Park Group plc Annual Report and Accounts Annual Report 2013

More Choice More Customers More Channels Park Group plc Annual Report and Accounts 2013 Welcome Park Group plc is the UK’s leading multi-redemption voucher and prepaid gift card business focused on the corporate and consumer markets. Sales are generated through agents, our direct sales force and the internet.

Contents Company Overview Financial Statements 2013 Financial highlights 1 Consolidated Income Statement 29 At a glance 2 Consolidated Statement of How we operate 4 Comprehensive Income 29 Our strategy 6 Statements of Financial Position 30 Key performance indicators 8 Consolidated Statement of Business Review Changes in Equity 31 Chairman’s statement 9 Company Statement of Chief Executive’s review 10 Changes in Equity 32 Financial review 14 Statements of Cash Flows 33 Risk factors 16 Accounting Policies 34 Board of directors 18 Notes to the Accounts 39 Notice of Meeting 63 Corporate Governance Directors and Advisers 64 Directors’ Report 20 Corporate Governance 21 Remuneration Report 25 Independent Auditor’s Report 28 Group billings (£m) 2013 Financial highlights £352.0m (2012 – £329.0m) 352.0 Billings increased 7 per cent to 329.0 297.6 £352.0m 250.5 263.2 (2012 – £329.0m)

2009 2010 2011 2012 2013 Profit before tax rose 11 per cent to Profit before taxation and other operating income (£m) £9.5m £9.5m (2012 – £8.6m) 9.5 (2012 – £8.6m) 8.6 7.0 Finance income of 6.2 £2.0m 5.3 2009 2010 2011 2012 2013 (2012 – £1.7m)

Dividend for year lifted 5 per cent to Dividends per share (p) 2.10p (2012 – 2.00p) 2.10 2.00 2.10p 1.70 (2012 – 2.00p) 1.32 1.32

Total cash balances peaked at £170m 2009 2010 2011 2012 2013 (2012 – £152m) Total adjusted basic earnings per share (p) 4.58p (2012 – 3.91p) Online orders over 4.58 3.91 3.17 £122m 2.44 (2012 – £100m) 2.14

2009 2010 2011 2012 2013

Park Group plc — Annual report and accounts 2013 01 Serving our customers The success we enjoy is against a backdrop of high levels of customer service, strong financial control, innovative marketing and investment in technology.

Corporate We are one of the largest providers of incentive and reward solutions in the UK, providing market leading products for well over 20 years. • A number of new retail brands were secured during the year, including Edinburgh Woollen Mill, Euronics, Oasis, The Perfume Shop, The Works and Warehouse • Billings increase 7.6 per cent to £152.6m • Operating profit increases to £5.0m • Incentive and reward billings up by 5.1 per cent to £90m • New product launches of Everyday Benefits and flexecodes • Developments in charities sector • Online sales rise by 24 per cent c 900 Corporate users of flexecash® Billings £152.6m Revenue £95.5m Operating profit £5.0m

Brands

02 Park Group plc — Annual report and accounts 2013 Consumer Uncertainty on the high street, but the Christmas prepayment business had another good year. • Billings up 6.5 per cent to £199.4m • Operating profit up 19.8 per cent to £5.5m • Average customer order increases to £430 from £416 • UK and Ireland agents total 122,000 (2012 – 114,000) • Orders for Christmas booked via the internet now 41 per cent of total (Christmas 2011 – 37 per cent) • Online gift card and voucher retailer, highstreetvouchers.com experienced sales growth of 26 per cent to £13.5m c 423,000 Customer numbers Billings £199.4m Revenue £183.5m Operating profit £5.5m

Brands

Park Group plc — Annual report and accounts 2013 03 How we operate

Our business model

Retail Partners

Products and Services

Vouchers and Cards Other Products £336m £16m

Channels

Consumer Corporate B2C Online B2B

Over 1 Million Customers

04 Park Group plc — Annual report and accounts 2013 Delivering choice

Brands and retail partners 90+ High street retailers 20,000 Retail outlets 1 million customers

Park Group plc — Annual report and accounts 2013 05 Our strategic priorities Our strategy is focused on generating growth from our principal corporate and consumer markets through innovation and by harnessing the power of the internet to deliver new products to our customers backed by outstanding service.

Enhance our retailer proposition We must continue to evolve our offer so that we maintain and enhance the choice of retailers available to our customers

• Increase range of redeemers of Love2shop and flexecash® • Improve awareness of Love2shop and flexecash® brands

Develop and exploit our infrastructure We have invested significantly in our infrastructure. We need to continue to develop to maintain our growth

06 Park Group plc — Annual report and accounts 2013 Grow our multichannel offering Increase customer engagement and develop new customer touch points

• Improve online offering • Develop mobile products

Expand our customer base We aim to grow market share and reach more customers

• Improve and develop our Park Christmas prepayment offering • Increase the number of customers using our products under our Love2reward brand

Park Group plc — Annual report and accounts 2013 07 Key performance indicators

Corporate Consumer

Number of customers (000’s) Number of customers Uk and Ireland (000’s) 6,537 (2012 – 6,100) 433,000 (2012 – 425,000)

6,537 432 425 433 6,100 400 410 5,337 5,600 4,354

2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Billings growth (£m) Average order value (£) £152.6m (2012 – £141.8m) £430 (2012 – £416)

152.6 430 141.8 401 416 375 123.7 374 107.2 85.0

2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Internet derived revenue (£m) Christmas order book (£m) £26.8m (2012 – £21.4m) £182.0m (2012 – £172.6m)

26.8 182.0 172.6 162.1 164.5 21.4 150.5

15.2

8.7 6.0 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

08 Park Group plc — Annual report and accounts 2013 Chairman’s statement

Our business divisions each delivered an improved performance from their diverse customer groups. The corporate business provides its thousands of customers with ranges of products and services, often tailor-made to match individual requirements. Park has developed an extensive range of employee benefit and voluntary contribution schemes, which allow companies to reward and incentivise staff through the provision of discounted access to retail outlets. The business was built on the supply of paper vouchers, either Park’s leading Love2shop brand or those of individual stores redeemable at their outlets. The introduction of our flexecash® prepaid card has had a very significant and positive effect, helping to create many exciting new growth opportunities.

The consumer business, which specialises in Christmas clubs and was started in 1967, continues to perform well. It allows customers to order from Park’s catalogues and pay for products over a 45 week period, spreading the cost of Christmas over small weekly instalments, meaning Introduction our customers have peace of mind when Christmas approaches, despite I am pleased to report another good year for Park Group and we have the economic conditions they may face. delivered a positive set of results with significant advances across all our business sectors. Park’s principal markets are linked to retail activity and Strategy consumer spending; areas which have been subdued for some years as Park’s strategy is consistent and clear. The company is a UK based the UK economy delivers negligible economic progress. Park has again business which utilises communication technologies, principally the demonstrated great resilience in overcoming these external pressures to internet, mobile smart telephony and social media, to offer customers a generate further solid growth. range of incentive, reward and Christmas products, backed by the highest levels of service. In addition, we have an impressive and Financial performance successful record of innovation and development, always seeking to Group profit before taxation for the year to 31 March 2013 increased by devise new products and services for our customers, and striving to reach 11.1 per cent to £9.5m (2012 – £8.6m). Finance income was higher at new users and markets. £2.0m (2012 – £1.7m) as total cash balances increased, peaking at £170m (2012 – £152m), reflecting the level of trading activity, although overall Park is a market leader in the UK and in 2010 moved into the Republic of returns on cash remain very low. Park’s cash management strategy is very Ireland via the acquisition of a Christmas prepayment business, which conservative and is aimed at generating a return commensurate with offers access to new markets. This year we have tailored our proposition minimising risk. further, following market research, to suit the local market in that country. This strategy has been effective and was reflected in double digit order Customer billings increased 7.0 per cent to £352.0m (2012 – £329.0m) growth for Christmas 2013. while revenue was unchanged at £279.0m (2012 – £279.0m). We recognise customer billings as a more appropriate KPI and indicative Employees and board measure of activity than revenue, which is linked to the introduction of Park’s success is a reflection of its people. They are motivated by a desire Park’s flexecash® prepaid card in June 2010, where revenue is recorded to deliver excellence to customers, value to shareholders and to build a on a different basis than that for vouchers. The continued success of the business which is synonymous with quality, choice, innovation and card, along with the associated accounting treatment, will result in an success. Their commitment and dedication is greatly valued and increasing difference between reported revenue and billings. appreciated. The board proposes raising the final dividend by 5 per cent to 1.55p per The board of Park Group supports the general principles of the share (2012 – 1.475p) making a total dividend for the year of 2.1p per share Combined Code of Corporate Governance. In accordance with the (2012 – 2.00p). Park has a progressive dividend policy, with any increase principle concerning the reasonable tenure of independent directors, linked to cash generation and general business performance; it is Christopher Baker and George Marcall, our two longest serving pleasing to note that the total dividend has increased significantly over non-executive directors, who have each been on the board for 12 years, the last six years, reflecting the impressive progress of the company and will step down at the forthcoming AGM on 23 September 2013. I would its strong cash generating profile. Shareholder approval will be sought at like to take this opportunity to thank them both for their wise counsel the annual general meeting (AGM), to be held on 23 September 2013, to and the safe stewardship they have provided over that time. The pay the final dividend on 1 October 2013 to shareholders on the register recruitment process to appoint suitable replacement non-executive as at 30 August 2013. directors is well underway and Park will update the market as to succession in due course. Operating performance In past years, Park has maintained its performance during periods of Outlook economic difficulty as cautious customers take extra care with This has been another good set of results and the early indications for the preparations for the festive season. There is clear evidence that the low current year are positive. Park continues to build on the leading market growth economic environment, which has been with us for a number positions of its operations serving the consumer and corporate sectors, of years, is affecting consumer spending patterns and has contributed delivering high levels of service backed by product innovation and to the failure of a number of well known high street retailers. These investment. The economic outlook remains flat with continuing pressure problems have had an understandable impact on consumer and on interest rates, but we look forward with confidence, focused on corporate confidence and Park has addressed this through innovative delivering another sound performance for all our stakeholders. marketing; increasing the variety and extent of its product ranges; improving the diversity of retailer options for customer redemption; and excellent customer relations. No business is immune from external Peter Johnson factors, but it is encouraging that to date Park has been able to mitigate Non-executive Chairman the situation effectively, as demonstrated by its level of profitability and 11 June 2013 cash generation.

Park Group plc — Annual report and accounts 2013 09 “The transformation of park over recent years has been very significant, driven by product innovation and the application of ever more sophisticated technology.” Chief Executive’s review

Park made further positive progress during the year under review; The pace of technological advancements is rapid and we are the company’s financial performance reflects the success of its meeting this challenge by, where appropriate, exploiting the latest business model and strategic development. Markets never stand developments to introduce new products and systems for our still and management must use its skill and experience to anticipate customers. Our research shows that the majority of enquiries and change and develop new products to address future trends. Park has new customers are driven by online activity including search engine an excellent record of development and innovation, which has led marketing, emails and social media. To support the ever growing to major changes in the way it conducts business. Over the past number of customers choosing to visit our websites on mobile decade we have fully utilised the opportunities afforded by the devices, we have also launched mobile versions of internet to transform the company. More recently, we have highstreetvouchers.com and Love2shop.co.uk. developed and introduced the highly successful flexecash® prepaid card which is driving further positive changes to our product Analysing the way visitors use our websites gives us important offering and service levels. information to help our marketing department respond to enquiries and tailor product offerings to match visitor interest. Our analysis can The success of the prepaid card has had a significant and growing also identify corporate website visitors and determine whether they impact on our financial performance, although revenue from the are new or already known to Park. There is no doubt that ecommerce prepaid card business is reported differently under IFRS policies. is a huge market opportunity which is growing apace, and Park is Revenue from the prepaid card range is only recognised when the working hard to remain at the forefront of this advance and capitalise card is used rather than when it is billed and this difference between on the opportunities it offers. billings and revenue will continue to widen as card sales grow. The total value of customer billings in the year to 31 March 2013 Social media allows users to create, share and exchange information increased to £352.0m, up from £329.0m in 2012, while reported and ideas in virtual communities and networks. Use of Park’s revenue was in line with last year at £279m. Facebook pages is growing encouragingly and they currently have a total of over 30,000 followers. The sites are important because they The flexecash® card already has close to 900 corporate users, with provide us with early indications of customer issues or concerns and £160m of value loaded across approximately 2.4m individual cards. allow us to respond quickly and appropriately to topics identified At its launch in 2010 there were just two types of card, which we through monitoring comments and chat. In many cases, it also have built up rapidly to a suite now comprising 24. flexecash® is enables customers to answer the questions of others, without Park’s meeting, and in many cases exceeding, our expectations and is intervention being necessary. The sites are also used to promote driving Park into new and exciting areas of business. specific products, post regular competitions and ask customers to recommend friends – all with the aim of increasing orders. The Park has developed successfully over the years because it has Facebook pages have already directly generated over £0.3m of embraced change and invested in technology to drive innovation. orders for Christmas 2013, and we expect this progress to continue. The exponential growth of the internet and the opportunities it offers have been grasped by Park and utilised to take the business Each year, Park’s promotional spend is carefully analysed and refined into new markets and product areas. Annual capital expenditure on and as a result certain elements are either cancelled or retargeted to information technology hardware is running at around £0.6m while ensure that we remain abreast of the latest techniques and the total IT spend, including specialist staff, is now close to £3.0m. applications. This ongoing research drives a process of continuous This is a major expense for a company of Park’s size but it represents improvement linked to financial effectiveness. The work covers all an essential investment in the future of the business and has already our businesses and helps to build a first class understanding of delivered numerous benefits. customers and markets.

10 Park Group plc — Annual report and accounts 2013 Excellent customer service is a major feature of Park’s operations Another new and exciting product launched during the year was and we are always examining ways to enhance our offering. flexecodes, which would not have been possible without the The introduction of direct debit helps customers to make regular development of our prepaid card system. flexecodes is the new payments and it also encourages them to remain loyal to Park. e-code and e-voucher scheme that lets staff or customers shop at Our research has shown that up to 98 per cent of direct debit a number of top brand websites including Amazon, iTunes, Lovefilm payers remain with the company for a number of years. The and many more. flexecodes provides a very attractive solution for number of customers paying by direct debit during the year many of the markets we operate in. It offers a fast, cost effective increased by 23.9 per cent to over 26,000. reward solution, with no postage or fulfilment costs and delivery is almost instantaneous. The network of retailers able to accept flexecash® continues to grow. The introduction of our own standalone, portable plug-and-play Charities are a particularly important market and we have built strong flexecash® terminal, (similar to that used in restaurants) which relationships with a number of the UK’s largest organisations. Using transacts directly with the company, has enabled independent Park’s flexecash® card, charities can target their grants for a specific end retailers to also accept flexecash® cards. use, which is much more effective than a cash payment. The card can be restricted to an application that meets the needs of the recipient so Park achieved accreditation for the globally recognised ISO 27001 that it cannot be misapplied. This targeting could be used, for example, standard during the year. Obtaining the standard will help assure for the purchase of clothing, food, books, learning aids etc. There are customers and business partners of the company’s continual thousands of charities in the UK which provide grants, so this sector is a development and maintenance of a robust information security major opportunity for flexecash® while also being of financial benefit to management system that is regularly audited and assessed. the charity. The card is also being used for the provision of some government funded grants to people in need. Corporate The business made further good progress under its Love2reward Personal contact is an essential feature of the division’s sales and brand, serving the circa £4bn UK voucher and gift card market. marketing programme, but increasingly customers are encouraged Total billings to corporate customers in the year to 31 March 2013 to manage their relationship with Park through its websites. The amounted to £152.6m, up 7.7 per cent, and operating profit increased many features of the sites allow customers to place orders, check to £5.0m. Sales to the incentive and reward sector increased by deliveries and obtain information about products and services. 5.3 per cent to £85m. Park’s Love2shop voucher is the UK’s largest During the year under review, online sales rose 24 per cent above multi-retailer gift voucher and is accepted by over 90 major retailers the level of the previous year, while the number of leads increased representing more than 20,000 branches. New retail brands secured by 3 per cent. The rate of conversion of these enquiries into orders during the year include Edinburgh Woollen Mill, Euronics, Oasis, The increased by an impressive 8 per cent compared with the Perfume Shop, The Works and Warehouse. previous year.

The corporate division offers an extensive portfolio of gift cards Consumer and vouchers, which are used by an ever increasing client base as There is no doubt that the UK consumer has been under increasing incentive and reward products. Our range is designed to give pressure over recent years from a combination of economic forces customers the flexibility to develop schemes tailor-made to their and some nervousness regarding the strength of the retail sector individual requirements. We are one of the largest providers of following the demise of some well known high street names. incentive and reward solutions in the UK, and have been offering This uncertainty has been exacerbated by the reluctance of some market leading reward and incentive products for well over 20 years. administrators to accept voucher/gift card redemptions. This economic pressure is unlikely to diminish in the current year. In 2011 we introduced a reloadable card for the employee benefits In the face of these forces it is particularly pleasing that, overall, market, which can be used in thousands of retail outlets. The card the Christmas prepayment business had another good year, with has been very well received and during the year under review we a particularly encouraging contribution from the Irish operation we built on that success by introducing the Everyday Benefits card, acquired in 2010. which offers a significant broadening of this concept in the voluntary benefits market.

