Paypoint Plc Stock

Thank you very much, and good morning, everyone, and welcome to our results presentation. Today, we'll give a brief overview of the business performance, highlights by division, and then Rob will take you through the financials, followed by some further detail on our reorganization, what it means for the business going forward and why it represents, in our view, a major inflection moment for the business and then finish off with our outlook before we open up to Q&A.

So turning first to our headlines. Firstly, in terms of results, we're announcing record underlying pretax profits of GBP 69 million for the year and in the year, returning over GBP 90 million to shareholders in the form of share buybacks, the special dividend and ordinary dividends. Secondly, during the year, we've made strong progress in 3 of our key growth levers in the launch of PayPoint BankLocal with Lloyds Bank and now Nationwide.

We've launched Royal Mail Shop and the strategic investment by Royal Mail and Collect+ and our plans announced earlier in the year are now underway to simplify the group structure into 4 business units to drive both greater transparency and actually the platform necessary to deliver our target growth rate of 5% to 8% net revenue per annum.

I think combined, these headlines demonstrate great energy and momentum in the business and point to genuine inflection points here as we focus on our plans for the next 3 years to deliver the next phase of growth in the business.

We're also reiterating our confidence in the outlook for the current year, delivering further progress, exceeding the underlying profits achieved in FY '26 and results that will be in line with market expectations.

In terms of our performance overview, Rob is going to cover these financial results in more detail in a moment. However, in terms of headlines, underlying EBITDA increased to GBP 92 million, underlying PBT increased to GBP 69 million and net revenue increased to GBP 190.8 million. And we increased the final dividend by 2% to 20p per share.

As I said already, overall, these results demonstrate further resilience in performance for both the second half and for the year as a whole, and I think are a strong response to the specific headwinds we called out at our interims in November. On a divisional basis, shopping and payments and banking as businesses were up by 1.7% and 1.8%, respectively.

e-commerce was down by 4.9%, and we saw a solid increase of 3.5% in Love2shop. And in terms of divisional highlights in shopping, we continue to grow our retailer network and increase our service fee and net revenue with our day-to-day focus on better supporting our retailer partners with greater commission-generating opportunities and a broader range of essential community services.

In year, we successfully launched PayPoint BankLocal, enabling both app and chip-and-pin consumer cash deposits through our network with both Lloyds and Nationwide now live with our expectation that further banks will follow during the year. And in terms of customer adoption, early signs are encouraging with the deposit run rate already exceeding GBP 3 million per week and growing quickly.

In cards, in the second half of the year, we continue to strengthen the operating foundations to this business with a greater focus on optimizing profitability per merchant over absolute site growth ahead of the steps we've taken since in the early part of this year to fundamentally refocus this business.

Despite a challenging year for both processed volume and card estate growth in both PayPoint and Handepay, we've continued to enhance both our merchant value and product proposition. And in merchant rentals, the team have delivered another strong year, now establishing a growing number of partnerships, including the one recently announced or launched with FreedomPay.

And our business finance activities in partnership with YouLend had a further year of strong growth. In our FMCG activities, we delivered 40 brand campaigns through the year for a range of high-quality brands, and we've entered the current year with our strongest campaign pipeline. And in our ATM business, we've continued to see the positive impact of our recovery plan and site optimization activities in the second half with the rate of net revenue decline halving.

And looking forward, we expect further progress in the current year from these activities with additional benefits from the rollout of VMC during the first half of this year. Overall, in this business, our use of data and analytics continues to play an increasingly critical role and will be central to how we manage our network in the future, and I'll talk more about this later.

In e-commerce, after a strong first half for both parcel volumes and net revenue growth, the second half has been a period of consolidation with the ongoing focus being on a combination of, firstly, accelerating the growth and opportunity from the Royal Mail strategic partnership; secondly, bedding in the reset of our commercial relationship with the combined InPost/Yodel and developing detailed individual carrier growth plans and investing in the Collect+ network for the next stage of growth.

In payments and banking, our key highlights have continued to be in the growth of our Digital Payments & Open Banking activities, the strengthening of our position in a number of our key sectors, including housing and the leveraging of our multichannel payment platform to better cross-sell our payment services within both our existing client base and grow our new business pipeline.

Obconnect delivered the strong performance in the second half we'd anticipated, and we continue to make further progress in our cash through to digital activities. And finally, in Love2shop, a further year of strong performance with good overall net revenue and billing growth and a strong performance across our key product distribution channels, including Love2shop business and in-store by our InComm partnership and a solid performance from our Prepayments - Park Christmas Savings platform.

Our technology investment has delivered enhanced product capabilities and a single domain Love2shop e-com platform with the benefits of these expected in the current year and greater consumer brand awareness in both our B2B and our B2C channels. And as expected, the strong performance in the second half reflected the anticipated benefits of the timing of revenue recognition that we described in November.

I'm now going to hand over to Rob, who will take you through our financials in more detail.

Thanks, Nick, and good morning, everyone. If I start with the income statement, net revenue of GBP 190.8 million is up 1.7% on the prior year of GBP 187.7 million. Total costs of GBP 121.8 million are up 1.8%, with this leading to underlying profits of GBP 69 million, which is up 1.5% year-on-year.

I'll cover the key revenue and cost filters in the following slides, but you can see for our 2 segments, PayPoint profits of GBP 51.1 million are down versus the prior year of GBP 53.4 million and Love2shop profits of GBP 17.9 million are up on the prior year of GBP 14.6 million.

Further down this slide, you've got adjusting items of GBP 13.5 million, which includes GBP 7.1 million of exceptionals, GBP 1.2 million of movements on convertible loan notes and other investments and GBP 5.2 million in respect of amortization of acquired intangibles.

The GBP 7.1 million of exceptionals includes GBP 3.4 million in respect of legal costs and GBP 2.2 million in relation to the recent reorganization of the business. And after adjusting items, this gives profits on a statutory basis of GBP 55.5 million. Alongside the ongoing share buyback program, these profits support a 6.5% increase in our diluted underlying earnings per share to 73.6p.

