park report and accounts mar 12

8/22/2019 Park Report and Accounts Mar 12

1/68

Park Group plcAnnual report and accounts 2012


2/68

Park Group plcAnnual report and accounts 2012

Contents

Company Overview2012 Financial highlights 1At a glance 2How we operate 4Our strategy 6

Business ReviewChairmans statement 7Chief Executives review 8

Financial review 12Risk factors 14Directors 16

Corporate GovernanceDirectors Report 18Corporate Governance 19Remuneration Report 23Independent Auditors Report 26

Financial StatementsConsolidated Income Statement 27Consolidated Statement of Comprehensive Income 27Statements of Financial Position 28Consolidated Statement of Changes in Equity 29Company Statement of Changes in Equity 30Statements of Cash Flows 31

Accounting Policies 32Notes to the Accounts 37Notice of Meeting 62Directors and Advisers 63


3/68Park Group plc

Annual report and accounts 2012

1

CompanyOverview

BusinessReview

CorporateGovernance

FinancialStatements

2008 2009 2010 2011 2012

225.8250.5

263.2

297.6

329.0

2008 2009 2010 2011 2012

4.3

6.2

5.3

7.0

8.6

2008 2009 2010 2011 2012

1.201.32 1.32

1.70

2.00

2008 2009 2010 2011 2012

2.80

2.44

2.14

3.17

3.91

Profit before taxation and other

operating income (m)Group billings (m)

329.0m(2011 297.6m) 8.6m(2011 7.0m)

Total adjusted basic earnings per share (p)

3.91p(2011 3.17p)

Dividends per share (p)

2.00p (2011 1.70p)

Billings increased11percentto

329.0m(2011297.6m)Prot beoretaxandotheroperatingincomerose

23%to8.6m(20117.0m)Revenuesdeclined0.3per centto

279.0m(2011279.9m)

Financeincomeo

1.7m(20111.4m)Dividendoryearlited

18%to2.00p(20111.70p)

Totalcashbalancespeakedat

152m(2011140m)Onlineordersover

100m

2012Financialhighlights


4/68Park Group plcAnnual report and accounts 2012

2

Park at a glance

Corporate

Park sells its own brand vouchers and prepaidcards as well as individual store vouchers tocorporate customers, who use them orincentive schemes and sale to end users.

Consumer

Customers purchase vouchers,

prepaid cards, hampers or other gitproducts on a 45 week prepaidinstalment plan rom Park. Productsare delivered in time or Christmas.

Park is a UK based nancial services businessoering corporate and private customers a range

o incentive and savings products, backed by thehighest levels o service.

UKsNo1corporateincentiveprovider2011/2012billings142m

UKsNo 1onlinegift voucherretailer2011/2012billings11m

UKs No1multi-redemptiongift voucher/card2011/2012billings 295m

Prepaidcardrecently launchedregulatedEmoneyprepaidcard 2012 value

loaded56m

Corporateand consumerbrands

UKsNo1Christmas savings club

2012 orders 173m


5/68Park Group plc


3

CompanyOverview

BusinessReview

CorporateGovernance

FinancialStatements

Total

329m

Total

329m

>> Billings increase 14.6 per cent to 141.8m

>> Operating prot increases to 4.9m (2011 3.9m)

>> Incentive and reward billings up 10.8 per centto 80.3m

>> Customer numbers rise over 8 per cent to arecord 6,100

>> Customer retention steady at around 80 per cent

>> Major new clients include Daily Mail, Rexel UK,Sky, HomeServe, Philip Morris, Micheldever

>> Leading UK brands Love2reward, Love2shop,Love2choose, Love2play, Love2travel,retailers vouchers

>> Billings increase 7.6 per cent to 187.2m

>> Operating prot reduced to 4.1m (2011 4.5m)

>> Average customer order increases to 416(2011 401)

>> 116,000 agents (2011 110,000) UK and Ireland

>> 424,000 customers (2011 410,000) UK and Ireland

>> Euro voucher established

>> execash prepaid card now 10 per cent ototal sales

>> Christmas 2012 well ahead o same time last year,

orders up by 6 per cent>> Targeted advertising campaign to reach selected

social and geographical groupings

Billings by market (m)

Christmas savings 173.1

hsv.com 10.7

Other consumer 3.4

Incentive 80.3

Credit 47.4

Other corporate 14.1

Billings by product (m)

Consumer voucher 142.4

Corporate voucher 98.9Consumer card 14.7

Corporate card 39.0

Third party voucher 18.0

Hampers, gits

and other products 16.0



4

How we operate

85+High street retailers

20,000Retail outlets

Serving our customers

While Park has undergone signicant change over recentyears, our strategy, core skills and management ocus remainunchanged. We concentrate on broadening our productrange, providing more options to existing customers whilealso seeking to attract new customers by expanding into newareas through innovation and technology. The success weenjoy is against a backdrop o high levels o customer service,tight nancial control and imaginative sales and marketingeorts, all supported by measured investment in technology.

Corporate

>> UK voucher and git market estimated at 4bn

>> Strong, loyal and growing customer base

>> Low growth economy encourages customers to seek incentive and reward opportunities

>> Innovative schemes tailor made to suit individual customer needs

>> Over 600 businesses have purchased execash since launch in June 2010

>> Launch o execodes in 2012 will urther broaden prepaid ofering

Consumer

>> Currently supplying over 425,000 customers market 16m

>> Targeted TV and web advertising; increasing use o social networking

>> Online sales now over 50 per cent rom 2 per cent in 2007 andstill growing

>> Internet use has raised customer service levels and lowered costs

>> execash prepaid card delivering incremental sales

>> Full year contribution rom Irish business

Retailer partners


7/68Park Group plc


5

CompanyOverview

BusinessReview

CorporateGovernance

FinancialStatements

Vouchers and cards313m

ConsumerB2C

Products and services Channels

Other products16m

Online retail

CorporateB2B

Customers

Over1millioncustomers

P

artners

hips

InternetThe importance o IT systems to Park is immense

and it is at the heart o our operations. We invest

around 1m annually in capital equipment,

hardware and sotware to ensure we remain

abreast o the latest developments in order to

capitalise on the opportunities they oer. Park hasa team o highly skilled IT sta with specialist

expertise in technology and web based areas,

including digital marketing, to support our web

business and traditional markets. An increasing

proportion o our business is conducted via the

web, giving customers the inormation they

require in real time, day or night, throughout

the year.

Prepaid cardsParks innovative fexecash prepaid card was

launched in June 2010 ollowing three years o

product development and authorisation by the

Financial Services Authority (FSA). The prepaid card

spans all Parks business channels and is driving

growth across the group. We started with just twotypes o card, which we have expanded rapidly to a

suite comprising 17, as new customer applications

and opportunities are identied and serviced.

There are now:

>> More than 600 corporate users o the

execash card

>> Over 77m o value loaded

>> Approximately 1.4m individual cards issued



6

Number of customers corporate

6,100(2011 5,600)

Billings growth corporate (m)

141.8m(2011 123.7m)

Internet derived revenue corporate (m)

21.4m(2011 15.2m)

Number of customers consumer (000s)

425,000(2011 410,000)

Average order value consumer ()

416 (2011 401)

Christmas order book consumer (m)

172.6m(2011 164.5m)

2008 2010 2011 2012

3,550

2009

4,354

5,3375,600

6,100

2008 2010 2011 2012

81.6

2009

85.0

107.2

123.7

141.8

2008 2010

2.3

2009

6.0

8.7

2008 2010 2011 2012

398

2009

432 400 410425

15.2

21.4

2008 2010 2011 2012

355

2009

374 375 401416

2008 2010 2011 20122011 2012

141.3

2009

162.1 150.5164.5

172.6

Key perormance indicators

Our strategy

Our strategy is ocused on generating growthrom our principal corporate and consumermarkets through innovation and by harnessing

the power o the internet to deliver newproducts to our customers backed byoutstanding service.


9/68Park Group plc


7

CorporateGovernance

FinancialStatements

BusinessReview

CompanyOverview

Chairmans statement

Park has delivered another excellent set o results.

The quality and strength o our operations is reected

in these results and that perormance has extended

into the current year, which has started well.The transormation o Park has continued with the

rapid growth in our prepaid card ofering and the

introduction o a series o exciting new products.

