17 Jun 2008 07:00
NEWS RELEASE
PARK GROUP PLC
17 June 2008
Preliminary Unaudited Results for the Year Ended 31 March 2008
Summary
| 2008 | 2007 | ||
| Revenue from continuing operations | £225.1m | £305.2m | |
| Profit before tax - Continuing operations - Discontinued operations | £5.2m £(0.7)m | £10.1m £(3.9)m | |
| £4.5m | £6.2m | ||
| Profit after tax for the period | £4.7m | £4.2m | |
| Basic earnings per share | 2.85p | 2.58p | |
| Final dividend per share (proposed) | 0.80p | 0.80p | |
| Total dividend per share | 1.20p | 1.20p |
Earnings per share up 10.5% to 2.85p
Christmas 2008 orders up 17%
Corporate vouchers operating profit up 11% to £3.4m
Improved customer protection provided via trust accounts
Cash balances strong
No group borrowings
Dividend for year maintained
Peter Johnson, Chairman, commented: "I am pleased to report that Christmas savings orders for Christmas 2008 have shown a healthy recovery after the disappointing decline last year and that our corporate voucher business continues to grow. The outlook for the current year remains encouraging assisted by the growth in web enabled transactions."
Enquiries:
| Peter Johnson/Chris Houghton | Pascal Keane | John West/Jeremy Carey/Paul Young |
| Park Group plc | Shore Capital | Tavistock Communications |
| Tel: 0151 653 1700 | Tel: 020 7408 4090 | Tel: 020 7920 3150 |
Chairman's Statement
I am pleased to report that the group has performed in line with expectations, in this our fortieth year of trading, and we are well placed for our progressive plans for 2008.
During the year we have made substantial progress web enabling our business, and this has been a key area of focus in both the Christmas savings market and corporate voucher sales. Our online community is steadily developing as we add new products and services to our portfolio. Our existing customer database is growing, and our e-mail database is growing rapidly.
The popularity of the web amongst our target audiences is encouraging and is not only changing the way in which we operate, but also opening new markets, allowing us to market new products more effectively and to attract and communicate with new customers.
During the year we re-launched our online voucher shop, highstreetvouchers.com, ensuring that it operates with improved functionality and a broader product range. We sell our own high street gift vouchers and a range of third party voucher products as well as an exciting range of "gift experiences".
In May 2007 we launched myparkmag.com, an online magazine that targets audiences who fit our customers' demographic profile whilst being a vehicle to advertise our own product range. The magazine is attracting more than 325,000 unique visitors per month.
A combination of our television advertising, internet based brand awareness, recruitment campaigns and the introduction of trust arrangements established to enable our customers to save with confidence, has helped to produce the most successful marketing package in the company's forty year history. We received record numbers of enquiries and catalogue requests during the year, and recruited 47,000 new agents, up 20 per cent on the prior year.
Christmas saving orders for Christmas 2008 have shown a healthy recovery after the disappointing decline last year following the collapse of a major competitor. On 13 August 2007, we acted quickly to restore customer confidence in our product by empowering the Park Prepayments Protection Trust to hold payments received from agents. These trust arrangements established in conjunction with the Department for Business Enterprise and Regulatory Reform, have improved the protection provided for our customers' savings.
Revenue for Christmas 2007 was down compared with the previous year reflecting the well documented loss of confidence in the Christmas savings industry last year. Actions we have taken to improve the protection provided to our customers have clearly been recognised and reflected in the success, to date, of our current Christmas 2008 recruitment campaign where orders for Christmas 2008 have increased by 17 per cent on last year.
Group profit after tax improved by 10.9 per cent to £4.7m (2007: £4.2m) and earnings per share improved to 2.85 pence from 2.58 pence in 2007. Group revenue from continuing operations fell as expected, down by 26.3 per cent to £225.1m. Profit before tax for continuing activities reduced to £5.2m from £10.1m for the prior year.
The Directors are recommending an unchanged dividend of 0.80 pence per share payable on 1 October 2008 to shareholders on the register on 1 August 2008, making a total distribution of 1.2 pence per share for the year.