Park Group plc — Annual report and accounts 2013 11 Chief Executive’s review continued

Billings increased by 6.5 per cent to £199.4m (2012 – £187.2m) while operating profit rose 19.8 per cent to £5.5m (2012 – £4.6m). The number of UK agents trading for last Christmas increased to 122,000 from 114,000 the previous year; customer numbers have risen to 423,000 from 415,000. Average customer order values increased to £430 from last year’s level of £416. Christmas hampers, which were the origin of Park in 1967, held sales value at a similar level to the previous year, and their share of total Christmas prepayments slipped below 5 per cent, reflecting the changing business mix.

Although the majority of customers prefer to deal with Park through an agent, a growing proportion, 16.4 per cent, preferred to buy direct for Christmas 2012. These direct customers are generally attracted to the company by its consumer marketing programmes, including TV advertising. Some satisfied direct customers go on to become agents and offer Park’s products to friends and family, while others take full advantage of today’s connected world and recommend to their friends and family to also trade directly with Park.

The Love2shop voucher continued to dominate sector sales, accounting for some 77 per cent, with the innovative flexecash® card representing around 10 per cent. This imbalance between the two forms of the Love2shop offering reflects the relatively conservative nature of prepayment customers and their preference for cash in hand. Nevertheless, as customers appreciate the card’s many features, its acceptance is rising and the share of sales is increasing.

Carefully researched and targeted TV advertising has again been at the heart of our Christmas marketing campaign. In the year under review we decided against using a celebrity to spearhead the campaign and redirected the savings to deliver a very successful series of targeted advertisements in the UK and Ireland, each tailor-made for its national market. The campaigns delivered an excellent response and confirmed the importance of separating the UK and Irish programmes.

Orders for Christmas booked via the internet increased again and now account for 41 per cent (2012 – 37 per cent) of the total, with 54 per cent of new customers ordering electronically. Currently 53 per cent of all orders being booked for Christmas 2013 are coming via the web, the first time that the majority of orders have been received this way.

12 Park Group plc — Annual report and accounts 2013 Marketing Christmas prepayments is a very sophisticated process that uses internet and social media technology to reach potential new customers and also to maintain links with existing users. In the last financial year the marketing department sent out over 7m emails as an essential element of the sales effort. Ask Wanda, the information question and answer section of the website, received 335,000 enquiries during the year, over 50 per cent above the level of the previous year. Wanda answers questions but also directs enquirers to relevant sections of the website in an interactive and helpful manner.

Our online gift card and voucher retailer, highstreetvouchers.com, delivered sales growth of 26 per cent, reaching £13.5m (2012 – £10.7m). This internet only business is very popular with customers as it gives them complete flexibility to interact with Park entirely at their own convenience. Revenue from international orders increased to £0.7m with the site now able to accept payment from 29 countries. This allows overseas customers to purchase vouchers and gift cards for family and friends in the UK. highstreetvouchers. com started some years ago as an extension of the Christmas prepayments operation, but today over 80 per cent of its billings are to corporate customers and the site has become a driver of further corporate enquiries. The website had around 2.3m visitors and processed around 115,000 orders in 2012/13, which leads to a 5 per cent order conversion, a very impressive figure for this type of business.

The transformation of Park over recent years has been very significant, driven by product innovation and the application of ever more sophisticated technology. Our businesses cover both the consumer and corporate sectors and we are also looking increasingly at opportunities for expansion into new markets. The economic outlook may be unclear and there is no doubt that many of our customers are under pressure, but we remain confident that Park will continue to address these issues and grow its business.

Chris Houghton Chief Executive Officer 11 June 2013

Park Group plc — Annual report and accounts 2013 13 “Total cash balances peaked at just over £170m in the year, representing an increase of £18m over last year” Financial review

Profit from continuing operations In the corporate business, customer billings have increased by 7.6 per The group’s continuing operations are divided into two operating cent in the year at £152.6m, with operating profit increasing by £0.1m. segments: Revenue, however, has declined by 8.8 per cent to £95.5m reflecting • consumer, which represents the group’s sales to consumers, the ongoing growth in the level of card billings, with card revenue utilising its Christmas savings offering and consumer sales via the generally recognised as the margin earned on the value of cards internet; and spent rather than customer billings. Billings growth resulted in an • corporate, comprising the group’s sales to businesses, offering additional £0.8m of profit but this was largely offset by increased primarily sales of the Love2shop voucher, flexecash® cards and staff and administration costs of £0.6m above last year. other retailer vouchers to businesses for use as staff rewards/ incentives, marketing aids and prizes. The increased costs of other segments of £0.4m reflects primarily an increase in professional fees of £0.3m. All other segments comprise central costs and property costs. Taxation Revenue and margin from sales of flexecash® cards is included in The effective tax rate for the year was 20.3 per cent (2012 – 24.1 per both operating segments. cent) of profit before tax.

Operating profit is detailed below: The low effective tax rate this year is due to adjustments to current tax in respect of prior years’ computations. 2013 2012 Change £’000 £’000 £’000 Last year we made a provision of £0.35m in respect of claims made Consumer 5,513 4,602 911 in respect of research and development expenditure. Following Corporate 5,038 4,940 98 discussions with HMRC we no longer consider that this provision is Other segments (3,054) (2,683) (371) necessary and this amount has been released to income. Operating profit 7,497 6,859 638 Earnings per share Operating profit for the year ended 31 March 2013 has increased by Basic earnings per share (eps) increased to 4.58p from 3.91p. £0.6m to £7.5m. Dividends In the consumer business, customer billings have increased by 6.5 The board has recommended an increase in the final dividend of per cent to £199.4m. Revenue has also increased by 5.3 per cent to 5.1 per cent to 1.55p per share. An interim dividend of 0.55p per share £183.5m. Operating profit at £5.5m has increased by £0.9m from was paid on 8 April 2013. Subject to approval of the final dividend £4.6m in 2011/12. The improved gross margin arising from customer at the AGM, the total dividend for 2013 will be 2.10p per share. billings was £0.4m with a further £0.5m of margin improvement from lower marketing expenditure on the 2013 Christmas campaign, when compared against prior year.

14 Park Group plc — Annual report and accounts 2013 Cash flows Accounting policies At the end of March 2013 £10.8m (2012 – £7.1m) of cash and cash Revenue recognition equivalents was held by the group with a further £0.5m (2012 Revenue from cards is recorded differently to revenue from paper –£2.1m) held as deposits with a maturity period of greater than three vouchers and is the margin earned based on customer billings, months but less than 12 months. In addition, £40.2m (2012 – £42.1m) recognised when the value loaded on the card has been redeemed. was held by the Park Prepayments Trustee Company Limited. The Where cards are sold to businesses for onward gifting to consumers trust holds payments received in respect of orders for delivery the with no right of redemption, revenue includes an estimate of following Christmas. The conditions for the release of this money projected balances remaining on the card at expiry. The amount to the group are detailed in the trust deed, which is available at included in this year’s income statement as revenue from flexecash® www.getpark.co.uk and summarised in note 15. In addition, at cards is £5.5m (2012 – £3.3m). 31 March 2013, the group held £8.1m (2012 – £4.8m) of cash in the Park Card Services Limited E money Trust (PCSET) to support the Pensions E money float in accordance with regulatory requirements. The group continues to operate defined benefit pension schemes, where pensions at retirement are based on service and final salary. The total amount of cash and deposits held by the group combined These schemes are now closed to future accrual of benefit arising with the monies held in trust has increased in the year to £59.6m from service with the group. The pension deficit based on the from £56.1m as at 31 March 2012. These total balances peaked at just valuation performed at 31 March 2013 has reduced to £0.3m over £170m in the year, representing an increase of £18m over last (2012 – £1.9m). year. The group had no bank borrowings in the period. Under IAS 19 Employee Benefits the group has recognised a cost During the year, the group invested a further £0.8m in improving of £46,000 (2012 – £123,000) in its income statement. It has also its customer facing systems, and a further £0.3m in associated recognised an actuarial gain in the statement of comprehensive computer hardware. income (SOCI) of £0.2m (2012 – loss of £0.3m) net of tax.

Interest income in the year improved to £2.0m from £1.7m for the In the year ended 31 March 2013, contributions by the company prior year, as the group took advantage of relatively attractive to the schemes totalled £1.4m (2012 – £0.7m). The latest actuarial short-term deposit rates in an otherwise depressed market for valuation performed as at 31 March 2010 indicated a technical deposits, when rates are viewed against those available in earlier provisions deficit of £3.3m and expected future company years. contributions of £0.7m per annum. In addition, in response to a request by the trustee of the schemes, a further amount of £0.7m Provisions in contributions was made by the group during the year. At the year end, provisions had reduced to £32.2m from £33.2m. This was due to a reduction in the value of unspent vouchers. These unspent vouchers arise primarily from sales in the corporate business. Included within provisions is an amount of £168,000 in Martin Stewart respect of future expected settlements of claims arising from the Group Finance Director mis-selling of payment protection insurance. The group ceased to 11 June 2013 sell this insurance in 2007 when it closed its loan broking business.

Park Group plc — Annual report and accounts 2013 15 Risk factors

Financial risks

Risk area Potential impact Mitigation

Group funding The group, like many other The group manages its capital to safeguard its ability to operate as a going companies, depends on its ability to concern. Whilst the group has net liabilities and net current liabilities, it has continue to service its debts as they access to funds for working capital from the Park Prepayment Protection fall due and to have access to Trust (PPPT) for a defined period in the year. This enables it to operate finance where this is necessary. without bank borrowings. 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.

Treasury risks The group has significant funds on The group treasury policy ensures that funds are only placed with and spread deposit and as such is exposed to between high quality counterparties and where appropriate any exchange interest rate risk, counterparty risk rate exposure is managed to minimise any potential impact. and exchange rate movements following the commencement of operations in Ireland.

Banking system Disruption to the banking system The group seeks wherever possible to offer the widest possible range would adversely impact on the of payment options to customers to reduce the potential impact of failure group’s ability to collect payments of a single payment route. from customers and could adversely affect the group’s cash position.

Pension funding The group may be required to The group’s pension schemes are closed to future benefit accrual related increase its contributions to cover to service. Funding rates are in accordance with the actuaries’ any funding shortfalls. recommendations.

Financial services The business model may be The group has a regulatory team that monitors and enforces compliance and other market compromised by changes in with existing regulations and keeps the group up to date with impending regulation existing regulation or by the regulation. The group shares the objectives of Government in treating introduction of new regulation. customers fairly and in the protection of customer prepayments. The group Possible new regulation could operates a number of trusts to safeguard funds held on behalf of customers. include a requirement to ring fence In the event of new regulation being introduced that requires additional cash funds for vouchers sold to to be segregated, the group has access to other potential sources of funds, if consumers. This could adversely required. affect the group’s cash position.

Credit risks Failure of one or more customers Customers are given an appropriate level of credit based on their trading and the risk of default by credit history and financial status, a prudent approach is adopted towards credit customers due to reduced control. Credit insurance is used in the majority of cases where customers do economic activity. not pay in advance.

16 Park Group plc — Annual report and accounts 2013 Operational risks

Risk area Potential impact Mitigation

Business continuity Failure to provide adequate service The group plans and tests its business continuity procedures in and IT systems levels to customers, retail partners preparation for catastrophic events and for the existence of counterfeit or other suppliers, resulting in a vouchers or cards. failure to maintain services that Our focus is on the elimination of any single point of failure in our generate revenue. IT systems. 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.

Loss of key The group depends on its directors Existing key appointments are rewarded with competitive remuneration management and key personnel. packages including long term incentives linked to the group’s performance The loss of the services of any and shareholder return. directors or other key employees could damage the group’s business, financial condition and results.

Relationships with The group is dependent upon the The group has a dedicated team of managers whose role it is to ensure that high street and success of its Love2shop voucher the group’s products have a full range of retailers. They also work closely with online retailers and flexecash® card. These products all retailers to promote their businesses to Park’s customers who utilise Park’s only operate provided the vouchers and cards and drive forward incremental sales to their retail outlets. participating retailers continue to Contracts which provide minimum notice periods for withdrawal are in place accept them as payment for goods with all retailers and are designed to mitigate any potential impact on Park’s or services provided. The failure of business. one or more participating retailers could make these products less attractive to customers.

Failure of the The failure of the distribution Wherever possible the group seeks to utilise a wide range of geographically distribution network during the Christmas spread carriers to mitigate the failure of a single operator. network period, for example a Post Office strike, road network disruption or fuel shortages could adversely impact the results and reputation of Park’s brands.

Brand perception Adverse market perception in Ongoing investment in television advertising. Operation of a process and reputation relation to the group’s products or of continual review of all marketing material and websites to promote services, for example, following the transparency to customers. Extensive testing and rigorous internal collapse of a competitor. This could controls exist for all group systems to maintain continuity of online customer result in a downturn in demand for service. its products and services.

Promotional The success of the group’s annual Detailed management processes that are designed to optimise the cost of activity promotional campaign is essential recruiting are in place. The effectiveness of each individual television advert is to ensure the continued assessed separately and future plans amended where appropriate. recruitment of customers. Failure to 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 customers and no single customer represents arising from increased activity from more than 13 per cent of total customer billings. competitors. Significant resources are dedicated to developing and maintaining strong relationships with customers and to developing new and innovative products which meet their precise needs.

Park Group plc — Annual report and accounts 2013 17 Board of directors

Directors Peter Johnson (73) is the company’s founder and majority share holder and has the role of non-executive chairman. He has a service agreement with the company entered into on 6 April 2012 which requires six months’ notice of termination by either party.

Chris Houghton (54) was appointed to the board on 11 October 2000 and became chief executive officer on 11 April 2012. He is a Fellow of the Chartered Institute of Management Accountants and joined the group as group accountant in 1986. He became group finance director on 29 March 2001 and up to his appointment as chief executive officer was previously group managing director. He has a service agreement with the company entered into on 1 April 2012 which requires 12 months’ notice of termination by either party.

Martin Stewart (52) was appointed to the board on 1 November 2004 and is the group finance director. He is a Fellow of the Institute of Chartered Accountants in England and Wales and joined the group from Eddie Stobart Group PLC, where he was group finance director. Prior to this he was with UK Waste Management Limited from 1992 to 2000, from 1997 as group finance director, and earlier in his career held financial positions with The Littlewoods Organisation, ICI PLC and Price Waterhouse. He has a service agreement with the company entered into on 1 November 2004 which requires 12 months’ notice of termination by either party. Mr Stewart, in accordance with the articles of association of the company, retires by rotation and, being eligible, offers himself for re-election.

Gary Woods (56) was appointed to the board on 29 March 2001. He joined the group with the acquisition of Chrisco Hampers in 1980 and has gained wide experience in divisional roles. He is managing director of Park Retail Limited. He has a service agreement with the company entered into on 29 June 2001 which requires 12 months’ notice of termination by either party.

From left to right: Gary Woods, Martin Stewart, Peter Johnson, John Dembitz, Chris Houghton, George Marcall and Christopher Baker 18 Park Group plc — Annual report and accounts 2013 Christopher Baker MBE (61) was appointed to the board as a non-executive director on 29 March 2001. He has a service agreement with the company entered into on 23 March 2006 which requires six months’ notice of termination by either party. He has formerly held senior management positions with Littlewoods plc and Hill Samuel Bank Limited, and is currently chairman of Aintree University Hospitals NHS Foundation Trust, GSTS Pathology LLP and NISA Retail Ltd and holds a number of other non-executive appointments. He is chairman of the group’s audit committee, a member of the remuneration and nomination committees, and the group’s senior independent non-executive director.

George Marcall (63) was appointed to the board as a non- executive director on 29 March 2001. He has a service agreement with the company entered into on 23 March 2006 which requires six months’ notice of termination by either party. He has formerly held directorships with Airtours plc and Yates Group plc and is a non-executive director of St Helens and Knowsley NHS Trust. Mr Marcall is chairman of the group’s remuneration committee and a member of the audit and nomination committees.

John Dembitz (63) was appointed to the board as a non-executive director on 8 May 2008. He has a service agreement with the company entered into on 8 May 2008 which requires six months’ notice of termination by either party. He was formerly chairman of a number of companies including Tack International Limited, Coffee Point plc and CVO Group BV, and held senior executive positions with McKinsey & Co, Consolidated Gold Fields Plc, Charterhouse Japhet and Valin Pollen Limited. He is currently chairman of EAC Management Limited and Saviour Box Limited and a non-executive director of Lee Baron. Mr Dembitz is chairman of the nomination committee and a member of the audit and remuneration committees. In accordance with the Combined Code, Mr Dembitz offers himself for re-election.

Park Group plc — Annual report and accounts 2013 19 Directors’ Report

The directors submit their report for the year ended 31 March 2013 Mr P R Johnson has: for Park Group plc, registration number 1711939. • a beneficial interest in 34,485,680 shares held in the 1989 Peter Johnson Settlement Trust in which Capita Fiduciary Group has Profit and dividend an interest; The group profit for the financial year, after taxation, was £7.595m • a beneficial interest in 16,235,386 shares in which Huntress (2012 – £6.516m). Nominees Limited has an interest; and • a non-beneficial interest, as a member and council member, in The directors have declared a dividend as follows: The Johnson Foundation, a registered charity with number 518660. £m The Johnson Foundation hold 4,665,454 shares in the company. Approved interim dividend of 0.55p per share (2012 – 0.525p) 0.931 Proposed final dividend of 1.55p per share (2012 – 1.475p) 2.625 Directors and their interests The directors who were in office during the year ended 31 March 2013, Total ordinary dividend of 2.10p per share (2012 – 2.00p) 3.556 or have been subsequently appointed, are shown on pages 18 and 19.