Lastly, the closing net debt for FY '26 was GBP 132.5 million, and I'll cover this in the cash flow slide shortly. Moving on to net revenue analysis. This slide breaks down revenue by segment and business area. Starting with shopping, revenue rose 1.7% to GBP 66.3 million, with growth in service fee income more than offsetting lower revenues in card payments, ATMs and counter cash.

E-commerce revenue of GBP 15.6 million is down on the prior year with higher transaction volumes being more than offset by the new commercial terms with InPost/Yodel, which we outlined in our half year results. Payments and Banking revenue rose 1.8%, driven by double-digit growth in digital, along with the inclusion of a full 12 months of obconnect. And this growth more than offsets the decline in our legacy cash bill payments, which fell by 10% year-on-year.

Combined, these 3 areas drove 1% growth in revenues for the PayPoint segment. Love2shop revenues of GBP 53.5 million, were up 3.5% year-on-year with overall billings increasing by 5% to GBP 385.8 million, driven by Love2shop business, [ high growth ] in physical card distribution.

So combined, these 2 segments give overall group revenue of GBP 190.8 million. This slide shows underlying profit progression year-on-year from GBP 68 million of profits in FY '25 to GBP 69 million in FY '26. The first 4 blocks are revenue related, which I've covered already, GBP 1.1 million revenue growth from shopping, GBP 0.8 million decline from e-commerce, GBP 1 million from payments banking and GBP 1.8 million from Love2shop. The last column is costs, which I'll break down further in the slide to follow.

Overall costs are up 1.8%, as I said, from GBP 119.7 million in FY '25 to GBP 121.8 million. In managing this cost base, we continue to identify opportunities to drive further efficiencies across the group. So these revenue cost filters gave profits of GBP 69 million that you see on the right-hand side of this slide.

So this slide breaks down the key drivers of the GBP 2.1 million cost progression year-on-year. Firstly, the inflationary cost pressures we kept minimal at an increase of GBP 800,000 versus the prior year increase of GBP 2.8 million.

Secondly, the obconnect increase of GBP 2.1 million is due to the inclusion of a full 12 months of its costs versus the 5 months we had in the prior year. The financing costs have increased by GBP 800,000 driven by the increase in our debt from the continuing share buyback program.

And lastly, we've had GBP 1.6 million of people and overhead savings with some of this driven by a high proportion of staff being capitalized plus higher R&D tax credits coming through in the year. Overall, this results in a below inflation increase to our cost base to GBP 121.8 million on the right of this slide.

In terms of cash generation and net debt, midway down this slide, you can see our cash generation of GBP 70.4 million for the year, which is up GBP 1.4 million versus the prior year, and that's after various add-backs for adjusting items, D&A, share-based payments and working capital.

The working capital outflow is largely timing of payments to suppliers, which is expected to unwind in FY '27. Further down, we had other outflows in respect of tax paid GBP 17.1 million, which includes the GBP 9.4 million tax on the part disposal of Collect+, CapEx of GBP 22.6 million, the exceptional payment of GBP 10.4 million in respect of Utilita settlement plus a one-off pension contribution of GBP 1.5 million.

The acquisitions and investments of GBP 37 million includes the GBP 43.4 million inflow from the part disposal of Collect+ plus an outflow of GBP 6.4 million in respect of obconnect taking full control. The share buyback of GBP 30.1 million is consistent with what we've committed previously with the prior year outflow of GBP 14.9 million being 9/12 of the GBP 20 million that we committed for the first 12 months.

Our GBP 60.8 million cash outflow for dividends includes a special dividend of GBP 34.5 million that we paid in half 2, plus the normal dividend of GBP 26.3 million, with this dividend being GBP 1.5 million lower than the prior year as a result of the share buyback and consolidation, reducing the number of shares in issue.

So these movements result in a net overall cash outflow for the year of GBP 35.1 million and closing net debt of GBP 132.5 million. Briefly on balance sheet. Overall net assets are down GBP 21.5 million year-on-year, driven principally by the outflows in respect of the share buyback and dividends.

In terms of key deltas versus the prior year, noncorporate cash and cash equivalents is up GBP 80.7 million, with this offset by a GBP 76.5 million drop in restricted funds. This reflects a movement between -- towards instant access accounts, which are attracting similar or higher rates of interest.

Loans and borrowings of GBP 28.5 million were the drivers covered on the previous slide. Working capital is GBP 22.9 million lower, which reflects the GBP 10.4 million payment to Utilita that we provided for in the prior year, plus the working capital outflow noted earlier.

So at the bottom of this slide, this gives overall net assets of GBP 75.8 million. Finally, before I pass back to Nick, on capital allocation, our target leverage remains in the 1.2 to 1.5 (sic) [ 1.2x to 1.5x ] range. With a normal increase in dividends of circa 2%, we expect to see dividend cover move from its current range to above 2x over the next 2 years.

This year, we've returned over GBP 90 million to shareholders through a combination of our ordinary dividend, special dividends and the share buyback. On the share buyback, so far, we've returned GBP 45 million with a further GBP 30 million planned for FY '27 and FY '28, and that equates to an overall share buyback of GBP 105 million in aggregate. This alongside the share consolidation targets an overall reduction in our issued shares of circa 30% from the commencement of our buyback back in July 2024 to the end of FY '28.

As with prior years, the level of buyback will be based on business performance, market conditions and the overall capital needs of the business. On the right of this slide, our future cash requirements are similar to the prior year, outflows in respect of dividends, the share buyback and capital expenditure, which we expect to be circa GBP 21 million this year.

Finally, on our facility, we exercised a 1-year extension to the facility last year. So this ends in June of 2029 and includes a GBP 75 million non-amortizing loan and a GBP 90 million RCF, which supports our capital allocation policy and expected future needs of the business. I'll now pass you back to Nick.

Rob, thanks. Turning now to the business reorganization and why it's so important to the next stage in our growth, what will be different and why it believes -- why we believe it provides a major inflection point for the business and well executed, underpins our net revenue growth target of 5% to 8% per annum.