Following our exit from lending activities, we are reporting the continuing results of the group under two segments, Christmas Savings and Corporate Vouchers.
The development of our web based activities has continued with a number of successes. This year, 90 per cent of enquiries were received via the web with 29 per cent of all orders being placed via this route. This, along with the successful introduction of new e-mail and telecommunications technology last year, has helped to reduce operational costs whilst providing our agents with a more flexible way of trading with us. As a result, the retention level of existing agents has improved to an impressive 87.13 per cent (2007: 60.1 per cent).
Our online voucher shop, highstreetvouchers.com, which sells vouchers direct to customers, has more than doubled its sales year on year to £2.3m, and saw transactions increase by 259 per cent. It is pleasing to note that this positive trend is continuing with sales in the first two periods of 2008/9 again doubling those of the same period last year.
Corporate sales of our High Street Gift Vouchers continued to perform well, with revenue from the incentive market increasing by 14.2 per cent to £53.9m. This growth was offset by changes in the historical business sectors where the recently imposed smoking ban and an increased presence of online providers impacted on the traditional bingo halls, and a change of canvassing strategy in the home collected credit industry has also had an adverse impact on sales volumes.
Our sales to other Christmas savings businesses also declined last year as they themselves were impacted by the loss of customer confidence. However, returning confidence has helped their orders for Christmas 2008 to recover which will have a positive impact on our revenue in this financial year. The factors above have resulted in an overall reduction in corporate voucher volumes of 7.7 per cent to £82m. However, operating profit from this segment has improved year on year by 11 per cent to £3.4m.
The conditional contract for the disposal of surplus land situated at Dock Road North, Birkenhead, Merseyside, announced on 26 January 2006, has been terminated. The company continues to market the land which has planning permission for 74 residential units subject only to the completion of a section 106 agreement.
I am also delighted to announce the appointment of John Dembitz to the Board as Non-Executive Director on 8 May 2008. John has many years of experience and will be a great asset as we seek to develop the business in 2008 and beyond.
Outlook
Our experience this year demonstrates that there are opportunities to expand our businesses organically and that customers value our products and services. The saving concept is still very strong and during periods of economic uncertainty and inflationary pressures, our company provides an easy and convenient solution to help families plan for Christmas and avoid debt at an expensive time of year. The expansion of our product range offered to corporate voucher customers will provide a cost effective way for our growing customer base to incentivise customers and staff during difficult economic conditions. The use of the internet will not only enable us to communicate more effectively with our existing customers but also reach new customers and open new markets as demonstrated by the success of our online voucher shop, highstreetvouchers.com.
The Board of Park believes that the outlook for the current year remains encouraging following the success of this year's Christmas Savings recruitment campaign and the continued development of our corporate voucher business.
I would like to thank our staff for their continued hard work and commitment.
Peter Johnson
Chairman
17 June 2008
Operational Review 2008
Online Marketing
The development of our online marketing has been an area of focus in both the Christmas savings market and corporate voucher sales. Our online community is steadily developing as we add new products and services to our portfolio. Our traditional customer base and our e-mail database are now rapidly growing.
During the year we have relaunched our online voucher shop, highstreetvouchers.com, ensuring that it now operates with improved functionality and a broader product range. We now sell our own high street gift vouchers and a range of third party voucher products as well as an exciting range of "gift experiences".
We are very aware of the importance of maintaining good communication with our customers. This year we have introduced online catalogues which are e-mailed to customers, as well as improving the way we deal with e-mail traffic.
In May 2007 we launched myparkmag.com, an online magazine which targets audiences who fit our customers' demographic profile. The magazine, which contains news, gossip, competitions and information about Park Group products, now attracts more than 325,000 unique visitors per month. It is used to advertise our own product range as well as carrying third party advertising.
