PayPoint plc (PAY) Earnings Call Transcript

Welcome, everyone, to our annual results presentation for the year ended March 2023, and also [ summarily ], the release of our Q1 update. And really, firstly, my apologies for the delay in our reporting this year. I think really, the impact of closing the Appreciate transaction in the last month of our financial year and the knock-on effect this has had, really in terms of coordinating a number of accounting firms to conclude our audit, I think, has been really quite considerable. The good news, that this is done and we're with you today to take you through what we believe are a really excellent set of results. We've laid out on this first slide our proposed agenda for today's presentation. The plan is very much I'll take you through the overview to our results at a more in-depth review of our strategy. Al's going to review the numbers, followed by a very brief review of the business by division, a summary of our outlook and then time for Q&A. We're really pleased to be reporting a further year of strong financial performance, where we've made progress in our strategy and in the transformation of our business. Our key headline numbers for the business as a whole, including a 1-month contribution from the former Appreciate businesses are very much at the top end of market expectations and show a year-on-year net revenue growth of over 11%, underlying EBITDA up over 5%, underlying PBT up over 5% and cash generation up over 15% to GBP 62.3 million. And we've increased our dividend, final dividend by 3.3% to 18.6p per share. Within these numbers, there are some accounting policy changes which Alan is going to take you through properly and reconcile when we get to the financial section of the presentation. The great news is we've delivered net revenue growth, I think, probably for the first time at each of our 3 businesses. Shopping net revenue grew by 5.6%, reflecting a growth in the PayPoint One retailer estate, a growth in service fee income and card processing net revenue, a growing number of successful FMCG brand campaigns, and I think really further progress on our overall retail partner for engagement. In E-commerce, we had a really outstanding year, with net revenue growth by over 46.3% in terms of parcel transaction volumes, which went through the Collect+ network, and a total of 56.4 million transactions overall. I think we've been fortunate in being exposed to the right parcel categories, though I think we've worked hard in partnership with our key carrier partners and started to really reap the benefits of our investment in in-store print technology, as this has become increasingly important to the parcel consumer who use our network. In Payments & Banking, net revenue grew by 9.1% as we made significant progress in the delivery and adoption of our digital payments proposition. We delivered a resilient performance in our legacy cash payments business, a stable -- a stabilizing performance in the second half in our cash through division activities, which include gaming, gifting and neobanking, and we've secured a number of really important new business wins in our newer capabilities in direct debit and open banking. And for completeness, as I've said already, we've included a 1-month contribution from the former Appreciate businesses in these headline numbers. So overall, a really pleasing performance from the business and the first time we've ever delivered net revenue growth in each of the former 3 divisions. Turning now to an update on strategy, and taking stock as to what we as a business and the management team are focused on as we continue to drive the business forward from here. As I said, as a management team, we've been taking stock, both of our progress in the transformation of our business over the past 3 years and really challenging ourselves as to the key focus areas we have for the business as we look forward to the next stage in our growth. In our view, key building blocks are now largely in place, but our focus today on 4 key areas: firstly, the value creation of future opportunity from the M&A we've executed over the past 3 years; where we are in terms of our progress in accelerating the shift from our legacy [ cash flow ] payments business to the digital multichannel multi-sector payments platform; and where we should invest internally our investment over the next 3 years to support our key areas of growth to maximize returns; and then finally, to ensure our strong cash flow is allocated in a way that optimizes shareholder rewards and supports the future performance of the business. I think the other key challenge we face is in communicating a clear and simple investment case to our investors which brings to life the value we're building from the business, and the business we have today focuses attention on the right financial metrics and how we execute on well-defined opportunities for accelerating our growth in the shareholder returns that flow from this. To this end, we have introduced EBITDA as an additional financial KPI, more of which later in the presentation. Looking firstly at our M&A over the past 3 years, and the acquisitions we've made over the past 3 years have been essential steps in transitioning our business to a high-growth multichannel platform and growing a collection of customer service propositions, all of which add to value to our SME and our retailer network. I think firstly, taking full ownership of Collect+ has allowed us to accelerate our investment plans in this business, open up the network to all major carriers, I think moved the performance of the business to a different level and established Collect+ as the #1 out-of-home network. As you can see, growth continues to accelerate in this business as the network becomes more attractive to both carriers and their customers, and while it's important that we also drive permission and footfall into the retailer network. i-movo has proved to be an outstanding acquisition and a really critical technology in the delivery of our