The directors have recommended that the final ordinary dividend Details of directors’ and connected persons’ share interests in the be paid on 1 October 2013 to those shareholders on the register on company are shown in the remuneration report on page 26. 30 August 2013. Employee involvement Principal activities Employees are kept informed of the performance and objectives of A statement describing the business activities of the company the group through personal briefings, regular meetings and email. and its subsidiary undertakings is set out on pages 10 to 13 with comments on current developments in the chairman’s statement on Market value of land and buildings page 9. The principal subsidiary undertakings and their activities are As at 31 March 2013, in the opinion of the directors, the market value set out in note 8 to the accounts. and book value of the land and buildings of the group are not significantly different. Business review A review of the group’s activities over the financial year is contained Political and charitable contributions in the chairman’s statement on page 9 and in the chief executive’s During the year ended 31 March 2013 the group contributed to review on pages 10 to 13. charity £31,330 (2012 – £10,895). These donations were made primarily to local charities supporting local communities. There Share capital were no political contributions. Issue of new ordinary shares On 20 August 2012, 2,753,102 provisional shares were awarded. This Creditor payment policy resulted in 1,321,485 shares being issued, with the balance of the For all trade creditors, it is the group’s policy to: award totalling £705,000 being settled in cash, under the terms of the • agree the terms of payment at the start of business with that supplier; group’s 2009 long term incentive plan (LTIP) scheme. An employee • ensure that suppliers are aware of the terms of payment; and benefit trust (EBT) was created to provide a vehicle with which to • pay in accordance with its contractual and other legal obligations. acquire the shares by way of subscription or from existing shareholders As at 31 March 2013 the number of days of parent company to make those shares available for the current and future employees of purchases outstanding was 22 days. the group. Awards to the executive directors and certain employees were made at nil cost. A sum of £650,831 was paid by the company to Disclosure of information to auditors the trustee of the EBT to be used to subscribe for the awarded shares The directors who held office at the date of approval of this directors’ at a subscription price of 49.25p. report confirm that, so far as they are aware, there is no relevant audit information of which the company’s auditors are unaware; and each The share awards to executive directors were: director has taken all the steps that they ought to have taken as a director C Houghton 318,842 shares to make themselves aware of any relevant audit information and to MR Stewart 263,496 shares establish that the company’s auditors are aware of that information. GA Woods 263,496 shares Reappointment of auditors Grant of LTIP awards In accordance with section 489 of the Companies Act 2006, on On 19 July 2012, 1,521,155 provisional shares were awarded under the 22 February 2013 the directors appointed Ernst & Young LLP as terms of the group’s 2012-2015 LTIP scheme. Share distributions may auditors of the group. KPMG Audit Plc resigned as auditors and be made at the end of the plan cycle, which cannot be less than three confirmed to the group that, in accordance with section 519 of the consecutive years, and are subject to certain performance criteria. Companies Act 2006, there were no circumstances in connection Major shareholders with its resignation which it considered needed to be brought to the At the date of this report the following had notified interests in the attention of the group’s members or creditors. share capital of the company of 3 per cent or more: No of shares % By order of the board Mr P R Johnson 34,485,680 20.36 Huntress Nominees Limited 16,235,386 9.59 Schroder Investment Management Limited 16,000,000 9.45 M R Stewart SFM UK Management LLP 13,000,000 7.68 Company Secretary Investec Asset Management 10,350,000 6.11 Birkenhead Casenove Capital Management Limited 8,575,000 5.06 11 June 2013 AXA Investment Managers SA 8,500,000 5.02

20 Park Group plc — Annual report and accounts 2013 Corporate Governance

Corporate governance The nomination committee’s terms of reference are available from the The board has given consideration to the UK Corporate Governance company secretary and are displayed on the group’s website. The Code (the Code) issued by the Financial Reporting Council (FRC) in nomination committee will meet if a future vacancy arises or need June 2010 and applicable for listed companies for financial periods is identified to alter the mix of skills and experience on the board. beginning after 29 June 2010. Remuneration committee Although companies traded on the Alternative Investment Market During the year the remuneration committee comprised George (AIM) are not required to provide corporate governance disclosures, Marcall (chairman), Christopher Baker and John Dembitz, who are or follow guidelines in its Code, the directors have chosen to provide independent non-executive directors. Peter Johnson attended certain information on how the company has adopted various meetings by invitation. The remuneration committee met three principles of the Code. times during the year.

The board The remuneration committee’s principal responsibilities are: The group is controlled through its board of directors. The board’s • setting, reviewing and approving individual remuneration main roles are: packages for executive directors and the chairman including terms • to provide entrepreneurial leadership of the group; and conditions of employment and any changes to the packages; • to set the group’s strategic objectives and to ensure that the • recommend and monitor the level and structure of remuneration necessary financial and human resources are in place to enable for senior management; them to meet those objectives; • approving the rules, and launch, of any group share, share option • to review management performance; or cash based incentive scheme; and • to set the company’s standards and values; and • the grant, award, allocation or issue of shares, share options or • to ensure that the company’s obligations to its shareholders and payments under such scheme. others are understood and met. In addition the remuneration committee periodically reviews the The board, which meets at least six times a year, has a schedule of group’s remuneration policy in relation to: matters reserved for its approval. It meets on other occasions as • its competitors and industry norms; necessary. • compensation commitment; and • contract periods. The board has appropriate insurance cover in respect of legal action The remuneration for the non-executive directors is determined by against its directors. the executive directors.

The specific responsibilities reserved to the board include: The remuneration committee’s terms of reference are available from • setting group strategy and approving an annual budget and the company secretary and are displayed on the group’s website. medium-term projections; The directors’ remuneration report is set out on pages 25 to 27 of the • implementing the strategies and policies of the group; annual report. • monitoring the liquidity risk of the business and the going concern basis of preparation; Audit committee • reviewing operational and financial performance; During the year the audit committee comprised Christopher Baker • approving entering into financing arrangements; (chairman), George Marcall and John Dembitz, who are independent • approving major acquisitions, divestments and capital non-executive directors. Peter Johnson, Chris Houghton and Martin expenditure; Stewart and the group’s external auditors attend meetings of the audit • reviewing the group’s systems of financial control and risk committee by invitation. Christopher Baker has the necessary recent management; and relevant experience set out in the biographical details on page 19. • ensuring that appropriate management development and The audit committee met three times during the year. succession plans are in place; • developing and implementing risk management systems; The audit committee usually reviews its terms of reference annually • reviewing the environmental, health and safety performance of and recommends to the board any changes required as a result of the the group; review. No changes were made in the year. • approving appointments to the board and the company secretary; • approving policies relating to directors’ remuneration and the The audit committee’s terms of reference are available from the severance of directors’ contracts; and company secretary and are displayed on the group’s website. • ensuring that a satisfactory dialogue takes place with shareholders. In the financial year to 31 March 2013 the audit committee discharged Compliance with the Code its responsibilities by: Throughout the year to 31 March 2013, the company complied with • reviewing the group’s draft financial statements and interim results the provisions of the Code except for the fact that the non-executive statement prior to board approval and reviewing the external directors and board committees are not subject to evaluation. The auditors’ detailed reports thereon; board considers its arrangements for appraisal are adequate for the • reviewing the appropriateness of the group’s accounting policies; size of the company and its board. • reviewing regularly the potential impact in the group’s financial statements of certain matters; Committees of the board • reviewing and approving the audit fee and reviewing non-audit Nomination committee fees payable to the group’s external auditors; During the year the nomination committee comprised John • reviewing the external auditors’ plan for the audit of the group’s Dembitz (chairman), Peter Johnson, Christopher Baker and George accounts, which included key areas of audit focus, key risks on the Marcall. No meetings were held during the year. accounts, confirmations of auditor independence and the proposed audit fee and approving the terms of engagement for the audit;

Park Group plc — Annual report and accounts 2013 21 Corporate Governance continued

• reviewing post-acquisition reports on integration and performance The following table sets out the number of scheduled meetings of the of significant recent acquisitions; and board and its committees during the year and individual attendance by • reviewing the processes for managing risks associated with major board members at these meetings. Attendance at the meetings by business programmes. non-member directors is not shown:

Group Audit Remuneration Nomination The audit committee, at least annually, meets the external auditors, board committee committee committee without management, to discuss matters relating to its remit and any Executive directors issues arising from the audit. Chris Houghton 6 Martin Stewart 6 Under its terms of reference, the audit committee monitors the integrity Gary Woods 6 of the group’s financial statements and any formal announcements relating to the group’s financial performance, reviewing any significant Non-executive financial reporting judgements contained in them. directors Peter Johnson (chairman) 6 0 The audit committee is responsible for monitoring the external Christopher Baker 6 3 3 1 auditor’s independence and objectivity, the effectiveness of the George Marcall 6 3 3 1 external audit process and making recommendations to the board in John Dembitz 6 3 3 1 relation to the appointment, reappointment and remuneration of the external auditor. It is responsible for ensuring that an appropriate Scheduled meetings 6 3 3 1 relationship between the group and the external auditors is maintained, including reviewing non-audit services and fees. During Senior independent director the year, the audit committee managed the process for tendering the The board has appointed Christopher Baker as senior independent group’s external audit, as a result of which it recommended to the director. He is always available to meet shareholders on request and to board the appointment of Ernst & Young LLP with effect from the ensure that the board is aware of any shareholder concerns not resolved year end audit. through the existing mechanisms for investor communication.

The audit committee reviews arrangements by which staff of the Directors and directors’ independence company may, in confidence, raise concerns about possible The board currently comprises the non-executive chairman, three improprieties in matters of financial reporting or other matters. The independent non-executive directors and three executive directors. The audit committee’s objective is to ensure that arrangements are in place names of the directors, together with their biographical details, are set for the proportionate and independent investigation of such matters out on pages 18 and 19. All the directors served throughout the period and for appropriate follow-up action. under review.

The audit committee monitors regularly the non-audit services being The board includes independent non-executive directors who provided to the group by its external auditors in line with its policy on constructively challenge and help develop proposals on strategy and non-audit work performed by the auditors. The policy prohibits the bring independent judgement, knowledge and experience to the external auditors from undertaking certain work and provides that other board’s deliberations. The independent directors are of sufficient calibre categories of non-audit work must be submitted to the audit and number that their views carry significant weight in the board’s committee for approval prior to engagement. decision making. The board considers its non-executive directors to be independent in character and judgement. The audit committee keeps under informal review the need for the group to have an internal audit function. Due to the size and scope of The non-executive directors have confirmed that, except for as noted the business the audit committee has recommended to the board that below, none of them: it does not currently consider it appropriate for the group to have an • has been an employee of the company or group within the last five internal audit function. years; • has, or has had within the last three years, a material business Over the year the management team engaged BDO to carry out a relationship with the group apart from a director’s fee, participates in number of internal reviews to examine areas of management and the company’s share option or performance related pay scheme or is control risks. These reports were subsequently considered by the board. a member of the group’s pension scheme, except as noted below; The board continues to keep under review the need for a more formally • has close family ties with any of the group’s advisers, directors or constituted internal audit programme. senior employees; • holds cross-directorships or has significant links with other directors Risk management committee through involvement in other companies or bodies, other than those During the year the risk management committee comprised Chris disclosed in the directors’ biographical details on pages 18 and 19; Houghton (chairman), Gary Woods, Martin Stewart and Steve Lock (head • represents a significant shareholder; or of IT). The risk management committee met four times during the year. • has served on the board for more than nine years.

The risk management committee’s terms of reference include: Our non-executive chairman, Mr Peter Johnson, has a significant • identification of business risk throughout the group’s operations; shareholding in the company and was executive chairman for the • determination of the controls necessary to manage identified risk; year ended 31 March 2012. He also performs a number of pro-bono • evaluation of the effectiveness of those controls; and roles and entered into a consultancy services arrangement with the • continuous assessment and reporting to the board. group on 1 April 2012. This contract ended on 31 March 2013. The board is satisfied that these are not such as to interfere with the The audit committee considers any matters in relation to the principal discharge of his duties. risks, as determined by the risk management committee.

22 Park Group plc — Annual report and accounts 2013 Two of the non-executive directors, Mr Christopher Baker and management accounts and regular management reports and Mr George Marcall, have served on the board for more than nine years. information which enable them to scrutinise the group’s and The board considers that these arrangements are appropriate and have management’s performance against agreed objectives. no impact on effective governance. Relations with shareholders Mr Baker and Mr Marcall have indicated that they intend to resign The chairman gives feedback to the board on issues raised with him by following the 2013 AGM. The group is in the process of recruiting major shareholders. suitable replacement non-executives. The AGM is attended by all directors, and shareholders are invited to ask The directors are given access to independent professional advice at the questions during the meeting and to meet with directors after the group’s expense, when the directors deem it is necessary in order for formal proceedings have ended. them to carry out their responsibilities. The group maintains a corporate website containing a wide range of Professional development information of interest to investors. On appointment, directors take part in an induction programme when they receive information about the structure and practices of the group Presentations are made to analysts and institutional investors following together with the group’s latest financial information. This is announcements to the stock exchange of the half-year and full-year supplemented by meetings with key senior executives. Throughout results. Other ad hoc meetings are held with interested parties on their period in office the directors are continually updated on the request. group’s business, the competitive and regulatory environments in which it operates and other changes affecting the group and the industry The senior independent director is available to shareholders if they have it operates in as a whole, by written briefings, meetings with senior concerns which contact through the normal channels of non-executive executives and attendance at external courses. The group complies with chairman and chief executive officer has failed to resolve or for which the Code except to the extent that the chairman does not regularly such contact is inappropriate. review and agree with each director their training and development needs. It considers that appropriate training and development takes Risk and internal control place, given the size of the company and its board. The board is responsible for the group’s system of internal control and for reviewing its effectiveness. There is an ongoing process for Performance evaluation identifying, evaluating and managing the significant risks faced by the There is no formal process for the annual evaluation of the directors group. These may be strategic, operational, reputational, financial or or the chairman. The remuneration committee considers individual environmental. It is reviewed regularly by the board and accords with director’s performance when it determines their forthcoming annual the Code. The directors have continued to review the effectiveness of remuneration. Directors’ performance is under continual review and is the group’s system of financial, operational and compliance controls measured against targets. The non-executive directors are not subject against significant risk. to evaluation. The board considers its arrangements for appraisal are adequate to ensure effective governance given the size of the company The principal elements of the group’s established control systems and its board. include: • a clearly defined organisational structure under which individual Re-election responsibilities are monitored by members of the board; Subject to the company’s articles of association, the Companies Acts • budgets covering key financial aspects of group activities which are and satisfactory performance, non-executive directors are appointed for approved by the board; an initial period of three years. Before the third and sixth anniversary of • monthly comparisons of results against budget and prior year the non-executive director’s first appointment, the director discusses which are considered by the board; with the board whether it is appropriate for a further three year term to • clearly defined procedures for treasury management and the be served. authorisation of capital expenditure; and • the appointment of a risk management sub-committee. The company’s articles of association require that one third of the members of the board or, if their number is not three or a multiple of The risk management sub-committee’s terms of reference are shown on three, the number nearest to but not exceeding one third, shall retire by page 22. rotation and seek re-election each year. Notwithstanding this, the board is observing the terms of the Code in that each director will seek As pointed out in the Code, any such system is designed to manage re-election at regular intervals consisting of no more than three years. rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against Company secretary material misstatement or loss. The company secretary is responsible for advising the board through the chairman on all governance matters. The directors have access to This process has been in place for the year under review and up to the the advice and services of the company secretary who is responsible date of approval of the annual report and accounts. to the board for ensuring board procedures are complied with. The company’s articles of association provide that the appointment and removal of the company secretary is a matter for the full board.

Information Regular reports and papers are circulated to the directors in a timely manner in preparation for board and committee meetings. These papers are supplemented by information specifically requested by the directors from time to time. All executive directors receive monthly

Park Group plc — Annual report and accounts 2013 23 Corporate Governance continued

Statement of directors’ responsibilities in respect of the annual report and the financial statements The directors are responsible for preparing the annual report and the group and parent company financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare group and parent company financial statements for each financial year. As required by the AIM Rules of the London Stock Exchange they are required to prepare the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and applicable law and have elected to prepare the parent company financial statements on the same basis.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of their profit or loss for that period. In preparing each of the group and parent company financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether they have been prepared in accordance with IFRSs as adopted by the EU; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities.

The directors have decided to prepare voluntarily a directors’ remuneration report in accordance with Schedule 8 to The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 made under the Companies Act 2006, as if those requirements were to apply to the company. The directors have also decided to prepare voluntarily a corporate governance statement as if the company were required to comply with the Listing Rules and the Disclosure Rules and Transparency Rules of the Financial Conduct Authority in relation to those matters.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

24 Park Group plc — Annual report and accounts 2013 Remuneration Report

The directors have decided to prepare voluntarily a directors’ remuneration report in accordance with Schedule 8 to the Large and Medium- sized Companies and Groups (Accounts and Reports) Regulations 2008 made under the Companies Act 2006.

Unaudited information Remuneration committee Details of the remuneration committee are given on page 21.

The committee has access to external advisers if it so wishes. It has not been materially assisted during the year.

Executive remuneration policy The aim of the group’s remuneration policy is to adopt levels of remuneration which should be sufficient to attract, motivate and retain high calibre executives. The policy is to reward directors with competitive salaries and benefit packages which are linked to both individual and business performance. These packages are reviewed each year to ensure that they are supportive of the group’s business objectives and the creation of shareholder value.

