £22,255 £30,000 £51,587 £27,073 £39,138 £60,798 2021 £21,935 £30,000 £53,321 £23,663 £34,977 £59,399 The data for the three employees identified have been considered and fairly reflect pay at the relevant quartiles amongst the employee population. Annual percentage change in remuneration of Directors and employees The table below shows the percentage change in Director remuneration, comprising salary, taxable benefits and annual bonus, and comparable data for the average of all employees on a full-time equivalent basis within the Company. The data in this table has been calculated based on a combined total of the values paid for both the Chief Executive and Finance Director roles as disclosed in the single total figure table above. Base salary/Fee Benefits Annual bonus Executive Directors 1 Nick Wiles N/A N/A N/A 2 Alan Dale N/A N/A N/A Non-Executive Directors Gill Barr 0% N/A N/A 3 Giles Kerr N/A N/A N/A 4 Rakesh Sharma N/A N/A N/A Ben Wishart 0% N/A N/A 5 | Rosie Shapland | | N/A N/A N/A | | | | --- | --- | --- | --- | --- | | | 6 | | 7 | | | Employee population | | 6.2% -3.3% | | -0.3% | 1. Nick Wiles was appointed Chief Executive in May 2020 so there is no full-year comparison. 2. Alan Dale was appointed Finance Director in November 2020 so there is no full-year comparison. 3. Giles Kerr was appointed Chairman from May 2020 so there is no full-year comparison. 4. Rakesh Sharma was appointed Senior Independent Director in May 2020 and receives an annual fee for this so there is no full-year comparison. 5. Rosie Shapland joined the board in October 2020, there is no full-year comparison for this. 6. The data is based on employees who were employed by PayPoint for the entirety of both financial years but excludes those who were promoted to a new role. 7. There have been no changes to taxable benefits but the cost of providing these benefits has reduced. PayPoint Plc Annual Report 202298 ## Directors’ Remuneration Report continued 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 2021 and 31 March 2022. | Total employee | | Distributions | | | --- | --- | --- | --- | | pay expenditure | | to shareholders | | | | £’000 | | £’000 | 2022 34,076 23,096 2021 34,212 21,385 % change -4.5% 8% The reduction in expenditure for the year ended 31 March 2022 is driven mainly by a reduction in redundancy and termination costs compared to the prior year. Pay for performance The graph below compares the value of £100 invested in PayPoint shares, including reinvested dividends, with the FTSE 250 Index (excluding investment trusts) over the last ten 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. Total Shareholder Return (’TSR’) (rebased to 100) PayPoint plc FTSE 250 Index (excluding Investment Trusts) 200 100 0 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Chief Executive single figure of remuneration (£’000) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Annual bonus payout (as % of maximum) 86% 91% 88% 31% 64% 66% 71% 0% 100% 76% LTIP vesting (as % of maximum) 100% 100% 0% 0% 0% 30% 100% 32% 0% 0% 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 2022: Shares held Shareholding guidelines Unvested LTIP Unvested DABS awards subject Unvested RSA Owned and SIP awards to holding period awards subject Guideline outright or subject to and performance to holding period Current Guideline number of vested¹ holding period² conditions³ and underpin Shareholding⁴ % of salary shares⁵ Met? Nick Wiles 70,361 20,178 115,306 80,677 200 150,883 No Alan Dale 9,161 9,207 4,502 38,988 12,948 200 96,308 No 300 Giles Kerr 7,50 0 Gill Barr 2,595 Rakesh Sharma 4,270 Ben Wishart – Rosie Shapland – 1. Includes SIP shares other than SIP matching shares and SIP dividend shares subject to a holding period. 2. Includes unvested DABS shares, SIP matching shares and SIP dividend shares subject to a holding period. 3. Unvested LTIP awards. 4. Current shareholding includes unvested deferred bonus shares and SIP shares not subject to a holding period, on a net of tax basis. 5. A three-month average share price to 31 March 2022 of £6.23 has been used to calculate the holding relative to this guideline. The market price of the Company’s shares on 31 March 2022 was £5.82 per share (31 March 2021: £6.07 per share) and the low and high share prices during the period were £5.22 and £7.41 respectively. Financial statements Shareholder information 99Strategic report Governance Directors’ interests in shares in PayPoint long-term incentive plans and all-employee plans Long-Term Incentive Awards (audited) | | | Number | Number | Number | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Number of | of shares | of shares | of shares | Number of | | | | | | | | shares at | awarded | released | lapsed | shares at | Share price | | Value of | | | | Type of | 31 March | during the | during the | during the | 31 March | | at grant | shares | Date of | Lapse/ | 1 awards 2021 period period period 2022 £ awarded grant Release Nick Wiles RSA¹ 59,443 – – – 59,443 5.93 352,497 27.07.20 27.07.23 -27.07.25 RSA¹ – 55,863 – – 55,863 6.31 352,497 13.08.21 13.08.24 -13.08.26 Alan Dale² LTIP³ 4,566 – – 4,566 – 10.10 04.06.18 04.06.21 LTIP³ 4,502 – – – 4,502 10.50 47, 271 10.06.19 10.06.22 RSA¹ 9, 274 – – – 9,274 5.93 54,995 27.07. 20 27.07. 23 RSA¹ – 29,714 – – 29,714 6.31 187,495 13.08.21 13.08.24 -13.08.26 1. For RSAs to vest the Committee must be satisfied that PayPoint’s underlying performance and delivery against its strategy and plans are sucient to justify the level of vesting having regard to such factors as the Committee considers to be appropriate in the round (including revenue, earnings and share price performance) and the shareholder experience more generally (including the risk of windfall gains). 2. The awards granted to Alan Dale in 2018, 2019 and 2020 were made prior to his appointment to the Board. 3. 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, with full vesting occurring for upper quartile performance with pro rata vesting between points. 50% of LTIP awards will only vest if the Company’s EPS grows by 4% p.a., at which point 25% of awards will vest, with full vesting occurring for EPS growth of 10% p.a. with pro rata vesting between points. Deferred Annual Bonus Scheme¹ (audited) | | | Number | Number | Number | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Number of | | of shares | of shares | of shares | Number of | | | | | Value of | | | | shares at | | awarded | released | lapsed | shares at | | Share price | | | shares | | | | 31 March | | during the | during the | during the | 31 March | | | at grant | | awarded | | Lapse/ | | | 2021 | period | period | period | | 2022 | | | £ | | £ Date of grant | Release | Nick Wiles – 19,785 – – 19,785 6.31 124,843 13.08.21 13.08.24 Alan Dale² 709 – 709 – – 10.10 7,161 04.06.18 04.06.21 1,025 – – – 1,025 10.50 10,763 10.06.19 10.06.22 – 7, 231 – – 7,231 6.31 45,627 13.08.21 13.08.24 1. The release of shares is dependent upon continuous employment for a period of three years from the date of grant. 2. The awards granted to Alan Dale in 2018 and 2019 were made prior to his appointment to the Board. Share Incentive Plan (audited) | | Number of | | Number of | | Number of | | | | Number of | | Number of | | Number of | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | partnership | | matching | | | dividend | | | partnership | | matching | | dividend | | | | | | | | shares | | shares | | Shares¹ | | Total | | shares² | | Shares³ | | Shares | | | Total | | | purchased | | awarded at | | acquired at | | shares at | | purchased | | | awarded | acquired | | Dates of release | shares at | | | | at 31 March | | 31 March | | 31 March | | 31 March | | during the | | during the | | during the | | of matching and | 31 March | | | | | 2021 | | 2021 | | 2021 | | 2021 | | period | | period | | period | dividend Shares⁴ | | 2022 | | Nick Wiles 126 126 3 255 235 235 29 22.04.2024 | | | | | | | | | | | | | | | | | 754 | -22.03.2025 Alan Dale 761 761 208 1,730 236 236 112 22.04.2024 2,314 -22.03.2025 1. 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. 2. Partnership shares are ordinary shares of the Company purchased on a monthly basis during the period (at prices from £5.91 to £7.10). 3. Matching shares are ordinary shares of the Company awarded conditionally on a monthly basis during the period (at prices from £5.91 to £7.10). 4. The dates used are based on the earliest allocation of the matching shares. 100 PayPoint Plc Annual Report 2022 # Directors' Remuneration Report continued 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 | Company notice period | Contract date | | --- | --- | --- | | Nick Wiles | 12 months | 19 May 2020 | | Alan Dale | 12 months | 20 November 2020 | 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. 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 | Start of current three-year term | Unexpired term as at 31 March 2022 | Date of appointment | Notice period | | --- | --- | --- | --- | --- | | Gill Barr | 2 June 2021 | 26 months | 1 June 2015 | One month | | Giles Kerr | 20 November 2021 | 32½ months | 20 November 2015 | One month | | Rakesh Sharma | 12 May 2020 | 22½ months | 12 May 2017 | One month | | Ben Wishart | 14 November 2019 | 7½ months | 14 November 2019 | One month | | Rosie Shapland | 2 October 2020 | 18 months | 2 October 2020 | One 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. Shareholding guidelines PayPoint's shareholding guidelines encourage a long-term focus and align the interests of Executive Directors with Shareholders. Executive Directors are required to build up a shareholding in the Company equal in value to 200% of their base salary. In employment they are required to retain 50% of any share award acquired on vesting (net of tax) until the guideline has been met. Post-employment they are required to retain shares equal to 100% of the shareholding guideline up until the first anniversary of cessation. Between the first and second anniversary of cessation they will need to retain shares equal to 50% of the guideline. Executive Directors leaving the employment of PayPoint would be required to self-certify annually in writing post-cessation that they still hold the required shares as part of their termination agreement. Implementation of Remuneration Policy for year ending 31 March 2023 Base salary Current base salary levels, and those from 1 July 2022 (the normal salary review date), are as follows: | | From 1 July 2022 | From 1 July 2021 | % increase | | --- | --- | --- | --- | | Nick Wiles | £484,100 | £470,000 | 3% | | Alan Dale | £309,000 | £300,000 | 3% | Benefits Nick Wiles will continue to receive a £25,000 annual benefits allowance in respect of car allowance, petrol, life assurance, medical insurance and permanent health insurance. Alan Dale's benefits will continue to comprise a car allowance, petrol, medical insurance, life assurance and permanent health insurance. Pension Pension provision for Nick Wiles and Alan Dale, offered in the form of pension and/or a salary supplement, will continue to be 5% of salary, in line with the current workforce pension provision. Annual bonus Annual bonus potential will continue to be set at 106% of salary for both the Chief Executive and Finance Director. Full details of the annual bonus targets for the 2022/23 financial year and performance against the targets will be disclosed in next year's Annual Report on Remuneration. Strategic report Governance Financial statements Shareholder information 101 # **RSA** RSAs to be granted in 2022 will continue to: - be set at 75% of salary for the Chief Executive and 62.5% of salary for the Finance Director - vest 50% after three years from the grant date, 25% after four years from grant and 25% after five years from grant, subject to continued employment, satisfactory individual performance and a positive assessment of performance against the underpin (see below) No shares can be sold until at least five years from grant, other than those required to settle any taxes. For RSAs granted to Executive Directors to vest, in addition to continued service, the Committee must be satisfied that PayPoint's underlying performance and delivery against its strategy and plans are sufficient to justify the level of vesting, having regard to such factors as the Committee considers to be appropriate in the round (including revenue, earnings and share price performance) and the shareholder experience more generally (including the risk of windfall gains). # **Chairman and Non-Executive Director fees** Chairman and Non-Executive Director fees are as follows: | | From 1 July 2022 | From 1 April 2021 | | --- | --- | --- | | **Base fees** | | | | Chairman | **£169,950** | £165,000 | | Non-Executive Director | **£49,955** | £48,500 | | **Additional fees** | | | | Chairman, Audit Committee | **£9,476** | £9,200 | | Chairman, Remuneration Committee | **£9,476** | £9,200 | | Senior Independent Director | **£6,283** | £6,100 | 1. A 3% increase in Non-Executive Director fees has been agreed in line with the minimum increase being applied to the general workforce. Fees were last increased in April 2019. This Report covers the remuneration of all Directors who served during the period and was approved by the Board on 17 June 2022. **Rakesh Sharma** Chairman, Remuneration Committee 17 June 2022 PayPoint Plc Annual Report 2022102 ## Directors’ Report PayPoint Plc (the ‘Company’) is a public limited company incorporated As at 31 March 2022: in England and Wales, registration number 3581541. The Company is Number of Percentage of a holding company and its subsidiaries (a complete list of which can be Name of holder ordinary shares issued capital found in note 15 on pages 139 to 140) are engaged in providing Asteriscos Patrimonial and its group 13,751,061 19.95% innovative services and technology connecting millions of consumers Liontrust Asset Management 8,627,139 12.52% with over 60,000 retailer partner and SME locations across multiple 1 sectors. The Strategic Report on pages 01 to 69 provides a review of Schroder Investment Management 5,104,448 7.41% the business, the Group’s trading for the period ended 31 March 2022, Sanford Deland Asset Management 3,915,000 5.68% key performance indicators and an indication of future developments. Brown Capital Management 3, 831,743 5.56% Directors’ Report content Columbia Threadneedle Investments 3, 457,15 0 5.02% As required by the Companies Act 2006 and the Disclosure Guidance Premier Miton Investors 2,428,926 3.52% and Transparency Rule (‘DTR’) 4.1.8.R, the Directors’ Report for PayPoint Plc comprises these pages 102 to 103 together with information in the following sections of the annual report and accounts, all of which are The following notification(s) have been received since 1 April 2022 incorporated into this Directors’ Report by reference: up to 17 June 2022. Any subsequent notifications can be found on our website: corporate.paypoint.com/investor-centre/announcements. Information Location in annual report | Review of the business, principal | Chief Executive’s Review; Our | | | Number of | Percentage of | | --- | --- | --- | --- | --- | --- | | | | Name of holder | ordinary shares | | issued capital | | risks and uncertainties, emerging | Business Model; Year in Review; | | | | | | risks and KPIs | Our Strategy; Key Performance | Asteriscos Patrimonial and its group 14,480,095 21.011% | | | | | | Indicators, Financial Review and | Liontrust Asset Management 8,578,190 12.446% | | | | Principal Risks and Uncertainties (includes emerging risks) All notifications made to the Company under DTR 5 are published Strategy and business model Our Strategy; Our Business model via a Regulatory Information Service and made available on the | Future business developments Our Strategy | | Company’s website. | | --- | --- | --- | | GHG emissions and non-financial | Responsible Business and | | | reporting: | Audit Committee Report | Share capital | | Environmental matters | | As at 31 March 2022 68,921,442 ordinary shares of 0.03 pence each | | Anti-corruption and Anti-bribery | | have been issued and fully paid up and are quoted on the London | Stock Exchange. During the year ended 31 March 2022, 103,193 Employment for disabled persons Responsible business, ordinary shares were issued under the Company’s share schemes and and employee engagement Corporate Governance Report 155, 851 shares were issued following the acquisition of i-movo in throughout the workforce S.172(1) Statement FY2021. The rights and obligations attaching to the Company’s ordinary Gender diversity Responsible Business shares, as well as the powers of the Company’s Directors are set out in Business relationships, Engagement with stakeholders the Company’s Articles of Association, copies of which can be obtained stakeholders and their eect and S.172(1) Statement from Companies House or by writing to the Company Secretary. on decisions Use of financial instruments Financial Review and note 27 There are no restrictions on the voting rights attaching to the ordinary and credit 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 This annual report has been prepared for, and only for, the members holders of securities that may result in restrictions on the transfer of of the Company, as a body, and no other persons. The Company, its securities or on voting rights. Unless expressly specified to the contrary Directors, employees, agents or advisors do not accept or assume in the Articles of Association of the Company, the Company’s Articles responsibility to any other person to whom this document is shown or of Association may be amended by a special resolution of the into whose hands it may come and any such responsibility or liability is Company’s shareholders. expressly disclaimed. As at 31 March 2022, the PayPoint Network Limited Employee Incentive By their nature, the statements concerning the risks and uncertainties Trust (the ‘Trust’) held 769 ordinary shares in the Company for allocation facing the Group in this annual report involve uncertainty since future under the Company’s share schemes. Any voting or other similar events and circumstances can cause results and developments to dier decisions in relation to the shares held by the Trust would be taken by materially from those anticipated. The forward-looking statements the trustees, who may take account of any recommendations of the reflect knowledge and information available at the date of preparation of Company. The Trustees have waived their right to receive dividends of this annual report and the Company undertakes no obligation to update the shares held in the Company. these forward-looking statements. Nothing in this annual report should be construed as a profit forecast. At the annual general meeting on 20 July 2021, the Directors were given authority to purchase up to 10% of the Company’s issued share capital, Substantial shareholdings allot relevant securities up to an aggregate nominal amount of £152,570 The Company had been notified of the following disclosable interests and to disapply pre-emption rights in respect of allotments of relevant in the voting rights of the Company as required by DTR 5 of the FCA’s securities up to an aggregate nominal amount of £11,443 with a further Disclosure Guidance and Transparency Rules. £11,443 for limited purposes. Resolutions to renew these authorities will be proposed at the 2022 annual general meeting, details of which are set out in the Notice of Annual General Meeting on pages 156 to 162. Directors The names of the Directors at the date of this report and their biographical details are on pages 72 to 73. Their interests in the ordinary shares of the Company are on page 98. Directors are appointed and replaced in accordance with the Company’s Articles of Association, the Companies Act 2006 and the Code. The powers of the Directors are set out in the Articles of Association and the Companies Act 2006. 1. Holding includes CFD 1,918 shares. Strategic report Governance Financial statements Shareholder information 103 # **Results for the year** The consolidated statements of profit or loss, comprehensive income, financial position, changes in equity and cash flows for the year ended 31 March 2022 are set out on pages 111 to 116. An analysis of risk is set out on pages 55 to 58, and of risk management on page 54. # **Indemnity provisions for the benefits of Directors** In addition to the indemnity provisions in the Articles of Association, the Company has entered into direct indemnity agreements with each of the Directors. These indemnities constitute qualifying indemnities for the purposes of the Companies Act 2006 and remain in force at the date of approval of this report without any payment having been made under them. The Company also maintains directors' and officers' liability insurance which gives appropriate cover for any legal action brought against its Directors. # **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 £70 million, £5 million ancillary facilities; and a £21.7 million term loan, which expire on 11 February 2024, with the option to extend for one year. The terms of the facility (which includes the ancillary facilities and loan) allow for termination on a change of control, subject to certain conditions. 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. Further information can be obtained from the government's payment practice reporting portal. # **Charitable and political donations** The Group made no political donations during the year (2021: nil). Details of the charitable donations policy can be found within the Responsible Business section of the annual report on page 47. # **Related party transactions** Related party transactions that took place during the year can be found in note 30. # **Dividends** Dividends are paid quarterly in July, September, December and March. We have declared a final dividend of 18.0 pence per share (2021: 16.6 pence per share) payable in equal instalments of 9.0 pence per share (2021: 8.3 pence per share) on 25 July 2022 and 30 September 2022 to shareholders on the register on 10 June 2022 and 2 September 2022 respectively. The final dividend is subject to the approval of the shareholders at the annual general meeting on 20 July 2022. The final dividends will result in £12.4 million (2021: £11.4 million) being paid to shareholders from the standalone statement of financial position of the Company which, as at 31 March 2022, had approximately £67.9 million (2021: £59.7 million) of distributable reserves. An interim ordinary dividend of 17.0 pence (2021: 15.6 pence) was paid in equal instalments of 8.5 pence on 30 December 2021 and 7 March 2022. The dividend policy including all the dividends declared during the year is set out in the Financial Review on page 68. # **Going concern** As at 31 March 2022 the Group had £43.9 million of net debt. As at 31 March 2022, the Group had cash and cash equivalents of £24.3 million, including £16.6 million of clients' funds and retailer partners' deposits. In addition, following the Group-wide refinancing in the prior year and a subsequent one-year extension which was secured after the end of the current financial year, the Group's borrowing facilities consist of a £21.7 million amortising term loan which is due to be fully repaid over the next two financial years and an unsecured £75.0 million revolving credit facility with a £30.0 million accordion facility (uncommitted) expiring in February 2025. The Company's cash and borrowing capacity is adequate to meet the foreseeable needs of the Group, taking into account any risks (see pages 55 to 58). 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 59 of the Strategic Report and commentary on financial risk management is shown in note 27. # **Independent auditor** KPMG LLP have expressed their willingness to continue as the Company's auditor and a resolution for their reappointment will be proposed at the forthcoming annual general meeting. The Notice of Annual General Meeting can be found on pages 156 to 162. # **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 76 to 81 (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 2. The Director has taken all the steps that he/she ought reasonably to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006. # **Annual general meeting** The annual general meeting will be held at PayPoint's head office, 1 The Boulevard, Shire Park, Welwyn Garden City AL7 1EL on 20 July 2022 at 12 noon. The Notice of Annual General Meeting and explanatory information on the resolutions to be passed at the annual general meeting can be found on pages 156 to 162. The Directors' Report was approved by the Board and signed on its behalf by: **Brian McLelland** **Company Secretary** 17 June 2022 ![img-8.jpeg](img-8.jpeg) PayPoint Plc Annual Report 2022104 ## Statement of Directors’ responsibilities in respect of the annual report and the financial statements The directors are responsible for preparing the Annual Report and Under applicable law and regulations, the directors are also responsible the Group and parent Company financial statements in accordance for preparing a Strategic Report, Directors’ Report, Directors’ with applicable law and regulations. Remuneration Report and Corporate Governance Statement that complies with that law and those regulations. Company law requires the directors to prepare Group and parent Company financial statements for each financial year. Under that The directors are responsible for the maintenance and integrity of the law they are required to prepare the Group financial statements in corporate and financial information included on the company’s website. accordance with UK-adopted international accounting standards Legislation in the UK governing the preparation and dissemination of and applicable law and have elected to prepare the parent Company financial statements may dier from legislation in other jurisdictions. financial statements on the same basis. In accordance with Disclosure Guidance and Transparency Rule 4.1.14R, Under company law the directors must not approve the financial the financial statements will form part of the annual financial report statements unless they are satisfied that they give a true and fair view prepared using the single electronic reporting format under the TD ESEF of the state of aairs of the Group and parent Company and of the Regulation. The auditor’s report on these financial statements provides Group’s profit or loss for that period. In preparing each of the Group no assurance over the ESEF format. and parent Company financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; Responsibility statement of the directors in respect of the • make judgements and estimates that are reasonable, relevant annual financial report and reliable; We confirm that to the best of our knowledge: • state whether they have been prepared in accordance with • the financial statements, prepared in accordance with the applicable international accounting standards in conformity with the set of accounting standards, give a true and fair view of the assets, requirements of the Companies Act 2006 and, as regards the Group liabilities, financial position and profit or loss of the company and the financial statements UK-adopted international accounting standards; undertakings included in the consolidation taken as a whole; and • assess the Group and parent Company’s ability to continue as a • the strategic report includes a fair review of the development and going concern, disclosing, as applicable, matters related to going performance of the business and the position of the issuer and concern; and the undertakings included in the consolidation taken as a whole, • use the going concern basis of accounting unless they either together with a description of the principal risks and uncertainties intend to liquidate the Group or the parent Company or to that they face. cease operations, or have no realistic alternative but to do so. We consider the annual report and accounts, taken as a whole, is fair, The directors are responsible for keeping adequate accounting balanced and understandable and provides the information necessary records that are sucient to show and explain the parent Company’s for shareholders to assess the Group’s position and performance, transactions and disclose with reasonable accuracy at any time the business model and strategy. financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. ### Alan Dale They are responsible for such internal control as they determine is ### Finance Director necessary to enable the preparation of financial statements that are ### free from material misstatement, whether due to fraud or error, and have 17 June 2022 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. Strategic report Governance Financial statements Shareholder information 105 # Independent Auditor's Report ### 1 Our opinion is unmodified We have audited the financial statements of PayPoint plc ("the Company") for the year ended 31 March 2022 which comprise the Consolidated Statement of Profit or Loss, 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 2022 and of the Group's profit for the year then ended; - the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards; - the parent Company financial statements have been properly prepared in accordance with UK-adopted international accounting standards 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. # Basis for opinion 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 first appointed as auditor by the directors on 15 August 2017. The period of total uninterrupted engagement is for the five financial years ended 31 March 2022. 