PayPoint plc (PAY) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to PayPoint's half-year results call. [Operator Instructions] Please also be advised that this call is currently being recorded for PayPoint's own internal purposes. With that, I would now like to hand the call over to Nick Wiles, Chief Executive Officer of PayPoint plc to begin with opening remarks. Nick, please go ahead.

Thank you very much, and good morning, everyone, and welcome to our half-year results presentation. Presenting this morning, you've got myself, Nick Wiles, the CEO; and Alan Dale, our Finance Director. The agenda follows our usual format. We look forward to answering your questions at the end of our presentation. So really turning firstly to the overview of the first half. I think overall, it's clearly been a very busy and rewarding half-year for our business with a significant number of new initiatives taking shape, and I think with the business as a whole, delivering a strong first half performance. As you can see, net revenue from continuing operations was up 20.9%. PBT, from continuing operations up 30%, and we've reduced our debt following the disposal of Romania to GBP 36.5 million. And it's this financial performance, which underpins an interim dividend of 17p, which is a 9% increase over the same period last year. Strategically, we've enlarged the PayPoint Group universe now to over 60,000 retailer partners and SME locations with the broadening opportunities that this brings to the wider business. We've made a GBP 6.7 million investment in Snappy Group alongside our commercial partnership to enable our retailer partners to respond to the demand for rapid local home delivery. We've strengthened our payment platform capability and the opportunity to access new sectors with the acquisition of RSM for GBP 5.9 million, which we completed in early April. And as I said already, we've completed now on the disposal of our Romanian business, with total proceeds of GBP 48 million and a GBP 30 million profit on disposal. Operationally, a real key focus for the business is to create greater agility as we look to deliver a number of new initiatives and projects across our business as a whole. In shopping, we've made really exciting progress in enhancing our retailer proposition with the launch of Snappy home delivery which is now live in over 130 stores with a strong onboarding pipeline. In Counter Cash, our cash out and balance inquiry without purchase service is now live in over 900 sites since we launched on the first of November, and we've seen half of those sites already transacting. We've introduced our retailer rewards app, made good progress in FMCG campaign planning for 2022. We've broadened our eMoney partnerships with top brands such as Love2Shop and we've launched our PayPoint business financing partnership with YouLend. At Handepay, we've introduced a number of new features such as faster settlement and also recently, our 1-month contract trial for new business. And in e-commerce, we have 3 main operational initiatives over the first half. Firstly, in launching a new partnership with Randox to support their COVID-19 testing service. Secondly, in expanding services to our existing clients with an introduction of an in-store return service for both DHL and Amazon. And finally, the rollout of our Zebra thermal printers to support parcel returns. To more than half of our parcel estate to date with the plan to extend this to the entire parcels estate in due course. In payments and banking, we've continued to deliver additional services to our existing clients, plus winning 18 new digital clients, of which 12 were from outside the energy sector. We've launched the new payment exception service for DWP via our i-movo business, and we signed Studio Retail as our first new major direct debit client. And as you will see, we have kept our guidance for the full year unchanged, and I'll go into more detail as to our outlook at the end of our presentation this morning. Turning briefly to Ofgem. I think we have little to add to the announcement both we and Ofgem made on Tuesday. As you will have read, Ofgem have now accepted the package of commitments we proposed earlier in the year as a resolution to their concerns. And we're now in the process of implementing these commitments with the relevant stakeholders to the timetable we've agreed with Ofgem. And I think it's really good to have had closure on this issue such that we can properly focus on the business and remove this uncertainty. What we've tried to do on this slide is really highlight the key themes from the first half and how they've impacted both our business and the clients and partners we support and really how we've responded to these. Firstly, I think it's fair to say we've seen a renewed need for innovation as the broader economy emerges from COVID. For SME businesses, this has really introduced a fresh range of challenges for them in terms of rising costs, the recent supply chain issues and, really, uncertainty as to demand. And I think the convenience sector is increasingly feeling rather like the last man standing at this time as they take on additional services from suppliers who are stepping back from the high street. And I think while the post-pandemic, they are challenged with staying relevant. They really need to focus on what makes their customers convert footfall into revenue. I think our response has been to work harder on developing a range of services that is valued by their customers, bringing more innovation with new offers and engaging and listening better to both our retail partners and our key trade associations. And I think aligned to this theme is the evolving change to consumer behavior post-pandemic. And I think it's fair to say the 3 standouts from us are the continued shift from cash to digital, the impact of hybrid working patterns and the rebalancing of in-store and online behavior. I think in response, we've accelerated our MultiPay digital platform, both in terms of investment and rollout. We've continued to expand our car processing locations and merchants within our network, and we've launched Counter Cash to increase the ease of cash access with low cost and high accessibility. And I think this really creates availability potentially through the majority of our PayPoint network today. In parcels, it's clear that a combination of the strong sustainability credentials of PUDO and a new hybrid working model play very much to the strengths of the Collect+ network. And we're working with our carrier partners to better communicate this to consumers as this is natural as the alternative to dual-stop delivery. In the energy market, we've been seeing unprecedented dislocation in recent months as many suppliers have been unhedged to the sustained high gas price. As you know, a small number of our energy clients have gone into liquidation. Also, we see an increased level of concern amongst the most vulnerable consumers as we support those into the winter months. And clearly, there's the fear there of fuel poverty. Our response has been very much to stay close to our energy clients through both engagement and monitoring and provide a stable network and service to their customers during this time. And really, for the longer term, from our own business perspective, we continue to look to diversify our customer base into non-energy and digital payments. And finally, one of the key themes which are not only impacting the first half, but I think will be a new and enduring challenge is the impact of COVID on our people and working practices. I think we're all adjusting to new and more flexible working patterns. In the short term, for us, we've seen high levels of COVID-related illness, along with higher levels of staff turnover and increased salary pressures and of course, the challenge to recruit and retain. I think this is a challenge, as a business, we're underestimating. We've been proactive in managing new hybrid working patterns in our business and engaging actively and regularly with our teams. At a time of transformation for this business, I think we recognize the importance of taking our team with us and deliver this transformation. We need to have the right working patterns to promote strong project management and delivery disciplines. Turning now to the strategy. Over the period, we've seen our PayPoint universe expand to over 60,000 retailer partners and SME locations. To make the most of the opportunity this presents, we have to build greater value and capability across each of our 3 divisions and support this expanded PayPoint customer and client universe together, as they respond to what we see as the 3 key macro trends of shopping locally, e-commerce growth and the transition from cash to digital payments. To achieve this, we've highlighted the progress in 3 areas: the further enhancing of our retailer proposition, the securing of new parcel carrier partnerships and improving our offering in the Collect+ PUDO network and accelerating the pace of our digital payments expansion and the new payment exception service for the DWP. In the first half, a number of the key initiatives I've already described are reflected in the expansion of our PayPoint universe and the footprint of the business across our 3 divisions. In green, we've highlighted the additions to the proposition or relationships over the first half. In shopping, you can see the addition of Snappy, [ Hunger ], which is going to be the proposition we're working jointly with Snappy into the hospitality sector. Counter Cash, the MyStore+ rewards app, the business finance through YouLend and the addition of Love2Shop. In e-commerce, the addition of Randox, the partner, plus the expansion of services into both Amazon and DHL. And in payments, our delivery of the payment exception service for the DWP and branded FMCG campaign partnerships and the developing conversations with newspaper groups for the digitization of paper subscriber vouchers. I hope it's clear from this update, the scale of change underway in the business and the progress we're making and the delivery of this broad and exciting spread of projects. Turning now to Alan, and I'll pass it on to Alan for the financial review.