In the past year we relaunched our Love2reward web site which is aimed at corporate customers. This site is driving enquiries for our field based sales team and enquiries via this method have more than doubled our levels prior to the relaunch. This month we also launched our Love2choose pre-paid card which provides an improved range of redemption options for corporate incentive customers. The Love2choose card can be used to purchase vouchers or a range of products from our Love2choose web site.
We have also converted our travel voucher into a pre-paid card. These cards can now be used to purchase holidays from our call centre based travel agency.
In the incentive market we launched our VIP system (virtual incentive points). VIP is an online system that enables our customers to operate a points based incentive system by purchasing points which can then be awarded to staff as a reward for good performance. These points can be exchanged for vouchers or a range of selected products.
Our new web based developments have been produced by our own in-house design and marketing team made up of web developers, graphic designers, search engine specialists and our marketing department.
The popularity of the web amongst our target audiences is very encouraging and is not only changing the way we operate but also opening new markets, providing the ability to market new products effectively and to attract and communicate with new customers.
Christmas Savings
As expected revenue for Christmas 2007 was below last year, following the well documented loss of customer confidence in the industry. Total revenue amounted to £143.5m, 33.8 per cent below that which was achieved during the previous year. Operating profit fell from £5.1m to £0.7m, reflecting the reduced levels of activity and the cost of establishing improved protection for customers via trust account arrangements.
Although agent numbers fell to 94,000 from 116,000 for the previous year and customer numbers fell to 398,000 from 612,000, our customer average order value increased by 3.9 per cent to £355.
Revenue in the agency business continues to be dominated by voucher sales which accounted for 90.5 per cent (2007: 91.3 per cent) of the total at £114m (2007: £167m). Hamper revenue at £10.5m (2007: £13.5m) accounted for 7.6 per cent (2007: 6.6 per cent) of Christmas savings revenue. Other gift products accounted for 1.9 per cent (2007: 2.1 per cent) of revenue at £2.6m (2007: £4.3m).
Web developments continue to benefit the business. www.highstreetvouchers.com continued to provide increased revenue with sales achieving £2.3m, more than double last year's £1m.
We have worked hard during the year to restore customer confidence in the industry and to explore new ways to recruit customers. Customer service is a key focus and we have invested in new outbound telephony systems to help our customer care process. This year we have also enhanced our IVR systems to allow agents to check account balances and make payments over the telephone.
A combination of our television and internet based brand awareness and recruitment campaign and the introduction of trust account arrangements, has helped to produce the most successful marketing package in the company's forty year history. We received record numbers of enquiries and catalogue requests during the year and recruited 47,000 new agents, up 20 per cent on the prior year.
Currently we have orders from 102,000 agents with 442,000 customers (2007: agents 94,000, customers 398,000). Total Christmas orders are currently 17 per cent ahead of last year at this stage.
Corporate Vouchers
Although the largest single market for our high street gift vouchers remains the Christmas savings market, our corporate voucher business has continued to make progress during the year.
Revenue for the year at £81.6m was 7.7 per cent below last year's £88.4m. Operating profit improved by 11 per cent to £3.4m from £3.1m the prior year.
Revenue from the incentive market increased by 14.2 per cent to £53.9m. This growth was offset by reductions in other markets. Revenue from third party Christmas savings businesses reduced by £8.1m (49 per cent) following the market issues last year which also impacted on our Christmas business. Sales to the bingo industry reduced by £0.6m (22 per cent), reflecting a decline in activity following the introduction of the smoking ban and the increased popularity of online bingo. A change in canvassing strategy in the home collected credit industry reduced volumes to this market by £4.8m (17 per cent).
Our corporate customer base has increased by 32 per cent to 3,550 customers. The introduction of new products to support the development of our incentive business such as the online VIP system in addition to the Love2choose and Love2travel pre-paid cards will help to broaden the appeal of our products to a wider range of customers.
Discontinued Activities
The exit from the lending business was completed with the closure of the mortgage and secured lending business Imagine Finance in June 2007. During the year we have continued to collect at a satisfactory rate the small residual Park Direct Credit loan book, which had a carrying value of £0.2m as at 31 March 2008.
