TIDMPARK

RNS Number : 8895B

Park Group PLC

12 June 2019

12 June 2019

PARK GROUP PLC

("Park", "Park Group" or "the Group")

Preliminary Final Results for the Year Ended 31 March 2019

Summary

Park Group plc, the UK's leading multi-retailer redemption product provider to corporate and consumer markets, today announces its final results for the financial year ended 31 March 2019. These are Park's first annual results presented under a new accounting standard (IFRS 15 Revenue from Contracts with Customers), with 2018 comparatives restated accordingly.

Financial highlights

   --      Billings increased 3.4 per cent to GBP426.9m (2018 - GBP412.8m) 
   --      Revenue decreased marginally to GBP110.4m (2018 restated - GBP111.1m) 

-- Total cash balances, including monies held in trust and deposits were GBP134.0m (2018 - GBP121.4m)

   --      Adjusted* operating profit of GBP10.9m (2018 restated - GBP11.3m) 
   --      Adjusted* profit before tax of GBP12.5m (2018 restated - GBP12.6m) 
   --      Adjusted* earnings per share of 5.43p (2018 restated - 5.50p) 

-- Proposed final dividend raised to 2.15p per share (2018 - 2.05p) making a total dividend for the year up 4.9 per cent to 3.20p per share (2018 - 3.05p). Dividend levels continue to grow, despite investment during a period of transformation, reflecting the board's confidence.

*before GBP1.21m of exceptional items related to the impairment of our land and buildings

Statutory results

   --      Operating profit of GBP9.7m (2018 restated - GBP11.3m) 
   --      Profit before tax of GBP11.3m (2018 restated - GBP12.6m) 
   --      Earnings per share of 4.78p (2018 restated - 5.50p) 

Operational highlights

   --      Corporate: 
   -    Good growth in billings of 8.1 per cent to GBP194.8m (2018 - GBP180.2m) 
   -    Revenues from new clients who were billed more than GBP100,000 increased fivefold 
   -    Park's own brand products grew from 85 per cent of total billings to 89 per cent 
   --      Consumer: 
   -    Record volume of new customer accounts for Christmas 2018 
   -    Significant 83 per cent increase in web users interacting via a mobile device last year 

Implementation of the strategic business plan

   --      Strengthened our management team through important senior appointments 
   --      Signed a lease for our new offices in Liverpool city centre 
   --      Separated the hampers business, under a new discrete management team 
   --      Invested significantly in technology to enhance scalability, resilience and efficiency 
   --      Continued to work on the development of a new product 

Ian O'Doherty, Chief Executive Officer, commented:

"Park delivered another good performance last year, continuing to build upon our position as the UK's leading multi-retailer redemption product provider to the corporate and consumer markets.

"Our outlook for the current financial year is unchanged, as we anticipate continued good growth in our Corporate business to be partially offset by a slower Consumer Christmas savings market.

"In summary, we are pleased with the considerable progress that we are making and we are confident that delivery of the strategic business plan will lay the foundations for strong and sustained growth in future years."

Please follow the link below to access a short video of Ian O'Doherty, Chief Executive Officer, summarising the results.

http://bit.ly/PARK_FY19

Park will host a presentation for analysts at MHP Communications' offices (6 Agar Street, London, WC2N 4HN) at 9.30am this morning.

If you would like to attend, please contact MHP on 020 3128 8193 or parkgroup@mhpc.com.

For further information please visit http://www.parkgroup.co.uk/ or contact:

 
 Park Group plc         Liberum                MHP Communications 
                         (NOMAD and broker) 
 Ian O'Doherty, CEO     Richard Crawley        Reg Hoare 
  Tim Clancy, CFO        Jamie Richards         Katie Hunt 
                                                Patrick Hanrahan 
                                                Charles Hirst 
 
   Tel: 0151 653 1700     Tel: 020 3100 2251     Tel: 020 3128 8193 
 

The information contained within this announcement is deemed by Park Group to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").

Notes to Editors:

Park is the UK's leading multi-retailer redemption product provider to corporate and consumer markets. Park is dedicated to providing its new and existing customers access to its offering through easy to use products, supported by intuitive and innovative digital platforms combined with its sales and customer services teams. As part of its strategic plan the company has pledged to put digital first, exploring technology solutions to broaden its physical and virtual payment capabilities. Park recently unveiled its new Love2Shop app, which gives consumers access to one integrated mobile platform.

Consumers can access Park's multi-retailer redemption product directly or via its leading Christmas Savings offering, which currently helps over 426,000 families budget for Christmas. Park also provides around 37,000 business customers with market-leading incentive, recognition and rewards options for an estimated 2 million recipients through 189 retail partners with over 25,000 outlets.

Park Group plc's shares are traded on AIM, a market operated by the London Stock Exchange.

For further information on Park Group please visit: www.parkgroup.co.uk

The Park Prepayments Protection Trust is designed to increase protection for customers' prepayments. The Trust has three directors, two of whom are independent of Park. Details of the trust are set out here: https://www.getpark.co.uk/CORPORATE/declaration.pdf

Business and Operating Review

Introduction

Park delivered another good performance last year, continuing to build upon our position as the UK's leading multi-retailer redemption product provider to the corporate and consumer markets.

In December 2018, at the time of Park's half year results, we announced our new strategic business plan and the initial actions we were undertaking to deliver it. We are pleased to report that we have already made tangible progress in delivering the initial actions, in terms of investment in our people, premises and technology. This investment is establishing a more robust and scalable business model that will strengthen our ability to take advantage of the growth opportunities in our markets.

Overall, we are confident that the steps we are taking will strengthen the group's proposition for consumers, businesses and retailers alike, and ensure we are able to capitalise on opportunities in the fast-evolving markets that we serve. Importantly our plan will significantly improve the efficiency of our operations, leading to enhanced profitability in future years following the investments we are making in the current financial year.

Results for the year

These are Park's first annual results presented under a new accounting standard (IFRS 15 Revenue from Contracts with Customers) which, in summary, requires us to report revenue on a 'net' rather than 'gross' basis for Love2shop vouchers. Furthermore, the standard leads to a deferment of revenue and operating profit in respect of multi-retailer redemption products. The accounting treatment does not impact billings, change the underlying profitability of the business model or impact reported or future cash flows. All figures for the year are presented on an IFRS15 basis, with the prior years restated accordingly.

Billings* increased by 3.4 per cent in the year to 31 March 2019 to GBP426.9m (2018 - GBP412.8m), despite not repeating a low margin product through our intermediary channel (which contributed GBP6.2m of billings in the prior year). Revenue decreased marginally by 0.6 per cent to GBP110.4m (2018 restated - GBP111.1m) reflecting good growth from our Corporate business, notwithstanding the removal of the aforementioned product, and a stable performance from our Consumer business. This was offset by a higher proportion of revenues being deferred to the current financial year than in prior years due to a change in our revenue mix.

Operating profit for the year was GBP9.7m (2018 restated - GBP11.3m). Interest receipts were GBP1.6m (2018 - GBP1.3m) on average cash balances (including cash held in trust) of GBP174.0m (2018 - GBP165.0m), after which profit before tax was GBP11.3m (2018 restated - GBP12.6m). Underlying profit before tax was GBP12.5m (2018 restated - GBP12.6m) before an exceptional charge of GBP1.2m relating to the impairment of our land and buildings (2018 - no exceptional items). Total cash balances, including monies held in trust and bank deposits, at 31 March 2019 were GBP134.0m (2018 - GBP121.4m).

Dividend

The Board is recommending a final dividend of 2.15p, a 4.9 per cent increase on the prior year (2018 - 2.05p), which together with the interim dividend of 1.05p per share (2018 - 1.00p) gives a total dividend of 3.20p (2018 - 3.05p), a 4.9 per cent increase compared to the prior year. Dividend levels continue to grow, despite investment and a period of transformation, reflecting the Board's confidence.

The final dividend will be payable on 1 October 2019 to shareholders on the register on 23 August 2019, with an ex-dividend date of 22 August 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 nine years, reflecting this. The Board will keep Park's dividend policy under review as the business develops, including considering bringing forward payment and record dates.

Divisional review

We continue to operate in dynamic and growing markets, serving customers in both corporate and consumer channels. There has been an encouraging rate of growth in the UK gift card market during the calendar year 2018, with growth in the second half at 12 per cent**. Key market trends include strong growth in the B2B segment, a significant shift towards digital, an increase in experiences as well as product and demand for more personalisation.

This industry growth and key trends are aligned to our strategic plans and these reinforce our decision to invest in the future of Park.

**Source: UK Gift Card and Voucher Association

Corporate (47 per cent of group revenue in the year ended 31 March 2019)

Park's Corporate business provides around 37,000 business customers with market-leading incentive, recognition and rewards options for an estimated 2m recipients through 189 retail partners with over 25,000 outlets.

Corporate billings of GBP194.8m were 8.1 per cent ahead of the prior year (2018 restated - GBP180.2m) despite not continuing a low margin product through our intermediary channel (which contributed GBP6.2m of billings in the prior year). Corporate revenue was GBP51.5m (2018 restated - GBP49.8m) representing growth of 3.4 per cent, despite GBP6.2m of low margin business in the prior year which has not been repeated and a higher proportion of revenues being deferred in to the current financial year due to the greater proportion of revenues being generated through cards and e-codes. These trends were also reflected in a segmental profit which increased by GBP1.1m to GBP7.8m (2018 restated - GBP6.7m), with an underlying improvement in the mix of products towards those generating higher gross margin, offset by a greater proportion deferred in to the current financial year.

The strong underlying performance from our Corporate business was driven through a combination of sales growth and a more profitable product mix, including:

-- A concerted marketing effort to recruit larger businesses saw billings derived from new clients who were billed more than GBP100,000 increase from GBP2m in 2017/18 to GBP10m in 2018/19.

-- Greater emphasis on account management also resulted in a growth of sales from established customers despite the removal of some low margin single store products in favour of Park's higher margin multi-retailer redemption products.

-- Park's own brand products grew from 85 per cent of total billings to 89 per cent, with profit further enhanced by a shift from paper vouchers to cards and e-codes.

Consumer (53 per cent of group revenue in the year ended 31 March 2019)

Consumers can access Park's multi-retailer redemption product directly from our website highstreetvouchers.com or via our leading Christmas savings offering, which currently helps over 428,000 families budget for Christmas.

Our Consumer business billings were GBP232.1m compared to GBP232.6m in the prior year. Consumer revenue was GBP58.9m (2018 restated - GBP61.3m) which produced a segmental profit of GBP6.8m versus GBP7.2m (restated) in the prior year.