DWP payment exception service, cash-out capabilities and our growing voucher and FMCG brand partnerships and campaigns. The acquisition of RSM has been key to establishing our direct debit platform and our early charities proposition, while the investments in Optus Homes and OBConnect have respectively strengthened our housing association proposition, provided us with a great open banking capability, which has really put us at the front of this emerging opportunity as we win a number of new clients and begin to drive a strong revenue stream from these early activities. The acquisition of Handepay/Merchant Rentals has created the opportunity for us to bring scale to our card processing and terminal leasing business, expand our SME network beyond traditional retail convenience, and bring a level of sector mortgage and expertise into the business. This is absolutely fundamental to growing and succeeding in this market. Cards as a payment channel is also key, delivering on our multichannel payment platform and success in our client business. Having acquired this business, we've described a number of times before the importance of what we do next in terms of investing in this platform and our card capabilities so that we can generate growth and a market-leading presence in cards. In particular, our plan is to become a PayFac strength in our product development plans that underpin our sales rates and the reduction of churn in addition to expanding our sales capabilities as we open up new sectors. This acquisition is still very much a work in progress as we deliver the opportunity we see in cards. But I think it's clear our progress on this journey is encouraging and we still see significant opportunity to create value from this acquisition. And finally, the recently closed acquisition of Appreciate, which has brought into the business 2 key activities: firstly, a structured savings platform product in Park Christmas Savings; and secondly, the Love2shop digital platform for employee and consumer rewards and a prepaid post-loop channel. I hope what's clear is the common themes running through these acquisitions is the enhancement of our payment capabilities to provide a joined up multichannel payment platform and the strengthening of our services proposition available through our SME and our retailer network. We now believe we have the capability in place, and with continued internal investments and good execution, we now have a really great business from which to generate significant returns for our shareholders as we look forward. Turning to the Appreciate acquisition in a bit more detail. Firstly, and I think probably most importantly, the integration of the business is going well, with great cooperation between the 2 teams really across all the functions, and in particular in the engine room of HR, IT development and systems, client management and new business sales. So overall, it feels like there's a really good cultural fit between the 2 businesses, and we've moved quickly such that we're ensuring there is minimum disruption to our laser-like focus on both businesses on delivery and plan and the pursuit of new business opportunities where we can see them. For us, it's immediately clear. There are considerable additional opportunities from both Love2shop and Park Christmas Savings being part of the wider PayPoint business. We are already accelerating the development road map to invest and unlock and strengthen the Love2shop proposition. The new business teams from both are already working together to join opportunities in both central and local government. And with our expanded corporate clients, we're adding to the new business initiatives already underway in Love2shop. And I think this will certainly see a growth in billings, both in the current year and in the years ahead. The Park Christmas Savings business is a great addition to our consumer proposition, targeting a demographic which is consistent with many of the consumers who already use our services through our retailer partner network. In addition to the current Park Christmas Savings direct debit and agent customer recruitment channels, we have now launched an additional channel in partnership with the NFRN to create a network of PayPoint retailer super agents to recruit and support Park Christmas Savers, starting with the soon-to-be launched Christmas 2024 campaign. This launch is already off to a strong start, with retailers sign-ups strong, and I think sort of hot off the press, I think we're now looking at an additional 125 new to pay point retailers who actually have adopted the Park Christmas Savings opportunity. We believe this will add meaningfully an incremental growth to the GBP 161 million of billings achieved by Park Christmas Savings in the last financial year and the current 350,000 founders already saving with us. In addition, we're already looking at the opportunity for additional prepaid savings solution partners and also for other areas where we can support milestone events such as weddings to add further to the growth prospects of this business. Beyond BAU for this business, we're already seeing the prospect of a number of new opportunities and partnerships from the acquisition, where the ability to bring together closed loop payments, vouchering, rewards, brand campaigns and redemption in addition to broader payments is creating the opportunity to unlock new markets and revenue, more of which we'll report at our interims in November. So overall, I don't think we could be more pleased with the early progress we're making, both in Love2shop and Park Christmas Savings. We're clear that they are really great businesses which we believe will add considerable value to the enlarged group. This next slide sets out what we think is a very straightforward way to our response to really the key question we've been asked a number of times, which is how do we make money for the Love2shop business? Firstly, as I've already described, the Appreciate acquisition brought 2 revenue streams, Park Christmas