Financial Review 2008
Profit from Continuing Operations
With the closure of the loan broking business in the first half of the year, the group completed its exit from its cash lending business. Following this, the group's continuing operations have been divided into two new operating segments. The new segments are:
Christmas savings which represents the group's b2c offering, primarily being the Christmas savings businesses and consumer sales via the internet, and
Corporate vouchers comprising the group's b2b offering, primarily sales of the Love2shop voucher and other retailer vouchers to businesses for use as staff rewards/incentives, marketing aids and prizes.
Where it is impractical to allocate central costs these have been separately reported.
Operating profit from continuing operations is detailed below:
| 2007/8 | 2006/7 | Change | |
| £'000 | £'000 | £'000 | |
| Christmas Savings | 691 | 5,116 | (4,425) |
| Corporate Vouchers Unallocated | 3,438 (1,638) | 3,105 (1,417) | 333 (221) |
| Operating Profit | 2,491 | 6,804 | (4,313) |
Discontinued operations
The loss before tax of £0.7m arose from the loan broking business and cash reserve. This business was closed in the first half of the year.
Taxation
The effective tax rate for the year on continuing operations was 28.6 per cent (2007: 34.5 per cent) of profit before tax.
The high effective tax rate for the prior year reflected a balancing charge arising on the disposal of property.
The credit for the current year reflects the benefit of a previously unrecognised tax loss arising from the now discontinued home collected credit business, previously not expected to be recovered.
Earnings per Share
Basic earnings per share increased to 2.85p (2007: 2.58p).
Basic earnings per share from continuing operations decreased from 4.02p to 2.23p.
Dividends
The board has recommended a final dividend of 0.80p the same as last year. Upon approval of the final dividend at the AGM, the total dividend for 2008 will be 1.20p. This represents a dividend yield of 5.4 per cent based on our year-end share price.
Cash Flows
Following the start up of the Park Prepayments Protection Trust in August 2007, payments received from agents in respect of orders for delivery the following Christmas are held in the trust. The conditions of the release of this money to the group are detailed in the trust deed, which is available at www.getpark.co.uk. At the end of March 2008 £17.3m was held by the trust and as a result is not included within the group's cash balances. The total amount of cash held by the group combined with the monies held in trust peaked at just under £96m in the year. The group had no bank borrowings in the year.
As a result of this transfer to the trust there was a cash outflow of £6.8m in the year. If the cash balances held in trust had been included in cash balances of the group there would have been a net cash inflow of £10.4m in the year. This inflow follows the increased level of agents' prepayments for Christmas 2008, reversing the reduction in prepayments the previous year following a reduction in consumer confidence arising from the failure of one of our major competitors. This movement is included within the increased amount for trade and other payables at 31 March 2008 when compared with last year. In addition the cessation of lending activity resulted in a reduction of loans and receivables of £1.2m.
Cash balances at 31 March 2008 stood at £5.4m a reduction of £6.8m from prior year reflecting again the transfer of cash into the trust. Cash balances peaked at just under £96m and remained positive throughout the year.
Pensions
The company continues to operate defined benefit plans where pensions at retirement are based on service and final salary.
Under IAS 19 the group recognizes any actuarial gains or losses in each period in the Statement of Recognised Income and Expense (SORIE). In the year-ended 31 March 2008 the group recognised an actuarial loss in the SORIE of £220,000 (2007: £293,000) net of tax. The pension deficit based on the valuation performed at 31 March 2008 now amounts to £2.6m, an increase of £0.4m from the deficit of £2.2m at 31 March 2007.
In 2005/06 contributions were increased for the company to 11 per cent of members' pensionable earnings and to 5.5 per cent for employees. This was in response to the actuarial valuation available at the time which indicated a deficit of £0.8m. This actuarial valuation is in the process of being updated and following completion of this exercise contribution rates may change. The basis of calculation of the scheme position for the actuarial valuation is different from the basis used under IAS19.