Park achieved a record volume of new customer accounts for Christmas 2018, whilst also implementing a number of initiatives to improve the customer experience, attract customers into the business and provide them with an attractive range of spending options. This was a good performance given the evolving Christmas savings market, where consumers are engaging less through traditional channels and more through digital channels.

In terms of improving the customer experience, the expansion of the 'self-serve' functionality of our website and app has given customers greater flexibility in managing their payments and orders directly, which has led to a doubling of 'self' management of orders compared to the prior year. In addition, enhancements to our mobile user experience mean that 83 per cent of customers now choose to interact with us via phone or tablet. Overall, the strength of our customers' experience is demonstrated by our 9.8/10 Trustpilot Score.

To attract more customers into the business, and to respond to how TV viewing habits have changed, we have broadened our marketing into several new channels including digital and social media. We have also launched a comprehensive review of our media buying and creative agencies in order to further refine the customer proposition and increase our future marketing efficiency.

We have continued to improve the range of spending options for our customers with over 70 online retailers and more than 20 restaurants and experiences added to our Love2shop gift card in the last year, whilst sales of the Your Choice Mastercard, which can be spent in-store and online, have grown very strongly.

As the market continues to evolve, we expect to realise the benefits of these initiatives for Christmas 2020.

Progress with our strategic business plan

In December 2018, we set out our new strategic business plan; it aims to build on the high regard in which Park is held by existing customers to capture more of the available market in the future. The plan has been designed to deliver this through improving the customer experience, simplifying our offer, making our products and services available to a wider customer base, and developing our digital platforms to meet the needs of our customers both now and in the future.

The four principal pillars of the new strategic business plan are set out below, alongside the progress we have made in delivering the initial steps in the plan:

   1.   Productivity: we will be more efficient and effective 

Progress to date:

-- We have signed a lease for our new offices in Liverpool city centre, which we believe will ensure a modern, collaborative working culture as well as helping us to retain and attract talented staff. We expect to move in during late summer 2019.

-- Investment in our technology has already enhanced our capabilities, capacity, functionality and performance to benefit our customers.

   2.   Appeal: we will broaden our customer appeal 

Progress to date:

-- We have continued to work on the development of a new product, in order to target currently untapped demand from a broader audience.

-- Having completed much of the work to develop the product concept, we expect to move to a phase of comprehensive market testing during the second half of the year. We will update further on this later in the year.

   3.   Clarity: we will focus on our multi-retailer redemption proposition 

Progress to date:

   --      We have separated the hamper business, under a new discrete management team. 

-- We have further simplified our product range by reducing the number of Love2shop flexecash(R) schemes available whilst maintaining customer choice.

-- We have made good progress with migrating customers from paper vouchers to card sales, through a phased approach of offering fewer paper products through our catalogues and encouraging both Christmas savers and corporate accounts to make the switch.

-- We have commenced a review of our brand architecture and will communicate the results of this review later in the year.

   4.   Experience: we will be easier to work with for all of our customers 

Progress to date:

-- We continue to drive product and customer innovation, by anchoring the organisation on digital, having put in place new personalised e-delivery, an enhanced app capability and a new mobile digital enablement agreement with Mastercard.

-- We have selected a new Enterprise Resource Planning (ERP) system, Microsoft Dynamics 365, which will give us the scalability, resilience and efficiency required for a more seamless and automated back office support functions across the business.

Investing in our people to deliver growth

Board succession planning

We were pleased to confirm in April 2019 that our Chairman, Laura Carstensen, will continue in her role for a further three years, ensuring she will remain fully involved in guiding the executive directors and management team as they deliver the strategic business plan.

Following six years' as a non-executive director, Michael de Kare-Silver intends to retire by rotation from the Board at the time of the group's AGM in September 2019. We are actively seeking a new independent non-executive director and will provide a further update in due course. We thank Michael for his significant contribution during his tenure, most recently during a period of great change for the group in terms of its leadership and strategy.

As previously reported, Tim Clancy became Chief Financial Officer (CFO) during the financial year, and his extensive board level experience in businesses and sectors which are extremely relevant to Park has already brought benefits to the business.

Enhancing our management team

To support the effective implementation of our new strategic plan, we have broadened and enhanced our management team including a number of newly created roles to help deliver the strategic business plan and future growth: these appointments included a new Chief Information Officer (CIO), to drive our technology strategy; a Chief Transformation Officer (CTO), to help execute the changes we are making; and a new Human Resources Director, to ensure we attract, nurture and retain great talent.

Investing in our people

We would like to thank all our employees, whose experience, ambition and dedication to delivering on our customers' expectations are at the heart of our success. We are highly focussed on doing the very best for our people; by providing them with the necessary tools, support, training and development opportunities to succeed and by establishing a strong culture that supports them in working together with clarity and purpose as we deliver our growth plans.

Outlook

Our outlook for the current financial year is unchanged, as we anticipate continued good growth in our Corporate business to be partially offset by a slower Consumer Christmas savings market.

As we stated in our trading update in April 2019, we expect additional costs (net of initial expected cost savings) of GBP2.0m associated with implementing the strategic business plan in the current financial year, which will supress profitability this financial year (19/20). These costs (which are both one off and recurring) relate to running two sites as we transition to the new offices, as well as additional technology and marketing investment.

This investment and the transformation we are undertaking are expected to result in enhanced future growth prospects and a more robust and scalable business model, putting us in a much stronger position.

In summary, we are pleased with the considerable progress that we are making and we are confident that delivery of the strategic business plan will lay the foundations for strong and sustained growth in future years.

Laura Carstensen, Chairman

Ian O'Doherty, Chief Executive

12 June 2019

* See page 26 in accounting policies for a reconciliation of billings to revenue

Financial Review

With effect from 1 April 2018 the group adopted IFRS15. The group applied the full retrospective approach when transitioning to the new standard. The adoption of IFRS15 does not impact billings to external customers or clients or cash flow, nor does it change the overall profitability of the business model. However, it has led to the group recognising significantly lower revenues, a relatively small deferment in operating profit and a reduced net asset position for all restated periods.

Billings and Revenue

The group's products are split into the following categories:

-- Multi-retailer redemption products - Love2shop vouchers, flexecash(R) cards, Mastercards and e-codes

   --      Single retailer redemption products - third party retailer vouchers, cards and e-codes 
   --      Other - hampers, merchandise and consultancy fees 

For multi-retailer redemption products, billings are the gross value of goods and services shipped and invoiced to customers during the year. Revenue for multi-retailer redemption products is the net service fee received on redemption, cardholder fees and breakage which are recognised when multi-retailer redemption products are redeemed.

For single retailer redemption products and other, both billings and revenue are the gross value of goods and services shipped and invoiced to customers during the year.

Further details can be found in accounting policies on pages 20 to 26.

 
 Billings*                      2019    2018   Change 
                                GBPm    GBPm        % 
 Multi-retailer redemption 
  products                     362.4   340.9     +6.3 
 Single retailer redemption 
  products                      50.8    57.5    -11.7 
 Other                          13.7    14.4     -4.9 
 Total                         426.9   412.8     +3.4 
 

Multi-retailer redemption product billings includes billings in respect of e-codes which are capable of being converted into either multi-retailer redemption products or single retailer redemption products. Revenue figures below reflect the product into which the e-code is converted by the cardholder.

 
 Revenue                                Restated 
                                 2019       2018     Change 
                                 GBPm       GBPm          % 
 Multi-retailer redemption 
  products                       41.1       36.1      +13.9 
 Single retailer redemption 
  products                       55.6       60.6       -8.2 
 Other                           13.7       14.4       -4.8 
 Total                          110.4      111.1       -0.6 
 

The value of multi-retailer billings has increased by 6.3 per cent reflecting the strategy to promote the group's own brand product. The mix of multi-retailer redemption products increased from 82.7 per cent to 84.9 per cent due to the increased volume and the strategic curtailment of some low margin single retailer business.

Revenue decreased marginally by 0.6 per cent to GBP110.4m due to not repeating some low margin single retailer redemption product business offset by a greater volume of multi-retailer redemption products with an increased mix of higher value card revenue.

Profit from operations

The group's operations are divided into two principal operating segments:

-- Consumer - which represents sales to consumers, utilising the group's Christmas savings offering and our website, highstreetvouchers.com; and

-- Corporate - comprising sales to businesses, offering primarily sales of the Love2shop voucher, flexecash(R) cards, Mastercards and e-codes in addition to other retailer vouchers.

All other segments comprise central costs and property costs which are shown separately in order to give a more meaningful view of divisional performance.

 
                               Restated 
                         2019      2018    Change 
                      GBP'000   GBP'000   GBP'000 
-------------------  --------  --------  -------- 
Consumer                6,809     7,246     (437) 
-------------------  --------  --------  -------- 
Corporate               7,789     6,700     1,089 
-------------------  --------  --------  -------- 
All other segments    (4,866)   (2,629)   (2,237) 
-------------------  --------  --------  -------- 
Operating profit        9,732    11,317   (1,585) 
-------------------  --------  --------  -------- 
 

Consumer

In the Consumer business, customer billings have decreased marginally by 0.2 per cent from GBP232.6m to GBP232.1m. Billings for Christmas savers were down marginally but this was offset by stronger other Consumer billings, derived through the hightstreetvouchers.com website. Revenue has decreased by 3.9 per cent to GBP58.9m (2018 restated - GBP61.3m), primarily due to more deferred revenue as a consequence of a higher card mix and slower redemption of paper vouchers.

The mix of card billings increased in Consumer from 41.9 per cent in the prior year to 44.4 per cent in 2018/19 with a billings value of GBP98.9m (2018 - GBP93.2m). Card revenue increased marginally to GBP37.5m from GBP37.0m with more multi-retailer redemption products on a net basis.

Operating profit was GBP6.8m, a decrease of GBP0.4m (6.0 per cent) from the GBP7.2m achieved in the prior year. This was primarily due to a reduction in revenue as noted above.

Corporate

In the Corporate business customer billings have increased strongly by 8.1 per cent, from GBP180.2m to GBP194.8m. This growth was driven by multiple new clients, with two new large clients accounting for GBP7.9m of billings in 2018/19. Corporate revenue grew by 3.4 per cent over the prior year, from GBP49.8m to GBP51.5m. Additional volume was offset by greater multi-retailer redemption product reported on a net basis and more revenue deferred due to a higher card mix, which grew from 43.1 per cent to 51.8 per cent. Overall our customer incentive market grew but this was offset by a reduction in the intermediary channel where we did not repeat some low margin business from the previous year.