Savings and Love2shop. In terms of how we manage both, our starting point for measuring progress and performance is billings, i.e., transaction volume, in much the same way as we view any other transaction-based businesses across the group such as payment transactions, parcels, and card processing volumes. Then in terms of revenue streams in both businesses, there are 4: firstly, your retailer service and management fees; secondly, your card fee; thirdly, the nonredemption income at the end of the life of the card; and fourthly, interest earned on cash balances. Inevitably between the 2 businesses, there is a different weighting between these 4. Again, as a financial model, this is consistent with the way we recognize revenue streams elsewhere in the business and shopping, in e-commerce, in payments and banking. And to summarize what the business model actually looks like, as I said already, billings is the most immediate KPI. We measure it on a weekly basis in much the same way we measure other transactions across the business as a whole. These billings are quickly converted into cash. And as I said before, held in trust against the future spend and redemption of the cards that we've issued. Revenue is then recognized during the life and at the end of the life of the card in the 4 key areas I described, leading to a profit recognition and ultimately, PBT. In respect of profit recognition, this has been a key adjustment that we've made post acquisition and which Alan will talk about later in his section. As we've restated the recognition of nonredemption income such that we recognize this now, the expiry of the card rather than estimating or recognizing in the life of the card. As such, we're accounting for this in a more conservative and consistent way with the way that other leading peers do in the sector. Moving this accounting treatment has no impact on our cash flow simply the timing of recognition of profit on nonredemption income and how we show this in the P&L. Our second focus area is the acceleration in the shift from cash to digital payments. We have now built, through a combination of acquisition and internal investment, a differentiated platform that supports payments across cash, grown debits, cards, open banking and with a full range of support tools. I think this is really what is illustrated in the right-hand side of the chart. Digital net revenue growth year-on-year was over 100%, GBP 15.7 million. And this arose from a combination of delivering large central government support schemes such as the DWP payment exception service, winning new business in nonenergy sectors such as local authorities and housing. For us, our long-term success in accelerating the shift to digital payments is now dependent on winning and integrating new business across a number of key sectors such as local and central government, further progress with the housing associations, more wins at charities, along with a continued strong presence and doing more for our clients in energy and other utilities. We see the early signs of success, and we're building on the success as we execute on a growing new business pipeline in each of these sectors. And you'll see more of this as we develop through the year with obviously the next update in November. This next slide sets out again in what we think is a simple way of the structure of our business today, the capabilities we have in our payments platform and in our retailer network services proposition, and importantly, through the color coding, prospects for growth over the next 3 years. On the left-hand side, we've set out our payment platform in terms of our capabilities and the key sector verticals we're working with today, we're targeting in the future. Our strategy over the past 3 years has been to establish this comprehensive payment capability that you see today. Subsequently, we have what we need to win business and have a multi leading presence in each of these key sector verticals. In our view, with the exception of cash, each of these payment channels represent growth opportunities for us, and we believe we are uniquely placed to deliver this full range of integrated payment channels on a single platform. And while cash is highlighted here in red, it does remain a critical payment channel for many of our products in both existing and in target sectors. On the right-hand side, we set up the service proposition today, which we have available through our retailer and our SME network. At a headline level, we have over 62,000 total locations. And within this, we have over 28,000 retailer locations and over 18,400 PayPoint One locations. However, the real key for us over the past 3 years is within this significant overarching network is to size individual product proposition networks, very specifically to the opportunity and coverage needs for each. Great example of this is probably parcels, where our overall Collect+ network is over 10,000 stores. But even within this, each carrier has a coverage that works best for them. In the network we have today, we want our retailers to offer multiple PayPoint products rather than simply bill pay. And as a result, almost 50% of our PayPoint retailers now offer at least 3 PayPoint One services. As we go forward, we want this number to grow further. As I've highlighted here in green, the majority of these service propositions are in growth mode, and this strategy, we believe, creates greater commission opportunities for our retailers, drives footfall and will deliver a better overall customer experience and service. At a high level, on this next slide, we believe unlocking new clients and markets and driving more customer adoption through our retailer network will deliver a meaningful uplift in our financial performance. And we set ourselves the clear financial objective of delivering in excess of GBP 100 million in EBITDA over the next year period from this plan. We believe we have the opportunity to leverage our materially enhanced platform in the way I've described this morning, which