Yes. Thanks, Nick, and good morning, everyone. The detailed numbers for the half year are provided in the RNS release this morning, and so I will be concentrating on the key points in the presentation. The key metrics being reported all reflect the positive performance from our first half, the contribution from our recent acquisitions and are compared to a period impacted by COVID-19. Turning to the highlights slide. The key starting point is our reported profit before tax at GBP 54.8 million, up from GBP 20.6 million, which consists of 3 amounts. We can now see the final impact on our results of the previously announced disposal of our Romanian business with a healthy GBP 30 million of net profit being realized. There was also a GBP 2.9 million exceptional gain from the accounting for the contingent consideration relating to our i-movo acquisition. The consideration for the acquisition has a number of deferred elements contingent on future performance over an earn-out period. Under the accounting rules, we view the likelihood of the criteria being met. And although the target dates are in the future, we have to release the liability, if not for certain to be -- still be met. Our key focus in the following slides will be the profit from continuing operations, which has increased 30% to GBP 21.9 million for the period, largely as a result of our acquisitions, although there were other items to highlight. As well as considering our increased profit from continuing operations in the following slides, we will also cover cash generation, our balance sheet, net corporate debt and the increased dividends. We'll start with reviewing the changes in underlying net revenue compared to the first half of last year. The slide reflects the business model introduced at last year-end, with shopping, e-commerce and payments and banking divisions. Our shopping division shows a considerable increase in net revenue from GBP 19.4 million to GBP 29.3 million, primarily from the inclusion of GBP 9.8 million from the Handepay and Merchant Rentals acquisitions. Handepay contributed GBP 6.5 million from card payments and Merchant Rentals, GBP 3.3 million from leases. Handepay pleasingly increased in volumes from their pre-acquisition performance by 26% and benefiting from the recovery from COVID-19 lockdowns. Service fee revenue also increased by GBP 1.1 million or 15.3%, driven by an increase of 1,100 revenue-generating PayPoint One sites since this time last year, with site increases in the high revenue point of core from new sales, which are only at the core price points and updates from base. PayPoint car payments revenue decreased by GBP 1.3 million due to lower average transaction values despite a slight increase in transactions with cards still being the preferred method of payment in our estate. ATM net revenue reduced slightly with volumes staying flat. The return of most COVID-19 suspended size and the recovery from lockdowns offset the general decline in use of cash. Our e-commerce division saw a net revenue increase by 39% to GBP 2.1 million from increased volumes, benefiting from the recovery of COVID-19 lockdowns and new developments with existing new carriers like Randox that Nick mentioned. Payments and banking division saw a decreased net revenue of GBP 0.8 million or 3.1% with a number of business lines moving in different directions. Cash bill payments decreased by GBP 1.3 million or 9.5% due to transactions decreasing with less use of cash and move to digital. Average transaction value is not returning to pre-COVID-19 levels and continuing margin pressure. Cash top-ups decreased by GBP 0.4 million or 9.3% due to the continuing decline in the prepaid market sector. Digital, which comprises our MultiPay product, Cash Out and the new acquisitions, i-movo and RSM 2000. Net revenue increased by GBP 0.6 million or 20.7%, with a decrease in MultiPay from utility taking their business in-house, more than offset by the contribution from the acquisitions and increased Cash Out business supporting local authorities. The new DWP scheme launched late August, and so its impact will be seen much more in the second half as volumes grow. Cash through to digital is eMoney, which continued its solid performance and grew net revenue by GBP 0.4 million or 11.1%. The table at the bottom of the slide shows an important message of the changing business mix for PayPoint. We're producing revenue from payments and banking, our historic dominant division and growing revenue in shopping and e-commerce, where shopping now the dominant division. Turning now to underlying profit before tax from continuing operations. This has increased by GBP 4.1 million or 22% compared to the prior period. To pull out the underlying performance from the prior period's profit before tax of GBP 17.8 million, we have firstly added back GBP 1 million of acquisition expenses that were not previously classified as exceptional at half year, although worth the year-end with a definition of accounting policy and successful completion of the acquisitions. For the current period, we also exclude the GBP 2.9 million exceptional gain from the release of the contingent consideration. The principal driver of the