Details of remuneration Executive directors are remunerated through the provision of a basic salary, annual bonus (linked to performance), long term incentives (share options and LTIP – linked to performance), car allowance, medical and permanent health insurance cover. Certain executive directors enjoy benefits in kind such as contributions to pension arrangements and the payment of certain telephone accounts and professional subscriptions.

Basic salaries Basic salaries for executive directors are reviewed each year.

Performance related payments Executive directors can earn performance related bonus payments, subject to the achievement of predetermined business unit and group profit targets. Bonuses do not form part of pensionable earnings.

Share options and LTIP The directors’ participation in the group’s approved executive share option scheme (AESOS), unapproved share option scheme (UESOS) and LTIP is shown below. Exercise of the options for all directors is subject to the following criteria:

The 2010 LTIP was adopted by the remuneration committee on 25 June 2010. The 2011 LTIP was adopted by the remuneration committee on 21 July 2011. The 2012 LTIP was adopted by the remuneration committee on 19 July 2012. The vesting of awards and the distribution of shares resulting therefrom to participants is subject to the achievement of certain performance targets related to total shareholder return over each plan cycle.

Contracts Details of executive directors’ service contracts are given on pages 18 and 19. At the date of this report all contracts had an unexpired term of 12 months. No contract provides for compensation payments on loss of office.

Non-executive directors The independent non-executive directors receive fees as directors which are determined by the whole board, each director abstaining from decisions affecting his own remuneration.

Total shareholder return (TSR) The following graph charts the total cumulative shareholder return of the company since 1 April 2008, compared with the AIM all share index and the all shares financials index. The company feels that these are the most appropriate indices to use as the first shows a broad average equity share performance and the second shows the share performance for the industry sector in which the company operates.

500 Park Group plc All shares financials AIM all share 400

300

200

100 TSR (%) rebased to April to 2008 (%) rebased TSR

0 2008 2009 2010 2011 2012 2013

Park Group plc — Annual report and accounts 2013 25 Remuneration Report continued

Audited information Directors’ emoluments The emoluments of directors for the year ended 31 March 2013 were:

Performance Total Pension costs Salary or fees related payments Benefits 2013 2012 2013 2012 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Executive C Houghton 211 74 17 302 328 49 49 M R Stewart 174 60 17 251 269 40 39 G A Woods 174 60 17 251 269 42 41 559 194 51 804 866 131 129

Non-executive P R Johnson 2881 – 2 290 4392 – – C J Baker 47 – – 47 45 – – R G Marcall 47 – – 47 45 – – J Dembitz 47 – – 47 45 – – 429 – 2 431 574 – – 988 194 53 1,235 1,440 131 129

1 In the year ended 31 March 2013 Mr P R Johnson was paid £240,000 in respect of consultancy services provided. 2 In the year ended 31 March 2012 Mr P R Johnson held the role of executive chairman and the emoluments stated relate to that role for the full year.

Directors’ share interests The beneficial interests in the share capital of the company of the directors in office at 31 March 2013 and connected persons were as follows:

Beneficial shareholding 31 March 31 March 2013 2012 P R Johnson 50,721,066 110,884,711 C Houghton 652,639 322,797 M R Stewart 480,347 206,851 G A Woods 438,192 174,696 C J Baker 10,000 10,000 R G Marcall 10,000 10,000 J Dembitz 100,000 100,000

AESOS – options over ordinary shares 31 March 31 March Exercise Date Expiry 2013 2012 price exercisable date C Houghton 148,148 148,148 20.25p 16.06.13 15.06.20 M R Stewart 148,148 148,148 20.25p 16.06.13 15.06.20 G A Woods 148,148 148,148 20.25p 16.06.13 15.06.20

UESOS – options over ordinary shares 31 March 31 March Exercise Date Expiry 2013 2012 price exercisable date C Houghton 250,000 250,000 29.00p 15.07.074 14.07.14 G A Woods 250,000 250,000 29.00p 15.07.074 14.07.14

26 Park Group plc — Annual report and accounts 2013 LTIP – provisional share awards 31 March 31 March Year5 2013 2012 exercisable C Houghton – 666,338 20121 671,386 671,386 20131 298,570 298,570 20142 325,591 – 20153 M R Stewart – 548,952 20121 553,111 553,111 20131 245,973 245,973 20142 266,233 – 20153 G A Woods – 548,952 20121 553,111 553,111 20131 245,973 245,973 20142 266,233 – 20153

1 subject to performance criteria as set out in LTIP plan dated 25 June 2010. 2 subject to performance criteria as set out in LTIP plan dated 21 July 2011. 3 subject to performance criteria as set out in LTIP plan dated 19 July 2012. 4 subject to performance criteria as set out in scheme rules, options issued prior to 31 March 2006. 5 awards are exercisable after 10 consecutive dealing days commencing on the date of the announcement by the group of its results in each year.

Share price information is given in note 21a to the accounts.

There were no changes to directors’ interests in shares between 31 March 2013 and the date of this report.

On behalf of the board

R G Marcall Chairman of the Remuneration Committee Birkenhead 11 June 2013

Park Group plc — Annual report and accounts 2013 27 Independent Auditor’s Report to the Members of Park Group plc We have audited the financial statements of Park Group plc for the year ended 31 March 2013 which comprise of the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Group and Parent Company Statements of Financial Position, the Group and Parent Company Statements of Cash Flow, the Consolidated Statement of Changes in Equity and the Company Statement of Changes in Equity and the related notes 1 to 28. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor As explained more fully in the Directors’ Responsibilities Statement on page 24, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

The company has also instructed us to audit the section of the directors’ remuneration report that has been described as audited and state whether it has been properly prepared in accordance with the basis of preparation described therein.

Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements In our opinion: • the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 March 2013 and of the group’s profit for the year then ended; • the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; • the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Opinion on other matter In our opinion the part of the directors’ remuneration report that has been described as audited has been properly prepared in accordance with the basis of preparation as described therein.

Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements and the part of the directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit.

Alistair Denton (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor Leeds 11 June 2013

Notes: 1. The maintenance and integrity of the Park Group plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. 2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

28 Park Group plc — Annual report and accounts 2013 Consolidated Income Statement For the year to 31 March 2013

2013 2012 Notes £’000 £’000 Billings 352,021 328,965 Revenue 1 278,984 279,025 Cost of sales (255,291) (257,283) Gross profit 23,693 21,742

Distribution costs (2,578) (2,638) Administrative expenses (13,618) (12,245) Operating profit 7,497 6,859

Finance income 3 2,034 1,725 Finance costs 3 – (2) Profit before taxation 1,2 9,531 8,582

Taxation 4 (1,936) (2,066)

Profit for the year 7,595 6,516 Attributable to: Equity holders of the parent 7,728 6,565 Non-controlling interests (133) (49) 7,595 6,516

Earnings per share 5 – basic 4.58p 3.91p – diluted 4.43p 3.75p

All activities derive from continuing operations.

Consolidated Statement of Comprehensive Income For the year to 31 March 2013

2013 2012 £’000 £’000 Profit for the year 7,595 6,516

Other comprehensive income: Actuarial gains/(losses) on defined benefit pension plans 251 (310) Deferred tax on actuarial (gains)/losses on defined benefit pension plans (58) 108 Foreign exchange translation differences (26) 52 Other comprehensive income for the year net of tax 167 (150)

Total comprehensive income for the year 7,762 6,366 Attributable to: Equity holders of the parent 7,895 6,415 Non-controlling interests (133) (49) 7,762 6,366

Park Group plc — Annual report and accounts 2013 29 Statements of Financial Position As at 31 March 2013

Group Company 2013 2012 2013 2012 Notes £’000 £’000 £’000 £’000 Assets Non-current assets Goodwill 6 1,364 1,369 – – Other intangible assets 7 4,090 4,291 181 214 Investments 8 8 8 7,972 7,972 Investment property 9 251 257 – – Property, plant and equipment 10 8,702 9,020 850 887 Trade and other receivables 13 – 628 – – Deferred tax assets 11 – – 705 728 14,415 15,573 9,708 9,801 Current assets Inventories 12 1,419 1,941 – – Trade and other receivables 13 7,507 7,256 7,375 6,867 Tax receivable – – – 303 Other financial assets 14 500 2,100 – 1,000 Monies held in trust 15 48,313 46,882 – – Cash and cash equivalents 16 10,810 7,111 10,123 7,616 68,549 65,290 17,498 15,786 Total assets 82,964 80,863 27,206 25,587

Liabilities Current liabilities Trade and other payables 17 (59,981) (59,193) (19,280) (9,077) Tax payable (1,674) (2,248) – – Provisions 18 (32,246) (33,217) (168) (192) (93,901) (94,658) (19,448) (9,269) Non-current liabilities Deferred tax liability 11 (83) (21) – – Retirement benefit obligation 19 (308) (1,884) (308) (1,884) (391) (1,905) (308) (1,884) Total liabilities (94,292) (96,563) (19,756) (11,153) Net (liabilities)/assets (11,328) (15,700) 7,450 14,434

Equity attributable to equity holders of the parent Share capital 21a 3,387 3,361 3,387 3,361 Share premium 1,638 1,638 1,638 1,638 Retained earnings (16,171) (20,650) 2,425 9,435

Non-controlling interests (182) (49) – – Total equity (11,328) (15,700) 7,450 14,434

Approved by the board of directors and signed on its behalf on 11 June 2013.

C Houghton Chief Executive Officer

30 Park Group plc — Annual report and accounts 2013 Consolidated Statement of Changes In Equity

Non- Share Share Retained Total parent controlling Total capital premium earnings equity interests equity £’000 £’000 £’000 £’000 £’000 £’000 Balance at 1 April 2012 3,361 1,638 (20,650) (15,651) (49) (15,700)

Total comprehensive income for the year Profit – – 7,728 7,728 (133) 7,595

Other comprehensive income Actuarial gains on defined benefit pension plans – – 251 251 – 251 Tax on defined benefit pension plans – – (58) (58) – (58) Foreign exchange translation adjustments – – (26) (26) – (26) Total other comprehensive income – – 167 167 – 167 Total comprehensive income for the year – – 7,895 7,895 (133) 7,762

Transactions with owners, recorded directly in equity Equity settled share-based payment transactions – – (36) (36) – (36) LTIP shares awarded 26 – – 26 – 26 Dividends – – (3,380) (3,380) – (3,380) Total contributions by and distribution to owners 26 – (3,416) (3,390) – (3,390)

Balance at 31 March 2013 3,387 1,638 (16,171) (11,146) (182) (11,328)

Balance at 1 April 2011 as originally reported 3,361 1,638 (25,717) (20,718) – (20,718) Restatement due to change in actuarial assumptions – – 1,258 1,258 – 1,258 Restated balance at 1 April 2011 3,361 1,638 (24,459) (19,460) – (19,460)

Total comprehensive income for the year Profit – – 6,565 6,565 (49) 6,516

Other comprehensive income Actuarial losses on defined benefit pension plans – – (310) (310) – (310) Tax on defined benefit pension plans – – 108 108 – 108 Foreign exchange translation adjustments – – 52 52 – 52 Total other comprehensive income – – (150) (150) – (150) Total comprehensive income for the year – – 6,415 6,415 (49) 6,366

Transactions with owners, recorded directly in equity Equity settled share-based payment transactions – – 250 250 – 250 Dividends – – (2,856) (2,856) – (2,856) Total contributions by and distribution to owners – – (2,606) (2,606) – (2,606)

Balance at 31 March 2012 3,361 1,638 (20,650) (15,651) (49) (15,700)

Park Group plc — Annual report and accounts 2013 31 Company Statement of Changes in Equity

Share Share Retained Total parent capital premium earnings equity £’000 £’000 £’000 £’000 Balance at 1 April 2012 3,361 1,638 9,435 14,434

Total comprehensive income for the year Loss – – (3,787) (3,787)

Other comprehensive income Actuarial gains on defined benefit pension plans – – 251 251 Tax on defined benefit pension plans – – (58) (58) Total other comprehensive income – – 193 193 Total comprehensive income for the year – – (3,594) (3,594)

Transactions with owners, recorded directly in equity Equity settled share-based payment transactions – – (36) (36) LTIP shares awarded 26 – – 26 Dividends – – (3,380) (3,380) Total contributions by and distribution to owners 26 – (3,416) (3,390)

Balance at 31 March 2013 3,387 1,638 2,425 7,450

Balance at 1 April 2011 as originally reported 3,361 1,638 4,963 9,962 Restatement due to change in actuarial assumptions – – 1,258 1,258 Restated balance at 1 April 2011 3,361 1,638 6,221 11,220

Total comprehensive income for the year Profit – – 6,022 6,022

Other comprehensive income Actuarial losses on defined benefit pension plans – – (310) (310) Tax on defined benefit pension plans – – 108 108 Total other comprehensive income – – (202) (202) Total comprehensive income for the year – – 5,820 5,820

Transactions with owners, recorded directly in equity Equity settled share-based payment transactions – – 250 250 Dividends – – (2,856) (2,856) Total contributions by and distribution to owners – – (2,606) (2,606)

Balance at 31 March 2012 3,361 1,638 9,435 14,434

32 Park Group plc — Annual report and accounts 2013 Statements of Cash Flows For the year to 31 March 2013

Group Company 2013 2012 2013 2012 Notes £’000 £’000 £’000 £’000 Cash flows from operating activities Cash generated from operations 23 7,544 4,680 8,111 437 Interest received 1,793 1,695 103 130 Interest paid – (2) – (2) Tax paid (2,043) (1,774) (2,043) (1,774) Net cash generated from/(used in) operating activities 7,294 4,599 6,171 (1,209)

Cash flows from investing activities Receipt of deferred consideration arising from assets previously held for sale 1,151 602 – – Proceeds from sale of investments – 17 – 17 Dividends received from group companies – – – 8,000 Purchase of intangible assets (1,039) (710) (42) (154) Purchase of property, plant and equipment (327) (741) (242) (595) Purchase of investments – (8) – (8) Net cash (used in)/generated from investing activities (215) (840) (284) 7,260

Cash flows from financing activities Dividends paid to shareholders (3,380) (2,856) (3,380) (2,856) Net cash used in financing activities (3,380) (2,856) (3,380) (2,856)

Net increase in cash and cash equivalents 3,699 903 2,507 3,195

Cash and cash equivalents at beginning of period 7,111 6,208 7,616 4,421

Cash and cash equivalents at end of period 10,810 7,111 10,123 7,616

Cash and cash equivalents comprise: Cash 16 10,810 7,111 10,123 7,616

Park Group plc — Annual report and accounts 2013 33 Accounting Policies

1 Basis of preparation The group and company financial statements have been prepared and approved by the directors in accordance with the IFRSs as adopted by the EU (adopted IFRS).

The group’s business activities, together with factors likely to affect its future development, performance and position, are set out on pages 10 to 13 of the business review. The financial position of the group, its cash flows, liquidity position and financial risks are described on pages 14 to 17 of the business review. In addition notes 28, 14, 15 and 16 of the consolidated financial statements include the group’s objectives, policies and processes for financial risk management, details of monies held in trust, deposits and cash and cash equivalents.

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 despite the group’s net liabilities and net current liabilities. Funds are utilised for working capital purposes as permitted under the terms of the PPPT. The group’s working capital requirements are dependent upon a continuing level of prepaid sales to corporate customers and, at certain times during the year, amounts drawn from the PPPT to meet its working capital requirements (under the terms set out in note 15). The group’s positive cash flow from its ongoing customer base, together with the facility to drawdown funds from the PPPT at certain times of the year, enables it to operate without reliance on any external funding. The group continues to trade profitably and early indications for growth in the current year are positive, in spite of the uncertain economic outlook. Accordingly, the directors continue to adopt the going concern basis in preparing the consolidated financial statements.

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 accounting policies have, unless otherwise stated, been applied consistently to all periods and by all group entities.

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions 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.

2 Changes to International Financial Reporting Standards The following standards have been adopted by the EU but are not yet effective for the year ended 31 March 2013 and have not been applied in preparing the financial statements. Their adoption is not expected to have a material impact on the financial statements. • IAS 1 Amendment to financial statement presentation, effective for accounting periods starting on or after 1 July 2012. • IAS 19 Amendment to employee benefits, effective for accounting periods starting on or after 1 January 2013. • IFRS 10 Consolidated financial statements, effective for accounting periods starting on or after 1 January 2013. • IFRS 11 Joint arrangements, effective for accounting periods starting on or after 1 January 2013. • IFRS 12 Disclosures of interests in other entities, effective for accounting periods starting on or after 1 January 2013. • IFRS 10, 11 and 12 Amendments in transition guidance, effective for accounting periods starting on or after 1 January 2013. • IFRS 13 Fair value measurement, effective for accounting periods starting on or after 1 January 2013. • IFRS 7 Amendment to financial instruments: disclosures, effective for accounting periods starting on or after 1 January 2013. • IAS 32 Amendment to financial instruments: presentation, effective for accounting periods starting on or after 1 January 2014. • IAS 27 Separate financial statements (revised), effective for accounting periods starting on or after 1 January 2013. • IAS 28 Associates and joint ventures (revised), effective for accounting periods starting on or after 1 January 2013. • IFRS 9 Financial instruments, effective for accounting periods starting on or after 1 January 2015.

3 Accounting policies Basis of consolidation The group accounts consolidate the accounts of the company and its subsidiary undertakings up to the relevant period end.

