APP.L Regulatory News (APP)

PARK GROUP PLC

("Park" or "Park Group")

14 June 2011

Preliminary Results for the Year Ended 31 March 2011

Summary

Park Group plc is one of the UK's leading multi-redemption voucher and prepaid gift card business focussed on both corporate and consumer markets. Sales are generated through our direct sales force, agents and the internet.

Peter Johnson, Chairman, commented: "I am delighted to report that Park Group made excellent progress in the year ended 31 March 2011. Park's core businesses will continue to serve and develop our well established customer bases and progressively capitalise on the significant growth opportunities offered by flexecash®, our innovative prepaid card.

The outlook for Park is positive and the current year has started well. We look forward to delivering another sound performance for shareholders."

Enquiries:

Chairman's Statement

I am delighted to report that Park Group made excellent progress in the year ended 31 March 2011. The strong performance of the first six months, reported in early December 2010, has been maintained through the second half of the year, which as a result of the seasonality of the business contributes over eighty per cent of group revenues. Park has been undergoing a steady transformation over the past few years as it capitalises on the market leadership of its traditional business and harnesses the power of the internet to drive exciting and substantial product innovation, which is already capturing significant new business and generating strong profit growth.

Group revenue for the year to 31 March 2011 rose 6.4 per cent to £279.9 million (2010: £263.2 million). Group profit before taxation and other operating income was ahead by 32.8 per cent at £7.0 million (2010: £5.3 million). Operating profit before other operating income increased 30.1 per cent to £5.6 million (2010: £4.3 million). Group profit before taxation and after other operating income was £12.5 million (2010: £5.3 million); other operating income in 2011 totals £5.5 million and relates to a recovery of VAT and a profit on disposal of a property. Finance income remained low at £1.4 million (2010: £1.0 million) reflecting the prevailing low interest rate environment; the uplift in income resulted from higher cash balances, which continue to be managed very conservatively to minimise risk.

We propose raising the final dividend by 36.4 per cent to 1.20 pence per share (2010: 0.88 pence) making a total dividend for the year of 1.70 pence per share (2010: 1.32 pence). This substantial increase reflects the board's confidence in the current performance of the business and the anticipated impact from the future profitability of its innovative product ranges. Shareholder approval will be sought at the annual general meeting to be held on 20 September 2011 to pay the final dividend on 3 October 2011 to shareholders on the register on 26 August 2011.

Park has no bank borrowings and the business is cash generative. The cash resources were boosted by the full and final settlement of a long standing claim against HM Revenue and Customs, which resulted in the repayment to Park of VAT and associated interest totalling £4.4 million after expenses. In September 2010 Park announced the sale of its Dock Road North site to a major house builder for £1.8 million. The cash consideration will be paid to Park as the houses to be built on the site are sold with the total consideration to be paid by September 2014. Interest is payable to Park on the outstanding consideration in the period up to September 2014.

In October 2010 Park acquired the brand names and customer and agent databases of Dublin based business Celtic Hampers and Family Hampers, for a cash consideration of €1 million.  This is an important development for Park as it is its first international acquisition and takes the group into the Eurozone.

In February 2011 Park purchased the freehold on the site in Birkenhead, which is the location of the great majority of the group's operations, for a cash consideration of £4.75 million plus VAT. Stamp duty is also payable arising from the purchase of £228,000. The purchase of the freehold will generate an annual saving in rent of approximately £459,000.

Trading performance

Corporate revenue increased 4.0 per cent to £111.5 million (2010: £107.2 million) and operating profit was ahead by 23.0 per cent to £3.9 million (2010: £3.2 million). This is a particularly strong performance and demonstrates the inherent attraction of Park's traditional incentive and reward schemes but also shows the initial impact of flexecash®. Park's innovative flexecash® prepaid card was launched in May 2010 following three years of product development and authorisation by the Financial Services Authority (FSA). The FSA approval, although granted in the UK, can be extended throughout the European Union. While the card is still a small part of Park's business, demand has been growing rapidly and its performance has exceeded the board's expectations. Cards have already been sold to over 330 corporate clients; with 26 retailers accepting the card and many more in the process of joining the programme. Since its launch in May last year £20 million of value has been issued. flexecash® has many significant benefits and it offers Park's customers a broad range of new opportunities. One important cost benefit of flexecash® is that Park can process transactions in-house, avoiding the need to utilise the costly services of a third party.