emphasizes growth in the key areas of integrated payments, cards, retail proposition, parcels and rewards. We'll be able to deliver further payment transaction growth from the integrated platform that we've created, and as I've described already, the significant momentum we have in open banking and our successes in energy, borrowing success in housing, operate success in local and central government. As you see this morning, we're enhancing our retailer proposition, we're driving forward the next generation of technology with integrated EPOS solutions for a number of key partners, and we're driving further multiple services into our retailer partners. We have clear acceleration plans for cards. We're launching our mid-market card proposition. We're moving to a single acquirer, beginning that journey to becoming a PayFac. We have great momentum in parcels with plans to deliver additional volume as we bring on even further carriers and work closer to the ones that we're working with today. We've only just started to identify and see the incremental opportunity in Love2shop in terms of employee and customer rewards as we unlock revenue opportunities and grow further, both Love2shop and Park Christmas Savings. We see the opportunity to unlock new markets, and with it the revenue from enterprise level solutions as we bring together all the capabilities we have across the business in one tailored proposition as we target new sectors. When it comes to cost, clearly, we have intensity and focus in that execution. We have a great control of both cost and a real tight management culture. These ingredients, we believe, are key in terms of the building blocks that we have in place today to deliver that GBP 100 million plus EBITDA in under 3 years. And finally, what does this mean in terms of delivering enhanced shareholder returns? We believe our starting point is a strong one as we already highlight a very strong cash profit-generating business, the current year generating over GBP 62 million of gross cash flow. Even with the healthy internal investment needed to support our growth, including IT development, this growing cash flow profile allows us to reduce our current debt quickly and support our current progressive dividend policy. As Alan will describe in a moment, we believe we're in a great position in which earnings and cash flow are growing. We expect our EV/EBITDA ratio to be below 1x during the next financial year. Our target earnings cover range of 1.5 to 2x, we expect to deliver, progressive dividend policy, all of which we believe will create credible choices for the business in terms of allocating surplus capital as we look forward. To this end, you'll see we've highlighted our proposed renewal of our buyback authority for any future buyback program. And I think against this background, I will now hand over to Alan, who will take you through the financials.

Yes. Thanks, Nick, and good morning, everyone. As you've just heard from Nick, the group has had a strong year as it continued its transformation and finished it with the acquisition of Appreciate Group. Appreciate Group is now referred to as Love2shop and we show it as a new division in analysis as well as report it as a separate segment. Given Love2shop only contributed 1 month to our results, in the following pages, I will mainly talk to the positive performance of the historic PayPoint segment, separating out the impact of the exceptional items and amortization of intangible assets arising on acquisition to get to our underlying results. With the highlight slide, the key starting point is our net revenue growth of 11.9% to GBP 128.9 million, which I will cover in more detail later. This has led to an underlying profit before tax on our new reporting basis of GBP 50.8 million, a 5.8% increase compared to the represented prior year of GBP 48 million. On the next slide, I will walk through how we represented our results after considering the impact arising from changing the historic accounting policy for Love2shop. The underlying result is after adjusting for exceptional items, and as I just said, is now also for the amortization of the intangible assets arising by acquisition, which have greatly increased, I'd say, with the Appreciate Group. In the year, we had GBP 5.6 million of exceptional items. In the first half, we previously announced a GBP 1.3 million loss from our disposal of our investment in Snappy Shopper. And then we have had GBP 4.3 million of acquisition costs for the Appreciate transaction. We are now focusing on underlying EBITDA as a KPI as it reflects a better view of operational performance and showed a good 5.2% growth. This key slide explains the changes in all our PBT measures. So let me walk you through from left to right. The starting point for orientation is last year's profit before tax, excluding exceptional items of GBP 45.6 million. Our approach now is to focus on the operational performance, and so we exclude amortization of intangible assets surviving the acquisition, which then gets us to the key represented underlying profit comparative of GBP 48 million for financial year '22. The important area for our PayPoint segment is in the center, where we've analyzed a GBP 2.3 million or 4.8% increase in underlying profit, with all 3 divisions showing organic net revenue growth. Moving to the right of this year's GBP 50.3 million underlying profit. You can see the impact of the 1 month Love2shop GBP 0.5 million in underlying profit. We have previously announced this was expected to be a small loss as the business is seasonal, with profits generated mainly in Q3 of the financial year. However, as Nick has said, we have had to change the historic accounting policy for Love2shop in relation to its nonredemption income. This is now recognized only when a product expires and is more lumpy according to when batches of products expire. We benefited in March from a high number of expiries. The group underlying profit increased to GBP 50.8 million, by 5.8%. The GBP 2.6 million of amortization