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Park Group plc Group Park Annual Report2013 and Accounts 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.