Operating profit improved by 16.3 per cent to GBP7.8m (2018 restated - GBP6.7m) reflecting the higher level of billings and an improved mix of products sold, principally flexecash(R) cards.

All other segments

Central and property costs increased by 85.1 per cent from GBP2.6m to GBP4.9m. This includes the impairment of the Valley Road site at GBP1.2m and GBP0.5m of development costs attributable to the new strategic business plan including the use of consultants and a customer research exercise (2018 - no impairment or development costs). These development costs will continue at a lower level in the current financial year together with additional costs of implementing the revised strategy. Additional payroll costs of GBP0.5m were incurred relating to the new management team.

Reconciliation of adjusted to statutory profit measures

The Board believes that adjusted profit (excluding impairment) is the best measure of the underlying performance of the group.

 
                                      Operating    Profit     Profit 
   2019                                  profit    before    for the 
                                                      tax       year 
                                        GBP'000   GBP'000    GBP'000 
 Profit before exceptional item          10,942    12,514     10,092 
 Impairment of property, plant and 
  equipment                             (1,210)   (1,210)    (1,210) 
                                     ----------  --------  --------- 
 Statutory profit                         9,732    11,304      8,882 
                                     ----------  --------  --------- 
 
 2018 
 Statutory profit                        11,317    12,587     10,188 
                                     ----------  --------  --------- 
 
 

Impairment of the Valley Road site

In December 2018, the group announced its intention to relocate the majority of the workforce to a new head office location in central Liverpool. A small number of staff will remain at Valley Road and the Board are currently considering options for the site that could include the sale of the site and lease-back of areas which are still required. Following a review of the value of land and buildings at Valley Road, undertaken with our property consultants, we have decided to reduce the book value of the site by GBP1.2m to GBP5.0m.

Finance income

Finance income increased by 23.8 per cent to GBP1.6m from GBP1.3m. Average total cash held by the group, including cash held in trust during the year increased by over 5 per cent to GBP174m (2018 - GBP165m), and the yield achieved on this higher cash balance improved due to the increase in base rates.

Taxation

The effective tax rate for the year was 21.4 per cent (2018 - 19.1 per cent) of profit before tax. The increase compared to the prior year was primarily due to the fact that the impairment charge in respect of the Valley Road site did not attract tax relief.

Earnings per share

Basic earnings per share (EPS) fell by 13.1 per cent from 5.50p (restated) in 2018 to 4.78p. Excluding the exceptional impairment charge basic EPS is 5.43p (2018 restated - 5.50p), down 1.3 per cent.

Dividends

The Board has recommended a final dividend of 2.15p per share. An interim dividend of 1.05p per share was paid on 8 April 2019. Subject to approval of the final dividend at the AGM, the total dividend for 2019 will be 3.20p per share representing an increase of 4.9 per cent over the prior year.

Cash flows and treasury

Cash flows from operating activities were GBP6.9m, GBP3.7m (34.8 per cent) lower than the prior year, due to an increase in monies held in trust, offset by a cash inflow in respect of working capital. Monies in trust grew from GBP87.0m in 2018 to GBP99.3m. This growth was primarily in the Park Card Services Limited E money Trust (PCSET) to support the e-money float in accordance with regulatory requirements. This increased by GBP10.7m to GBP36.6m due to higher levels of card business.

In addition, GBP60.9m (2018 - GBP60.1m) was held by the Park Prepayments Trustee Company Limited. The trust holds payments received in respect of orders for delivery the following Christmas. The conditions for the release of this money to the group are detailed in the trust deed, which is available at www.getpark.co.uk.

Also, at 31 March 2019, the group held GBP1.8m of other ring fenced funds (2018 - GBP1.0m).

At the end of March 2019 GBP36.9m (2018 - GBP40.3m) of cash was held by the group. This was GBP3.4m (8.5 per cent) lower than the prior year due to higher funds held as monies in trust.

The total amount of cash and deposits net of any overdraft position held by the group, combined with the monies held in trust, has increased in the year by 10.4 per cent to GBP134.0m from GBP121.4m. These total balances peaked at just under GBP236m in the year, representing an increase of over GBP7m from the prior year. This was principally due to the higher level of cash receipts into the PCSET due to higher Corporate card business.

Trade and other payables

Included within trade and other payables is deferred income in respect of multi-retailer redemption products (vouchers, cards and e-codes). Revenue is deferred for service fees and breakage, net of discount. The amount of revenue deferred at March 2019 has increased to GBP7.0m from GBP5.8m in the prior year due to an increase in card mix, an increase in final quarter billings and slower redemption of paper vouchers. The increase in card mix, where breakage levels are higher, has resulted in greater deferred revenue. A shift to card schemes with higher levels of breakage has further increased deferred revenue.

Provisions

At 31 March 2019, provisions had increased to GBP58.3m from GBP48.0m. This was mainly due to an increase in the amounts provided in respect of flexecash(R) cards of GBP9.8m and for unspent vouchers of GBP0.4m. The value of unspent vouchers included in the provision, arises primarily from sales in the Corporate business.

Pensions

The group continues to operate two defined benefit pension schemes, where pensions at retirement are based on service and final salary. These schemes are now closed to future accrual of benefit arising from service with the group. These schemes have a net pension surplus of GBP1.9m based on the valuation under IAS19 performed at 31 March 2019 (2018 - surplus of GBP2.7m).

Following a High Court ruling in October 2018 the group is required to equalise Guaranteed Minimum Payments (GMPs) for men and women. Our actuaries have calculated that the expected impact of this for the group is GBP0.3m and this has been recognised in the statement of profit or loss.

The group has recognised interest income of GBP73,000 (2018 - GBP32,000) in the statement of profit or loss in respect of the pension schemes. In addition, the group has recognised a re-measurement loss in the statement of comprehensive income (SOCI) of GBP0.8m (2018 - gain of GBP0.9m) net of tax.

In the year ended 31 March 2019, contributions by the group to the schemes totalled GBP0.5m (2018 - GBP0.7m). The latest triannual scheme funding reports, performed as at 31 March 2016, indicated that one scheme had a technical provisions deficit (reflecting the liabilities to pay pension benefits in relation to past service as they fall due) of GBP1.9m and one had a surplus on the same basis of GBP0.9m. Future group contributions to the scheme that is in deficit have been agreed with the Trustee at GBP0.5m for the year to March 2019, with no further contributions to the scheme after that date. The next triannual valuation will be undertaken as at 31 March 2019 when the positions will be reassessed.

Tim Clancy

Chief Financial Officer

12 June 2019

* See page 26 in accounting policies for a reconciliation of billings to revenue

Risk Factors

Financial risks

 
Risk area                                Potential impact                        Mitigation 
-------------------------------------    ------------------------------------    ------------------------------------- 
Group funding                            The Group, like many other              The Group manages its capital to 
                                         companies, depends on its ability to    safeguard its ability to operate as a 
                                         continue to service its debts           going concern. The 
                                         as they fall due and to have access     Group has access to funds for working 
                                         to finance where this is necessary.     capital from the Park Prepayments 
                                                                                 Protection Trust (PPPT) 
                                                                                 for a defined period in the year, 
                                                                                 although the Group has not used this 
                                                                                 facility in either 
                                                                                 of the last two years and is not 
                                                                                 forecasting to do so. 
                                                                                 In addition the Group has a high 
                                                                                 level of visibility of future revenue 
                                                                                 streams from its Consumer 
                                                                                 business. The funding requirements of 
                                                                                 the business are continually 
                                                                                 reforecast to ensure that 
                                                                                 sufficient liquidity exists to 
                                                                                 support its operations and future 
                                                                                 plans. The Group will arrange 
                                                                                 bank facilities to assist with 
                                                                                 liquidity management if necessary. 
-------------------------------------    ------------------------------------    ------------------------------------- 
Treasury risks                           The Group has significant funds on      The Group treasury policy ensures 
                                         deposit and as such is exposed to       that funds are only placed with, and 
                                         interest rate risk, counterparty        spread between, high 
                                         risk and exchange rate movements.       quality counterparties and where 
                                                                                 appropriate any exchange rate 
                                                                                 exposure is managed, utilising 
                                                                                 forward contracts, to minimise any 
                                                                                 potential impact. Some funds are 
                                                                                 placed on fixed term deposits 
                                                                                 to mitigate interest rate 
                                                                                 fluctuations. 
-------------------------------------    ------------------------------------    ------------------------------------- 
Banking system                           Disruption to the banking system        The Group seeks, wherever possible, 
                                         would adversely impact on the           to offer the widest possible range of 
                                         Group's ability to collect              payment options 
                                         payments from customers and could       to customers to reduce the potential 
                                         adversely affect the Group's cash       impact of failure of a single payment 
                                         position.                               route. 
-------------------------------------    ------------------------------------    ------------------------------------- 
Pension funding                          The Group may be required to            The Group's pension schemes are 
                                         increase its contributions to cover     closed to future benefit accrual 
                                         any funding shortfalls.                 related to service. Funding 
                                                                                 rates are in accordance with the 
                                                                                 agreements reached with the trustees 
                                                                                 after consultation with 
                                                                                 the scheme actuary. 
-------------------------------------    ------------------------------------    ------------------------------------- 
Financial services and other market      The business model may be               The Group has a regulatory team that 
regulation                               compromised by changes in existing      monitors and enforces compliance with 
                                         regulation or by the introduction       existing regulations 
                                         of new regulation. Possible new         and keeps the Group up to date with 
                                         regulation could include a              impending regulation. The Group 
                                         requirement to ring fence funds         shares the objectives 
                                         for vouchers sold to consumers. This    of Government in treating customers 
                                         would adversely affect the Group's      fairly and in the protection of 
                                         cash position.                          customer prepayments. 
                                                                                 The Group operates a number of trusts 
                                                                                 to safeguard funds held on behalf of 
                                                                                 customers. In the 
                                                                                 event of new regulation being 
                                                                                 introduced that requires additional 
                                                                                 cash to be segregated, the 
                                                                                 Group potentially has access to other 
                                                                                 sources of funds, if required. 
-------------------------------------    ------------------------------------    ------------------------------------- 
Credit risks                             Failure of one or more customers and    Customers are given an appropriate 
                                         the risk of default by credit           level of credit based on their 
                                         customers due to reduced                trading history and financial 
                                         economic activity.                      status, a prudent approach is adopted 
                                                                                 towards credit control. 
                                                                                 Credit insurance is used in the 
                                                                                 majority of cases where customers do 
                                                                                 not pay in advance. 
-------------------------------------    ------------------------------------    ------------------------------------- 
 

