4 December The Park Group Half Year Results & Strategy Update

Transcription

1 The Park Group Half Year Results & Strategy Update

2 Introductions Ian O Doherty CEO Tim Clancy CFO Stephen Miller CIO

3 Half Year Results & Strategy Update - context and objectives This is a changing business with: New leadership team New ambitions New opportunities Ours is a changing market place with: Greater competition Increasingly digital user expectations Greater online and mobile activity We have a strategic business enabling us to: Strengthen market position Take advantage of growth opportunities Ensure the business is fit for the future

4 Half Year Results to 30 September 2018

5 Financial highlights A good performance In line with expectations 3.3% Increase in customer billings to 109.0m (H1 2017: 105.5m) 27.4m Revenues* reflecting removal of low margin business (H1 2017: 30.6m) 1.5m Seasonal pre tax losses reduced despite 0.3m oneoff strategy fees (H1 2017: 1.9m loss) 1.05p 212.4m 175.4m 3.9m Interim dividend (H1 2017: 1.00p) Cash balances including trust cash (H1 2017: 199.6m) Average cash balances (H1 2017: 166.1m) Operating cash inflow (H1 2017: 20.9m outflow) * Adjusted for IFRS 15

6 Operational highlights Corporate and consumer businesses performed well, as expected New major retailer partnerships; gift vouchers now accepted by over 175 national brands in over 20,000 UK high street stores Strengthened the management team with appointments of Tim Clancy as Chief Financial Officer and Stephen Miller as Chief Information Officer Developed strategic business plan for the next stage of Park s growth; informed by in depth research Commenced initiatives under strategic plan including investing in IT infrastructure and team, enhancing HR policies, reviewing compensation and incentivisation, and undertaking our first employee engagement survey. Operational efficiency improvements already leading to an improved customer experience and enhanced margins

7 Consumer Corporate Segmental Overview 74.7m Billings up 1% - despite non-repeat of 6.3m of low margin intermediary product 20.6m Revenue* - despite non-repeat of low margin intermediary product 14% Increase in segmental profit to 2.4m - improved mix of higher margin products Shout! New social employee recognition system well received by corporate customers (H1 2017: 74.0m) (H1 2017: 24.8m) (H1 2017: 2.1m) 34.3m 6.8m 9% Billings up 9% - some growth but mainly earlier despatches Revenue* - up 17% reflecting earlier timing of despatches Reduction in seasonal segmental losses to 3.1m Extended self-service for Christmas savers (H1 2017: 31.4m) (H1 2017: 5.8m) (H1 2017: 3.4m) * Adjusted for IFRS 15

8 IFRS

9 Revenue from contracts with customers IFRS 15 creates a single source of revenue requirements for all entities in all industries and represents a significant change from legacy standards The new standard aims to remove reporting inconsistencies and provide better comparability across industries We have adopted a fully retrospective method applied to the start of the accounting period (1 st April 2018) with prior year comparatives restated for the previous five years IFRS principles Implications for Park Step 1 Identify the contract(s) with a customer Park acts as the Agent as it arranges for a customer to redeem a product at a Retailer (the Principal) Step 2 Identify the performance obligations in the contract The service of retailer redemption is a separately identifiable obligation to our customers Step 3 Determine the transaction price The transaction price for Park is the service fee received from a retailer net of discounts plus breakage. Breakage is variable consideration recognised when highly probable Step 4 Allocate the transaction price to the performance obligations in the contract Park offer a single performance obligation (redemption) within the customer contract. The transaction price is therefore allocated in full to that performance obligation Step 5 Recognise revenue when (or as) the entity satisfies a performance obligation Revenue will be recognised when the redemption activity at the retailer takes place. 9

10 Summary of changes Vouchers Current treatment IFRS15 Treatment Revenue Face value on despatch Service fee on redemption Discount Netted against revenue on despatch Netted against revenue on redemption Agents Commission Cost of sales as incurred Cost of sales on redemption Breakage Cost of sale on despatch Revenue on redemption Card Current treatment IFRS15 Treatment Service Fee Revenue Service fee on redemption Service fee on redemption Card Fee Revenue Card fees as levied Card fees as levied Discount Netted against revenue on redemption Netted against revenue on redemption Agents Commission Cost of sales as incurred Cost of sales on redemption Breakage (cards with no right of redemption) Breakage (cards with right of redemption) Revenue on load Fees recognised on and after expiry Revenue on redemption Fees recognised on and after expiry

11 The Numbers

12 Income statement ( m) H1 2018/19 Restated H1 2017/18 Billings Revenue Operating (loss)/profit Consumer (3.1) (3.4) 6.8 Corporate Central and property costs (1.6) (1.3) (2.6) Operating (loss)/profit (2.3) (2.6) 11.3 Interest (Loss)/profit before tax (1.5) (1.9) 12.6 Tax (2.4) Restated Year 2017/18 Pre IFRS 15 reported revenue of 296.2m Billings and revenue comparatives impacted by removal of low margin business Operating profitability improved as a result of improved mix and efficiencies Seasonal loss generated from Christmas Savers product Additional 0.3m strategy and research costs (Loss)/profit after tax (1.2) (1.6) 10.2 Interest receipts increased on (Loss)/earnings per share (basic) (0.67)p (0.84)p 5.50p higher cash balances Dividend per share 1.05p 1.00p Park Group 3.05p plc

