27th Jun 2007 07:02
Park Group PLC27 June 2007 27 June 2007 NEWS RELEASE PARK GROUP PLC Preliminary Unaudited Results for the Year Ended 31 March 2007 Summary 2007 2006Revenue £310.7m £233.4m Profit/(loss) before taxation - continuing operations - cash savings £10.2m £5.4m - cash lending £(4.8)m £(3.4)m - discontinued operations £0.8m £(15.4)m ----------------------- £6.2m £(13.4)m ======================= Profit/(loss) after tax for the period £4.2m £(17.5)m Basic earnings/(loss) per share 2.58p (10.64)p Final dividend per share (proposed) 0.80p 0.74p Total dividend per share 1.20p 1.10p • Cash savings pre-tax profit £10.2m, up 88% • Dividend for year increased by 9% to 1.2p • Corporate vouchers revenue up 44% to £88m • 21% of Christmas 2007 orders placed via web • Trust accounts will restore confidence to the benefit of Christmas 2008 and beyond Peter Johnson, Chairman, commented: 'It gives me great pleasure to present anexcellent set of results after a challenging year, which reflect the stronggrowth within our Christmas savings and high street voucher business.' Enquiries: Park Group plc - 0151 653 1700 Peter Johnson, Executive Chairman Chris Houghton, Group Managing Director Tavistock Communications - 020 7920 3150 Jeremy Carey/ John West Chairman's Statement It gives me great pleasure to present an excellent set of results after achallenging year, which reflect the strong growth within our Christmas savingsand high street voucher business. Group revenue from continuing operations has increased by 33% to £310.7m whilstprofit before tax from continuing operations has increased to £5.4m. As a resultearnings per share rose to 2.58p (2006 - loss of 10.64p). The directors arepleased to recommend a final dividend of 0.8p per share payable on 1 October2007 to shareholders on the register at close of business on 31 August 2007,making a total distribution of 1.2p for the year. Christmas 2006 was the most successful in Park's history. The Park, Country andFamily brands delivered Christmas for our agents and customers in recordvolumes. This division achieved considerable growth. Revenue increased by 32.6%to £305.2m and profit before tax increased by 88% to £10.2m. The internet is now playing an ever increasingly important role in the group'sactivities. In the Christmas savings business, on-line orders amount to 21% ofall orders for Christmas 2007. On the corporate side, the majority of newbusiness contacts are being generated by internet marketing and our fledglingonline voucher retail business, www.highstreetvouchers.com is showing impressivegrowth. Park Group is now an established multi channel organisation. The Office of Fair Trading announced in April 2007 that it was enquiring intothe acquisition by Park of the Home Farm business on 7 March 2007. We are fullyresponding to this enquiry, but believe that the Christmas savings businessforms part of a demonstrably wider market where Park has only a small marketshare. The results of this enquiry are expected in August 2007. The decision last year to withdraw from the home collected credit industry wasfollowed in March this year by the announcement that we were closing the bulk ofour loan broking business Imagine Finance. This restructuring returns the groupprimarily to its core business of Christmas savings and high street vouchers. Following consultation with the Government on the implications of the collapseof Farepak, we have agreed to introduce additional protection in the form oftrust accounts to hold cash savings on behalf of our agents and customers. Thesetrust accounts will be subject to independent oversight in the form ofindependent trustees and the formation of a new trade association - TheChristmas Prepayment Association Limited (CPA). We believe that these measures,when finalised, will be a substantial benefit in restoring customers' faith inthe Christmas savings model. Our Christmas 2007 recruitment campaign was conducted against a background ofthe massive publicity surrounding the collapse of our competitor Farepak Food &Gifts Ltd. In spite of this, we generated record levels of enquiries, 262,000and recruited 39,000 new agents with 72,000 new customers. Unsurprisingly, totalorders for Christmas 2007 have been impacted by a loss of confidence in themarket and are 30.6% below last year. While this will affect our results for thecurrent year, we believe that Park stands to benefit in subsequent years as ourcustomers' confidence is restored with the provision of the cash safeguards Ihave mentioned above and Park's continuing commitment to the highest levels ofcustomer service. The corporate voucher product continues to make progress andthe sales to date are most encouraging. As announced previously, we intend to move the Company's stock exchange