Park Group plc – HALF YEAR RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2018

Park is the UK's leading multi-retailer redemption product provider to corporate and consumer markets. Sales are delivered through innovative leading edge digital channels, a direct sales force and a network of agents. Park's business is highly seasonal; the first half of the year sees an expected loss with the bulk of annual revenues and profit generated in the second half of the year.

Financial Highlights

·      Billings increased by 3.3% to £109.0m (H1 2017: £105.5m)

·      Park revenue* of £27.4m (H1 2017: £30.6m) reflecting some low margin business not being repeated

·      Seasonal operating losses reduced to £2.3m (H1 2017: £2.6m loss)

·      Pre-tax losses reduced to £1.5m (H1 2017: £1.9m loss) after interest receipts of £0.8m (H1 2017: £0.7m)

·      Dividend raised by 5% to 1.05p (H1 2017: 1.0p)

·      Cash balances, including cash held in trust, at 30 September of £212.4m (H1 2017: £199.6m); average cash balances of £175.4m (H1 2017: £166.1m)

* 2017 restated following adoption of IFRS15, which requires some revenues to be reported on a 'net' basis, as outlined in our IFRS15 transition document

Operational Highlights

·      Corporate and Consumer businesses performed well in the first half

·      Profitability enhanced following some low margin business not being repeated

·      New major retailer partners added to portfolio since the beginning of the first half have included Arcadia, Fat Face and The Entertainer

·      Order book comfortably ahead of comparative period, reflecting strong Corporate orders and stable Consumer orders as previously guided

·      Operational efficiency improvements leading to an improved customer experience

·      Tim Clancy appointed as Chief Financial Officer in August

Four pillars of our strategic business plan announced, with initial actions being implemented:

1.   We will focus on our multi-retailer redemption proposition;

·     separating hamper production from the core business as a step towards simplifying our product range

2.   We will be easier to work with for all of our customers (consumer, businesses and retailers);

·     maximising our use of industry infrastructure and technology to launch a virtual prepaid card

3.   We will be more efficient and effective;

·     moving to new offices in Liverpool city centre to enable optimal use of assets and attract talent

4.   We will broaden our customer appeal to drive growth;

·     launching a new product targeting a £2 billion market with a broader demographic and in which we currently do not compete

Laura Carstensen, Chairman, commented: 

“Park performed well in the first half, consistent with our expectations for the year as a whole and we are encouraged by our order book which is ahead of the same time last year overall.

“We are excited to announce the principal pillars of our new strategic business plan and the initial actions we are undertaking to deliver it. We continue to be encouraged by the future opportunities for Park and are optimistic about how the plan will enhance these opportunities further and accelerate our future growth trajectory.“

Business review for the six months ended 30 September 2018

Introduction

Park performed well in the first half, consistent with our expectations for the year as a whole.  As we are a seasonal business with approximately a quarter of our revenue reported in the first half, and three quarters of revenue reported in the second half (commencing 1 October), we have as expected reported a loss, albeit a reduced loss compared to the first half of the prior year. 

Although the first half is a quieter period, within the business our team has been very busy developing our strategic business plan for the next stage of Park's growth.  This work is being led by our Chief Executive Ian O'Doherty, who joined us in January 2018.  All the work has been informed by in depth product research conducted on the Group's behalf with its customers and staff.

The research project reinforced our confidence in the long-term growth opportunity for Park, the robustness of demand for our products and services, and the high regard in which we are held by customers.  However, it also identified that we have the opportunity to improve our products and tap into potential enhanced demand when these improvements are delivered. 

In the strategy section below, we set out the plan that the Board has approved, and which is now being implemented. A number of important projects are already being undertaken, which are intended to enhance Park's operating and financial performance in future years.

Results for the half year

This reporting period represents Ian's first full period managing the business.  These results are also Park's first in which we are required to present them under a new accounting standard known as 'IFRS15 – Revenue from contracts with customers'.  In the simplest terms, this change requires us to report revenue on a 'net' basis rather than 'gross' for some products but does not impact billings, and we have restated prior years to provide a like for like comparative.  This does not change the profitability of the business model nor impact on cash flow. The following numbers for the period are presented on this basis and note 1 to the half year results below sets out further details of the impact of adopting IFRS15 on the financial information being presented. 

Billings increased 3.3% in the six months to 30 September 2018 to £109.0m (H1 2017: £105.5m) while Park revenue was down 10.3% at £27.4m (H1 2017: £30.6m) as a result of some low margin business not being repeated.  This is reflected in reduced operating losses of £2.3m (H1 2017: loss £2.6m).  Losses would have been £0.3m lower still but for the fees that are being incurred for the strategy work currently underway, including the market research project referred to above. Interest receipts were £0.8m (H1 2017: £0.7m) on average cash balances of £175.4m (H1 2017: £166.1m) producing a reduced pre-tax loss of £1.5m (H1 2017: loss £1.9m).  Total cash balances, including cash held in trust at 30 September 2018, were £212.4m (H1 2017: £199.6m).

Interim dividend

The Board has declared an interim dividend of 1.05p per share, a 5% increase on the comparative period (H1 2017: 1.00p).  The dividend will be paid on 8 April 2019 to shareholders on the register on 1 March 2019. Park's dividend policy is linked to the cash we generate and business performance.  It is noteworthy that the total dividend has more than doubled over the last eight years, reflecting the success of Park and our confidence in the future. The Board will keep our dividend policy under review as the business develops.  

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE HALF YEAR TO 30 SEPTEMBER 2018

All activities derive from continuing operations.