Operational risks

 
Risk area                                Potential impact                        Mitigation 
-------------------------------------    ------------------------------------    ------------------------------------- 
Business continuity and IT systems       Failure to provide adequate service     The Group plans and tests its 
                                         levels to customers, retail partners    business continuity procedures in 
                                         or other suppliers,                     preparation for catastrophic 
                                         resulting in a failure to maintain      events and for the existence of 
                                         services that generate revenue.         counterfeit vouchers or cards. 
                                         There is a cyber risk to our            Our focus is on the elimination of 
                                         business which means that there is a    any single point of failure in our IT 
                                         risk that an attack on our              systems. Our critical 
                                         infrastructure by an individual or      infrastructure has been designed to 
                                         group could be successful and impact    prevent unauthorised access and 
                                         the availability of                     reduce the likelihood 
                                         critical systems.                       and impact of a successful attack. 
                                                                                 The Group maintains three separate 
                                                                                 data centres in relation to its core 
                                                                                 infrastructure to 
                                                                                 ensure that service is maintained in 
                                                                                 the event of a disaster at its 
                                                                                 primary data centre. Developed 
                                                                                 software is extensively tested prior 
                                                                                 to implementation. We also manage the 
                                                                                 risk of malicious 
                                                                                 attacks on our infrastructure by 
                                                                                 continuously monitoring our systems. 
                                                                                 The Group has decided to upgrade its 
                                                                                 IT systems by implementing a new 
                                                                                 Enterprise Resource 
                                                                                 Planning (ERP) system, Microsoft 
                                                                                 Dynamics, which will provide 
                                                                                 scalability, resilience and 
                                                                                 efficiency. 
-------------------------------------    ------------------------------------    ------------------------------------- 
Loss of key management                   The Group depends on its directors      Existing key appointments are 
                                         and key personnel. The loss of the      rewarded with competitive 
                                         services of any directors               remuneration packages including long 
                                         or other key employees could damage     term incentives linked to the Group's 
                                         the Group's business, financial         performance and shareholder return. 
                                         condition and results. 
-------------------------------------    ------------------------------------    ------------------------------------- 
Relationships with high street and       The Group is dependent upon the         The Group has a dedicated team of 
online retailers                         success of its Love2shop voucher and    managers whose role it is to ensure 
                                         flexecash(R) card. These                that the Group's products 
                                         products only operate provided the      have a full range of retailers. They 
                                         participating retailers continue to     also work closely with all retailers 
                                         accept them as payment                  to promote their 
                                         for goods or services provided. The     businesses to Park's customers who 
                                         failure of one or more participating    utilise Park's vouchers and cards to 
                                         retailers could make                    drive forward incremental 
                                         these products less attractive to       sales to their retail outlets. 
                                         customers.                              Contracts which provide minimum 
                                                                                 notice periods for withdrawal 
                                                                                 are in place with all retailers and 
                                                                                 are designed to mitigate any 
                                                                                 potential impact on Park's 
                                                                                 business. 
-------------------------------------    ------------------------------------    ------------------------------------- 
Failure of the distribution network      The failure of the distribution         Wherever possible the Group seeks to 
                                         network during the Christmas period,    utilise a wide range of 
                                         for example a Post Office               geographically spread carriers 
                                         strike, road network disruption or      to mitigate the failure of a single 
                                         fuel shortages could adversely          operator. 
                                         impact the results and reputation 
                                         of Park's brands. 
-------------------------------------    ------------------------------------    ------------------------------------- 
Brand perception and reputation          Adverse market perception in            Operation of a process of continual 
                                         relation to the Group's products or     review of all marketing media, 
                                         services, for example, following        material and websites to 
                                         the collapse of a competitor. This      promote transparency to customers. 
                                         could result in a downturn in demand    Extensive testing and rigorous 
                                         for its products and                    internal controls exist for all group 
                                         services.                               systems to maintain continuity 
                                                                                 of online customer service. 
                                                                                 Our brand strategy has been 
                                                                                 thoroughly reviewed. 
-------------------------------------    ------------------------------------    ------------------------------------- 
Promotional activity                     The success of the Group's annual       Detailed management processes that 
                                         promotional campaign is essential to    are designed to optimise the cost of 
                                         ensure the continued                    recruiting customers 
                                         recruitment of customers. Failure to    are in place. 
                                         recruit would result in loss of 
                                         revenue to the Group. 
                                         Promotional activity must also be 
                                         cost effective. 
Competition                              Loss of margins or market share         The Group has a broad base of 
                                         arising from increased activity from    customers and no single customer 
                                         competitors.                            represents more than 4 per 
                                                                                 cent of total customer billings. 
                                                                                 Significant resources are dedicated 
                                                                                 to developing and maintaining strong 
                                                                                 relationships with 
                                                                                 customers and to developing new and 
                                                                                 innovative products which meet their 
                                                                                 precise needs. 
-------------------------------------    ------------------------------------    ------------------------------------- 
Brexit                                   The Group currently takes advantage     There is a project in place to plan 
                                         of the FCA's passporting regime to      for a hard Brexit, to clarify 
                                         issue regulated cards                   processes and procedures 
                                         in Ireland. There is a risk that the    in the scenario of no longer being 
                                         Group will be unable to issue cards     able to issue and maintain cards 
                                         in Ireland after                        within the ROI. 
                                         the revised Brexit deadline. 
-------------------------------------    ------------------------------------    ------------------------------------- 
 

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE YEAR TO 31 MARCH 2019

 
                                                                    Restated* 
                                                             2019        2018 
                                                          GBP'000     GBP'000 
 
 Billings                                                 426,901     412,786 
                                                        ---------  ---------- 
 
 Revenue 
 
   *    Goods - Single retailer redemption products        55,624      60,621 
 
   *    Other goods                                         7,511       8,497 
 
   *    Services - Multi-retailer redemption products      41,111      36,087 
 
   *    Other services                                      6,119       5,777 
 
   *    Other                                                  29          72 
                                                        ---------  ---------- 
                                                          110,394     111,054 
 
 Cost of sales                                           (79,117)    (79,628) 
                                                        ---------  ---------- 
 Gross profit                                              31,277      31,426 
 Distribution costs                                       (2,934)     (3,002) 
 Administrative expenses                                 (17,401)    (17,107) 
                                                        ---------  ---------- 
 Operating profit before exceptional item                  10,942      11,317 
 
 Impairment of property, plant and equipment              (1,210)           - 
                                                        ---------  ---------- 
 Operating profit                                           9,732      11,317 
 
 Finance income                                             1,572       1,274 
 Finance costs                                                  -         (4) 
                                                        ---------  ---------- 
 Profit before taxation                                    11,304      12,587 
 Taxation                                                 (2,422)     (2,399) 
                                                        ---------  ---------- 
 Profit for the year attributable to equity 
  holders of the parent                                     8,882      10,188 
                                                        ---------  ---------- 
 
 
 Earnings per share (see note 8) 
 : basic                            4.78p   5.50p 
 : diluted                          4.77p   5.48p 
 
 

* Restated for implementation of IFRS15, see revenue recognition accounting policy

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR TO 31 MARCH 2019

 
                                                                   Restated* 
                                                            2019        2018 
                                                         GBP'000     GBP'000 
 
 Profit for the year                                       8,882      10,188 
 Other comprehensive (expense)/income 
 Items that will not be reclassified to profit 
  or loss: 
  Remeasurement of defined benefit pension 
  schemes                                                (1,009)       1,142 
 Deferred tax on defined benefit pension schemes             172       (194) 
                                                        --------  ---------- 
                                                           (837)         948 
                                                        --------  ---------- 
 Items that may be reclassified subsequently 
  to profit or loss: 
 Foreign exchange translation differences                    (3)        (20) 
 
 Other comprehensive (expense)/ income for 
  the year net of tax                                      (840)         928 
                                                        --------  ---------- 
 
 Total comprehensive income for the year attributable 
  to equity holders of the parent                          8,042      11,116 
                                                        --------  ---------- 
 

* Restated for implementation of IFRS15, see revenue recognition accounting policy

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2019

 
                                                                            Restated*   Restated* 
                                                          As at                 As at       As at 
                                                       31.03.19              31.03.18    01.04.17 
                                                        GBP'000               GBP'000     GBP'000 
 Assets 
 Non-current assets 
 Goodwill                                                 2,168                 2,185       2,202 
 Other intangible assets                                  2,295                 2,278       2,682 
 Property, plant and equipment                            6,216                 7,684       7,688 
 Deferred tax assets                                          -                   237         654 
 Retirement benefit asset                                 1,927                 2,721       1,827 
                                                         12,606                15,105      15,053 
                                           --------------------  --------------------  ---------- 
 Current assets 
 Inventories                                              4,574                 3,808       2,632 
 Trade and other receivables                             12,582                10,917       9,236 
 Other financial assets                                     200                   200         200 
 Monies held in trust                                    99,251                86,992      83,018 
 Cash                                                    36,868                40,311      34,236 
                                                        153,475               142,228     129,322 
                                           --------------------  --------------------  ---------- 
 
 Total assets                                           166,081               157,333     144,375 
                                           --------------------  --------------------  ---------- 
 
   Liabilities 
 Current liabilities 
 Trade and other payables                              (89,952)              (94,592)    (87,201) 
 Tax payable                                              (580)                 (704)     (1,272) 
 Provisions                                            (58,286)              (48,012)    (46,164) 
                                           --------------------  --------------------  ---------- 
                                                      (148,818)             (143,308)   (134,637) 
                                           --------------------  --------------------  ---------- 
 Non-current liabilities 
 Deferred tax liability                                   (553)                     -           - 
 Retirement benefit obligation                                -                     -       (924) 
                                           --------------------  --------------------  ---------- 
                                                          (553)                     -       (924) 
                                           --------------------  --------------------  ---------- 
 
 Total liabilities                                    (149,371)             (143,308)   (135,561) 
                                           --------------------  --------------------  ---------- 
 
 
 Net assets                                              16,710                14,025       8,814 
                                           --------------------  --------------------  ---------- 
 
   Equity attributable to equity holders 
   of the parent 
 
 Share capital                                            3,727                 3,711       3,687 
 Share premium                                            6,470                 6,137       6,137 
 Retained earnings                                        6,824                 4,488       (699) 
 Other reserves                                           (311)                 (311)       (311) 
 
 Total equity                                            16,710                14,025       8,814 
                                           --------------------  --------------------  ---------- 
 

* Restated for implementation of IFRS15, see revenue recognition accounting policy

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 
                                                Share      Share       Other    Retained     Total 
                                              capital    Premium    reserves    earnings    equity 
                                              GBP'000    GBP'000     GBP'000     GBP'000   GBP'000 
 