increase in underlying profit is the GBP 4.2 million contribution from our recent acquisitions. If we had not taken the positive action last year to invest in these acquisitions, then you can see that the legacy PayPoint business lines would have largely stayed flat. Our shopping division, as just explained, saw small net revenue growth but there was a mixture of business line performances against prior period. The e-commerce division is recovering well, and the net revenue for payments and banking division decreased GBP 2.3 million if you back out the GBP 1.5 million contribution from the new acquisitions. We will now delve into the underlying cost reductions on the next slide where the net cost reductions of GBP 1.5 million helped the historic PayPoint business result to be flat. We have worked at keeping a tight control on costs in the period, and this slide focuses on explaining the increased reported costs by looking at the change in historic underlying costs. We start by adding back the prior period one-off acquisition expenses we just discussed to get to the prior period underlying costs. The GBP 1 million reduction in costs from sustainable efficiencies and end-of-life assets include lower depreciation due to a number of assets reaching the end of their life in the prior period and the elimination of the previous transaction costs from i-movo as a third party, as these are now eliminated on consolidation. The GBP 0.7 million one-off cost reductions includes GBP 0.5 million of vacancy savings where it has taken time to replace levers and is after giving our people a pay rise in July when none was given in the prior period. We also have a number of one-off savings, while transactional costs have decreased reflecting the decrease in revenue in MultiPay and ATMs. Financing costs have increased against prior period due to the level of borrowings to fund the acquisitions, combined with the renegotiation of our facility terms in February 2021. Therefore, total historic underlying costs for the period were GBP 27.1 million, a good decrease of 5.2% from the prior period. To get back to the reported costs, we then add the GBP 7.1 million cost contributed in the period by our new acquisitions. With our cash generation, the key point is that we still have strong cash generation from our continuing operations. The profit before tax from continuing operations of GBP 21.9 million has been adjusted for depreciation, amortization and working capital to arrive at a strong continuing cash generation of GBP 22.1 million. This conversion to cash is not as strong as the prior period as we have had a GBP 1.8 million reversal of the VAT deferral though the prior period benefited from another negative working capital movements. These predominantly relate to trade payable working capital outflows in the period and are expected to largely reverse in the second half of the year. The cash generated was primarily used to reduce the year-end balance of the RCF facility, pay increased dividends, the acquisition of RSM and the investments in Snappy. The next slide shows how our balance sheet has changed since the prior period, and more importantly, the year-end. The balance sheet has strengthened with net assets increasing by GBP 40.8 million to GBP 80.3 million since year-end, mainly due to the disposal of the Romanian business. The net assets held for sale is now gone, and the proceeds used to bring down net debt by GBP 39.6 million. Goodwill has gone up by GBP 5.5 million from the completion of the RSM 2000 acquisition. We are now showing the investments in Snappy Group Limited of GBP 6.7 million, which we treat as an associate. The deferred consideration has decreased, as explained earlier, with the release of the exceptional item. And finally, the provision set up for the end of the year for Ofgem is now classified as a current payable given the Ofgem announcement on November 23. The dividend and financing slide covers a number of topics. We have set out our increased financing structure that can support future growth, together with the current drawdowns and corporate cash to arrive at net corporate debt. Material cash flows for the second half will include the GBP 12.5 million liability in respect of Ofgem, which will be paid within 30 days of the announcement. Dividends and CapEx, where based on current expectations, we expect to be spending a further GBP 6 million to GBP 8 million. We have provided a reminder of our previously stated capital allocation policy. Consideration is given to future investments, where acquisition opportunities or CapEx to drive future revenue or provide resilience and efficiency. Our dividend policy targets a cover ratio of 1.2 to 1.5x earnings. Consistent with that policy, we are declaring an interim dividend of 17p, payable in 2 equal installments on 30th of December 2021 and 7th of March 2022. This is an increase of 2.4% compared to the previously announced 16.6p final dividend declared on 27th May 2021 and is 9% higher than the dividend for the same period last year. This increased dividend reflects the confidence we have in the business for the future. And with that, I trust that was helpful in insight, and I'll pass back to Nick.