Park Group plc
UNAUDITED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR TO 31 MARCH 2008
| 2008 | 2007 | ||
| £'000 | £'000 | ||
| Continuing Operations | |||
| Revenue | 225,069 | 305,216 | |
| Cost of sales | (211,205) | (287,430) | |
| Gross profit | 13,864 | 17,786 | |
| Distribution costs | (2,409) | (2,993) | |
| Administrative expenses | (8,964) | (7,989) | |
| Operating profit | 2,491 | 6,804 | |
| Finance income | 2,688 | 3,319 | |
| Finance costs | (18) | (3) | |
| Profit before taxation | 5,161 | 10,120 | |
| Taxation | (1,475) | (3,491) | |
| Profit from continuing operations | 3,686 | 6,629 | |
| Discontinued Operations | |||
| Profit/(loss) from discontinued operations | 1,021 | (2,384) | |
| Profit for the period attributable to equity holders of the parent | 4,707 | 4,245 |
| Earnings per share (see note 7) | |||
| - basic - continuing operations | 2.23p | 4.02p | |
| - basic - total | 2.85p | 2.58p | |
| - diluted - continuing operations | 2.22p | 4.00p | |
| - diluted - total | 2.84p | 2.56p |
Park Group plc
UNAUDITED STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE YEAR TO 31 MARCH 2008
| 2008 | 2007 | ||
| £'000 | £'000 | ||
| Profit for the period | 4,707 | 4,245 | |
| Actuarial losses on defined benefit pension scheme | (306) | (419) | |
| Deferred tax on actuarial losses on defined benefit pension scheme | 86 | 126 | |
| Net losses not recognised in income statement | (220) | (293) | |
| Total recognised income for the period attributable to equity holders of the parent | 4,487 | 3,952 |
Park Group plc
UNAUDITED GROUP BALANCE SHEET AS AT 31 MARCH 2008
| As at | As at | ||
| 31.03.08 | 31.03.07 | ||
| £'000 | £'000 | ||
| Assets | |||
| Non-current assets | |||
| Goodwill | 1,513 | 1,513 | |
| Intangible assets | 1,079 | 1,639 | |
| Investments | 2 | 2 | |
| Investment property | 279 | - | |
| Property, plant and equipment | 4,324 | 4,823 | |
| Deferred tax assets | 1,248 | 1,835 | |
| 8,445 | 9,812 | ||
| Current assets | |||
| Inventories | 1,028 | 447 | |
| Loans and receivables | 187 | 1,382 | |
| Trade and other receivables | 6,115 | 5,917 | |
| Current tax assets | 673 | - | |
| Cash and cash equivalents | 5,430 | 12,192 | |
| Monies held in trust | 17,336 | - | |
| Assets held for sale | 700 | 815 | |
| 31,469 | 20,753 | ||
| Total assets | 39,914 | 30,565 | |
| Liabilities | |||
| Current liabilities | |||
| Trade and other payables | (44,526) | (39,395) | |
| Current tax liabilities | - | (350) | |
| Provisions | (23,708) | (22,077) | |
| (68,234) | (61,822) | ||
| Non-current liabilities | |||
| Retirement benefit obligation | (2,623) | (2,246) | |
| (2,623) | (2,246) | ||
| Total liabilities | (70,857) | (64,068) | |
| Net liabilities | (30,943) | (33,503) | |
| Shareholders' equity | |||
| Share capital | 3,301 | 3,301 | |
| Share premium account | 1,070 | 1,070 | |
| Retained earnings | (35,314) | (37,874) | |
| Total shareholders' equity | (30,943) | (33,503) |
Park Group plc
UNAUDITED GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2008
| 2008 Total | 2007 Total | |||||
| £'000 | £'000 | |||||
| Cash flows from operating activities | ||||||
| Cash used in operations (note 8) | (6,943) | (6,710) | ||||
| Interest received | 2,614 | 3,323 | ||||
| Interest paid | (18) | (3) | ||||
| Tax paid | (98) | (186) | ||||
| Net cash used in operating activities | (4,445) | (3,576) | ||||
| Cash flows from investing activities | ||||||
| Net proceeds from sale of home collected credit business | - | 6,136 | ||||
| Proceeds from sale of non-core property | 128 | 1,571 | ||||
| Proceeds from sale of property, plant and equipment | 11 | 1 | ||||
| Purchase of property, plant and equipment | (376) | (365) | ||||
| Purchase of intangible assets | (98) | (808) | ||||
| Cash acquired from business combinations | - | 878 | ||||
| Net cash (used in)/generated from investing activities | (335) | 7,413 | ||||
| Cash flows from financing activities | ||||||
| Net proceeds from issue of ordinary share capital | - | 62 | ||||
| Dividends paid to shareholders | (1,982) | (1,811) | ||||
| Net cash used in financing activities | (1,982) | (1,749) | ||||
