5 November 2020

This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation and is disclosed in accordance with the Issuer's obligations under Article 17 of the Market Abuse Regulation

PayPoint plc

(“PayPoint” or the “Company”)

 

PayPoint announces the acquisition of Handepay and Merchant Rentals

Important step forward in delivering enhanced growth and value in its core U.K. market

  • Handepay is a well-established ‘top 4’ card payments business with over 21,000 merchants processing £3bn annually, with over 30,000 term leasing agreements with SME merchants for card payment terminals achieved through Merchant Rentals
  • Enables reach into new SME sectors, including groceries, hospitality, food services and auto trade; very limited customer overlap with PayPoint’s existing card services
  • Significant growth in last 5 years with £16.7m gross revenue and adjusted EBITDA of £5.4 million in FY ended 30 April 20201
  • Earnings enhancing in first full year of ownership
  • Resilient performance through the Covid-19 pandemic, reflecting diverse sector reach and higher levels of card usage, with proactive plan in response to the most recent national restrictions
  • Best in class customer proposition, ranked no.1 card service processing provider on Trustpilot with a rating of 4.9/5
  • Strong sales and support team, and adds capability to deliver a better proposition, onboarding and in-life customer experience to the combined PayPoint cards business
  • Opportunity for synergies – combined share of the U.K. card merchant market of less than 5%, leading to opportunities within a growing and fragmented market
  • Transaction of £70m (Enterprise Value) expected to complete in Q4 of current financial year, subject to regulatory approvals

PayPoint is pleased to announce that it has signed an agreement to acquire Handepay Limited (“Handepay”) and Merchant Rentals Limited (“Merchant Rentals”), leading card payments and card terminal leasing businesses, from a consortium of private investors. The cash consideration for the acquisition is expected to be £70 million on a cash free debt free basis, after closing balance sheet adjustments.

Card payments in the UK continue to grow and have been the preferred payment method since 2016, with significant increases in usage seen over the Covid-19 pandemic. However, there remains substantial growth potential, with circa 2 million SMEs still not accepting card payments. In line with the move to local convenience shopping, 81% of people claimed they would be more inclined to shop locally if they knew shops accepted cards2.

The acquisition of Handepay will create a combined national card payments business with significant customer diversity: over 30,000 SMEs, spanning the grocery, auto trade, clothing, household goods and hospitality sectors. The business comes with a strong and experienced management team who have successfully built a leading national cards business with broad industry reach.  The group’s highly motivated sales and support teams deliver a comprehensive customer proposition with a 4.9/5 Trust Pilot rating.

Leveraging these capabilities, alongside PayPoint’s existing 9,000 customer strong card payment estate, will enhance the end-to-end customer proposition and offering, accelerating the Company’s strategy in the U.K. cards market and broadening its growth prospects. Mark Latham, currently Chief Commercial Officer at Handepay, will join the PayPoint Executive Board as Card Services Director, responsible for the combined cards portfolio. Ian Kennedy, currently Sales Director at Handepay, will join the business as Sales Director leading both the PayPoint and Handepay sales teams, reporting to Ben Ford, PayPoint’s Retail Services Director. Andy Peake will continue as CEO of Handepay until completion, and then will act as a consultant to PayPoint.

Adjusted EBITDA in the financial year ended 30 April 2020 was £5.4 million3 and profit before tax was £2.5 million. The gross assets as of 30 April 2020 were £20.2 million.

A systematic approach to the enlarged customer base, and the use of existing customer analytics data for the combined business, creates the opportunity for:

  • a better retention strategy for existing merchants
  • better targeting of new customers, by region and sector, and
  • enhancing the performance and efficiency of the combined sales teams and support infrastructure.

The acquisition is subject to regulatory approvals and, therefore, completion is anticipated to take place in January 2021. PayPoint has extended its current financing facility of £75 million to £95 million which will be used to fund the acquisition.

Nick Wiles, Chief Executive Officer of PayPoint plc, said: “Our acquisition of Handepay and Merchant Rentals will significantly increase our card payments capability and broaden our SME customer base. This important step refocuses PayPoint towards a core growth area and creates synergies through cross selling of other PayPoint services and leveraging the scale of the combined business. Handepay has delivered a resilient performance through Covid-19, through the breadth of its customer base and strong recovery of active merchants after the first lockdown, and has a proactive plan in response to the most recent national restrictions. I am equally pleased to welcome the Handepay management team into the PayPoint Group and look forward to working with them as we deliver on the exciting potential of the combined card business.”

Andy Peake, Chief Executive Officer of Handepay, said: “I’m incredibly proud of the business we’ve built, now serving over 21,000 merchants and ranked the no.1 card service processing provider on Trustpilot. I believe we’ve found the right home in PayPoint to take us to the next stage of our growth. The whole team are excited to be joining the PayPoint Group and benefiting from the scale, expertise and market leadership that they have built in omni-channel payments and technology over the last 24 years.”

PwC undertook financial and tax due diligence on behalf of PayPoint plc and Freshfields Bruckhaus Deringer LLP acted as legal adviser to PayPoint plc on the acquisition. PwC acted as lead corporate finance adviser and JMW legal adviser to the shareholders of Handepay and Merchant Rentals for the transaction.

A call and presentation will be held at 8.30am today for analysts and shareholders. Please register at https://www.webcast-eqs.com/paypoint20201105.

PayPoint is due to announce its interim results on 26 November 2020.

For further information please contact:

Enquiries:

PayPoint plc                                                                                 Finsbury

01707 600 300                                                                             0207 251 3801

Nick Wiles, Chief Executive (Mobile: 07768636801)                  Rollo Head

Alan Dale, Interim Finance Director (Mobile: 07778043962)     Nidaa Lone

     (Email: Paypoint@finsbury.com)

ABOUT PAYPOINT

For tens of thousands of businesses and their customers, we make life and payments more convenient.

For retailers, we offer innovative and time-saving technology that empowers them to achieve higher footfall and increased spend so they can grow their businesses profitably. Our innovative retail services platform, PayPoint One, is now live in over 16,500 shops in the UK and offers everything a modern convenience store needs. More broadly, we also provide card payments services to thousands of growing businesses across the hospitality, auto trade, clothing and households goods sectors.  Our technology helps companies to serve customers quickly, improve business efficiency and modernise their operations.

For clients of all sizes, we also provide market-leading payments technologies without the need for capital investment. Our seamlessly integrated omnichannel solution – MultiPay – is a one-stop shop for digital and other customer payments, via any channel and on any device.

Together, these solutions help millions of consumers to control their household finances, make essential payments and access services like cash withdrawals, eMoney and parcel collections and drop-offs. Our UK network of more than 27,500 stores is bigger than all banks, supermarkets and Post Offices together, putting us at the heart of communities nationwide.

ABOUT HANDEPAY AND MERCHANT RENTALS

Handepay has been operating in the UK since 2006, where it has established itself as a leading card payments business with over 21,000 SME merchants currently processing over £3bn card payments, through its acquiring relationships. It has also established over 30,000 term leasing agreements with SME merchants for card payment terminals through Merchant Rentals Ltd.




1 Aggregated result of Handepay and Merchant Rentals, excludes discontinued operations and payments to shareholders to better reflect ongoing business performance

2 Internal market estimates. https://www.globalbankingandfinance.com/why-are-so-many-smes-across-the-uk-not-accepting-credit-card-payments/

3 Aggregated result of Handepay and Merchant Rentals excludes discontinued operations and payments to shareholders to better reflect ongoing business performance