20th Dec 2005 14:04
Park Group PLC20 December 2005 20 December 2005 INTERIM RESULTS FOR THE HALF YEAR ENDED 30 SEPTEMBER 2005 Summary Half Year Half Year Year to to 30.09.05 to 30.09.04 31.03.05 Turnover £39.5m £32.2m £243.8mLoss before taxation £(8.0)m £(7.0)m £(0.7)mDiscontinued operations £(-)m £(0.4)m £(0.6)mDividend per share 0.36p 0.36p 1.1pLoss per share - - (0.63)p • Interim results presented for the first time in accordance with International Financial Reporting Standards ('IFRS') which has introduced major changes in the presentation of the figures, although underlying cash flows are unchanged • Strong performance from Cash Savings Division • Difficult trading and market conditions for Cash Lending Division • Cash balances of £76m at 30 September 2005 • Maintained interim dividend of 0.36 pence per ordinary share Peter Johnson, Chairman, states: 'Our cash flow has remained very strong duringthe year and cash balances were 1.7% higher than the previous half year at £76m,reflecting the continued strength of our Cash Savings businesses. However, ourCash Lending business has struggled in a difficult market and this is reflectedin the increased losses it has incurred over the last six months. A number ofactions have been taken to address the performance of this business and weexpect to see an improvement in the full year results.' Enquiries: Peter Johnson, Executive ChairmanChris Houghton, Group Managing DirectorPark Group plc - Tel: 0151 653 1700 Issued on behalf of Park Group plc by Tavistock Communications Limited (ContactChristian Taylor-Wilkinson, tel: 020 7920 3150) CHAIRMAN'S STATEMENT-------------------- This is our first set of interim statements under International FinancialReporting Standards ('IFRS'). Turnover for the period to 30 September 2005showed a £7.3m increase to £39.5m compared with the restated figures for theprevious year. Interest receipts of £0.9m were 4.6% above last year reflectinghigher average cash balances which peaked at a record £100m during November. Theseasonal half year loss before taxation increased to £8.0m from £7.0m last year. Our cash flow has remained strong during the year and cash balances were 1.7%higher than the previous half year at £76m, reflecting the continued strength ofour Cash Savings businesses. The performance of our Cash Lending business has been disappointing and this isreflected in the increased loss it has recorded in the last six months. Acontributory factor has been the reduction in consumers' disposable incomecaused by escalating household costs, which has affected much of our sector andhas been widely commented on by our competitors. A number of actions have beentaken to improve the performance of this business and although this division isunlikely to produce an operating profit under IFRS for the full year we expectto see an improvement by the year end. . Against this background I am pleased to announce that the Board is paying anunchanged interim dividend of 0.36p. This will be payable on 6 April 2006 toshareholders on the register at close of business on 3 March 2006. Following the discontinuation of talks regarding a possible offer for theCompany, the board is now examining alternative options to develop shareholdervalue. A comprehensive strategic review of the business is to be conducted whichwill include the proposed move from the main market of the London Stock Exchangeto the Alternative Investment Market ('AIM'). OPERATIONAL REVIEW------------------ Cash Savings Division Sales for this division to 30 September 2005 were up 16.5% compared to the sameperiod last year at £23.4m. The seasonal operating loss traditionally incurredby this business reduced by 8% to £3.3m. Orders for Christmas 2005 via our mailorder catalogues are up 5% compared with last year. We have continued to developour customer base and a successful recruitment campaign for Christmas 2005 hasincreased agent numbers by 12% to 86,000. Sales of our High Street Gift Voucher have continued to show strong growth boththrough our mail order catalogues and particularly to our corporate customerswhere our sales increased by 13% at the half year. Our 'Love2' range of vouchershas been well received and seems likely to provide promising growthopportunities. We have invested in the development of our internet proposition and launched anumber of new sites which are now fully integrated with our other computersystems. This enables an increasing proportion of our customers to view ourproduct offering, make and amend orders and pay online, thereby improving ourservice to customers whilst reducing transaction costs at the same time. The Christmas 2006 campaign was launched in September of this year viatelevision, direct mail and press. Responses to date have been encouraging. Cash Lending Division Turnover in the first half of the year was 33.5% up on the prior year at £16.0m.The operating loss in the period was £5.6m as compared with £4.3m last year. Difficult market conditions affecting our home collected credit business ('HCC')have contributed towards a higher level of arrears. Stricter credit controlshave been introduced to improve collection performance and as a directconsequence less new business has been written compared with the prior year. HCCturnover increased by 26.9% to £15.3m with the operating loss increasing to£4.1m. Our new loan broking business, Imagine Finance, incurred start up costs of £1.5mon turnover of £0.8m to 30 