Subsidiaries are all entities over which the group has the power to govern the financial and operating policies so as to obtain benefits from its activities. The results of a subsidiary undertaking are included in the consolidated financial statements from the date that control commences until the date that control ceases. All subsidiaries share the same reporting date, 31 March, as Park Group plc. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests, even if doing so causes the non-controlling interests to have a deficit balance.

Inter-group income, expenses, balances and unrealised gains or losses on transactions between group companies are eliminated on consolidation.

As permitted by section 408 of the Companies Act 2006, the income statement of the parent company has not been separately presented. The profit of the parent company is shown in its statement of changes in equity.

Business combinations A business combination is recognised where separate entities or businesses have been acquired by the group.

The purchase method of accounting is used to account for the business combinations made by the group. The cost of a business combination is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange.

Identifiable assets, liabilities and contingent liabilities acquired in the business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the group’s share of the identifiable net assets acquired is recorded as goodwill.

34 Park Group plc — Annual report and accounts 2013 Segmental reporting An operating segment is a distinguishable component of an entity about which separate financial information is available that is evaluated regularly by management in deciding how to allocate resources and in assessing performance. Provided certain quantitative and qualitative criteria are fulfilled, IFRS 8 Operating Segments permits the aggregation of those components into reportable segments for the purposes of disclosure in the group’s financial statements. In assessing the group’s reportable segments, the directors have had regard to the nature of the products offered and the client bases amongst other factors.

The group operates in one geographical segment, being the UK. The group operations in Ireland are immaterial to the results and assets of the group in the year ended 31 March 2013.

Income recognition Vouchers and other goods – revenue is based on values invoiced to external customers for goods and services and is recorded net of VAT, rebates and discounts after eliminating intra-group sales. Revenue is recognised when the significant risk and rewards have passed to the customer. This is usually the date on which vouchers and other goods are received by customers. This is normally shortly after despatch. At the point of revenue recognition, a provision is made for the redemption liability arising. flexecash® cards – revenue is the fees charged to cardholders and service fees receivable from retailers/redemption partners. Where the cardholder has the right of redemption, this is recognised when amounts are deducted from values held on cards, ie when cards are redeemed at retailers/redemption partners or when charges are levied. Where there is no right of redemption, revenue also includes an estimate of projected balances remaining on the card at expiry. Revenue is recorded net of VAT, rebates and discounts.

Billings Billings represents the value of vouchers, flexecash® cards and other goods and services shipped and invoiced to customers during the year and are recorded net of VAT, rebates and discounts.

Finance income and costs Finance income comprises the returns generated on cash and cash equivalents and monies held in trust and is recognised as it accrues. Finance costs comprise the interest on external borrowings and are recognised as they accrue.

Goodwill Goodwill arising on acquisition represents the difference between the consideration and the fair value of net assets acquired. Goodwill is not amortised, but is reviewed annually for impairment and whenever events or changes in circumstances indicate that the carrying value of the goodwill may not be receivable. Goodwill is carried in the statement of financial position as deemed cost at 1 April 2004, the date of transition to IFRS for the group, less accumulated impairment losses.

Impairment of property, plant and equipment and intangibles An impairment loss is recognised to the extent that the carrying amount of the property, plant and equipment exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. Value in use is calculated using cash flows derived from budgets and projections approved by the board which are discounted at the group’s risk adjusted weighted cost of capital calculated from equity market data and borrowing rates. For the purpose of impairment testing, goodwill and intangible assets, ie customer lists, are allocated to cash generating units (CGUs) based on past acquisitions of Christmas savings club brands and customer lists. Whilst these are not reportable segments, as management do not manage and review the business at this level, information is available to enable goodwill to be tested for impairment at this level. Any impairment is recognised immediately through the income statement and impairments in respect of goodwill are not subsequently reversed.

Other intangible assets Computer software Acquired software licences are capitalised at cost and are amortised on a straight-line basis over their anticipated useful life, which is generally five years.

Costs that are directly associated with the creation of identifiable software, which meet the development asset recognition criteria as laid out in IAS 38 Intangible Assets, are recognised as intangible assets. Direct costs include the employment costs of staff directly involved in specific software development projects and external consultancy fees.

All other software development and maintenance costs are recognised as an expense as incurred.

Computer software development costs recognised as assets are amortised over their anticipated useful lives of between 3 and 10 years on a systematic straight-line basis.

Customer lists Customer lists acquired are included at cost less accumulated amortisation and impairment. They are amortised over their useful life of up to 10 years based on the pattern of forecast cash flows to be generated. On an annual basis, management review the expected cash flows to be generated and make appropriate provision for impairment.

Park Group plc — Annual report and accounts 2013 35 Accounting Policies continued

Investments Investments are stated at cost less any provision for impairment in their value. Impairment is calculated based on lower of cost or recoverable amount, determined with reference to market value wherever possible or discounted cash flows.

Investment property Properties are classified as investment properties where they are held by the group to earn rentals or for capital appreciation. Investment properties are carried at cost and are depreciated through the income statement over 50 years on a straight-line basis so as to spread the difference between the cost and residual value over the anticipated useful life of properties. The properties’ residual values are reviewed, and adjusted if appropriate, at each year end. A property’s carrying amount is written down immediately to its recoverable amount if its carrying value is greater than its recoverable amount.

Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. Cost represents expenditure that is directly attributable to the purchase of the asset. At the date of transition to IFRS on 1 April 2004, land and buildings previously held at cost under UK GAAP less accumulated depreciation were revalued and the fair values derived have been taken as their deemed cost as at that date in accordance with the exemption available under IFRS 1 First time Adoption of International Financial Reporting Standards. The parent company’s date of transition to IFRS was 1 April 2006, however it did not revalue its land and buildings at that date.

Depreciation is charged on a straight-line basis, spreading the difference between cost and residual value over the anticipated useful life of assets as follows:

Freehold land Nil Freehold buildings 2–2.5 per cent Short leasehold over unexpired term of lease Fixtures and equipment 10–20 per cent Motor vehicles 25 per cent

The assets’ residual values and economic lives are reviewed, and adjusted if appropriate, at each year end date. An asset’s carrying value is written down immediately to its recoverable amount if its carrying value is greater than its recoverable amount.

Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined by the ‘first in first out’ method and is based on purchase price. Finished goods stock and work in progress includes attributable production overheads. Net realisable value is based on estimated selling price in the ordinary course of the business less cost of disposal having regard to the age, saleability and condition of the inventory.

Trade and other receivables Trade receivables Trade receivables are recognised initially at the fair value of the amount receivable and subsequently reduced by any provision for impairment. A provision for impairment is established when there is objective evidence that there is a difference between the carrying value and the recoverable amount.

Monies held in trust On 13 August 2007 a declaration of trust constituted the PPPT to hold agents’ prepayments. Park Prepayments Trustee Company Limited, as trustee of the trust, holds this money on behalf of agents. The conditions of the release of this money to the group are detailed in the trust deed, which is available at www.getpark.co.uk.

On 16 February 2010 a declaration of trust constituted the PCSET to hold the E money float in accordance with regulatory requirements. The E money float represents the value of the obligations of the company to card holders and redeemers. The liability in respect of deposits received on flexecash® cards is held within trade creditors.

Monies held under the declaration of trust with the PPPT and the PCSET on behalf of customers, card holders and redeemers is recognised on the statement of financial position as the group has access to the interest on these monies and can, having met certain conditions, withdraw the funds. However, given the restrictions over these monies, the amounts held in trust are not included in cash and cash equivalents for the purposes of the statement of cash flows.

Cash and cash equivalents Cash and cash equivalents includes cash in hand and deposits held with banks with original maturities of three months or less, however, the deposits can be accessed immediately if required. It is therefore considered appropriate that these deposits be classed as cash and cash equivalents. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position. Cash balances and overdrafts are offset where the group has the ability and intention to settle these balances on a net basis. For cash flow purposes, bank overdrafts are shown within cash and cash equivalents.

36 Park Group plc — Annual report and accounts 2013 Provisions Unredeemed vouchers Unredeemed vouchers are included at their fair value at the date of initial 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 redemption rates and timings. The key estimates used in deriving the provision includes discounts provided by retailers, interest rates used for discounting and the timing and amount of the future redemption of vouchers. The future cash payments are discounted as required under IAS 37 as the amounts are considered to be material.

Payment protection insurance An amount is provided to cover existing and future potential settlements in relation to claims made in respect of mis-selling this insurance. These policies were sold as part of the closed loan broking business. The future cash payments are not discounted as required under IAS 37 as the amounts are not considered to be material.

Employee benefits Retirement benefit obligation The group has both defined benefit and defined contribution pension plans. The assets of the defined benefit pension plans are held in separate trustee administered funds.

The present value of the defined benefit obligation less the fair value of the plan assets is recognised in the statement of financial position as the retirement benefit obligation.

Regular valuations are prepared by independent professionally qualified actuaries on the projected unit credit method. The valuations are carried out every three years and updated on a half yearly basis for accounting purposes. These determine the level of contribution required to fund the benefits set out in the rules of the plans and allow for the periodic increase of pensions in payment.

The regular service cost of providing retirement benefits to employees during the year is charged to operating profit in the year. The schemes are closed to future accrual for years’ service but pensions are still dependent on actual final salaries. Consequently the group may have a current service cost in future where salary rises differ from those projected. Past service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period, in which case the past service costs are spread over that period.

A credit representing the expected return on the assets of the retirement benefit schemes during the year is included within administrative expenses. This is based on the market value of the assets of the schemes at the start of the financial year. A charge is also made within administrative expenses representing the expected increase in the liabilities of the retirement benefit schemes during the year. This arises from the liabilities of the schemes being one year closer to payment.

The difference between the market value of the assets and the present value of accrued pension liabilities is shown as an asset or liability in the statement of financial position.

Differences between actual and expected returns on assets during the year are recognised in the SOCI, together with differences arising from changes in actuarial assumptions.

For defined contribution plans, the group pays contributions to privately administered pension plans on a contractual basis. The contributions are recognised as an employee benefit expense as they fall due.

Holiday pay Provision is made for any holiday pay accrued by employees to the extent that the holiday entitlements accrued have not been taken at the period end.

Share-based payments The group operates a number of equity settled share-based payment plans.

An expense is recognised in respect of the fair value of the share options at the date of grant. This is calculated using the binomial method. A corresponding amount is recorded as an increase in equity. This expense is spread on a straight-line basis over any relevant vesting period and is adjusted on a prospective basis at each period end for any changes in assumptions or estimates that relate to non-market conditions, taking into account the conditions existing at each year end.

Leases Operating lease rentals are charged to the income statement on a straight-line basis over the period of the lease.

Foreign currency Transactions in foreign currencies are recorded at the rates of exchange at the date the transactions occur. Monetary assets and liabilities are restated at the prevailing exchange rate at each year end. Differences arising on restatement are included in the income statement for the year.

Park Group plc — Annual report and accounts 2013 37 Accounting Policies continued

Taxation The charge for taxation is based on the result for the year and takes into account taxation deferred because of temporary differences between the treatment of certain items for taxation and accounting purposes. Current tax is the expected tax payable on the taxable result for the year using tax rules enacted or substantively enacted at the year end, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. The following temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the year end and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Taxation is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Dividends In accordance with IAS 10 Events After the Balance Sheet Date dividends are recognised in the financial statements in the period in which they are approved by shareholders in the case of the final dividends and when paid in the case of the interim dividends. Key assumptions and estimates The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions 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. In applying the accounting policies set out above, the group make significant estimates and assumptions that affect the reported amounts of assets and liabilities as follows: Income taxes (£0.08m deferred tax liability, current tax liability £1.67m) The tax treatment of certain items cannot be determined precisely until tax audits or enquiries have been completed by the tax authorities, which in some instances can be some years after the item has been first reflected in the financial statements. The group recognises assets/liabilities for anticipated tax audits and enquiry issues based on an assessment of whether such assets/liabilities are likely to arise. If the outcome of such audits is that a final asset/liability is different to the amount originally estimated, such differences will be recognised in the period in which the audit or enquiry is determined. Any differences may necessitate a material adjustment to the level of tax assets held in the statement of financial position. Provisions (£32.08m unredeemed vouchers, £0.17m payment protection insurance) Unredeemed vouchers A provision is made in respect of unredeemed vouchers of £32.08m. The provision is calculated by estimating anticipated amounts payable to retailers on redemption and the expected timing of payments. Historical data over a number of years and current trends are regularly reviewed and are used to prepare the estimates detailed above. Any differences to the above estimates may necessitate a material adjustment to the level of the provision held in the statement of financial position. Management have considered the sensitivities of the key estimates and do not foresee that any likely change in these estimates will have a material impact on the size of the provision. Short term variations in the redemption profile would not be reflected in the provision until further evidence was obtained that the changes in consumer behaviour were sustained in the long term. Consequently the provision for redemption is not sensitive to such variations. Payment protection insurance A provision is made in respect of payment protection insurance of £0.17m. The provision is calculated by estimating the anticipated amounts payable and expected timing of claims by former customers of the now closed loan broking business. Historical data and current trends are reviewed and are used to calculate the estimates above. Monies held in trust (£48.31m) and trade and other payables (£59.98m) The group includes within monies held in trust and trade and other payables, amounts received from customers in respect of savings for Christmas 2013 and value held on E money cards. The group is entitled to receive amounts from the trusts provided the group meets the conditions specified in each trust deed. Goodwill (£1.36m) and other intangible assets (£4.09m) Goodwill arising on acquisition represents the difference between the consideration and the fair value of net assets acquired. Goodwill is not amortised, but is reviewed annually for impairment and whenever events or changes in circumstances indicate that the carrying value of the goodwill may not be receivable. The impairment review relies on a number of assumptions (see note 6 for details). Any differences to the assumptions made may necessitate a material adjustment to the level of goodwill held in the statement of financial position. Within other intangible assets are agency customer lists of £0.65m. These customer lists are amortised over their useful life of up to 10 years based on the pattern of forecast cash flows expected to be generated. These cash flows are reviewed on an annual basis and where necessary an appropriate provision for impairment is made. Pensions (£0.31m) The valuation of the pension deficit uses actuarial valuations and assumptions regarding discount rate, future salary increases, future pension increases and mortality rates. Any differences to the assumptions made may necessitate a material adjustment to the pension deficit in the statement of financial position.

38 Park Group plc — Annual report and accounts 2013 Notes to the Accounts

1 Segmental reporting The amount included within the elimination column reflects vouchers sold by the corporate vouchers segment to the consumer segment. They have been included in elimination so as to show the total revenue for both segments.

Details of operating segments can be found on page 14 of the financial review.

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.

All other segments have been adjusted in the prior year to further re-allocate costs, assets and liabilities of the card business and those relating to the head office property, to both the consumer and corporate segments. Rental costs of £464,000 in respect of the consumer segment and £75,000 in respect of the corporate segment have been set-off against rental income included within all other segments results. Assets of £1,933,000 in respect of the card business and £5,332,000 in respect of the head office property have been re-allocated to the consumer segment. Assets of £5,569,000 in respect of the card business and £856,000 in respect of the head office property have been re-allocated to the corporate segment. Liabilities of £1,460,000 have been re-allocated to the consumer segment and £4,209,000 have been re-allocated to the corporate segment in respect of the card business.

All other Consumer Corporate segments Elimination Group 2013 £’000 £’000 £’000 £’000 £’000 Billings External billings 199,403 152,618 – – 352,021 Inter-segment billings – 149,536 – (149,536) – Total billings 199,403 302,154 – (149,536) 352,021

Revenue External revenue 183,460 95,524 – – 278,984 Inter-segment revenue – 149,536 – (149,536) – Total revenue 183,460 245,060 – (149,536) 278,984

Results Segment operating profit/(loss) 5,513 5,038 (3,054) 7,497 Finance income 2,034 Profit before taxation 9,531 Taxation (1,936) Profit 7,595

All other segments loss comprises primarily of staff costs, professional fees and property costs.

All other Consumer Corporate segments Group £’000 £’000 £’000 £’000 Segment assets 54,638 15,766 12,560 82,964

Segment liabilities 45,646 48,016 630 94,292

Other segment items Capital expenditure 184 143 – 327 Depreciation 453 198 – 651 Impairment of goodwill 5 – – 5 Other intangible asset additions 471 568 – 1,039 Amortisation of other intangible assets 543 336 – 879 Impairment of other intangible assets 361 – – 361

All other segments assets comprise primarily of cash and cash equivalents and trade and other receivables. All other segments liabilities comprise primarily of trade and other payables and retirement benefit obligation.

Park Group plc — Annual report and accounts 2013 39 Notes to the Accounts continued

1 Segmental reporting continued All other Consumer Corporate segments Elimination Group 2012 £’000 £’000 £’000 £’000 £’000 Billings External billings 187,193 141,772 – – 328,965 Inter-segment billings – 141,050 – (141,050) – Total billings 187,193 282,822 – (141,050) 328,965

Revenue External revenue 174,286 104,739 – – 279,025 Inter-segment revenue – 141,050 – (141,050) – Total revenue 174,286 245,789 – (141,050) 279,025

Results Segment operating profit/(loss) 4,602 4,940 (2,683) 6,859 Finance income 1,725 Finance costs (2) Profit before taxation 8,582 Taxation (2,066) Profit 6,516

All other segments loss comprises primarily of staff costs, professional fees and property costs.