Firstly, the reorganization creates a transparent, a more accountable structure and a simplified business model with a logical grouping of our business activities and channels to each market. Externally, it makes the business easier to understand and internally, it establishes better ownership. It will enable a clear strategy for each business unit, a greater focus on the delivery of our key growth projects, ensure investment in the key enablers to growth, including in several of our key areas, additional commercial sales resource, refresh and on-point marketing and the next phase of product and capability development, a better harnessing of the value from our data analytics and AI capabilities to support key decisions and investment and drive cross-business co-operation.

This will result in a balanced growth strategy for the business as a whole, combining disciplined investment to support the highest growth opportunities in each business unit while managing for value our more mature and legacy activities to maximize their longevity and cash generation. In recent years, I think we've done a great job in demonstrating cost discipline and use of our capital, develop our capabilities and modernize our business. We now need to demonstrate a similar focus on the investment and operating disciplines required to deliver consistent growth and our target net revenue growth rate of 5% to 8% per annum.

Achieving this objective is critical to the next stage of our business. Turning now to an overview of actually what the reorganization of the business looks like. As I said earlier, our activities have now been grouped into a simplified structure with 4 distinct business units. The product or services for each of these business units are now served by clearly defined distribution or go-to-market channels.

This structure will better enable each business unit, the operational focus and targeted investment in technology, our go-to-market strategy, including marketing and sales and use of our data analytics and AI tools to strengthen our market position and maximize opportunities for revenue growth.

One of the primary objectives of this reorganization is to better support and enable growth. In Network Services, the key distribution channel for our 4 primary products and services that make up our core community services proposition is through our 30,000 location retailer network.

Today, Network Services is our largest single business unit with important growth levers such as consumer and SME banking, parcels and the digital content and engagement platform, key to the next stage in our growth, supported by a better performing network and adoption of our services and higher revenue per retailer. In Digital Payments & Open Banking, this is a great example of where we are investing further in our sales, our technology and client support resources as the primary channel to support our existing clients and accelerate our new business pipeline.

Having now established a leading technology platform, combining digital payments, open banking and real-time credit scoring, the key to this business unit fulfilling its potential as our fastest-growing business is a strong go-to-market strategy, combining marketing, sales and further product development and innovation.

Love2shop, our distribution channel strategy is already well underway and embedding across the business with a clear focus on maximizing the lifetime value of our products in each distribution channel across both physical and digital products and into both B2B and B2C channels.

Further investment in technology, our platform and new products remain key to maximizing the potential of this business during the next stage of its growth. In Merchant Services, it's become increasingly clear that we needed to do something fundamentally different and radically change our model.

A reset strategy in merchant acquiring has resulted in a reshaped SMB team focused on higher-value merchants and the addition of a mid-market team focused on selling a broader range of payment capabilities, including A2A payments, direct debit and Love2shop hosted on a single platform. As well as dedicated additional resource to support the onboarding and in-life management of our merchant network, we now also have separated dedicated sales channels for merchant rentals and business lending, both of which have clear strategies for accelerated growth.

The immediate financial impact of this reset has been a lower cost base and a more profitable business and a strong platform from which to resume growth and a more compelling future go-to-market strategy. In each of these business units, the better grouping of activities, clear go-to-market strategies, a greater focus on execution with greater accountability will drive better performance and ensure each business unit is set up to maximize its opportunities.

It will create greater opportunity for cooperation between business units, most particularly as we develop further our payment capabilities. Now turning to each business unit and what will be different.

Starting with Network Services. I think based on our findings from deploying our store growth specialist team in the field over the past year and supported by our data analytics team, it's clear there's a great deal more we can do to grow our retailer value.

We can increase revenue per store. We can improve compliance. We can widen our product penetration and service adoption and provide a better service to our retailer partners and their customers. The opportunities for our retailers to make money from being a PayPoint retailer have never been greater.

We just need to raise our game to unlock this potential. The first step in what's going to be different is the way we will organize ourselves. We've now restructured into 4 primary regions and 36 subregions with the field team, retail services and finance teams fully integrated in each of these regions.

This will result in a more efficient operating model and improved coordination between field and the retail hub and a better real-time support to our retailers. In addition, we use our data analytics and AI tools to optimize our field sales resource and better equip them in their engagement with the retailer network.

Good examples of this in action are how in the future, we task the workflow of the field team, measure the outcomes of our retailer visits and engagement to drive adoption and compliance such that we can measure progress in growing the number of services delivered and the revenue per site. Well executed, this will result in more efficient use of our field team as a resource, a higher performing network, better revenue per retailer and stronger retailer relationships with a greater emphasis on retailer quality rather than network growth.

For the current year, our priorities are clear: number one, launching and embedding this new operating model, measuring its impact with our retailers and a small number of performance-related KPIs, continuing the expansion of our key community services into the network, including BankLocal parcels and a high-value digital engagement proposition. It's clear to us as the PayPoint network becomes increasingly important in the delivery of essential services into the community and our service partners become even more demanding in the quality of the service we deliver.

This organizational change and growing retail value as a strategy represents a fundamental change in the way we deliver services through the network.

In Digital Payments & Open Banking, we're bringing together MultiPay, obconnect, and Aperidata onto a single technology platform and under a single management and operating structure. The capabilities of this platform are really exciting. We have a digital payments platform enabling secure payments for major organizations across housing, government, utilities, local authorities and financial services through open banking, cards, direct debit and cash with a multiple of channels.

We have a SaaS data-sharing platform, providing a resilient network for open banking, CoP and other data sharing and a real-time credit reference and transaction analytics powered by open banking and AI. And the key to this business, as I've said already fulfilling its potential is investment in a comprehensive go-to-market strategy, including commercial sales, marketing and next-phase product development.

And with this in mind, the key priorities for the year ahead are to deliver further product innovation and new business wins in obconnect, accelerate new business growth and upsell into the PayPoint client base from a broader set of payment capabilities and continue to develop our technology partnerships and collaborations to develop new opportunities.

In Love2shop, the growth building blocks have been established over the past 2 years through a combination of investment in technology, product and platform investment as well. The clear focus now for this business is to maximize the lifetime value of billings in each of our distribution channels, strengthen the go-to-market strategy and reinforce the Love2shop market-leading position in each of its product markets and distribution channels.