of intangible assets reflects the increase of 1 month amortization of those assets relating to Love2shop. For financial year '24, we anticipate the full-year equivalent to be a cost of GBP 8.1 million. Within this, due to the change in their historic accounting policy, we do have a GBP 7.5 million specific assets to amortize over 2 years, and the level of this will then decrease in financial year '26 by GBP 3.7 million per annum. We complete the journey to this year's GBP 42.6 million reported PBT with the GBP 5.6 million of exceptional items I've just discussed. As I've just highlighted, all 3 divisions saw an increase in net revenue. Our Shopping division increased 5.6% from GBP 58.7 million to GBP 62 million. Service fee net revenue increased by GBP 1.3 million or 8.3%, driven by an increase of 333 revenue-generating PayPoint One sites since this time last year. Card payments net revenue increased by GBP 1.4 million or 4.3%. The growth has come from our Handepay/Merchant Rentals business with PayPoint RSM flat. We have seen increased transactions but at a lower average transaction value. ATMs and Counter Cash net revenue decreased by GBP 0.4 million or 4.2%. The result is impacted by the reduced demand for cash, but the use of our new product, Counter Cash, continues to grow with increasing sites and almost GBP 43 million withdrawn in the year. The excellent 46.3% increase in net revenue in our E-commerce division is particularly pleasing. We've continued volumes of over 1 million transactions a week, benefiting from our investment in the in-store label printing. The Payments & Banking division saw increased net revenue of GBP 4.7 million or 9.1%, with a number of business lines moving in different directions. Cash bill payments decreased by just GBP 2.2 million or 6.3%. In the first half, we have seen energy consumers topping up more frequently and we've increased average transaction values. However, in the second half, the government's EBSS scheme impacted these transactions although benefited our digital transactions. Digital net revenue increased by GBP 7.9 million or 102.7%. We had a full year of the DWP payment exception service delivered by i-movo and strong growth in Cash Out in the second half driven by the EBSS scheme. Cash flow traditional net revenue decreased by GBP 1.3 million or 16.5%. And volumes have returned to pre-Covid levels, which we believe is the new baseline set for this category. As always, we have continued to work at keeping a tight control on costs in the year with all the inflationary pressures. The overall increase for PayPoint segment was GBP 8.1 million or 12.1%. One of our largest increases results from our investments in people, and in particular, our sales teams. Like most other businesses, we faced into wage inflation, but our overall net increases were limited to 4%. Whilst we had a number of vacancies in the first half, our sales teams were back up to strength and performing well at the end of the year. The increase in asset leasing costs reflects the change in accounting treatment for our Merchant Rental sourced card lease products. These are now operating leases, and so we have a [ depreciating ] asset expense rather than with the accounting for net investments in finance leases. A number of our products have related transaction processing costs. And with the increase in revenue, we can see additional costs coming through. The largest of these was in relation to the second half EBSS business, but there were further costs in relation to Cash Out and MultiPay businesses. There is then the GBP 0.7 million one-off impact from McColls provision announced in the first half. As explained at the end of last year, we again see lower depreciation due to the number of assets having reached their end of life in the prior year. Financing costs have increased due to our debt being at variable rates, but this was largely offset by the continued deleveraging. Finally, we have the 1-month Love2shop segment costs, which includes the allocation of finance costs relating to the acquisition. Overall, this is largely offset by the interest income within other revenue that Love2shop earned on funds waiting to be converted into cards and vouchers or paying for redemption with retailers. With our cash generation, the key point is excluding exceptional items, we have strong conversion of profit to cash. The group profit before all tax from continuing operations of GBP 42.6 million has been adjusted for exceptional items, depreciation, amortization and working capital to arrive a strong continuing operations cash generation of GBP 62.3 million. This is GBP 8.4 million better than last year, primarily due to working capital changes, including GBP 2.4 million relating to net investment and finance leases, and GBP 2.5 million in relation to acquisition expenses. Together, these funds were used to pay increased dividends of GBP 25.1 million, a GBP 3.3 million investment in our open banking partner, OBConnect, and GBP 4.7 million increased CapEx required for the changes in our card lease products. Previously, the purchase of card terminals went through the net investment in finance leases and was reflected in working capital changes. The cash element of acquiring Appreciate was GBP 61.9 million, with GBP 16.3 million cash acquired, giving a net impact of GBP 45.6 million. We sold our investment in Snappy Group for GBP 5.5 million. And other than these net investment cash flows, we have paid GBP 10.8 million of our existing amortizing loan. This next slide shows how our balance sheet has changed since prior year-end. All the main changes are as a result of buying Appreciate, as can be seen in the Love2shop segment balance sheet column. Love2shop only had a small amount of net assets, so most of the acquisition cost is allocated to the GBP 59.6 million of goodwill and GBP 40.2 million of amortizing intangible assets. Of the goodwill, some GBP 14 million arises from the Love2shop change in accounting policy where we have had to recognize GBP 18 million