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. ### 2 Key audit matters: our assessment of risks of material misstatement Key audit matters are those matters that, in our professional judgement, 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. | | The risk | Our response | | --- | --- | --- | | Revenue recognition (part of the revenue within a total of £145.1 million; 2021: £127.7 million). Refer to page 85 (Audit Committee Report), page 121 (accounting policy) and page 127 (financial disclosures). | Data capture and processing error: The risk is that revenue transacted through the groups network of terminals 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 data does not correctly flow through the IT systems. | Our procedures included: - Control design and operation: Testing controls, and mitigating controls over the general IT environment, with the support of our IT specialists to assess whether the transaction recording, 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; - Control operation: Testing key automated controls (with the support of our IT specialists) and manual controls, including controls that are designed to ensure reconciliations are performed between system reports used to generate invoices and off-site terminal network systems; - Tests of details: Using data analytical tools to test that revenue invoiced agrees through to cash received; and - Tests of details: On a statistical sample basis, agreeing revenue recorded back to supporting documentation including examination of cash receipts from clients or third-party confirmations. Our results The results of our procedures were satisfactory, and we considered the amount of revenue recognised to be acceptable (2021: acceptable). | PayPoint Plc Annual Report 2022106 ## Independent Auditor’s Report continued 2 Key audit matters: our assessment of risks of material misstatement continued The risk Our response | Acquisition accounting | Accounting application: | Our procedures included: | | | --- | --- | --- | --- | | in relation to RSM 2000 | On 12 April 2021 PayPoint plc acquired | • Our valuation expertise: Engaging our valuation specialists to | | | (£5.6 million; 2021: nil). | the entire share capital of RSM 2000 | | support the audit team to review the valuation methodology | | | Limited for consideration of £6.9 million. | | applied and certain key assumptions included within; | | Refer to page 86 (Audit | | • Assessing forecasts: Assessing the forecasts prepared by | | | Committee Report), | We identify the valuation of RSM 2000 | | management in relation to buyer-specific synergies; | | page 124 (accounting | intangibles at acquisition as a risk because | • Management discussions: Discussing the rationale for the | | | policy) and page 140 | of the inherent complexity, and judgement | | acquisition with relevant members of the management team | | (financial disclosures). | involved in determining an appropriate | | to corroborate the ongoing value of assets such as the licences, | | | valuation methodology, the proportion | | the RSM 2000 brand, and IT systems; and | | | of goodwill recorded versus acquired | • Assessing transparency: Assessing whether the Group’s | | | | intangibles, and because of the size of the | | disclosures detailing the sensitivity relating to key assumptions | | | acquisition. Auditor judgement is required | | on the valuation of acquired intangibles are adequate. | to assess whether the Group’s overall judgement reached is acceptable. We performed the tests above rather than seeking to rely on any of the Group’s controls because the small number of transactions The eect of these matters is that, as meant that detailed testing is inherently the most eective means part of our risk assessment for audit of obtaining audit evidence. planning purposes, we determined that | the recorded intangibles had a high degree | Our results | | --- | --- | | of estimation uncertainty, with a potential | We found the resulting treatment of RSM 2000 acquisition | | range of reasonable outcomes greater | accounting to be acceptable. We found the Group’s disclosures | | than our materiality for the financial | to be acceptable in their description of the accounting treatment | | statements as a whole. In conducting our | relating to the acquisition of RSM 2000. | final audit work, we reassessed the degree of estimation uncertainty to be less than that of materiality. Acquisition accounting Subjective estimate: Our procedures included: in relation to i-movo Acquisition-related liabilities include • Accounting analysis: Using our accounting expertise to assess (£nil; 2021: £5.7 million). performance based earnouts which are the appropriateness of the approach to valuation; estimated future payments to previous • Tests of details: Assessing whether the basis of the calculation Refer to page 87 (Audit owners of the i-movo business, which of the earnout payment remains appropriate with reference to the Committee Report), was acquired in 2021. terms of the Sale and Purchase Agreement; and page 126 (accounting • Assessing transparency: Assessing the adequacy of the Group’s policy) and page 144 The estimated future payments are based disclosures in relation to the earnout liability. (financial disclosures). on four revenue related targets of the acquired entity. The potential earnout We performed the tests above rather than seeking to rely on any liability is material to the Group financial of the Group’s controls because the small number of transactions statements. meant that detailed testing is inherently the most eective means of obtaining audit evidence. The eect of these matters is that, as part of our risk assessment for audit planning Our results purposes, we determined that the recorded We found the earnout liability balance and related disclosures to liability had a high degree of estimation be acceptable. uncertainty, with a potential range of reasonable outcomes greater than our materiality for the financial statements as a whole. In conducting our final audit work, we reassessed the degree of estimation uncertainty to be less than that of materiality. Strategic report Governance Financial statements Shareholder information 107 | | The risk | Our response | | --- | --- | --- | | **Recoverability of group goodwill in relation to i-movo and of parent's investment in subsidiary in relation to i-movo** (Group: £8.8 million; 2021: £9.0 million; Parent: £8.4 million; 2021: £8.4 million). *Refer to page 86 (Audit Committee Report), pages 124 and 125 (accounting policy) and pages 135 and 139 (financial disclosures).* | **Forecast-based assessment:** Goodwill in the group and the carrying amount of the parent Company's investment in subsidiary are significant and at risk of irrecoverability due to the performance of aspects of the i-movo business versus prior forecasts. The estimated recoverable amount of these balances is subjective due to the inherent uncertainty involved in forecasting and discounting future cash flows. The effect of these matters is that, as part of our risk assessment, we determined that the value in use of goodwill and the recoverable amount of the cost of investment in subsidiary have a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our materiality for the financial statements as a whole, and possibly many times that amount. | Our procedures included: - **Our sector experience:** Evaluating the current level of trading, in particular trade relating to a government contract, and the newspaper business by considering our knowledge of the Group and the market; - **Benchmarking assumptions:** Benchmarking the assumptions used in the cash flows included in the budgets based on key inputs such as numbers of newspaper subscribers and government contract users; - **Sensitivity analysis:** Performing sensitivity analysis which considered reasonably possible changes in the key assumptions that had the greatest judgements and their impact on the valuation, including newspaper subscribers and government contract users; - **Historical comparisons:** Assessing the reasonableness of the budgets by considering the historical accuracy of the Group's ability to forecast accurately and comparing to previous assumptions; and - **Assessing transparency:** Assessing the adequacy of the Group's disclosures in respect of goodwill recoverability, and parent Company's disclosures in respect of the investment in subsidiary. We performed the detailed tests above rather than seeking to rely on any of the Group or parent Company's controls because our knowledge of the design of these controls indicated that we would not be able to obtain the required evidence to support reliance on controls. **Our results** We found the goodwill balance without any impairment in the period in the group, and the parent Company's investment in subsidiary to be acceptable. | Last year, in response to a material acquisition in the period, we reported the valuation of Handepay and Merchant Rentals intangible assets as a key audit matter. We have not identified the valuation of assets of the business combination – forecast based valuation, arising in the current year as a risk of significant importance. ### 3 Our application of materiality and an overview of the scope of our audit Materiality for the Group financial statements as a whole was set at £2.0m (2021: £2.0m), determined with reference to a benchmark of Group profit before tax from continuing operations normalised to exclude this year's exceptional items as disclosed in note 6 (2021: Group profit before tax from continuing operations normalised to exclude exceptional items as disclosed in note 6 and by averaging over three years to address the volatility due to Covid-19, of £46.1 million) of which it represents 4.4% (2021: 4.4%). Materiality for the parent company financial statements as a whole was set at £1.0 million (2021: £0.8 million), determined with reference to a benchmark of Company total assets, of which it represents 0.57% (2021: 0.75%). In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality was set at 75% (2021: 75%) of materiality for the financial statements as a whole, which equates to £1.5 million (2021: £1.5 million) for the group and £0.75 million (2021: £0.6 million) for the parent company. We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk. We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £0.1 million (2021: £0.1 million), in addition to other identified misstatements that warranted reporting on qualitative grounds. Of the group's 14 (2021: 13) reporting components, we subjected six (2021: five) to full scope audits for group purposes. The group team performed procedures on the items excluded from normalised group profit before tax. The components within the scope of our work accounted for the percentages illustrated on the following page. For the residual components, we performed analysis at an aggregated group level to re-examine our assessment that there were no significant risks of material misstatement within these. The Group team approved the component materialities, which ranged from £0.35 million to £1.40 million (2021: £0.80 million to £1.60 million), having regard to the mix of size and risk profile of the Group across the components. The work on all components, including the audit of the parent Company, was performed by the Group audit team. In the prior year, work on one component was performed by the component auditor. We were able to rely upon the Group's internal control over financial reporting in several areas of our audit, where our controls testing supported this approach, which enabled us to reduce the scope of our substantive audit work; in the other areas the scope of the audit work performed was fully substantive. PayPoint Plc Annual Report 2022108 ## Independent Auditor’s Report continued Group normalised profit before Group materiality 4 Impact of climate change on our audit tax from continuing operations £2.0m (2021: £2.0m) In planning our audit we have considered the potential impacts of climate £45.6m (2021: PBT £46.1m) change on the Group’s business and its financial statements. The Group’s £2.0m business model does not include extractive or high pollutive activities Whole financial that are a significant contributor to climate change. The Group’s main statements materiality (2021: £2.0m) exposure to climate risk is the shiing expectations from business stakeholders to transition to low-carbon supply chains and greater emphasis on climate related disclosures in the annual report. As part of our audit we made enquiries of management and inspected minutes from the Climate Risk Committee meetings held throughout the year, to understand the Group’s assessment and preparedness for climate change. We have performed a risk assessment on how the £1.5m impact of climate change may aect the financial statements and our Range of materiality at six components audit, and taking into account headroom on goodwill and nature of the (£1.40m to £0.35m) Group’s assets and liabilities, concluded that there was no significant (2021: £1.6m to £0.8m) impact on our key audit matters, including impairment forecasts, or key | | £100k | areas of our audit. | | --- | --- | --- | | Group normalised | Misstatements reported | | | profit before tax from | to the Audit Committee | | We have also read the Group’s and Parent Company’s disclosure of continuing operations (2021: £100k) climate related information in the front half of the annual report as set Group materiality out on pages 38 to 43 and considered consistency with the financial statements and our audit knowledge. 5 Going concern Group revenue Group profit before tax The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Company or to cease their operations, and as they have concluded that the Group’s and the Company’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of ## 94% 95% approval of the financial statements (“the going concern period”). (2021: 97%) (2021: 95%) We used our knowledge of the Group, its industry, and the general 97 95 economic environment to identify the inherent risks to its business model and analysed how those risks might aect the Group’s and 94 95 Company’s financial resources or ability to continue operations over the going concern period. The risk that we considered most likely Group total assets Group normalised to adversely aect the Group’s and Company’s available financial profit before tax from resources over this period was lower than expected trading volumes. continuing operations We also considered less predictable but realistic second order impacts, such as a significant cyber incidence, or the erosion of customer or supplier confidence, which could result in a rapid reduction of available financial resources. ## 94% 92% We considered whether these risks could plausibly aect the liquidity or (2021: 94%) (2021: 94%) covenant compliance in the going concern period by comparing severe, but plausible downside scenarios that could arise from these risks individually and collectively against the level of available financial resources 94 94 and covenants indicated by the Group and Company’s financial forecasts. 94 92 We considered whether the going concern disclosure in note 1 to Full scope for Group the financial statements gives a full and accurate description of the audit purposes 2022 Directors’ assessment of going concern, including the identified risks Full scope for Group and related sensitivities. audit purposes 2021 Residual components Our conclusions based on this work: • we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate; • we have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Group’s or Company’s ability to continue as a going concern for the going concern period; • we have nothing material to add or draw attention to in relation to the directors’ statement in note 1 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 the going concern period, and we found the going concern disclosure in note 1 to be acceptable; and Shareholder information 109Strategic report Governance Financial statements • the related statement under the Listing Rules set out on page 103 As the Group is regulated, our assessment of risks involved gaining is materially consistent with the financial statements and our audit an understanding of the control environment including the entity’s knowledge. procedures for complying with regulatory requirements. However, as we cannot predict all future events or conditions and as We communicated identified laws and regulations throughout our team and subsequent events may result in outcomes that are inconsistent with remained alert to any indications of non-compliance throughout the audit. judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group or the Company will The potential eect of these laws and regulations on the financial continue in operation. statements varies considerably. 6 Fraud and breaches of laws and regulations – ability to detect Firstly, the Group is subject to laws and regulations that directly Identifying and responding to risks of material misstatement due aect the financial statements including financial reporting legislation to fraud (including related companies legislation), distributable profits legislation, To identify risks of material misstatement due to fraud (“fraud risks”) and taxation legislation, and we assessed the extent of compliance with we assessed events or conditions that could indicate an incentive or these laws and regulations as part of our procedures on the related pressure to commit fraud or provide an opportunity to commit fraud. financial statement items. Our risk assessment procedures included: • Enquiring of directors, the audit committee, internal audit and Secondly, the Group is subject to many other laws and regulations where inspection of policy documentation as to the Group and Company’s the consequences of non-compliance could have a material eect on high-level policies and procedures to prevent and detect fraud, amounts or disclosures in the financial statements, for instance through including the internal audit function, and the Group and Company’s the imposition of fines or litigation. We identified the following areas as channel for “whistleblowing”, as well as whether they have knowledge those most likely to have such an eect: payment services legislation, of any actual, suspected or alleged fraud. data protection laws, anti-bribery, regulatory capital and liquidity, • Reading Board minutes, and by attending Audit Committee meetings. and certain aspects of company legislation recognising the financial • Considering remuneration incentive schemes and performance and regulated nature of the Group’s activities to provide payments targets for management, and directors including the profit before tax services and its legal form. Auditing standards limit the required audit and net revenue targets for management remuneration. procedures to identify non-compliance with these laws and regulations • Using analytical procedures to identify any unusual or unexpected to enquiry of the directors and other management and inspection of relationships. regulatory and legal correspondence, if any. Therefore if a breach of • Our forensic specialists assisted us in identifying key fraud risks. operational regulations is not disclosed to us or evident from relevant This included holding a discussion with the engagement partner, correspondence, an audit will not detect that breach. engagement manager and engagement quality control reviewer, and assisting with designing relevant audit procedures to respond to the For the regulatory matter discussed in note 21 we assessed disclosures identified fraud risks. against our understanding from regulatory correspondence and used our compliance specialists to help us assess the treatment and disclosure. We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit. Context of the ability of the audit to detect fraud or breaches of law or regulation As required by auditing standards, and taking into account possible Owing to the inherent limitations of an audit, there is an unavoidable pressures to meet profit targets, we perform procedures to address the risk that we may not have detected some material misstatements in risk of management override of controls, in particular the risk that Group the financial statements, even though we have properly planned and and component management may be in a position to make inappropriate performed our audit in accordance with auditing standards. For example, accounting entries. On this audit we do not believe there is a fraud risk the further removed non-compliance with laws and regulations is from related to revenue recognition because the revenue recognition policy the events and transactions reflected in the financial statements, is simple and its application involves a low degree of estimation and the less likely the inherently limited procedures required by auditing judgement. standards would identify it. We did not identify any additional fraud risks. In addition, as with any audit, there remained a higher risk of non- detection of fraud, as fraud may involve collusion, forgery, intentional We performed procedures including: omissions, misrepresentations, or the override of internal controls. Our • Identifying journal entries to test for all full scope components audit procedures are designed to detect material misstatement. We are based on risk criteria and comparing the identified entries to not responsible for preventing non-compliance or fraud and cannot be supporting documentation. These included those posted to expected to detect non-compliance with all laws and regulations. unusual accounts, and round number adjustments to provisions. • Evaluated the business purpose of significant unusual transactions. 7 We have nothing to report on the other information in the • Assessing whether the judgements made in making accounting Annual Report estimates are indicative of a potential bias. The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion We discussed with the Audit Committee matters related to actual or on the financial statements does not cover the other information and, suspected fraud, for which disclosure is not necessary, and considered accordingly, we do not express an audit opinion or, except as explicitly any implications for our audit. stated below, any form of assurance conclusion thereon. Identifying and responding to risks of material misstatement Our responsibility is to read the other information and, in doing so, related to compliance with laws and regulations consider whether, based on our financial statements audit work, the We identified areas of laws and regulations that could reasonably be information therein is materially misstated or inconsistent with the expected to have a material eect on the financial statements from our financial statements or our audit knowledge. Based solely on that work general commercial and sector experience, and through discussion with we have not identified material misstatements in the other information. the directors and other management (as required by auditing standards) and discussed with the directors and other management the policies and The Company is required to include these financial statements in an procedures regarding compliance with laws and regulations. annual financial report prepared using the single electronic reporting format specified in the TD ESEF Regulation. This auditor’s report provides no assurance over whether the annual financial report has been prepared in accordance with that format. PayPoint Plc Annual Report 2022110 ## Independent Auditor’s Report continued Strategic report and directors’ report We are required to review the part of the Corporate Governance Based solely on our work on the other information: Statement relating to the Group’s compliance with the provisions • we have not identified material misstatements in the strategic of the UK Corporate Governance Code specified by the Listing Rules report and the directors’ report; for our review. We have nothing to report in this respect. • in our opinion the information given in those reports for the financial year is consistent with the financial statements; and 8 We have nothing to report on the other matters on which we • in our opinion those reports have been prepared in accordance are required to report by exception with the Companies Act 2006. Under the Companies Act 2006, we are required to report to you if, in our opinion: Directors’ remuneration report • adequate accounting records have not been kept by the parent In our opinion the part of the Directors’ Remuneration Report to Company, or returns adequate for our audit have not been received be audited has been properly prepared in accordance with the from branches not visited by us; or Companies Act 2006. • the parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement Disclosures of emerging and principal risks and with the accounting records and returns; or longer-term viability • certain disclosures of directors’ remuneration specified by law are not We are required to perform procedures to identify whether there is a made; or material inconsistency between the directors’ disclosures in respect • we have not received all the information and explanations we require of emerging and principal risks and the viability statement, and the for our audit. financial statements and our audit knowledge. We have nothing to report in these respects. Based on those procedures, we have nothing material to add or draw attention to in relation to: 9 Respective responsibilities • the directors’ confirmation within the Corporate Governance Directors’ responsibilities Report on page 55 that they have carried out a robust assessment As explained more fully in their statement set out on page 104, the of the emerging and principal risks facing the Group, including those directors are responsible for: the preparation of the financial statements that would threaten its business model, future performance, solvency including being satisfied that they give a true and fair view; such internal and liquidity; control as they determine is necessary to enable the preparation of • the Principal risks and uncertainties disclosures describing these financial statements that are free from material misstatement, whether risks and how emerging risks are identified, and explaining how due to fraud or error; assessing the Group and parent Company’s ability they are being managed and mitigated; and to continue as a going concern, disclosing, as applicable, matters related • the directors’ explanation in the viability statement of how they have to going concern; and using the going concern basis of accounting assessed the prospects of the Group, over what period they have unless they either intend to liquidate the Group or the parent Company done so and why they considered that period to be appropriate, and or to cease operations, or have no realistic alternative but to do so. their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet Auditor’s responsibilities its liabilities as they fall due over the period of their assessment, Our objectives are to obtain reasonable assurance about whether the including any related disclosures drawing attention to any necessary financial statements as a whole are free from material misstatement, qualifications or assumptions. whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does We are also required to review the viability statement, set out on not guarantee that an audit conducted in accordance with ISAs page 59 under the Listing Rules. Based on the above procedures, (UK) will always detect a material misstatement when it exists. we have concluded that the above disclosures are materially Misstatements can arise from fraud or error and are considered consistent with the financial statements and our audit knowledge. material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on Our work is limited to assessing these matters in the context of only the basis of the financial statements. the knowledge acquired during our financial statements audit. As we cannot predict all future events or conditions and as subsequent events A fuller description of our responsibilities is provided on the FRC’s may result in outcomes that are inconsistent with judgements that website at www.frc.org.uk/auditorsresponsibilities. were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the Group’s and 10 The purpose of our audit work and to whom we owe our Company’s longer-term viability. responsibilities This report is made solely to the Company’s members, as a body, in Corporate governance disclosures accordance with Chapter 3 of Part 16 of the Companies Act 2006. We are required to perform procedures to identify whether there is a Our audit work has been undertaken so that we might state to the material inconsistency between the directors’ corporate governance Company’s members those matters we are required to state to them disclosures and the financial statements and our audit knowledge. 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 Based on those procedures, we have concluded that each of the other than the Company and the Company’s members, as a body, for following is materially consistent with the financial statements and our audit work, for this report, or for the opinions we have formed. our audit knowledge: • the directors’ statement that they consider that the annual ### James Tracey report and financial statements taken as a whole is fair, balanced ### (Senior Statutory Auditor) and understandable, and provides the information necessary for ### shareholders to assess the Group’s position and performance, for and on behalf of KPMG LLP, business model and strategy; ### Statutory Auditor • the section of the annual report describing the work of the ### 17 June 2022 Audit Committee, including the significant issues that the audit committee considered in relation to the financial statements, | | and how these issues were addressed; and | Chartered Accountants | | --- | --- | --- | | • the section of the annual report that describes the review of | | 15 Canada Square | | | the eectiveness of the Group’s risk management and internal | Canary Wharf | | | control systems. | E14 5GL | Shareholder information 111Strategic report Governance Financial statements ##  1 Restated | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | | | 2022 | | 2021 | | Note | | £’000 | | £’000 | Continuing operations Revenue 2,3 145,144 1 2 7, 74 7 Cost of revenue 5 (4 8,725) (45 , 4 8 5) Gross profit 96 , 419 82, 262 Administrative expenses – excluding exceptional items (4 8 ,75 1) (4 4 , 3 7 3) Operating profit before exceptional items 47, 6 6 8 3 7, 8 8 9 Exceptional item – revaluation of deferred, contingent consideration liability 6 2, 880 – Exceptional item – administrative expenses 6 – (1 5, 6 0 0) Operating profit 50,548 22,2 89 Finance income 13 22 Finance costs – excluding exceptional items (2 ,046) (1 ,4 0 9) Exceptional item – finance costs 6 – (4 5 9) Profit before tax from continuing operations 48 ,51 5 20, 4 43 Tax on continuing operations 9 (8 ,986) (4, 524) Profit from continuing operations 39 ,529 15,919 Discontinued operation Profit from discontinued operation, net of tax 11 148 6 ,423 Exceptional item – gain on disposal of discontinued operation, net of tax 11 29,863 – Profit for the year attributable to equity holders of the parent 69, 54 0 22, 3 42 1 Restated | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | Note | | 2022 | | 2021 | Earnings per share Basic 10 101 .3p 32 .7p Diluted 10 10 0.2p 32 .4p Earnings per share – continuing operations Basic 10 57. 