| Net (decrease)/increase in cash and cash equivalents | (6,762) | 2,088 | ||||
| Cash and cash equivalents at beginning of period | 12,192 | 10,104 | ||||
| Cash and cash equivalents at end of period | 5,430 | 12,192 | ||||
| Cash and cash equivalents comprise: | ||||||
| Cash | 5,430 | 12,192 |
(1) Basis of preparation
The group financial statements have been prepared and approved by the directors in accordance with the International Financial Reporting Standards as adopted by the EU ('Adopted IFRS'). The company has elected to prepare its parent company financial statements for the first time under Adopted IFRS.
The financial information set out above does not constitute the company's statutory accounts for the years ended 31 March 2008 or 2007. The auditors have reported on the 2007 accounts; their report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for 2008, will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the registrar of companies in due course.
The directors are of the opinion that the accounts should be prepared on a going concern basis. Based on projected cash flows, the directors believe that the company will be able to generate sufficient cash inflows from its operations to continue to settle its obligations as they fall due.
The financial statements have been prepared under the historical cost convention, as modified by the accounting for financial instruments at fair value. The accounting policies set out below have been applied consistently to all periods and by all group entities.
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.
(2) Changes to International Financial Reporting Standards
During the year the group has adopted IFRS 7 Financial Instruments: Disclosures and the related amendments to IAS1 Presentation of Financial Statements.
The following standards and interpretations have been adopted by the European Union but are not yet effective for the year ended 31 March 2008 and have not been applied in preparing the financial statements:
IFRS 8 Operating Segments was issued in November 2007 and is effective for accounting periods beginning on or after 1 January 2009. This new standard replaces IAS 14 Segmental Reporting and requires segmental information to be presented on the same basis that management uses to evaluate performance of its reporting segments in its management reporting. The adoption of IFRS 8 will have no impact upon the results or net assets of the Group.
The following are not expected to have any effect on the financial statements:
IFRIC 9 Reassessment of Embedded Derivatives - effective for periods beginning on or after 1 June 2007
IFRIC 12 Service Concession Arrangements - effective for periods beginning on or after 1 January 2008 (if endorsed for use in European Union)
IFRIC 14 (IAS19 The Limit on a Defined Benefit Asset Minimum Funding Requirements and their interaction) - effective for periods beginning on or after 1 January 2008 (if endorsed for use in the European Union)
The following are under review as to their effect on the Group:
IFRIC 11 Scope of IFRS 2 - Group and Treasury Share Transactions - effective for periods beginning on or after 1 March 2007
IFRIC 13 Customer Loyalty programmes - effective for periods beginning on or after 1 July 2008 (if endorsed for use in the European Union)
(3) Accounting Policies
The financial information in this preliminary announcement has been prepared in accordance with the accounting policies described in the Annual Report and Accounts for the year ended 31 March 2007 as amended by the following additional disclosures. The Annual Report and Accounts for the year ended 31 March 2007 was lodged with the London Stock Exchange and can be found on our website at www.parkgroup.co.uk. The 2008 accounts will expand on our existing policies and provide further information on how we apply those policies. The additional text is below.
Loans and Receivables
Loans and receivables comprise amounts due from customers of the former cash lending business. They are carried in the balance sheet at net realisable value, based on estimated future cash flows.