additional financing liability and GBP 4 million in deferred tax. These liabilities then keep getting replaced, and so a balance will stay in working capital. The acquisition was made for refinancing of GBP 61.9 million of debt and GBP 17.2 million of equity. The main other balances in Love2shop are the GBP 120 million cash held as client funds and monies held in trust, ready to pay for EBITDA future purchases of vouchers and cards or to settle to retailers for vouchers and cards issued but not yet redeemed, offset by equal amounts of payables. As part of the Appreciate acquisition, we issued GBP 3.6 million of shares, creating a merger reserve of GBP 17.3 million. The dividend and the financing slide covers a number of topics. We have set out in the table our new financing structure that we put in place before our offer to Appreciate Group. Material cash flows for the next year include dividends and CapEx where, based on current expectations, we'd expect to be spending a further GBP 18 million on terminals and systems. As we have seen, our business is very cash generative. Although nothing is guaranteed we would expect in normal circumstances for the combined business to return to a ratio of net debt to EBITDA below 1 by the end of financial year '24-'25. Turning to dividends. We have provided an update to our progressive capital allocation policy. Our dividend policy now targets a cover ratio of 1.5x to 2x earnings, earnings being from continued operations and excluding exceptional items. Consideration is given to future investments, whether acquisition opportunities such as Appreciate or OBConnect or CapEx to drive future revenue provide resilience and efficiency. Consistent with our progressive policy, we are declaring an increased final dividend of 18.6p, payable in 2 equal installments. This is an increase of 3.3% compared to last year's 18p final. This increased dividend reflects the confidence we have in the business for the future. I trust that was a helpful insight and will now pass back to Nick for a brief review by division.

Thanks, Alan. And now really sort of turning to each of the divisions, but very much in -- at a high level. Looking firstly at Shopping. As you can see, net revenue increased by 5.6% to GBP 62 million. That growth very much driven by the PayPoint One increasing the estate, our service fee, a strong card platform and merchant estate growth, and importantly, the enhancement of our retailer proposition and engagement across Counter Cash, business finance, MyStore+ and other elements of our proposition. Within the headline number, the retail services piece is up 6.7% and card processing up 4.6%. And within card processing, our card estate, at the EVO estate, which is our most active book, is growing strongly, Lloyds Cardnet is broadly flat, and as you know, the dormant Worldpay book continues to decline rather in line with our expectations. But I think an encouraging strong performance actually from our Shopping division. We highlight here very briefly our retail and SME proposition and progress in the year. We've talked already about the enhancement of our proposition across Handepay and the PayPoint Card Services business. We've had our strongest ever sales performance in the second half of the year, and that momentum in cards, in particular, has really continued into the first quarter. We've had a further expansion of our Counter Cash, which is now enabled at over 5,600 of our sites, and we've had a positive performance from business finance via the YouLend proposition, where we've lent near over GBP 12.5 million. Some really, really good FMCG campaigns building momentum. We've worked with a number of major brands, particularly in the second half. We've got a really strong pipeline, which has been playing out in the first quarter of this year with Coca-Cola, with Amazon, with AG Barr, JTI and other major brands, and I think there's some really encouraging opportunities as we look further into the year. And it's really pleasing that our retailer engagement has moved positive. Our Net Promoter Score for the year has now moved into positive territory, which is always a great sign that things we're doing are getting resonance and engagement with our retailer community. Turning to E-commerce. Continued terrific momentum. Net revenue up 46.3% and parcel transactions up 69.8% to 56.4 million parcel transactions. I've talked already about really the key drivers to that. The development of that e-commerce delivery platform is the continued investment in store, and it's the reshaping of our carrier relationships, expansion of our brand portfolio and the driving of a really great service proposition. We've shown here our growing number of partners, and I think this sort of roster speaks to itself, really. And I think we're now working with pretty well every major carrier here in the U.K. Looking forward, it's about how do we go from here? How do we continue to build this strong momentum? We're looking already at where we can build new partnerships, which we've either launched in the back end of last year or into the current year. The Yodel store-to-store parcels proposition is now really gathering pace. We're moving into lockers within post to support store-to-store parcels. We've launched a partnership with Wish.com and we are now rolling out at greater speed our Amazon returns proposition, which is now available in over 2,000 sites across the U.K. And we actually rapidly rolled out just over 1,450 Collect+ sites to support the Royal Mail and particularly its business customers. Turning to Payments & Banking, really the story here is focused on digital growth. Once the headline number showed net revenue growing by 9.1% to GBP 56.2 million, the real driver here has been actually the growth in our digital business, which is up over 100% with GBP 15.7 million of net revenue. As I said earlier, our cash through to digital business has now stabilized. In Europe, it was down 16.5% in terms of net revenue to GBP 6.9 million. And certainly, during the