6 p 23. 3p Diluted 10 5 7. 0p 2 3.1p Earnings per share – continuing operations before exceptional items Basic 10 53.4p 43.1p Diluted 10 52 . 8p 42 .9p ## Consolidated statement of comprehensive income 1 Restated | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | | | 2022 | | 2021 | | Note | | £’000 | | £’000 | Items that may subsequently be reclassified to the consolidated statement of profit or loss: Exchange dierences on translation of foreign operation – (91 2) Exchange dierences on disposal of discontinued operation reclassified to profit or loss 11 1 , 645 – Other comprehensive income/(loss) for the year 1 ,6 45 (91 2) Profit for the year 69, 54 0 22, 3 42 Total comprehensive income for the year attributable to equity holders of the parent 71 ,1 85 21, 43 0 1. The prior year comparatives have been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. PayPoint Plc Annual Report 2022112 ##  | | | | | | 1 | | | 1 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | Restated | | | Restated | | | | | 31 March | | 31 March | | | 31 March | | | | | | 2022 | | 2021 | | | 2020 | | | Note | | £’000 | | £’000 | | | £’000 | | Non-current assets Goodwill 12 57, 6 6 8 52, 0 8 5 11, 8 53 Other intangible assets 13 35, 9 9 0 3 5 , 7 17 10 , 293 Investment in associate 17 6,73 9 – – Convertible loan note 15 75 0 – – Property, plant and equipment 14 21 ,782 21 , 379 24 , 8 4 0 Net investment in finance lease receivables 29 4, 407 6 , 51 1 – Deferred tax asset 23 – – 565 Total non-current assets 127,336 1 15,692 4 7, 5 51 Current assets Inventories 332 525 214 Trade and other receivables 18 75 , 975 6 9 , 5 76 10 8 , 3 6 8 Current tax asset 4 ,1 91 2, 832 1,099 Cash and cash equivalents – clients’ funds and retailer partners’ deposits 19 16 ,6 46 28,4 0 5 35,7 3 9 Cash and cash equivalents – corporate cash 19 7, 6 5 3 10 , 535 58,03 5 10 4 ,7 97 111, 873 203, 455 Assets held for sale 11 – 5 7, 3 5 3 – Total current assets 10 4 ,797 16 9, 226 20 3, 455 Total assets 232 , 1 33 28 4 , 918 251 , 0 0 6 Current liabilities Trade and other payables 20 92 , 375 102, 50 4 148 , 6 21 Provision 21 – 12, 50 0 – Deferred consideration liability 22 1,000 1 ,4 62 – Lease liabilities 29 200 194 1 97 Loans and borrowings 28 39,6 43 63,627 70 ,000 133 ,2 18 18 0, 2 87 218, 818 Liabilities directly associated with the assets held for sale 11 – 4 0, 86 6 – Total current liabilities 133 ,2 18 221 , 15 3 218, 818 Non-current liabilities Trade and other payables – – 95 Deferred consideration liability 22 – 4, 28 5 – Lease liabilities 29 60 253 74 4 Loans and borrowings 28 11 ,8 91 22, 95 6 – Deferred tax liability 23 3,70 6 2 , 971 – Total non-current liabilities 15 , 6 57 30,46 5 839 Total liabilities 1 4 8 , 875 251 , 61 8 2 19 , 657 Net assets 83,258 33, 3 0 0 31 , 3 4 9 Equity Share capital 24 230 22 9 228 Share premium 24 1 ,000 4, 975 4, 485 Merger reserve 24 999 999 – Share-based payment reserve 1 , 570 2,0 0 5 1 , 875 Translation reserve – (1,6 45) (733) Retained earnings 79,459 26 ,7 37 25, 49 4 Total equity attributable to equity holders of the parent 83,258 33, 3 0 0 31 , 3 4 9 1. The prior year comparatives and beginning of the preceding period have been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. The prior year comparatives have also been restated for a retrospective measurement period adjustment to goodwill and inventories. Refer to note 12. These financial statements were approved by the Board of Directors and authorised for issue on 17 June 2022 and were signed on behalf of the Board of Directors. ### Nick Wiles ### Chief Executive ### 17 June 2022 Shareholder information 113Strategic report Governance Financial statements ##  1 Share-based Restated 1 | | | | | Share | Merger | payment | | Translation | | Retained | | | Restated | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Share capital | | premium | | reserve | | reserve | | reserve | earnings | | Total equity | | | | Note | | £’000 | | £’000 | £’000 | | £’000 | | £’000 | | £’000 | | | £’000 | Opening equity at 1 April 2020, 1 previously stated 228 4,48 5 – 1, 875 (733) 3 2 , 47 5 38, 330 Reversal of previously capitalised SaaS 1 implementation costs – – – – – (6 , 9 8 1) (6 , 9 81) 1 Opening equity at 1 April 2020, restated 228 4,48 5 – 1, 875 (733) 25,4 94 31 , 3 4 9 1 Profit for the year, restated – – – – – 22, 3 42 22, 3 42 Exchange dierences on translation of foreign operation – – – – (912) – (912) Comprehensive income for the year – – – – (912) 22, 342 21 , 430 Issue of shares 24 1 – 999 – – – 1,000 Equity-settled share-based payment expense 25 – – – 1,066 – – 1,066 Vesting of share scheme 25 – 49 0 – (926) – 286 (1 50) Deferred tax on share-based payments 23 – – – (10) – – (10) Dividends 26 – – – – – (21, 3 8 5) (21 , 3 8 5) 1 Closing equity at 31 March 2021, restated 229 4, 975 999 2 ,005 (1 ,6 45) 26 ,737 33 , 30 0 Profit for the year – – – – – 69, 54 0 69, 54 0 Exchange dierences on translation of foreign operation 11 – – – – 1 , 645 – 1 , 645 Comprehensive income for the year – – – – 1 ,645 6 9,5 40 71 ,1 85 Issue of shares 24 1 1 ,000 – – – – 1 ,0 01 Equity-settled share-based payment expense 25 – – – 868 – – 868 Vesting of share scheme 25 – – – (1 , 303) – 1 , 303 – Reclassification of share premium into retained earnings 1 – (4 , 9 75) – – – 4 , 975 – Dividends 26 – – – – – (23,0 96) (23 ,09 6) Closing equity at 31 March 2022 230 1,000 999 1 , 57 0 – 7 9, 459 83, 258 1. The prior year comparatives have been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. PayPoint Plc Annual Report 2022114 ##  Restated¹ | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | | | 2022 | | 2021 | | Note | | £’000 | | £’000 | Net cash inflow from operating activities 31 22 , 552 54 ,6 43 Investing activities Investment income 13 332 Purchases of property, plant and equipment (5, 185) (3, 287) Purchases of intangible assets (5,627) (7, 9 5 0) Acquisitions of subsidiaries net of cash acquired 16 (4,543) (60,800) Contingent consideration cash paid 22 (2,000) – Purchase of investment in associate 17 (6 ,7 39) – Purchase of convertible loan note 15 (75 0) – Proceeds from disposal of discontinued operation net of cash disposed 11 20,159 21 Net cash used in investing activities (4 , 6 72) (7 1,684) Financing activities Dividends paid 26 (23,0 96) (21 , 3 85) Proceeds from issue of share capital 1 1 Repayments of loans and borrowings 28 (61 , 4 6 9) (7 0,000) Proceeds from loans and borrowings 28 2 6, 420 81, 2 59 Payment of lease liabilities 29 (243) (2 11) Net cash used in financing activities (58,3 87) (10, 3 36) Net decrease in cash and cash equivalents (4 0 , 5 07) (2 7, 37 7 ) Cash and cash equivalents at beginning of year 64,806 9 3 , 7 74 Eect of foreign exchange rate changes – (1 , 59 1) Cash and cash equivalents at end of year 24,2 99 6 4, 80 6 1. The prior year comparatives have been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. ##  | | 31 March | | 31 March | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Note | | £’000 | | £’000 | Continuing operations Corporate cash 7, 6 5 3 10, 53 5 Clients’ funds and retailer partners’ deposits 16 ,6 46 28,4 0 5 Cash and cash equivalents on the consolidated statement of financial position 19 2 4, 29 9 38, 940 Discontinued operation Corporate cash – 7, 8 1 4 Clients’ funds and retailer partners’ deposits – 18,05 2 Cash and cash equivalents (discontinued operation) – 25, 8 66 Cash and cash equivalents (continuing and discontinued operations) 24 ,2 99 6 4, 80 6 Shareholder information 115Strategic report Governance Financial statements ##  | | 31 March | | 31 March | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Note | | £’000 | | £’000 | Non-current assets Other intangible assets 13 – 5,539 Investments in wholly owned subsidiaries 15 139,105 138,539 Investment in associate 17 6,739 – Convertible loan note 15 750 – Trade and other receivables 18 26,155 27,517 Total non-current assets 172,749 171,595 Current assets Trade and other receivables 18 3,108 9,269 Current tax asset – 2,378 Cash and cash equivalents – corporate cash 301 524 Total current assets 3,409 12,171 Total assets 176,158 183,766 Current liabilities Trade and other payables 20 54,765 15,625 Provision 21 – 12,500 Deferred consideration liability 22 1,000 1,462 Loans and borrowings 28 37, 833 60,333 Total current liabilities 93,598 89,920 Non-current liabilities Deferred consideration liability 22 – 4,285 Loans and borrowings 28 10,833 21,667 Total liabilities 104,431 115,872 Net assets 71,727 67,894 Equity Share capital 24 230 229 Share premium 24 1,000 4,975 Merger reserve 24 999 999 Share-based payment reserve 1,570 2,005 Retained earnings 67,92 8 59,686 Total equity attributable to equity holders of the parent 71,727 67,89 4 The Company has taken advantage of the exemption under section 408 of the Companies Act 2006 and consequently the statement of profit or loss of the Company is not presented as part of these financial statements. The profit of the Company for the financial year was £25.1 million (2021: £22.3 million). These financial statements were approved by the Board of Directors and authorised for issue on 17 June 2022 and were signed on behalf of the Board of Directors. ### Nick Wiles ### Chief Executive ### 17 June 2022 PayPoint Plc Annual Report 2022116 ##  Share-based | | | | | Share | Merger | payment | | Retained | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Share capital | | premium | | reserve | reserve | | earnings | | Total equity | | | Note | | £’000 | | £’000 | £’000 | | £’000 | | £’000 | | £’000 | Opening equity at 1 April 2020 228 4,485 – 1,865 58,530 65,108 Profit for the year – – – – 22,255 22,255 Issue of shares 24 1 – 999 – – 1,000 Equity-settled share-based payment expense 25 – – – 1,066 – 1,066 Vesting of share scheme 25 – 490 – (926) 286 (150) Dividends 26 – – – – (21,385) (21,385) Closing equity at 31 March 2021 229 4,975 999 2,005 59,686 67,89 4 Profit for the year – – – – 25,060 25,060 Issue of shares 24 1 1,000 – – – 1,001 Equity-settled share-based payment expense 25 – – – 868 – 868 Vesting of share scheme 25 – – – (1,303) 1,303 – Reclassification of share premium into retained earnings 1 – (4,975) – – 4,975 – Dividends 26 – – – – (23,096) (23,096) Closing equity at 31 March 2022 230 1,000 999 1,570 67, 928 71,727 ##  | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | | | 2022 | | 2021 | | Note | | £’000 | | £’000 | Net cash inflow from operating activities 31 28,575 5,501 Investing activities Dividend income – 38,548 Investment income – 13 Purchases of intangible assets – (6,042) Increased capitalisation of existing investments 15 (5,000) (1,001) Acquisition transaction costs 15 – (2,796) Acquisitions of subsidiaries 16 (5,944) (67, 9 03) Contingent consideration cash paid 22 (2,000) – Purchase of investment in associate 17 (6,739) – Purchase of convertible loan note 15 (750) – Proceeds from disposal of discontinued operation 11 48,063 21 Net cash from/(used in) investing activities 27,630 (39,160) Financing activities Dividends paid 26 (23,096) (21,385) Proceeds from issue of share capital 1 1 Repayments of loans and borrowings 28 (57, 833) (70,000) Proceeds from loans and borrowings 28 24,500 82,000 Net cash used in financing activities (56,428) (9,384) Net decrease in cash and cash equivalents (223) (43,043) Cash and cash equivalents at beginning of year 524 43,567 Cash and cash equivalents at end of year 301 524 Strategic report Governance Financial statements Shareholder information 117 # Notes to the consolidated financial statements ## 1. Accounting policies ### Statement of compliance with IFRS and basis of preparation PayPoint Plc ("PayPoint" or the "Company") is a public limited company and is incorporated and registered in England in the UK under the Companies Act 2006. The Company's ordinary shares are traded on the London Stock Exchange. The Group and Company financial statements have been prepared in accordance with UK-adopted International Accounting Standards ("UK-adopted IFRS"), and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. 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 standards and policies The accounting policies adopted by the Group in the financial statements for the year ended 31 March 2022 have been applied consistently to all periods set out in these group financial statements, with the exception of the following policies which are set out below and are applicable for the first time in the year ended 31 March 2022: i) investments in associates and ii) capitalisation of costs incurred in the implementation of cloud computing "Software as a Service" (SaaS) arrangements. ### Investments in associates Investments in associates are accounted for using the equity method and are initially recognised at cost. The carrying amounts of the associates are subsequently adjusted where material to recognise the Group's share of the profit or loss after tax, distributions received and any impairment in value of the associates. Where the Group's share of losses in associates exceeds the value of the investment, the Group ceases to recognise further losses because no obligation exists for the Group to fund the losses. Where a change in net assets has been recognised directly in the associate's equity, the Group recognises its share of those changes in the consolidated statement of changes in equity when applicable. Adjustments are made to align the accounting policies of the associates with the Group and to eliminate the Group's share of unrealised gains and losses on transactions between the Group and its associates. ### Prior year restatement for implementation costs of cloud computing SaaS arrangements During the year, the Group updated its accounting policy on intangible assets following the April 2021 International Financial Reporting Interpretations Committee ("IFRIC") agenda decision on the configuration and customisation costs incurred in implementing cloud computing SaaS arrangements. The Group's previously capitalised SaaS related costs primarily relate to the implementation costs for PayPoint's cloud-hosted SaaS CRM platform. Under the revised accounting policy, costs incurred in the configuration and customisation of cloud-hosted SaaS arrangements are now expensed where they do not give rise to an identifiable intangible asset which the Group controls. Amounts paid to the cloud vendor for configuration and customisation that are not distinct from access to the cloud software are expensed over the SaaS contract term. In limited circumstances, configuration and customisation costs may give rise to an identifiable intangible asset, for example, where code is created that is controlled by the Group. The revision to the accounting policy has been accounted for retrospectively, resulting in a prior year restatement. See note 32 for the impacts of the restatement. The restatement represents a non-cash adjustment. The Group consolidated prior year comparatives have been restated to derecognise previously capitalised SaaS related costs amounting to £0.8 million in the year ended 31 March 2021 which no longer meet the criteria for recognition as an asset under IAS 38. Also, amortisation on previously capitalised intangible assets of £1.8 million for the prior year ended 31 March 2021 has been reversed and the tax charge for the prior year ended 31 March 2021 has increased by £0.2 million. The impact of the restatements has decreased the restated opening Group retained earnings at 1 April 2020 by £7.0 million, increased the Group's profit for the prior year ended 31 March 2021 by £0.8 million and decreased total Group assets on the prior year balance sheet by £6.2 million. ### Reclassification of Company brand intangible asset in relation to Collect+ joint arrangement During the year ended 31 March 2017, PayPoint restructured an arrangement with Yodel Delivery Network Limited (Yodel) in the form of a 50:50 joint venture becoming a joint operation in Collect+ Group (consisting of Collect+ Holdings Limited and its wholly owned subsidiary Collect+ Brand Limited). The joint operation licensed the use of the Collect+ brand to both Yodel and PayPoint. In the Company statement of financial position, the arrangement was recognised as a £5.9 million investment in Collect+ Group. At the start of the year ended 31 March 2021, PayPoint acquired the remaining 50% interest in Collect+ that Yodel owned for £6.0 million. In the Company statement of financial position, the remaining 50% interest in Collect+ was recognised as a £6.0 million brand intangible asset and amortised over its useful economic life of 12 years. During the current year, management reviewed the accounting treatment in the Company financial statements in relation to its interest in Collect+ and concluded that it should have presented a brand intangible asset whilst the arrangement was a joint operation, and transferred that asset together with the additional consideration paid into an investment in a wholly owned subsidiary when control was obtained. Management has decided not to re-present the prior year comparatives relating to the above item, as the adjustment is not considered material to the Company financial statements. In the current year the £6.0 million was reclassified from a brand intangible asset to an investment on the Company statement of financial position and £0.5m of accumulated amortisation was reversed through the Company statement of profit or loss. The revision has no impact on the Group consolidated financial statements and represents a non-cash adjustment in the Company financial statements. 118 PayPoint Plc Annual Report 2022 # Notes to the consolidated financial statements continued ## 1. Accounting policies continued ### Reclassification of share premium balance Management has reviewed the treatment of the share premium balance as at 31 March 2021 and concluded that an amount of £5.0 million should have been presented within retained earnings. This balance was previously presented within share premium on the consolidated and Company statements of financial position and statements of changes in equity, and relates entirely to share awards which have vested and been recycled from the share-based payment reserve. Management has decided not to re-present the prior year comparatives relating to the above item, as it has no impact on the consolidated statement of profit or loss or the consolidated statement of cash flows for the prior year ended 31 March 2021 and the adjustment is not considered significant compared to the overall amount in the consolidated statement of financial position and/or the captions affected. The revision has not reduced distributable reserves and has not had any impact on operating profit, profit for the year, assets and liabilities or cash flows for the year ended 31 March 2022, where the revised presentation has been adopted, or periods prior to this current year. ### New and revised IFRS in issue but not yet effective Other than the IFRIC agenda decision on the configuration and customisation costs incurred in implementing cloud computing SaaS arrangements, no new standards or interpretations have been adopted in the Group's accounting policies in the year ended 31 March 2022. At the date of authorisation of these financial statements, new and revised standards issued but not yet effective are set out 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's accounting policies: - IFRS 17 Insurance Contracts (effective date to be confirmed). - Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Classification of Liabilities as Current or Non-current (effective date to be confirmed). - Amendments to IAS 37: Onerous Contracts—Cost of Fulfilling a Contract (effective date to be confirmed). - Amendments to References to the Conceptual Framework in IFRS 3 (effective date to be confirmed). - Amendments to IAS 16: Property, Plant and Equipment—Proceeds before Intended Use (effective date to be confirmed). - Annual Improvements to IFRS Standards 2018-2020 (effective date to be confirmed). - Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to introduce a new definition for accounting estimates (effective date to be confirmed). - Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statements 2 Making Materiality Judgements (effective date to be confirmed). - Amendments to IAS 12 Income Taxes – Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction (effective date to be confirmed). ### Going concern The financial statements have been prepared on a going concern basis. The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt to equity balance. The capital structure of the Group consists of debt, cash and cash equivalents and equity attributable to equity holders of the parent comprising capital, reserves and retained earnings. The Group's policy is to borrow centrally to meet anticipated funding requirements. Our cash and borrowing capacity provides sufficient funds to meet the foreseeable needs of the Group. At 31 March 2022, the Group had cash and cash equivalents of £24.3 million, consisting of £7.7 million corporate cash and £16.6 million of clients' funds and retailer partners' deposits. In addition, following the group-wide refinancing in the prior year and a subsequent one-year extension which was secured after the end of the current financial year, the Group's borrowing facilities consist of a £21.7 million amortising term loan which is due to be fully repaid over the next two financial years and an unsecured £75.0 million revolving credit facility with a £30.0 million accordion facility (uncommitted) expiring in February 2025. At 31 March 2022, £27.0 million (2021: £49.5 million) was drawn down from the revolving credit facility. At 31 March 2022 the Group also had £2.9 million (2021: £4.6 million) of block loan balances. The Group has a strengthened statement of financial position, with net assets of £83.3 million as at 31 March 2022, having made a profit for the year of £69.5 million and delivered net cash flows from operating activities of £22.6 million for the year then ended. During the current year the Group received £48.6 million proceeds from the sale of the Romanian business. The proceeds were used to partly repay the revolving credit facility in April 2021. The Group had net current liabilities of £28.4 million (2021 restated: £51.9 million), with no assets or liabilities held for sale in the current year following the sale of the Romanian business in April 2021, partial repayment of the revolving credit facility using proceeds from the sale of the Romanian business and full utilisation of the £12.5 million Ofgem provision recognised in the prior year. The Directors have prepared cash flow forecast scenarios for a period of at least 12 months from the date of approval of these financial statements, taking into account the Group's current financial and trading position, the principal risks and uncertainties and the strategic plans that are reviewed at least annually by the Board. Additionally, the Directors have carried out an assessment of the principal risks and uncertainties and applied several severe but plausible scenarios to further test the Group viability, which included a reduction in the volume of transactions, loss of key contracts and under-performance of acquisitions and new products or service lines. As mitigating actions we have assumed achievable reductions in expenditure and a reduction in the level of future dividends following the payment of the final dividend of 18.0 pence per share declared in respect of financial year ended 31 March 2022. The cash flow forecasts included an analysis and stress test for the above scenarios to ensure working capital movements within a reporting period do not trigger a covenant breach. Based on this assessment, the Directors confirm that 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 not less than 12 months from the date of approval of these financial statements and therefore have prepared the financial statements on a going concern basis. Strategic report Governance Financial statements Shareholder information 119 # Use of judgements and estimates In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing 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. # Critical judgement: initial recognition of acquired intangible assets and goodwill at fair value on acquisition of RSM 2000 The goodwill arising on a business combination represents the excess of fair value of consideration paid over the net of the identifiable assets acquired and liabilities assumed at the acquisition date, including the recognition of acquired intangible assets. Those acquired intangible assets are required to be recognised at fair value which reflects the exit price that would be received to sell those assets in an orderly transaction between market participants at the measurement date and excludes buyer-specific intentions. The fair value of acquired intangible assets (acquired customer relationships and acquired regulatory licences) recognised on the acquisition of RSM 2000 amounted to £0.4 million (6.3% of total consideration), resulting in goodwill of £5.8 million (80.4% of total consideration). A critical judgement arises in relation to the fair value measurement of those acquired intangible assets and therefore the residual value of goodwill, as the acquired intangible assets were not purchased in separate transactions but rather as part of the wider RSM 2000 business combination, which makes the 'market participant' perspective hypothetical. Therefore, in measuring the acquired intangible assets at fair value, management considered the types of potential market participants (e.g. competitors and comparable companies) in order to apply assumptions that were consistent with the assumptions that market participants would use when pricing the intangible assets. Given that the acquired intangible assets are not traded on an active market, have no recent market transactions and are unique to RSM 2000, the customer relationships were valued using a multi-period excess earnings method (MEEM) income approach and the regulatory licenses were valued using the cost to recreate approach. The MEEM approach reflects market participant fair value by including forecast lifetime earnings which were specifically attributable only to the customer relationships existing at the acquisition date. The discount rate applied to the MEEM incorporates general market rates of return at the acquisition date as well as industry risks and the risks of the asset to a typical market participant, based on an analysis of comparable companies. The cost to recreate approach reflects market participant fair value by assessing the costs which a third party would have incurred to replace the acquired regulatory licences at the acquisition date. The residual £5.6 million goodwill represents the future economic benefits arising from the acquisition that were not individually identified and separately recognised at the acquisition date. The buyer-specific synergies subsumed into goodwill did not exist at the market-participant level at the acquisition date because i) they result from combining the digital operations of PayPoint and RSM 2000 which enables PayPoint to offer new customers the full scope of digital payments capabilities post-acquisition; ii) the new customer relationships and sectors are anticipated to arise post-acquisition but were not identifiable at the acquisition date (including charities, not-for profit organisations, events, housing and SMEs in the UK) and iii) the workforce, operating expertise and detailed knowledge of direct debit processing are not separately identifiable intangible assets. # Critical estimate: Valuation of the goodwill relating to cash generating unit Accounting for goodwill and other intangible assets with an indefinite useful life, requires an annual impairment review. Paypoint has acquired four subsidiaries i-movo, Handepay, Merchant Rentals and RSM 2000. The first three subsidiaries were acquired in the prior year and are distinct Cash Generating Units (CGU) whilst RSM 2000 was acquired in the current year and is now part of the Digital CGU. When testing for impairment, the recoverable amount of the CGU is measured at its value in use by discounting future expected cash flows from the assets in that CGU. Impairment models have been built which consider expected future cash flows based on the Board approved plan. The Board approved plan forecasts cash flows for three years and then appropriate assumptions were applied to forecast a further two years, before appropriate long term growth rates were applied to the fifth year to calculate terminal values. The discount rate used is built up from the PayPoint WACC and then adjusted for specific risks associated with the CGU's estimated cash flows, in particular for i-movo and Digital, higher small entity risk. Sensitivity analysis has been applied to determine the impacts of reasonably possible changes in the assumptions used for the value-in-use calculations. The critical estimates when calculating the value-in-use in these impairment models are the timing of key revenue streams and the impact of revenue growth prospects. For some recently acquired businesses, significant Directors' judgement is required in setting these estimates as there is invariably no relevant external or historic benchmark to suggest how well these businesses will perform once integrated as members of the Group. Consequently, in setting estimates of high single or double digit growth in the early years following acquisition for a number of the newly acquired businesses, the Directors are judging that PayPoint's existing infrastructure and capabilities will facilitate such growth rates alongside those of the acquired entities. The CGUs are different sizes and at different stages of maturity. i-movo is a CGU with considerable growth forecast as its most significant current contract, with DWP, only commenced in August 2021 and is expected to reach maturity for transaction levels in FY 22/23. The model assumes ongoing continuation of this contract, or replacement by other revenue streams. The newspaper and FMCG revenue streams contribute an insignificant amount of revenue but are forecast to grow strongly in the near term, and the Directors have confidence in the viability of the product offering following successful pilots and other proof of concept activities this year. Handepay and Merchant Rentals CGUs are both mature businesses in the cards sector, a highly competitive marketplace, with growth forecast to come from increased sales activity and changes in Handepay's acquirer relationship. Digital CGU forecast growth is a mix of organic growth in existing business, DD and Multipay, and growth in the Housing and Charities sectors for the combined proposition. 