13 Billings by product category ( k) 9% growth in multi retailer driven across both B2C and B2B sectors Billings k H1 H1 FY 2018/ /18 Variance 2017/18 Multi Retailer Redemption 92,008 84,323 7, ,096 Single Retailer Redemption 13,480 18,918 (5,438) 57,378 Other (product, FMI, hampers) 3,476 2,222 1,254 14,312 Single retailer billings down due to removal of low margin intermediary business Other product increase due to higher contract packing billings and FMI Continued improvement of mix towards higher margin card products Total 108, ,463 3, ,786 Higher volume of in-house code/virtual product Billings k H1 H1 FY Multi & Single Retailer redemption 2018/19 Mix % 2017/18 Mix % Variance 2017/18 Mix % Paper 50,199 48% 50,711 49% (512) 213,068 53% Card 48,773 46% 42,504 41% 6, ,556 42% Code/Virtual 6,516 6% 10,026 10% (3,510) 17,850 5% Total 105, ,241 2, ,474

14 Billings by market k Xmas savers billings ahead of last year due to timing Billings k H1 H1 FY Multi & Single Retailer Redemption 2018/ /18 Variance % var 2017/18 Consumer - Xmas Savers 33,294 30,923 2, % 214,219 Consumer - Other 2,313 2, % 6,006 Corporate - Employee benefits 8,884 7,460 1, % 17,461 Corporate - Staff Rewards 25,210 21,941 3, % 57,448 Corporate - Customer Incentives 17,054 13,801 3, % 32,194 Corporate - Intermediaries 18,733 27,056 (8,323) -30.8% 71,146 Total 105, ,241 2, % 398,474 Consumer sub-total 35,607 32,983 2, % 220,225 Corporate sub-total 69,881 70, % 178,249 Other consumer billings ahead by 12% due to direct HSV Staff rewards growth of 15% due to higher direct online volume Customer incentives growth of 24% due to impact of new clients won in prior year Intermediaries down due to increases in direct B2B business replacing lower margin business

15 Balance sheet m H1 2018/19 Restated H1 2017/18 Non-current assets Current assets Monies held in trust Cash and deposits Total assets Restated Current liabilities (252.2) (250.0) (142.6) Non-current liabilities (0.7) (0.8) (0.7) Net assets Year 2017/18 Current assets reduced due to lower stock of third party vouchers Timing on drawdown from trust reduces monies held in trust but increases cash and deposits ( 44m H vs 24m H1 2017) Retained earnings restated for IFRS 15 Share capital Share premium Retained earnings (2.8) (8.6) 4.2 Total shareholders equity

16 Continued growth in cash balances Cash graph m 5 year cash comparison m /19 Actual 17/18 Actual 16/17 Actual m 18/19 Actual 13/14 Actual Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 0 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Period end total cash: 212.4m vs 199.6m Average Cash: 175.4m vs 166.1m Peak cash 18/ m 13/ m

17 Cash flow m H1 2018/19 H1 2017/18 Year 2017/18 Net cash generated from/(used in) operations 4.1 (20.2) 10.5 Interest received Tax paid (0.8) (1.3) (2.5) Net cash generated from/(used in) operating activities 3.9 (20.9) 9.3 Purchase of intangible assets (0.3) (0.3) (0.4) Purchase of property plant and equipment (0.2) (0.3) (0.7) Proceeds of exercise of share options Dividends paid (5.3) (4.5) (5.4) Net (decrease)/ increase in cash (1.7) (26.0) 2.8 Opening cash Closing cash Deposits Trust cash Total Group Cash flow impacted by timing of trust drawdown, extra 20m taken from the trust as at 30 th September but this reversed in October.

18 Full year guidance Underlying trading expected to remain strong Seasonality in revenues typically reflected in c.25% H1 : 75% H2 weighting Profitability to continue to benefit from change in mix: Away from low margin intermediary product Towards multi-retailer product Towards card and digital IFRS 15 has a limited impact on profits; no change in the business model profitability, customer billings or cash flow Costs relating to research and strategy development being incurred

19 Summary

20 Outlook maintaining momentum Outlook for underlying trading for full year unchanged Order book ahead of comparative period: Christmas savings order book broadly stable year on year, consistent with our June expectation Corporate business expected to be ahead of last year Strong platform and strengthened team in place to deliver another positive financial performance this year, whilst initiating the strategic plan Strategic plan expected to enhance our future opportunities and prospects and accelerate our future growth trajectory