September 2005. The volume of business transacted isnow increasing and performance is improving. In addition, Imagine now providesleads for unsecured loans and general insurance to our other cash lendingbusinesses. We anticipate that Imagine Finance will incur a loss in thisfinancial year, but move into profit the year after. IMPACT OF ADOPTING IFRS ON CURRENT PERIOD AND RESTATED RESULTS Our results are required to be presented using IFRS because Park is listed onThe London Stock Exchange. Unfortunately, the application of IFRS to aspecialised business such as ours produces some anomalies when compared toresults reported under UK GAAP. This has been well documented by a number of ourcompetitors in the lending business. By way of illustration, in our cash saving business we are now required toexpense our advertising and promotional expenditure as incurred rather thanmatching this cost with the associated revenues which fall in subsequentperiods. This is a significant expense item as it includes all the costsassociated with the recruitment of new agents and the maintenance of ourexisting customer base. Consequently, in these results, costs associated withour 2005 and 2006 Christmas campaigns have been expensed in the period, eventhough we are not permitted to recognise any of the revenue arising from theseactivities until products are despatched in a subsequent accounting period. The impact on our cash lending business is even more pronounced where we nowhave a completely different basis for recognising interest income and are nowrequired to assess our loan receivables for any impairment. The basis for thisis the use of a calculated effective interest rate for our products andimpairment is based on discounted cash flows. This, combined with the rapidgrowth of our home collected credit business in recent years, has resulted in animpairment of the loan book at a substantially higher rate than would have beenreported under UK GAAP. Details of the changes to previously reported results arising from the adoptionof IFRS are contained within our Transition Document. The major changes to lastyear's results and balance sheet are contained in section 1 of the TransitionDocument. This can be found on our web site at www.parkgroup.co.uk or can beobtained by contacting Kate Walker on 0151 653 1745. Regulation We have continued to assist the Competition Commission ('C.C') with their marketinvestigation. The C.C published their 'Emerging Thinking' document on 27October 2005 which highlighted the issues being considered. That document can befound on the C.C's website at www.competiton-commission.org.uk. Provisionalfindings are due to be published in January/February 2006. PARK GROUP PLC CONSOLIDATED INCOME STATEMENT FOR THE HALF YEAR TO 30 SEPTEMBER 2005 Half Year Half Year Year to to 30.09.05 to 30.09.04 31.03.05 Restated Restated £'000 £'000 £'000 Continuing operationsTurnover 39,546 32,191 243,789 Cost of sales (42,743) (35,009) (233,876) -------------------------------------------- Gross (loss)/profit (3,197) (2,818) 9,913Distribution costs (142) (105) (1,696)Administrative expenses (5,560) (4,921) (10,902) --------------------------------------------Operating loss (8,899) (7,844) (2,685) Interest receivable and similar income 884 845 2,026Interest payable and similar charges (10) - (3) --------------------------------------------Loss before taxation (8,025) (6,999) (66)Taxation 2,439 2,159 202 --------------------------------------------Loss from continuing operations (5,586) (4,840) (460) Discontinued operations Loss from discontinued operations - (446) (567) --------------------------------------------Loss for the period (5,586) (5,286) (1,027) -------------------------------------------- Loss per share (see note 3) - basic - - (0.63)p- diluted - - (0.61)p STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE HALF YEAR TO 30 SEPTEMBER 2005 Half Year Half Year Year to to 30.09.05 to 30.09.04 31.03.05 Restated Restated £'000 £'000 £'000 Loss for the period (5,586) (5,286) (1,027) Actuarial gains on defined benefit pension scheme - 358 716 Deferred tax on actuarial gains ondefined benefit pension scheme - (107) (215) --------------------------------------------Net gains not recognised in income statement - 251 501 -------------------------------------------- Total recognised expense for the period (5,586) (5,035) (526) -------------------------------------------- PARK GROUP PLC GROUP BALANCE SHEET As at As at As at 30.09.05 30.09.04 31.03.05 Restated Restated £'000 £'000 £'000AssetsNon-current assetsGoodwill 2,993 2,520 2,993Intangible assets 1,097 1,220 1,098Investments 2 2 2Investment property 1,494 1,531 1,512Property, plant and equipment 5,408 5,838 5,752Deferred tax assets 7,675 5,935 6,674 -------------------------------------------- 18,669 17,046 18,031 -------------------------------------------- Current assetsLoans and receivables 15,414 13,063 16,435Inventories 8,182 6,561 685Trade and other receivables 9,858 5,966 4,898Current tax assets 1,464 1,066 -Cash and cash equivalents 75,976 74,717 4,694 -------------------------------------------- 110,894 101,373 26,712 -------------------------------------------- Non-current assets available for sale 700 636 700 --------------------------------------------Total assets 130,263 119,055 45,443 -------------------------------------------- LiabilitiesCurrent liabilitiesTrade and other payables (151,692) (137,427) (59,266)Current