It is pleasing to report that Park has deliveredanother excellent set o results. Park hasachieved a signicant advance in prot backedby strong cash generation and orshareholders, another increase in the proposeddividend or the ull year. This time last year,I reerred to the steady transormation o Parkas it harnesses the power o the internet andsocial media tools to drive growth in its existingmarkets, while introducing innovative newproducts which give access to exciting newmarkets. The success o the strategy andmanagements ability to deliver strong growth,is clearly demonstrated in these results andParks success enables us to look orwardwith optimism.

Group prot beore taxation and other

operating income or the year to 31 March 2012was ahead by 22.6 per cent at 8.6m(2011 7.0m). Operating prot beore otheroperating income increased 22.1 per cent to6.9m (2011 5.6m). Finance income was1.7m (2011 1.4m) reecting the ongoinglow interest rate environment, with the uplitin income resulting rom higher cash balances,which continue to be managed veryconservatively to minimise risk. Park is cashgenerative and has no bank debt on itsbalance sheet.

Revenue or the year reduced by 0.3 per cent

to 279.0m (2011 279.9m). Customer billingsincreased 10.5 per cent to 329.0m(2011 297.6m). It is important to note thatcustomer billings dier rom revenue reectingthe eect o the execash prepaid cardaccounting policy announced in our resultsstatement o June 2011. Revenue rom prepaidcards is recorded dierently to revenue rompaper vouchers and is the margin earnedbased on customer billings, recognisedwhen the value loaded on the card has beenredeemed. This policy has no eect on thelevel o margin contribution or prot, butdelays recognition. The very signicant and

growing numerical dierence betweenrevenue and billings vividly demonstratesthe positive impact o our prepaid cardand highlights its success since launchtwo years ago.

The board proposes raising the nal dividendby 22.9 per cent to 1.475p per share(2011 1.20p) making a total dividend or theyear o 2.0p per share (2011 1.70p). Thisincrease reects continued condence in thebusiness and the anticipated urthercontribution rom the protability o itsinnovative product ranges. Shareholderapproval will be sought at the annual generalmeeting to be held on 27 September 2012 topay the nal dividend on 1 October 2012 toshareholders on the register on 31 August 2012.

Park is an ambitious business that believesin continually supporting innovation to meetthe current and uture needs o its customersin both the corporate and consumermarketplaces. The ace o Park may be

traditional, but its businesses over recent yearshave become leading edge. This progress isone o the reasons why we have updated ourcorporate identity at the group level. Buildingon many years o growth and evolution, theidentity is a symbol o the companys ongoingcommitment to the uture, through innovationand the delivery o stakeholder value.

A urther change is more personal. I am proudo my executive involvement in Park sinceounding the company in 1967, when it wasknown as the Park Hamper Company Limited.As with all business decisions timing is crucial

and some months ago, ater 45 years at thehelm, I advised the board that the time wasright or me to take a step back. I reachedthat decision condent in the knowledgethat Park has a rst class, highly experiencedmanagement team, which would continuethe impressive development o the business.I was delighted to accept the boards invitationto retain my close relationship with Park asnon-executive chairman. Subsequent to myrole becoming non-executive, the boardappointed Chris Houghton as chie executiveofcer. Chris joined Park in 1986 becominggroup managing director in 2004; he has

played a leading role in the development oPark and I am condent that he will continue todrive the organisation orward with distinction.

Parks strategy over the years has beenconsistent and transparent. We are a UKbased nancial services business ocusedon harnessing the power o technology,principally the internet, social media and ourown innovation, to oer corporate and privatecustomers a range o incentive and savingsproducts, backed by the highest levels oservice and security. We achieve our goalsthrough the range o products and serviceswe oer. In addition, we also continue todevelop innovative new products and servicesor existing customers, while working to reachnew customers and new markets. Park hastwo core channels business to business andbusiness to consumer. Park is a market leaderin the UK and last year entered the Irish market.

PeopleParks continuing success is a reection o thequality, dedication and application o its peopleat all levels. Their enthusiasm and energy areour most vital assets and on behal o allshareholders, I thank them or their support.

OutlookThe quality and strength o our operations isreected in these results and that perormancehas extended into the current year, which hasstarted well. The transormation o Parksbusiness has continued with the rapid growthin our prepaid card oering and the

introduction o a series o exciting newproducts. Orders or Christmas 2012 are upapproximately 6 per cent compared with theprior year at this time, corporate and onlinebillings are also ahead o last year at this earlystage o the current nancial year. Park is wellplaced or another year o progress, as itsexperienced management team builds onmarket leading positions, backed by strongcustomer relations and a strong cash position.

Peter JohnsonNon-executive Chairman12 June 2012

PeterJohnsonChairman



8

Chie Executives review

Str

ength

Key strengths

>> Market leading brands in eacharea in which we operate

>> Protable, highly cashgenerative, no bank debt

>> Over 90 per cent o annualrevenues rom vouchersand cards

>> Increasing ocus on use ointernet and e-solutions

>> Transormational impact ofexecash prepaid card

This has been another year o signicantachievement across our business divisions as wecapitalise on sales opportunities in our keygrowth markets. We have introduced excitingand innovative new products, achievingaccelerating sales growth rom the execashprepaid card. Since this impressive product waslaunched in June 2010, there are now in excesso 600 corporate users o the execash card,with 77m o value loaded across approximately1.7m individual cards. We started with just twotypes o card, which we have expanded rapidlyto a suite comprising 17 products, as newcustomer applications and opportunities areidentied and serviced.

A year ago, in our statement accompanying theull year results or 2011, we commented on the

eect accounting policies were having on thereporting o revenues within the prepaid cardbusiness. The accounting policy in respect orevenue recognition masks the expansion othe prepaid card range and the gap betweenbillings and revenue will widen as card salesgrow. The total value o customer billings inthe year to 31 March 2012 rose signicantlyto 329.0m, up rom 297.6m in 2011, whilereported revenue was 279.0m comparedwith 279.9m in 2011. Reported revenue romprepaid cards is accounted dierently romvouchers as only the margin earned isrecognised as revenue, not the actual amount

billed to customers, with some margin beingdeerred to uture periods.

While Park has undergone signicant changeover recent years, our strategy, core skills andmanagement ocus remain unchanged. We areresolute in continuing to concentrate onbroadening our product range, providing moreoptions to existing customers while alsoseeking to attract new customers byexpanding into new areas through innovationand technology. The success we enjoy isagainst a backdrop o high levels o customerservice, tight nancial control and imaginative

sales and marketing eorts, all supported bymeasured investment in technology.

There is no doubt that Park has beentransormed by execash and we continueto control its development in a careul anddisciplined manner. We continue to ensurethat the correct inrastructure is in place, withsystems tested rigorously to handle theincreasing volumes rom our growingcustomer base. This inrastructure also allowsus to capitalise on new sales opportunitiesand launch new product applications. Postyear end, we built on the execash platorm,by launching execodes, an innovativemulti-retailer e-code solution. execodesis a virtual card application, which gives usersa unique code allowing them to shop onlineat the sites o participating retailers up to thevalue attached to each execode. Our growingnumber o participating retailers currently

includes Amazon.co.uk, HMV, iTunes,Marks & Spencer and many more.

The prepaid card spans all Parks businesschannels and is driving growth across thebusiness. One o the most importantdevelopments or execash is being Euro ()enabled, which could clearly oer signicantopportunity or geographic expansion.

We continue to expand urther our use o theinternet as a means o enhancing productdevelopment, which in turn improves ourcustomer service levels and increases business

efciency. Our corporate business nowconducts over 80 per cent o its marketingonline, whilst our consumer division currentlyhandles around 130,000 customers viathe internet.

The success o Parks prepaid card range is theresult o many years o product research anddevelopment coupled with investment in thelatest internet technology and support romhighly trained and experienced sta withsophisticated application skills. Annual capitalinvestment in IT is now running at over 1mwith about hal spent on upgrading and

replacing servers, peripherals and generalinrastructure. We now employ some 50specialists in IT, including web services, desktopand telephone support. This has doubled romve years ago.

ChrisHoughtonChieExecutive Ofcer


11/68Park Group plc


9

CorporateGovernance

FinancialStatements

BusinessReview

CompanyOverview

mobile website

Since the execash prepaid card was launched in June 2010, there

are now in excess o 600 corporate users, with 77m o value loadedacross approximately 1.7m individual cards. We started with just two

types o card, which we have expanded rapidly to a suite comprising

17 products, as new customer applications and opportunities are

identied and serviced.