Thanks, Alan. Just turning to the operational review, I mean, turning to our 4 strategic priorities for the business in terms of operational progress over the first half. As I described earlier, I think we've made good progress in the further enhancement of our retailer proposition in the first half. We have a number of key initiatives now well underway, rolling out across the network. The site count remains strong. Our annual service fee has seen a healthy increase to GBP 16.80 per week. I think it's fair to say our key price point for growth has been at the core offering, which feels increasingly to be our real sweet spot for our retailers. We haven't made the progress we would like to have done in the migration to Pro and the retailers we signed up to on our "Try Before You Buy Initiatives," which happened this time last year, haven't converted as we had hoped. And I think some of these have unwound in the first half of this financial year, as we've ended the period. And I think, hence, as you've seen the drop here in EPoS Pro over the period. The Snappy rollout is really gathering pace now, with over 130 retailers live, with a strong pipeline to support, really, a rapid onboarding taking place here. Our ATM business has been resilient with some growth in our ATM estate and the launch of our Counter Cash service, whereas I said already, we already have 900 sites live since we launched on the first of November with half of these already transacting for customers. And as I said, this is a really busy time for our retailer business as we look to roll out and enhance the proposition and do the right things to ensure our retailer partners and their customers see value in what we're delivering here. To this end, we are listening harder to our retailers and engaging more closely with trade federations such as the ACS, and NFRN under Scottish Grocers' Federation so that we get this right. Our cards' performance over the first half has been resilient in the PayPoint card business and strong in the Handepay estate, where we've seen a combination of merchant sites returning from COVID and continuing sales growth. In terms of site count, PayPoint is broadly unchanged at 9,900 sites, and the Handepay status increased to over 22,600 live sites during the first half. During the period, we've introduced a number of new card initiatives to support the next level growth in cards. These include the 1-month contract for new switches at EVO, faster settlement across the EVO merchants, further enhancements to the acceleration of our onboarding process for new merchants across both PayPoint and EVO and a new card switcher proposition for PayPoint retailers with our PayPoint cards today. The expansion of our business finance proposition joint venture with YouLend has now moved into the PayPoint of state where already, across both Handepay and PayPoint, we have a facility of over GBP 2 million of lending to support these businesses. In e-commerce, we've continued to invest in our technology, the improvement of our parcel journey and customer experience and our individual carrier relationships. Our focus here is to deliver a technology-based platform from which positions Collect+ as the preeminent PUDO network for our carrier partners and their customers. To post-pandemic world, this is a critical moment, in our view, for Collect+ to take leadership in the industry, to reinforce the sustainability credentials of PUDO and its adaptability to respond to changing consumer lifestyles and demands for a premium parcel experience to match their experience at [ Door ]. In the first half, we sustained an overall network of over 10,000 sites. We've seen good volume growth and improved overall levels of customer satisfaction. We've accelerated the rollout of the Zebra thermal printers and are targeting a rollout of this to the entire network in due course. And I said earlier, we've launched a new partnership with Randox and expanded our services to both DHL and Amazon. We're making good progress in the rollout of our send proposition and the first phase of our marketing of this new service was launched over the summer. I think progress overall has been slower than we would hope, but we expect this to build and actually accelerate into the new year. Our focus now for this business is on delivering a strong peak for our carrier partners. I've already talked about our key focus in the client business to accelerate the investment in our digital payment capability through our MultiPay platform. We continue to win new clients with a greater diversity in terms of both the number of services taken and the spread across sectors. To support this growth, we continue to develop and roll out new products across the MultiPay platform, such as the next generation PayByLink, recurring payments and app balance inquiry. I've already spoken about the new payment exception service for DWP, which is now scaling rapidly. Our eMoney, cash through to digital payments business supports a growing number of clients and schemes is delivering some good growth in the first half. And we're making encouraging progress in the 3 pilot schemes currently underway with newspaper publishers to digitize their consumer services. And hopefully, we can talk about more of this in the years to come. In terms of our organization and culture, I think we've made further progress over the first half in delivering greater focus and clarity to culture, purpose and values. As an organization, we've embraced the changes to working patterns at a time when we put a greater focus on project delivery, business collaboration and raising the quality of our service engagement with our clients and our retailer partners. I think we also made good early progress in our approach to ESG and in defining our priorities and response as a business in this key area. Finally, turning to the outlook. As I said a number of times this morning, the first half has been an exceptionally busy one for the business. And this same tempo has continued into the second half as we manage significant number of new initiatives right across the business. Our core strategic priorities remain unchanged, and our focus on execution remains key. As we look to the second half of this year, we are balancing the uncertainties in some of our markets with our overall confidence in the progress we're making across our business. We can see the turmoil in energy markets is likely to continue. Energy top-up volumes will remain below our expectations and the peak parcel season is also important to the full-year outcome. Nonetheless, I think we continue to have a tight operational focus throughout the business. As Alan has already said, we're managing our costs well. And with this balanced approach, we're confident in our ability to deliver on our new business opportunities, not just for this year but also into the future. And I think with this confidence, both reflected in our increased dividend to 17p, we are comfortable and confident in unchanged guidance for the year. And with that, we're very happy to open up to questions.