 Balance at 1 April 2018                        3,711      6,137       (311)       4,488    14,025 
 
 Total comprehensive income for 
  the year 
 Profit                                             -          -           -       8,882     8,882 
 
 Other comprehensive expense 
 Remeasurement of defined benefit 
  pension schemes                                   -          -           -     (1,009)   (1,009) 
 Tax on defined benefit pension 
  schemes                                           -          -           -         172       172 
 Foreign exchange translation adjustments           -          -           -         (3)       (3) 
                                            ---------  ---------  ----------  ----------  -------- 
 Total other comprehensive expense                  -          -           -       (840)     (840) 
                                            ---------  ---------  ----------  ----------  -------- 
 Total comprehensive income for 
  the year                                          -          -           -       8,042     8,042 
                                            ---------  ---------  ----------  ----------  -------- 
 
 Transactions with owners, recorded 
  directly in equity 
 Equity settled share-based payment 
  transactions                                      -          -           -          11        11 
 Tax on equity settled share-based 
  payment transactions                              -          -           -        (45)      (45) 
 Exercise of share options                         12        333           -           -       345 
 LTIP shares awarded                                4          -           -         (4)         - 
 Dividends                                          -          -           -     (5,668)   (5,668) 
                                            ---------  ---------  ----------  ----------  -------- 
 Total contributions by and distribution 
  to owners                                        16        333           -     (5,706)   (5,357) 
                                            ---------  ---------  ----------  ----------  -------- 
 
 Balance at 31 March 2019                       3,727      6,470       (311)       6,824    16,710 
                                            ---------  ---------  ----------  ----------  -------- 
 
 Balance at 1 April 2017 as originally 
  reported                                      3,687      6,137       (311)       2,912    12,425 
 Restatement due to adoption of 
  IFRS15 (see revenue recognition 
  policy)                                           -          -           -     (3,611)   (3,611) 
                                            ---------  ---------  ----------  ----------  -------- 
 Restated balance at 1 April 2017               3,687      6,137       (311)       (699)     8,814 
 
 Total comprehensive income for 
  the year 
 Profit as restated                                 -          -           -      10,188    10,188 
 
 Other comprehensive income/(expense) 
 Remeasurement of defined benefit 
  pension schemes                                   -          -           -       1,142     1,142 
 Tax on defined benefit pension 
  schemes                                           -          -           -       (194)     (194) 
 Foreign exchange translation adjustments           -          -           -        (20)      (20) 
                                            ---------  ---------  ----------  ----------  -------- 
 Total other comprehensive income                   -          -           -         928       928 
                                            ---------  ---------  ----------  ----------  -------- 
 Total comprehensive income for 
  the year                                          -          -           -      11,116    11,116 
                                            ---------  ---------  ----------  ----------  -------- 
 
 Transactions with owners, recorded 
  directly in equity 
 Equity settled share-based payment 
  transactions                                      -          -           -       (620)     (620) 
 Tax on equity settled share-based 
  payment transactions                              -          -           -          85        85 
 LTIP shares awarded                               24          -           -        (24)         - 
 Dividends                                          -          -           -     (5,370)   (5,370) 
                                            ---------  ---------  ----------  ----------  -------- 
 Total contributions by and distribution 
  to owners                                        24          -           -     (5,929)   (5,905) 
                                            ---------  ---------  ----------  ----------  -------- 
 
 Balance at 31 March 2018                       3,711      6,137       (311)       4,488    14,025 
                                            ---------  ---------  ----------  ----------  -------- 
 

Other reserves relate to the acquisition of a minority interest in a subsidiary.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR TO 31 MARCH 2019

 
                                                  2019      2018 
                                               GBP'000   GBP'000 
 Cash flows from operating activities 
 Cash generated from operations                  6,874    10,540 
 Interest received                               1,497     1,271 
 Interest paid                                       -       (4) 
 Tax paid                                      (1,576)   (2,537) 
                                              --------  -------- 
 Net cash generated from operating 
  activities                                     6,795     9,270 
 
   Cash flows from investing activities 
 Proceeds from sale of property, 
  plant and equipment                                -         1 
 Purchase of intangible assets                   (781)     (361) 
 Purchase of property, plant and 
  equipment                                      (371)     (659) 
 
 Net cash used in investing activities         (1,152)   (1,019) 
 
 Cash flows from financing activities 
 Proceeds from exercise of share 
  options                                          345         - 
 Dividends paid to shareholders                (5,668)   (5,370) 
 Net cash used in financing activities         (5,323)   (5,370) 
                                              --------  -------- 
 Net increase in cash and cash equivalents         320     2,881 
                                              --------  -------- 
 
 Cash and cash equivalents at beginning 
  of period                                     34,243    31,362 
                                              --------  -------- 
 
 Cash and cash equivalents at end 
  of period                                     34,563    34,243 
                                              --------  -------- 
 
 Cash and cash equivalents comprise: 
 Cash                                           36,868    40,311 
 Bank overdrafts                               (2,305)   (6,068) 
                                              --------  -------- 
                                                34,563    34,243 
                                              --------  -------- 
 

NOTES TO THE PRELIMINARY RESULTS

(1) Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS's) as adopted by the European Union (EU) including International Financial Reporting Interpretations Committee (IFRIC) interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

Park Group plc is incorporated and domiciled in the United Kingdom. The financial statements have been prepared under the historical cost convention, as modified by the accounting for financial instruments at fair value where required by IAS 39 Financial Instruments: Recognition and Measurement. The Group financial statements are presented in sterling and all values are rounded to the nearest thousand (GBP'000) except where otherwise stated.

The accounting policies have been applied consistently to all periods presented in these financial statements and by all Group entities.

(2) Going concern

The Group's business activities, together with factors likely to affect its future development, performance and position, are set out in the Business and Operating Review. The financial position of the Group, its cash flows, liquidity and solvency position and financial risks are described in the Financial Review.

The Group's forecasts and projections, taking into account reasonably possible changes in trading performance and customer behaviour, show that the Group has sufficient financial resources to fund the business for the foreseeable future. Whilst funds are available for working capital purposes as permitted under the terms of the PPPT, the Group does not envisage accessing these funds in the period covered by these forecasts. The Group's working capital requirements are dependent upon a continuing level of prepaid sales to corporate customers. The Group continues to trade profitably and early indications for growth in the current year are positive. Accordingly, the directors continue to adopt the going concern basis in preparing the consolidated financial statements.

(3) Changes to International Financial Reporting Standards

Interpretations and standards which became effective during the year

The following accounting standards and interpretations, that are relevant to the Group, became effective during the period:

 
 
                                                                   Effective from 
                                                                    accounting period 
                                                                    beginning on 
                                                                    or after: 
  IFRS 2         Classification and measurement of 
                  share based payment transactions (amendments)      1 Jan 2018 
  IFRIC 22       Foreign currency transactions and                 1 Jan 2018 
                  advances considerations 
  IFRS 9         Financial Instruments                             1 Jan 2018 
  IFRS 15        Revenue from Contracts with Customers             1 Jan 2018 
 
 

The impact of IFRS15 on the financial statements is shown below.

The adoption of IFRS9 has had an immaterial impact on the Group's financial performance or position.

Adoption of the remaining amendment and interpretation to standards has not had a material impact upon the Group's financial performance or position.

Interpretations and standards which have been issued and are not yet effective

The following standards have been adopted by the EU but are not yet effective for the year ended 31 March 2019 and have not been applied in preparing the financial statements. Those standards that have relevance to the Group are mentioned below:

 
                                                       Effective 
                                                        from accounting 
                                                        period beginning 
                                                        on or after: 
  IFRIC 23    Uncertainty over Income Tax Treatment    1 Jan 2019 
  IFRS 16     Leases                                   1 Jan 2019 
 

IFRS 16 replaces IAS 17 Leases. It will become effective for the Group from 1 April 2019 and the Group has decided to take a modified retrospective approach to implementation of the standard. Under this approach, the cumulative effect of initial application of the standard is recognised at the date of adoption, ie 1 April 2019. The Group is in the process of finalising the impact the new standard will have on the financial statements but currently do not believe a material adjustment will be required in respect of leases in place at 31 March 2019 given the current value of operating leases payable. Under the standard, the Group will recognise right-of-use assets and lease liabilities for all operating and finance leases unless the lease term is 12 months or less or the underlying asset has a low value.

The largest impact of the new standard is expected to be on the accounting treatment of property rentals payable, once the lease is completed. This will create a right-of-use asset and a lease liability. Rental charges will be reclassified as finance charges and depreciation. Key accounting judgements will be an appropriate discount rate and the level of certainty of exercising lease options.

   (4)   Accounting policies 

The financial information in this preliminary announcement has been prepared in accordance with the accounting policies described in the annual report and accounts for the year ended 31 March 2018, except for those policies described below. The annual report and accounts for the year ended 31 March 2018 can be found on our website at www.parkgroup.co.uk.

Revenue recognition

With effect from 1 April 2018 the group adopted IFRS 15 Revenue from Contracts with Customers. The group applied the full retrospective approach when transitioning to the new standard and as a consequence the date of transition to IFRS15 was 1 April 2017. The group prepared its opening statement of financial position as at that date.

The group recognises revenue from contracts with customers when control over the goods and services is transferred to the customer. Revenue is recognised at an amount that reflects the consideration to which the group expects to be entitled in exchange for those goods and services, net of VAT, rebates and discounts.

The group is a principal if it controls the promised good or service before transferring it to the customer. The group is an agent if its role is to arrange for another entity to provide the good or service. The group acts as an agent in the sale of multi-retailer redemption products and travel agency services and therefore fees that are retained for its agency service are recorded in revenue on a net basis. For all other products and services, the group acts as a principal and revenues are recorded on a gross basis.

As described below, the majority of revenues are recognised at a point in time. For multi-retailer redemption products revenue is recognised when the products are redeemed; for single retailer redemption products and other goods revenue is recognised when the goods are received by the customer. Revenue for other services is recognised over time or at a point in time depending on the nature of the revenue stream, as described further in (ii) below.

The group's multi-retailer redemption products may be partially or fully redeemed, and the unused amount (ie the non-refundable unredeemed or unspent funds on a voucher, card or e-code at expiry) is referred to as breakage. Where the end user has no right of redemption (corporate gifted cards), the group may expect to earn a breakage amount and this is recognised as revenue in proportion to the actual timing of redemptions. Where the customer has the right of redemption, breakage is recognised as revenue when the card has expired and the right of redemption has lapsed.