tax liabilities - (28) (853) -------------------------------------------- (151,692) (137,455) (60,119) -------------------------------------------- Non-current liabilitiesRetirement benefit obligation (1,643) (1,961) (1,623)Deferred tax liability (24) - (24) -------------------------------------------- (1,667) (1,961) (1,647) -------------------------------------------- --------------------------------------------Total liabilities (153,359) (139,416) (61,766) -------------------------------------------- --------------------------------------------Net liabilities (23,096) (20,361) (16,323) --------------------------------------------Shareholders' equityShare capital 3,283 3,268 3,283Share premium account 969 892 969Retained earnings (28,504) (25,729) (21,773)Other reserves 1,156 1,208 1,198 --------------------------------------------Total shareholders' equity (23,096) (20,361) (16,323) -------------------------------------------- PARK GROUP PLC GROUP CASH FLOW STATEMENT As at As at As at 30.09.05 30.09.04 31.03.05 £'000 £'000 £'000 Cash flows from operating activities (note 4) Cash generated from operations 72,969 69,856 1,279Interest received 678 646 2,026Interest paid (10) - (3)Tax paid (906) (105) (944) --------------------------------------------Net cash from operating activities 72,731 70,397 2,358 -------------------------------------------- Cash flows from investing activitiesAcquisition of subsidiaries (net of cash acquired) - - (529)Acquisition of businesses (net of cash acquired) - (360) (409)Proceeds from sale of property, plant and equipment - 817 817Proceeds from sale of intangible assets - 55 55Purchase of property plant and equipment (162) (209) (559)Purchase of intangible assets (120) (93) (138) --------------------------------------------Net cash (used)/generated in investing activities (282) 210 (763) -------------------------------------------- Cash flows from financing activitiesNet proceeds from issue of ordinary share capital - 1 93Dividends paid to shareholders (1,167) (531) (1,634) -------------------------------------------- Net cash used in financing activities (1,167) (530) (1,541) -------------------------------------------- --------------------------------------------Net increase in cash and cash equivalents 71,282 70,077 54 -------------------------------------------- Cash and cash equivalents at beginning of period 4,694 4,640 4,640 -------------------------------------------- Cash and cash equivalents at end of period 75,976 74,717 4,694 -------------------------------------------- --------------------------------------------Cash and cash equivalents comprise:Cash 75,976 74,717 4,694 -------------------------------------------- PARK GROUP PLC SEGMENTAL ANALYSIS FOR THE HALF YEAR TO 30 SEPTEMBER 2005 As at As at As at 30.09.05 30.09.04 31.03.05 £'000 £'000 £'000 TurnoverCash savings 23,482 20,155 214,517Cash lending 16,064 12,036 29,272 --------------------------------------------Third party sales 39,546 32,191 243,789 Operating lossCash savings (3,309) (3,589) 3,052Cash lending (5,590) (4,255) (5,737) -------------------------------------------- (8,899) (7,844) (2,685)Loss from discontinued operations - (446) (567) --------------------------------------------Loss before interest (8,899) (8,290) (3,252) -------------------------------------------- Notes (1) Basis of preparation From 1 April 2005, the group is required to prepare its annual and interimconsolidated financial statements in accordance with International FinancialReporting Standards (IFRS) as adopted by the European Union and implemented inthe UK. The date of transition to IFRS for the group was 1 April 2004 and thegroup has prepared its opening IFRS balance sheet as at that date. The effectsof adopting IFRS have been set out in the group's Transition Document which hasbeen lodged with the London Stock Exchange and which can be found on our websiteat www.parkgroup.co.uk. The financial information in this interim report has been prepared in accordancewith the accounting policies described in the Transition Document. Theseaccounting policies have been based on the current standards and interpretationsexpected to be effective at 31 March 2006. In particular the group has adoptedearly the December 2004 amendment to IAS 19 'Employee Benefits'. However, theIFRS and International Financial Reporting Interpretations Committee (IFRIC)interpretations that will be applicable as at 31 March 2006, including thosethat will be applicable on an optional basis, are not yet known with certaintyat the time of preparing this report. It is therefore possible that furtherinterpretations might arise which could lead to changes in the financialinformation and accounting policies. The comparative figures set out in the interim financial statements have beenrestated to reflect the revised accounting policies. The group has applied theprovisions of IAS 32 and IAS 39 to its comparative figures. Reconciliations andexplanations of the effect of adopting IFRS compliant accounting policies on thegroup's equity (net assets) and profits are provided in the Transition Document. The financial statements have been prepared under the historical costconvention, as modified by the use of revaluations of fixed assets as deemedcost and the accounting for financial instruments at fair value. In additionthis interim financial report does not comply with IAS34 'Interim FinancialReporting', which is not currently required to be applied under the listingrules. A summary of the significant group accounting policies is set out in theTransition Document and an explanation of the principal changes from UKGenerally Accepted Accounting Practice (UK GAAP) is also set out in thatdocument. 