listingfrom the London Stock Exchange Main Market to the Alternative Investment Market(AIM). A resolution to approve this change, and associated changes to theArticles of Association, will be proposed at an EGM to be convened for the sameday as the AGM in September 2007. Finally, the skills and commitment of our employees have come to the fore inwhat has been a very challenging but very successful year and I want to thankthem all for their efforts. Most of all I would like to thank our customers whocontinue to enjoy the benefits of the unique services that Park Group offers. Peter JohnsonChairman27 June 2007 Operational Review 2007 This year has seen a considerable amount of change in our industry. Against abackground of the most successful year ever for our Christmas savings businessand for our High Street Gift Voucher, the collapse of European Home Retail plcand the subsequent failure of Farepak Food and Gifts Ltd has resulted in asignificant level of governmental review into the business, as well as a loss ofcustomer confidence in the industry. We actively worked with the DTI and theFamily Fund to provide some support to those affected by the collapse ofFarepak, by donating £1m of High Street Gift Vouchers to the fund and byproviding our expertise to distribute the fund in the form of High Street GiftVouchers, which we supplied at a discount, to increase the value provided tothose affected. Added to this, we have been working with the DTI to establish trust accountarrangements to improve consumer protection and have agreed heads of terms fortheir operation. It is expected that the new trust arrangements, withindependent trustees, will be operational in July 2007. The introduction oftrust accounts will increase operating costs of the business but the benefit tocustomer protection and confidence far outweigh this cost. We acquired Home Farm Hampers Limited on 7 March 2007 for a cash considerationof £300,000 from Findel plc. This business was a joint venture between Findelplc and Farepak. The customer database has been merged into the Park ChristmasSavings Club. The acquisition is currently being reviewed by the Office of FairTrading under its powers conferred by the Enterprise Act 2002 to establish ifthere has been a substantial lessening of competition in the UK market. We areco-operating fully with this enquiry and have responded to it. The results ofthe enquiry are expected in August 2007. Our continued strategic development of the group has resulted in the closure ofthe bulk of Imagine Finance, our mortgage and secured loan broker, which wasstruggling to attract cost effective leads. We are currently consulting on thefull closure of Imagine and the cessation of lending activity in the cashlending division. A decision to withdraw from these activities would result inthe business being focussed on the profitable Christmas savings and the highstreet voucher business going forward. Christmas Savings In last year's report we announced that the 2006 recruitment campaign hadachieved a record year. It is pleasing to report that our Park and Countrybrands achieved a 9.2% like for like increase in orders year on year and theacquisition of Family Hampers in February 2006 resulted in the Christmas savingsrevenue increasing by 24.7% to £205m for Christmas 2006. Total divisionalrevenue increased by 32.6% to £305.2m and pre tax profit increased by £4.8m to£10.2m. Our Christmas savings business operates in a wide market, competing withretailers, dairies, banks and building societies and many other businessesoffering substitutable services. We offer a 45 week savings plan to spread thecost of Christmas, helping our customers to avoid debt at an expensive time ofyear. We sell product via a network of agents, although an increasing number ofcustomers are now dealing with us directly. Agents are paid a commission basedon sales volume which averages 4% of order value and is also paid to directcustomers, subject to a minimum order value. The latter averaged 3.1% of ordervalue last year. Based on the 45 week payment period the commission paidrepresents a very competitive incentive for direct customers and agents to savewith one of Park's three Christmas savings brands. The Christmas savings revenue continues to be dominated by vouchers with 91.3%of revenue attributable to High Street Gift Vouchers and other retailers'vouchers. This compares with 93% for Christmas 2005. The change in the productsales mix reflects the impact of the Family acquisition where the proportion ofvouchers sold was traditionally less than that experienced by Park and Country.Hamper revenue increased from £8.5m (5.1% of revenue) to £13.5m (6.6% ofrevenue) with gift and other products increasing from £3.2m (1.9% of revenue) to£4.3m (2.1% of revenue). We