Significant accounting judgements and estimates relating to revenue are described on pages 27 and 28.

Impact of the adoption of IFRS15

The adoption of IFRS15 does not impact billings to external customers or clients or cash flow, nor does it change the overall profitability of the business model. However, it has led to the group recognising significantly lower revenues, an immaterial movement in operating profit and a reduced net asset position in retained earnings for all restated periods.

The effects of adopting IFRS15 on the Consolidated Statement of Financial Position at 1 April 2017 are detailed below:

 
 Consolidated Statement 
  of Financial Position 
 
                                                         IFRS15 
                                  01.04.2017            Revenue          IFRS15 
                                          As     Classification         Revenue 
                                  Previously     & Presentation          Timing     01.04.2017 
                                    Reported        Adjustments     Adjustments       Restated 
                                     GBP'000            GBP'000         GBP'000        GBP'000 
 
 Key impacts                                        (i) & (iii)            (ii) 
 
 Assets 
 Non-current assets 
 Deferred tax                          (194)                  -             848            654 
 
 Current assets 
 Trade and other receivables           9,096                  -             140          9,236 
 
 Liabilities 
 Current liabilities 
 Trade and other payables           (82,602)                  -         (4,599)       (87,201) 
 
 Equity attributable to 
  equity holders of the 
  parent 
 Retained earnings                     2,912                  -         (3,611)          (699) 
 

The effects of adopting IFRS15 on the financial year ended 31 March 2018 are detailed below:

 
 Consolidated Statement 
  of Profit or Loss 
 
                                                              IFRS15 
                                             2018            Revenue          IFRS15 
                                               As     Classification         Revenue 
                                       Previously     & Presentation          Timing         2018 
                                         Reported        Adjustments     Adjustments     Restated 
                                          GBP'000            GBP'000         GBP'000      GBP'000 
 
 Key impacts                                             (i) & (iii)            (ii) 
 
 Revenue 
 Goods - Single retailer 
  redemption products                      60,621                  -               -       60,621 
 Other goods                                8,497                  -               -        8,497 
 Services - Multi-retailer 
  redemption products                     221,136          (184,797)           (252)       36,087 
 Other services                             5,862                  -            (85)        5,777 
 Other                                         72                  -               -           72 
                                    -------------                                     ----------- 
                                          296,188                                         111,054 
 
 Cost of sales                          (264,490)            184,797              65     (79,628) 
 Gross profit                              31,698                  -           (272)       31,426 
 
 Operating profit                          11,589                  -           (272)       11,317 
 
 Profit before taxation                    12,859                  -           (272)       12,587 
 Taxation                                 (2,450)                  -              51      (2,399) 
 Profit for the year attributable 
  to equity holders of the 
  parent                                   10,409                  -           (221)       10,188 
 
 Earnings per share 
  - basic (p)                                5.62                  -          (0.12)         5.50 
  - diluted (p)                              5.60                  -          (0.12)         5.48 
 
 
 Consolidated Statement 
  of Financial Position 
 
                                                              IFRS15 
                                             2018            Revenue          IFRS15 
                                               As     Classification         Revenue 
                                       Previously     & Presentation          Timing         2018 
                                         Reported        Adjustments     Adjustments     Restated 
                                          GBP'000            GBP'000         GBP'000      GBP'000 
 
 Key impacts                                             (i) & (iii)            (ii) 
 
 Assets 
 Non-current assets 
 Deferred tax                               (662)                  -             899          237 
 
 Current assets 
 Trade and other receivables               10,872                  -              45       10,917 
 
 Liabilities 
 Current liabilities 
 Trade and other payables                (89,816)                  -         (4,776)     (94,592) 
 
 Equity attributable to 
  equity holders of the 
  parent 
 Retained earnings                          8,320                  -         (3,832)        4,488 
 

Key impacts of IFRS15

Having applied the principles of IFRS15, the directors have concluded that the key impacts for the group are:

   (i)    Principal and Agent classification (affecting 'gross' and 'net' revenue recognition). 
   (ii)   Timing of revenue recognition. 

(iii) Presentation and disclosure.

The primary driver of the reduction in revenue and cost of sales is the presentation of Love2Shop vouchers, where the group is now deemed to act as the agent and revenue is based on service fees received, rather than the face value of the vouchers sold. This has no impact on profit. Further details are provided in (i) below.

The IFRS15 profit impacts, marked as (ii) above, relate principally to the deferral of service fee for vouchers and breakage for vouchers, cards and e-codes which are now recognised in proportion to actual redemption timing, rather than on despatch or load. Further details are provided in (ii) below.

The adjustment to retained earnings at 01.04.17 and at 31.03.18 represents the cumulative effect of the revenue, and profit, timing adjustments (ii) for all restated periods.

Adjustments in respect of other revenue streams are immaterial.

The impact of the IFRS15 adjustments on the tax expense and deferred tax is also reflected above.

The adoption of IFRS15 does not impact Other Comprehensive Income or the Statement of Cash Flows.

The group's primary revenue streams are as follows:

   1.   Services - multi-retailer redemption products 
   a)   Love2shop vouchers 
   b)   flexecash(R) cards and e-codes 
   c)   Mastercards 
   2.   Goods - single retailer redemption products 
   a)   third party vouchers, cards and e-codes 
   3.   Other goods 
   a)   hampers and gifts 
   4.   Other services 
   a)   brand engagement 
   b)   packing 
   c)   collection and delivery 
   d)   travel agency 
   e)   other services 

Customers are offered standard business credit terms or pay in advance for their products and services.

The adoption of IFRS15 has significantly impacted the reporting of revenue in respect of the group's multi-retailer redemption products. The revenue associated with these products is as described below.

For multi-retailer redemption products, the group now recognises revenue for service fees, cardholder fees and breakage.

The group has contractual relationships with each of the redeemers. The group earns a service fee from the redeemer when a consumer redeems their voucher, card or e-code with that redeemer.

Cardholder fees are earned for services provided to cardholders such as issue, dealing with lost/stolen/damaged cards and maintenance.

The multi-retailer redemption products may be partially or fully redeemed, and the unused amount (ie the non-refundable unredeemed or unspent funds on a voucher, card or e-code at expiry) is referred to as breakage. Where the end user has no right of redemption (corporate gifted cards), the group may expect to earn a breakage amount. However, where the customer has the right of redemption, no breakage is recognised until the card has expired and the right of redemption has lapsed.

IFRS15 also impacts the following costs:

   --      discounts provided to corporate clients; and 
   --      commission rewards paid to Park Christmas Savings agents for their orders. 

These are described further within (ii) and (iii) below.

(i) Principal and Agent

Under IFRS15, the group is a principal (and records revenue on a gross basis) if it controls the promised good or service before transferring it to the customer.

The group is an agent (and records as revenue the net amount that it retains for its agency services) if its role is to arrange for another entity to provide the good or service.

The directors have concluded that the group acts as an agent when it supplies multi-retailer redemption products in exchange for a service fee from the redeemer. This results in the restatement of revenues from the sale of Love2shop vouchers.

 
       Revenue stream          Principal / Agent   Gross / Net revenue   Revenue based on        Previous basis 
 1a)   Love2shop vouchers      Agent               Net                   Service fees received   Gross face value of 
                                                                         from redeemers          the vouchers 
      ----------------------  ------------------  --------------------  ----------------------  ---------------------- 
 1b)   flexecash(R) cards      Agent               Net                   Service fees received   No change 
       and e-codes                                                       from redeemers 
      ----------------------  ------------------  --------------------  ----------------------  ---------------------- 
 1c)   Mastercards             Agent               Net                   Service fees received   No change 
                                                                         from redeemers 
      ----------------------  ------------------  --------------------  ----------------------  ---------------------- 
 2a)   Third party vouchers,   Principal           Gross                 Values invoiced to      No change 
       cards and e-codes                                                 external customers 
                                                                         for goods 
      ----------------------  ------------------  --------------------  ----------------------  ---------------------- 
 3a)   Hampers and gifts       Principal           Gross                 Values invoiced to      No change 
                                                                         external customers 
                                                                         for goods 
      ----------------------  ------------------  --------------------  ----------------------  ---------------------- 
 4a)   Brand engagement        Principal           Gross                 Values invoiced to      No change 
                                                                         external customers 
                                                                         for services 
      ----------------------  ------------------  --------------------  ----------------------  ---------------------- 
 4b)   Packing                 Principal           Gross                 Values invoiced to      No change 
                                                                         external customers 
                                                                         for services 
      ----------------------  ------------------  --------------------  ----------------------  ---------------------- 
 4c)   Collection and          Principal           Gross                 Values invoiced to      No change 
       delivery                                                          external customers 
                                                                         for services 
      ----------------------  ------------------  --------------------  ----------------------  ---------------------- 
 4d)   Travel agency           Agent               Net                   Agent's commission      No change 
                                                                         received 
      ----------------------  ------------------  --------------------  ----------------------  ---------------------- 
 4e)   Other services          Principal           Gross                 Values invoiced to      No change 
                                                                         external customers 
                                                                         for services 
      ----------------------  ------------------  --------------------  ----------------------  ---------------------- 
 

For multi-retailer redemption products, in addition to the service fees noted above, the group also earns cardholder fees and breakage as follows:

 
      Revenue stream    Principal   Gross /        Revenue based       Previous 
                         / Agent     Net revenue    on                  basis 
 1.   Cardholder fees   Principal   Gross          Charges levied      No change 
     ----------------  ----------  -------------  ------------------  ----------- 
 1.   Breakage          Principal   Gross          Non-refundable      No change* 
                                                    unredeemed funds 
     ----------------  ----------  -------------  ------------------  ----------- 
 

* See (iii) below for presentational change.

For all revenue streams, intra-group sales are eliminated and revenue is recorded net of VAT, rebates and discounts.

(ii) Timing of revenue recognition

Under IFRS15, revenue is recognised when (or as) an entity satisfies an identified performance obligation by transferring a promised good or service to a customer. A good or service is considered to be transferred when the customer obtains control.

As summarised below, the adoption of IFRS15 has resulted in the deferral of service fees relating to Love2shop vouchers and breakage relating to multi-retailer redemption products, until the point at which the products have been redeemed. Previously they were recognised on despatch.