second half and into the first quarter of the current year, that year-on-year volume has now stabilized at around flat. And cash down 5.4% in terms of the payment channel but still contributing over GBP 33 million of net revenue. As we look to the drivers, there's some really important highlights to call out here. As I said, already really strong progress in digital transactions. Our payment exception service delivered for the Department of Work and Pensions showing net growth in euro over 179% to GBP 4.4 million. We dispersed over GBP 246 million worth of Energy Bill's support payment vouchers through our network. And as I said already, actually, we've seen some stable performance through cash through to digital with a growing number and importantly, a growing number of clients, including Netflix, Google Pay and amongst our neobanks, Monzo and JPMorgan Chase, and there are more of those to come in during the course of this year. And I think our priority to be going forward is the driving of our new business pipeline and importantly, the growing of our client network. In terms of Love2shop. I've talked a lot about this business already. I think it's fair to say that they had a strong operational year at both Park Christmas Savings and Love2shop. We've looked already about how we actually drive and support this business going forward, and particularly how we identify the real opportunities actually with the businesses coming together. I think our priority in the current year is very much about ensuring we have, a, a very good Christmas 2023 savings program with Park Christmas Savings, and importantly, actually, we set the platform for a really good campaign for Christmas savings into 2024. We're working hard to unlock further growth in the corporate business for Love2shop, leveraging the client base we have at PayPoint, and we're really accelerating our technology development such that we've got absolutely the best product in the market to support the sales capability we have across the 2 businesses. We're making really great progress in a key focus area, which is around building the culture, the inclusiveness of the organization. We've made good progress in our ESG program. We've delivered a comprehensive program of welcoming everybody activities, which builds our commitments to diversity to equity and to inclusion. We've been doing a number of major partnerships, including those with the Citizens Advice and Advice Scotland, very much around supporting cost of living, targeting customers with consumer campaigns, advice and technology support, and we continue in our program to improve the quality of our IT service through this transformation so we've got the right resilience to our service and IT capabilities. And that's very much the focus as we go into the current year. Before I turn to the outlook, I think it's just worth actually, firstly, reflecting on a great set of first quarter results, which were also announced this morning. And also in a year where there have been so many moving parts, just to summarize 2 or 3 key points, which are the real takeaways from the presentation this morning. Firstly, I hope it's clear we've announced a really strong set of results today which underline the progress that we're making in delivering transformation and accelerated profit performance in the business. That's come through, I hope, from the results and also from the Q1 announcement we also made this morning. The second point is that we are quickly integrating the appreciate acquisition into the wider business, and both Park Christmas Savings and Love2shop are delivering well to plan in the current year. and we're already seeing significant additional opportunities from the added capability that each brings to our enlarged business. And thirdly, I hope that our ambition and focus and belief in this business is really coming through today in terms of the significant growth opportunity we see over the next 3 years, and that's why we've announced a 3-year EBITDA target which is in excess of GBP 100 million, which we feel is a real measure of our ambition and the confidence we have in the plans that we described to you today. And then just sort of finally, just turning to the outlook. I think the outlook on our Q1 results announced this morning really make it clear. Firstly, as we've described this morning, the enhanced platform and expanding capabilities across the group, combined with a more energized and engaged culture, gives us great confidence in delivering further progress in the current year and in meeting expectations. As you will have seen from our Q1 results this morning, we've made a positive start to the year across all the divisions, continuing the performance we've reported on for the full year to March. It's particularly pleasing that we've actually delivered growth in the first quarter across every product in our estate, including PayPoint One, card merchants, ATMs and Counter Cash. Our growth in parcels and its performance in the first quarter absolutely stands out. Although with the exception, I think possibly, of our cash flow payments, all areas of the business continue to grow and deliver profitable growth. I mean as a business, we remain alert to the broader economic challenges and particularly those that our consumers and customers face at this time, and that includes any changes that we see to consumer behaviors in the energy sector, and the impact of this, we're obviously monitoring closely. However, we're building a strong business model based on, hopefully, transparent performance measurement metrics, strong cash generation and the investment in operational executions in place to deliver really sustained growth. Our confidence in the year ahead is reflected in a further increase in the dividend, while growing further the underlying cash and earnings cover and a strong belief in our confidence as a board delivering further progress in the execution of our strategy in the current year. And I think with that, we should open up for questions, Steve.