120 PayPoint Plc Annual Report 2022 # Notes to the consolidated financial statements continued # 1. Accounting policies continued Critical judgement: recognition of cash and cash equivalents The nature of payments and banking services means that PayPoint collects and holds funds on behalf of clients as those funds pass through the settlement process and also retains retailer partners' deposits as security for those collections. A critical judgement in this area is whether clients' funds and retailer partners' deposits are recognised in the statement of financial position. This includes evaluating: (a) the existence of a binding agreement clearly identifying the beneficiary of the funds (b) the identification of funds, ability to allocate and separability of funds (c) the identification of the holder of those funds at any point in time (d) whether PayPoint bears the credit risk The Group evaluated the April 2022 IFRIC agenda decision on demand deposits with restrictions on use arising from a contract with a third party and concluded that it did not have any impact on the Group's existing accounting policy for cash and cash equivalents. Where there is a binding agreement specifying that PayPoint holds funds on behalf of the client (i.e. acting in the capacity of a trustee) and those funds have been separately identified as belonging to that beneficiary, the cash and the related liability are not included in the statement of financial position. In all other situations the cash and corresponding liability are recognised on the statement of financial position. Corporate cash and clients' funds and retailer partners' deposits are presented as separate line items within cash and cash equivalents on the statement of financial position. # Prior year critical judgements and estimates Revenue recognition (agent vs principal) which was a critical judgement in the prior financial year ended 31 March 2021, is no longer considered to be a critical judgement. The Romanian business, which was where most of the Group's revenue as principal was recognised, was disposed of on 8 April 2021. The cost of mobile top-ups and SIM cards as principal was £1.1 million in the current year (2021: £46.9 million), refer to note 4. Therefore, at 31 March 2022, this judgement no longer has a significant risk of resulting in material adjustment to the amount of revenue recognised within the next financial year. The valuation of the deferred, contingent consideration liability arising from the i-movo acquisition, which was a critical estimate in the prior financial year ended 31 March 2021, is no longer considered to be a critical estimate. The i-movo sale and purchase agreement includes four elements of deferred consideration which are contingent on future performance over the earnout period and are linked to four monthly revenue growth targets on two potential key revenue streams. The £nil valuation of the deferred, contingent consideration liability at 31 March 2022 (31 March 2021: £5.7 million) is based on estimated future performance of the related business over the earnout period using management's latest forecasts and does not have a significant risk of resulting in material adjustment to the carrying amount of the deferred, contingent consideration liability within the next financial year. # 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. # Underlying performance measures (non-IFRS measures) Underlying performance measures allow shareholders to better understand the underlying operational performance in the year, to facilitate comparison with prior years and to better assess trends in financial performance. They usually exclude the impact of one-off, non-recurring and exceptional items. A reconciliation from profit before tax from continuing operations to underlying profit before tax from continuing operations is included in note 6. # Net revenue (non-IFRS measure) Net revenue is revenue less commissions paid to retailer partners and the cost of mobile top-ups and SIM cards where PayPoint is principal. This reflects the benefit attributable to PayPoint's performance eliminating pass-through costs which creates comparability where PayPoint is agent or principal and is an important measure of the overall success of our strategy. A reconciliation from revenue to net revenue is included in note 4. # Effective tax rate (non-IFRS measure) Effective tax rate (note 9) is the tax cost as a percentage of the net profit before tax. # Reported dividends (non-IFRS measure) Reported dividends are based on a financial year's results from which the dividend is declared and consist of the interim dividend paid and final dividend declared (note 26). This is different to statutory dividends where 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 earnings before tax, depreciation, amortisation and exceptional items adjusted for working capital (excluding movement in clients' funds and retailer partners' deposits) as detailed in note 31 to the financial statements. This measures the cash generated which can be used for tax payments, new investments and financing activities. # Total costs (non-IFRS measure) Total costs comprise other cost of revenue (note 5), administrative expenses, finance income and finance costs. Total costs excludes exceptional costs. Shareholder information 121Strategic report Governance Financial statements Underlying earnings per share from continuing operations (non-IFRS measure) Underlying earnings per share from continuing operations (note 10) is calculated by dividing the net profit from continuing operations before exceptional items attributable to equity holders of the parent by the basic or diluted weighted average number of ordinary shares in issue. Underlying operating margin (non-IFRS measure) Underlying operating margin is calculated by dividing operating profit before exceptional items from continuing operations by net revenue from continuing operations. This measure reflects the eciency of converting revenue into profits. The calculation of operating margin before exceptional items is as follows: 1 Restated | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 | | | £’000 | | £’000 | Operating profit from continuing operations 50,548 22,289 Adjust for: Exceptional items – (administrative income)/expenses (2,880) 15,600 Operating profit from continuing operations before exceptional items 47,6 68 37, 8 8 9 Net revenue from continuing operations (note 4) 115,112 97,138 Underlying operating margin 41.4% 39.0% 1. The prior year comparatives have been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. Net corporate debt (non-IFRS measure) Net corporate debt represents cash and cash equivalents excluding cash recognised as clients’ funds and retailer partners’ deposits, less amounts borrowed under financing facilities (excluding IFRS 16 liabilities). The reconciliation of cash and cash equivalents to net corporate debt is as follows: | 31 March | | 31 March | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £’000 | | £’000 | Cash and cash equivalents – corporate cash from continuing operations 7,653 10,535 Cash and cash equivalents – corporate cash from discontinued operation – 7, 814 Less: Loans and borrowings (note 28) (51,534) (86,583) Net corporate debt (43,881) (68,234) Significant accounting policies Basis of consolidation PayPoint Plc (the ‘Company’) acts as a holding company. The accounts of the Company and its investments in entities controlled by the Company (its subsidiaries) are consolidated in the Group accounts. Control is achieved when the Company has power over an entity, exposure to variable returns and the ability to use that power to aect its returns from the entity. The Company reassesses its control over 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 exists. All intergroup transactions, balances, income and expenses are eliminated on consolidation. All the subsidiaries in the Group, a list of which are presented in note 15 of the financial statements, apply accounting policies which are consistent with those of the Group. The Company has an investment in an associate over which it has significant influence but not control. The results of the associate are not consolidated but instead accounted for using the equity method as disclosed in the accounting policy for investments in associates. Revenue Revenue represents the value of services and goods delivered or sold to clients, retailer partners and SME partners which is measured using the fair value of the consideration received or receivable, net of value added tax. Performance obligations are identified at contract inception and the revenue is recognised once the performance obligations are satisfied. Upfront payments for management fees and set-up and development fees in respect of contracts with clients, retailer partners and SME partners are deferred and recognised on a straight-line basis over the contracted period, which appropriately reflects that the clients, retailer partners and SME partners receive and consume the benefits of those performance obligations evenly throughout the contract. PayPoint provides shopping and e-commerce services to retailer partners, which form part of PayPoint’s network, and SME partners. Shopping (retail services) revenue comprises: • Service fees from retailers that use PayPoint One, 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. Retailers simultaneously receive and consume the benefits related to the services fee; therefore, a straight-line approach appropriately reflects the transfer of the service. • ATM and Counter Cash transaction fees which are recognised when each transaction is processed. • Home delivery revenue from PayPoint’s partnership with Snappy Shopper which enables local store to door delivery and click and collect for retailer partners. PayPoint earns a commission on the turnover which is recognised when the corresponding transactions are processed. • Fees for receipt advertising and FMCG revenue from digital vouchering, digital screen advertising, sales data, and PayPoint’s retailer engagement channels which is recognised over the period of the campaign on a straight-line basis. • Operating lease income from ATMs which is recognised on a straight-line basis over the expected lease term. • Other retail services revenue including failed Direct Debits which are recognised at the time the transaction occurs. PayPoint Plc Annual Report 2022122 ##  continued 1. Accounting policies continued Shopping (card payments) revenue comprises: • Commissions and fees from card payments which are recognised when each transaction is processed. • Finance lease income from card terminals is recognised over the expected lease term using the sum of digits method. • Operating lease income from card terminals which is recognised on a straight-line basis over the expected lease term. • Commissions from PayPoint’s Business Finance products in partnership with YouLend which is earned on the loan amounts outstanding from card payment retailers and recognised when the commission is processed. e-commerce revenue comprises: • Fees earned for processing parcels which are recognised when each parcel has been delivered or returned through the PayPoint network. • Royalty income from the Collect+ brand which is recognised as the parcels are processed. Payments and banking revenue is recognised as performance obligations are satisfied which is usually at the point in time each transaction is processed. Other than for the sale of SIM cards as principal, PayPoint is contracted as agent in the supply of payments and banking services and accordingly the commission earned from clients for processing transactions is recognised as revenue when each transaction is processed. Payments and banking revenue comprises: • Cash bill payments: customers of PayPoint’s clients can pay their bills (due to the client) over-the-counter at any of PayPoint’s retailer partners. PayPoint provides the technology for recording the payment of bills and transmission of that payment data to the client. PayPoint then collects bill payment funds from retailer partners and remits those funds to clients. • Cash top-ups: customers of PayPoint’s clients can top up their mobiles over-the-counter at any of PayPoint’s retailer partners. This category also includes revenue from the sale of SIM cards which is primarily earned from the mobile operators based on the value of top-ups aer the initial activation. This revenue is contingent on the customer actions and is recognised at the point in time when the consumer tops up the SIM card. PayPoint contracts as principal for SIM card sales as it obtains control of the SIM cards before transferring control to the customer, therefore revenue is recognised at the gross sale price and cost of revenue includes the related cost. • Digital payments: MultiPay is an integrated solution oering a full suite of digital payments. It enables transactions online and through smartphone apps and text messages, as well as event payments, over the counter, over the phone and via interactive voice response (IVR) systems. It also supports a full range of Direct Debit options, including scheduling collections, as well as new product developments such as PayByLink, recurring payments and Event Streamer. CashOut enables the rapid dispersal of funds through secure digital channels, including the Payment Exception Service which is run for the Department for Work and Pensions by i-movo, delivering payments to those without access to a standard bank account. i-movo also issues digital newspaper vouchers which enable newspaper publishers to digitise consumer subscription services and home news delivery in local convenience stores. • Cash through to digital: PayPoint provides the physical network of retail locations for consumers to convert cash into electronic funds with online organisations. Consumers pay for a ‘pin on receipt’ code in any of PayPoint’s retail locations and then can use that value online with their chosen digital brand or service across a comprehensive portfolio of banking, e-commerce, gaming and loyalty card partners. Cost of revenue Cost of revenue primarily consists of expenses related to delivering our services and products. These include retailer commissions, cost of SIM cards (where PayPoint is principal), depreciation and amortisation of assets used to deliver services, field sales costs, transaction costs, terminal and ATM maintenance costs and telecommunications costs. Foreign currency Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transaction. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the statement of financial position 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 translation are included in net profit or loss for the year. The Group does not have any overseas operations at 31 March 2022, following the disposal of the Romanian business on 8 April 2021, which was classified as held for sale at 31 March 2021. The assets and liabilities of that foreign discontinued operation were translated at exchange rates prevailing on the statement of financial position date. Cash flows and income statement items were translated at the average exchange rates for the year. Exchange dierences arising on consolidation were recorded in a separate component of equity titled the translation reserve. Goodwill and fair value adjustments arising on the acquisition of the foreign operation were historically treated as assets and liabilities of the foreign operation and translated at the closing rate. Exchange dierences arising were recognised in other comprehensive income. 31 March 2021 Exchange rates used for translation £’000 Romania Leu – average 5.44 Romania Leu – year end 5.77 Euro – average 1.12 Euro – year end 1.17 Financial instruments The financial asset or liability is initially recognised when the Group becomes party to the contractual instrument. The Group classifies derivative financial instruments, which consist of foreign exchange contracts, as held for trading and measures the financial instruments at fair value through profit or loss. The Group’s derivative financial instruments are valued using forward exchange rates at the balance sheet date. Shareholder information 123Strategic report Governance Financial statements The Group discloses the fair value measurements of financial assets and liabilities using three levels as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. 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. Dierences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the statement of financial position. Share-based payments Share-based payment arrangements are equity settled. Equity-settled share-based payments are measured at fair value at the date of grant. The fair value at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period and adjusted for non-market-based conditions where they will not vest (i.e. leavers). For equity-settled share-based payment arrangements with market-based vesting conditions, fair value is measured by use of a Monte Carlo simulation. The fair value of other equity-settled share-based payment arrangements where no market-based vesting conditions exist is based on the share price at the date of the grant. Finance income Finance income comprises bank deposit interest received on cash and cash equivalents held at financial institutions. Interest is recognised as earned which reflects the eective interest rate method. Finance costs Finance costs comprises interest costs on loans and borrowings and bank overdras. Finance costs are recognised as an expense in the period in which they are incurred. Retailer partner commission costs Retailer partner commission costs represent the fees due to PayPoint’s retailer partners for providing PayPoint’s services in their store. These costs are recognised as an expense within cost of revenue when the transaction or parcel is processed. PayPoint owns the relationship with the retailer and accordingly recognises the cost as a principal, rather than as a pass-through cost for clients. Exceptional items The Group presents on the face of the consolidated statement of profit or loss those material items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year, to facilitate comparison with prior years and to better assess trends in financial performance. Exceptional items are non-recurring or intermittent, and because of their nature and expected infrequency of the events giving rise to them, do not reflect current operational performance. Examples of exceptional items include, but are not limited to: • costs incurred as part of the acquisition and integration of acquired businesses as these are non-operational, non-recurring and material (mainly legal, due diligence, valuation and IT integration costs and stamp duty) • revaluation of the deferred, contingent consideration liability to fair value, as this is material and not a reflection of overall underlying operational performance of the Group • profit or loss items arising from changes to the Group’s capital structure, including significant refinancing, which are non-operational and material (legal and advisory fees and write-o of unamortised arrangement fees on the old facility) • other one-o profit or loss items which are non-recurring, material and do not reflect underlying operational performance, such as the profit from disposal of the discontinued operation Taxation Until disposal of the discontinued foreign operation the Group operated in two dierent tax jurisdictions which led to some complexity in tax matters. 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 the provision for deferred tax. Taxable profit diers 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 are applicable to the current year. Deferred tax is provided in full on taxable temporary dierences 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 dierences to the extent that it is probable that future taxable profit will be available against which the tax asset will be realised. Deferred tax liabilities are recognised for taxable temporary dierences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary dierence and it is probable that the temporary dierence 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 sucient 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 to other comprehensive income or equity, in which case the deferred tax is recorded in other comprehensive income or equity. PayPoint Plc Annual Report 2022124 ##  continued 1. Accounting policies continued 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. When the initial accounting for a business combination is determined, it is done so on a provisional basis. Measurement period adjustments to these provisional values may be made within 12 months of the acquisition date and are eective as at the acquisition date, if new information about facts and circumstances that existed at the acquisition date is obtained and, if known, would have resulted in the recognition of those assets and liabilities at that date. Non-current assets held for sale and discontinued A non-current asset or a group of assets containing a non-current asset (a disposal group) is classified as held for sale if its carrying amount will be recovered through sale rather than through continuing use, it is available for immediate sale and sale is highly probable within one year. On initial classification as held for sale, non-current assets and disposal groups are measured at the lower of previous carrying amount and fair value less costs to sell with any adjustments taken to profit or loss. The same applies to gains and losses on subsequent remeasurement although gains are not recognised in excess of any cumulative impairment loss. Any impairment loss on a disposal group is first allocated to goodwill, and then to remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets and investment property, which continue to be measured in accordance with the Group’s accounting policies. Intangible assets and property, plant and equipment once classified as held for sale or distribution are not amortised or depreciated. A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. The post-tax profit or loss of the discontinued operations is shown as a single line on the face of the consolidated income statement, separate from the continuing operating results of the Group. When an operation is classified as a discontinued operation, the comparative income statement is restated as if the operation had been discontinued from the start of the comparative period. 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 cash-generating units or groups of 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 reporting 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 suered 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 yet available for use are tested for impairment annually and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately. The reversal of any impairment loss is limited by the net book value to which the relevant asset would have been reduced, had no impairment occurred. A reversal of an impairment loss is recognised as income. Intangible assets Recognition on acquisition The Group has recognised acquired brands, customer relationships and developed technology intangible assets at fair value in accordance with IAS 38 Intangible Assets, which are amortised over their estimated useful economic lives as follows: Brands – eleven to fieen years Customer relationships – four to thirteen years Developed technology – one to seven years Shareholder information 125Strategic report Governance Financial statements Acquired brands are valued using the relief-from-royalty method using an estimation of future revenues and a market-based royalty rate that an acquirer would pay in an arm’s length licensing arrangement to secure access to the same rights. The theoretical royalty payments are discounted to obtain the cash flows to determine the present asset value. A tax amortisation benefit is applied to reflect the present value of the expected benefits of amortising the value of the intangible asset over its useful tax life. Acquired customer relationships are valued using the multi-period excess earnings method (‘MEEM approach’) by estimating the total expected income streams from customer relationships and deducting portions of the cash flow that can be attributed to supporting or contributory assets (including workforce). The residual income streams are discounted. No tax amortisation benefit is applied. Acquired developed technology is valued using a depreciated replacement cost method, which requires an estimate of all the costs a typical market participant would incur to generate an exact replica of the intangible asset in the context of the acquired business. The depreciated replacement cost method takes into account factors including economic and technological obsolescence. The useful life of acquired intangible assets is based on factors including the expected usage of the asset, typical product lifecycles for the asset (reflecting the ability to generate the expected future economic benefits with reasonably low levels of required maintenance expenditure), technical, technological, commercial or other types of obsolescence, expected actions by competitors and the period of the contractual or other legal rights over which the entity expects to use the asset including renewal, which determines future amortisation charges. Development expenditure The Group develops soware and other intangible assets including EPoS services and the digital payments platform which generate future economic benefits through revenue from clients, retailer partners and SME partners or internal use. Development expenditure on large projects is recognised as an intangible asset if the product or process is technically and commercially feasible and the Group intends to and has the technical ability and sucient resources to complete development, future economic benefits are probable and if the Group can measure reliably the expenditure attributable to the intangible asset during its development. 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 seven years. Other soware costs are recognised in administrative expenses when incurred. Costs incurred in the configuration and customisation of cloud-hosted SaaS arrangements are expensed where they do not give rise to an identifiable intangible asset which the Group controls. Amounts paid to the cloud vendor for configuration and customisation that are not distinct from access to the cloud soware are expensed over the SaaS contract term. In limited circumstances, configuration and customisation costs may give rise to an identifiable intangible asset, for example, where code is created that is controlled by the Group. 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 o 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 fiy years Leasehold improvements over the life of the lease PayPoint One terminals seven years Card terminals three to seven years Other terminals five years ATMs five years Other classes of assets three to five years The gain or loss arising on the disposal or retirement of an asset is determined as the dierence between the sale proceeds and the carrying amount of the asset and is recognised in profit or loss. Investments Investments in subsidiaries and associates in the Company accounts are stated at cost less accumulated impairments. Investments in associates in the Group accounts are initially recognised at cost and subsequently adjusted, where material, for the Group’s share of the profit or loss aer tax, distributions received and accumulated impairments using the equity method. Investments in convertible debt instruments (embedded derivatives) in the Group and Company accounts are stated at fair value. Inventories Inventories comprises stocks of SIM cards and card terminals. These are stated at the lower of cost or net realisable value. Where PayPoint trades as principal for the sale of SIM cards, the cost of these is included in inventories. Where PayPoint acts as an agent, the cost of these 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. PayPoint has used the expected credit loss (‘ECL’) model and has adopted an allowance matrix for trade receivables, whereby these are segmented according to number of days outstanding and an appropriate probability of impairment is applied to each category based on historical loss experience and adjusted for information about current and reasonable supportable future conditions. Items in the course of collection represent gross transaction values received by retailer partners for clients which have not yet been collected by PayPoint. PayPoint bears the credit risk for these amounts. PayPoint Plc Annual Report 2022126 ##  continued 1. Accounting policies continued Accrued income Unbilled revenue is a receivable and is presented as accrued income on the balance sheet. 