All other Consumer Corporate segments Group £’000 £’000 £’000 £’000 Segment assets 56,570 12,288 12,005 80,863

Segment liabilities 48,047 46,180 2,336 96,563

Other segment items Capital expenditure 470 271 – 741 Depreciation 417 182 – 599 Impairment of goodwill 38 – – 38 Other intangible asset additions 333 377 – 710 Amortisation of other intangible assets 675 263 – 938

All other segments assets comprise primarily of cash and cash equivalents and trade and other receivables. All other segments liabilities comprise primarily of trade and other payables and retirement benefit obligation.

The group operates in only one geographical segment, being the UK. The group’s operations in Ireland were immaterial to the results and assets of the group for the year ended 31 March 2013.

2 Profit before taxation The following items, relating to continuing operations only, have been included in arriving at profit before taxation:

2013 2012 £’000 £’000 Staff costs 10,582 10,630 Cost of inventories recognised as an expense (included in cost of sales) 27,095 25,134 Write down of inventories recognised as an expense (included in cost of sales) 9 – Depreciation of property, plant and equipment and investment property 651 599 Amortisation of other intangibles 879 938 Impairment of other intangibles 361 – Impairment loss on goodwill 5 38 Other operating leases payable: – plant and machinery 75 77 – property 32 8 Repairs and maintenance on property, plant and equipment 382 422

40 Park Group plc — Annual report and accounts 2013 2 Profit before taxation continued Services provided by the group’s auditors During the year the group obtained the following services from the group’s auditor at costs as detailed below:

2013 2012 £’000 £’000 Fees payable to the company’s auditor for the audit of the company’s annual accounts 35 – Fees payable to the company’s auditor and its associates for other services: – audit of subsidiaries and associates pursuant to legislation 59 – – other services pursuant to legislation – – Fees payable to the company’s former auditor for the audit of the company’s annual accounts – 38 Fees payable to the company’s former auditor and its associates for other services: – audit of subsidiaries and associates pursuant to legislation – 69 – other services pursuant to legislation 8 10 102 117

Fees paid for non-audit services to the company itself are not disclosed in the individual accounts of Park Group plc because the company’s consolidated accounts are required to disclose such fees on a consolidated basis.

3 Finance income and costs 2013 2012 £’000 £’000 Finance income: Bank interest receivable 2,004 1,587 Other interest receivable 30 138 2,034 1,725 Finance costs: Bank interest payable – 2

4 Taxation 2013 2012 £’000 £’000 £’000 £’000 Analysis of income statement charge in period

Current tax 2,101 2,204 Adjustments to current tax in respect of prior periods (631) (247) 1,470 1,957 Deferred tax 265 49 Adjustments to deferred tax in respect of prior periods 201 60 466 109 Taxation charge in respect of continuing operations 1,936 2,066

Tax charged/(credited) directly to other comprehensive income Deferred tax on actuarial gains/(losses) on defined benefit pension plans 58 (108)

Tax credited directly to equity Deferred tax on share options (462) –

The tax for the period is lower (2012 – lower) than the standard rate of corporation tax in the UK of 24 per cent (2012 – 26 per cent). The differences are explained below:

2013 2012 £’000 £’000 Profit on ordinary activities before tax 9,531 8,582

Expected tax charge at 24 per cent (2012 – 26 per cent) 2,287 2,231

Effects of: Adjustments to tax in respect of prior periods (430) (187) Expenses not deductible for tax purposes 50 26 Effect of rate change on current year deferred tax (3) (4) Tax not provided on losses 32 – Total taxation (continuing operations) 1,936 2,066

Park Group plc — Annual report and accounts 2013 41 Notes to the Accounts continued

5 Earnings per share Basic eps is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

For diluted eps, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares.

The calculation of basic and diluted eps is based on the following figures:

2013 2012 £’000 £’000 Earnings Total earnings for year 7,728 6,565

2013 2012 Weighted average number of shares Basic eps – weighted average number of shares 168,841,984 168,030,990 Diluting effect of employee share options 5,778,155 7,001,007 Diluted eps – weighted average number of shares 174,620,139 175,031,997

2013 2012 Basic eps Weighted average number of ordinary shares in issue 168,841,984 168,030,990 Eps (p) 4.58 3.91

2013 2012 Diluted eps Weighted average number of ordinary shares 174,620,139 175,031,997 Eps (p) 4.43 3.75

The prior year diluting effect of employee share options has been adjusted to take account of 575,000 options granted on 15 July 2004 which were omitted from the calculation in the accounts to 31 March 2012. This has had the effect of reducing the prior year diluted eps by 0.01p.

6 Goodwill Group £’000 Deemed cost At 31 March 2012 and 2013 4,166

Impairment At 1 April 2012 2,797 Impairment in year 5 At 31 March 2013 2,802

Net book amount At 31 March 2013 1,364 At 31 March 2012 1,369

£’000 Deemed cost At 31 March 2011 and 2012 4,166

Impairment At 1 April 2011 2,759 Impairment in year 38 At 31 March 2012 2,797

Net book amount At 31 March 2012 1,369 At 31 March 2011 1,407

42 Park Group plc — Annual report and accounts 2013 6 Goodwill continued Goodwill allocation to CGUs The allocation of goodwill to CGUs is shown below: Goodwill Goodwill at 1 April at 31 March 2012 Impairment 2013 CGUs £’000 £’000 £’000 Consumer 1,369 (5) 1,364 Corporate – – – Net book amount 1,369 (5) 1,364

All goodwill acquired prior to the current financial year was tested for impairment during the year in accordance with IAS 36 Impairment of Assets.

In performing the impairment tests all recoverable amounts were measured on their value in use.

Consumer – Family Hampers (£1,173,000) and Country Hampers franchisee (£191,000) The key assumptions in the value in use calculations were as follows: • The order position for the forthcoming Christmas. • The budgeted gross margins. These are based on the average achieved in the last 12 month period. These margins are forecast to be maintained going forward. • Average agent retentions forecast. These are based on historical performance of agent retention achieved. Historically, such forecasts have been materially correct. • Budgeted revenue. This is based on average historical order value and average agent retention rates which have been extrapolated forward 10 years post acquisition. The generally high retention values for customers supports the adoption of a 10 year customer life cycle value as being appropriate for the business. No revenue growth has been factored into the data used in the calculation (2012 – nil).

The resulting cash flows were discounted using a pre-tax discount rate of 7 per cent (2012 – 7 per cent).

The above assumptions have been used as the businesses are profitable and stable. It is therefore appropriate to use historical data.

Following the tests, an impairment of £5,000 was identified (2012 – £38,000) in respect of the Country Hampers franchisee, which reduced the goodwill value from £196,000 to £191,000. This reduction was based on estimated value in use, calculated as outlined above, being less than previously calculated due to a decline in revenue marginally greater than previously anticipated.

Park Group plc — Annual report and accounts 2013 43 Notes to the Accounts continued

7 Other intangible assets Group Agency Computer customer software lists Total £’000 £’000 £’000 Cost At 1 April 2012 6,662 2,130 8,792 Additions – internally developed assets 634 – 634 Additions – externally purchased assets 185 220 405 At 31 March 2013 7,481 2,350 9,831

Amortisation and impairment At 1 April 2012 3,084 1,417 4,501 Amortisation charge for the year 601 278 879 Impairment 361 – 361 At 31 March 2013 4,046 1,695 5,741

Net book amount At 31 March 2013 3,435 655 4,090 At 31 March 2012 3,578 713 4,291

Cost At 1 April 2011 6,314 2,130 8,444 Additions – internally developed assets 429 – 429 Additions – externally purchased assets 281 – 281 Disposals (362) – (362) At 31 March 2012 6,662 2,130 8,792

Amortisation and impairment At 1 April 2011 2,954 971 3,925 Amortisation charge for the year 492 446 938 Disposals (362) – (362) At 31 March 2012 3,084 1,417 4,501

Net book amount At 31 March 2012 3,578 713 4,291 At 31 March 2011 3,360 1,159 4,519

The impairment in the year is in respect of an internally developed website. The impairment arose due to expected revenue growth from the website being lower than originally anticipated.

The agency customer lists relate to lists of 30,000 agents nationwide acquired from FHSC Limited on 15 February 2006, 7,500 agents nationwide acquired from Findel PLC on 7 March 2007, 4,000 agents in the Republic of Ireland acquired from Dublin based Celtic Hampers and Family Hampers on 25 October 2010 and 388 agents nationwide acquired from I and J L Brown Limited, who operated a Country Christmas Savings Club franchise, on 3 December 2012. Customer lists are amortised over their useful life of up to 10 years based on the pattern of forecast cash flows expected to be generated. On an annual basis, management review the expected cash flows to be generated and make appropriate provision for impairment.

44 Park Group plc — Annual report and accounts 2013 7 Other intangible assets continued Company Computer software £’000 Cost At 1 April 2012 2,171 Additions 42 At 31 March 2013 2,213

Amortisation and impairment At 1 April 2012 1,957 Amortisation charge for the year 75 At 31 March 2013 2,032

Net book amount At 31 March 2013 181 At 31 March 2012 214

Cost At 1 April 2011 2,017 Additions 154 At 31 March 2012 2,171

Amortisation and impairment At 1 April 2011 1,907 Amortisation charge for the year 50 At 31 March 2012 1,957

Net book amount At 31 March 2012 214 At 31 March 2011 110

8 Investments Group Other investments £’000 Cost At 31 March 2012 and 2013 8

Provisions At 31 March 2012 and 2013 –

Net book amount At 31 March 2012 and 2013 8

Park Group plc — Annual report and accounts 2013 45 Notes to the Accounts continued

8 Investments continued Company Shares in subsidiary Other undertakings investments Total £’000 £’000 £’000 Cost At 31 March 2012 and 2013 8,525 8 8,533

Provisions At 31 March 2012 and 2013 561 – 561

Net book amount At 31 March 2012 and 2013 7,964 8 7,972

The other investment relates to a minority investment in ordinary share capital of a single third party.

At 31 March 2013 the parent company’s principal subsidiary undertakings included in the consolidation were:

Name of company Nature of business Park Group UK Limited Holding company Park Retail Limited Mail order and cash savings operations Park Christmas Savings Club Limited Mail order agency cash savings Country Christmas Savings Club Limited Mail order agency cash savings Family Christmas Savings Club Limited Mail order agency cash savings Handling Solutions Limited Contract packing High Street Vouchers Limited Voucher sales Budworth Properties Limited Property management Park Direct Credit Limited Cash lending and debt collection services Park Travel Service Limited Travel agency Park Financial Services Limited Insurance broking services Park Card Services Limited Electronic money issuer Park Card Marketing Services Limited Card administration support services MaximB2B Limited Sales and marketing

Park Group UK Limited, Park Card Services Limited and Park Card Marketing Services Limited are wholly owned subsidiary undertakings of Park Group plc. All of the other companies above were directly held, wholly owned, subsidiary undertakings of Park Group UK Limited, except for MaximB2B Limited. Park Retail Limited owns 50.01 per cent of the share capital of MaximB2B.

All of the above companies are registered in England.

9 Investment property Group 2013 2012 £’000 £’000 Cost At 1 April and 31 March 296 296

Accumulated depreciation At 1 April 39 34 Charge in year 6 5 At 31 March 45 39

Net book amount at 31 March 251 257

Two properties, one in Walton and one in Bishop Auckland, are rented out to a third party.

Included in revenue is £24,000 (2012 – £24,000) of rental income generated from investment properties.

Direct operating expenses arising on the investment property in the period amounted to £nil (2012 – £nil).

The directors are of the opinion that the fair value and book value of investment properties are not significantly different.

46 Park Group plc — Annual report and accounts 2013 10 Property, plant and equipment Group Land and Plant and buildings equipment Vehicles Total £’000 £’000 £’000 £’000 Cost or valuation At 1 April 2012 15,706 5,976 22 21,704 Additions at cost – 327 – 327 At 31 March 2013 15,706 6,303 22 22,031

Accumulated depreciation At 1 April 2012 7,954 4,708 22 12,684 Charge in year 225 420 – 645 At 31 March 2013 8,179 5,128 22 13,329

Net book amount At 31 March 2013 7,527 1,175 – 8,702 At 31 March 2012 7,752 1,268 – 9,020

Cost or valuation At 1 April 2011 15,700 5,678 22 21,400 Additions at cost 6 735 – 741 Disposals – (437) – (437) At 31 March 2012 15,706 5,976 22 21,704

Accumulated depreciation At 1 April 2011 7,729 4,776 22 12,527 Charge in year 225 369 – 594 Disposals – (437) – (437) At 31 March 2012 7,954 4,708 22 12,684

Net book amount At 31 March 2012 7,752 1,268 – 9,020 At 31 March 2011 7,971 902 – 8,873

Park Group plc — Annual report and accounts 2013 47 Notes to the Accounts continued

10 Property, plant and equipment continued Company Land and Plant and buildings equipment Total £’000 £’000 £’000 Cost or valuation At 1 April 2012 31 4,160 4,191 Additions at cost – 242 242 At 31 March 2013 31 4,402 4,433

Accumulated depreciation At 1 April 2012 31 3,273 3,304 Charge in year – 279 279 At 31 March 2013 31 3,552 3,583

Net book amount At 31 March 2013 – 850 850 At 31 March 2012 – 887 887

Cost or valuation At 1 April 2011 35 3,565 3,600 Additions at cost – 595 595 Group transfer (4) – (4) At 31 March 2012 31 4,160 4,191

Accumulated depreciation At 1 April 2011 32 3,045 3,077 Charge in year – 228 228 Group transfer (1) – (1) At 31 March 2012 31 3,273 3,304

Net book amount At 31 March 2012 – 887 887 At 31 March 2011 3 520 523

11 Deferred tax Group 2013 2012 £’000 £’000 Deferred tax asset 604 626 Deferred tax liability (687) (647) Net deferred tax liability (83) (21)

IAS 12 Income Taxes requires the offset of deferred tax balances meeting the offset criteria in the standard. All deferred tax liabilities were available for offset against deferred tax assets.

Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 23 per cent (2012 – 24 per cent). The rate of corporation tax was reduced to 23 per cent for the year to 31 March 2014 in the budget of March 2012 and the rate change was substantively enacted on 3 July 2012. The further reduction in the rate to 21 per cent from 1 April 2014 and 20 per cent from 1 April 2015, announced in the budget of March 2013 but not yet substantively enacted, is not expected to have a material impact on the deferred tax position.

48 Park Group plc — Annual report and accounts 2013 11 Deferred tax continued The movement on the deferred tax account is shown below:

2013 2012 £’000 £’000 At 1 April (21) (20) Income statement charge (466) (109) Statement of comprehensive income (charge)/credit (58) 108 Amounts credited directly to equity 462 – At 31 March (83) (21)

Deferred tax assets have been recognised in respect of other temporary differences giving rise to deferred tax assets where it is probable that these assets will be recovered. Deferred tax assets have not been provided on trading losses of £20,624,000 and on capital losses of £2,038,000.

There are no deferred tax liabilities arising on temporary differences associated with subsidiaries.

The movements in deferred tax assets and liabilities are shown below: Property, plant and equipment Total £’000 £’000 Deferred tax liabilities At 1 April 2012 (647) (647) Charged to income statement (40) (40) At 31 March 2013 (687) (687)

At 1 April 2011 (696) (696) Credited to income statement 49 49 At 31 March 2012 (647) (647)

Retirement benefit Share obligation options Total £’000 £’000 £’000 Deferred tax assets At 1 April 2012 452 174 626 Charged to income statement (323) (103) (426) Charged to statement of comprehensive income (58) – (58) Credited to equity – 462 462 At 31 March 2013 71 533 604

At 1 April 2011 551 125 676 (Charged)/credited to income statement (207) 49 (158) Credited to statement of comprehensive income 108 – 108 At 31 March 2012 452 174 626

Company 2013 2012 £’000 £’000 Deferred tax asset 705 728 Deferred tax liability – – Net deferred tax asset 705 728

IAS 12 requires the offset of deferred tax balances meeting the offset criteria in the standard. All deferred tax liabilities were available for offset against deferred tax assets.

Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 23 per cent (2012 – 24 per cent). The rate of corporation tax was reduced to 23 per cent for the year to 31 March 2014 in the budget of March 2012 and the rate change was substantively enacted on 3 July 2012. The further reduction in the rate to 21 per cent from 1 April 2014 and 20 per cent from 1 April 2015, announced in the budget of March 2013 but not yet substantively enacted, is not expected to have a material impact on the deferred tax position.

Park Group plc — Annual report and accounts 2013 49 Notes to the Accounts continued

11 Deferred tax continued The movement on the deferred tax account is shown below:

2013 2012 £’000 £’000 At 1 April 728 823 Income statement charge (427) (203) Statement of comprehensive income (charge)/credit (58) 108 Amounts credited directly to equity 462 – At 31 March 705 728

Deferred tax assets have been recognised in respect of other temporary differences giving rise to deferred tax assets where it is probable that these assets will be recovered. Deferred tax assets have not been provided on capital losses of £440,000.

The movements in deferred tax assets are shown below:

Retirement Property, benefit plant and Share obligation equipment options Total £’000 £’000 £’000 £’000 Deferred tax assets At 1 April 2012 452 102 174 728 Charged to income statement (323) (1) (103) (427) Charged to statement of comprehensive income (58) – – (58) Credited to equity – – 462 462 At 31 March 2013 71 101 533 705

At 1 April 2011 551 147 125 823 (Charged)/credited to income statement (207) (45) 49 (203) Credited to statement of comprehensive income 108 – – 108 At 31 March 2012 452 102 174 728

12 Inventories Group 2013 2012 £’000 £’000 Raw materials 204 90 Finished goods 1,215 1,851 1,419 1,941

The cost of inventories recognised as an expense in the year is £27,095,000 (2012 – £25,134,000).