have also updated and improved our www.highstreetvouchers.com web site whichallows our customers to order vouchers online for next day delivery. This sitegenerated over £1m of revenue during the year, an increase of 149% year on year. Following our excellent Christmas 2006 recruitment campaign last year agentnumbers increased to 116,000 from 86,000 in the prior year serving 612,000customers compared with 517,000 the year before. Average customer spendincreased by 5.2% to £341. However, the growth in the number of direct ordershas reduced the average number of customers per agent to 5.3 from 6.0 last year. The web is now proving to be popular with our customers with 21% of ordersplaced over the internet and this year over 40,000 agents are using this methodto manage their accounts online. The increased use of the web is making iteasier to communicate with our customers and offer new products at any time ofthe year. During the year we have continued to invest in and develop our web presenceimproving our web sites and adding new products and services. During May 2007 welaunched our new online magazine www.myparkmag.co.uk which will provide avaluable online marketing tool attracting new customers. We have also been very successful selling vouchers to corporate customers, towhom we sell our own High Street Gift Voucher in addition to retailers'vouchers. Corporate voucher revenue increased by 43.6% year on year to £87.9mwith revenue from the incentive market increasing by 45.0% to £46.5m, wherevouchers are used as reward and recognition tools. Our travel voucher and travel agency is gaining popularity with corporatecustomers and revenue from this area increased by 102% to £1.0m of vouchersales. These vouchers are redeemed through our ATOL bonded travel agency usuallywith a high incremental cash spend. Our sales team have continued to develop the corporate customer base increasingaccounts by 34% to 2,700 during the year. A particularly strong performance hasbeen achieved in the incentive and reward market where we have seen a 67%increase in the recruitment of new clients. Cash Lending After a promising start to the year Imagine Finance found it increasinglydifficult to acquire cost effective leads for new business. This resulted in thedecision to close the Barnet operation which, following a period ofconsultation, was completed in March 2007. The division incurred a loss before tax of £4.8m for the year, after closurecosts of £0.8m. Prospects The collapse of Farepak on 13 October 2006 occurred at the beginning of ourrecruitment campaign for Christmas 2007. The impact was to undermine theconfidence of the existing customer base in the Christmas savings proposition.Despite the considerable adverse publicity we recruited 39,000 new agents to ourPark and Country brands, an increase of 1.9% over the previous year. Ordersoverall are currently 30.6% below the same time last year. Agent numbers arecurrently 21.6% below last year's actual at 102,557 and customer numbers are 36.4% below last year at 411,729. We have been working with the DTI to providesecurity for customers' payments by establishing trust account arrangements,which we believe will provide customers with more confidence going forward. Ourmarket research indicates that the appeal of our Christmas savings propositionremains strong and we are confident that this will lead to a recovery incustomer numbers and order amounts for Christmas 2008 and beyond. As a result of the loss of customer confidence we anticipate a significantreduction in profit in cash savings for 2007/8, which will be partly offset bythe elimination of the losses in cash lending. Following the acquisition of HomeFarm and the Farepak database, together with the enhanced customer protectionprovided by the trust arrangements, we are confident that we will be able toachieve a growth in our order book for Christmas 2008. This combined with thecontinued development of our corporate voucher business indicates good futureprospects for the Group. Financial Review 2007 Profit from Continuing Operations The Group's continuing operations comprise cash savings and cash lendingdivisions. Following the sale of home collected credit in July, the results forthe cash lending division primarily reflect the performance of Imagine Finance. Profit before taxation from continuing operations is detailed below: 2006/7 2005/6 Change £'000 £'000 £'000Cash savings 10,223 5,439 4,784Cash lending (4,784) (3,469) (1,315) ------------------------------------------Profit beforetaxation 5,439 1,970 3,469 ========================================== Taxation The effective tax rate for the year on continuing operations was 35.5% (2006 -16.1%) of profit before tax. The high effective tax rate for the current year reflects