Digital marketing and mobiledevelopments

>> Conducted over 400 digital

marketing campaigns in the last12 months

>> Using mobile SMS to market andinform customers about

deliveries

>> Using social media to interactwith customers

>> New mobile applicationslaunched in November. Available

on iPhone, android phones plusmobile enabled site

>> Over 15,000 apps downloaded

>> Mobile transactional sites

under construction

Park is in the nal stages o achieving ISO 27001accreditation. This internationally recognisedstandard on inormation security is the bestpractice specication and identies businessesand organisations throughout the world thathave developed best-in-class inormationsecurity management systems.

Managing risk is a vital component o our salesoering and is particularly important to our424,000 consumer customers, who want to becondent that their unds are secure. Treasurymanagement is at the core o our operationsand we ollow very conservative strategies toensure that customer savings are protected.The majority o these unds are held in theindependent Park Prepayments TrusteeCompany Limited, which segregates

prepayments away rom Parks unds, toprovide extra security and give customersreassurance and condence.

CorporateThe business delivered yet another year ogrowth. Billings rose 14.6 per cent to 141.8mcompared with 123.7m in the previous yearwhile revenue was lower at 104.7m against111.5m a year earlier. This widening gapbetween billings and revenue reects thepositive impact o the prepaid card and themanner in which it is recognised in theaccounts. Operating prot increased

23.7 per cent to 4.9m rom 3.9m in theprevious 12 months. This excellentperormance was driven by the strong growtho execash but also the launch o other newproducts, many tailored to meet speciccustomer needs. Among signicantdevelopments, Argos agreed to accept allPark vouchers and cards in the incentive andreward sector, which is another very positivedevelopment. This ollows the welcome newsduring the period o Marks & Spencersdecision to accept execash cards.

The UK voucher and git market is estimated to

be now worth around 4bn. Parks Love2shopis the UKs leading multi-redemption gitvoucher, available in paper or electronic orm,accepted by over 85 major retailers coveringmore than 20,000 high street outlets.

Customer numbers grew to a record 6,100,some 400 above the level o last year, withretentions steady at around 80 per cent.

Over 600 businesses have now purchasedexecash since launch in June 2010. Newredeemers include DW Sports, Greenwoods,Homebase, House o Fraser, JJB Sports,Poundstretcher, Shoe Zone and Stead &Simpson. Marks & Spencer will be acceptingexecash in its stores or Christmas 2012.

The launch o execodes, ater the year end,is a urther step orward in Parks prepaidoering. Customers can shop online withselected retailers including Amazon, iTunes,CD Wow, Hamleys, HMV, LOVEFiLM,Marks & Spencer and The Hut. With no postage

or ullment costs, execodes are deliveredto recipients via email, oering businesses aquick, trouble-ree and cost eective way toreward and incentivise their customers withsales promotions, on-pack promotions,online surveys and gaming incentives.execodes is also an ideal instant rewardmechanism or sta.



10

Chie Executives review continued

The corporate sector is characterised by manycompanies using Parks products as employeeor sales incentives. Our sales teams workalongside customers to develop tailored

schemes to meet the individual requirementso end users. This personalised service reectsthe knowledge and experience o the salesteam, drawing on years o know-how toensure that each customer is oered theapplication that best matches its needs.

Schemes developed during the year include avery successul incentive promotion to readerso the weekend editions o the Daily Mailoering Love2shop cards in return orredeeming codes rom the newspaper. Over650,000 execash cards were issued and thepromotion was repeated in the early months o2012. Also, a leading consumer market researchbusiness now oers execash cards as areward to participants. These businesses andothers like them oten nd it difcult to attractinterviewees so cards are being oered toincentivise respondents. This reward schemehas resulted in over 100,000 cards beingdistributed during the year under review.

Among other new product initiatives,Park has launched exebens as an employeebenet scheme. The employee benetsmarket is increasingly important, as businessesseek innovative ways to retain and rewardtheir people, against a general backdrop oincreased ocus on costs. The scheme issimple to operate. Participating sta membersare given a exebens git card and value isadded to the card as an ater tax salarydeduction, with sta receiving a discount onthe amount loaded. The card can then beused in thousands o retail outlets includingbranches o Argos, Boots, Comet, Debenhams,The Early Learning Centre, Halords,Mothercare and Superdrug.

Park Travel made good progress with revenuesrising 31 per cent above the level o theprevious year. This ull-service travel agency

oers customers a wide choice o highlycompetitive deals rom over 200 o the worldsleading holiday and travel companies. Manycustomers take rewards via the Love2travelcard, which can be redeemed at Park Travel.

The Irish customer list, purchased inSeptember 2010, is steadily building sales othe Euro Love2shop voucher, which is nowaccepted by close to 30 retailers in theRepublic o Ireland. The next step in thedevelopment o this operation will be thelaunch o execash into the country.

ConsumerConsumer revenue increased by 3.5 per centto 174.3m with billings increasing by7.6 per cent to 187.2m. A reduction in the levelo contract packing and storage activity and a

movement in product mix towards vouchersand cards impacted on margin and resulted ina 7.4 per cent reduction in operating prot orthe year to 4.1m.

Parks savings schemes allow customers tomanage their nances in a controlled andcareul manner, ensuring that they enjoy theestive season ree rom nancial worries.Customers purchase vouchers, hampers orother git products through a 45 weekinstalment plan, with everything delivered intime or Christmas. Park has been helpingamilies prepare and budget or Christmas orover 45 years. The discipline o making regularcontributions to a savings plan is particularlyvaluable to those amilies who want to lookorward to the estive season ree o last minutenancial concerns, especially in times oeconomic uncertainty.

The business is operated through agents,who are usually recruited between Octoberand February. The agents sign up customers,oten amily members, who wish to purchasethe various products in Parks catalogues or onthe internet, including shopping, travel andleisure vouchers as well as hampers. Althoughhampers were the original Park product, theynow comprise less than 5 per cent o totalrevenues. Agents are paid a commission basedon sales and they may also receive gits andother benets or achieving targets throughoutthe year.

The stability o the Christmas savings businessreects not only the popularity, quality andreliability o the product but also the traditionalhabits o its customers. The internet hastransormed the way many customers interactwith the company, it has radically altered theway Park operates, but our commitment tocustomer loyalty remains unchanged. In 2007only 2 per cent o orders were placed online,in the current year over hal will be received viathe web.

execash now accounts or approximately10 per cent o the Christmas savings businesswith sales o paper vouchers at a similar levelto last year, demonstrating the incrementalcontribution rom our E money oering.Christmas MoneyBox, launched in 2011,is a new brand using our web-based exesaverChristmas savings solution. It operates in asimilar way to our other savings productsbut can be delivered in white label ormto oer corporate customers employeebenet opportunities.

Park makes great eorts to stay close to its

customers through eedback surveys to ensuresatisaction with products and service. Over90 per cent o our customers said service wasexcellent or very good. Recent results indicatethat among the Christmas savings customer

base over 90 per cent have a mobile phone,70 per cent have internet access, while ewerthan 50 per cent have a credit card.

Television advertising remains the mosteective method o reaching new and existingcustomers. Advertisements are careullytargeted at selected social groupings in specicareas o the UK and Ireland. The campaignpeaks in January and February and itseectiveness is monitored on a daily basis sothat it can be ne tuned to accommodate anyunexpected trends.

The Christmas 2012 television campaignwas very successul with the volume o newbusiness secured rising above that o theprevious year or the same advertising spend.

While television remains the key driver oChristmas volume there is also a major advancein online reerrals through word o mouth orrecommending a riend. Social media is a astgrowing marketing tool and Parks Facebooksite has over 12,000 members; many go togreat lengths to discuss their interest in thebusiness and its products. Anotherdevelopment is the popularity andeectiveness o Ask Wanda, the customerservice device on Parks websites that answersusers questions. Last year over 200,000questions were answered and the knowledgebase o FAQs is growing steadily. This helpsimprove customer service, whilst drivingcosts down.

In 2012 highstreetvouchers.com, the astgrowing, direct-to-consumer online oering,achieved record revenue o 10.4m, a25 per cent uplit over last years gure o8.3m. This internet-only brand has in excesso 90,000 customers, 20,000 more than in theprevious year, and gives users the ultimate inchoice and exibility to order when and howthey wish. Parks analysis shows that 18 per cento online visitors access the site rom a mobiledevice, but the conversion level is low.Park is addressing this by creating a mobile

version o the site to improve unctionality,making it more mobile riendly to generateadditional sales.

Park is a changing business, adopting newand innovative technology to drive growth.I am very pleased with the progress we aremaking across all areas and look orward to thenext nancial year with condence.