The establishing of additional partnerships such as Vanquis and MLP further creates opportunity for this business. In the current year, the focus is on ensuring a mix of business, which delivers revenue growth from a continued strong performance from Love2shop business, maximizing the value of a single Love2shop digital platform for both B2B and B2C channels and further growing physical distribution on the high street through the PayPoint network and through our InComm partnership.

And finally, in Merchant Services, as I said already, a fundamental reset of strategy in this business with a focus on net revenue, improved profitability for new business in the mid-market sector and in our existing merchant estate, which is to be managed for value rather than pure estate growth. The outcome of this will be a go-to-market strategy focused on measured growth in the mid-market segment with improved net revenue and profitability, better in-life management of the existing merchant estate and additional sales channel established to focus on selling a multiple payment product in the former SMB market segmentation.

In addition, both merchant rentals and business finance are targeting further growth driven by major partnerships, including FreedomPay and YouLend. Overall, establishing a logical grouping of business for each of our business units, creating clear go-to-market strategies and distribution channels for delivery will bring about fundamental change in the PayPoint business and the opportunity to maximize the potential from the collective services and capabilities we have in the business today.

We know looking forward for the business to succeed and fulfill its potential, we need to establish a growth rate of at least 5% to 8% per annum. And the actions I have described today underpin the principles of what will be different in the business and are key to meeting this objective. And then finally, just turning to our outlook.

In terms of outlook, it's important to recognize, firstly, the current year is a key year for the business with the reorganization now well underway and the driver of significant change throughout the group as we deliver on our #1 business priority, which is to build a business platform from which we deliver a consistent 5% to 8% net revenue growth per annum.

It's been a busy first quarter already as we implement the organizational changes. We ensure that we've minimized the disruption to the trading momentum in the business, and we get off to a good start to the year. And early indications are that we've achieved this and started the year well. In terms of profit balance for the current year, we may have a slightly greater weighting towards the second half compared to the first, certainly when compared to FY '26, although the Board remains confident in both exceeding the underlying profits achieved in FY '26 and the results, which will be in line with market expectations. And we look forward to hosting a Capital Markets Day in the second half of the year, potentially in Q4 of the current calendar year.

And with that, we're happy to answer questions.

The first question comes from the line of Michael Donnelly from Investec.

Can you hear me okay?

Good morning, Michael. Hi.

Two from me, please. First of all, Nick, on competitive positioning, what is it that you see that differentiates open banking and the payments platform when you're working against competitors on winning new clients? And secondly, on the reorg, are there any tangible early-stage benefits that you can see in your internal management data, maybe even anecdotally that you might be able to share with us at this stage? Or is it too early even for that?

Thank you, Michael. I think the first thing is that we start in a really great position with respect to our Digital Payments & Open Banking business because we have a fantastic customer base. And I think that one of the key things that we need to much better leverage is the opportunities that come from actually working with such an extensive client base across housing, utilities, local and central government charities.

And we really do start in a great place. And I think that -- I think one of the really early opportunities comes from actually bringing together all the capabilities of that platform onto a single management organization and structure. And I think that the principal competitive advantage we start with, as I said already, is actually the sort of the scale of that opportunity in terms of our existing base.

I think that the investment we're making in commercial sales and the investment we're making in marketing to really get marketing on point, I think will really actually step up the competitive advantage that we have and importantly, have very relevant payment solutions into those specific markets. And I think when one begins to think about actually sort of our go-to-market strategy, it's really making the relevance of actually the payment channels that we have actually to the clients that we have today.

And I think joining up the dots in that way, I think, really positions us very well to both really upsell those payment capabilities into our existing PayPoint client base, but also have a really compelling proposition actually to build our new business pipeline.

And I think there's very clear evidence already in the partnerships we're establishing, whether that's in A2A payments, whether that's in the development of trust frameworks. I think that we bring something really strong to partnerships in opening up those payment areas. So I think it's early days, but I think this has the potential to be by far our fastest-growing business and the one that really long.

In terms of reorganization, I mean, you're absolutely right. It's very early days. But what I would say is that I think the whole business has really been energized by the opportunity of creating really logical groupings of businesses and importantly, creating much more transparent and accountable organizational structures.

And I think that's particularly the case when we talk about the way that we manage the network services businesses and importantly, how we actually engage with our retailers into the future. I think one of the biggest frustrations we've had historically is the inability to solve challenges and problems that our retailers have in real time, where our field team identify issues in the field, and we're not organized to be able to respond to those in a real-time way. In organizing the business as we have done now, having the 4 integrated regional structures with the 36 subsets sitting beneath it, there's the ability there to actually sort of join up what happens at the retail hub and what's happening real time in the field in a way that actually addresses issues in a really timely and efficient way.

Unquestionably, it's going to create a more efficient operating model. As I said already, it creates the ability to embrace the opportunities from our AI tools and our data analytics tools to really provide a much stronger, more comprehensive service. So I think that's going to be a very early win.

And I think similarly, across the business, I think this sort of regrouping of our activities has really shown a really strong light on to the areas that actually we need to sharpen up on and where we need to really focus our investment.

And I said a number of times today, I think it's really focused minds around our go-to-market strategies, which unquestionably are actually sort of the heart of actually sort of what will drive our new business. And that's what will drive ultimately our growth rate of 5% to 8% per annum. There's a lot more to unpack here, and I'm hoping we'll better do that at the Capital Markets Day later this year.

Ladies and gentlemen, there are no more questions at this time. I would now like to turn the conference back over to Nick Wiles, CEO, for any closing remarks.

Thank you very much. And everybody, thank you very much for joining us this morning. And I hope that you join us later in the year for our Capital Markets Day. Speak to you soon. Thank you. Bye-bye.

Good morning, everyone, and welcome to our interim results presentation this morning. We're going to adopt our usual format, starting with me giving an overview of our performance in the first half. Rob can then cover the financials, followed by an update on the delivery of our key growth projects and then a first half business review. Rob is going to update on our progress in working with Nile, on our long-term organizational framework. And then finally, an update on our outlook and the Q&A.