[Operator Instructions] We will take the first question Will Kirkness from Jefferies.

I've got about 3, please. The first one, just move out to sort of management's Handepay. Just wondered if you could talk about the opportunity for cross-sell here. I think you've had a chance now to get your arms around the business. So it looks like now, you can maybe press on with some of those sort of revenue synergy opportunities. So just if we can hear about how you see that developing in the next year or 2. Secondly, just on capital allocation. You're pretty active into the new growth areas. So just interested to hear a bit about M&A pipeline, thoughts there? And then last question, looks like there's plenty of new initiatives coming through. I appreciate that some of them are in quite early stages. But just wondered if there's any that sort of are particularly exciting and could become fairly significant contributors to net revenue in the medium term.

Let's start off on the 3. I mean, if you go back to the announcement we made last year when we acquired -- when we announced we were due to acquire Handepay merchant rentals, we put a slide up which was essentially a quadrant of where we saw the opportunities. And I think the gateway to those opportunities was actually really integrating Handepay merchant rentals into the business and doing a really good job in that. So -- and I think we've now done that, and I think Mark Latham has done an excellent job in bringing the Handepay/Merchant Rentals team into the business. And I think that integration has now really run its course, which I think is really good news. I think the immediate impact of that is that we're beginning to think as a joined-up cards business. So I think that's the first, really, key cross-selling opportunity, beginning to think how we develop the proposition, the card proposition, how we target markets, how we target clients in a joined-up way. And clearly, there are nuances around how you approach the convenience sector to how you approach the broader SME market. And I think having a much more broader-based sales team, which is both telesales led and streets led is a major part in that. So I think that knowledge and that learnings from the sales team, approach to market, is one important thing. The second is the development of the product. And I think the third is actually sort of how we consolidate our acquirer partnerships for the future and how we maximize the commercials that come from that, from having a larger, sort of forward-looking book. The other area is clearly the opportunity to start selling -- or cross-selling product into what's been a pure card merchant estate actually in Handepay. The first immediate phase of that will be when we begin to introduce [ Hunger ], which is the hospitality EPoS and actually sort of app into the Handepay estate, and then we're looking at other areas with other products that we will begin to actually sell into the Handepay estate over the next sort of 6 to 12 months. So I think already, a number of cross-selling and actually joined-up opportunities are beginning to emerge. And I think the key thing is you can only do that if you have the stable base of actually a well-integrated business, and I think that now has taken place. Alan, do you want to pick up the point around capital allocation?