Monies held in Trust
On 13 August 2007 a declaration of trust constituted Park Prepayments Protection Trust to hold agents' prepayments. Park Prepayments Trustee Company Ltd, as trustee of the trust, holds this money on behalf of agents. The conditions of the release of this money to the group are detailed in the trust deed, which is available at www.getpark.co.uk.
Monies held under the declaration of trust with the Park Prepayments Protection Trust on behalf of customers is recognised on balance sheet as the Group has access to the interest on these monies and can, having met certain conditions, withdraw the funds. However, given the restrictions over these monies, the amounts held in Trust are not included in cash and cash equivalents for the purposes of the cash flow statement.
Provisions
Unredeemed vouchers
The key estimates used in deriving the provision includes discounts provided by retailers, interest rates used for discounting and the timing of the future redemption of vouchers.
(4) Segmental analysis
Following the closure of cash lending businesses comprising our Cash Reserve and Imagine Finance operations, the group was left with one segment, Cash Savings. For the first time the former Cash savings business has been subdivided into two new segments, Christmas Savings and Corporate Vouchers, as discussed within the business review part of the directors' report. As a result of this change in segments, and of the additional elements now included within discontinued operations for the first time, the prior year's figures have been restated.
The amount included within the unallocated/elimination column with respect to revenue reflects vouchers sold by the Corporate voucher segment to the Christmas savings segment. They have been included in unallocated/elimination so as to show the total revenue for both segments.
Unallocated costs consist primarily of central costs relating to the corporate activities of the group which it was felt could not be reasonably allocated to either business segment.
| Christmas savings | Corporate vouchers | Unallocated/ Elimination | 2008 Total | Christmas savings | Corporate vouchers | Unallocated/ Elimination | Restated 2007 Total | ||||||
| Continuing operations | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||
| Revenue | |||||||||||||
| External revenue | 143,450 | 81,619 | - | 225,069 | 216,791 | 88,425 | - | 305,216 | |||||
| Inter-segment revenue | - | 101,846 | (101,846) | - | 53 | 150,056 | (150,109) | - | |||||
| Total revenue | 143,450 | 183,465 | (101,846) | 225,069 | 216,844 | 238,481 | (150,109) | 305,216 |
Inter-segment sales are entered into under normal arm's length commercial terms and conditions.
| Results | ||||||||
| Segment operating profit/(loss) | 691 | 3,438 | (1,638) | 2,491 | 5,116 | 3,105 | (1,417) | 6,804 |
| Finance income | 2,688 | 3,319 | ||||||
| Finance costs | (18) | (3) | ||||||
| Profit before taxation | 5,161 | 10,120 | ||||||
| Taxation | (1,475) | (3,491) | ||||||
| Profit from continuing operations | 3,686 | 6,629 |
| Discontinued operations | |||||||||||||
| Total revenue | 708 | 708 | 9,984 | 9,984 | |||||||||
| Results | |||||||||||||
| Segment result | (707) | (707) | (3,933) | (3,933) | |||||||||
| Loss before taxation | (707) | (3,933) | |||||||||||
| Taxation | 1,728 | 1,549 | |||||||||||
| Profit/(loss) from discontinued operations | 1,021 | (2,384) |
(5) Discontinued operations
| Cash | Imagine | ||||||||
| Original | Reserve | Finance | Restated | ||||||
| 2008 | 2007 | 2007 | 2007 | 2007 | |||||
|
|
|
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 |
| Revenue | 708 | 4,513 | 1,352 | 4,119 | 9,984 | ||||
| Expenses |
|
|
|
| (1,415) | (3,765) | (1,737) | (8,415) | (13,917) |
| (Loss)/profit before taxation | (707) | 748 | (385) | (4,296) | (3,933) | ||||
| Taxation | 1,728 | (13) | 1,240 | 322 | 1,549 | ||||
| Profit/(loss) from discontinued operations | 1,021 | 735 | 855 | (3,974) | (2,384) | ||||
Discontinued operations comprise the result of our Cash Reserve and Imagine Finance businesses. We announced in June 2007 that both businesses were experiencing operational difficulties and as a result both operations were to close. As it was not disposed of there was no gain or loss on disposal.