And with that, turning really to the first half and an overview of actually our first half. And I think despite an uncertain market background, the performance of our underlying business has remained in line with our expectations. We've continued to grow our PayPoint core estate with new business in key areas such as housing, local authorities, government departments, FMC brand campaigns and in Love2shop business. I think progress has been good. We've accelerated growth in our digital payments platform. We've taken further actions to strengthen our card processing platform and its capabilities. And in parcels, we've strengthened further our key carrier relationships, all of which is very much consistent with the long-term objectives we set out for the business earlier this year.

In the first half, we have encountered 2 specific challenges, which have impacted performance. Firstly, the financial terms of our new commercial contract with InPost Yodel have had a greater impact than we'd anticipated and with the additional volumes we would expect to come through not yet materializing, and that's rather been compounded by what's now the well-publicized disruption to parcel volumes and service in our network from the InPost Yodel internal network and operational harmonization plans.

It's taken some good work and collaboration between the 2 businesses but it does now feel that we're through the worst of the operational disruption and we expect our volumes to recover through the course of November, which, as you know, is really a key trading period for the business. Secondly, in OBConnect, the first half of this year has seen slower growth than we had anticipated and some consolidation after a strong performance last year. I think this is largely due to the overall opportunities we'd hope to see from the verification of pay opportunity and uptake in Europe being rather disappointing with the team, I think, doing a really good job in response by pivoting the new business pipeline and opportunities to other areas alongside what we're doing in terms of discussions already underway with several jurisdictions and corporates to replicate the success of GetVerified in New Zealand.

And while the OBConnect business will not grow at the rate we expected in the current year, I think it's fair to say the foundations and capabilities of this business remains strong and our growth in the second half will still be stronger than the performance we saw in the second half of last year. So I think overall, our confidence in the opportunities that OBConnect brings to our business is undiminished. Its technology platform and capabilities remain important to our long-term digital ambitions as a business.

More positively, we've made significant progress in the first half in the successful delivery of several major projects, which are key to our long-term growth. We've launched bank local services with Lloyds Banking Group and with the expectation of further banks to join this service in the coming months. We've launched Royal Mail Shop and branding across the Collect+ network following the strategic investments in Collect+ by Royal Mail. And we've accelerated the Love2shop partnership with InComm Payments.

Each of these projects required detailed planning and execution, and now the focus is very much shifting from the rollout to the actions required to accelerate consumer adoption. Turning now to our summary of the financial performance of the business. Overall, as I said already, a resilient performance across the key financial metrics. And by division, net growth in each business with the exception of Love2shop, where the impact of the anticipated changes we've made to our accounting treatment have resulted in some changes to the timing of revenue recognition on the expiry of cards which has resulted in a greater weighting to profit recognition in the second half.

In terms of our growth plans, we should not let the specific challenges we've experienced in the first half deflect the business from the long-term growth plans we announced earlier this year. Delivering GBP 100 million underlying EBITDA remains a key financial milestone for the business. And while we're making meaningful progress towards this target in the current year, it is going to take a little longer to achieve. It was always an ambitious target to be delivering it in this financial year but it remains a key milestone for the business.

We still believe a combination of our business mix today and the delivery of our key growth projects will deliver consistent net revenue growth in the range of 5% to 8%. And in the meantime, we're developing an organizational structure for the long term to support this accelerated growth. And maximizing returns to shareholders through strong and consistent earnings and cash generation. For the current year, we're on track to deliver more than GBP 90 million to shareholders through a combination of ordinary and special dividends and share buybacks.

I'll now hand over to Rob, who will take you through the numbers.

Thank you, Nick, and good morning, everyone. I'll start with the key financial highlights. Net revenue of GBP 84.7 million is marginally up versus the prior half 1. There's a revenue breakdown on the following slide, which shows PayPoint segment revenues are up 2.9% but this is dampened by Love2shop revenues down 9.6%. As Nick said, this is timing in nature, and we fully expect this position to unwind in the second half to give year-on-year growth for the Love2shop segment.

Underlying profit before tax of GBP 25.7 million is down 4.5% that being a combination of flat revenue plus a 2.3% increase in overall costs. And I'll cover the cost deltas in a few slides. Reported profit before tax of GBP 19.9 million is after GBP 5.8 million of deductions to underlying numbers, including GBP 2.6 million of amortization of acquired intangibles and GBP 3.2 million of exceptional items, of which GBP 2.6 million relates to legal costs in respect of claims against PayPoint and the remainder is reorganizational costs.

Underlying EBITDA of GBP 37.3 million is broadly flat versus the prior half with GBP 1.2 million of lower profits being partly dampened by higher depreciation and amortization. On earnings per share, diluted underlying EPS of 26.7p is 2.6% down versus the prior half. And finally, on this slide, net debt is down 3.2% to GBP 84 million for the first half. And again, I'll cover this in more detail shortly.

This slide breaks down the net revenue into a little bit more detail. As I mentioned previously, PayPoint segment revenue is up 2.9%, with e-commerce revenues of GBP 8.6 million, providing growth of 7.5%, and that's driven by transactional volumes increasing 20% to GBP 74.3 million. Payments and banking revenue grew 4.4%, and that's driven by the inclusion of GBP 1.9 million of revenue from OBConnect. And in shopping, growth in service fees of 8.4% to GBP 11.6 million was largely dampened by cards, which is a combination of both lower process volume and sites impacting revenue and ATMs revenue down, reflecting a reduced demand for cash across the economy.

For Love2shop, 12 months ago, I explained the half 1 numbers included revenue brought forward from half 2 into half 1, and this was following changes to expiry dates on some of our products. For this year, we've made further changes to the expiry date of some of our products but these changes will benefit the second half year. And therefore, this revenue drop is all timing in nature. Overall, with billings growth of 4.6%, up versus the prior half 1, we expect year-on-year revenue growth for the full year.