Chris Houghton

Chie Executive Ofcer12 June 2012


13/68Park Group plc


11

CorporateGovernance

FinancialStatements

BusinessReview

CompanyOverview

Park is a changing business, adopting new and innovative

technology to drive growth. I am very pleased with the progress

we are making across all areas and look orward to the next

nancial year with condence.

Brands and retail partners

Park has in its portfolio a number of the UKsleading brands in the market places in which

it operates.

Leading brand position inkey markets

>> UKs No 1 multi-redemption gitvoucher/cardBillings 295m(2011 265m)

>> UKs No 1 Christmas savings

businessBillings 173m(2011 162m)

>> UKs No 1 corporate incentiveprovider Billings 142m(2011 124m)

>> UKs No 1 online git voucherretailer Billings 11m(2011 8m)

>> Regulated E money prepaidcard launched in June 2010Value loaded since launch

circa 77m, 2012 56m(2011 18m)



12

0

10,000

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Jan

Feb

Mar

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

120,000

130,000

140,000

150,000

160,000

20112012 Actual

20102011 Actual

Dailycashgraph

Financial review

Prot rom continuing operationsThe groups continuing operations are divided into two operating segments:

> corporate, comprising the groups sales to businesses, oering primarily sales o the Love2shopvoucher, execash cards and other retailer vouchers to businesses or use as sta rewards/

incentives, marketing aids and prizes; and> consumer, which represents the groups sales to consumers, utilising its Christmas savings

oering and consumer sales via the internet.

All other segments comprise central costs and property costs.

Revenue and margin rom sales o execash cards is included in both operating segments.

Operating prot is detailed below:2012

000

2011

000

Change

000

Corporate 4,865 3,934 931Consumer 4,138 4,470 (332)Other segments (2,144) (2,785) 641

Operating prot beore other operating income 6,859 5,619 1,240Other operating income 5,506 (5,506)

Operating prot 6,859 11,125 (4,266)

Operating prot beore other operating income or the year ended 31 March 2012 has increasedby 1.2m to 6.9m.

In the corporate business customer billings have increased by 14.6 per cent in the year to 141.8mwith operating prot increasing by 0.9m. With card revenue generally recognised as the marginearned on the value o cards spent rather than customer billings, this has resulted in revenuedecreasing by 6.1 per cent to 104.7m. Overall margins when expressed as a percentage ocustomer billings have improved to 3.4 per cent rom 3.2 per cent. This reects the increasedvolume o business and improved margin in certain markets, oset by increased costs associatedwith the operation o execash.

MartinStewartGroupFinance Director


15/68Park Group plc


13

CorporateGovernance

FinancialStatements

BusinessReview

CompanyOverview

The board has recommended anincrease in the nal dividend o23 per cent to 1.475p per share.

In the consumer business operating protdeclined by 0.3m to 4.1m arising rom anadverse mix movement on sales to customerswho participate in Christmas savings planswhich reduced prots by 0.1m. Reductionsin income rom cold storage and repackagingactivities have reduced prot rom 2011by 0.5m oset by improved income romonline sales to consumers which increasedby 0.4m over 2011.

The improvement in prot or other segmentso 0.6m reects primarily the reduction in thecost o management incentive payments/awards o 0.5m and reduced property rentalpayments o 0.2m, ollowing the purchase othe groups head ofce near the end o last year.

Other operating income in 2011 includes4.4m o prot arising rom the VAT Flemingclaim and a 1.1m prot arising on the sale ounutilised surplus land in Birkenhead.

TaxationThe eective tax rate or the year was 24.1 percent (2011 23.9 per cent) o prot beore tax.

The low eective tax rate this year is mainly dueto adjustments to current tax in respect o prioryears computations.

Last year we made the decision to provide in ull

or tax on the receipt o 1.9m o VAT received in2010 in respect o the over declaration o outputtax or prior periods (Fleming claim). Whilst it isstill our contention that this amount should notbe treated as taxable income, it is clear romcorrespondence we have had with HM Revenueand Customs (HMRC) that it believes thisamount to be taxable.

Earnings per shareBasic earnings per share decreased to 3.91prom 5.76p. Excluding the prior year otheroperating income, the basic adjusted earningsper share has increased to 3.91p rom 3.17p.

DividendsThe board has recommended an increase inthe nal dividend o 23 per cent to 1.475p pershare. An interim dividend o 0.525p per share

was paid on 6 April 2012. Subject to approvalo the nal dividend at the annual generalmeeting (AGM), the total dividend or 2012will be 2.00p per share.

Cash fowsAt the end o March 2012 9.2m (2011 6.8m)o cash and cash equivalents was held by thegroup with a urther 42.0m (2011 38.2m)being held by the Park Prepayments TrusteeCompany Limited. The trust holds paymentsreceived rom agents in respect o ordersor delivery the ollowing Christmas. Theconditions or the release o this money tothe group are detailed in the trust deed,which is available at www.getpark.co.uk.In addition at 31 March 2012 the group holds4.9m (2011 1.4m) o cash in the Park Card

Services Limited E money Trust (PCSET) tosupport the E money oat in accordance withregulatory requirements.

The total amount o cash held by the groupcombined with the monies held in trust hasincreased in the year to 56.1m rom 46.4m asat 31 March 2011. These total balances peakedat almost 152m in the year representing anincrease o 12m over last year. The group hadno bank borrowings in the period.

During the year, the group invested a urther0.7m in improving its customer acing

systems and telephony, and a urther 0.7min associated computer hardware.

ProvisionsAt the year end provisions had reduced to33.0m rom 34.1m. This was due to areduction in the value o unspent vouchers.These unspent vouchers arise primarily romsales in the corporate business.

Accounting policiesFollowing the launch o the execash cardlast year, our accounting policy in respect orevenue recognition has this year been

updated or new terms and regulationsassociated with execash cards. Revenuerom cards is recorded dierently to revenuerom paper vouchers and is the margin earnedbased on customer billings, recognised when

the value loaded on the card has beenredeemed. Where cards are sold to businessesor onward giting to consumers with no righto redemption, revenue includes an estimateo projected balances remaining on the cardat expiry. The amount included in this yearsincome statement as revenue rom execashcards is 3.3m (2011 1.2m).

PensionsThe group continues to operate denedbenet pension schemes, where pensions atretirement are based on service and nal salary.These schemes are now closed to utureaccrual o benet arising rom service withthe group. The pension decit based on thevaluation perormed at 31 March 2012 hasreduced to 1.9m (2011 2.1m). The current

and prior year decits reect a prior yearadjustment shown in the statement ocomprehensive income (SOCI) o 1.7m.This is due to a change in actuarial assumptionsto use consumer price index (CPI) rather thanretail price index (RPI).

Under IAS 19 Employee Benets the group hasrecognised a cost o 123,000 (2011 255,000)in its income statement. It has also recognisedan actuarial loss in the SOCI o 0.2m(2011 gain o 1.1m) net o tax.

In the year ended 31 March 2012 contributions

by the company to the schemes totalled 0.7m,in response to the actuarial valuationsperormed, the latest o which was as at31 March 2010. This indicated a technicalprovisions decit o 3.3m and expected uturecompany contributions o 0.7m per annum.

Martin StewartGroup Finance Director12 June 2012



14

Risk actors

Financial risks

Risk area Potential impact Mitigation

Group unding The group, like many other companies, depends on its

ability to continue to service its debts as they all due andto have access to nance where this is necessar y.

The group manages its capital to saeguard its ability to

operate as a going concern. Whilst the group currentlyoperates without bank borrowings, the unding

requirements o the business are continually reorecast

to ensure that sufcient liquidity exists to support its

operations and uture plans.

Treasury risks The group has signicant unds on deposit and as such is

exposed to interest rate risk, counterparty risk and exchangerate movements ollowing the commencement o

operations in Ireland.

The group treasury policy ensures that unds are only

placed with and spread between high qualitycounterparties and where appropriate any exchange rate

exposure is managed to minimise any potential impact.

Banking system Disruption to the banking system would adversely impact

on the groups ability to collect payments rom customers

and could adversely aect the groups cash position.

The group seeks wherever possible to oer the widest

possible range o payment options to customers to reduce

the potential impact o ailure o a single payment route.

Pension unding The group may be required to increase its contributions to

cover any unding shortalls.

The groups pension schemes are closed to uture benet

accrual related to service. Funding rates are in accordance

with the actuaries recommendations.

Financial services and

other market regulation

The business model may be compromised by changes in

existing regulation or by the introduction o new regulation.

The group has a regulatory team that monitors and enorces

compliance with existing regulations and keeps the group

up to date with impending regulation. The group shares theobjectives o Government in treating customers airly and in

the protection o customer prepayments. The group

operates a number o trusts to saeguard unds held onbehal o customers.

