Chairman's Statement

PayPoint has continued to grow and invest in new business areas despite the tough economic climate.  Margins, operating profit and dividends have increased.

PayPoint’s established business streams delivered to plan and provide a solid base for ongoing development. We added over 650 net new retail outlets in the UK and Ireland. PayPoint.net has continued to grow but margins for larger merchants reduced as they reached volumes that justified lower pricing.

Our investment is focussed on developing new business streams: bill payment, top-ups and retail services in Romania; developing and building our parcel collection and delivery joint venture; and by extending our payment channels using PayByPhone.

We have continued to transform PayPoint Romania into a full service network by rolling out 900 more full service terminals, whilst removing mobile top-up only sites. We plan to replace the remaining mobile top-up only sites with full service sites. We accept bill payment for 22 clients and volumes have grown to over 5.5 million transactions, an increase of nearly six times the number of transactions in the prior year.

Collect+, our parcels joint venture with Yodel, was successfully launched in May 2009 and we are continuing the roll-out of this service across the network. Momentum is building, with considerable interest among major internet retailers. We have over 3,400 sites able to take Collect+ transactions and thirteen clients live.

In March, we completed the acquisition of PayByPhone (Verrus Mobile Technologies Inc. and Verrus UK Limited), adding mobile payments capability to our existing retail and internet channels. This service has considerable potential beyond its existing market leadership in mobile phone parking payments.

In the established business streams, our focus is on yield in our retail networks, extending retail services and on growth in our internet channel and Romanian full service retail network.

We have provided the National Lottery Commission (NLC) with a robust response to Camelot’s application to provide bill payment and mobile top-ups. We argue that the application should be rejected, primarily on competition grounds, for which we have received strong independent legal advice, including counsel’s opinion, and are reserving our position. Whatever the decision, we are well prepared and our new developing business streams, which are unaffected by this threat, provide opportunity for strong profitable growth. It is clear that the uncertainty arising from this consultation process, with a decision still pending, has had some adverse impact on our share price, which is disappointing.

We have core strength in the attractive UK cash payments sector to which our skills are well suited. In addition, consumer behaviour, regulatory change and technical innovation are leading to a proliferation of new payment media utilising a variety of new channels. With our key skills in client and retail management, transaction processing and financial settlement, we are well placed to take advantage of the new markets opening up to us.

These opportunities are supported by strong cash generation and the stability of the underlying industries in which our clients operate.

We are proposing a final dividend of 14.4 pence per share, which together with the interim dividend of 7.4 pence makes a total for the year of 21.8 pence, an increase of 24 percent.

For the current financial year, trading is in line with the company’s expectations.

Our established business is strong, with opportunities to enhance retail yield and increase the number of online merchants we serve. In our developing businesses, there is substantial growth potential as we roll out our services to a wider base, to improve profitability. Together, these businesses provide a solid foundation from which we aim to deliver long term value for shareholders.

To veiw the full Annual Report for the 52 week period ended 28 March 2010, please click here.