a balancing chargearising on the disposal of property. The low tax rate for the prior year is dueto the difference in the treatment of deferred tax on properties under IFRS. Earnings per Share Basic earnings per share increased to 2.58p (2006 - loss of 10.64p).Earnings per share from continuing operations increased from 1.01p to 2.13p. Dividends The Board has recommended a final dividend of 0.80p, compared with 0.74p lastyear. Upon approval of the final dividend at the AGM, the total dividend for2007 will be 1.20p. This represents a dividend yield of 5.4% based on ouryear-end share price. Cash Flows The cash savings division generated £49,000 net of cash in 2007 from itsoperating activities. Increased cash balances arising from the earnings of thecash savings business have been offset by lower cash receipts from agents as aresult of the decline in agents orders for Christmas 2007. This can be seen fromthe decrease in trade and other payables as at 31 March 2007. In addition anamount of £1.6m was received in respect of the sale of a non-core property, thishas been disclosed primarily within the cash savings division. Over the year to 31 March 2008, our forecasts show that the cash savings division will generate net cash from its operating activities. The cash lending division has utilised £3.6m in cash arising from the operationsof Imagine Finance and the monthly direct debit loan book. During the year acash inflow (net of closure costs) of £6.1m was received in respect of the saleof the home collected credit business, this is disclosed within the cash lendingdivision. Cash balances in 2006 peaked at £150m and remained positive throughout the year. Pensions The Company continues to operate defined benefit plans where pensions atretirement are based on service and final salary. Under IAS 19 the Group recognizes any actuarial gains or losses in each periodin the Statement of Recognised Income and Expense (SORIE). In the year-ended 31March 2007 the Group recognised an actuarial loss in the SORIE of £293,000 (2006- £204,000) net of tax. In 2006 contributions were increased for the company to 11% of members'pensionable earnings and to 5.5% for employees. This was in response to thepension liability existing at the time of £1.6m. The pension deficit based onthe valuation performed at 31 March 2007 now amounts to £2.2m, an increase of£0.4m from the deficit of £1.8m at 31 March 2006, levels of contribution arekept under review. The increase in the deficit is primarily due to the use ofupdated mortality tables based upon advice received from the scheme's actuaries. Park Group plc UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE YEAR TO 31 MARCH 2007 2007 2006 Cash Cash Total Cash Cash Total savings lending 2007 savings lending 2006 £'000 £'000 £'000 £'000 £'000 £'000ContinuingoperationsRevenue 305,182 5,505 310,687 230,223 3,192 233,415 Cost of sales (287,376) (8,831) (296,207) (217,420) (5,244) (222,664) ------------------------------------------------------------------ Gross profit/(loss) 17,806 (3,326) 14,480 12,803 (2,052) 10,751 Distributioncosts (2,993) - (2,993) (1,942) - (1,942) Administrativeexpenses (7,906) (1,458) (9,364) (7,349) (1,426) (8,775) ------------------------------------------------------------------Operatingprofit/(loss) 6,907 (4,784) 2,123 3,512 (3,478) 34 Finance income 3,319 - 3,319 1,939 9 1,948 Finance costs (3) - (3) (12) - (12) ------------------------------------------------------------------Profit/(loss)before taxation 10,223 (4,784) 5,439 5,439 (3,469) 1,970 Taxation (3,517) 1,588 (1,929) (1,272) 955 (317) ------------------------------------------------------------------Profit/(loss)from continuingoperations 6,706 (3,196) 3,510 4,167 (2,514) 1,653 DiscontinuedoperationsProfit/(loss)from discontinuedoperations (168) 903 735 - (19,141) (19,141) ------------------------------------------------------------------Profit/(loss)for the periodattributableto equityholders of theparent 6,538 (2,293) 4,245 4,167 (21,655) (17,488) ------------------------------------------------------------------ Dividend paid £660,000 £592,000Dividend proposed £1,321,000 £1,218,000Dividend per share 1.20p 1.10p Earnings/(loss) per share (see note 6)- basic - continuing operations 2.13p 1.01p- basic - total 2.58p (10.64)p- diluted - continuing operations 2.12p 1.00p- diluted - total 2.56p (10.57)p Park Group plc UNAUDITED STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR TO 31 MARCH 2007 2007 2006 £'000 £'000 Profit/(loss) for the period 4,245 (17,488) -------------------- Actuarial losses on defined benefit pension scheme (419) (291) Deferred tax on actuarial losses on defined benefit pension scheme 126 87 --------------------Change to income/(expense) recognised directly in equity (293) (204) -------------------- Total recognised income/(expense) for the periodattributable to equity holders of the parent 3,952 (17,692) -------------------- Park Group plc UNAUDITED GROUP BALANCE SHEET AS AT 31 MARCH 2007 As at As at 31.03.07 31.03.06 As restated £'000 £'000AssetsNon-current assetsGoodwill (note 7) 1,513 1,972 Other intangible assets 1,639 2,030 Investments 2 2 Property, plant and equipment 4,823 5,160 Deferred tax assets 1,835 2,649 --------------------- 9,812 11,813 Current assetsInventories 447 974 Loans and receivables 1,382 1,732 Trade and other receivables 5,917 6,763 Current tax assets - 466 Cash and cash equivalents 12,192 10,104 Assets held for sale 815 7,492 --------------------- 20,753 27,531 --------------------- ---------------------Total assets 30,565 39,344 ---------------------LiabilitiesCurrent liabilitiesTrade and other payables (39,395) (53,881) Current tax liabilities (350) - Provisions (22,077) (19,336) --------------------- (61,822) (73,217) ---------------------Non-current liabilitiesRetirement benefit obligation (2,246) (1,815) --------------------- (2,246) (1,815) --------------------- Total liabilities (64,068) (75,032) --------------------- ---------------------Net liabilities (33,503) (35,688) --------------------- Shareholders' equityShare capital 3,301 3,291 Share premium account 1,070 1,018 Retained earnings (37,874) (39,997) ---------------------Total equity attributable to equity holders of the parent (33,503) (35,688) --------------------- Park Group plc UNAUDITED GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2007 Cash Cash 2007 2006 savings lending Total Total as restated £'000 £'000 £'000 £'000Cash flows from operating activities Cash (used in)/generated from operations (note 8) (3,085) (3,625) (6,710) 7,019Interest received 3,323 - 3,323 1,951Interest paid (3) - (3) (12)Tax paid (186) - (186) (1,281)Net cash (used in)/generated from ----------------------------------------operating activities 49 (3,625) (3,576) 7,677 ---------------------------------------- Cash flows from investing activities Net proceeds from sale of home collectedcredit business - 6,136 6,136 -Proceeds from sale of non-core property 1,543 28 1,571 -Proceeds from sale of property, plant and equipment 1 - 1 -Purchase of property, plant and equipment (365) - (365) (467)Purchase of intangible assets (808) - (808) (659)Cash acquired from business combinations 878 - 878 608 ----------------------------------------Net cash generated from/(used in) investing activities 1,249 6,164 7,413 (518) ---------------------------------------- ----------------------------------------Segmental cash flow pre financing activity 1,298 2,539 3,837 7,159 ---------------------------------------- Cash flows from financing activitiesNet proceeds from issue of ordinary share capital 62 57Dividends paid to shareholders (1,811) (1,806) --------------------Net cash used in financing activities (1,749) (1,749) --------------------Net increase in cash and cash equivalents 2,088 5,410 --------------------Cash and cash equivalents at beginning of period 10,104 4,694 -------------------- Cash and cash equivalents at end of period 12,192 10,104 --------------------Cash and cash equivalents comprise:Cash 12,192 10,104 -------------------- (1) Basis of preparation This preliminary announcement has been approved by the directors on 26 June2007. The unaudited financial information on which it is based has been preparedin accordance with the recognition and measurement requirements of InternationalFinancial Reporting Standards as adopted by the EU. The financial information set out above does not constitute the company'sstatutory accounts for the years ended 31 March 2007 or 2006. The auditors havereported on the 2006 accounts; their report was unqualified and did not containa statement under section 237(2) or (3) of the Companies Act 1985. The statutoryaccounts for 2007, will be finalised on the basis of the financial informationpresented by the directors in this preliminary announcement and will bedelivered to the registrar of companies in due course. The financial statements have been prepared under the historical costconvention, as modified by the accounting for financial instruments at fairvalue. The preparation of financial statements in conformity with generally acceptedaccounting principles requires the use of estimates and assumptions that affectthe reported amounts of assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period. Although these estimates are based on management's bestknowledge of the amount, event or actions, actual results ultimately may differfrom those estimates. The directors are of the opinion that the financial information should beprepared on a going concern basis, for the following