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 clients’ funds and retailer partners’ deposits. Corporate cash consists of cash available to PayPoint for its daily operations. Clients’ funds consists of cash collected on behalf of clients from retailer partners, but not yet transferred to clients and is held in PayPoint’s bank accounts. Retailer partners’ deposits consists of retailer partners’ funds held as security against default, except if held in trust which is disclosed o balance sheet. 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. Deferred consideration Where a business combination agreement provides for an adjustment to the consideration, the Group accrues the fair value, based on the estimated additional consideration payable as a liability at the acquisition date. To the extent that the consideration is payable aer more than one year from the acquisition date, the consideration is discounted at an appropriate interest rate and carried at net present value in the consolidated statement of financial position. The discount component is then unwound as a finance cost in the consolidated statement of profit or loss over the life of the earnout. Where the deferred consideration is contingent on future performance over the contractual earnout period, the liability is measured against the contractually agreed performance targets at each subsequent reporting date with any adjustments recognised in the consolidated statement of profit or loss. Where the contingent consideration is contractually linked to ongoing employment of the founders over the contractual period it is treated as an expense and recognised in the consolidated statement of profit or loss. 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. Leases The Group assesses whether a contract is a lease at inception of the contract. Where the Group is lessee, it recognises a right-of-use asset and a corresponding lease liability, except for short-term leases and leases of low value assets. For these leases, the Group recognises the lease payment as an operating expense on a straight-line basis over the term of the lease. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease. The lease liability is subsequently increased by the interest cost on the lease and decreased by payments made. The lease liability is presented as a separate line in the consolidated statement of financial position. The Group remeasures the lease liability and makes a corresponding adjustment to the right-of-use asset whenever there has been a lease payment change, the lease contract is modified or any other significant event. The right-of-use asset is initially measured at cost and subsequently recognised at cost less accumulated depreciation and impairment losses. The right-of-use asset is depreciated over the shorter of the period of the expected lease term and useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The right-of-use asset is presented within property, plant and equipment. The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified loss as described in the ‘Property, plant and equipment’ policy. Where the Group leases assets to a third party as a lessor, the Group assesses whether the contract is a finance lease or operating lease, depending on whether the lease transfers substantially all the risks and rewards incidental to ownership of the underlying asset. Where the lease is a finance lease, the Group recognises as a receivable an amount equal to the net investment in the finance lease i.e. the minimum lease payments receivable under the lease discounted at the interest rate implicit in the lease. Incremental initial direct costs of obtaining the lease are included in the initial measurement of the net investment in the lease. This receivable is reduced as the lessee makes capital payments over the term of the lease. The terminal lease income is recognised over the expected lease term. Where the lease is an operating lease, lease payments are recognised as income on a straight-line basis which reflects the pattern in which economic benefits from leasing the underlying asset are derived. The underlying asset is capitalised as property, plant and equipment and costs, including depreciation, incurred in earning the lease income are recognised as an expense. Initial direct costs incurred in obtaining the operating lease are added to the carrying amount of the underlying asset and recognised as an expense over the expected lease term on the same basis as the lease income. Loans and borrowings Loans and borrowings are initially measured at fair value, net of any attributable transaction costs, and are subsequently measured at amortised cost using the eective interest rate method. Dividends Final dividends on ordinary shares are recognised in equity in the year in which they are approved by the Company’s shareholders. Interim ordinary dividends are recognised when paid. In the Company accounts, dividend income from investments is recognised when the shareholders’ rights to receive payment have been established. Shareholder information 127Strategic report Governance Financial statements Merger reserve Merger reserve represents consideration in excess of the nominal value of shares issued on certain acquisitions. 2. Segment reporting Segment information The Group provides a number of dierent services and products. However, these do not meet the definition of dierent segments under IFRS 8, as the chief operating decision maker, the Executive Board, does not review those separately to make decisions about resource allocation and performance. Therefore, the Group has only one operating segment. A business division analysis of revenue has been provided in note 3. Geographic information | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | | | 2022 | | 2021 | | Revenue | | £’000 | | £’000 | Continuing operations – UK 145,144 127,747 1 Discontinued operation – Romania (note 9) 1,258 67,742 Total 146,402 195,489 1. The current year revenue from the discontinued operation represents the revenue from Romania between 1 and 8 April 2021 prior to disposal. The total £127.3 million (2021 restated: £115.7 million) non-current assets at 31 March 2022 are geographically located within the UK. 3. Revenue Disaggregation of revenue | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 | | | £’000 | | £’000 | Continuing operations Shopping Service fees 16,575 14,649 Card payments 24,951 14,058 Card terminal leases 5,566 974 ATMs 13,858 13,956 Other shopping 1,936 1,219 Shopping total 62,886 44,856 e-commerce total 13,600 11,074 Payments and banking Cash – bill payments 36,660 39,889 Cash – top-ups 12,898 14,166 Digital 8,224 6,050 Cash through to digital 9,411 9,983 Other payments and banking 1,465 1,729 Payments and banking total 68,658 71,817 Total continuing operations 145,144 127,747 1 Discontinued operation – Romania 1,258 67,742 Total 146,402 195,489 1. The current year revenue from the discontinued operation represents the revenue from Romania between 1 and 8 April 2021 prior to disposal. Service fee revenue of £16.6 million (2021: £14.6 million) and management fees, set-up fees and upfront lump sum payments of £1.2 million (2021: £1.2 million) are recognised on a straight-line basis over the period of the contract. Card terminal leasing revenue of £5.6 million (2021: £1.0 million for the 2 months since the acquisition of Merchant Rentals) is recognised over the expected lease term using the sum of digits method for finance leases and on a straight-line basis for operating leases. The remainder of revenue is recognised at the point in time when each transaction is processed. The usual timing of payment by customers is on fourteen-day terms. Revenue subject to variable consideration of £10.7 million (2021: £10.3 million) exists where the consideration which PayPoint is entitled to varies according to transaction volumes processed and rate per transaction. Management estimates the total transaction price using the expected value method at contract inception, which is reassessed at the end of each reporting period, by applying a blended rate per transaction to estimated transaction volumes. Any required adjustment is made against the transaction prices in the period to which it relates. The revenue is recognised at the constrained amount to the extent that it is highly probable that the inclusion will not result in a significant revenue reversal in the future, with the estimates based on projected transaction volumes and historical experience. The potential range in outcomes for revenue subject to variable consideration resulting from changes in these estimates is not material. PayPoint Plc Annual Report 2022128 ##  continued 3. Revenue continued Contract balances | | 31 March | | 31 March | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Notes | | £’000 | | £’000 | Trade receivables 18 10,316 10,772 Net investment in finance lease receivables 29 6,221 10,575 Accrued income 18 4,315 3,320 Contract assets – capitalisation of fulfilment costs 18 2,057 1,889 Contract liabilities – deferral of set-up and development fees 20 (788) (1,472) Deferred income 20 (401) (565) PayPoint’s contract balances arise from dierences between timing of cash flow and revenue recognition, which is usually at the point in time each transaction is processed or on a straight-line basis over the contracted period for management fees, set-up fees or upfront lump sum payments. • The trade receivables represent PayPoint’s entitlement to consideration from clients and SME and retailer partners for services and goods delivered and invoiced at the reporting date, where the right to payment is unconditional except for the passage of time. • The net investment in finance lease receivables balance represents the total minimum lease payments receivable to PayPoint as lessor under finance leases, adjusted for the incremental initial direct costs of obtaining that lease, discounted at the interest rate implicit in those leases, with corresponding card terminal finance leasing revenue recognised over the expected lease term using the sum of digits method. • The accrued income is a receivable which represents PayPoint’s entitlement to consideration from clients and SME and retailer partners for services and goods delivered but not yet invoiced at the reporting date. • The contract assets are mainly capitalised employee costs directly relating to the implementation services which are expected to be recovered from the customer and are amortised on a straight-line basis over the period of the contract. • The contract liabilities represent set-up and development fees which are released on a straight-line basis over the period of the contract. • The deferred income is a contract liability which represents advance consideration received from clients and SME and retailer partners at the reporting date, which is released with revenue recognised upon delivery of the performance obligations. 4. Net revenue (alternative performance measure) | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 | | | £’000 | | £’000 | Continuing operations Service revenue 141,310 123,886 Sale of goods 1,183 1,343 Royalties 2,651 2,518 Total revenue from continuing operations 145,144 127,747 Less: Retailer partners’ commissions (29,827) (30,272) Cost of SIM card sales as principal (205) (337) Net revenue from continuing operations 115,112 97,13 8 1 Discontinued operation Service revenue 366 17, 842 Sale of goods 892 49,900 Total revenue from discontinued operation 1,258 67,742 Less: Retailer partners’ commissions (101) (5,847) Cost of mobile top-ups and SIM card sales as principal (897) (46,567) Net revenue from discontinued operation 260 15,328 Total net revenue 115,372 112,466 1. The current year revenue and net revenue from the discontinued operation represents the revenue and net revenue from Romania between 1 and 8 April 2021 prior to disposal. Shareholder information 129Strategic report Governance Financial statements 5. Cost of revenue Restated¹ | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 | | | £’000 | | £’000 | Continuing operations Retailer partners’ commissions 29,827 30,272 Cost of mobile top-ups and SIM cards as principal 205 337 Total cost of revenue deducted for net revenue 30,032 30,609 Depreciation and amortisation 7,626 7, 86 0 Field sales costs 7,548 3,174 Other 3,519 3,842 Total other costs of revenue 18,693 14,876 Total cost of revenue from continuing operations 48,725 45,485 2 Discontinued operation Retailer partners’ commissions 101 5,847 Cost of mobile top-ups and SIM cards as principal 897 46,567 Total cost of revenue deducted for net revenue 998 52,414 Depreciation and amortisation 10 381 Other (10) 331 Total other costs of revenue – 712 Total cost of revenue from discontinued operation 998 53,126 Total cost of revenue 49,723 98,611 1. The prior year comparatives have been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. 2. The current year cost of revenue from the discontinued operation represents the cost of revenue from Romania between 1 and 8 April 2021 prior to disposal. 6. Exceptional items | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 | | | £’000 | | £’000 | Revaluation of deferred, contingent consideration liability – administrative expenses 2,880 – Acquisition costs expensed – administrative expenses – (2,796) Provision in relation to Ofgem Statement of Objections – administrative expenses – (12,500) Refinancing costs expensed – administrative expenses – (304) Total exceptional items included in operating profit 2,880 (15,600) Gain on disposal of discontinued operation, net of tax 29,863 – Refinancing costs expensed – finance costs – (459) Total exceptional items included in profit or loss 32,743 (16,059) Reconciliation of profit before tax from continuing operations to underlying profit before tax from continuing operations Restated¹ | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 | | | £’000 | | £’000 | Profit before tax from continuing operations 48,515 20,443 Exceptional items (2,880) 16,059 Underlying profit before tax from continuing operations 45,635 36,502 1. The prior year comparatives have been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. PayPoint Plc Annual Report 2022130 ##  continued 6. Exceptional items continued Reconciliation of earnings from continuing operations to underlying earnings from continuing operations Restated¹ | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 | | | £’000 | | £’000 | Earnings from continuing operations 39,529 15,919 Exceptional items (2,880) 16,059 Tax on exceptional items – (2,462) Underlying earnings from continuing operations 36,649 29,516 1. The prior year comparatives have been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. 7. Employee information | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 | | | £’000 | | £’000 | Average number of employees Sales, distribution and marketing 201 206 Operations and administration 469 503 Total 670 709 Employee costs during the year (including Directors) Wages and salaries 28,682 28,500 Social security costs 2,902 2,411 Pension costs 2,365 2,005 Redundancy and termination costs 127 1,296 Total 34,076 34,212 Directors’ emoluments, pension contributions and share options are disclosed in the Remuneration Committee Report on pages 90 to 101. Included within wages and salaries is a share-based payment charge of £0.9 million (2021: £1.1 million). Refer to note 25 for disclosure of share awards made in the year. Pension arrangements The Group administers a number of non-contributory defined contribution schemes for employees. The amount charged in the consolidated statement of profit or loss for the year for pension costs of the Group under the schemes was £2.4 million (2021: £2.0 million). There was no accrual for pension contributions at the statement of financial position date (2021: £nil). 8. Profit for the year Restated¹ | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 | | | £’000 | | £’000 | Profit from continuing operations is aer (charging)/crediting: Inventory expensed – cost of mobile top-ups and SIM cards as principal (205) (337) Inventory expensed – Merchant Rentals card terminals 316 25 Depreciation on property, plant and equipment – cost of revenue (4,221) (4,116) Amortisation of intangible assets – cost of revenue (3,405) (3,744) Depreciation of property, plant and equipment – administrative expenses (547) (478) Amortisation of intangible assets – administrative expenses (2,396) (379) Loss on disposal of property, plant and equipment – administrative expenses (59) (57) Government grant income (HMRC furlough scheme for Handepay and Merchant Rentals) – administrative expenses – 189 Research and development costs – administrative expenses (808) (1,093) 1. The prior year comparatives have been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. Shareholder information 131Strategic report Governance Financial statements | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 | | | £’000 | | £’000 | Auditor’s remuneration: Fees payable to the Company’s auditor for the audit of the Company’s annual accounts 100 103 Fees payable to the Company’s auditor for the audit of the Company’s subsidiaries 347 367 Total audit fees 447 470 Fees payable to the Group’s auditor for the review of the interim results 38 38 Audit-related assurance services 38 38 Total auditor’s remuneration 485 508 There were no other audit-related services or fees provided in the current and prior years. A description of the work of the Audit Committee is set out on pages 84 to 85 and includes an explanation of how auditor independence is safeguarded by limitation of non-audit services. Group profit before tax from continuing and discontinued operations Restated¹ | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 | | | £’000 | | £’000 | Profit before tax from continuing operations 48,515 20,443 Gain on disposal aer tax from discontinued operation (note 11) 148 7, 551 Profit up to date of disposal from discontinued operation (note 11) 29,863 – Group profit before tax from continuing and discontinued operations 78,526 27, 9 94 1. The prior year comparatives have been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. 9. Tax Restated¹ | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 | | | £’000 | | £’000 | Continuing operations Current tax Charge for current year 8,254 4,911 Adjustment in respect of prior years 86 (146) Current tax charge 8,340 4,765 Deferred tax Charge/(credit) for current year 577 (444) Adjustment in respect of prior years 69 203 Deferred tax charge/(credit) 646 (241) Total income tax charge on continuing operations 8,986 4,524 Discontinued operation Current tax Charge for current year – 1,107 Current tax charge – 1,107 Deferred tax Charge for current year – 21 Deferred tax charge – 21 Total income tax charge on discontinued operation – 1,128 Total income tax charge 8,986 5,652 1. The prior year comparatives have been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. PayPoint Plc Annual Report 2022132 ##  continued 9. Tax continued The income tax charge on continuing operations is based on the UK statutory rate of corporation tax for the year of 19% (2021: 19%). Temporary dierences have been measured using the enacted tax rates that are expected to apply when the liability is settled or the asset realised. During the financial year, an increase in the main rate of UK corporation tax from 19% to 25% with eect from 1 April 2023 was enacted. Deferred tax has been calculated based on the rate applicable at the date timing dierences are expected to reverse. The income tax charge on continuing operations of £9.0 million (2021: £4.5 million) on profit before tax of £48.5 million (2021: £20.4 million) 1 represents an eective tax rate of 18.5% (2021: 22.1%). This is lower than the UK statutory rate of 19% due to expenditure qualifying for the capital allowances super deduction, research and development credits and the non-taxable exceptional item in the current year, partially oset by the impact of revaluing the deferred tax liability following the enactment of the increased main rate of UK corporation tax from 19% to 25% with eect from 1 April 2023. The eective tax rate is lower than the prior year due to the disallowable acquisition and disposal costs in the prior year together with the super deduction, research and development credits and the non-taxable exceptional item in the current year, partially oset by the impact of revaluing the deferred tax liability following the enactment of the increased main rate of UK corporation tax from 19% to 25% with eect from 1 April 2023. 1. Eective tax rate is the tax cost as a percentage of profit before tax on continuing operations. Restated¹ | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 | | | £’000 | | £’000 | Profit before tax from continuing operations 48,515 20,443 Tax at the UK corporation tax rate of 19% (2021: 19%) 9,218 3,884 Tax eects of: (Non-taxable income)/disallowable expenses (726) 508 Adjustments in respect of prior years 155 57 Tax impact of share-based payments (3) 75 Revaluation of deferred tax liability 889 – Non-taxable exceptional item (547) – Actual amount of tax charge on continuing operations 8,986 4,524 1. The prior year comparatives have been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. The eective tax rate on the discontinued operation was 0.0% (2021: 14.9%) because the gain on disposal of the discontinued operation was exempt from UK corporation tax under the substantial shareholding exemption. 10. Earnings per share Basic and diluted earnings per share are calculated on the following profit and number of shares. Restated¹ | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 | | | £’000 | | £’000 | Total profit for basic and diluted earnings per share is the net profit attributable to equity holders of the parent 69,540 22,342 Continuing operations Profit for basic and diluted earnings per share is the net profit from continuing operations attributable to equity holders of the parent 39,529 15,919 Continuing operations – underlying Profit for basic and diluted earnings per share is the net profit from continuing operations before exceptional items attributable to equity holders of the parent 36,649 29,516 Discontinued operation Profit for basic and diluted earnings per share is the net profit from discontinued operation attributable to equity holders of the parent 30,011 6,423 Shareholder information 133Strategic report Governance Financial statements | 31 March | | 31 March | | | --- | --- | --- | --- | | | 2022 | | 2021 | | Number | | Number | | | of shares | | of shares | | | Thousands | | Thousands | | Weighted average number of ordinary shares in issue (for basic earnings per share) 68,631 68,406 Potential dilutive ordinary shares: Long-term incentive plan 164 164 Restricted share awards 408 197 Deferred annual bonus scheme 108 62 SIP and other 58 50 Weighted average number of ordinary shares in issue (for diluted earnings per share) 69,369 68,879 Restated¹ | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | Earnings per share (pence) | | 2022 | | 2021 | Basic 101.3 32.7 Diluted 100.2 32.4 1. The prior year comparatives have been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. Restated¹ | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | Earnings per share – continuing operations (pence) | | 2022 | | 2021 | Basic 57.6 23.3 Diluted 57.0 23.1 Restated¹ | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | Underlying earnings per share – continuing operations before exceptional items (pence) | | 2022 | | 2021 | Basic 53.4 43.1 Diluted 52.8 42.9 | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | Earnings per share – discontinued operation (pence) | | 2022 | | 2021 | Basic 43.7 9.4 Diluted 43.2 9.3 1. The prior year comparatives have been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. 11. Discontinued operation The sale of the Romanian business, PayPoint Services SRL, to Innova Capital completed on 8 April 2021 following regulatory and other customary approvals. The sale was consistent with PayPoint’s focus on its key strategic priorities and the delivery of enhanced growth and value in its core UK markets. Cash proceeds of £48.3 million were received in April 2021 and were used to partly repay the revolving credit facility and reduce net corporate debt. A further £0.3m working capital adjustment was received on 2 November 2021. The Group profit from the discontinued operation was £30.0 million: Year ended 31 March 2022 Group £’000 Total disposal proceeds received 48,585 Costs of disposal (1,010) Carrying amount of net assets sold (16,067) Gain on sale before income tax and reclassification of foreign currency translation reserve 31,508 Reclassification of foreign currency translation reserve to profit or loss (1,645) Tax charge on discontinued operation – Gain on disposal aer tax 29,863 Profit up to date of disposal 148 Profit from discontinued operation (attributable to owners of the Company) 30,011 PayPoint Plc Annual Report 2022134 ##  continued 11. Discontinued operation continued Year ended 31 March 2022 Company £’000 Total disposal proceeds received 48,585 Costs of disposal (522) Carrying value of investment in discontinued operation in Company statement of financial position (note 15) (17,420) Profit from discontinued operation (attributable to owners of the Company) 30,643 The gain on disposal of the discontinued operation was exempt from UK corporation tax under the substantial shareholding exemption. The major classes of assets and liabilities comprising the carrying amount of net assets sold (and classified as held for sale in the prior year) were as follows: | 8 April | 31 March | | | --- | --- | --- | | 2021 | | 2021 | | £’000 | | £’000 | Assets Goodwill 11,149 11,149 Other intangible assets 455 455 Property, plant and equipment 2,242 2,242 Deferred tax asset – – Inventories 124 124 Trade and other receivables 20,033 17,517 Corporate cash 7,814 7, 814 Clients’ funds and retailer partners’ deposits 20,090 18,052 Total assets of discontinued operation 61,907 57, 353 Liabilities Trade and other payables 44,928 39,954 Lease liabilities 707 707 Current tax liability 201 201 Deferred tax liability 4 4 Total liabilities of discontinued operation 45,840 40,866 Net assets of discontinued operation 16,067 16,487 The net assets of the discontinued operation were assessed to ensure their fair value less costs to sell were greater than their carrying value. The proceeds of the disposal substantially exceeded the carrying amount of the related net assets and accordingly no impairment loss was recognised prior to disposal. The current period results of the discontinued operation up to the date of disposal and the gain on disposal aer tax have been included in the total Group profit for the year as follows: | Period from | | Year ended | | | --- | --- | --- | --- | | 1 to 8 April | | 31 March | | | | 2021 | | 2021 | | | £’000 | | £’000 | Revenue 1,258 67,742 Cost of revenue (998) (53,126) Gross profit 260 14,616 Expenses (112) ( 7,188) Operating profit 148 7,428 Finance income – 311 Finance costs – (188) Profit before tax 148 7, 551 Tax – (1,128) Gain on disposal 29,863 – Post-tax profit from discontinued operation attributable to equity holders of the parent 30,011 6,423 Shareholder information 135Strategic report Governance Financial statements Cash flows from discontinued operation | Period from | | Year ended | | | --- | --- | --- | --- | | 1 to 8 April | | 31 March | | | | 2021 | | 2021 | | | £’000 | | £’000 | Net cash from operations 2,038 11,018 Net cash used in investing activities – (689) Net cash used in financing activities – dividends paid to the Company – ( 7,146 ) Net cash disposed as part of discontinued operation (27,904) – Net (decrease)/increase in cash and cash equivalents (25,866) 3,183 Cash and cash equivalents at beginning of year 25,866 24,328 Eect of foreign exchange rate changes – (1,645) Cash and cash equivalents at end of year – 25,866 The Group proceeds from the disposal of the discontinued operation net of cash disposed were £20.2 million: Year ended 31 March 2022 Group £’000 Total disposal proceeds received 48,585 Costs of disposal (522) Corporate cash held for sale in the discontinued operation (7,814) Clients’ funds and retailer partners’ deposits held for sale in the discontinued operation (20,090) Proceeds from disposal of the discontinued operation net of cash disposed 20,159 Year ended 31 March 2022 Company £’000 Total disposal proceeds received 48,585 Costs of disposal (522) Proceeds from disposal of the discontinued operation 48,063 12. Goodwill The Group tests goodwill for impairment annually and more frequently if there are indicators of impairment as set out in note 1. The Group’s cash- generating units (‘CGUs’) have been assessed based on independently managed cash flows. When testing for impairment, recoverable amounts for the Group’s CGUs are measured at their value-in-use by discounting the future expected cash flows from the assets in the CGUs. The Group prepares five-year cash flow forecasts derived from the most recent three-year financial budgets approved by the Board which are extrapolated for a further two years and subsequently extended to perpetuity. A key source of estimation in the impairment tests is the short-term revenue growth rates applied within the cash flow forecasts, which are