[Operator Instructions] And the first question comes from Joe Brent, Liberum.

Can I have 3 questions, first of all. Firstly, amazing results on digital. Could you give us some indication of the expectation for future revenues from DWP. And then secondly, you talked hopefully about capital allocation. I'd be very interested to hear your perspective on what gaps you might have and what sort of businesses you might look to buy? And finally, with regards to the new accounting policy at Appreciate and the profit recognition at the end of the term of the contract, could you give us some indication of what that means for EBITDA, if anything?

Okay. I'll try and tackle the first 2, Al, and why don't you pick up the last. Firstly, in terms of DWP, I think, look, that was a very, very strong year of growth in DWP, as that contract came to full fruition in year. I think from this point on, the contribution that DWP makes to the growth in our digital business will be limited. I mean we cannot continue to grow at that rate with that contract. But I think it's reasonable to say the broader contribution from our digital payments business will pick up the growth that we've seen in DWP in the year. So I think you will see more moderated growth in our digital payment business, but nevertheless, actually still double-digit strong growth. But don't expect that DWP will be the primary driver of that in the current year. In terms of M&A and capabilities, look, I hope the one thing that has come across clearly this morning is that we believe that over the past 3 years, the work we've done has assembled the collective capabilities that we need to have that sort of comprehensive multichannel payment business. And to that end, I think those pieces are now in place. And I wouldn't expect us to be making major further steps in M&A. I think the principal thing we need to do now is, firstly, to do the right level of actually internal investment, particularly around sort of accelerating our development platform. But most importantly is actually then to really leverage that through the new sales and actually new business initiatives. And I think putting volume onto that payment platform now is the key to actually delivering a really, really strong return from the investments we've made. So I would expect that actually M&A will be limited, and we're very much sort of infill by its nature, and actually, what we will see is sort of a steady level of investment consistent with what you've seen in the previous years.

Yes, thanks, Nick. Yes, with the accounting policy, it doesn't really make any major change to EBITDA. As we've already said, it doesn't affect. The cash flow is really the recognition of income and all that's happening is we've changed the timing of that, so at the end, when cards and vouchers have expired. But if you think about it, therefore, a business that's been done in the past is coming through into this year, and some of this year's stuff we would have expected to recognize goes into next year. And it's just a timing thing. So it shouldn't affect the EBITDA that much.

And the next question comes from Orson Rout, Barclays.

The first is just on the Q1 performance, specifically in Payments & Banking, where there's been quite a sequential slowdown to sort of minus 6% decline. And I was just wondering, if I look at the comps, last year Q1 was actually the weakest quarter, and comps in Payments & Banking do look to get much tougher for the rest of the year. I was just wondering, in terms of phasing, should we expect Payments & Banking to get worse from here? So should we expect double-digit declines during the coming quarters? Overall that certain taxes within digital, which should mean that you should be able to track that sort of weakness that you've seen in Q1 in the division. So that's the first question. As a follow-up to [indiscernible] outlook for overall organic revenue, I mean that Payments & Banking performance, do you see now organic revenue for the total business also dropped down significantly to sort of 2% growth? I was just wondering, on an organic basis, can you commit to expecting positive growth for the overall business across all of the quarters this year? Or depending on macro, is it possible that because of Payments & Banking comps becoming tougher, that we could some volatility quarter to quarter. I'll leave it with these 2 and/or maybe come up with a follow-up.