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Research: Financials
Park Group’s AGM statement says that trading in the first five months of the current financial year has been in line with management expectations and provides an update on implementation of the strategic business plan aimed at boosting medium-term growth. Shareholders also approved changing the name of the group to Appreciate Group, which the board believes will better reflect the company’s product and market position as an innovative payments, savings and rewards provider.
Park Group |
Trading in line and implementing strategic plan |
AGM and name change |
Financial services |
25 September 2019 |
Share price performance
Business description
Next events
Analysts
Park Group is a research client of Edison Investment Research Limited |
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Park Group’s AGM statement says that trading in the first five months of the current financial year has been in line with management expectations and provides an update on implementation of the strategic business plan aimed at boosting medium-term growth. Shareholders also approved changing the name of the group to Appreciate Group, which the board believes will better reflect the company’s product and market position as an innovative payments, savings and rewards provider.
Year end |
Billings* |
Revenue |
Adj. PBT** |
EPS*** |
DPS |
P/E |
Yield |
03/18 |
412.8 |
111.1 |
12.6 |
5.5 |
3.05 |
9.9 |
5.6 |
03/19 |
426.9 |
110.4 |
12.5 |
4.8 |
3.20 |
11.3 |
5.9 |
03/20e |
442.5 |
113.8 |
11.8 |
5.1 |
3.20 |
10.6 |
5.9 |
03/21e |
462.5 |
117.5 |
13.3 |
5.8 |
3.35 |
9.4 |
6.2 |
Note: *Billings is a non-statutory measure of sales defined as the face value of voucher sales and the amount of value loaded onto prepaid cards, less any discount given to customers. **PBT is adjusted for exceptional items. ***EPS is fully diluted on a statutory basis.
Trading in line with expectations
Trading in the current year is in line with previous guidance, with continued growth in the corporate business and a stable performance in the Christmas savings market. We are making no changes to the estimates set out in our July 2019 report, which look for further billings growth but for the net investment costs related to the implementation of the strategic business plan to negatively affect FY20e PBT by a net c £2.0m. Our FY21 forecast includes reduced net investment costs and further top-line growth, but does not capture the medium-term strategic business plan benefits. Management targets P&L benefits of £2–5m pa after FY21.
Investing for faster medium-term growth
The AGM was held at the group’s new offices in Chapel Street, in the centre of Liverpool, to which the group relocated its core operations last week. The move to ‘fit for purpose’ new offices is one element in the strategic plan, which aims to build existing strengths and market positioning to accelerate growth and improve efficiency by enhancing its products, providing product and branding clarity, and investing in its core infrastructure with a particular focus on increased digitalisation. Park says it is making good progress on rationalising its brand architecture and implementing its technology upgrades, and that work on the planned new digitally optimised product, targeting currently untapped areas of the gift voucher market, is showing encouraging progress. A further update on the product as well as a launch date will be provided later in the year.
Valuation: Attractive yield and medium-term growth
Our modified DCF valuation, incorporating a two-stage, long-term growth assumption to capture the benefits of the strategic investment, is unchanged at 90p. With near-term earnings suppressed by investment spend, the implied CY20e P/E at 90p is 18.0x and CY21e 16.2x, which we believe is reasonable in a peer group context.
Exhibit 1: Financial summary
Year end 31 March |
£'000s |
2015 |
2016 |
2017 |
2018 |
2019 |
2020e |
2021e |
PROFIT & LOSS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|
Consumer billings |
196,796 |
208,352 |
216,771 |
232,635 |
232,096 |
232,185 |
235,562 |
|
Corporate billings |
176,091 |
176,679 |
187,741 |
180,151 |
194,805 |
210,275 |
226,977 |
|
Total Billings |
|
372,887 |
385,031 |
404,512 |
412,786 |
426,901 |
442,460 |
462,539 |
Revenue |
|
85,769 |
100,556 |
119,637 |
111,054 |
110,394 |
113,802 |
117,544 |
Cost of sales |
(59,193) |
(72,030) |
(89,944) |
(79,628) |
(79,117) |
(80,427) |
(82,435) |
|
Gross profit |
26,576 |
28,526 |
29,693 |
31,426 |
31,277 |
33,375 |