determined using an estimate of future results based on the latest business forecasts and appropriately reflect expected performance of the CGU. The estimates of future cash flows are based on past experience adjusted for estimates of future performance, including the continued shi from cash to digital payments. Terminal values are based on long-term growth rates that do not exceed 2%, which appropriately reflects the expected long-term rate of GDP growth in the UK. The pre-tax risk adjusted discount rates have been used to discount the forecast cash flows calculated by reference to the weighted average cost of capital (‘WACC’) of each CGU. The cost of equity is based on the risk-free rate for long-term UK government bonds, which is adjusted for the beta (reflecting the systemic risk of PayPoint relative to the market as a whole), the equity market risk premium (reflecting the required return over and above a risk-free rate by an investor who is investing in the market as a whole) and a CGU specific risk adjustment (reflecting other systemic risks specific to each CGU and the markets in which it operates). All CGUs assessed generate value-in-use in excess of their carrying values. Sensitivity analysis applied to WACC and gross margin demonstrated that no reasonably possible change in any of the above assumptions would cause the carrying values of the CGUs to exceed their recoverable amounts. Restated | | | | | | | Merchant | | | Digital | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Romania | | i-movo | Handepay | | Rentals | | payments | | Total | | | | CGU | CGU | | CGU | | CGU | | CGU | CGUs | | Group – goodwill values | | £’000 | £’000 | | £’000 | | £’000 | | £’000 | £’000 | At 31 March 2020 11,853 – – – – 11,853 Acquisitions of businesses – 6,867 35,632 9,052 – 51,551 Exchange rate adjustment (704) – – – – (704) Balance reclassified as held for sale (11,149) – – – – (11,149) At 31 March 2021, previously reported – 6,867 35,632 9,052 – 51,551 Measurement period adjustment – Merchant Rentals – – – 534 – 534 At 31 March 2021, restated – 6,867 35,632 9,586 – 52,085 Acquisition of business – – – – 5,583 5,583 At 31 March 2022 – 6,867 35,632 9,586 5,583 57,6 68 PayPoint Plc Annual Report 2022136 ##  continued 12. Goodwill continued The prior year comparatives have been restated for a retrospective measurement period adjustment which resulted in an increase in the goodwill attributable to the Merchant Rentals acquisition by £0.5 million. New information about facts and circumstances that existed at the acquisition date was obtained within the measurement period which, if known, would have resulted in an adjustment to reduce the fair value of inventories purchased at the acquisition date. There were no other measurement period adjustments to the fair values of the identifiable assets purchased and liabilities assumed as presented for the Handepay and i-movo acquisitions in the financial statements for the year ended 31 March 2021. Assumptions used for annual impairment tests Merchant Digital i-movo Handepay Rentals payments CGU CGU CGU CGU At 31 March 2022 Carrying value of cash generating unit £8.8m £46.8m £22.6m £10.5m Pre-tax risk adjusted discount rate 15.0% 11.8% 11.8% 15.6% Terminal growth rate 0.0% 2.0% (5.0)%-2.0% 2.0% At 31 March 2021 Carrying value of cash generating unit £9.0m £48.1m £27.9m – Pre-tax risk adjusted discount rate 12.0% 15.1% 15.1% – Terminal growth rate 2.0% 2.0% 2.0% 2.0% Given the proximity of the timing of the acquisitions to the prior year end, fair value less costs of disposal was also considered as an alternative measure of recoverable amount and indicated that no impairment was required at the prior year end. 13. Other intangible assets | | Development | | | Customer | | Brands and | | | | Developed | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | costs | relationships | | | trademarks | | | Regulatory | technology | | Total | | Group | | £’000 | | | £’000 | | £’000 | licences £’000 | | | £’000 | £’000 | Cost 1 At 31 March 2021, restated 26,512 18,404 8,951 – 306 54,173 Acquisitions of businesses 7 204 – 236 – 447 Additions 5,627 – – – – 5,627 Disposals – – – – – – At 31 March 2022 32,146 18,608 8,951 236 306 60,247 Accumulated amortisation 1 At 31 March 2021, restated 17,574 293 538 – 51 18,456 Charge for the year 2,903 1,905 714 24 255 5,801 Disposals – – – – – – At 31 March 2022 20,477 2,198 1,252 24 306 24,257 Carrying amount At 31 March 2022 11,669 16,410 7,6 99 212 – 35,990 At 31 March 2021, restated¹ 8,938 18,111 8,413 – 255 35,717 1. The prior year comparatives have been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. Included within development costs at 31 March 2022 are £3.6 million (2021: £nil) of assets under construction which were not being amortised at 31 March 2022. At 31 March 2022, the Group had entered into contractual commitments for development cost additions amounting to £1.0 million (2021: £nil). Shareholder information 137Strategic report Governance Financial statements Restated¹ | | Development | | | Customer | | Brands and | | Developed | | Restated¹ | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | costs | relationships | | | trademarks | | technology | | | Total | | Group | | £’000 | | | £’000 | | £’000 | | £’000 | | £’000 | Cost At 31 March 2020, previously reported 31,938 – 259 – 32,197 Reversal of previously capitalised SaaS implementation costs (7,401) – – – (7,401) 1 At 31 March 2020, restated 24,537 – 259 – 24,796 Acquisitions of businesses 626 18,404 2,909 306 22,245 1 Additions, restated 1,805 – 6,042 – 7,847 Disposals (169) – – – (169) Exchange rate adjustment (40) – (15) – (55) Balance reclassified as held for sale (247) – (244) – (491) 1 At 31 March 2021, restated 26,512 18,404 8,951 306 54,173 Accumulated amortisation At 31 March 2020, previously reported 14,793 – 130 – 14,923 Reversal of accumulated amortisation on previously capitalised SaaS implementation costs (420) – – – (420) 1 At 31 March 2020, restated 14,373 – 130 – 14,503 1 Charge for the year, restated 3,251 293 590 51 4,185 Disposals (169) – – – (169) Exchange rate adjustment (16) – (11) – (27) Balance reclassified as held for sale 135 – (171) – (36) 1 At 31 March 2021, restated 17, 574 293 538 51 18,456 Carrying amount At 31 March 2021, restated¹ 8,938 18,111 8,413 255 35,717 At 31 March 2020, restated¹ 10,164 – 129 – 10,293 1. The prior year comparatives have been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. Brand Company £’000 Cost At 31 March 2021 6,042 Reclassification of Collect+ arrangement from brand intangible asset to investment (6,042) Additions – Disposals – At 31 March 2022 – Accumulated amortisation At 31 March 2021 503 Reversal of accumulated amortisation on previously recognised Collect+ brand intangible asset (503) Disposals – At 31 March 2022 – Carrying amount At 31 March 2022 – At 31 March 2021 5,539 In the current year on the Company statement of financial position, the £6.0 million Collect+ arrangement was reclassified from a brand intangible asset to a wholly owned investment in subsidiary. The £6.0 million investment relates to the Company’s acquisition of the remaining 50% interest in Collect+ that Yodel owned in the prior year, which resulted in Collect+ becoming a fully owned subsidiary controlled by the Company. Refer to note 1. PayPoint Plc Annual Report 2022138 ##  continued 13. Other intangible assets continued Brand Company £’000 Cost At 31 March 2020 – Additions 6,042 Disposals – At 31 March 2021 6,042 Accumulated amortisation At 31 March 2020 – Charge for the year 503 Disposals – At 31 March 2021 503 Carrying amount At 31 March 2021 5,539 At 31 March 2020 – 14. Property, plant and equipment Fixtures, | Terminals | | fittings and | | Land and | | Right-of-use | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | and ATMs | | equipment | | buildings | | | assets | Total | | | £’000 | | £’000 | | £’000 | | £’000 | £’000 | Cost At 31 March 2021 37, 473 3,479 11,081 428 52,461 Acquisitions of businesses 12 – – 34 46 Additions 4,982 202 – – 5,184 Disposals (1,129) (8) – – (1,137) At 31 March 2022 41,338 3,673 11,081 462 56,554 Accumulated depreciation At 31 March 2021 27, 495 1,737 1,827 23 31,082 Charge for the year 4,118 185 274 191 4,768 Disposals (1,078) – – – (1,078) At 31 March 2022 30,535 1,922 2,101 214 34,772 Carrying amount At 31 March 2022 10,803 1,751 8,980 248 21,782 At 31 March 2021 9,978 1,742 9,254 405 21,379 At 31 March 2022, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to £2.1 million (2021: £0.5 million). Shareholder information 139Strategic report Governance Financial statements Fixtures, | Terminals | | fittings and | | Land and | | Right-of-use | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | and ATMs | | equipment | | buildings | | | assets | Total | | | £’000 | | £’000 | | £’000 | | £’000 | £’000 | Cost At 31 March 2020 40,618 4,666 10,974 1,549 57, 8 07 Acquisitions of businesses 5 75 50 298 428 Additions 3,141 175 57 86 3,459 Disposals (2,279) (23) – – (2,302) Exchange rate adjustment (276) (90) – (89) (455) Balance reclassified as held for sale (3,736) (1,324) – (1,416) (6,476) At 31 March 2021 37, 473 3,479 11,081 428 52,461 Accumulated depreciation At 31 March 2020 28,469 2,261 1,573 664 32,967 Charge for the year 4,218 308 254 133 4,913 Disposals (2,209) (23) – – (2,232) Exchange rate adjustment (232) (54) – (46) (332) Balance reclassified as held for sale (2,751) (755) – (728) (4,234) At 31 March 2021 27,495 1,737 1,827 23 31,082 Carrying amount At 31 March 2021 9,978 1,742 9,254 405 21,379 At 31 March 2020 12,149 2,405 9,401 885 24,840 15. Investments The Company, a holding company, has investments (directly or indirectly) in the following undertakings which are wholly owned subsidiaries, other than Snappy Shopper Limited (investment in associate) and Optus Homes Limited (purchase of convertible loan note): Investments in wholly owned subsidiaries Direct or indirect Company name investment Principal activity (registered address) Country of registration PayPoint Network Limited Direct Management of an electronic payment service England and Wales (1 The Boulevard, Shire Park, Welwyn Garden City, Hertfordshire AL7 1EL) PayPoint Collections Limited Direct Provision of a payment collection service (1 The Boulevard, England and Wales Shire Park, Welwyn Garden City, Hertfordshire AL7 1EL) PayPoint Retail Solutions Limited Direct Provision of retail services (1 The Boulevard, Shire Park, England and Wales Welwyn Garden City, Hertfordshire AL7 1EL) PayPoint Payment Services Limited Direct Provision of regulated payments services (1 The Boulevard, England and Wales Shire Park, Welwyn Garden City, Hertfordshire AL7 1EL) i-movo Holdings Limited Direct Holding company (1 The Boulevard, Shire Park, Welwyn England and Wales Garden City, Hertfordshire AL7 1EL) i-movo Limited Indirect Provision of digital voucher service (1 The Boulevard, Shire England and Wales Park, Welwyn Garden City, Hertfordshire AL7 1EL) Handepay Limited Direct Sales business in merchant acquiring industry England and Wales (1 The Boulevard, Shire Park, Welwyn Garden City, Hertfordshire AL7 1EL) Merchant Rentals Limited Direct Provision of asset finance and leasing solutions to merchant England and Wales acquiring industry (1 The Boulevard, Shire Park, Welwyn Garden City, Hertfordshire AL7 1EL) Collect+ Holdings Limited Direct Holding company (1 The Boulevard, Shire Park, Welwyn England and Wales Garden City, Hertfordshire AL7 1EL) Collect+ Brand Limited Indirect Holder of Collect+ brand (1 The Boulevard, Shire Park, England and Wales Welwyn Garden City, Hertfordshire AL7 1EL) RSM 2000 Limited Direct Provision of regulated payments services (1 The Boulevard, England and Wales Shire Park, Welwyn Garden City, Hertfordshire AL7 1EL) Event Payment Services Limited Indirect Provision of business support services (1 The Boulevard, England and Wales Shire Park, Welwyn Garden City, Hertfordshire AL7 1EL) PayPoint Trust Managers Limited Indirect Dormant company (1 The Boulevard, Shire Park, Welwyn England and Wales Garden City, Hertfordshire AL7 1EL) PayPoint Plc Annual Report 2022140 ##  continued 15. Investments continued Investment in associate Direct or indirect Company name investment Principal activity (registered address) Country of registration Snappy Shopper Limited Direct Associate of PayPoint Plc, 9.35% holding in ordinary share Scotland capital (29 Commercial Street, Dundee, Scotland, DD1 3DG) The Group acquired 100% interest in RSM 2000 Limited on 12 April 2021. PayPoint Plc subscribed to 9.35% of the ordinary share capital (conferring 13.04% of voting rights) in Snappy Shopper Ltd on 7 July 2021. PayPoint Plc purchased a convertible loan note of nominal amount £750,000 from Optus Homes Ltd on 25 March 2022, which is classified as an embedded derivative convertible debt instrument. The Group’s previously held interests in the Romanian businesses PayPoint Services SRL, Payzone SA and SC P.P. Network Progresimo SRL were disposed on 8 April 2021. PayPoint Collections Ireland Limited was liquidated on 17 May 2021. PayPoint Network Ireland Limited was liquidated on 9 June 2021. PayPoint Ireland Limited was liquidated on 16 June 2021. Movement in investments in wholly owned subsidiaries | | 31 March | | 31 March | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Company | | £’000 | | £’000 | Balance at the beginning of the year 138,539 60,170 Reclassification of Collect+ arrangement from brand intangible asset to investment (note 1) 6,042 – Acquisitions of wholly owned subsidiaries (note 16) 6,944 74,593 Acquisition transaction costs capitalised – 2,796 Increased capitalisation of existing investments in wholly owned subsidiaries 5,000 1,001 Disposal of investments in wholly owned subsidiaries (note 11) (17,420) – Liquidation of investments in wholly owned subsidiaries – (21) Balance at the end of the year 139,105 138,539 In the current year on the Company statement of financial position, the £6.0 million Collect+ arrangement was reclassified from a brand intangible asset to a wholly owned investment in subsidiary. The £6.0 million investment relates to the Company’s acquisition of the remaining 50% interest in Collect+ that Yodel owned in the prior year, which resulted in Collect+ becoming a fully owned subsidiary controlled by the Company. Refer to note 1. In the current year the Company increased its investment in RSM 2000 by £5.0 million. RSM 2000 allotted and issued £5.0 million of additional shares (5.0 million additional shares at nominal value of £1 each) in satisfaction of the increased investment. The Company’s investments in the Romanian businesses PayPoint Services SRL, Payzone SA and SC P.P. Network Progresimo SRL were disposed on 8 April 2021 at their carrying value of £17.4 million, with proceeds received of £48.6 million. An impairment test was performed on the Company’s investments in subsidiaries which indicated that no impairment was required. Recoverable amounts for the Company’s investments are measured at their value-in-use by discounting the future expected cash flows, derived from the most recent financial budgets approved by the Board which are extended to perpetuity. The estimates of future cash flows are based on past experience adjusted for management’s expectations of future performance. 16. Acquisition of RSM 2000 On 12 April 2021, PayPoint acquired 100% of the share capital of RSM 2000 Limited for initial cash consideration of £5.9 million and deferred consideration of £1.0 million payable in cash on the first anniversary of completion. The deferred consideration is not contingent on future performance. The acquisition resulted in a net £4.5 million cash outflow (net of cash acquired) in the current year. The primary reasons for the acquisition were to enhance PayPoint’s digital payments capability and enable reach into new sectors, including charities, housing, not-for-profit organisations, events and SMEs in the UK. An RSM 2000 regulatory licences intangible asset of £0.2 million has been recognised and is being amortised over a useful life of 10 years. An RSM 2000 customer relationship intangible asset of £0.2 million has been recognised and is being amortised over a useful life of 12 years. In the period since acquisition, RSM 2000 earned revenue of £2.1 million and reported profit before tax of £0.1 million. The result for the period from 1 to 12 April 2021 is not considered material so RSM 2000 has been consolidated from 1 April 2021. Therefore, had the acquisition taken place on the first day of the financial year, there would be no change to the revenue and reported profit before tax included in these consolidated financial statements. Strategic report Governance Financial statements Shareholder information 141 The following table summarises the provisional fair values of the identifiable assets purchased and liabilities assumed as at the date of acquisition: | | 12 April 2021 £'000 | | --- | --- | | Acquired customer relationship asset | 204 | | Acquired regulatory licence asset | 236 | | Intangible assets – development costs | 7 | | Property, plant and equipment | 12 | | Right-of-use assets | 34 | | Trade and other receivables | 168 | | Cash and cash equivalents | 1,401 | | Trade and other payables | (564) | | Lease liabilities | (34) | | Current tax liabilities | (18) | | Deferred tax liabilities | (85) | | **Total identifiable net assets acquired at fair value** | **1,361** | | Initial cash consideration | 5,944 | | Deferred consideration | 1,000 | | **Total consideration** | **6,944** | | **Goodwill recognised on acquisition** | **5,583** | | **Acquisition of subsidiary net of cash acquired (Group)** | **(4,543)** | | **Acquisition of subsidiary (Company)** | **(5,944)** | The acquired identifiable assets and liabilities have been recognised at their fair values at acquisition date and in accordance with the Group's accounting policies disclosed in note 1: - The acquired customer relationships have been valued using the multi-period excess earnings method ("MEEM approach") by estimating the total expected income streams from the customer relationship and deducting portions of the cash flow that can be attributed to supporting, or contributory, assets (including workforce). The residual income streams are discounted. No tax amortisation benefit is applied. The key inputs to this method are the customer churn rate, revenue growth rate and discount rate applied to future forecasts of the businesses. - The acquired licences have been valued using the cost-to-recreate method, representing the cost of the process to attain the licenses. This requires an estimate of all the costs a typical market participant would incur to generate an exact replica of the intangible asset in the context of the acquired business. The cost-to-recreate method takes into account factors including economic and technological obsolescence. - Trade receivables and trade payables have been assessed at fair value on the basis of the contractual terms and economic conditions existing at the acquisition date, reflecting the best estimate at the acquisition date of contractual cash flows not expected to be collected. The values presented above other than cash and cash equivalents represent the best estimate based on information available at the acquisition date and are therefore subject to adjustment within the measurement period if new information about facts and circumstances that existed at the acquisition date is obtained and, if known, would have resulted in the recognition of those assets and liabilities at that date. The £5.6 million goodwill acquired, which was previously fully allocated to the RSM 2000 CGU at the time of acquisition, is now fully allocated to the digital payments CGU. The CGU to which the goodwill is allocated changed during the current year following the continued integration of PayPoint's combined digital payments capability which means that the goodwill allocated to the digital payments CGU cannot be non-arbitrarily identified or associated with an asset group at a lower level than the digital payments CGU. The digital payments CGU represents the CGU which is expected to benefit from the synergies of the acquisition and represents the lowest level at which the goodwill is monitored for internal management purposes. The goodwill is attributable to workforce in place, know-how within the business (operating expertise and detailed knowledge of direct debit processing facilitating enhanced potential to grow digital payments capabilities), new customer relationships and the growth in new sectors that is anticipated to arise post-acquisition (including charities, not-for profit organisations, events, housing and SMEs in the UK), as well as the fair value of expected synergies from combining the digital operations of PayPoint and RSM 2000 (the ability of PayPoint to offer new customers the full scope of digital payments capabilities post-acquisition). Of the £5.6 million goodwill acquired, no goodwill is expected to be deductible for tax purposes. #### 17. Investment in associate On 7 July 2021, PayPoint Plc subscribed to 9.35% of the ordinary share capital (conferring 13.04% of voting rights) in Snappy Shopper Ltd for total cash consideration of £6.7 million. The investment will enable PayPoint to take advantage of the growth in consumer demand for local home delivery and its convenience retailer partners to remain at the forefront of retail and consumer trends. An investment is treated as an associate where the investor has significant influence over the investment. Under IAS 28 significant influence may be evidenced by a number of factors, including representation on the Board of Directors of the investee. PayPoint is considered to have significant influence over Snappy Shopper as the Chief Executive of PayPoint, Nick Wiles, joined their Board as a Non-Executive Director. The investment has therefore been treated as an associate and recognised at its cost of £6.7 million under the equity method. PayPoint's share of Snappy Shopper's result was immaterial for the year ended 31 March 2022 and has therefore not been recognised in the consolidated statement of profit or loss or in the consolidated statement of financial position against the carrying value of the investment. The principal place of business for Snappy Shopper Limited is in the United Kingdom. PayPoint Plc Annual Report 2022142 ##  continued 18. Trade and other receivables | | 31 March | | 31 March | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Group | | £’000 | | £’000 | Trade receivables 10,316 10,772 1 Items in the course of collection 55,449 47,512 Revenue allowance for expected credit losses (1,058) (949) 64,707 57,335 Other receivables 134 152 Net investment in finance lease receivables (note 29) 1,814 4,064 Contract assets – capitalisation of fulfilment costs 2,057 1,889 Accrued income 4,315 3,320 Prepayments 2,948 2,816 Total 75,975 69,576 1. Items in the course of collection represent amounts collected for clients by retailer partners. An equivalent balance is included within trade and other payables (settlement payables). Refer to note 20. The Group’s exposure to the credit risk inherent in its trade and other receivables is discussed in note 27. 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 trade receivables are past due debtors with a carrying amount of £1.7 million (2021: £2.4 million). There has been a decrease compared to prior year due to the timing of billing at the year end. The ageing of the trade receivables past due is as follows: | Less than | | | | | | More than | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 1 month | | 1-2 months | | 2-3 months | | 3 months | | Total | | | £’000 | | £’000 | | £’000 | | £’000 | £’000 | Carrying value at 31 March 2022 907 455 44 290 1, 696 Carrying value at 31 March 2021 1,238 421 107 659 2,425 The expected credit losses associated with accrued income balances are immaterial, based on historical loss experience for those customers, adjusted for information about current and reasonable supportable future conditions. Movement in the revenue allowance | 31 March | | 31 March | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £’000 | | £’000 | Balance at the beginning of the year 949 1,379 Amounts utilised in the year (654) (802) Increase in allowance 763 767 Foreign exchange – (23) Balance reclassified as held for sale – (372) Balance at end of the year 1,058 949 Age of revenue allowance | Less than | | | | | | More than | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 1 month | | 1-2 months | | 2-3 months | | 3 months | | Total | | | £’000 | | £’000 | | £’000 | | £’000 | £’000 | Carrying value at 31 March 2022 195 84 79 700 1,058 Carrying value at 31 March 2021 126 98 50 675 949 The expected credit losses associated with items in the course of collection are immaterial. Shareholder information 143Strategic report Governance Financial statements | | 31 March | | 31 March | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Company | | £’000 | | £’000 | Amounts owed by Group companies (non-current) 26,155 27, 517 Trade and other receivables (non-current) 26,155 27, 517 Amounts owed by Group companies (current) 2,353 8,143 Other receivables 11 8 Accrued income 12 12 Prepayments 732 1,106 Trade and other receivables (current) 3,108 9,269 Total 29,263 36,786 Amounts owned by subsidiaries are unsecured, have no fixed date of repayment and are repayable on demand. Expected credit losses are immaterial. 19. Cash and cash equivalents Total cash and cash equivalents from continuing operations of £24.3 million (2021: £38.9 million) consists of £7.7 million (2021: £10.5 million) corporate cash and £16.6 million (2021: £28.4 million) relating to funds collected on behalf of clients where PayPoint has title to the funds (clients’ funds) and where retailer partners have provided security deposits (retailer partners’ deposits). A balance equivalent to the latter amount is included within trade payables. Clients’ funds held in trust which are not included in cash and cash equivalents amounted to £58.9 million (2021: £50.3 million). During the year the Group operated cash pooling amongst most of its bank accounts in the UK whereby individual accounts could be overdrawn without penalties being incurred so long as the overall position is in credit. 20. Trade and other payables | | 31 March | | 31 March | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Group | | £’000 | | £’000 | 1 Amounts owed in respect of clients’ funds and retailer partners’ deposits 16,646 28,405 2 Settlement payables 55,449 47, 512 Client payables 72,095 75,917 Trade payables 4,789 5,925 Other taxes and social security 3,314 6,439 Other payables 901 692 Accruals 10,087 11,494 Deferred income 401 565 Contract liabilities – deferral of set-up and development fees 788 1,472 Total 92,375 102,504 Disclosed as: Current 92,375 102,504 Non-current – – Total 92,375 102,504 1. Relates to monies collected on behalf of clients where the Group has title to the funds (clients’ funds and retailer partners’ deposits). An equivalent balance is included within cash and cash equivalents (note 19). 2. Payable in respect of amounts collected for clients by retailer partners. An equivalent balance is included within trade and other receivables (items in the course of collection). Refer to note 18. | | 31 March | | 31 March | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Company (Current) | | £’000 | | £’000 | Amounts owed by Group companies 52,160 13,039 Other payables 240 774 Accruals 2,365 1,812 Total 54,765 15,625 PayPoint Plc Annual Report 2022144 ##  continued 21. Provision | | 31 March | | 31 March | | | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | Group and Company | | £’000 | | £’000 | At beginning of year 12,500 – Provision utilised (12,500) – Provision recognised in relation to the Ofgem Statement of Objections (current liability) – 12,500 At end of year – 12,500 A £12.5 million donation was made to the Energy Industry Voluntary Redress Scheme as part of the commitments in resolution of the concerns raised in Ofgem’s Statement of Objections received on 29 September 2020, resulting in full utilisation of the £12.5 million provision which was previously recognised in the prior year ended 31 March 2021. 