The write down of inventories recognised as an expense in the period is £9,000 (2012 – £nil).

13 Trade and other receivables Group 2013 2012 £’000 £’000 Non-current assets Deferred consideration for assets previously held for sale – 628

2013 2012 £’000 £’000 Current assets Trade receivables 3,935 3,602 Less: Provision for impairment of receivables (71) (20) Trade receivables – net 3,864 3,582 Other receivables 2,897 2,206 Deferred consideration for assets previously held for sale 52 575 Prepayments 694 893 7,507 7,256

Of the trade receivables – net balance above, £3,708,000 is due within one month, with the remaining £156,000 falling due in more than one but less than three months. Other receivables and deferred consideration for assets previously held for sale are due within one month.

50 Park Group plc — Annual report and accounts 2013 13 Trade and other receivables continued 2013 2012 Credit quality of trade receivables £’000 £’000 Neither past due nor impaired 3,581 3,408 Past due but not impaired 283 180 Past due and impaired 71 14 Total 3,935 3,602

The group has charged £53,000 in respect of the provision for impairment of receivables during the year (2012 – £2,000).

The movement in the provision for impairment of trade receivables is as follows: 2013 2012 £’000 £’000 At 1 April (20) (22) Additional provisions (69) (2) Amounts used 2 4 Amounts reversed 16 – At 31 March (71) (20)

Company 2013 2012 £’000 £’000 Receivables from subsidiaries 6,458 6,116 Other receivables 377 334 Prepayments 540 417 7,375 6,867

Other receivables are due within one month.

14 Other financial assets Group 2013 2012 £’000 £’000 Bank deposit 500 2,100

This comprises a deposit with a bank which has a maturity date of 1 November 2013 (2012 – there were three deposits with maturity dates of 8 October 2012, 31 October 2012 and 27 November 2012). The deposit will be held to maturity and will generate a fixed interest income to the group. The carrying value might be affected by changes in the credit risk of the counterparty. In the published accounts as at 31 March 2012, this figure was shown within cash and cash equivalents.

Company 2013 2012 £’000 £’000 Bank deposit – 1,000

The prior year balance comprises a deposit with a bank which had a maturity date of 27 November 2012. The deposit was held to maturity and generated a fixed interest income to the company. The carrying value may have been affected by changes in the credit risk of the counterparty. In the published accounts as at 31 March 2012, this figure was shown within cash and cash equivalents.

15 Monies held in trust Group 2013 2012 £’000 £’000 Park Prepayments Protection Trust 40,208 42,049 E money Trust 8,105 4,833 Monies held in trust 48,313 46,882

On 13 August 2007 a declaration of trust constituted PPPT to hold customer prepayments. Park Prepayments Trustee Company Limited, as trustee of the trust, holds this money on behalf of the agents.

Park Group plc — Annual report and accounts 2013 51 Notes to the Accounts continued

15 Monies held in trust continued The conditions of the trust that allow the release of money to the group are summarised below: 1 Purchase of products to be supplied to customers. 2 Supply of products to customers less any amounts already received under condition 1 (above). 3 Amounts required as a security deposit to any credit card company or other surety. 4 Amounts payable for VAT. 5 Amounts equal to any bond required by the Christmas Prepayments Association (CPA). 6 Amounts to meet its working capital requirements. 7 Residual amounts upon completion of despatch of all orders in full.

Products for this purpose means goods, vouchers, prepaid cards or other products ordered by customers.

Prior to any such release of monies under condition 6 above, the trustees of PPPT require a statement of adequacy of working capital from the directors of Park Retail Limited, stating that it will have sufficient working capital for the year. Releases can be requested from the trust between 1 February and 31 May of each year and shall not exceed 50 per cent of the cumulative balance of prepayments made by customers.

A summary of the main provision of the deeds and a copy of the trust deed is available at www.getpark.co.uk.

On 16 February 2010 a declaration of trust constituted the PCSET to hold the E money float in accordance with regulatory requirements. The E money float represents the value of the obligations of the company to card holders and redeemers.

All monies held in trust have a maturity date of less than three years. The timing of the release of the monies to the group from PPPT is as detailed above. The release of monies from the E money Trust occurs as the obligations fall due.

16 Cash and cash equivalents Group 2013 2012 £’000 £’000 Cash at bank and in hand 10,810 7,111

All cash held at bank at 31 March 2013 had a maturity date of less than one month.

In the published accounts as at 31 March 2012, cash and cash equivalents included amounts which have subsequently been reclassified as other financial assets (see note 14).

Company 2013 2012 £’000 £’000 Cash at bank and in hand 10,123 7,616

All cash held at bank at 31 March 2013 had a maturity date of less than one month.

In the published accounts as at 31 March 2012, cash and cash equivalents included amounts which have subsequently been reclassified as other financial assets (see note 14).

17 Trade and other payables Group 2013 2012 £’000 £’000 Trade payables 56,463 55,804 Other taxes and social security payable 716 1,167 Other payables 1,059 269 Accruals and deferred income 1,743 1,953 59,981 59,193

Trade payables fall due as follows: 2013 2012 £’000 £’000 Not later than one month 56,108 54,781 Later than one month and not later than three months 355 1,023 56,463 55,804

Trade payables include agents’ prepayments for products that will be supplied prior to Christmas 2013. It also includes balances due to both customers and retailers in respect of flexecash® cards.

Other payables are due within one month.

An amount of £192,000 in respect of payment protection insurance, which was included within other payables at 31 March 2012, has been reclassified as provisions (see note 18).

52 Park Group plc — Annual report and accounts 2013 17 Trade and other payables continued Company 2013 2012 £’000 £’000 Trade payables 193 133 Other taxes and social security payable 74 76 Payables to subsidiaries 18,466 8,113 Other payables 89 141 Accruals and deferred income 458 614 19,280 9,077

Trade payables and other payables are due within one month.

An amount of £192,000 in respect of payment protection insurance, which was included within other payables at 31 March 2012, has been reclassified as provisions (see note 18).

18 Provisions Group Vouchers Payment Impact of protection Gross discounting Net insurance Total £’000 £’000 £’000 £’000 £’000 At 1 April 2012 34,018 (993) 33,025 192 33,217 Arising on vouchers despatched in period at date of despatch 30,415 (946) 29,469 – 29,469 Increase in provision arising from the unwind of the discount recorded on initial recognition – 854 854 – 854 Increase in payment protection insurance provision in period – – – 105 105 Vouchers utilised in period (31,270) – (31,270) – (31,270) Payment protection insurance provision used in period – – – (129) (129) At 31 March 2013 33,163 (1,085) 32,078 168 32,246

The voucher provision is made in respect of unredeemed vouchers which are included at the present value of expected redemption amounts. 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. The anticipated amounts payable to retailers are arrived at by reference to historical data as to voucher redemption patterns. Whilst the voucher redemption provision covers a number of years of expected redemptions, typically the great majority of vouchers issued are redeemed within 12 months of issue.

The payment protection insurance provision is in respect of future expected settlements of claims arising from the mis-selling of payment protection insurance. The group ceased to sell this insurance in 2007 when it closed its loan broking business. The timing of the outflows are uncertain but we expect the majority to be settled within the next 12 months.

In the published accounts as at 31 March 2012, the figure for payment protection insurance was shown within trade and other payables.

Company Payment protection insurance £’000 At 1 April 2012 192 Increase in payment protection insurance provision in period 105 Payment protection insurance provision used in period (129) At 31 March 2013 168

19 Retirement benefit obligation Group and company The group operates two defined benefit pension schemes, Park Food Group plc Pension Scheme (PF) and Park Group Pension Scheme (PG), providing benefits based on final pensionable pay. Both schemes are closed to future accrual of benefit based on service. The assets of the schemes are held separately from those of the company in trustee administered funds. Contributions to the schemes are determined by a qualified actuary on the basis of triennial valuations.

The group makes contributions to a defined contribution pension scheme which is insured with Aegon. It also makes contributions to a defined contribution stakeholder pension plan, insured with Clerical Medical, for employees who are not eligible to join the Aegon defined contribution scheme, as well as to individual personal pension plans for certain employees.

Park Group plc — Annual report and accounts 2013 53 Notes to the Accounts continued

19 Retirement benefit obligation continued The total pension charge for the year to 31 March 2013 was £660,000 (2012 – £677,000) of which £614,000 (2012 – £538,000) related to defined contribution pension schemes. At 31 March 2013, contributions of £52,000 (2012 – £75,000) were outstanding, which represented the contributions for the month of March.

The group has applied IAS 19 (Revised 2004) to both schemes and the following disclosures relate to this standard. The group recognises any differences between the actual and expected return on assets and differences arising from the changes in actuarial assumptions in each period in the SOCI.

Full actuarial valuations were carried out at 31 March 2011 (of the PF scheme) and as at 31 March 2010 (of the PG scheme). Both valuations have been updated to 31 March 2013 by a qualified independent actuary.

Principal actuarial assumptions at the date of the statement of financial position (expressed as weighted averages):

2013 2012 % % Discount rate 4.80 4.90 Future salary increases 2.50 2.40 Future pension increases PF scheme 3.50 3.40 PG scheme 2.50 2.40 Life expectancy at age 65 for: Males (PG and PF) 88.1 85.6 Females (PG and PF) 90.5 88.5

The post-retirement mortality assumptions used are based on ‘PCxA 00’ standard tables with some allowance for future mortality improvements.

The expected rates of return for each asset class, gross of scheme expenses, were: 2013 2012 % % Equities 6.30 6.20 Bonds 4.80 4.90 Diversified Growth Fund 5.80 5.70 Property 5.80 5.70 Cash 0.50 0.50 Gilts 2.80 2.70

The major categories of scheme assets as a percentage of total scheme assets are as follows: 2013 2012 % % Equities 37.2 55.2 Bonds 21.6 9.1 Diversified Growth Fund 12.3 4.5 Property 5.7 4.8 Cash 4.4 4.2 Gilts 18.8 22.2

Where investments are held in bonds and cash, the expected long term rate of return is taken to be the yields generally prevailing on such assets at the date of the statement of financial position. A higher rate of return is expected on equity investments, which is based more on realistic future expectations than on returns that have been available historically. Diversified Growth Funds aim to deliver equity-like returns. The overall expected long term rate of return on assets is then the average of these rates taking into account the underlying asset portfolio of the pension plan.

The amounts recognised in the statement of financial position are as follows: Restated1 2013 2012 2011 2010 2009 £’000 £’000 £’000 £’000 £’000 Present value of pension obligation 15,084 14,303 13,913 17,759 11,722 Fair value of scheme assets (14,776) (12,419) (11,792) (13,910) (10,655) Net liability 308 1,884 2,121 3,849 1,067

1 The 2011 figures were restated following the change in statutory indexation measure used to assess future pension liabilities from retail price index (RPI) to consumer price index (CPI).

54 Park Group plc — Annual report and accounts 2013 19 Retirement benefit obligation continued The amounts recognised in the income statement are as follows: 2013 2012 £’000 £’000 Current service cost – – Interest on obligation 692 848 Expected return on scheme assets (646) (725) Settlement losses/(gains) – – Total included in administrative expenses 46 123

Actual return on scheme assets for the year to 31 March 2013 was £1.360m (2012 – £0.425m).

Changes in the present value of the defined benefit obligation are as follows: 2013 2012 £’000 £’000 Opening defined benefit obligation 14,303 13,913 Service cost – – Employee contributions – – Interest cost 692 848 Settlement losses – – Actuarial losses 463 198 Benefits paid (374) (468) Changes in assumptions – (188) Closing defined benefit obligation 15,084 14,303

Change in the fair value of scheme assets: 2013 2012 £’000 £’000 Opening fair value of scheme assets 12,419 11,792 Expected return 646 725 Actuarial gains/(losses) 714 (300) Contributions by employer 1,371 670 Contributions by employees – – Benefits paid (374) (468) Closing assets at fair value 14,776 12,419

None of the schemes’ assets were invested in Park Group plc or property occupied by Park Group plc.

The group expects to contribute in the year to 31 March 2014 to the PG scheme a fixed amount of £643,000 per annum, payable monthly, based on the current schedule of contributions following the actuarial valuation carried out as at 31 March 2010. In addition to this, Park has committed to pay life assurance premiums of £12,000 in the year. Contributions to the PF scheme are to be paid at a rate of £2,000 per calendar month following completion of the actuarial valuation as at 31 March 2011.

Analysis of amount to be recognised in the SOCI: 2013 2012 £’000 £’000 Actual return less expected return on pension scheme assets 714 (300) Actuarial losses arising on pension scheme liabilities – (198) Changes in assumptions underlying the present value of the scheme liabilities (463) 188 Total amount of actuarial gains/(losses) recognised in the SOCI in the year: 251 (310) Cumulative amount of actuarial losses recognised in the SOCI at year end: (426) (677)

Park Group plc — Annual report and accounts 2013 55 Notes to the Accounts continued

19 Retirement benefit obligation continued History of experience gains and losses over the years Restated1 2013 2012 2011 2010 2009 £’000 £’000 £’000 £’000 £’000 Difference between the expected and actual return on scheme assets: Amount 714 (300) 34 2,399 (2,310) Value of assets 14,776 12,419 11,792 13,910 10,655 Percentage of scheme assets 5% (2%) 0% 17% (22%)

Experience gains and losses on scheme liabilities: Amount – (198) 5 (108) 120 Present value of liabilities 15,084 14,303 13,913 17,759 11,722 Percentage of present value of scheme liabilities 0% (1%) 0% (1%) 1%

Total amount recognised in SOCI: Amount 251 (310) 1,465 (3,038) 1,506 Present value of liabilities 15,084 14,303 13,913 17,759 11,722 Percentage of present value of scheme liabilities 2% (2%) 11% (17%) 13%

1 The 2011 figures were restated following the change in statutory indexation measure used to assess future pension liabilities from RPI to CPI. The following figures were restated:

Previously As reported restated Adjustment £’000 £’000 £’000 Present value of pension obligation 15,613 13,913 1,700

The change in the present value of pension obligation is due to: Changes in assumptions in respect of defined benefit obligation 274 (1,426) 1,700

20 Employees and directors Group Employee benefit expense for the group during the year 2013 2012 £’000 £’000 Wages and salaries 8,524 8,825 Social security costs 1,102 824 Other pension costs 660 677 Share-based payments 234 250 Other benefits 62 54 10,582 10,630

Average monthly number of people (including executive directors) employed 2013 2012 Number Number Consumer 201 184 Corporate 93 94 All other segments 10 8 Average number employed 304 286

Key management compensation 2013 2012 £’000 £’000 Salaries and short term employee benefits 1,235 1,440 Post-employment benefits 131 129 Share-based payments 109 139 1,475 1,708

Key management are deemed to be the group’s executive and non-executive directors.

Details of directors’ emoluments, including those of the highest paid, can be found in the remuneration report.

The amount of £129,000 for post-employment benefits for key management is a correction of an error with the previously reported amount of £146,000.

The amount of £139,000 for share-based payments for key management is a restatement of the previously reported amount of £134,000 due to a number of share options being omitted from the calculation in the prior year (see note 21a).

56 Park Group plc — Annual report and accounts 2013 21a Share capital Group and company No of shares £’000 Authorised: Ordinary shares of 2p each At 31 March 2012 and 2013 195,000,000 3,900

Allotted, called up and fully paid At 1 April 2012 168,030,990 3,361 LTIP shares awarded 1,321,485 26 At 31 March 2013 169,352,475 3,387

Options over ordinary shares in the company have been granted and dealt with as follows as at 31 March 2013:

Options over ordinary shares Exercised Latest Lapsed/ Exercise exercise Date of grant Granted surrendered Prior years This year Outstanding price date 17.01.03 2,650,000 (2,650,000) – – – 21.83p 16.01.13 15.07.04 1,800,000 (775,000) – – 1,025,000 29.00p 14.07.14 16.06.10 888,888 – – – 888,888 20.25p 15.06.20

The market price of the shares at 31 March 2013 was 58.25p with a range in the year of 42.50p to 64.50p.

The figures stated in the published accounts for 31 March 2012 omitted 575,000 options granted on 15 July 2004 which were still outstanding at that year end.

21b Share-based payments The group operates three share schemes: UESOS, AESOS and LTIP.

For the purposes of assessing the income statement charge under IFRS 2, the options and awards under the schemes were valued using the binomial option pricing model.

The group recognised a total charge of £234,000 (2012 – £250,000) related to equity settled share-based transactions during the year ended 31 March 2013.

This charge was split across the schemes as follows:

2013 2012 £’000 £’000 UESOS 22 28 AESOS 13 14 LTIP 199 208 234 250

The fair value per option or award granted and the assumptions used in the calculation are as follows:

UESOS AESOS LTIP 2009–12 LTIP 2010–13 LTIP 2011–14 LTIP 2012–15 Grant date 15.07.04 16.06.10 25.06.10 25.06.10 14.06.11 19.07.12 Share price at grant date 29.00p 20.50p 21.75p 21.75p 48.00p 49.75p Exercise price 29.00p 20.25p Nil Nil Nil Nil Number of shares under option or provisionally awarded 1,800,000 888,888 2,753,102 2,834,856 1,394,911 1,521,155 Option/award life (years) 10 10 3 3 3 3 Expected volatility 45% 35% 35% 35% 35% 34% Risk free rate 4.50% 3.76% 3.61% 3.61% 3.57% 1.66% Expected dividend yield 3.75% 6.00% 6.00% 6.00% 5.00% 5.00% Forfeiture rate 25% 0% 0% 0% 0% 0% Fair value per option/award 6.10p 5.38p 7.32p 5.95p 13.51p 15.10p

For share options issued prior to June 2010, the expected volatility of share price has been estimated using the logarithmic share price returns approach, based on share price performance over recent years. For awards issued from June 2010, the expected volatility of share price was based on historical movements in the share price, calculated as the standard deviation of percentage returns on the shares in the period since 2006.