Credit risks Failure o one or more customers and the risk o deault by

credit customers due to reduced economic activity.

Customers are given an appropriate level o credit based on

their trading history and nancial status, a prudentapproach is adopted towards credit control. Credit

insurance is used in the majority o cases where customersdo not pay in advance.

.


17/68Park Group plc


15

CorporateGovernance

FinancialStatements

BusinessReview

CompanyOverview

Operational risks

Risk area Potential impact Mitigation

Business continuity and IT

systems

Failure to provide adequate service levels to customers,

retail partners or other suppliers, resulting in a ailure tomaintain services that generate revenue.

The group plans and tests its business continuity

procedures in preparation or catastrophic events and orthe existence o countereit vouchers or cards.

Our ocus is on the elimination o any single point o ailure

in our IT systems.

The group maintains three separate data centres in relation

to its core inrastructure to ensure that service is maintainedin the event o a disaster at its primary data centre.

Developed sotware is extensively tested prior to

implementation.

Loss o key management The group depends on its directors and key personnel.

The loss o the services o any directors or other key

employees could damage the groups business, nancialcondition and results.

Existing key appointments are rewarded with competitive

remuneration packages including long term incentives

linked to the groups perormance and shareholder return.

Relationships with high

street and online retailers

The group is dependent upon the success o its Love2shop

voucher and execash card. These products only operateprovided the participating retailers continue to accept them

as payment or goods or services provided.

The group has a dedicated team o managers who work

closely with all retailers to promote their businesses to Parkscustomers who utilise Parks vouchers and cards and drive

orward incremental sales to their retail outlets. Contracts

which provide minimum notice periods or withdrawal arein place with all retailers and are designed to mitigate any

potential impact on Parks business.

Failure o the distributionnetwork

The ailure o the distribution network during the Christmasperiod, or example a Post Ofce strike, road network

disruption or uel shortages could adversely impact the

results and reputation o Parks brands.

Wherever possible the group seeks to utilise a wide range ogeographically spread carriers to mitigate the ailure o a

single operator.

Brand perception andreputation

Adverse market perception in relation to the groupsproducts or services, or example, ollowing the collapse o

a competitor. This could result in a downturn in demand orits products and services.

Ongoing investment in television advertising. Operation oa process o continual review o all marketing material and

websites to promote transparency to customers. Extensivetesting and vigorous internal controls exist or all group

systems to maintain continuity o online customer service.

Promotional activity The success o the groups annual promotional campaign is

essential to ensure the continued recruitment o customers.

Failure to recruit would result in loss o revenue to the

group. Promotional activity must also be cost eective.

Detailed management processes that are designed to

optimise the cost o recruiting are in place. The eectiveness

o each individual television advert is assessed separately

and uture plans amended where appropriate.

Competition Loss o margins or market share arising rom increased

activity rom competitors.

The group has a broad base o customers and no single

customer represents more than 11 per cent o totalcustomer billings.

Signicant resources are dedicated to developing and

maintaining strong relationships with customers and todeveloping new and innovative products which meet their

precise needs.



16

Directors

01 02

03 04

05 06

07


19/68Park Group plc


17

CorporateGovernance

FinancialStatements

BusinessReview

CompanyOverview

01 Peter Johnson (72) is the companysounder and majority shareholder and has therole o non-executive chairman. He has aservice agreement with the company enteredinto on 6 April 2012 which requires six monthsnotice o termination by either party.

02 Chris Houghton (53)was appointed tothe board on 11 October 2000 and becamechie executive ofcer on 11 April 2012.He is a Fellow o the Chartered Institute oManagement Accountants and joined thegroup as group accountant in 1986.He became group nance director on29 March 2001 and up to his appointment aschie executive ofcer was previously groupmanaging director. He has a service agreementwith the company entered into on 29 June

2001 which requires 12 months notice otermination by either party.

03 Martin Stewart (51) was appointed tothe board on 1 November 2004 and is thegroup nance director. He is a Fellow o theInstitute o Chartered Accountants in Englandand Wales and joined the group rom EddieStobart Group PLC, where he was groupnance director. Prior to this he was with UKWaste Management Limited rom 1992 to 2000,rom 1997 as nance director, and earlier in hiscareer held nancial positions with TheLittlewoods Organisation, ICI PLC and Price

Waterhouse. He has a service agreement withthe company entered into on 1 November2004 which requires 12 months notice otermination by either party.

04 Gary Woods (55) was appointed to theboard on 29 March 2001. He joined the groupwith the acquisition o Chrisco Hampers in 1980and has gained wide experience in divisionalroles. He is managing director o Park RetailLimited. He has a service agreement with thecompany entered into on 29 June 2001 whichrequires 12 months notice o termination byeither party. Mr Woods, in accordance with the

articles o association o the company, retiresby rotation and, being eligible, oers himselor re-election.

05 Christopher Baker MBE (60) wasappointed to the board as a non-executivedirector on 29 March 2001. He has a serviceagreement with the company entered into on23 March 2006 which requires six monthsnotice o termination by either party. He hasormerly held senior management positionswith Littlewoods plc and Hill Samuel BankLimited, and is currently chairman o AintreeUniversity Hospitals NHS Foundation Trust andchair o GSTS Pathology LLP and holds anumber o other non-executive appointmentson public and private sector boards. He ischairman o the groups audit committee, amember o the remuneration and nominationcommittees, and the groups seniorindependent non-executive director.

06 George Marcall (62) was appointedto the board as a non-executive director on29 March 2001. He has a service agreementwith the company entered into on 23 March2006 which requires six months notice otermination by either party. He has ormerlyheld directorships with Airtours plc and YatesGroup plc and is a non-executive director oAintree University Hospitals NHS FoundationTrust and o the National Union o StudentsServices Limited. Mr Marcall is chairmano the groups remuneration committeeand a member o the audit and nominationcommittees. Mr Marcall, in accordance with

the articles o association o the company,retires by rotation and, being eligible, oershimsel or re-election.

07 John Dembitz (62) was appointed to theboard as a non-executive director on 8 May2008. He has a service agreement with thecompany entered into on 8 May 2008 whichrequires six months notice o termination byeither party. He was ormerly chairman o anumber o companies including TackInternational Limited, Coee Point plc and CVOGroup BV, and held senior executive positionswith McKinsey & Co, Consolidated Gold FieldsPlc, Charterhouse Japhet and Valin PollenLimited. He is currently chairman o AllaneldGroup Plc and EAC Management Limited and anon-executive director o Avidity-IP Group andLee Baron. Mr Dembitz is chairman o thenomination committee and a member o theaudit and remuneration committees.



18

The directors submit their report or the year ended 31 March 2012or Park Group plc, registration number 1711939.

Prot and dividend

The group prot or the nancial year, ater taxation, was 6.516m(2011 9.514m).

The directors have declared a dividend as ollows:m

Approved interim dividend o 0.525p per share (2011 0.50p) 0.882Proposed nal dividend o 1.475p per share (2011 1.20p) 2.478

Total ordinary dividend o 2.00p per share (2011 1.70p) 3.360

The directors have recommended that the nal ordinary dividendbe paid on 1 October 2012 to those shareholders on the register on31 August 2012.

Principal activitiesA statement describing the business activities o the company andits subsidiary undertakings is set out on pages 8 to 11 with commentson current developments in the chairmans statement on page 7.The principal subsidiary undertakings and their activities are set outin note 9 to the accounts.

Business reviewA review o the groups activities over the nancial year is containedin the chairmans statement on page 7 and in the chie executivesreview on pages 8 to 11.

Share capitalGrant o long term incentive plan (LTIP) awardsOn 14 June 2011, 1,394,910 provisional shares were awarded underthe terms o the groups 2011 LTIP scheme. Share distributions maybe made at the end o the plan cycle, which cannot be less than threeconsecutive years, and are subject to certain perormance criteria.

Major shareholdersAt the date o this report the ollowing had notied interests in theshare capital o the company o 3 per cent or more:

No o shares %

Mr P R Johnson 94,649,325 56.33Jupiter Nominees Limited 16,235,386 9.66Schroder Investment Management Limited 16,000,000 9.52

Mr P R Johnson has:> a benecial interest in 94,648,325 shares held in the 1989 PeterJohnson Settlement Trust in which Allied Irish Banks plc, CapitaTrustee Services Limited and AIB Bank (CI) Limited have notiedtheir interest;

> a benecial interest in 16,235,386 shares in which JupiterNominees Limited has an interest; and

> a non-benecial interest, as a member and council member,in The Johnson Foundation, a registered charity with number518660. The Johnson Foundation hold 4,665,454 shares inthe company.