 
       Revenue stream                          Revenue recognised                      Previously recognised 
 1a)   Love2shop vouchers                      Service fees - when product is          On despatch of product. 
                                               redeemed. 
      --------------------------------------  --------------------------------------  -------------------------------- 
                                               Breakage - in proportion to actual      On despatch of product. 
                                               redemption timing. 
      --------------------------------------  --------------------------------------  -------------------------------- 
 1b)   flexecash(R) cards and e-codes          Service fees - when product is          No change 
                                               redeemed. 
      --------------------------------------  --------------------------------------  -------------------------------- 
                                               Cardholder fees - when fees are         No change 
                                               levied. 
      --------------------------------------  --------------------------------------  -------------------------------- 
                                               Breakage (where end user has no right   On despatch or load of product. 
                                               of redemption) - in proportion to 
                                               actual redemption 
                                               timing. 
      --------------------------------------  --------------------------------------  -------------------------------- 
                                               Breakage (where end user has the        No change 
                                               right of redemption) - when product 
                                               has expired and the right 
                                               of redemption has lapsed. 
      --------------------------------------  --------------------------------------  -------------------------------- 
 1c)   Mastercards                             Service fees - when product is          No change 
                                               redeemed. 
      --------------------------------------  --------------------------------------  -------------------------------- 
                                               Cardholder fees - when fees are         No change 
                                               levied. 
      --------------------------------------  --------------------------------------  -------------------------------- 
                                               Breakage (where end user has no right   On despatch or load of product. 
                                               of redemption) - in proportion to 
                                               actual redemption 
                                               timing. 
      --------------------------------------  --------------------------------------  -------------------------------- 
                                               Breakage (where end user has the        No change 
                                               right of redemption) - when product 
                                               has expired and the right 
                                               of redemption has lapsed. 
      --------------------------------------  --------------------------------------  -------------------------------- 
 2a)   Third party vouchers, cards and         When the customer obtains control of    No change 
       e-codes                                 the goods - usually the date on which 
                                               they are received 
                                               by the customer. 
      --------------------------------------  --------------------------------------  -------------------------------- 
 3a)   Hampers and gifts                       When the customer obtains control of    No change 
                                               the goods - usually the date on which 
                                               they are received 
                                               by the customer. 
      --------------------------------------  --------------------------------------  -------------------------------- 
 4a)   Brand engagement                        Over time. As the services provided     No change 
                                               are unique to each client, the 
                                               group's performance creates 
                                               an asset with no alternative use to 
                                               the group. Additionally, the group 
                                               has an enforceable 
                                               right to payment for work performed. 
                                               Revenue continues to be recognised 
                                               using input methods, 
                                               as this is the measure of progress 
                                               which most faithfully depicts the 
                                               group's performance towards 
                                               complete satisfaction of the 
                                               performance obligation. The majority 
                                               of projects are less than 
                                               12 months in duration. 
      --------------------------------------  --------------------------------------  -------------------------------- 
 4b)   Packing                                 When the customer obtains control of    No change 
                                               the service - usually the date on 
                                               which they are received 
                                               by the customer. 
      --------------------------------------  --------------------------------------  -------------------------------- 
 4c)   Collection and delivery                 When the customer obtains control of    No change 
                                               the service - usually the date on 
                                               which they are received 
                                               by the customer. 
      --------------------------------------  --------------------------------------  -------------------------------- 
 4d)   Travel agency                           When the commission is paid by the      At the point of travel booking. 
                                               third party agent. 
      --------------------------------------  --------------------------------------  -------------------------------- 
 4e)   Other services                          When the customer obtains control of    No change 
                                               the service - usually the date on 
                                               which they are received 
                                               by the customer. 
      --------------------------------------  --------------------------------------  -------------------------------- 
 

Travel commission represents variable consideration contingent on future events (as travel plans can be changed or cancelled after the original booking date). Accordingly, the group does not recognise revenue until it is highly probable that a significant reversal in the amount of cumulative revenue will not occur.

The timing of the following costs is also impacted by IFRS15.

 
 Cost                           Timing of recognition     Previously recognised 
 Discounts for multi-retailer   In proportion to actual   Voucher discounts 
  redemption products            redemption timing.        were recognised on 
  provided to corporate                                    despatch. No change 
  clients                                                  for cards and e-codes. 
                               ------------------------  ------------------------ 
 Commission rewards             In proportion to actual   Expensed as incurred. 
  for multi-retailer             redemption timing. 
  redemption products 
                               ------------------------  ------------------------ 
 

(iii) Presentation and disclosure

The group's implementation of IFRS15 has introduced some presentational changes as follows:

 
                               Presentation                  Previous presentation 
 Breakage on multi-retailer    Presented as revenue          Voucher breakage was 
  redemption products           in the Statement of           presented in cost 
                                Profit or Loss.               of sales. 
                                                              No change for cards 
                                                              and e-codes. 
                              ----------------------------  ------------------------ 
 Deferred revenue for          Presented as deferred         Presented as deferred 
  multi-retailer redemption     income in the Statement       income for cards and 
  products - service            of Financial Position         e-codes only. 
  fees                          for vouchers, cards 
                                and e-codes. 
                              ----------------------------  ------------------------ 
 Deferred revenue for          Presented as deferred         Not deferred. 
  multi-retailer redemption     income in the Statement 
  products - breakage           of Financial Position 
                                for vouchers, cards 
                                and e-codes. 
                              ----------------------------  ------------------------ 
 Discounts                     Discounts form part           No change. 
                                of the transaction 
                                price and are therefore 
                                presented as deductions 
                                from revenue in the 
                                Statement of Profit 
                                or Loss. 
                              ----------------------------  ------------------------ 
 Deferred discounts            Netted against deferred       Netted against deferred 
  for multi-retailer            income in the Statement       income for cards and 
  redemption products           of Financial Position         e-codes only. 
                                for vouchers, cards 
                                and e-codes. 
                              ----------------------------  ------------------------ 
 Agents' commission            Incremental cost of           No change. 
                                obtaining customer 
                                contracts, presented 
                                in cost of sales in 
                                the Statement of Profit 
                                or Loss. 
                              ----------------------------  ------------------------ 
 Deferred agents' commission   Commission costs for          Not deferred. 
  for multi-retailer            multi-retailer redemption 
  redemption products           products are included 
                                in prepayments in 
                                the Statement of Financial 
                                Position 
                              ----------------------------  ------------------------ 
 

Prepaid costs and deferred income are not discounted to take into account the expected timing of redemption as the impact is not considered to be material. This is due to the fact that over 90 per cent of multi-retailer redemption products are redeemed within 12 months of issue.

Contract balances

Trade Receivables

A receivable represents the group's right to an amount of consideration that is unconditional (ie only the passage of time is required before payment of that consideration is due).

Contract Liabilities

A contract liability is the obligation to transfer goods or services to a customer for which the group has received consideration (or an amount of consideration is due) from the customer. Contract liabilities are presented as deferred income within trade and other payables.

Billings

Billings represents the value of goods and services shipped and invoiced to customers during the year and is recorded net of VAT, rebates and discounts. Billings is an alternative performance measure, which the directors believe provides a more meaningful measure of the level of activity of the group than revenue. This is due to revenue from multi-retailer redemption products being reported on a 'net' basis, whilst revenue from single retailer redemption products and other goods are reported on a 'gross' basis.

The reconciliation between billings and revenue is as follows:

 
                                                    2019        2018 
                                                 GBP'000     GBP'000 
--------------------------------------------  ----------  ---------- 
 Billings                                        426,901     412,786 
 Multi-retailer redemption products - gross 
  to net revenue recognition                   (315,305)   (301,271) 
 Timing of revenue recognition                   (1,202)       (461) 
--------------------------------------------  ----------  ---------- 
 Revenue                                         110,394     111,054 
--------------------------------------------  ----------  ---------- 
 

Financial instruments (selected policies where changed)

Financial assets and liabilities are recognised in the group's statement of financial position when the group becomes party to the contractual provisions of the instrument.

Financial assets

Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the group's business model for managing them.

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are 'solely payments of principal and interest (SPPI)' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.

The group's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

The group only holds financial assets that are classified as loans and receivables and are measured at amortised cost. The group measures financial assets at amortised cost if both of the following conditions are met:

-- The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows, and

-- The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding

Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the group's statement of financial position) when:

-- The rights to receive cash flows from the asset have expired; or

-- The group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either:

(a) the group has transferred substantially all the risks and rewards of the asset, or

(b) the group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the group continues to recognise the transferred asset to the extent of its continuing involvement.

Trade and other receivables

For trade and other receivables the group applies the simplified approach permitted by IFRS9, with lifetime expected credit losses (ECLs) recognised from initial recognition of the receivable. These assets are assessed based on the group's historical credit loss experience adjusted for forward looking information. The group uses historical trends to then apply this to an assessment of the likely credit losses in the future. The group's experience has shown that aging of receivable balances is primarily due to normal collection process issues rather than increased likelihood of non-recoverability, and therefore IFRS9 has had an immaterial impact on the group's financial performance or position. At each reporting date, management reviews the carrying amount of its receivables to determine whether there is any indication that those assets had suffered an impairment loss.

In respect of receivables from subsidiaries, management's assessment of the impact of IFRS9 has focused on the change in IFRS9 around ECLs on intercompany balances. The loans to the subsidiary companies are classified as repayable on demand. Management have considered the probability of default, the loss given default, when the borrower is not capable of repaying on demand, and the discount rate when calculating ECLs. As the intercompany loans have no terms and the company expects a full recovery of the loan, there is no credit loss per time value lost. Therefore no ECLs have been recognised on intercompany balances.

Provisions

Unredeemed vouchers and cards

Unredeemed vouchers and unspent balances on flexecash(R) cards and e-codes where the cardholder does not have the right of redemption (corporate gifted cards), are included at their present value at the date of recognition. This comprises the anticipated amounts payable to retailers on redemption, after applying an appropriate discount rate to take into account the expected timing of payments. Anticipated payments to retailers are assessed by reference to historical data as to voucher and card redemption rates and timings. The key estimates used in deriving the provision include the future service fees paid by retailers, interest rates used for discounting and the timing and amount of the future redemption of vouchers and cards. The future cash payments are discounted as required under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as the amounts are considered to be material. The service fee and breakage revenue associated with multi-retailer redemption products is deferred as described in the revenue recognition accounting policy.

   (5)   Key judgements and estimates 

The preparation of financial statements in conformity with IFRS requires the use of estimates and judgements that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. New judgements and estimates for the year to 31 March 2019 are shown below.

Judgements

In applying the accounting policies, management has made the following judgements:

Revenue

In applying the principles of IFRS15, management have considered whether the group is a principal or agent when it supplies multi-retailer redemption products. Having assessed the nature of the group's contractual relationships with retailers, the directors have concluded that the group acts as an agent in exchange for a service fee as it does not control the transfer of goods or services by the retailer to the product holder upon redemption. This results in 'net' revenue recognition as described in the revenue recognition accounting policy.

