Is Paypoint Worth a Punt? Great Financially But Does It Have A Future.

Update, October 2026: we wrote this analysis several years ago. PayPoint has changed a lot since then:

• New businesses: it bought card payment business Handepay in 2021 and gift card and savings business Love2shop in 2023. Love2shop made £53.5m of net revenue in the year to 31 March 2026.
• Collect+: PayPoint took full ownership of Collect+ after the Yodel joint venture ended. Royal Mail has since bought 49% of it for £43.9m.
• Results: in the year to 31 March 2026, PayPoint reported net revenue of £190.8m, underlying profit before tax of £69.0m and a final dividend of 20.0p (PayPoint).
• Balance sheet: after its acquisitions and share buybacks, PayPoint now has net corporate debt of £132.5m, rather than net cash.
• Share price: 617.5p on 15 September 2026, on a P/E of about 10.6 (StockAnalysis).

The figures in the rest of this article describe PayPoint at the time we wrote it. This is our opinion and not a recommendation to buy or sell any share. When investing, your capital is at risk.

Why PayPoint caught our eye

Whenever we ran stock screens to find new shares worth investing in, PayPoint always seemed to appear. It had high returns on capital, strong free cash flow and a very strong balance sheet. What stopped us from investing was uncertainty about its future in an increasingly cashless world.

PayPoint runs a network of terminals in local shops where people can pay utility bills and council rents, top up prepaid energy meters and mobile phones, buy lottery tickets and send money.

The financials at the time

• Return on capital employed (ROCE): PayPoint had produced a lease-adjusted ROCE of more than 40% for 10 years. That’s exceptional. It needs relatively little investment in assets to generate its profits.
• Free cash flow (FCF): FCF per share had risen from about 19p to just over 50p in 10 years. The cash flow margin (free cash flow as a percentage of turnover) was around 15% and rising. High margins help a company absorb setbacks better than a low-margin business, as long as competitors don’t move in.
• Balance sheet: net cash of £56.9m and no borrowings.
• Dividends: the dividend had grown from about 5p to around 40p a share in 10 years, more than 20% a year. But the dividend was taking up a growing share of free cash flow, so future dividend growth was likely to slow.

The problem: struggling for growth

With so much going for it, why did PayPoint trade on such a low valuation? Investors worried it couldn’t grow.

Its biggest segment, Bill and General (prepaid energy, bill payments and cash-out services), was shrinking. In the year we looked at, transactions fell from 449.2m to 430.5m and revenue from £59.5m to £58.5m. Smart meters were giving prepayment customers new ways to pay, such as apps, instead of paying cash in a local shop.

Mobile and prepaid card top-ups were also in decline, with net revenue down more than 10% over seven years. That’s no surprise as people move to contracts and online payments.

PayPoint had also tried to build an internet and mobile payments business, but couldn’t make it profitable and decided to sell it. As the UK moves towards a cashless society, these pressures were likely to grow.

Ways PayPoint could grow

Management had several ideas to restart growth:

• PayPoint One: a new terminal that also helped retailers with other parts of their business, such as card payments and stock control. If successful, it could offset the decline in bill payments and top-ups. The risk was competition from Apple Pay and other payment services.
• Collect+: a joint venture with parcels firm Yodel, using PayPoint shops as places to collect and return online orders. It was growing but only made a small profit, and Yodel wanted to charge more to move parcels.
• Romania: PayPoint had built a successful business in Romania, where cash was still widely used. Entering other cash-heavy markets could add growth.

Was PayPoint a good share?

It depended on how quickly you thought the UK would go cashless. If quickly, PayPoint’s core business would shrink as people paid bills online. If you thought cash would be around for a long time, it looked interesting.

At the time, PayPoint traded on a P/E of 9.6, cheap compared with the wider market. If it simply held its profits steady for 10 years, the shares looked like a bargain. Our discounted cash flow analysis, using analysts’ forecasts that we thought were a little optimistic, gave a value of £8.60 a share. Given the uncertainties, we wanted a bigger margin of safety before buying.

Overall, PayPoint had been an excellent business with high returns on capital and a very strong balance sheet. Its big risk was competition from new payment technology.

Looking back, PayPoint did what we suggested it needed to do: it diversified into card payments, parcels and Love2shop. But that came at the cost of taking on debt, and the shares now trade below the £8.60 value we estimated at the time.

Do you use PayPoint as a customer or retailer? How do you think the company will fare? Let us know in the comments.

Disclaimer: This article reflects the author’s opinion and is not a recommendation to buy or sell any share. Past performance is not a guide to future performance.