Directors and their interestsThe directors who were in oce during the year ended

31 March 2012 or have been subsequently appointed areshown on pages 16 and 17.

Details o directors and connected persons share interests in thecompany are shown in the remuneration report on page 24.

Employee involvementEmployees are kept inormed o the perormance and objectives othe group through personal briengs, regular meetings and e-mail.

Market value o land and buildingsAs at 31 March 2012, in the opinion o the directors, the market valueand book value o the land and buildings o the group are notsignicantly dierent.

Political and charitable contributionsDuring the year ended 31 March 2012 the group contributed tocharity 10,895 (2011 8,937). There were no political contributions.

Creditor payment policyFor all trade creditors, it is the groups policy to:

> agree the terms o payment at the start o business with thatsupplier;

> ensure that suppliers are aware o the terms o payment; and> pay in accordance with its contractual and other legal obligations.

As at 31 March 2012 the number o days o parent companypurchases outstanding was 14 days.

Disclosure o inormation to auditorsThe directors who held oce at the date o approval o this directorsreport conrm that, so ar as they are aware, there is no relevant auditinormation o which the companys auditors are unaware; andeach director has taken all the steps that they ought to have takenas a director to make themselves aware o any relevant auditinormation and to establish that the companys auditors areaware o that inormation.

Reappointment o auditorsIn accordance with section 489 o the Companies Act 2006,a resolution or the reappointment o KPMG Audit Plc as auditorso the group is to be proposed at the orthcoming AGM.

By order o the board

M R StewartCompany SecretaryBirkenhead12 June 2012

Directors Report


21/68Park Group plc


19

CompanyOverview

BusinessReview

FinancialStatements

CorporateGovernance

Corporate GovernanceThe board has given consideration to the Combined Code oCorporate Governance (the Code) issued by the Financial ReportingCouncil (FRC) in June 2010 and applicable or listed companies or

nancial periods beginning a ter 29 June 2010.

Although companies traded on the Alternative Investment Market(AIM) are not required to provide corporate governance disclosures,or ollow guidelines in its Code, the directors have chosen to providecertain inormation on how the company has adopted variousprinciples o the Code.

The boardThe group is controlled through its board o directors. The boardsmain roles are:

> to provide entrepreneurial leadership o the group;> to set the groups strategic objectives and to ensure that the

necessary nancial and human resources are in place to enablethem to meet those objectives;

> to review management perormance;> to set the companys standards and values; and

> to ensure that the companys obligations to its shareholdersand others are understood and met.

The board, which meets at least six times a year, has a scheduleo matters reserved or its approval. It meets on other occasionsas necessary.

The specic responsibilities reserved to the board include:> setting group strategy and approving an annual budget and

medium-term projections;> implementing the strategies and policies o the group;> reviewing operational and nancial perormance;> approving major acquisitions, divestments and capital

expenditure;> reviewing the groups systems o nancial control and risk

management;> ensuring that appropriate management development and

succession plans are in place;> developing and implementing risk management systems;> reviewing the environmental, health and saety perormance

o the group;> approving appointments to the board and the company

secretary;> approving policies relating to directors remuneration and

the severance o directors contracts; and> ensuring that a satisactory dialogue takes place with

shareholders.

Compliance with the CodeThroughout the year to 31 March 2012, the company complied withthe provisions o the Code except or the act that the non-executivedirectors and board committees are not subject to evaluation. Theboard considers its arrangements or appraisal are adequate or thesize o the company and its board.

Committees o the boardNomination committeeDuring the year the nomination committee comprised John Dembitz(chairman), Peter Johnson, Christopher Baker and George Marcall. Nomeetings were held during the year.

The nomination committees terms o reerence are available romthe company secretary and are displayed on the groups website. Thenomination committee will meet i a uture vacancy arises or need isidentied to alter the mix o skills and experience on the board.

Remuneration committeeDuring the year the remuneration committee comprised GeorgeMarcall (chairman), Christopher Baker and John Dembitz , who areindependent non-executive directors. Peter Johnson attended

meetings by invitation. The remuneration committee met threetimes during the year.

The remuneration committees principal responsibilities are:> setting, reviewing and approving individual remuneration

packages or executive directors and the chairman includingterms and conditions o employment and any changes to thepackages;

> approving the rules, and launch, o any group share, share optionor cash based incentive scheme; and

> the grant, award, allocation or issue o shares, share options orpayments under such scheme.

In addition the remuneration committee periodically reviews thegroups remuneration policy in relation to:

> its competitors and industry norms;> compensation commitment; and> contract periods.

The remuneration or the non-executive directors is determined bythe chairman and executive directors.

The remuneration committees terms o reerence are availablerom the company secretary and are displayed on the groupswebsite. The directors remuneration report is set out on pages23 to 25 o the annual report.

Audit committeeDuring the year the audit committee comprised Christopher Baker(chairman), George Marcall and John Dembitz , who are independentnon-executive directors. Peter Johnson, Chris Houghton and MartinStewart and the groups external auditors attend meetings o theaudit committee by invitation. Christopher Baker has the necessaryrecent and relevant experience set out in the biographical details onpage 17. The audit committee met three times during the year.

The audit committee usually reviews its terms o reerence annuallyand recommends to the board any changes required as a result othe review. No changes were made in the year.

The audit committees terms o reerence are available rom thecompany secretary and are displayed on the groups website.

In the nancial year to 31 March 2012 the audit committeedischarged its responsibilities by:

> reviewing the groups drat nancial statements and interimresults statement prior to board approval and reviewing theexternal auditors detailed reports thereon;

> reviewing the appropriateness o the groups accounting policies;> reviewing regularly the potential impact in the groups nancial

statements o certain matters;> reviewing and approving the audit ee and reviewing non-audit

ees payable to the groups external auditors;> reviewing the external auditors plan or the audit o the groups

accounts, which included key areas o audit ocus, key risks on theaccounts, conrmations o auditor independence and theproposed audit ee and approving the terms o engagement or

the audit;> reviewing post-acquisition reports on integration and

perormance o signicant recent acquisitions; and> reviewing the risks associated with major business programmes.

Corporate Governance



20

The audit committee, at least annually, meets the external auditors, without management, to discuss matters relating to its remit and anyissues arising rom the audit.

Under its terms o reerence, the audit committee monitors the integrity o the groups nancial statements.

The audit committee is responsible or monitoring the eectiveness o the external audit process and making recommendations to the boardin relation to the appointment, reappointment and remuneration o the external auditor. It is responsible or ensuring that an appropriaterelationship between the group and the external auditors is maintained, including reviewing non-audit services and ees.

The audit committee monitors regularly the non-audit services being provided to the group by its external auditors in line with its policy onnon-audit work perormed by the auditors. The policy prohibits the external auditors rom undertaking certain work and provides that othercategories o non-audit work must be submitted to the audit committee or approval prior to engagement.

The audit committee keeps under inormal review the need or the group to have an internal audit unction. Due to the size and scope o thebusiness the audit committee has recommended to the board that it does not currently consider it appropriate or the group to have aninternal audit unction.

Risk management committeeDuring the year the risk management committee comprised Chris Houghton (chairman), Gary Woods, Martin Stewart and Steve Lock (head oIT). The risk management committee met our times during the year.

The risk management committees terms o reerence include:> identication o business risk throughout the groups operations;> determination o the controls necessary to manage identied risk;> evaluation o the eectiveness o those controls; and> continuous assessment and reporting to the board.

The audit committee considers any matters in relation to the principal risks, as determined by the risk management committee.

The ollowing table sets out the number o scheduled meetings o the board and its committees during the year and individual attendanceby board members at these meetings. Attendance at the meetings by non-member directors is not shown:

Group

board

Audit

committee

Remuneration

committee

Nomination

committee

Executive directorsPeter Johnson (chairman)Chris HoughtonMartin StewartGary Woods

Non-executive directorsChristopher BakerGeorge MarcallJohn Dembitz

6666

566

333

333

0

000

Scheduled meetings 6 3 3 0

Senior independent directorThe board has appointed Christopher Baker as senior independent director. He is always available to meet shareholders on request and toensure that the board is aware o any shareholder concerns not resolved through the existing mechanisms or investor communication.

Directors and directors independenceThe board currently comprises the non-executive chairman, three independent non-executive directors and three executive directors.The names o the directors together with their biographical details are set out on pages 16 and 17. All the directors served throughout theperiod under review.