Yes. As we say, we will always consider suitable opportunities for us. That's why we do have some, I'd say, extra headroom in our financing facilities. And I say, the market, there's always things coming across my desk. But I think we -- if we are looking at M&A, we'll be very careful to choose things that say, do add value to our business and are a good fit.

Yes. And I think that bit that I would add to that is that we are very much looking to -- actually to build capability in the business. And I think what we think very hard about is what capabilities are missing in our skillset today that actually really take the business forward to the next stage. And I think if you look at the capabilities that came with i-movo, those that came with RSM and those that came through with Handepay/Merchant Rentals. That's a journey which actually is looking to broaden out our capability and importantly, actually open up new sectors where there is actually high levels of growth from those that we see in our legacy businesses. And I think -- well, your final question, I think, was around new initiatives. And I think the poise there is you're right. There are a lot, and think what's really exciting about the first half is that whilst there are a lot, they are actually moving forward with pace. I've talked a lot about the Snappy relationship. I'm really excited how that can really [ to ] begin deliver both a really good P&L from actually a growing estate. And secondly, I'm hoping to see the capital value of that investment grow is actually Snappy as it really gets traction in the market. I think Counter Cash is clearly really exciting. And I think at a time when we're seeing the banks retire from the high street. If we can really leverage our network and potentially, we could have, in due course, the majority of our pay point, 1 estate engaged actually and capable of actually sort of providing Counter Cash. That clearly really begins to build our sort of banking and cash-out credentials. There's a major area of growth there. And quite clearly, parcels, we think this is a really key moment for parcels. And if we can really drive home the benefits to consumers of accessing our PUDO network and provide a service and an experience, actually, which matches what they would expect when delivered to door, I think there's real opportunity there, and we're talking to a number of carriers about how we drive that message home to consumers in a way that really grows volumes. So I think there are just 3 examples, but I think, sort of equally important is what we're doing with YouLend in terms of developing business finance into both PayPoint and to Handepay. What we're doing around sort of putting more thought around proposition into cards, plus actually what we're doing more broadly into the future with FMCG and potentially newspapers as well. So there's a real range of opportunities there, all with the opportunity to really deliver some growth and strong P&L to the bottom line.

We will take the next question from Brent from Liberum.

Three questions, if I may. Maybe take them in turn, it's easy that way. Could you talk through the i-movo performance since acquisition?

Yes. I mean, look, there are 3 areas there where I think i-movo is already contributing. The first one is around sort of really strengthening our cash out, cash vouchering capability. And you've seen both in cash out during the first half, and I think that is in no small part, actually, to the contribution that i-movo has made. The second one is in terms of really what it's contributing in terms of actually developing our FMCG, so the partnering capability and actually being -- think through with a number of the moats and also brands as to how we develop FMCG campaigns. And then thirdly, I think as we've said already, you're beginning to see the real acceleration, the rollout of the DWP on track for the favored exception, on track to, actually, for the DWP.. And then I mean, you put some sort of around that. As Alan said, that contract started to roll out in August. And at this point, we're sort of getting close to a position where we've got about over 20,000 customers onto the service, and clearly, that's beginning to really accelerate. So I think that's going to be exciting, and we'll really see the benefit of that in the second half. And I think the final area, which is probably the least formed the 3, is actually the conversations that we're having with the newspaper publishers around how we digitize, actually, what's currently a paper process for actually vouchering for the payment of newspapers. And I think that we will hear -- we will give you more on that when we get to the full year, because that's clearly a really interesting opportunity for us and a growth area for our business. So as you can see, what have been a relatively small acquisition has brought a lot of value to the business. And again, I think we've integrated that well. And I think the platform that we have on, which we're actually sort of servicing the DWP contract, I think, benefits from being within the wider PayPoint Group. So I think I'm really excited about what that's going to contribute, not just this year, but going forward.

And a second question, if I may, is on trade payables and the impact that had on the first half and the unwind in the second half. Can you just talk us through what was behind that?

There's a couple of projects we're doing around capitalization, say, enhancing the ISM platform. So there's a bigger spend than normal, say, happening there. But that's what's saying it should go back to normal, I'd say, in the second half. The biggest thing around cash generation is the tax angle, which in last year, there was the deferral of the VAT, which then now, we're paying just our normal VAT, plus the reversal of that deferral.