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 financial information included in this interim financial report for the sixmonths ended 30 September 2005 does not constitute statutory accounts as definedin section 240 of the Companies Act 1985 and is unaudited, but subject to areview opinion. The restated comparative figures for 2004 are also unaudited,but not subject to a review opinion. A copy of the group's statutory accountsfor the year ended 31 March 2005, which were prepared in accordance with UKGAAP, and on which the auditors gave an unqualified opinion and did not make astatement under section 237 of the Companies Act 1985, has been filed with theRegistrar of Companies. (2) Taxation The taxation credit for the six months to 30 September 2005 has been calculatedusing an overall effective tax rate of 30.39% (year to 31 March 2005 - 30.51%). (3) Earnings per share As in previous years the board considers it misleading, in the light of resultsexpectations for the full year, to include in the half-year statement earningsper share information. (4) Reconciliation of operating profit to net cash inflow from operatingactivities: As at As at As at 30.09.05 30.09.04 31.03.05 £'000 £'000 £'000Net loss (5,586) (5,286) (1,027) Adjustments for:Tax on continuing operations (2,439) (2,159) (202)Tax on discontinued operations - (201) (250)Interest income (884) (845) (2,026)Interest expense 10 - 3Depreciation and amortisation 646 625 1,242Profit on sale of property, plant and equipment - (4) (4)Net loan book investment 1,021 (498) (3,834)(Increase)/decrease in inventories (7,497) (5,100) 776(Increase)/decrease in trade and other receivables (4,726) (1,022) 20Increase in trade and other payables 92,376 84,306 6,493Increase in retirement benefit obligation 20 20 40Share-based payments 28 20 48Net cash inflows from operating activities 72,969 69,856 1,279 (5) Approval This statement was approved by the board on 19 December 2005. (6) Reports A copy of this announcement will be mailed to shareholders on 20 January 2006and copies will be available for members of the public at the company'sregistered office - Valley Road, Birkenhead CH41 7ED and also at the offices ofthe company's registrars, Computershare Investor Services PLC, P O Box 82, ThePavilions, Bridgwater Road, Bristol BS99 7NH. Independent review report to Park Group plc IntroductionWe have been engaged by the company to review the financial information set outon pages 6 to 12 and we have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with the terms of ourengagement to assist the company in meeting the requirements of the ListingRules of the Financial Services Authority. Our review has been undertaken sothat we might state to the company those matters we are required to state to itin this 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 forour review work, for this report, or for the conclusions we have reached. Directors' responsibilitiesThe interim report, including the financial information contained therein, isthe responsibility of and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the ListingRules which require that the accounting policies and presentation applied to theinterim figures should be consistent with those applied in preparing thepreceding annual financial statements except where any changes, and the reasonsfor them, are disclosed. As disclosed in note 1 to the financial information, the next annual financialstatements of the group will be prepared in accordance with IFRSs adopted foruse in the European Union. The accounting policies that have been adopted in preparing the financialinformation are consistent with those that the directors currently intend to usein the next annual financial statements. There is, however, a possibility thatthe directors may determine that some changes to these policies are necessarywhen preparing the full annual financial statements for the first time inaccordance with those IFRSs adopted for use by the European Union. This isbecause, as disclosed in note 1, the directors have anticipated that certainstandards, which have yet to be formally adopted for use in the EU, will be soadopted in time to be applicable to the next annual financial statements. Review work performedWe conducted our review in accordance with guidance contained in Bulletin 1999/4Review of interim financial information issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof group management and applying analytical procedures to the financialinformation and underlying financial data and, based thereon, assessing whetherthe accounting policies and presentation have been consistently applied unlessotherwise disclosed. A review is substantially less in scope than an auditperformed in accordance with Auditing Standards and therefore provides a lowerlevel of assurance than an audit. Accordingly, we do not express an auditopinion on the financial information. Review conclusionOn the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2005. KPMG Audit PlcChartered AccountantsLiverpool 20 December 2005 -- ends -- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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