The board includes independent non-executive directors who constructively challenge and help develop proposals on strategy and bringindependent judgement, knowledge and experience to the boards deliberations. The independent directors are o sucient calibre andnumber that their views carry signicant weight in the boards decision making. The board considers its non-executive directors to beindependent in character and judgement.

Corporate Governance continued


23/68Park Group plc


21

CompanyOverview

BusinessReview

FinancialStatements

CorporateGovernance

The non-executive directors have conrmed that, except or as noted below, none o them:> has been an employee o the group within the last ve years;> has, or has had within the last three years, a material business relationship with the group;> receives remuneration other than a directors ee;

> has close amily ties with any o the groups advisers, directors or senior employees;> holds cross-directorships or has signicant links with other directors through involvement in other companies or bodies, other than thosedisclosed in the directors biographical details on pages 16 and 17;

> represents a signicant shareholder; or> has served on the board or more than nine years.

Our non-executive chairman Mr Peter Johnson has a signicant shareholding in the company and was an employee o the group as chieexecutive ocer or the year ended 31 March 2012. He also perorms a number o pro-bono roles but the board is satised that these arenot such as to interere with the discharge o his duties.

Two o the non-executive directors, Mr Christopher Baker and Mr George Marcall, have served on the board or more than nine years.The board considers that these arrangements are appropriate and have no impact on eective governance.

The directors are given access to independent proessional advice at the groups expense, when the directors deem it is necessary in orderor them to carry out their responsibilities.

Proessional developmentOn appointment, directors take part in an induction programme when they receive inormation about the structure and practices o thegroup together with the groups latest nancial inormation. This is supplemented by meetings with key senior executives. Throughouttheir period in oce the directors are continually updated on the groups business, the competitive and regulatory environments in whichit operates and other changes aecting the group and the industry it operates in as a whole, by written briengs, meetings with seniorexecutives and attendance at external courses.

Perormance evaluationThere is a ormal process or the annual evaluation o the executive directors. In addition the remuneration committee considers individualdirectors perormance when it determines their orthcoming annual remuneration. Directors per ormance is under continual review and ismeasured against targets. The non-executive directors are not subject to evaluation. The board considers its arrangements or appraisal areadequate to ensure eective governance given the size o the company and its board.

Re-electionSubject to the companys articles o association, the Companies Acts and satisactory perormance, non-executive directors are appointedor an initial period o three years. Beore the third and sixth anniversary o the non-executive directors rst appointment, the directordiscusses with the board whether it is appropriate or a urther three year term to be served.

The companys articles o association require that one third o the members o the board or, i their number is not three or a multiple othree, the number nearest to but not exceeding one third, shall retire by rotation and seek re-election each year. Notwithstanding this,the board is observing the terms o the Code in that each director will seek re-election at regular intervals consisting o no more thanthree years.

Company secretaryThe company secretary is responsible or advising the board through the chairman on all governance matters. The directors have accessto the advice and services o the company secretary who is responsible to the board or ensuring board procedures are complied with.The companys articles o association provide that the appointment and removal o the company secretary is a matter or the ull board.

InormationRegular reports and papers are circulated to the directors in a timely manner in preparation or board and committee meetings.These papers are supplemented by inormation specically requested by the directors rom time to time. All executive directors receivemonthly management accounts and regular management reports and inormation which enable them to scrutinise the groups andmanagements perormance against agreed objectives.



22

Relations with shareholdersThe chairman gives eedback to the board on issues raised with him by major shareholders.

The AGM is normally attended by all directors, and shareholders are invited to ask questions during the meeting and to meet with directors

ater the ormal proceedings have ended.

The group maintains a corporate website containing a wide range o inormation o interest to investors.

Presentations are made to analysts and institutional investors ollowing announcements to the stock exchange o the hal-year andull-year results. Other ad hoc meetings are held with interested parties on request.

The senior independent director is available to shareholders i they have concerns which contact through the normal channels onon-executive chairman and chie executive ocer has ailed to resolve or or which such contact is inappropriate.

Risk and internal controlThe board is responsible or the groups system o internal control and or reviewing its eectiveness. There is an ongoing process oridentiying, evaluating and managing the signicant risks aced by the group. These may be strategic, operational, reputational, nancial orenvironmental. It is reviewed regularly by the board and accords with the Code. The directors have continued to review the eectiveness othe groups system o nancial, operational and compliance controls against signicant risk.

The principal elements o the groups established control systems include:> a clearly dened organisational structure under which individual responsibilities are monitored by members o the board;> budgets covering key nancial aspects o group activities which are approved by the board;> monthly comparisons o results against budget and prior year which are considered by the board;> clearly dened procedures or treasury management and the authorisation o capital expenditure; and> the appointment o a risk management sub-committee.

The risk management sub-committees terms o reerence are shown on page 20.

As pointed out in the Code, any such system is designed to manage rather than eliminate the risk o ailure to achieve business objectives andcan only provide reasonable and not absolute assurance against material misstatement or loss.

This process has been in place or the year under review and up to the date o approval o the annual report and accounts.

Statement o directors responsibilities in respect o the annual report and the nancial statementsThe directors are responsible or preparing the annual report and the group and parent company nancial statements in accordance withapplicable law and regulations.

Company law requires the directors to prepare group and parent company nancial statements or each nancial year. As required by theAIM Rules o the London Stock Exchange they are required to prepare the group nancial statements in accordance with InternationalFinancial Reporting Standards (IFRSs) as adopted by the EU and applicable law and have elected to prepare the parent company nancialstatements on the same basis.

Under company law the directors must not approve the nancial statements unless they are satised that they give a true and air view o thestate o aairs o the group and parent company and o their prot or loss or that period. In preparing each o the group and parent companynancial 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 nancial 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 or keeping adequate accounting records that are sucient to show and explain the parent companystransactions and disclose with reasonable accuracy at any time the nancial position o the parent company and enable them to ensure thatits nancial statements comply with the Companies Act 2006. They have general responsibility or taking such steps as are reasonably opento them to saeguard the assets o the group and to prevent and detect raud 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 i those requirements wereto apply to the company. The directors have also decided to prepare voluntarily a corporate governance statement as i the company wererequired to comply with the Listing Rules and the Disclosure Rules and Transparency Rules o the Financial Services Authority in relation to

those matters.

The directors are responsible or the maintenance and integrity o the corporate and nancial inormation included on the companys website.Legislation in the UK governing the preparation and dissemination o nancial statements may dier rom legislation in other jurisdictions.

Corporate Governance continued


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CompanyOverview

BusinessReview

FinancialStatements

CorporateGovernance

Remuneration Report

Park Group plc uses, as a guideline or its disclosure in relation to remuneration, the requirements applicable to listed companies, as set out inthe Directors Remuneration Report Regulations 2002 (incorporated into the Companies Act 2006).

Unaudited inormation

Remuneration committeeDetails o the remuneration committee are given on page 19.

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

Executive remuneration policyThe aim o the groups remuneration policy is to adopt levels o remuneration which should be sucient to attract, motivate and retain highcalibre executives. The policy is to reward directors with competitive salaries and benet packages which are linked to both individual andbusiness perormance. These packages are reviewed each year to ensure that they are supportive o the groups business objectives and thecreation o shareholder value.

Details o remunerationExecutive directors are remunerated through the provision o a basic salary, annual bonus (linked to perormance), long term incentives(share options linked to perormance), car allowance, medical and permanent health insurance cover. Certain executive directors enjoy benetsin kind such as contributions to pension arrangements and the payment o certain telephone accounts and proessional subscriptions.

Basic salariesBasic salaries or executive directors are reviewed each year.

Perormance related paymentsExecutive directors can earn perormance related bonus payments, subject to the achievement o predetermined business unit and groupprot targets. Bonuses do not orm part o pensionable earnings.

Share options and LTIPThe directors participation in the groups approved executive share option scheme (AESOS) and LTIP is shown below. Exercise o the options or alldirectors is subject to the ollowing criteria:

The 2009 LTIP and 2010 LTIP were adopted by the remuneration committee on 25 June 2010. The 2011 LTIP was adopted by the remunerationcommittee on 21 July 2011. The vesting o awards and the distribution o shares resulting thererom to participants is subject to theachievement o certain per ormance targets related to total shareholder return over each plan cycle.

ContractsDetails o executive directors service contracts are given on page 17. At the date o this report all contracts had an unexpired term o12 months. No contract provides or compensation payments on loss o oce.