The prior year figures have been restated to include both Cash Reserve and Imagine Finance. Previously these figures included only the Home Collected Credit part of the former cash lending business which was sold in July 2006, and the write off of stock partially provided for in connection with the sale of Link Brand Solutions which was disposed of in a prior year.
Of the group cashflows generated from operating activities, investing activities and financing activities set out on page 11, the following amounts were generated/(utilised) in respect of the discontinued operations.
| Cash flows from discontinued operations | Cash | Imagine | |||||||
| Original | Reserve | Finance | Restated | ||||||
| 2008 | 2007 | 2007 | 2007 | 2007 | |||||
|
|
|
|
|
| £'000 | £'000 | £'000 | £'000 | £'000 |
| Net cash flows from operating activities | (160) | - | (509) | (2,993) | (3,502) | ||||
| Net cash flows from investing activities | - | 6,136 | (422) | (49) | 5,665 | ||||
| Net cash flows from financing activities |
| - | - | - | - | - | |||
|
|
|
|
|
| (160) | 6,136 | (931) | (3,042) | 2,163 |
(6) Taxation
| 2008 | 2007 | |||
| £'000 | £'000 | |||
| Charge for the year - current and deferred | 1,475 | 3,491 | ||
| Tax credit on discontinued operations | (1,728) | (1,549) | ||
| Tax (credit)/charge | (253) | 1,942 |
The credit for the current year reflects the benefit of a previously unrecognised tax loss arising from the home collected credit business, previously not expected to be recovered.
The credit for the prior year arises as a result of losses incurred in the loan broking business previously included within continuing operations.
(7) Earnings per share
The calculation of basic and diluted earnings per share is based on the profit on ordinary activities after taxation of £3,686,000 (2007: £6,629,000) in respect of continuing operations and the profit on ordinary activities after taxation of £4,707,000 (2007: £4,245,000) in respect of total operations, and on the weighted average number of shares, calculated as follows:
| 2008 | 2007 | ||||||
| Basic eps - weighted average number of shares | 165,064,410 | 164,787,370 | |||||
| Diluting effect of employee share options | 622,260 | 883,734 | |||||
| Diluted eps - weighted average number of shares | 165,686,670 | 165,671,104 | |||||
(8) Reconciliation of net profit to net cash (outflow)/inflow from operating activities
| 2008 Total | Restated 2007 Total | ||||
| £'000 | £'000 | ||||
| Net profit for the period attributable to equity holders of the parent | 4,707 | 4,245 | |||
| Adjustments for: | |||||
| Tax on continuing operations | 1,475 | 3,491 | |||
| Tax on discontinued operations | (1,728) | (1,549) | |||
| Interest income | (2,688) | (3,319) | |||
| Interest expense | 18 | 3 | |||
| Depreciation and amortisation | 1,245 | 1,353 | |||
| Impairment of goodwill | - | 459 | |||
| Profit on sale of property, plant and equipment Profit on sale of other assets held for sale | (1) (13) | - (96) | |||
| Decrease/(increase) in loans and receivables | 1,195 | (720) | |||
| (Increase)/decrease in inventories | (581) | 528 | |||
| (Increase)/decrease in trade and other receivables | (124) | 862 | |||
| Increase/(decrease) in trade and other payables | 5,131 | (14,769) | |||
| Increase in provisions | 1,631 | 2,741 | |||
| (Increase) in monies held in trust Increase in retirement benefit obligation | (17,336) 71 | - 12 | |||
| Share-based payments | 55 | 49 | |||
| Net cash outflows from operating activities | (6,943) | (6,710) |
(9) The annual report will be posted to shareholders on 23 August 2008 and the Annual General Meeting (AGM) of the Company will be held in Birkenhead on Tuesday 23 September 2008.