22. Deferred consideration liability £’000 At 31 March 2020 – Recognition of discounted deferred, contingent consideration liability on acquisition of i-movo 5,690 Discount unwind on deferred consideration 57 At 31 March 2021 5,747 Recognition of deferred consideration liability on acquisition of RSM 2000 1,000 Revaluation of i-movo deferred, contingent consideration liability (2,880) Discount unwind on i-movo deferred, contingent consideration 133 Settlement of i-movo deferred, contingent consideration liability – cash consideration paid in the year (2,000) Settlement of i-movo deferred, contingent consideration liability – shares consideration paid in the year (1,000) At 31 March 2022 1,000 Disclosed as: | 31 March | | 31 March | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £’000 | | £’000 | Current 1,000 1,462 Non-current – 4,285 Total 1,000 5,747 Of the total £1.0 million deferred consideration liability at 31 March 2022, £nil relates to the acquisition of i-movo (2021: £5.7 million) and £1.0 million relates to the acquisition of RSM 2000 (2021: £nil). i-movo The £nil (2021: £5.7 million) deferred, contingent consideration liability in relation to the i-movo acquisition represents the discounted fair value of the estimated additional consideration payable at the reporting date. The £nil i-movo deferred, contingent consideration liability was contingent on future performance over the earnout period and was linked to four monthly revenue growth targets on two potential key revenue streams. The £nil (2021: £5.7 million) carrying amount of the deferred, contingent consideration liability is considered to approximate to its fair value. The fair value of the liability is categorised as Level 3 in the fair value hierarchy. The £2.9 million (2021: £nil) fair value gain recognised in the current year consolidated statement of profit or loss was due to the revaluation of part of the previously recognised liability based on the latest forecasts. The total contingent consideration was capped at £6.0 million (£4.0 million cash and £2.0 million shares), of which £3.0 million (£2.0 million cash and £1.0 million shares) was settled in the current financial year. The fair value of the expected earnout is measured against the contractually agreed performance targets at each reporting date, determined using a probability-weighted average best estimate of discrete scenarios based on the latest revenue forecasts which are discounted to present value. The fair value of the discounted deferred, contingent consideration liability is determined using an estimate regarding the future results. Any subsequent revaluations to deferred, contingent consideration as a result of changes in such estimations are recognised in the consolidated statement of profit or loss. The estimation of the liability requires an estimate of future performance of the related business over the earnout period, based on management’s latest forecasts. The significant unobservable inputs used in the fair value measurement are the discount rate and the forecast future revenue of the acquired business. Also, the Board have discretion to extend one or more of the earnout periods and also to make the earnout payments (or part of them) should the relevant earnout targets not be met by the target dates. RSM 2000 The £1.0 million (2021: £nil) RSM 2000 deferred consideration liability was paid out on the first anniversary of completion, aer the end of the financial year (refer to note 22). It therefore has not been discounted to present value at 31 March 2022 as the discounting impact would be immaterial. The deferred consideration is not contingent on any factors. It is measured at amortised cost. Refer to note 16 for details of the acquisition of RSM 2000. Shareholder information 145Strategic report Governance Financial statements 23. Deferred tax liability Credit/ (debit) to | | | Acquisitions/ | | consolidated | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 31 March | | disposals of | | statement of | | Charge to | | 31 March | | | | 2021 | businesses | | profit or loss | | | equity | | 2022 | | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | Property, plant and equipment 1,634 (2) (410) – 1,222 Intangible assets (4,790) (83) (433) – (5,306) Share-based payments 142 – 48 – 190 Short-term temporary dierences 39 – 149 – 188 (2,975) (85) (646) – (3,706) Balance reclassified as held for sale 4 (4) – – – Total (2,971) (89) (646) – (3,706) Credit/ (debit) to | | | Acquisitions/ | | consolidated | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 31 March | | disposals of | | statement of | | Charge to | | 31 March | | | | 2020 | businesses | | profit or loss | | | equity | | 2021 | | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | Property, plant and equipment 943 467 224 – 1,634 Intangible assets (609) (4,237) 56 – (4,790) Share-based payments 160 – (8) (10) 142 Short-term temporary dierences 71 19 (51) – 39 565 (3,751) 221 (10) (2,975) Balance reclassified as held for sale – 4 – – 4 Total 565 (3,747) 221 (10) (2,971) At the statement of financial position date, the Group had recognised unused tax losses of £257k (2021: £nil). No deferred tax liability has been recognised in respect of temporary dierences associated with investments in subsidiaries because the Group is able to control the timing of the reversal of the temporary dierences and it is probable that such dierences will not reverse in the foreseeable future. The aggregate amount of these dierences is not material at the statement of financial position date. 24. Share capital, share premium and merger reserve | 31 March | | 31 March | | | --- | --- | --- | --- | | | 2022 | | 2021 | | | £’000 | | £’000 | Called up, allotted and fully paid share capital 68,915,949 (2021: 68,656,907) ordinary shares of 1/3p each 230 229 The increase in share capital in the current year resulted from 155,851 shares issued (of 1/3p each) for the payment of deferred, contingent share consideration in relation to the i-movo acquisition, 81,177 shares issued (of 1/3p each) for share awards which vested in the year and 22,014 matching shares issued (of 1/3p each) under the Employee Share Incentive Plan. The share premium of £1.0 million (2021: £5.0 million) represents the payment of deferred, contingent share consideration in excess of the nominal value of shares issued in relation to the i-movo acquisition. The merger reserve of £1.0 million (2021: £1.0 million) represents initial share consideration in excess of the nominal value of shares issued on the initial acquisition of i-movo. 25. Share-based payments The Group’s share schemes are described in the Directors’ Remuneration Report on pages 90 to 101 and consist of the LTIP, DABS and RSA equity-settled share schemes. No share awards were issued under the LTIP scheme in the current year (2021: nil). The LTIP scheme was closed and replaced with the RSA scheme in the prior year. For LTIP share awards which were granted prior to 31 March 2020 and are yet to vest or lapse, 50% of the vesting is based on TSR and 50% on EPS growth. The performance condition for the TSR element is the same as the vesting period. The performance period for the EPS element is for three financial years from the grant date. 209,293 share awards were issued under the RSA scheme in the year (2021: 200,013), vesting over two to five years, between 30 June 2023 and 13 August 2026 subject to continued employment. The RSAs do not contain any performance conditions other than to complete the required period of service. 45,594 share awards were issued under the DABS scheme in the year (2020: 2,532), vesting over three years to 13 August 2024 subject to continued employment. The DABS do not contain any performance conditions other than to complete the required period of service. PayPoint Plc Annual Report 2022146 ##  continued 25. Share-based payments continued The share-based payments charge in the statement of profit or loss in the year was £0.9 million (2021: £1.1 million). Of this, £0.2 million (2021: £0.2 million) related to the Employee Share Incentive Plan. For each share purchased by the employee under the Employee Share Incentive Plan, the Company issues a free matching share which will vest subject to the employee remaining employed with the Group for three years from the date each share was purchased by the employee. A total charge of £1.3 million (2021: £0.9 million), which was previously recognised directly in equity, for schemes which have now lapsed or vested, was transferred from the share-based payments reserve to retained earnings during the year. Of this, £0.2 million (2021: £0.1 million) related to shares which vested under the Employee Share Incentive Plan. Share awards movement during the year | | Number of | | | Number of | | | --- | --- | --- | --- | --- | --- | | | | shares | | | shares | | 31 March 2022 | | | 31 March 2021 | | | Outstanding at the beginning of the year 432,725 535,371 Granted 254,887 202,545 Lapsed – – Exercised (112,556) (233,456) Forfeited (72,889) (71,735) Outstanding at end of the year 502,167 432,725 | | | Number of | | | Number of | | | --- | --- | --- | --- | --- | --- | --- | | | | | shares | | | shares | | Remaining vesting period of outstanding share awards | 31 March 2022 | | | 31 March 2021 | | | Within one year 141,344 165,317 One to two years 121,808 108,254 Two to three years 181,365 129,432 Three years or more 57,650 29,722 Outstanding at end of the year 502,167 432,725 The fair value of the equity instruments granted during the year was determined based on the share price on the date of the grant. All awards granted and in issue are for free shares and therefore the weighted average exercise price for all outstanding schemes is £nil. Awards Grant date Number of shares Fair value (£) Vesting date RSA – 2 years 30 June 2021 21,616 5.80 30 June 2023 RSA – 3 years 30 June 2021 58,309 5.80 30 June 2024 RSA – 3 years 13 August 2021 80,068 6.31 13 August 2024 RSA – 3 years 20 January 2022 6,512 6.91 3 January 2025 RSA – 4 years 13 August 2021 21,394 6.31 13 August 2025 RSA – 5 years 13 August 2021 21,394 6.31 13 August 2026 DABS 13 August 2021 45,594 6.31 13 August 2024 26. Dividends Year ended 31 March 2022 Year ended 31 March 2021 pence pence £’000 per share £’000 per share Reported dividends on ordinary shares: Interim ordinary dividend 11,687 17.0 10,708 15.6 Proposed final ordinary dividend 12,405 18.0 11,397 16.6 Total ordinary reported dividends (non-IFRS measure) 24,092 35.0 22,105 32.2 Dividends paid on ordinary shares: Final ordinary dividend for the prior year 11,409 16.6 10,676 15.6 Interim dividend for the current year 11,687 17.0 10,709 15.6 Total ordinary dividends paid (financing cash flows) 23,096 33.6 21,385 31.2 Number of shares in issue used for proposed final ordinary dividend per share calculation 68,915,949 68,656,907 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. Strategic report Governance Financial statements Shareholder information 147 # **27. Financial instruments and risk** The Group's financial instruments comprise cash and cash equivalents, trade and other receivables, net investment in finance lease receivables, trade and other payables, loans and borrowings 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 uses hedges to manage the foreign exchange risk of purchasing PayPoint One terminals and card terminals. # **(a) Credit risk** The Group's financial assets are cash and cash equivalents, trade and other receivables and net investment in finance lease receivables. The Group's credit risk is primarily attributable to its trade and other receivables and net investment in finance lease receivables. The Group has treasury policies in place which manage the concentration of risk with individual bank counterparties. Each counterparty has an individual limit determined by their credit ratings. In accordance with the Group's treasury policies and exposure management practices, counterparty credit exposure limits are monitored and no individual exposure is considered significant in the ordinary course of treasury management activity. The Company does not expect any significant losses from non-performance by these counterparties. To mitigate against credit risk, PayPoint credit checks clients, SME and retailer partners, holds retailer security deposits, operates terminal limits, monitors clients and retailer partners for changes in payment profiles and in certain circumstances, has the right to set-off monies due against funds collected. The Group's maximum exposure, at 31 March 2022, was £34.7 million (2021: £50.6 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 retailer partners. # **(b) Liquidity risk** The Group's policy throughout the year ended 31 March 2022 regarding liquidity has been to maximise the return on funds placed on deposit whilst minimising the associated risk. Refer to part (e) of this note for details of the Group's borrowing facilities. The following shows the exposure to liquidity risk for continuing operations. The amounts are gross and undiscounted, and include contractual interest payments: | 31 March 2022 £'000 | Carrying amount | Contractual cash flows | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | Total | 2 months or less | 2-12 months | 1-2 years | 2-5 years | | **Non-derivative financial liabilities** | | | | | | | | Revolving credit facility | 27,000 | (27,054) | (27,054) | – | – | – | | Amortising term loan | 21,667 | (21,797) | (2,839) | (8,125) | (10,833) | – | | Block loans | 2,867 | (2,867) | (395) | (1,299) | (924) | (249) | | Lease liabilities | 260 | (271) | (41) | (160) | (70) | – | | Trade payables | 94,147 | (94,147) | (94,147) | – | – | – | | Deferred consideration liability | 1,000 | (1,000) | (1,000) | – | – | – | | 31 March 2021 £'000 | Carrying amount | Contractual cash flows | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | Total | 2 months or less | 2-12 months | 1-2 years | 2-5 years | | **Non-derivative financial liabilities** | | | | | | | | Revolving credit facility | 49,500 | (49,505) | (49,505) | – | – | – | | Amortising term loan | 32,500 | (32,682) | (2,891) | (8,125) | (10,833) | (10,833) | | Block loans | 4,583 | (4,791) | (664) | (2,794) | (1,091) | (243) | | Lease liabilities | 447 | (479) | (36) | (179) | (194) | (70) | | Trade payables | 102,504 | (102,504) | (102,504) | – | – | – | | Provision | 12,500 | (12,500) | – | (12,500) | – | – | | Deferred consideration liability | 5,747 | (4,000) | – | (1,000) | (2,000) | (1,000) | # **(c) Foreign exchange risk** The Group's currency exposures comprise those transactional exposures that give rise to the net currency gains and losses recognised in the statement of profit or loss. 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 2022, these exposures were Enil (2021: Enil). The Group uses hedges to manage the foreign exchange risk related to PayPoint One terminal and card terminal purchases. 148 PayPoint Plc Annual Report 2022 # Notes to the consolidated financial statements continued # 27. Financial instruments and risk continued # (d) Interest rate risk The Group had no interest-bearing financial assets at 31 March 2022 other than cash and cash equivalents which totalled £24.3 million (2021: £38.9 million from continuing operations). The Group is also exposed to interest rate risk through use of its financing facility which incurs interest charges based on SONIA plus 1.75% (2021: LIBOR plus 2.25%). 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 Following the group-wide refinancing in the prior year and a subsequent one-year extension which was secured after the end of the current financial year, the Group's borrowing facilities consist of a £21.7 million amortising term loan which is due to be fully repaid over the next two financial years and an unsecured £75.0 million revolving credit facility with a £30.0 million accordion facility (uncommitted) expiring in February 2025. At 31 March 2022, £27.0 million (2021: £49.5 million) was drawn down from the revolving credit facility and the outstanding balance of the amortising term loan was £21.7 million (2021: £32.5 million). The Group also had £2.9 million (2021: £4.6 million) of outstanding block loan balances from the Merchant Rentals acquisition. The cash proceeds received from the sale of the Romanian business in April 2021 were used to partly repay the revolving credit facility and reduce net corporate debt. Interest is payable at SONIA plus 1.75% (2021: LIBOR plus 2.25%). PayPoint has the ability to roll over the drawdown for an additional period between one and six months. The Group is required to adhere to a net debt leverage of no more than three times EBITDA and an interest cover of no less than four times. The Group operated within these limits during the financial year ended 31 March 2022. # (f) Fair value of financial assets and liabilities All derivatives are held with an A rated bank and mature within one year. All financial assets/liabilities are measured at fair value through the profit or loss, comprising derivative financial instruments in the form of foreign exchange contracts (classified as Level 2), the deferred consideration liability recognised in the current year relating to the RSM 2000 acquisition (classified as Level 1), the deferred, contingent consideration liability recognised in the prior year relating to the i-movo acquisition (classified as Level 3) and the convertible loan note instrument purchased from Optus Homes (classified as Level 3). The fair value of the convertible loan note instrument purchased from Optus Homes was measured using the income approach (discounted cash flow) with the significant unobservable inputs being the board-approved forecast of Optus Homes and the weighted average cost of capital. There have been no transfers between Level 1, 2 or 3 in the current year or prior year. 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 2022, or 31 March 2021. # (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. The final dividend for the year ensures a prudent level of earnings coverage for the dividend and that leverage is not substantially increased. # (i) Financial instrument sensitivities Financial instruments affected by market risk include deposits, hedges, trade receivables and trade payables. Any changes in market variables (exchange rates and interest rates) will have an immaterial effect on these instruments. Shareholder information 149Strategic report Governance Financial statements 28. Loans and borrowings | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | | | 2022 | | 2021 | | Group | | £’000 | | £’000 | Balance at beginning of year 86,583 70,000 Changes in financing cash flows Repayment of old revolving credit facility (47,000) (70,000) Drawdown of new revolving credit facility 24,500 82,000 Repayment of amortising term loan (10,833) – Repayment of block loans (3,636) ( 741) Funding from block loans 1,920 – Total changes in financing cash flows (35,049) 11,259 Other liability related changes Block loans acquired – 5,274 Interest charge expensed 1,913 1,590 Cash interest paid (1,913) (1,540) Balance at end of year 51,534 86,583 Disclosed as: Current 39,643 63,627 Non-current 11,891 22,956 Total loans and borrowings 51,534 86,583 | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | | | 2022 | | 2021 | | Company | | £’000 | | £’000 | Balance at beginning of year 82,000 70,000 Changes in financing cash flows Repayment of old revolving credit facility (47,000) (70,000) Drawdown of new revolving credit facility 24,500 82,000 Repayment of amortising term loan (10,833) – Total changes in financing cash flows (33,333) 12,000 Other liability related changes Interest charge expensed 1,654 1,259 Cash interest paid (1,655) (1,259) Balance at end of year 48,666 82,000 Disclosed as: Current 37, 833 60,333 Non-current 10,833 21,667 Total loans and borrowings 48,666 82,000 29. Leases (a) Finance lease liabilities Property Vehicles Total £’000 £’000 £’000 At 31 March 2022 Current balance 164 27 191 Non-current balance 57 12 69 Total lease liabilities 221 39 260 Interest charge for the year 25 (3) 22 At 31 March 2021 Current balance 156 38 194 Non-current balance 214 39 253 Total lease liabilities 370 77 447 Interest charge for the year – (2) (2) PayPoint Plc Annual Report 2022150 ##  continued 29. Leases continued | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | | | 2022 | | 2021 | | Changes in liabilities | | £’000 | | £’000 | Balance at beginning of year 447 941 Lease liabilities acquired in year 34 370 Lease liability additions – 77 Payment of lease liabilities (financing cash flows) (243) (211) Interest on unwind of lease liabilities 22 (37) Exchange rate adjustment – 14 Balance reclassified as held for sale – (707) Balance at end of year 260 447 Disclosed as: Current 200 194 Non-current 60 253 Total lease liabilities 260 447 (b) Finance lease right of use assets Property Vehicles Total £’000 £’000 £’000 At 31 March 2022 184 64 248 Depreciation charge for the year ended 31 March 2022 (151) (40) (191) At 31 March 2021 298 107 405 Depreciation charge for the year ended 31 March 2021 (109) (24) (133) (c) Net investment in finance lease receivables | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 | | | £’000 | | £’000 | Current balance 1,814 4,064 Non-current balance 4,407 6,511 Total net investment in finance lease receivables 6,221 10,575 Interest income (revenue) on net investment in finance lease receivables 1,701 312 The increase in the interest income on net investment in finance lease receivables in the current year is due to Merchant Rentals (acquired on 4 February 2021) being included for the full year. Age of allowance for net investment in finance lease receivables | Less than | | | | | | More than | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 1 month | | 1-3 months | | 3-6 months | | 6 months | | Total | | | £’000 | | £’000 | | £’000 | | £’000 | £’000 | Carrying value at 31 March 2022 7 19 16 1,006 1,048 Carrying value at 31 March 2021 11 57 213 983 1,264 Contractual undiscounted cash flows for net investment in finance lease receivables Undiscounted lease receivables Unearned | finance | Less than | | | | | | 6 months-1 | | 1 year-3 | | 3 years-5 | | More than 5 | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | income | 1 month | | 1-3 months | | 3-6 months | | | year | | years | | years | | years | Total | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | £’000 | 31 March 2022 (1,669) 428 790 1,063 1,703 3,528 378 – 6,221 31 March 2021 (1,995) 634 1,216 1,695 2,956 5,576 493 – 10,575 The Group earned £0.2 million (2021: £nil) income from operating leases in the year. Shareholder information 151Strategic report Governance Financial statements 30. Related party transactions Remuneration of the Executive Directors, who are the key management of the Group, was as follows during the year: | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 | | | £’000 | | £’000 | Short-term benefits and bonus¹ 1,443 1,380 Pension costs² 38 37 Long-term incentives³ – – Other⁴ 4 2 Total 1,485 1,419 1. Includes salary, taxable benefits and annual bonus award. 2. Pension contributions. 3. Long-term incentives: for the years ended 31 March 2022 and 31 March 2021 no values have been included for the 2019 and 2018 LTIP award vesting as, based on performance for the relevant three-year performance periods, these awards are unlikely to vest. 4. SIP matching and dividend shares awarded in the year. The share-based payment charge to the statement of profit or loss for the year in relation to key management of the Group was £0.9 million (2021: £1.1 million). Directors’ remuneration is disclosed in the Directors’ Remuneration Report on pages 90 to 101. Company-related party transactions The following transactions occurred between the Company and its wholly owned subsidiaries: | Year ended | | Year ended | | | --- | --- | --- | --- | | 31 March | | 31 March | | | | 2022 | | 2021 | | | £’000 | | £’000 | Amounts owed by subsidiaries 28,508 35,660 Amounts owed to subsidiaries (52,160) (13,039) Interest paid to subsidiaries (885) (343) Interest received from subsidiaries 826 694 Dividends received from subsidiaries – 38,548 Snappy Shopper is a related party as an associate of PayPoint Plc. In the period since the investment in the associate was made, related party transactions consisted of £47,198 revenue, with £23,868 of accrued income at 31 March 2022. PayPoint Plc Annual Report 2022152 ##  continued 31. Notes to the cash flow statement Restated¹ | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | | | 2022 | | 2021 | | Group Note | | £’000 | | £’000 | Profit before tax from continuing operations 48,515 20,443 Profit before tax from discontinued operation 30,011 7, 551 Adjustments for: Depreciation of property, plant and equipment 14 4,768 4,913 Amortisation of intangible assets 13 5,801 4,185 Profit from discontinued operation 11 (30,011) – R&D and VAT credits (15) (54) Exceptional item – revaluation of deferred, contingent consideration liability 22 (2,880) – Exceptional item – non-cash provision 21 – 12,500 Loss on disposal of fixed assets 59 54 Net finance costs 2,033 1,265 Share-based payment charge 25 868 1,066 Cash-settled share-based remuneration – (151) Operating cash flows before movements in working capital 59,149 51,772 Movement in inventories 70 (11) Movement in trade and other receivables (526) 699 Movement in finance lease receivables 4,354 593 Movement in contract assets (24) 972 Movement in contract liabilities (684) (529) Movement in provision in relation to Ofgem Statement of Objections 21 (12,500) – Movement in payables (6,488) (765) Movement in lease liabilities (7) 22 Cash generated by operations 43,344 52,753 Corporation tax paid (9,161) (8,422) Financial costs paid 28 (1,913) (1,540) Net cash from operating activities (corporate) 32,270 42,791 Movement in clients’ funds and retailer partners’ deposits (9,718) 11,852 2 Net cash inflow from operating activities 22,552 54,643 1. The prior year comparatives have been restated for the retrospective application of the Group’s change in accounting policy on intangible assets. Refer to note 1 and note 32. 2. 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. Shareholder information 153Strategic report Governance Financial statements | | Year ended | | Year ended | | | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | | | 2022 | | 2021 | | Company Note | | £’000 | | £’000 | Profit before tax 27,439 19,879 Adjustments for: 1 Amortisation of intangible assets 13 (503) 503 Exceptional item – revaluation of deferred, contingent consideration liability 22 (2,880) – Exceptional item – non-cash provision 21 – 12,500 Dividends from subsidiaries – (38,548) Profit from discontinued operation 11 (30,643) – Net finance cost 1,843 954 Cash-settled share-based remuneration 392 16 Operating cash movement before movements in working capital (4,352) (4,698) Movement in receivables 8,827 8,578 Movement in payables 25,755 2,880 Cash generated by operations 30,230 6,760 Interest and bank charges paid (1,655) (1,259) Net cash inflow from operating activities 28,575 5,501 1. In the current year on the Company statement of financial position, the £6.0 million Collect+ arrangement was reclassified from a brand intangible asset to a wholly owned investment in subsidiary and £0.5m of accumulated amortisation was reversed through the Company statement of profit or loss. The £6.0 million investment relates to the Company’s acquisition of the remaining 50% interest in Collect+ that Yodel owned in the prior year, which resulted in Collect+ becoming a fully owned subsidiary controlled by the Company. Refer to note 1. 32. Prior year restatements for implementation costs of cloud computing SaaS arrangements The below tables show the impacts of restating the prior year consolidated financial statements for the retrospective application of the change in the Group’s accounting policies on intangible assets to derecognise previously capitalised SaaS related costs and amortisation which no longer meet the criteria for recognition as an asset, following the April 2021 IFRIC agenda decision on the configuration and customisation costs incurred in implementing cloud computing SaaS arrangements, as disclosed in note 1. Prior year consolidated statement of profit or loss Previously | reported | | | | Restated | | | --- | --- | --- | --- | --- | --- | | Year ended | | | | Year ended | | | 31 March | | | | 31 March | | | | 2021 | Restatement | | | 2021 | | | £’000 | | £’000 | | £’000 | Continuing operations Revenue 127,747 – 127,747 Cost of revenue (47,28 0) 1,795 (45,485) Gross profit 80,467 1,795 82,262 Administrative expenses – excluding exceptional items (43,578) (795) (44,373) Operating profit before exceptional items 36,889 1,000 37, 88 9 Exceptional item – revaluation of deferred, contingent consideration liability – – – Exceptional item – administrative expenses (15,600) – (15,600) Operating profit 21,289 1,000 22,289 Finance income 22 – 22 Finance costs – excluding exceptional items (1,409) – (1,409) Exceptional item – finance costs (459) – (459) Profit before tax from continuing operations 19,443 1,000 20,443 Tax on continuing operations (4,335) (189) (4,524) Profit from continuing operations 15,108 811 15,919 Discontinued operation Profit from discontinued operation, net of tax 6,423 – 6,423 Exceptional item – gain on disposal of discontinued operation, net of tax – – – Profit for the year attributable to equity holders of the parent 21,531 811 22,342 PayPoint Plc Annual Report 2022154 ##  continued 32. Prior year restatements for implementation costs of cloud computing SaaS arrangements continued Previously | reported | | Restated | | | --- | --- | --- | --- | | Year ended | | Year ended | | | 31 March | | 31 March | | | | 2021 | | 2021 | | | £’000 | | £’000 | Earnings per share Basic 31.5p 32.7p Diluted 31.3p 32.4p Earnings per share – continuing operations Basic 22.1p 23.3p Diluted 21.9p 23.1p Selected extracts from the consolidated statement of financial position for the prior year ended 31 March 2021 Previously | reported | | | | Restated¹ | | | --- | --- | --- | --- | --- | --- | | 31 March | | | | 31 March | | | | 2021 | Restatement | | | 2021 | | | £’000 | | £’000 | | £’000 | 1 Inventories 1,059 (534) 525 Current tax asset 3,021 (189) 2,832 Total current assets 169,949 (723) 169,226 1 Goodwill 51,551 534 52,085 Other intangible assets 41,698 (5,981) 35,717 Total non-current assets 121,139 (5,447) 115,692 Total assets 291,088 (6,170) 284,918 Net assets 39,470 (6,170) 33,300 Retained earnings 32,907 (6,170) 26,737 Total equity attributable to equity holders of the parent 39,470 (6,170) 33,300 1. The prior year comparatives have been restated for a retrospective measurement period adjustment to goodwill and inventories. Refer to note 12. Selected extracts from the consolidated statement of financial position for the year ended 31 March 2020 Previously | reported | | | | Restated | | | --- | --- | --- | --- | --- | --- | | 31 March | | | | 31 March | | | | 2020 | Restatement | | | 2020 | | | £’000 | | £’000 | | £’000 | Other intangible assets 17, 274 (6,981) 10,293 Total non-current assets 54,532 (6,981) 47, 551 Total assets 257, 987 (6,981) 251,006 Net assets 38,330 (6,981) 31,349 Retained earnings 32,475 (6,981) 25 494 Total equity attributable to equity holders of the parent 38,330 (6,981) 31,349 Shareholder information 155Strategic report Governance Financial statements Selected extracts from the prior year consolidated statement of cash flows and notes to the cash flow statement | Previously | | | | Restated | | | --- | --- | --- | --- | --- | --- | | reported | | | | Year ended | | | 31 March | | | | 31 March | | | | 2020 | Restatement | | | 2021 | | | £’000 | | £’000 | | £’000 | Profit before tax from continuing operations 19,443 1,000 20,443 Amortisation of intangible assets 5,980 (1,795) 4,185 Operating cash flows before movements in working capital 52,567 (795) 51,772 Cash generated by operations 53,548 (795) 52,753 Net cash from operating activities (corporate) 43,586 (795) 42,791 Net cash inflow from operating activities 55,438 (795) 54,643 Purchases of intangible assets (8,745) 795 ( 7, 950) Net cash used in investing activities (72,479) 795 (71,684) 33. Subsequent events The £1.0 million (31 March 2021: £nil) deferred consideration liability recognised on the acquisition of RSM 2000 was paid on 12 April 2022, the first anniversary of completion. On payment the corresponding liability was released which resulted in a £1.0 million financing cash outflow. The deferred consideration was neither contingent on future performance nor remuneration linked i.e. linked to continuing employment of the sellers. 