Non-executive directorsThe independent non-executive directors receive ees as directors which are determined by the whole board, each director abstaining romdecisions aecting his own remuneration.

Total shareholder return (TSR)The ollowing graph charts the total cumulative shareholder return o the company since 1 April 2007, compared with the AIM all share index and thespeciality and other nancial share index. The company eels that these are the most appropriate indices to use as the rst shows a broad averageequity share perormance and the second shows the share perormance or the industry sector in which the company operates.

TSR(%)rebasedtoApril2007

Park Group plc

Financial services

AIM all share

-100

-50

0

50

100

150

200

2007 2008 2009 2010 2011 2012Source: Hemscott



24

Audited inormationDirectors emolumentsThe emoluments o directors or the year ended 31 March 2012 were:

Salary

or ees

000

Perormance

related

payments

000

Benets

000

Total Pension costs

2012

000

2011

000

2012

000

2011

000

ExecutiveP R Johnson 292 106 41 439 512 C Houghton 205 106 17 328 405 50 46M R Stewart 169 83 17 269 331 47 37G A Woods 169 83 17 269 331 49 38

835 378 92 1,305 1,579 146 121

Non-executiveC J Baker 45 45 40 R G Marcall 45 45 40 J Dembitz 45 45 40

135 135 120

970 378 92 1,440 1,699 146 121

Directors share interestsThe benecial interests in the share capital o the company o the directors in oce at 31 March 2012 and connected persons were as ollows:

Benecial shareholding

31 March 2012 31 March 2011

P R Johnson 110,884,711 110,884,711C Houghton 322,797 322,797M R Stewart 206,851 206,851G A Woods 174,696 174,696C J Baker 10,000 10,000R G Marcall 10,000 10,000

J Dembitz 100,000 100,000

AESOS options over ordinary shares

31 March

2012

31 March

2011

Exercise

price

Date

exercisable

Expiry

date

C Houghton 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

M R Stewart 148,148 148,148 20.25p 16.06.13 15.06.20

LTIP provisional share awards

31 March

2012

31 March

2011

Year***

exercisable

C Houghton 666,338 666,338 2012*671,386 671,386 2013*

298,570 2014**

G A Woods 548,952 548,952 2012*

553,111 553,111 2013*

245,973 2014**

M R Stewart 548,952 548,952 2012*

553,111 553,111 2013*

245,973 2014**

* subject to perormance criteria as set out in LTIP plan dated 25 June 2010.

** subject to perormance criteria as set out in LTIP plan dated 21 July 2011.

*** options are exercisable ater 10 consecuti ve dealing days commencing on the date o the announcement by the group o its results in each year.

Remuneration Report continued


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FinancialStatements

CorporateGovernance

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

There were no changes to directors interests in shares between 31 March 2012 and the date o this report.

Directors pension entitlementsIn November 2010, the executive directors ceased to be members o the Park Group pension scheme ollowing their acceptance o a transervalue oer made by the scheme.

On behal o the board

R G MarcallChairman o the Remuneration CommitteeBirkenhead12 June 2012



26

We have audited the nancial statements o Park Group plc or theyear ended 31 March 2012 set out on pages 27 to 61. The nancialreporting ramework that has been applied in their preparation isapplicable law and International Financial Reporting Standards (IFRSs)

as adopted by the EU and, as regards the parent company nancialstatements, as applied in accordance with the provisions o theCompanies Act 2006.

In addition to our audit o the nancial statements, the directors haveengaged us to audit the inormation in the Directors RemunerationReport that is described as having been audited, which the directorshave decided to prepare (in addition to that required to be prepared)as i the company were required to comply with the requirements oSchedule 8 to The Large and Medium-sized Companies and Groups(Accounts and Reports) Regulations 2008 (SI 2008 No 410) madeunder the Companies Act 2006.

This report is made solely to the companys members, as a body, inaccordance with Chapter 3 o Part 16 o the Companies Act 2006 and,in respect o the separate opinion in relation to the DirectorsRemuneration Report and reporting on corporate governance, onterms that have been agreed. Our audit work has been undertakenso that we might state to the companys members those matters weare required to state to them in an auditors report and, in respecto the separate opinion in relation to the Directors RemunerationReport and reporting on corporate governance, those matters thatwe have agreed to state to them in our report, and or no otherpurpose. To the ullest extent permitted by law, we do not acceptor assume responsibility to anyone other than the company andthe companys members, as a body, or our audit work, or this report,or or the opinions we have ormed.

Respective responsibilities o directors and auditorAs explained more ully in the Directors Responsibilities Statementset out on page 22, the directors are responsible or the preparationo the nancial statements and or being satised that they give atrue and air view. Our responsibility is to audit, and express anopinion on, the nancial statements in accordance with applicablelaw and International Standards on Auditing (UK and Ireland).Those standards require us to comply with the Auditing PracticesBoards (APBs) Ethical Standards or Auditors.

Scope o the audit o the nancial statementsA description o the scope o an audit o nancial statements is providedon the APBs website at www.rc.org.uk/apb/scope/private.cm.

Opinion on nancial statements

In our opinion:> the nancial statements give a true and air view o the state o

the groups and o the parent companys aairs as at 31 March2012 and o the groups prot or the year then ended;

> the group nancial statements have been properly prepared inaccordance with IFRSs as adopted by the EU;

> the parent company nancial statements have been properlyprepared in accordance with IFRSs as adopted by the EU and asapplied in accordance with the provisions o the Companies Act2006;

> the nancial statements have been prepared in accordance withthe requirements o the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act2006 and under the terms o our engagementIn our opinion:

> the part o the Directors Remuneration Report which we were

engaged to audit has been properly prepared in accordance withSchedule 8 to The Large and Medium-sized Companies andGroups (Accounts and Reports) Regulations 2008 made under theCompanies Act 2006, as i those requirements were to apply tothe company; and

> the inormation given in the Directors Report or the nancial yearor which the nancial statements are prepared is consistent withthe nancial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect o the ollowing:Under the Companies Act 2006 and under the terms o ourengagement we are required to report to you i, in our opinion:

> adequate accounting records have not been kept by the parentcompany, or returns adequate or our audit have not beenreceived rom branches not visited by us; or

> the parent company nancial statements and the part o theDirectors Remuneration Report which we were engaged to auditare not in agreement with the accounting records and returns; or

> certain disclosures o directors remuneration specied by law arenot made; or

> we have not received all the inormation and explanations werequire or our audit.

In addition to our audit o the nancial statements, the directors haveengaged us to review their Corporate Governance Statement as i thecompany were required to comply with the Listing Rules and theDisclosure Rules and Transparency Rules o the Financial ServicesAuthority in relation to those matters. Under the terms o ourengagement we are required to review:

> the directors statement, set out on page 32, in relation to goingconcern; and

> the part o the Corporate Governance Statement on pages 19 to22 relating to the companys compliance with the nine provisionso the UK Corporate Governance Code specied or our review.

Nicola Quayle (Senior Statutory Auditor)or and on behal o KPMG Audit Plc, Statutory AuditorChartered Accountants8 Princes ParadeLiverpoolL3 1QHUnited Kingdom12 June 2012

Independent Auditors Reportto the Members o Park Group plc


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FinancialStatements

Notes

2012

000

2011

000

Billings 1 328,965 297,612

Revenue 1 279,025 279,938

Cost o sales (257,283) (259,819)

Gross prot 21,742 20,119

Other operating income 3 5,506Distribution costs (2,638) (2,548)Administrative expenses (12,245) (11,952)

Operating prot 6,859 11,125

Finance income 4 1,725 1,384Finance costs 4 (2) (2)

Prot beore taxation 1, 2 8,582 12,507

Taxation 5 (2,066) (2,993)

Prot or the year 6,516 9,514

Attributable to:Equity holders o the parent 6,565 9,514Minority interest (49)

6,516 9,514

Earnings per share 6 basic 3.91p 5.76p basic adjusted 3.91p 3.17p diluted 3.76p 5.53p diluted adjusted 3.76p 3.05p

All activities derive rom continuing operations.

Consolidated Statement o ComprehensiveIncomeFor the year to 31 March 2012

2012

000

Restated

2011

000

Prot or the year 6,516 9,514

Other comprehensive income:

Actuarial (losses)/gains on dened benet pension plans (310) 1,465Deerred tax on actuarial losses/(gains) on dened benet pension plans 108 (381)Foreign exchange translation dierences 52

Other comprehensive income or the year net o tax (150) 1,084

Total comprehensive income

park report and accounts mar 12

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