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PayPoint plc Half yearly financial report for the 26 weeks ended 28 September 2008 HIGHLIGHTS 26 weeks 27 weeks ended ended 28 30 September September Like-for-like 2008 2007 Increase % increase % GBPmillion GBPmillion Revenue 109.3 103.9 5 9 Net revenue, 35.6 34.2 4 8 Operating profit 14.2 13.9 2 11 Profit before tax 15.3 14.5 6 15 Diluted earnings per 16.0p 14.7p 9 18 share Interim dividend 6.0p 5.3p 13
PayPoint's UK terminal and ATM business had like-for-like3 net revenues up 6% and operating costs down 3%
UK terminal network expanded by nearly 900 sites to 20,772 - on track to meet target of 1,500 additional terminals for the year
ATM network has increased by 7% and internet merchants have grown by 6% since March 2008
New website and restructured marketing is generating increased leads for our internet business.
Romanian bill payment service launched in August with 1,200 branded PayPoint sites Operating profit growth in the UK terminal and ATM business was up 22% on a like-for-like3 basis, including a slight decline in mobile transactions and in ATM transactions per terminal, suffered in common with other providers. The terminal network in the UK has been expanded to service transaction growth and mitigate the decline in mobile volumes and the ATM estate compared to last year. Our internet companies have been integrated to operate successfully as a single business, PayPoint.net, and its new website and marketing programmes have driven more leads, which will increase the number of merchants using our service. This, combined with the introduction of PayCash, which permits the payment in cash at PayPoint convenience stores for consumer purchases on line, positions our internet business for growth. In Romania, we have launched bill payment alongside the existing mobile top-up business and transaction volumes are growing as expected with the four launch clients and with a further four to follow before the year end. We also have strong interest from other substantial bill issuers with whom we expect to sign contracts. We continue to invest in the roll-out of terminals in Romania at a rate faster than we anticipated last year and this, together with the delayed transfer of the transaction processing to the UK and the launch of bill payment, has held back the results. We expect the business to be profitable next year. David Newlands, Chairman, said "PayPoint has delivered first half results ahead of market expectations. There are new products and prospects in the UK and elsewhere, which provide ample opportunity for management to continue to deliver growth." The condensed financial statements cover the 26 week period from 31 March 2008 to 28 September 2008, the last Sunday in the month, compared to a 27 week period ended 30 September 2007.  Net revenue is revenue less commissions paid to retail agents, acquiring bank charges and the cost of mobile top-ups where PayPoint is the principal.  Net revenue and operating margin are measures which the directors believe assist with a better understanding of the underlying performance of the group. The reconciliation of net revenue to statutory amounts can be found in note 2  The like-for-like basis adjusts the comparative period to 26 weeks Management report The management report has been prepared solely to provide additional information to shareholders as a body to assess PayPoint's strategies and their potential to succeed, and it should not be relied upon for any other purpose. It contains forward looking statements that have been made by the directors in good faith based on the information available at the time of approval of the half yearly financial report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forecast. We aim to continue increasing economic value for shareholders by expanding:
UK cash payments for bills, general payments, mobile top-ups, ticketing, money transfer and ATM cash withdrawals building on the strength of our brand;
e-commerce payments and services through PayPoint.net and new PayPoint products across the retail and internet businesses; and
international growth in selected developing countries for cash payment networks and as an e-commerce payment service provider. Our terminal estate has grown by over 1,600 terminals (UK and International) since the end of the last financial year. Transaction volumes were up 5% and profit before tax up 6% although the period contains one week less of trading compared to last year. Profit before tax increased 15% excluding the extra week from the prior period's results. Bill and general payments have grown strongly, particularly in the UK, where prepaid gas and electric domestic price rises have helped to increase transaction volumes. The mobile sector overall in the UK and Ireland has seen a decrease in transaction volumes, as consumers economise and networks offer customers more airtime for their money. This decline has been mitigated in the UK by the expansion of the network. In Romania, Pay Store's mobile top-ups continued to grow and our bill payment service was launched in September with four clients. PayPoint.net has traded as planned with transaction volumes up 46% on last year. Operational review In the first 26 weeks of the financial year, PayPoint processed 249 million transactions, with a value of GBP4.0 billion (2007: 236 million transactions with a value of GBP3.5 billion in 27 weeks), an increase of 5% in transactions and 15% in value. On a like-for-like1 basis transaction volumes were up 10%. Commissions paid to retail agents were reduced to GBP41.2 million (2007: GBP41.5 million), a result of lower mobile top-ups. Analysis of transactions 26 weeks 27 weeks 53 weeks ended ended Increase/ Like for ended 28 30 (decrease) like  30 March September September increase 2008 2008 2007 % % millions millions millions Bill and general 152 141 8 13 311 payments Mobile top-ups 74 77 (4) (1) 151 ATMs 7 7 - 1 15 Internet payments 16 11 46 51 26 Total 249 236 5 10 503  The like-for-like basis adjusts the comparative period to 26 weeks  Includes debit/credit transactions  Included within the total is 9 …