This slide is really a graphical view of the revenue growth I highlighted on the previous slide and how this revenue growth contributes to underlying profit. So from left to right on this chart, shopping revenue is up GBP 200,000, e-commerce revenues up GBP 600,000, payments and banking GBP 1.1 million and Love2shop revenues down GBP 1.8 million, which I've said is timing in nature. I'll cover costs on the following slide but these have increased GBP 1.3 million half-on-half. And therefore, on the right-hand side of this slide, these movements result in an overall profit of GBP 25.7 million.

On costs, this slide breaks down the GBP 1.3 million increase that I mentioned, most notably is the inclusion of OBConnect costs of GBP 1.8 million following the majority stake we took in this business in the second half of last year. We've also seen additional depreciation and amortization of GBP 500,000 and GBP 500,000 in respect of financing costs. Offsetting these costs is a GBP 1.5 million reduction in people and overheads, which is the continuation of strong cost control discipline across the group. So these factors result in a GBP 1.3 million increase in costs of GBP 59 million.

Next on cash generation. We had a GBP 24.2 million of cash generation from operating activities in the half which is down GBP 4.3 million versus the prior half of GBP 30.7 million, and that delta is primarily working capital in nature. Further down the cash flow statement, we have tax of GBP 4.6 million, CapEx of GBP 10.9 million, which has increased by GBP 1.5 million half-on-half as we continue to invest in systems' modernization, a GBP 10.4 million payment in respect of the legal settlement, a one-off payment to the pension scheme of GBP 1.5 million.

And then we have the GBP 43.5 million cash in from the part disposal of Collect+, along with a GBP 13 million outflow for shares bought back in half 1 and GBP 13.9 million in respect of dividends. This gave an overall reduction to net debt of GBP 13.4 million for the period to GBP 84 million.

Very briefly on balance sheet. Net assets for the group of GBP 102 million are GBP 4.7 million higher than the March year-end position. And the key drivers of the swings are obviously half 1 earnings of GBP 14.9 million, the proceeds of GBP 34.1 million net following the ID investment in Collect+. And we've actually used these proceeds to subsequently distribute a special dividend of 50p per share, and that resulted in GBP 34.5 million going out in the second half of this year.

Alongside that, the 12 for 13 share consolidation reduced our share capital by circa 5.3 million shares. Other key balance sheet movements are the dividends paid of GBP 13.9 million and the share buyback of GBP 30 million. And similar to the prior half on the share buyback for accounting purposes, we've provided for the full GBP 30 million commitment in these balance sheet numbers.

Lastly, before I pass back to Nick, on the left-hand side of this slide, we continue to invest in the business to drive future revenue streams and improve operational resilience and efficiency. We've increased the interim dividend by 2.1% to 19.8p, while targeting a cover of over 2x and along with the buyback targeting leverage ratio of 1.2 to 1.5x. For this financial year, the business is on course to generate over GBP 90 million of shareholder returns through a combination of the ordinary dividend, the special dividend and the GBP 30 million share buyback.

On the right of this slide, we expect net debt to increase in the second half, driven by those ordinary and special dividends and the share buyback, plus up to GBP 25 million in respect of CapEx for the full year. And with the second half spend, we fully expect to stay within the target leverage ratio of 1.2 to 1.5x. I'll now pass you back to Nick.

Rob, thank you. And now really turning to the progress in the delivery of our key growth projects in the first half. I think as a business, the standout achievement of the first half has been the launch of multiple projects, both enhance our consumer proposition and establish important partnerships that strengthen the long-term prospects for the business.

Firstly, as I said, we've launched PayPoint BankLocal into our retailer network, enabling cash deposit or withdrawal with Lloyds Banking Group, the first of our high street banking partners. Secondly, we've launched Royal Mail Shops and a strategic investment into Collect+. And finally, we've taken further steps to accelerate our partnership between Love2shop and InComm Payments for the merchandising of the Love2shop gift card across multiple retail channels.

Turning now in a bit more detail to each of these. On successful launch of BankLocal service in August, I think, was a major achievement for the business, involving a group-wide collaboration. Lloyds Banking Group are the first high street bank to use this service, enabling their customers through our network to deposit cash via both app and card. In terms of success to date, we've seen a rapid adoption of this service from Lloyds Banking customers with the strength of our network delivering genuine convenience for cash banking services. Consumer and press feedback has been positive. And as we've seen with other of our services, as the pattern of transactions becomes established, we see strong demand for the service outside traditional opening hours and a weekend.

And in terms of what next, I think following the strong start and early adoption, our focus is now very much on further developing our cash banking services in the second half with the next phase of work focused on driving consumer awareness through a variety of channels, accelerating our SME banking solution and those plans [ succeedly ] can launch in Q2 of next year and engage further with other high street banks for our range of cash deposit solutions.

Overall, we expect to make significant progress in the rollout of our cash banking services over the next 12 months. Turning now to Collect+. The investment by Royal Mail into Collect+ announced at the end of September was a really important strategic step in our partnership with Royal Mail. The partnership strengthens the positioning of Collect+ as the leading out-of-home network and will enable the future expansion of further Royal Mail services into the network. It will enable further investment in both our consumer service proposition and our retailer network support as the partnership adds to our existing carrier relationships as part of a carrier-agnostic network.

The launch of Royal Mail Shop in the Collect+ network reflects our confidence in the strength of the Royal Mail brand and the opportunity to enable for consumers a broader Royal Mail services, including postage as well as collect, send and return parcels throughout a growing portion of the Collect+ network. The rollout of Royal Mail Shops is now really gathering pace with 3,000 stores already branded Royal Mail Shop, which, as I said already, enables a wider range of over-the-counter postal services, including stamps. And by the end of our financial year, this number would have increased to at least 8,000 sites.

To support this, there is an extensive consumer marketing campaign already underway with more planned over peak and into 2026 as we increase consumer awareness, drive more footfall and volume into the network. And as we look into the second half, as I said already, it's important to ensure that we have at least 8,000 sites branded and live for the full Royal Mail over-the-counter service by our year-end. We need to be taking the necessary steps, again, as I said already, to increase consumer awareness and uptake of these services. and we do launch our self-service kiosk in the first quarter of next year. And I think this is a really important time to accelerate the pace of our partnership with Royal Mail and to accelerate the consumer adoption of these services through the Collect+/Royal Mail Shop network.