35,108 |
|
Gross margin as % billings |
7.1% |
7.4% |
7.3% |
7.6% |
7.3% |
7.5% |
7.6% |
|
Distribution costs |
(2,761) |
(2,909) |
(2,940) |
(3,002) |
(2,934) |
(3,009) |
(3,099) |
|
Administrative expenses excluding depreciation & amortisation |
(14,914) |
(15,176) |
(16,348) |
(15,702) |
(16,007) |
(18,970) |
(18,470) |
|
EBITDA |
|
8,901 |
10,441 |
10,405 |
12,722 |
12,336 |
11,396 |
13,539 |
Depreciation & amortisation |
0 |
0 |
0 |
(1,405) |
(1,394) |
(1,230) |
(1,930) |
|
Operating profit before exceptional items |
|
8,901 |
10,441 |
10,405 |
11,317 |
10,942 |
10,166 |
11,609 |
Exceptional items |
0 |
0 |
0 |
0 |
(1,210) |
0 |
0 |
|
Operating profit |
|
8,901 |
10,441 |
10,405 |
11,317 |
9,732 |
10,166 |
11,609 |
Net Interest |
1,245 |
1,457 |
1,470 |
1,270 |
1,572 |
1,616 |
1,690 |
|
Profit Before Tax & exceptional items |
|
10,146 |
11,898 |
11,875 |
12,587 |
12,514 |
11,782 |
13,299 |
Profit before tax |
|
10,146 |
11,898 |
11,875 |
12,587 |
11,304 |
11,782 |
13,299 |
Tax |
(2,284) |
(2,177) |
(2,361) |
(2,398) |
(2,422) |
(2,239) |
(2,527) |
|
Profit after tax (IFRS) |
|
7,862 |
9,721 |
9,514 |
10,189 |
8,882 |
9,543 |
10,772 |
Average number of shares (m) |
182.5 |
183.7 |
183.9 |
185.3 |
186.0 |
186.3 |
186.3 |
|
Fully diluted average number of shares (m) |
184.7 |
187.2 |
187.2 |
185.9 |
186.1 |
187.3 |
187.3 |
|
Basic EPS - IFRS (p) |
|
4.3 |
5.3 |
5.2 |
5.5 |
4.8 |
5.1 |
5.8 |
Fully diluted EPS - IFRS (p) |
|
4.3 |
5.2 |
5.1 |
5.5 |
4.8 |
5.1 |
5.8 |
Dividend per share (p) |
2.40 |
2.75 |
2.90 |
3.05 |
3.20 |
3.20 |
3.35 |
|
Pay-out ratio |
55.7% |
52.0% |
56.1% |
55.4% |
67.0% |
62.5% |
58.0% |
|
BALANCE SHEET |
||||||||
Non-current assets |
|
13,924 |
13,749 |
14,399 |
14,868 |
12,606 |
16,626 |
11,396 |
Goodwill |
1,320 |
1,320 |
2,202 |
2,185 |
2,168 |
2,168 |
2,168 |
|
Other intangible assets |
3,168 |
3,036 |
2,682 |
2,278 |
2,295 |
5,195 |
5,395 |
|
Property, plant, & equipment |
8,143 |
8,003 |
7,688 |
7,684 |
6,216 |
7,336 |
1,906 |
|
Retirement benefit asset |
1,293 |
1,390 |
1,827 |
2,721 |
1,927 |
1,927 |
1,927 |
|
Other non-current assets |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
Current assets |
|
107,095 |
119,496 |
129,322 |
142,423 |
153,475 |
157,942 |
173,928 |
Inventories |
3,186 |
2,182 |
2,632 |
3,808 |
4,574 |
4,737 |
4,905 |
|
Trade & other receivables |
11,309 |
8,860 |
9,236 |
10,917 |
12,582 |
13,274 |
13,876 |
|
Monies held in trust |
65,728 |
75,219 |
83,018 |
86,992 |
99,251 |
106,211 |
112,857 |
|
Cash & equivalents |
26,333 |
32,735 |
34,236 |
40,311 |
36,868 |
33,520 |
42,089 |
|
Other current assets |
539 |
500 |
200 |
395 |
200 |
200 |
200 |
|
Current liabilities |
|
(121,545) |
(128,164) |
(133,789) |
(142,604) |
(148,818) |
(153,725) |
(159,765) |
Trade & other payables |
(77,688) |
(83,135) |
(87,201) |
(94,592) |
(89,952) |
(92,917) |
(96,208) |
|
Tax payable |
(671) |
(262) |
(424) |
0 |
(580) |
(580) |
(580) |
|
Provisions |
(43,186) |
(44,767) |
(46,164) |
(48,012) |
(58,286) |
(60,228) |
(62,976) |
|
Non-current liabilities |
|
(2,907) |
(1,881) |
(1,118) |
(662) |
(553) |
(553) |
(553) |
Deferred tax liability |
(273) |
(181) |
(194) |
(662) |
(553) |
(553) |
(553) |
|
Retirement benefit obligation |
(2,634) |
(1,700) |
(924) |
0 |
0 |
0 |
0 |
|
Net assets |
|
(3,433) |
3,200 |
8,814 |
14,025 |
16,710 |
20,290 |
25,006 |
Minorities |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
Shareholders' equity |
|
(3,433) |
3,200 |
8,814 |
14,025 |
16,710 |
20,290 |
25,006 |
CASH FLOW |
||||||||
Operating Cash Flow |
14,106 |
12,184 |
9,603 |
10,540 |
6,874 |
8,488 |
12,162 |
|
Net interest |
1,176 |
1,339 |
1,539 |
1,267 |
1,497 |
1,616 |
1,690 |
|
Tax paid |
(2,132) |
(2,490) |
(2,258) |
(2,537) |
(1,576) |
(2,239) |
(2,527) |
|
Capex |
(597) |
(1,126) |
(717) |
(1,020) |
(1,152) |
(5,250) |
(1,700) |
|
Acquisitions/disposals |
41 |
52 |
(875) |
1 |
0 |
0 |
5,000 |
|
Dividends paid |
(4,198) |
(4,380) |
(5,052) |
(5,370) |
(5,668) |
(5,963) |
(6,056) |
|
Other |
0 |
0 |
305 |
0 |
345 |
0 |
0 |
|
Net cash flow |
8,396 |
5,579 |
2,545 |
2,881 |
320 |
(3,348) |
8,569 |
|
Opening net (debt)/cash |
14,842 |
23,238 |
28,817 |
31,362 |
34,243 |
34,563 |
31,215 |
|
Closing net (debt)/cash |
|
23,238 |
28,817 |
31,362 |
34,243 |
34,563 |
31,215 |
39,784 |
Overdraft |
3,095 |
3,918 |
2,874 |
6,068 |
2,305 |
2,305 |
2,305 |
|
Closing net (debt)/cash as per balance sheet |
|
26,333 |
32,735 |
34,236 |
40,311 |
36,868 |
33,520 |
42,089 |
Source: Park Group, Edison Investment Research
|
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