The risk free interest rate is based on the yield available on zero coupon UK Government bonds of a term consistent with the assumed option life.

Park Group plc — Annual report and accounts 2013 57 Notes to the Accounts continued

21b Share-based payments continued For share options issued prior to June 2010, projected dividend yield is based on dividend yield over the last 10 years. For awards issued from June 2010, projected dividend yield was based on historical dividend payments in the three years prior to the dates of the awards, relative to the average annual share prices in that period.

For share options issued prior to June 2010, forfeiture rates are based on historical leaver information and depend on length of vesting period and category of employee. For awards issued from June 2010, on the basis that these awards were granted to senior management, a forfeiture rate of nil was assumed.

UESOS and AESOS Options are granted at the discretion of directors. Options can only be exercised during the option exercise period, being the period commencing on the third anniversary of the date of the grant of the option and ending on the day before the tenth such anniversary.

Schemes with a grant date prior to 2007 No option can be exercised unless the market value of a share is at least 50p. No option can be exercised unless the eps of the company is at least 4.3p per share.

Scheme granted on or after 16.06.10 No performance criteria attach to these options.

The requirement for the market value of a share to be a certain price is a market condition and has thus been reflected in the fair value of the options at the date of grant.

The requirement for eps to be at least 4.3p per share is a non-market condition. The fair value calculations do not incorporate the effects of non-market conditions.

Options lapse if an individual leaves the company by resigning.

A reconciliation of option movements during the year is shown below:

2013 2012 Weighted Weighted average average exercise exercise Number price (p) Number price (p) Outstanding at 1 April 2,763,888 23.98 2,963,888 23.10 Expired (850,000) 21.83 (200,000) 11.00 Outstanding at 31 March 1,913,888 24.94 2,763,888 23.98

2013 2012 Share options outstanding at end of period Weighted average remaining contractual life 4.0 years 3.7 years

The prior year figures above have been amended to include the 575,000 options omitted from the calculations in the accounts to 31 March 2012.

LTIP In June 2010, an LTIP was adopted by the remuneration committee. This plan was for the benefit of certain employees selected at the discretion of the committee. The awards consist of allocations of shares, the final distribution of which is dependent on market performance targets. Each participating employee can be awarded shares up to a maximum value of 100 per cent of salary.

A reconciliation of LTIP award movements during the year is shown below:

2013 2012 Weighted Weighted average average exercise exercise Number price (p) Number price (p) Outstanding at 1 April 6,982,869 – 5,587,958 – Granted 1,521,155 – 1,394,911 – Exercised (2,753,102) – – – Outstanding at 31 March 5,750,922 – 6,982,869 –

The prior year figures have been amended to take account of an incorrect figure for awards issued in respect of the LTIP 2010-13 scheme being used previously.

58 Park Group plc — Annual report and accounts 2013 21b Share-based payments continued 2013 2012 Weighted Weighted average average share price share price at date of at date of Number exercise (p) Number exercise (p) Shares awarded in respect of LTIP awards in the financial period 1,321,485 49.25 – –

2013 2012 LTIP awards outstanding at end of period Weighted average remaining contractual life 1.0 years 1.0 years

Details of the weighted average fair value of the awards made in the year, together with how this value was calculated, can be found on page 57.

22 Dividends Amounts recognised as distributed to equity holders in the year:

2013 2012 £’000 £’000 Interim dividend for the year ended 31 March 2012 of 0.525p (2011 – 0.50p) 882 840 Final dividend for the year ended 31 March 2012 of 1.475p (2011 – 1.20p) 2,498 2,016

An interim dividend of 0.55p per share in respect of the financial year ended 31 March 2013 was paid on 8 April 2013 and absorbed £931,000 of shareholders’ funds. In addition, the directors are proposing a final dividend in respect of the financial year ended 31 March 2013 of 1.55p per share which will absorb an estimated £2,625,000 of shareholders’ funds. The final dividend will be paid on 1 October 2013 to shareholders who are on the register of members at the close of business on 30 August 2013. Neither of these dividends were paid or provided for in the year.

23 Reconciliation of net profit/(loss) to net cash inflow from operating activities

Group Company 2013 2012 2013 2012 £’000 £’000 £’000 £’000 Net profit/(loss) 7,595 6,516 (3,634) 6,022 Adjustments for: Tax 1,936 2,066 (1,201) (1,170) Interest income (2,034) (1,725) (210) (308) Interest expense – 2 – 2 Dividend from related party – – – (8,000) Depreciation and amortisation 1,530 1,537 354 278 Impairment of other intangibles 361 – – – Impairment of goodwill 5 38 – – Decrease/(increase) in other financial assets1 1,600 (1,500) 1,000 (1,000) Decrease/(increase) in inventories 522 (616) – – Increase in trade and other receivables (534) (342) (175) (127) Increase/(decrease) in trade and other payables1 787 7,270 (149) (64) Movement in balances with related parties – – 13,946 5,109 Decrease in provisions1 (971) (1,046) (24) (8) Increase in monies held in trust (1,431) (7,275) – – Decrease in retirement benefit obligation (1,325) (547) (1,325) (547) Translation adjustment (26) 52 – – Cash settled share award (705) – (705) – Share-based payments 234 250 234 250 Net cash inflow from operating activities 7,544 4,680 8,111 437

1 The figures in the above reconciliation have been restated from those previously reported, as shown on page 60.

Park Group plc — Annual report and accounts 2013 59 Notes to the Accounts continued

23 Reconciliation of net profit/(loss) to net cash inflow from operating activities continued Group Company As Previously As Previously restated reported restated reported 2012 2012 2012 2012 £’000 £’000 £’000 £’000 Increase in other financial assets (1,500) – (1,000) – Increase/(decrease) in trade and other payables 7,270 7,262 (64) (72) Decrease in provisions (1,046) (1,038) (8) – 4,724 6,224 (1,072) (72)

Movement in cash flows (1,500) (1,000)

Net cash inflow from operating activities as previously reported 6,180 1,437 Movement in cash flows detailed above (1,500) (1,000) Net cash inflow from operating activities as restated 4,680 437

24 Contingent liabilities At 31 March 2012 the group had an obligation under a contract with a Country Christmas Savings Club franchisee to buy back the franchise once notice was given of a desire to surrender by the franchisee. Notice was given during the year and the franchise was bought back, in December 2012, at a cost to the group of £220,000.

25 Operating lease commitments – minimum lease payments Group 2013 2012 Vehicles, Vehicles, plant and plant and Property equipment Property equipment £’000 £’000 £’000 £’000 Non-cancellable operating lease rentals are payable as follows: Within one year 28 37 – 17 Later than one year and less than five years 67 87 – 18 After five years 26 29 – – 121 153 – 35

The group leases a warehouse and also property for its businesses not based at the head office site, under non-cancellable operating lease agreements. The leases have an average term of between five and ten years. Two of the leases contain break clauses at the three year anniversary of entering into the lease. The disclosed commitment has been calculated up to that point.

The group leases plant and machinery under non-cancellable operating lease agreements. The leases have an average life of between two and seven years.

26 Capital and other financial commitments Group 2013 2012 £’000 £’000 Contracts placed for future capital expenditure not provided in the financial statements 38 48

60 Park Group plc — Annual report and accounts 2013 27 Related party transactions Group Transactions between the group’s wholly owned subsidiaries, which are related party transactions, have been eliminated on consolidation and are therefore not disclosed in this note.

During the year the group provided working capital funding to MaximB2B Limited. At the year end the balance owed to the group by MaximB2B, net of provisions, was £177,000 (2012 – £234,000).

There are no transactions with key management personnel other than those disclosed in the directors’ remuneration report.

Mr P R Johnson, the ultimate controlling party of the group at 31 March 2012, reduced his direct shareholding during the year to 20.36 per cent of the share capital of Park Group plc. He also has a beneficial interest in 9.59 per cent of shares held by Huntress Nominees Limited. Following this transaction, there is no ultimate controlling party of the group.

Park Group plc have entered into a sponsorship agreement with Tranmere Rovers Football Club at a cost of £10,000. Mr P R Johnson has a controlling interest in the club.

Company The following transactions with subsidiaries occurred in the year: 2013 2012 £’000 £’000 Dividends received – 8,000

No purchases or sales transactions were entered into between the company and subsidiary companies.

Year end balances arising from transactions with subsidiaries 2013 2012 £’000 £’000 Receivables from subsidiaries (note 13) 6,458 6,116

Payables to subsidiaries (note 17) 18,466 8,113

The payables to subsidiaries arise mainly due to cash collected on behalf of other subsidiaries.

Provisions against inter company loans The balances stated above are shown net of the following provisions:

2013 2012 £’000 £’000 Subsidiaries 10,745 10,568

28 Financial instruments Credit risk Management has a policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed for all customers. The majority of trade receivables are subject to credit insurance, which further reduces credit risk.

At the year end there were no significant concentrations of risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position.

Park Group plc — Annual report and accounts 2013 61 Notes to the Accounts continued

28 Financial instruments continued The financial assets and financial liabilities of the group are detailed below: Carrying Carrying amount amount and fair and fair value value 2013 2012 Notes £’000 £’000 Financial assets Monies held in trust 15 48,313 46,882 Financial assets – deposit at bank 14 500 2,100 Cash and cash equivalents 16 10,810 7,111 Trade receivables 13 3,864 3,582 Other receivables (due within one year and over one year) 13 2,897 2,206 66,384 61,881

Financial liabilities Trade payables 17 56,463 55,804 Other payables 17 1,059 269 57,522 56,073

Cash balances are held on deposit with major UK banks to minimise credit risk on cash deposits.

For further details of each of the financial assets and financial liabilities, see note numbers as detailed above.

Due to their relatively short maturity, the carrying amounts of all financial assets and financial liabilities approximate to their fair values. Other receivables due in more than one year, in the prior year, relate to the deferred consideration for the sale of the Dock Road site on which interest is charged at market rates.

The provision for unredeemed vouchers is not a financial liability and is therefore excluded from the table above.

Interest rate risk Due to the significant levels of cash and cash equivalents held by the group and in trust, the group has an exposure to interest rates. In respect of all other financial assets and liabilities, the group does not have any interest rate exposure.

A 0.5 per cent movement in the interest rate applied to cash and cash equivalents, monies held in trust and other current financial assets would not have a material impact on the group’s profit before taxation, however a 1 per cent movement in interest rates would change profit before taxation by approximately £960,000.

Liquidity risk The group manages liquidity risk by continuously monitoring actual and forecast cash flows and by matching the maturity profiles of financial assets and liabilities. Whilst the group has net liabilities, it generates operational cash flows which enable it to meet its liabilities as they fall due. The group maintains an E money float, regulated by the Financial Conduct Authority, to hold E monies totally separately from group funds. The group is entitled to make limited draw downs from the PPPT subject to specific conditions being met as set out in the trust deed, available from www.getpark.co.uk. The group’s positive cash position enables it to operate without reliance on any external funding.

Details of the maturity of financial liabilities can be found in note 17. Comments on the group’s liquidity position and financial risk are set out on page 15 of the financial review and pages 16 and 17, the group’s risk factors. Comments on provisions, an area of concentration of risk, can be found in note 18.

Capital risk The group’s objectives in managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders. As the group continues to be in a net deficit position and has net current liabilities, its capital management focus to ensure that the group has adequate working capital includes management of its draw down facility with the PPPT and the extent to which net cash inflows from prepaid corporate customers are available to meet the group’s liabilities as they fall due.

The group as a whole is not subject to any external capital requirements (regulatory or funding). Park Financial Services Limited, a group subsidiary offering insurance broking services, and Park Card Services Limited, a group subsidiary operating as an electronic money issuer, are subject to Financial Conduct Authority capital requirements. Both companies report twice annually to the Financial Conduct Authority on the level of regulatory capital each company holds. The capital requirements were adhered to in the period. Voluntary trust arrangements are in place to provide some protection for the customers of our Christmas prepayment scheme. Further details of the trust are set out in note 15.

The group’s capital base includes share capital, share premium account and retained earnings.

Capital is reported monthly as part of the internal management accounts and is also included in budgeting and forecasting exercises. The ability to pay dividends is dependent on the parent company having distributable profits. It is management’s intention to manage the group’s and the company’s capital to maintain its ability to pay dividends.

62 Park Group plc — Annual report and accounts 2013 Notice of Meeting

Notice is hereby given that the thirtieth annual general meeting of Park Group plc will be held in The Vice Presidents Room, Tranmere Rovers Football Club Limited, Prenton Park, Prenton Road West, Birkenhead CH42 9PN on Monday 23 September 2013, at 12 noon for the following purposes:

To consider and, if thought fit, to pass the following resolutions as ordinary resolutions: 1 To receive and adopt the company’s annual accounts for the financial year ended 31 March 2013, together with the last directors’ report and the auditor’s report on those accounts. 2 To declare a final dividend for the financial year ended 31 March 2013. 3 To approve the remuneration report of the directors for the financial year ended 31 March 2013. 4 To re-elect Martin Stewart who retires by rotation and offers himself for re-election. 5 To re-elect John Dembitz who offers himself for re-election. 6 To appoint Ernst & Young LLP as auditors of the company. 7 To authorise the directors to determine the remuneration of the auditors. 8 That, pursuant to section 551 of the Companies Act 2006 (‘Act’), the directors be and are generally and unconditionally authorised to exercise all powers of the company to allot shares in the company or to grant rights to subscribe for or to convert any security into shares in the company up to an aggregate nominal amount of £1,185,016.50, provided that (unless previously revoked, varied or renewed) this authority shall expire at the conclusion of the next annual general meeting of the company after the passing of this resolution or on 23 December 2014 (whichever is the earlier), save that the company may make an offer or agreement before this authority expires which would or might require shares to be allotted or rights to subscribe for or to convert any security into shares to be granted after this authority expires and the directors may allot shares or grant such rights pursuant to any such offer or agreement as if this authority had not expired.

To consider and, if thought fit, to pass the following resolution as a special resolution: 9 That, subject to the passing of resolution 8 and pursuant to section 570 of the Act, the directors be and are generally empowered to allot equity securities (within the meaning of section 560 of the Act) for cash pursuant to the authority granted by resolution 8 as if section 561(1) of the Act did not apply to any such allotment, provided that this power shall be limited to the allotment of equity securities: 9.1 in connection with an offer of equity securities (whether by way of a rights issue, open offer or otherwise): 9.1.1 to holders of ordinary shares in the capital of the company in proportion (as nearly as practicable) to the respective numbers of ordinary shares held by them; and 9.1.2 to holders of other equity securities in the capital of the company, as required by the rights of those securities or, subject to such rights, as the directors otherwise consider necessary,

but subject to such exclusions or other arrangements as the directors may deem necessary or expedient in relation to treasury shares, fractional entitlements, record dates or any legal or practical problems under the laws of any territory or the requirements of any regulatory body or stock exchange; and 9.2 otherwise than pursuant to paragraph 9.1 of this resolution, up to an aggregate nominal amount of £177,752.47, and (unless previously revoked, varied or renewed) this power shall expire at the conclusion of the next annual general meeting of the company after the passing of this resolution or on 23 December 2014 (whichever is the earlier), save that the company may make an offer or agreement before this power expires which would or might require equity securities to be allotted for cash after this power expires and the directors may allot equity securities for cash pursuant to any such offer or agreement as if this power had not expired.

By order of the board

M R Stewart Company Secretary Valley Road Birkenhead CH41 7ED

29 July 2013

Notes: A member entitled to attend and vote at the meeting may appoint a proxy to attend and vote, on a poll, instead of him or her. A proxy need not be a member of the company. A form of proxy is enclosed for use by shareholders.

Park Group plc — Annual report and accounts 2013 63 Directors and Advisers

Directors: P R Johnson (Non-executive Chairman) ◊ C Houghton M R Stewart G A Woods C J Baker (Non-executive) *†◊ R G Marcall (Non-executive) *†◊ J Dembitz (Non-executive) *†◊

Secretary: M R Stewart

Registered office: Valley Road Birkenhead CH41 7ED Registered in England No 1711939

Nominated adviser: Arden Partners plc 125 Old Broad Street London EC2N 1AR

Merchant bankers: N M Rothschild & Sons Limited 82 King Street Manchester M2 4WQ

Auditors: Ernst & Young LLP 20 Chapel Street Liverpool L3 9AG

Stockbrokers: Arden Partners plc 125 Old Broad Street London EC2N 1AR

Bankers: Barclays Bank PLC 3 Hardman Street Manchester M3 3AX

Registrars: Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZZ

* Member of the audit committee † Member of the remuneration committee ◊ Member of the nomination committee

64 Park Group plc — Annual report and accounts 2013

Park Group plc Annual Report and Accounts Annual Report 2013

www.parkgroup.co.uk www.getpark.co.uk www.parkchristmas.ie www.highstreetvouchers.com www.love2reward.co.uk www.love2reward.ie www.love2choose.co.uk

Park Group plc Valley Road, Birkenhead Merseyside CH41 7ED [email protected]