156 PayPoint Plc Annual Report 2022 # 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 advisor, accountant or other independent professional advisor. 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. In line with the UK Government's removal of restrictions on face-to-face meetings (correct as at the date of this Notice), PayPoint Plc's annual general meeting ('AGM') is set to be held at PayPoint's registered office address. In the event that new guidance or restrictions on public gatherings are issued or imposed changes to the format of the AGM will be communicated to shareholders on the investors section of our website: https://corporate.paypoint.com/investor-centre/meeting and, where appropriate, by a stock exchange announcement in advance of the AGM. All appropriate COVID-19 related safety measures will be in place at our AGM venue, however attendees should carefully consider their own circumstances before choosing to attend in person. We remain committed to engaging with our shareholders so please do send any questions you may have for the Board, relating to the business of the meeting, to our Company Secretary at brianmclelland@paypoint.com by Monday 18 July 2022 at 12.00 noon. Meantime, we encourage you to submit your proxy votes to the Company's registrars, Equiniti, as early as possible. Further information on how you can submit your proxy votes can be found on page 159. The deadline for submitting proxy votes is 12.00 noon on Monday 18 July 2022. Notice is hereby given that the 2022 Annual General Meeting of PayPoint Plc (the 'Company') will be held at the Company's head office, 1 The Boulevard, Shire Park, Welwyn Garden City, Hertfordshire AL7 1EL on Wednesday 20 July 2022 at 12.00 noon. You will be asked to consider and pass the following resolutions: Resolutions 1 to 13 (inclusive) will be proposed as ordinary resolutions, and Resolutions 14 to 17 (inclusive) will be proposed as special resolutions. # Routine business 1. Directors' Report and Accounts To receive the accounts for the financial year ended 31 March 2022 together with the Directors' report and the auditors' report on those accounts. 2. Directors' Remuneration Report To approve the Directors' Remuneration Report for the financial year ended 31 March 2022 as set out on pages 90 to 101 of the annual report 2022. 3. Declaration of final dividend To declare a final dividend of 18.0 pence per ordinary share of the Company for the year ended 31 March 2022. 4. Re-election of Director – Alan Dale To re-elect Alan Dale as a Director. 5. Re-election of Director – Rosie Shapland To elect Rosie Shapland as a Director. 6. Re-election of Director – Gill Barr To re-elect Gill Barr as a Director. 7. Re-election of Director – Giles Kerr To re-elect Giles Kerr as a Director. 8. Re-election of Director – Rakesh Sharma To re-elect Rakesh Sharma as a Director. 9. Re-election of Director – Nick Wiles To re-elect Nick Wiles as a Director. 10. Re-election of Director – Ben Wishart To re-elect Ben Wishart as a Director. 11. Appointment of Auditor To reappoint KPMG LLP as auditor of the Company until the conclusion of the next AGM of the Company at which the accounts are laid. 12. Auditor's remuneration To authorise the Directors to determine the auditor's remuneration. Strategic report Governance Financial statements Shareholder information 157 # Special business # 13. Directors' authority to allot shares That the Board be generally and unconditionally authorised under section 561 of the Companies Act 2006 to allot shares in the Company and to grant rights to subscribe for or convert any security into shares in the Company: (A) up to a nominal amount of £68,927 (such amount to be reduced by any allotments or grants made under paragraph (B) below in excess of such sum); and (B) comprising equity securities (as defined in section 560(1) of the Companies Act 2006) up to a nominal amount of £137,854 (such amount to be reduced by any allotments or grants made under paragraph (A) above) in connection with an offer by way of a rights issue: (i) to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and (ii) to holders of other equity securities as required by the rights of those securities or as the Board otherwise considers necessary. and so that the Board may impose any limits or restrictions and make any arrangements which it considers necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter, such authorities to apply until the close of business on 20 October 2023 or, if earlier, the AGM in 2023 but, in each case, during this period the Company may make offers and enter into agreements which would, or might, require shares to be allotted or rights to subscribe for or convert securities into shares to be granted after the authority ends and the Board may allot shares or grant rights to subscribe for or convert securities into shares under any such offer or agreement as if the authority had not ended. # 14. Disapplication of pre-emption rights That if resolution 13 is passed, the Board be given power to allot equity securities (as defined in section 560(1) of the Companies Act 2006) for cash under the authority given by that resolution and/or to sell ordinary shares held by the Company as treasury shares for cash as if section 561 of the Companies Act 2006 did not apply to any such allotment or sale, such power to be limited: (A) to the allotment of equity securities and sale of treasury shares for cash in connection with an offer of, or invitation to apply for, equity securities (but in the case of the authority granted under paragraph (B) of resolution 13, by way of a rights issue only): (i) to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and (ii) to holders of other equity securities, as required by the rights of those securities or, as the Board otherwise considers necessary. and so that the Board may impose any limits or restrictions and make any arrangements which it considers necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter: (B) in the case of the authority granted under paragraph (A) of resolution 13 and/or in the case of any sale of treasury shares for cash, to the allotment (otherwise than under paragraphs (A) and (B) above) of equity securities or sale of treasury shares up to a nominal amount of £10,339, such power to apply until the close of business on 20 October 2023 or if earlier, the AGM in 2023 but, in each case, during this period the Company may make offers and enter into agreements which would, or might, require equity securities to be allotted (and treasury shares to be sold) after the power ends and the Board may allot equity securities (and sell treasury shares) under any such offer or agreement as if the power had not ended. # 15. Additional disapplication of pre-emption rights That if resolution 13 is passed, the Board be given power in addition to any power granted under resolution 14 to allot equity securities (as defined in section 560(1) of the Companies Act 2006) for cash under the authority given by that resolution and/or to sell ordinary shares held by the Company as treasury shares for cash as if section 561 of the Companies Act 2006 did not apply to any such allotment or sale, such authority to be: (A) limited to the allotment of equity securities or sale of treasury shares up to a nominal amount of £10,339; and (B) used only for the purposes of financing (or refinancing, if the authority is to be used within six months after the original transaction) a transaction which the Directors of the Company determine to be an acquisition or other capital investment of a kind contemplated by the Statement of Principles on Disapplying Pre-Emption Rights most recently published by the Pre-Emption Group prior to the date of this Notice, such power to apply until to apply until the close of business on 20 October 2023 or, if earlier, the AGM in 2023 but, in each case, during this period the Company may make offers, and enter into agreements which would, or might, require equity securities to be allotted (and treasury shares to be sold) after the power ends and the Board may allot equity securities (and sell treasury shares) under any such offer or agreement as if the power had not ended. 158 PayPoint Plc Annual Report 2022 # Notice of Annual General Meeting continued # 16. Company's authority to purchase its own shares That the Company be authorised for the purposes of section 701 of the Companies Act 2006 to make one or more market purchases (as defined in section 693(k) of the Companies Act 2006) of its ordinary shares of 1/3 pence each, provided that: (A) the maximum number of ordinary shares hereby authorised to be purchased is 6,892,704; (B) the minimum price which may be paid for an ordinary share is 5 pence and the maximum price which may be paid for an ordinary share is the highest of: (i) an amount equal to 5% above the average market value of an ordinary share for the five business days immediately preceding the day on which that ordinary share is contracted to be purchased; and (ii) the higher of the price of the last independent trade of an ordinary share and the highest current independent bid for an ordinary share on the trading venues where the purchase is carried out at the relevant time, in each case, exclusive of expenses; such authority to apply to apply until the close of business on 20 October 2023 or, if earlier, the AGM in 2023 but in each case so that during this period the Company may enter into a contract to purchase ordinary shares which would, or might be, completed or executed wholly or partly after the authority ends and the Company may purchase ordinary shares pursuant to any such contract as if the authority had not ended. # 17. Calling of general meetings on 14 days' notice. That any general meeting of the Company that is not an AGM may be called on not less than 14 clear days' notice. # Recommendation With respect to resolutions 4 to 10 (inclusive), the Chairman confirms that, based on the performance evaluation undertaken during the period, each of the retiring Directors' 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 election/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. Biographies of the Directors including their areas of expertise relevant to their role as a Director are given on pages 72 to 73 of the 2022 annual report. The Directors believe that the proposals described in this Notice of Meeting are in the best interests of the Company and its shareholders as a whole and recommend shareholders to support them by voting in favour of all the resolutions, as they intend to in respect of their own beneficial shareholders. By order of the Board Brian McLelland Company Secretary 17 June 2022 # Registered office: 1 The Boulevard Shire Park Welwyn Garden City Hertfordshire AL7 1EL United Kingdom Registered in England and Wales Company No. 03581541 Strategic report Governance Financial statements Shareholder information 159 # Notes to the Notice of Annual General Meeting 1. Shareholders should submit their proxy vote not less than 48 hours before the time of the AGM. A shareholder may appoint more than one proxy in relation to the AGM provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. A proxy need not be a shareholder of the Company. To appoint a proxy or proxies shareholders must: (a) submit a proxy appointment electronically at www.sharevote.co.uk; or (b) complete a Form of Proxy, sign it and return it, together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such authority, to the Company's registrars, Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA; or (c) complete a CREST Proxy Instruction (as set out in paragraph 5 below), in each case so that it is received no later than 12.00 noon on 18 July 2022. To appoint more than one proxy, you will need to complete a separate Form of Proxy in relation to each appointment. A Form of Proxy for use in connection with the AGM is enclosed with this document. Full details of the procedure to submit a proxy electronically are given on the website www.sharevote.co.uk. To use this service, you will need your Voting ID, Task ID and Shareholder Reference Number printed on the Form of Proxy. If you do not have a Form of Proxy and believe that you should, please contact the Company's registrars, Equiniti Limited, on 0371 384 2030 (or +44 121 415 7047 if calling from outside the United Kingdom) or at Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA. Lines are open from 8.30am to 5.30pm, Monday to Friday (except public holidays in England and Wales). 2. A member entitled to attend, speak and vote at the AGM 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 please contact the Company's registrar using the details provided above. CREST members should utilise 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. 3. 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 AGM. 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. 4. The statement of the rights of shareholders to appoint a proxy in paragraphs one and two above does not apply to Nominated Persons. The rights described in these paragraphs can only be exercised by shareholders of the Company. Nominated Persons are reminded that they should contact the registered holder of their shares (and not the Company) on matters relating to their investments in the Company. 5. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the AGM 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 R/A19) by the latest time(s) for receipt of proxy appointments specified in the notice of AGM. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST applications host) from which the issuer's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. The Company may treat as invalid a CREST proxy instruction in the circumstances set out in Regulation 35(5) of the Uncertificated Securities Regulations 2001. CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST proxy instructions. It is therefore the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST manual concerning practical limitations of the CREST system and timings. If you are an institutional investor you may be able to appoint a proxy electronically via the Proximity platform, a process which has been agreed by the Company and approved by the Registrar. For further information regarding Proximity, please go to www.proximity.io. Your proxy must be lodged by 12.00 noon on 18 July 2022 in order to be considered valid. Before you can appoint a proxy via this process you will need to have agreed to Proximity's associated terms and conditions. It is important that you read these carefully as you will be bound by them and they will govern the electronic appointment of your proxy. 6. 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. 7. To be entitled to attend and vote at the AGM 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 6:30pm on 18 July 2022 (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. 8. Biographical details of the Directors of the Company are shown on pages 72 to 73 of the 2022 annual report. 9. 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. 160 PayPoint Plc Annual Report 2022 # Notes to the Notice of Annual General Meeting continued 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 AGM; 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 26 May 2022, the latest practicable date before publication of this notice, was 68,927,036 ordinary shares of 0.03 pence each, carrying one vote each. The Company holds no treasury shares. The total number of voting rights in the Company on 26 May 2022 is 68,927,036. 13. The Directors' service agreements, Directors' letters of appointment and Directors' deeds of indemnity are available for inspection at the registered office of the Company. Email: brianmclelland@paypoint.com during normal business hours on any weekday (excluding public holidays). Copies of these documents will also be available at the place of the AGM from 15 minutes before the meeting until it ends. Strategic report Governance Financial statements Shareholder information 161 # Explanatory notes to certain of the resolutions to be proposed at the Annual General Meeting ## Resolution 1: To receive the Directors' report and accounts The Board asks that shareholders receive the Strategic Report, Directors' Report and the financial statements for the year ended 31 March 2022, together with the report of the auditor. ## Resolution 2: Directors' Remuneration Report Shareholders are asked to approve the Directors' Remuneration Report that appears on pages 90 to 101 of the 2022 annual report. 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 18.0 pence per ordinary share for the year ended 31 March 2022. Subject to approval, the dividend will be paid in equal instalments of 9.0 pence per share on 25 July 2022 and 30 September 2022 to the holders of ordinary shares whose names are recorded on the register of members at the close of business on 10 June 2022 and 2 September 2022 respectively. ## Resolutions 4 – 10: Directors The Directors believe that the Board continues to maintain an appropriate balance of knowledge and skills and that all the Non-Executive Directors are independent in character and judgement. This follows a process of formal evaluation, which confirms that each Director makes an effective and valuable contribution to the Board and demonstrates commitment to the role (including making sufficient time available for Board and Committee meetings and other duties as required). In accordance with the UK Corporate Governance Code and in line with previous years, all Directors will again stand for re-election, as relevant, at the AGM this year. Biographies are available on pages 72 to 73 of the annual report. It is the Board's view that the Directors' biographies illustrate why each Director's contribution is, and continues to be, important to the Company's long-term sustainable success. ## Resolutions 11 and 12: Appointment and remuneration of auditor The Company is required to appoint or reappoint an auditor at each general meeting at which accounts are presented to shareholders. Following an evaluation of the effectiveness and independence of KPMG LLP, the Directors recommend KPMG LLP be reappointed as auditor. Resolution 12 grants authority to the Company to determine the auditor's remuneration. ## Resolution 13: Directors' authority to allot shares Paragraph (A) of this resolution would give the Directors the authority to allot ordinary shares or grant rights to subscribe for or convert any securities into ordinary shares up to an aggregate nominal amount equal to £68,927 (representing 22,975,6379 ordinary shares of 0.03 pence each). This amount represents approximately one-third of the issued ordinary share capital of the Company as at 26 May 2022, the latest practicable date prior to publication of this notice. In line with guidance issued by the Investment Association, paragraph (B) of this resolution would give the Directors authority to allot ordinary shares or grant rights to subscribe for or convert any securities into ordinary shares in connection with a rights issue in favour of ordinary shareholders up to an aggregate nominal amount equal to £137,854 (representing 45,951,357 ordinary shares of 0.03 pence each), as reduced by the nominal amount of any shares issued under paragraph (A) of this resolution. This amount (before any reduction) represents approximately two-thirds of the issued ordinary share capital of the Company as at 26 May 2022, being the latest practicable date prior to publication of this notice. The authorities sought under paragraphs (A) and (B) of this resolution will expire at the close of business on 20 October 2023 or, if earlier, the AGM in 2023. The Directors have no present intention to exercise either of the authorities sought under this resolution, other than to allot ordinary shares as following the exercise of options and awards under the Company's share schemes. However, if they do exercise the authorities, the Directors intend to follow Investment Association recommendations concerning their use. As at the date of this Notice, the Company does not hold any shares in treasury. ## Resolutions 14 and 15: Authority to disapply pre-emption rights Resolutions 14 and 15 are proposed as special resolutions. If the Directors wish to allot new shares and other equity securities, or sell treasury shares, for cash (other than in connection with an employee share scheme), company law requires that these shares are first offered to shareholders in proportion to their existing holdings. At last year's AGM, a special resolution was passed, in line with institutional shareholder guidelines, empowering the Directors to allot equity securities for cash without first offering them to existing shareholders in proportion to their existing holdings. It is proposed, under resolution 14, that this authority be renewed. If approved, the resolution will authorise Directors to issue shares in connection with pre-emptive offers, or otherwise to issue shares for cash up to an aggregate nominal amount of £10,339 (representing 3,432,845 ordinary shares of 0.03 pence each) which includes the sale on a non-pre-emptive basis of any shares the Company holds in treasury for cash. The Pre-Ereption Group's Statement of Principles also support the annual disapplication of pre-emption rights in respect of allotments of shares and other equity securities and sales of treasury shares for cash where these represent no more than an additional 5% of issued ordinary share capital (exclusive of treasury shares) and are used only in connection with an acquisition or specified capital investment. The Pre-Ereption Group's Statement of Principles defines 'specified capital investment' as meaning one or more specific capital investment related uses for the proceeds of an issue of equity securities, in respect of which sufficient information regarding the effect of the transaction on the Company, the assets the subject of the transaction and (where appropriate) the profits attributable to them is made available to shareholders to enable them to reach an assessment of the potential return. Accordingly, the purpose of resolution 15 is to authorise the Directors to allot new shares and other equity securities pursuant to the allotment authority given by resolution 13, or sell treasury shares for cash, without first being required to offer such securities to existing shareholders, up to a further nominal amount of £10,339 (representing 3,432,845 ordinary shares of 0.03 pence each). The authority granted by this resolution, if passed, will only be used in connection with an acquisition or specified capital investment which is announced contemporaneously with the allotment, or which has taken place in the preceding six-month period and is disclosed in the announcement of the issue. If the authority given in resolution 15 is used, the Company will publish details of its use in its next annual report. The authority granted by resolution 15 would be in addition to the general authority to disapply pre-emption rights under resolution 14. The maximum nominal value of equity securities which could be allotted if both authorities were used would be £20,678. The Directors intend to adhere to the provisions in the Pre-emption Group's Statement of Principles and not to allot shares or other equity securities or sell treasury shares for cash on a non-pre-emptive basis pursuant to the authority in resolution 15 in excess of an amount equal to 7.5% of the total issued ordinary share capital of the Company, excluding treasury shares, within a rolling three-year period, other than: (i) With prior consultation with shareholders; or (ii) In connection with an acquisition or specified capital investment which is announced contemporaneously with the allotment or which has taken place in the preceding six-month period and is disclosed in the announcement of the allotment. The Directors have no present intention of using the power under these authorities but they will have the flexibility to act in the best interests of the Company when opportunities arise. 162 PayPoint Plc Annual Report 2022 # Explanatory notes to certain of the resolutions to be proposed at the Annual General Meeting continued # Resolution 16: Authority to make market purchases of ordinary shares Resolution 16 is another special resolution and renews the Directors' authority granted by the shareholders at previous AGMs to make market purchases of up to 10% of the Company's issued ordinary shares (excluding any treasury shares). The Company may make purchases of its own shares if, having taken account of all major factors such as the effect on earnings and net asset value per share, gearing levels and alternative investment opportunities, such purchases are considered to be in the Company's and shareholders' best interests while maintaining an efficient capital structure. If the Company purchases any of its ordinary shares pursuant to resolution 16, the Company may cancel these shares or hold them in treasury. Such decision will be made by the Directors at the time of purchase. The minimum price, exclusive of expenses, which may be paid for an ordinary share is 5 pence. The maximum price, exclusive of expenses, which may be paid for an ordinary share is the highest of: (i) an amount equal to 5% above the average market value for an ordinary share for the five business days immediately preceding the date of the purchase; and (ii) the higher of the price of the last independent trade and the highest current independent bid on the trading venues where the purchase is carried out at the relevant time. At last year's AGM, the Company was given authority to make market purchases of up to 6,838,184 shares. No shares have been purchased by the Company in the market since then. Options to subscribe for a total of 429,738 shares, being 0.6% of the issued ordinary share capital, were outstanding at 26 May 2022 (being the latest practicable date prior to the publication of this notice). If the existing authority given at the 2021 AGM and the authority being sought under resolution 16 were to be fully used, these would represent 10.5% of the Company's issued ordinary share capital at that date. The Directors do not have any current plans to exercise the authority to be granted pursuant to resolution 16. The Directors will exercise this authority only when to do so would be in the best interests of the Company, and of its shareholders generally. The authority will expire at the earlier of 22 October 2022 and the conclusion of the AGM of the Company held in 2023. # Resolution 17: Authority to allow any general meeting of the Company that is not an annual general meeting to be called on not less than 14 clear days' notice The minimum notice period for general meetings of listed companies is 21 days, but companies may reduce this period to 14 days (other than for annual general meetings) provided that: (a) the Company offers a facility for shareholders to vote by electronic means. This condition is met if the Company has a facility enabling all shareholders to appoint a proxy by means of a website; and (b) on an annual basis, a shareholders' resolution approving the reduction of the minimum notice period from 21 days to 14 days is passed. The Board is therefore proposing this resolution as a special resolution to approve 14 days as the minimum period of notice for all general meetings of the Company other than AGMs. The approval of this resolution will be effective until the end of the 2023 AGM 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. Shareholder informationFinancial statementsGovernanceStrategic report 163 ##  Directors Registered in England and Wales G Barr¹ Company number 03581541 A Dale | G Kerr¹ (Chairman) | Independent auditor | | --- | --- | | R Shapland¹ | KPMG LLP | | R Sharma¹ | 15 Canada Square | | N Wiles | London E14 5GL | | B Wishart¹ | United Kingdom | | Company Secretary | Registrar | | B McLelland | Equiniti | Aspect House | Registered oce | Spencer Road | | --- | --- | | 1 The Boulevard | Lancing | | Shire Park | West Sussex | | Welwyn Garden City | BN99 6DA | Hertfordshire AL7 1EL United Kingdom CBP00019082504183028 Printed by a CarbonNeutral® Company certified to ISO 14001 environmental management system. 100% of all dry waste associated with this production has been recycled. This publication is printed on an FSC® certified paper produced mix sourced material, manufactured at a mill that has ISO 14001 environmental standard accreditation. The paper is Carbon Balanced with World Land Trust, an international conservation charity, who oset carbon emissions through the purchase and preservation of high conservation value land. Through protecting standing forests, under threat of clearance, carbon is locked-in, that would otherwise be released. The paper is Carbon Balanced with World Land Trust, an international conservation charity, who oset carbon emissions through the purchase and preservation of high conservation value land. Through protecting standing forests, under threat of clearance, carbon is locked-in, that would otherwise be released. 1. Non-Executive Directors. PayPoint Group Annual Report 2022 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