And now turning to our continued progress with InComm. Our partnership with InComm established just over a year ago, has been a really important step in us delivering a strong new sales channel, enabling the sale of Love2shop physical gift cards through the major high street retailers. Sales through this channel have continued to grow strongly ahead of the peak sales period in the run-up to Christmas, and we benefited from a combination of growing consumer recognition of the brand and increasing availability of our cards through these additional high street retailers.

We've also seen the benefit of further rolling out the Love2shop card into our PayPoint retailer network with growth through this channel from our refreshed merchandising now up by more than 50% during the course of this year. I think with the next stage of this multichannel approach being the launch of the Love2shop Digital Mastercard in the early part of next year, enabling spend via digital wallet in-store and online, the further expansion into more high street retailer gift card malls in 2026 and more gift pegs in each of these malls and also the launch of MBL brands such as Greggs into the InComm Payment mall itself.

I think we can really see this partnership is now building strong momentum which is combining the merchandising expertise and distribution channels and the reach of InComm with an outstanding multi-redemption gift card product and product innovation from Love2shop.

Now turning to our business review. And firstly, in shopping, we've seen continued growth in the first half in each of our product estates with the exception of the Handepay card estate and have shown growth and some solid financial performances from the underlying business areas. We've seen continued service fee growth. And while card merchanting net revenue and process value are marginally down, I don't think this fairly reflects the continued work to strengthen the operational foundation of this business.

The improvements to the quality of our card proposition and the increased focus on profitability per merchant. We also saw another strong performance from our partnership with YouLend with funding advances up by over 50% in the period. In our FMCG activities, we continue to work with a growing number of consumer brands with 16 campaigns delivered in the first half, a strong pipeline of opportunities for the remainder of this year.

And in our ATM business, after a challenging period, we're seeing early signs of our recovery plan delivering results as we better manage the ATM estate and use our data to optimize individual site performance.

In e-commerce, overall, a positive half for Collect+ with both net revenue and parcel transactions showing growth in terms of really all the key call-outs. As I described earlier, we launched the first phase of Royal Mail Shop, branding into the network and enabled over-the-counter Royal Mail services in over 2,000 locations. And as I described earlier, we have encountered some operational challenges from the internal harmonization of InPost and Yodel which in the period has impacted both volumes and service in the second quarter. We think the action we've taken in partnership with InPost has now stabilized this and we expect volumes to recover during the key peak period.

More broadly, we continue to work hard across the wider carrier portfolio to maximize volume and performance with each carrier and support consumer adoption of out-of-home as we continue to grow the Collect+ estate. In Payments and banking, the key theme in this business has been the continued growth in our digital and open banking activities. And with the growth we are now seeing, we expect to arrive at a point soon whereby digital revenue will exceed revenues from our cash payment channels. Specific highlights from the first half have been several important new business wins, particularly in housing from a strong and well-balanced overall new business pipeline, good work to strengthen further our relationships with our existing clients with a number of upselling initiatives and several important client wins for our open banking activities.

Our first half digital revenue does include a latent contribution from our majority-owned OBConnect platform. And finally, in Love2shop, as Robert said already, the adoption of a more prudent accounting treatment in terms of the timing of revenue recognition from the expiry of cards which we announced, I think, at the time of the acquisition, has resulted in a timing impact to the headline performance of the business which will be unwound in the second half of the year.

Operationally, the business continues to perform well. I've already described the progress in our partnership with InComm

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position for our peak trading period.

In Park Christmas Savings, we expect to deliver a flat performance for the year after some good work through the year to support our agents and strengthen the saver proposition as we already turn our focus to the 2026 savings campaign. And in MBL, we've had an outstanding first half with a doubling of process value, which reflects the growing reach of this business and its brand partners. And with this, I'll now hand over to Rob to give you an update on our organizational framework project.

Thanks, Nick. In our FY '25 results, we announced a key target was establishing a framework to deliver greater automation and agility. We've now recently completed Phase 2 of this project, supported by now an independent consultant to identify how we can drive this automation agility across 3 key processes: onboarding, customer support, and billings & settlement.

The outcomes from this phase are a clear articulation of the target future state for each of these 3 processes, including key outcomes for each, which you can see from this slide. For example, for customer support, we're driving customer self-service capability in response to high-volume, low-value calls. Additionally, for each process, we've set out the benefits from moving to the target future state with financial benefits such as an additional revenue or lower costs and other benefits, for example, improved customer service levels or satisfaction levels.

Preliminary estimates have identified at least GBP 2 million of operational profit upside from moving to the desired future state with a potential to grow this figure further through the next phase of work. And this includes identifying technical solutions and external providers to support the shift to the target state, along with the costs associated with this transition. We expect this next phase of work to be completed in advance of our full year results announcing June '26, followed by implementation commencing early in FY '27. I'll now pass you back over to Nick to cover our outlook.

Thanks, Rob. So turning to our outlook for the year. After a resilient first half performance and despite the impact of the 2 specific challenges that I've already described, the Board remains confident in both delivering further progress in the current year and achieving our medium-term financial goals. We're executing our key projects well, and we do expect these to have a meaningful impact on our long-term performance. In a number of areas, our focus has already shifted to coordinating plans to support the accelerated consumer adoption of these projects, and there's more to come in this area.

Look, the current trading environment is not an easy one. Consumer confidence is weak and household budgets remain tight. However, as we enter our most important seasonal trading period for a number of our businesses, we are confident in the plans we've made to execute well and our early signs continue to be encouraging. We remain confident in the growth opportunities we have as a business and that we have a strong platform from which to deliver continued strong returns for shareholders.

As we said already in the current year, we're on course to generate returns to shareholders of over GBP 90 million. through a combination of our ordinary dividend, special dividend and share buyback program. And today, we've announced -- declared an interim dividend of 19.8p, which is an increase of 2.1%, and which is consistent with our dividend policy. And with that, we're very happy to answer questions.

[Operator Instructions] The first question comes from Michael Donnelly from Investec.