And then in terms of sort of guidance, I mean, clear message of guidance unchanged, energy bill payment's clearly a bit worse. I could see a few things that might be passed and maybe Handepay, maybe the cost savings. Love to hear from you. What kind of offsets are against energy bill payments?

Yes. I mean, there's a real balance here, Joe. And I think that there's a real underlying confidence in the progress we're making in the business and the transformation that we're delivering. You're absolutely right. I think probably the biggest headwind that we're facing today is that the recovery we had anticipated in energy bill payments has been pretty anemic. And actually, whether it's because of weather, whether it's because people are slightly tightening their belts around -- and as you -- whether it's because we've seen a bigger move from cash digital than we'd anticipated or maybe just people consume more energy last year because they were working from home. We just haven't seen that bounce back. And I think that's -- the impact of that has been amplified by, really, some of the rates that we've absorbed actually in terms of renewing contracts over the last 2 years, which I think we've talked about before. So you've got an impact of rates plus you've actually got volume, both actually really pointing to -- for us, what's been a disappointing outcome, actually, to sort of the bounce back in energy and the other area, which, as I said already, we're cautious of, is really what the scale of, actually, the second half in pass is going to look like. Because clearly, it's a seasonal business. We're now into peak of that. And I think we, like all the carriers, are rather holding our breaths to see what happens. Our expectation is not least because of the supply chain pressures. We'll probably see a longer and flatter peak this year than we've seen in previous years. Not least because I think there's still also some concern around sort of what consumer behaviors look like. So I think that's the other sort of point of concern -- not concern, but certainly, awareness that we would have in the second half. To your point, where are the positives? Well, I mean, clearly, we've talked about DWP. I think that's moving nicely. eMoney still contributes well to us. As you say, I think card volumes remain very, very encouraging. And I think the range of initiatives that are beginning to gather pace will also begin to drop through to the bottom line more -- some in the second half but more into next year. So I think there's a balance here. But I think the balance is weighted towards the new initiatives and what they're going to contribute second half and actually into next year.

We will take our next question from Kai Korschelt from Canaccord.

Just a quick one on the, so I guess, core business and the competitive environment. I think a couple of months ago, a few hundred of the Tesco stores moved over to Payzones. I'm just wondering, we obviously, sort of remember the sort of British Gas loss to them. What is the competitive at the moment? Is it -- are they a rational player or are they still sort of trying to be quite aggressive on the pricing front? I'm just wondering had any comments on that front. And then the second question was just around -- a similar question on parcel. I think there's been some new services introduced by Royal Mail in terms of sort of drop off and pick up -- home pickup, et cetera. So I'm just wondering, in terms of your own road map, some of the new services you're planning to roll out, are you -- how confident are you that Collect+ can continue to grow, say, at sort of double digits forward?

Look, thanks for those questions. In terms of the competitive landscape, I don't really think that anything has actually changed. I think we have the benefit of the majority of our renegotiation of energy contracts behind us now. I think we have 1 left or it might be 2 in the next 12 months. But the majority of those have been done. I think beyond that, I'm not really aware of the impact of any changes actually that I can see around sort of pay zones behavior in the market, how that's impacted our business. I think one has got to put the Tesco sort of situation in context. At the end of the day, they weren't particularly compliant around sort of the delivery of service on parcels and they were pretty modest in terms of, actually, the volume they did on bill payments. And what we've seen is, actually, that -- our independent estate has actually benefited from actually moving those payments, actually x-- those door payments that were being done through Tesco, actually, to actually the vicinity of, actually, the independent estates nearby. We've replaced the parcel volume, actually, that Tesco was doing, and I think we're getting a higher level of compliance. We're talking to a number of other of the malls at the moment around some of the services that we can provide to them. We've already had the success of putting our eMoney propositions into one of the moats, which we've agreed in the last couple of weeks. So I feel pretty balanced about where we are in the competitive world. And I'm more focused actually on the new initiatives and making sure that the consumers see the value of those, and I am particularly around what payers may be doing around the edges. So I don't think my view around competition has actually really changed. And in terms of parcels, I think everybody is seeking to be innovative. I think, really, the focus from Royal Mail has been very much on providing consumer excellence to door. And I understand very clearly that they're trying to put more services to the door for those who are spending more time at home. I remain confident that what we're doing, the initiatives we're putting in our parcels business, the collaboration that we are doing with our carriers will continue to drive double-digit volumes for our own parcels business. And I think the real opportunity here, as I said already, is to drive home the credentials of actually PUDO in what is increasingly an environmentally-aware world and making sure that we are adaptable, actually, to the changing consumer habits and working habits that actually support growth. So as you can see, we've got a number of new initiatives in the first half. We'll have more to announce in the second half. So I'm really confident, actually, in the sort of core dynamic of our business and how we're going to grow it.