reasons. Cash deposited by customers for the next Christmas period forms part of thecompany's working capital and is therefore available to meet its liabilities asthey fall due. There has previously been no restriction on the uses to whichthis cash could be put. Currently the company is in the process of establishingcustomer trust accounts whereby the cash deposited by customers for the nextChristmas period will be held in separate accounts managed by independenttrustees. Heads of terms for the trust agreement, which will govern how thetrust accounts will operate, have been agreed with the DTI and the final termsof the trust agreement are being prepared. Under the proposed trust agreement,the cash will be available to the company only to meet qualifying expenditure(broadly, that relating to the Christmas savings business, including in respectof past years), and interest earned on the deposits will continue to form part ofthe company's working capital. As noted in the Chairman's statement we have experienced a 30% decrease in theorders for Christmas 2007 following the collapse of our competitor, Farepak,last year and the resulting reduction of confidence in the Christmas savingsmarket. This has reduced the level of cash that has been deposited with thecompany which has had an adverse effect on cash flows in the year. The unauditedfinancial information shows a cash outflow from operations of £6,710,000 inthe year compared to a cash inflow of £7,019,000 in 2006. However, this deterioration has been partially offset by the proceeds received from the saleof the home collected credit business and the sale of non-core properties. Based on the projected cashflows allowing for the estimated downturn in businessthat has been experienced for Christmas 2007 and the agreed heads of terms forthe proposed trust agreement, the directors believe that the company will beable to generate sufficient cash inflows from its operations to continue tosettle its obligations as they fall due. (2) Accounting Policies The financial information in this preliminary announcement has been prepared inaccordance with the accounting policies described in the Annual Report andAccounts for the year ended 31 March 2006. The Annual Report and Accounts forthe year ended 31 March 2006 was lodged with the London Stock Exchange and canbe found on our website at www.parkgroup.co.uk. The 2007 accounts will expand onour existing policies and provide further information on how we apply thosepolicies. The additional text is below: Income Recognition Cash savings Revenue is based on values invoiced to external customers for goods and servicesand is recorded net of value added tax, rebates and discounts after eliminatinginter-group sales. Revenue is recognised when a group entity has fulfilled its contractualobligations to a customer and has obtained the right to receive consideration.This is usually on despatch but is dependent upon the contractual terms thathave been agreed with the customer. Upon the despatch of vouchers, a provision is made for the redemption of liability arising. Other intangible assets Customer lists acquired are included at the lower of cost and net realisablevalue. They are amortised over their useful life of up to 10 years based on thepattern of forecast cash flows to be generated. On an annual basis, managementreview the expected cash flows to be generated and make appropriate provisionfor impairment. Customer details acquired from third parties in respect of loan broking leadsare included at cost less impairment. Impairment is assessed on the differencebetween the cost of acquisition and the estimated future cash flows, from theconversion of leads. Provisions Unredeemed vouchers are included at their fair value at the date of initialrecognition. This comprises the anticipated amounts payable to retailers onredemption, after applying an appropriate discount rate to take into account theexpected timing of payments. Estimated future payments to retailers are assessedby reference to historical data in respect of redemption patterns. (3) Segmental analysis Cash Cash Elimin- 2007 Cash Cash Elimin- 2006 savings lending ation Total savings lending ation Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 ContinuingoperationsRevenueExternal revenue 305,182 5,505 - 310,687 230,223 3,192 - 233,415Inter-segmentrevenue 62 - (62) - 2,198 - (2,198) - -----------------------------------------------------------------------------Total revenue 305,244 5,505 (62) 310,687 232,421 3,192 (2,198) 233,415 ============================================================================= Inter-segment sales are entered into under normal arm's length commercial termsand conditions ResultSegment operatingprofit/(loss) 6,907 (4,784) - 2,123 3,512 (3,478) - 34 -----------------------------------------------------------------------------Finance income 3,319 - 3,319 1,939 9 1,948Finance costs (3) - (3) (12) - (12) ------------------- ------------------------------ -------------Profit/(loss) beforetaxation 10,223 (4,784) 5,439 5,439 (3,469) 1,970Taxation (3,517) 1,588 (1,929) (1,272) 955 (317) ------------------- ------------------------------ -------------Profit/(loss) fromcontinuingoperations 6,706 (3,196) 3,510 4,167 (2,514) 1,653 ------------------- ------------------------------ ------------- Discontinuedoperations Total revenue - 4,513 - 4,513 - 23,752 - 23,752 ----------------------------------------------------------------------------- ResultsSegment result (240) 988 - 748 - (15,408) - (15,408) -----------------------------------------------------------------------------Profit/(loss)before taxation (240) 988 - 748 - (15,408) - (15,408) Taxation 72 (85) - (13) - (3,733) - (3,733) -----------------------------------------------------------------------------Profit/(loss) fromdiscontinuedoperations (168) (903) - 735 - (19,141) - (19,141) ============================================================================= (4) Discontinued operations The home collected credit business had revenue of £4,513,000 in the year, priorto closure. The profit before tax for cash lending in the year of £988,000arises as a result of the write-back of provisions made in the previous year nowno longer required. The loss before tax of £240,000 in Cash savings reflects the further write-offof stock partially provided for in connection with the sale in a prior year ofLink Brand Solutions. (5) Taxation 2007 2006 £'000 £'000 Charge for the year - current and deferred 1,631 404 Prior year adjustments 298 (87) ---------------- 1,929 317Tax credit on discontinued operations 13 (1,253) Adjustment in respect of elimination ofdeferred taxation asset - 4,986 ---------------- 1,942 4,050 ================ The adjustment for the prior year reflects the elimination of the deferred taxasset in respect of loans and receivables arising from the home collectedcredited business that was not expected to be recovered. (6) Earnings per share The calculation of basic and diluted earnings per share is based on the profiton ordinary activities after taxation of £3,510,000 (2006 - £1,653,000) inrespect of continuing operations and the profit on ordinary activities aftertaxation of £4,245,000 (2006 - loss of £17,488,000) in respect of totaloperations, and on the weighted average number of shares, calculated as follows: 2007 2006 Basic eps - weighted average number of shares 164,787,370 164,297,656Diluting effect of employee share options 883,734 1,215,143 ---------------------------- Diluted eps - weighted average number of shares 165,671,104 165,512,799 ---------------------------- (7) Goodwill Due to the reassessment of the fair values on acquisition, goodwill has beenreduced by £250,000 in the prior year balance sheet for hindsight adjustments.These include a reduction in prepayments of £350,000 and a reduction in otherpayables of £600,000. (8) Reconciliation of net profit to net cash (outflow)/inflow from operating activities Cash Cash 2007 2006 savings lending Total Total as restated £'000 £'000 £'000 £'000 Net profit/(loss) for the periodattributable to equity holders ofthe parent 6,538 (2,293) 4,245 (17,488) Adjustments for:Tax on continuing operations 3,517 (1,588) 1,929 317Tax on discontinued operations (72) 85 13 3,733Interest income (3,319) - (3,319) (1,948)Interest expense 3 - 3 12Depreciation and amortisation 1,228 125 1,353 1,750Impairment of goodwill - 459 459 2,194 Profit on sale of other assets held for sale (94) (2) (96) -(Increase)/decrease in net loan book - (720) (720) 9,385Decrease/(increase) in inventories 528 - 528 (289)Decrease/(increase) in trade andother receivables 749 113 862 (1,717)(Decrease)/increase in trade andother payables (14,963) 195 (14,768) 5,624Increase in provisions 2,741 - 2,741 5,489(Increase)/decrease in retirementbenefit obligation 12 - 12 (99) Share-based payments 47 1 48 56 --------------------------------------------Net cash (outflows)/inflows fromoperating activities (3,085) (3,625) (6,710) 7,019 -------------------------------------------- Prior year figures have been reclassified, to reflect hindsight adjustments togoodwill arising as a result of the purchase of the Family customer list andorder book and to separately disclose agents' cash acquired as a result ofbusiness combinations. (9) The annual report will be posted to shareholders on 23 August 2007 and theAnnual General Meeting (AGM) of the Company will be held in Birkenhead onTuesday 25 September 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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