For cardholder fees and breakage associated with multi-retailer redemption products, the group acts as a principal in its contractual relationship with the product holders. This results in 'gross' revenue recognition as described in the revenue recognition accounting policy.

Under IFRS15, entities are required to disclose disaggregated revenue information to illustrate how the nature, amount, timing and uncertainty about revenue and cash flows are affected by economic factors. Management have considered this requirement and have disclosed information with regard to type of good or service, market or type of customer, timing of transfer of goods or services and geographical region. Management believe that this level of disaggregation is sufficient to satisfy the disclosure requirements of the standard.

Unredeemed cards

The directors have assessed the features of the group's multi-retailer redemption products and concluded that unredeemed balances on corporate gifted cards do not meet the definition of a financial liability within the scope of IFRS9. This is because the cards have expiry dates after which the card cannot be redeemed. The cards can also be redeemed with the group for certain goods or services and cannot be redeemed in cash. As a result, the liabilities relating to these products are not within the scope of IFRS9 and are instead measured in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Land and buildings

Subsequent to an assessment of the value of the Valley Road property conducted in early 2019 an assessment was made whether the property asset was an asset held for sale at 31 March 2019. As the sale of the property is not considered to be highly probable within 12 months, the property will continue to be classified as property, plant and equipment within non-current assets and impaired to the level of the current valuation indication.

Estimates

The key assumptions and other sources of estimation uncertainty at the reporting date are described below:

Breakage

For multi-retailer redemption products where the end user has no right of redemption (corporate gifted cards), the group may expect to earn a breakage amount. In order to calculate the expected breakage amount, the group estimates how many products will be fully redeemed and how many will be partially redeemed. For those which are partially redeemed, the group estimates projected balances remaining on the products at expiry. Historical data and current trends regarding patterns of redemption and expiry are used to prepare the estimates. As redemption behaviour may differ by market, historical data and current trends are reviewed at this level. If the expected level of breakage were to change by 0.1 per cent, the impact on revenue for the reporting period would be GBP0.2m. Management have considered the sensitivity of this estimate and do not foresee that any likely change to the estimate will have a material impact on either the level of deferred income held in the statement of financial position or the amount of revenue for the reporting period.

Deferred income - Love2shop voucher redemption timing

Revenue for multi-retailer redemption products is recognised in proportion to actual redemption timing, generating deferred income balances until the point of redemption. For Love2shop vouchers, there is a time delay between the point of redemption and when they are physically returned to the group for validation and accounting purposes. To negate the effects of this delay, an adjustment is made at the end of the reporting period, which estimates the value of vouchers already redeemed but not yet returned to the group and records the associated revenue. Historical data over a number of years and current trends are used to prepare the estimate. Management have considered the sensitivity of this estimate and do not foresee that any likely change to the estimate will have a material impact on either the level of deferred income held in the statement of financial position or the amount of revenue for the reporting period.

Property, plant and equipment - Value of Valley Road site

In December 2018 Park Group plc announced their intention to relocate the majority of their operations from the current site in Valley Road, Birkenhead to a modern city centre location in Liverpool. Subsequent to this, Glenbrook Property made an assessment of the value of the site. This took into account an assessment of the worth at sale, as well as the likely rental for spaces retained by Park and an assessment of the vacant space. This assessment has now been completed and the value of the site has been impaired to GBP5.0m, which is management's best estimate of market value. Any differences to this estimate may necessitate a material adjustment to the value of the property, plant and equipment held in the statement of financial position.

   (6)   Segmental analysis 

The Group's operations are divided into two principal operating segments:

-- Consumer - which represents sales to consumers, utilising the Group's Christmas savings offering and our website, highstreetvouchers.com; and

-- Corporate - comprising sales to businesses, offering primarily sales of the Love2shop voucher, flexecash(R) cards, Mastercards and e-codes in addition to other retailer vouchers.

All other segments are those items relating to the corporate activities of the group which it is felt cannot be reasonably allocated to either business segment.

The amount included within the other segments/elimination column reflects products sold by the corporate segment to the consumer segment. They have been included in other segments/elimination so as to show the total revenue for both segments.

Finance income, finance costs and taxation are not allocated to individual segments as they are managed on a group basis.

 
                                             All other                                       All other 
                                             segments/      2019                             segments/   Restated*2018 
                   Consumer   Corporate    elimination     Total   Consumer   Corporate    elimination           Total 
                    GBP'000     GBP'000        GBP'000   GBP'000    GBP'000     GBP'000        GBP'000         GBP'000 
 Billings 
 External 
  billings          232,096     194,805              -   426,901    232,635     180,151              -         412,786 
 Inter-segment 
  billings                -     134,714      (134,714)         -          -     140,751      (140,751)               - 
                  ---------  ----------  -------------  --------  ---------  ----------  -------------  -------------- 
 Total billings     232,096     329,519      (134,714)   426,901    232,635     320,902      (140,751)         412,786 
                  ---------  ----------  -------------  --------  ---------  ----------  -------------  -------------- 
 
 Revenue 
 External 
  revenue            58,886      51,508              -   110,394     61,250      49,804              -         111,054 
 Inter-segment 
  revenue                 -      38,204       (38,204)         -          -      39,462       (39,462)               - 
                  ---------  ----------  -------------  --------  ---------  ----------  -------------  -------------- 
 Total revenue       58,886      89,712       (38,204)   110,394     61,250      89,266       (39,462)         111,054 
                  ---------  ----------  -------------  --------  ---------  ----------  -------------  -------------- 
 
 Inter-segment sales are entered into under normal arm's length commercial 
  terms and conditions. 
 Result 
 Segment 
  operating 
  profit/(loss)       6,809       7,789        (4,866)     9,732      7,246       6,700        (2,629)          11,317 
                  ---------  ----------  -------------  --------  ---------  ----------  -------------  -------------- 
 
 
 Finance income         1,572     1,274 
 Finance costs              -       (4) 
                     --------  -------- 
 Profit before 
  taxation             11,304    12,587 
 Taxation             (2,422)   (2,399) 
                     --------  -------- 
 Profit                 8,882    10,188 
                     --------  -------- 
 

* Revenue, operating profit, profit before taxation and profit have been restated for implementation of IFRS15, see revenue recognition accounting policy. As well as restating the prior year results for the effects of IFRS15, there has also been a movement from the corporate segment to the consumer segment in respect of the consumer element of our website highstreetvouchers.com. This movement amounted to GBP8,093,000 of billings, GBP2,649,000 of revenue and GBP68,000 of operating profit.

 
 (7) Taxation                                  Restated* 
                                        2019      2018 
                                     GBP'000    GBP'000 
 Charge for the year - current 
  and deferred                         2,422     2,399 
                                  ----------  ---------- 
 

Comments on the effective tax rate can be found in the Financial Review.

* Restated for implementation of IFRS15, see revenue recognition accounting policy

   (8)   Earnings per share 

The calculation of basic and diluted EPS is based on the profit on ordinary activities after taxation of GBP8,882,000 (2018 - GBP10,188,000) and on the weighted average number of shares, calculated as follows:

 
                                                 2019          2018 
 Basic EPS - weighted average number 
  of shares                               185,964,433   185,268,587 
 Diluting effect of employee share 
  options                                     112,540       601,293 
                                         ------------  ------------ 
 Diluted EPS - weighted average number 
  of shares                               186,076,973   185,869,880 
                                         ------------  ------------ 
 
   (9)   Impairment of property, plant and equipment 

In December 2018 Park Group plc announced their intention to relocate the majority of their operations from the current site in Valley Road, Birkenhead to a modern city centre location in Liverpool. Subsequent to this, Glenbrook Property made an assessment of the value of the site. This took into account an assessment of the worth at sale, as well as the likely rental for spaces retained by Park and an assessment of the vacant space. This assessment has now been completed and the value of the site has been impaired by GBP1.2m to GBP5.0m, which is management's best estimate of market value.

   (10)   Reconciliation of profit for the year to net cash inflow from operating activities 
 
                                                        Restated* 
                                                 2019        2018 
                                              GBP'000     GBP'000 
 Profit for the year                            8,882      10,188 
 
 Adjustments for: 
 Tax                                            2,422       2,399 
 Interest income                              (1,572)     (1,274) 
 Interest expense                                   -           4 
 Research and development tax credit             (54)       (121) 
 Depreciation and amortisation                  1,394       1,428 
 Impairment of property, plant and 
  equipment                                     1,210           - 
                                            ---------  ---------- 
 Impairment of goodwill                            17          17 
                                            ---------  ---------- 
 Profit on sale of other intangibles 
  and property, plant and equipment                 -         (1) 
 Increase in inventories                        (766)     (1,176) 
 Increase in trade and other receivables      (1,589)     (1,678) 
 (Decrease)/increase in trade and 
  other payables                                (877)       4,197 
 Increase in provisions                        10,274       1,848 
 Increase in monies held in trust            (12,259)     (3,974) 
 Decrease in retirement benefit 
  obligation                                    (215)       (676) 
 Translation adjustment                           (3)        (20) 
 Taxes paid on share-based payments             (116)       (851) 
 Share-based payments                             126         230 
                                            ---------  ---------- 
 Net cash inflow from operating 
  activities                                    6,874      10,540 
                                            ---------  ---------- 
 

* Restated for implementation of IFRS15, see revenue recognition accounting policy

   (11)   Responsibility Statement 

To the best of each director's knowledge:

 
 --   the financial statements, prepared in accordance with the 
       applicable set of accounting standards, give a true and fair 
       view of the assets, liabilities, financial position and profit 
       or loss of the Company and the undertakings included in the 
       consolidation taken as a whole; and 
 --   the management report includes a fair review of the development 
       and performance of the business and the position of the issuer 
       and the undertakings included in the consolidation taken as 
       a whole, together with a description of the principal risks 
       and uncertainties that they face. 
 

(12) The financial information set out above does not constitute the Group's statutory accounts for the years ended 31 March 2019 or 2018 but is derived from those accounts.

Statutory accounts for 2018 have been delivered to the registrar of companies. The auditor, Ernst & Young LLP, has reported on the 2018 accounts; the report (i) was unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The statutory accounts for 2019 will be delivered to the registrar of companies following the AGM. The auditors have reported on these accounts; their report is unqualified and does not include a statement under either section 498(2) or (3) of the Companies Act 2006.

The annual report will be posted to shareholders on or before 1 August 2019 and will be available from that date on the Group's website: www.parkgroup.co.uk.

-ends

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

FR ZMGMVZMKGLZZ

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June 12, 2019 02:00 ET (06:00 GMT)

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