We will take our next question from James Goodman from Barclays.

Strong growth in Handepay, I guess, against the sort of the COVID comp 6 months to September 2020. So just wondering if you could comment on the revenue of that business in the last 6 months looks versus 2 years ago, sort of pre-COVID half and any sort of further assessment on the sustainable growth of that business? And then just in terms of some of the changes you've been making there. I wonder if you could sort of tie those together. I noticed in the release, you talk about sort of a salary review to sort of retain and improve talent acquisition in that business. And I think you showed on the slides moving to the shorter-term contracts as well. So maybe you could just sort of wrap that up into a comment on the Handepay strategy. And then just a quick follow-up to that was just the PayPoint card net revenue, which you called out has been down quite meaningfully off the back of decent volume but lower transaction value. Is that purely just a mechanical effect there? Or is there anything else that's sort of weighing on the existing PayPoint card business?

I'll try and answer the first one, James, and actually perhaps, Alan could pick up the second one around the PayPoint estate. I mean it's difficult for us to comment because clearly, we didn't own Handepay 2 years ago. What I would say is that Handepay has been on a strong growth trend for some time. And clearly, we have had the challenge of the dislocation of last year. But I think we're now back, very much actually, on a growing trend in terms of bringing new merchants onto the Handepay merchant platform. And I think what you see in the first half in terms of recovery is a combination of COVID returns, as I said, and also some growth in the estate from continuing sales process. The point that I was making around adaptability, I think is really relevant to Handepay and actually why we increased the salaries of the field team. I mean, I think there is a reality, which is we acquired a business where there was a relatively high level of turnover amongst the sales team. And I think we were keen to upscale and increase the quality of the sales team, reduce the level of turnover. And I think to be fair, we were slightly anticipating some of the sort of labor market challenges that we're now beginning to see. So I think moving early, I think, gave us the opportunity to invest at a higher quality point in terms of the field, make sure we had a higher level of retention and actually sort of perhaps sort of anticipate some of the problems that we're now seeing. And frankly, in terms of the proposition, we have continued to listen hard to what's happening in the market and adapt our proposition and our latest sort of 1-month contract for new switches, I think, is a reflection of that. And we're seeing some strong volume growth off the back of that because for a number of businesses, clearly looking to switch card processing suppliers, reducing that contract commitment to a month is clearly much more attractive and much more competitive in the market we're in today. So I think it is things like that. It's things like improving the onboarding experience, is the work we're doing with YouLend to provide finance around sort of anticipated take actually on cards. It's all those elements plus actually really working hard with acquirers around things like more rapid settlement, all of which actually really improve the quality and the competitiveness of the proposition. And I think Handepay has the right entrepreneurial thinking to actually be always looking at actually new developments in the market. Alan, do you want to talk about PayPoint?

Yes, sure. Thanks, Nick. Yes, James, as you say, the card thing is largely mechanical. As we say, the ATV has dropped down for the PayPoint estate from GBP 12.50 to GBP 11.30, I say, which -- I say, unfortunately, it does hurt us. It's good to see the volumes have stayed largely the same. And again, we're looking back at the period, which was the height of COVID when everyone was avoiding cash and lots of people, I say, were using cards. So it's great to see the volume is still there. But yes, it is disappointing, the mechanical aspect is that, I say, our net revenue has decreased and there is nothing else in that apart from the way, I say, all the transactions work their way through.

Okay. That's helpful. Just a further sort of thought on your comments there around the changes you make in the Handepay business. Did you have to sort of change the commission structure? Because my recollection, it may be incorrect, but was that -- there's quite significant commission payments to the field sales -- on those sales and presumably moving to shorter-term contracts has mechanically changed that quite a bit. Is that part of the base kind of changes that you've made there? And how have you managed the change in contract terms versus commission?

At the margin, but I think the reality was we could see, from the level of potential turnover in the field, we were losing our best people because the base was too low. And we needed to address that. And as I say, with the benefit of hindsight, I'm glad we did it when we did, because it was a proactive anticipation really of what we can see as a real tightening labor market. And I think from others in the industry, it's clear that people are working really hard and aggressively to keep their field teams at full strength.

[Operator Instructions] It appears there are no further questions. Nick, I'm handing back the conference back to you for any additional or closing remarks.

Thank you very much. And look, thank you very much to everybody, this morning, for joining us, and we look forward to updating you in January at our third quarter announcement and to talking again actually, the full year. So thank you very much, everybody, and have a good day.

That concludes today's call. Thank you for your participation. You may now disconnect.