Can you hear me okay?

Yes.

A couple for me, please. First of all, can you tell us a little bit more about what Nile are likely to be doing in the next phase. So that's what the expected costs. You've disclosed the costs in the first half, which is really useful. But the cost of benefits and the cost savings that are likely to come through from their work in '27, '28?

And then secondly, thanks for the update on RM and IDS. Is it possible to talk a bit more granularly about the trajectory of RM volumes since the IDS investment? Or should we be modeling -- maybe forget second half this year and model a ramp-up more into '26 rather than seeing the benefits -- the volume benefits of the investment come through in the second half?

Yes. Thanks, Michael. Rob, why don't you tackle Nile first, that would be helpful.

Yes. No, as I said, where we are today for each of those 3 key processes that I mentioned on the call, we've got a clear view of what the desired end state looks like and the benefits, and we've talked about 2 million plus worth of opportunities in terms of upside there. The next phase is really about going through the kind of selection process, external suppliers, vendors, et cetera, that will support that shift to that desired future state and the costs associated with that transition.

And as a part of that, obviously, we'll be making sure that the business case stacks up, so we make sure that the size of the prize is obviously exceeding the investment required. So really, Michael, the next phase of this is all about identifying external providers technology to help us to move that desired future state and making sure the business case stacks up. And that will take us probably to the end of this financial year, and therefore, we should be getting ready to execute and implement in early of next year. But we're still going through that kind of selection of suppliers and business case development at this stage.

And then just on the second of your questions, Mike. I mean I think the starting point for the Royal Mail investment, which I think we were clear about when we made the announcement on the 30th of September was that a combination of the special dividend, share consolidation and the ramp-up of volume would result actually in the transaction as a whole being earnings enhancing.

But I think specific to your point around the ramp-up of volume, I think as we said already, we're growing the network and the rebranding of the network as quickly as we can. We're working really hard with Royal Mail to move as much volume into the network as quickly as possible. We're seeing that ramp-up take shape, particularly since the autumn. And I think the peak period is an important time to see that move further. But these things do take time. And I think we'll see a much more meaningful contribution from the Royal Mail volume when we get into the next financial year. So I think your core sort of premise that we will see a more meaningful impact from Royal Mail volume in the Collect+/Royal Mail Shop network next year. But I mean, the ramp-up is clearly meaningful, not least given the size of Royal Mail in terms of a carrier in the U.K. parcels market.

The next question comes from Joe Brent from Panmure Liberum.

Three questions, if I may. Firstly, there's obviously lots to talk about, but I don't think you mentioned Lloyds Cardnet. Could you give us an update there? Secondly, in e-commerce, could you remind us where we are with the Chinese e-tailers? And thirdly, just following up on Michael's point on automation. It feels like the GBP 2 million will start to impact in FY '27, is that right? And could you maybe give us some indication of the scale of future savings there?

Rob, do you want to start with the automation point, that would be great.

Yes. I think we said that we've got line of sight to at least GBP 2 million here. And I think the question becomes how quickly can we execute and what's the cost to execute. And I think really looking at the full year to give that clear view, I mean, I am hoping to accelerate as much of that benefit as possible in FY '27, [indiscernible] et cetera, we can't pinpoint with accuracy. So I think probably give us until the full year results to get real clarity in terms of if we're going to drop some benefits in, let's be really clear once we've gone through that selection process with external providers, the vendor solutions and gone through that business case development. But I say I'm anxious to accelerate, get any quick wins as possible into FY '27 and drive costs down.

Would the cost of that be treated as non-underlying or be taken above the line?

Yes. We've taken those to exceptionals. So within the kind of restructuring that I mentioned in the exceptionals for the first half, we had about GBP 500,000, GBP 600,000. So that's where we'll be treating the costs going forward.

Cards business, I think, look, we've seen a small fall in the total size of the estate. And I don't think there's a particular reason for that. I think, look, it remains a competitive market. I think our card proposition, and I include Lloyd's Cardnet alongside the EVO proposition as part of that, I think it's stronger than it's ever been. And I think it's really competitive now in the marketplace. I think that our emphasis is increasingly switching from the number of retailers and the number of underlying merchants that we have to actually the quality of that business and importantly actually sort of the revenue that it generates.

The acquiring business in the first half was down year-on-year by about 8% in terms of processed volume. And I think that reflects a combination of things, including, I think, a tough retail environment, particularly for our convenience sector. And I think that's probably been our weakest sector actually across our card book, and that's probably where it's been most competitive. I think as we look into the second half, I think we're expecting certainly our sales performance in the second half to improve.

I think we've got a really strong proposition, as I said on the street. Our telesales team are performing very well. Our field team are certainly performing well. And I think we've had a number of new additions, new processes there, which I think will really deliver in the second half. So I feel quietly confident that we will continue to make progress in what clearly as we know very well, is a very competitive market. But ultimately, we need higher levels of consumer spend, and we haven't seen that in our estate in the first half.

On the Chinese, look, it's a great question. And I think that the Chinese have been relatively slow to create out-of-home choice at the customer checkout for customers using the Chinese marketplaces. They have adopted the out-of-home for returns but we haven't seen them sort of adopt out-of-home at the pace that, for example, we've seen Vinted adopt out-of-home for their principal fulfillment for their own marketplace.

We continue to work with the Chinese. And by that, I mean, sort of Shein, TikTok, Temu and ultimately, it's all down to price. And their conversations we're having directly with our carrier partners because we all want to work to move volume from to-door into the out-of-home network channels, whether that's working with InPost to get the choice of locker and PUDO or that's working with Royal Mail to offer the choice of actually the Royal Mail Shops. So I think there's more work to do there. There's clearly a major opportunity because cross-border volume is going to be increasingly important to us, but we haven't yet seen that adoption in the consumer checkout in the way that we need. And that's going to be an opportunity for us into the next year.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Nick Wiles for any closing remarks.

Look, thank you. Thank you very much, everybody, for joining us this morning. As I say, it's been a robust performance in the first half, some major opportunities to unfold during the second half, and we look forward to updating you later in the year. So thank you. Have a good day.