The consumer business, incorporating Christmas saving and online sales direct to consumers, was also well ahead of the previous year, with operating profit before other operating income advancing 59.4 per cent to £4.5 million (2010: £2.8 million) on revenues which were up 8.0 per cent to £168.4 million (2010: £156.0 million). This performance highlights the inherent underlying strength of the business and the high level of customer loyalty, coupled with the management's ability to refresh the product offering to attract new customers. The impact of the internet is considerable as it gives customers enhanced information and service levels while lowering central administration costs. The flexecash® prepaid card represents a further broadening of our product range and this advance, over time, should introduce a wealth of new user opportunities giving customers even greater choice.

People

On behalf of all shareholders I would like to thank our employees for their contribution to the results. Their commitment underpins our performance and generates considerable optimism for the future.

Outlook

Park Group is at a particularly exciting stage in its development. flexecash®, our innovative prepaid card, was launched just over a year ago and is already demonstrating the potential to transform the way the group operates and the services it offers. Park's core businesses will continue to serve and develop our well established customer bases and progressively capitalise on the significant growth opportunities offered by flexecash®.

Peter Johnson

Chairman

14 June 2011

Operational Review 2011

The past year may turn out to be one of the most important in the development of Park Group, following the launch in May 2010 of flexecash®, our innovative prepaid card. The card represents the culmination of over three years' intense development and £3 million of capital investment. Our IT, web and marketing teams and many other departments within the business have created a product platform that we believe is unique in our market place, offering users a completely new level of flexibility, functionality and convenience with the potential to take Park into entirely new areas of business.

The creation of the flexecash® brand is one of the biggest product investments in Park's history. Our business clients will use it as a platform to reward and incentivise their staff and customers, while consumers will benefit greatly from the card's range of options and ease of use. flexecash® uses existing routes to market so it can be sold alongside current ranges and is complementary to them, giving customers an even broader product offering.

These developments show the impressive progress made and demonstrates the group's evolution from Park's origins as a hamper business, which was founded in 1967 and became the forerunner of Park Group. The introduction of corporate vouchers in 1982 was a major strategic development and today, while we continue to offer an excellent range of hampers, they represent less than five per cent of total sales.

The internet is at the heart of Park's operations. We have embraced the technology and, this year, have invested £1.0 million in capital equipment, hardware and software to ensure we remain abreast of the latest developments in order to capitalise on these opportunities. In addition to this investment, over the past three years Park has filled some 35 new positions for highly skilled staff with specialist expertise in technology and web based areas, including digital marketing and IT to support flexecash®, our web business and traditional markets. An increasing proportion of our business is conducted via the web, giving customers the information they require in real time, day or night, throughout the year. Those customers who prefer to deal in person continue to be served by our telephone support staff.

Park processes and holds significant amounts of cash on behalf of customers and the balance rises with increasing levels of business. In the year to 31 March 2011, cash peaked at £140 million. Treasury management is at the core of our operations and we follow very conservative strategies to ensure that customer funds are secure. The majority of these funds are held in the independent Park Prepayments Protection Trust, which segregates prepayments away from the group's funds to provide additional security giving our customers reassurance and confidence. The funds held on flexecash® cards are also held in separate trust accounts to provide protection for customers and redeemers.

Reported revenue in respect of our new flexecash® card is different from our voucher, as only the margin earned is reported as revenue and not the amount billed to customers. The total value of customer billings in the year was £297.6 million whilst reported revenue is £279.9 million. The accounting policies provide the basis for this calculation. As we continue to develop and grow our flexecash® business, the impact of this accounting policy will result in a suppressed revenue figure being reported, relative to the amounts billed to customers.

Corporate

The UK voucher and gift market is valued at around £4 billion annually. Park's Love2shop voucher is the largest multi option gift voucher in the UK and is accepted by over 85 major retailers with more than 20,000 branches. Total sales to corporate customers were up 4.0 per cent and amounted to £111.5 million (2010: £107.2 million) in the year to 31 March 2011, while Park's sales to the incentive and reward market increased by 17.7 per cent to £78.6 million during this time (2010: £66.8 million). Love2Shop schemes are tailored to individual customer needs, principally recognising and rewarding a range of performance attributes. These include exceptional service, loyalty, making good suggestions, attendance, achieving targets, and project completion and are also applicable to a vast range of other possibilities.

Customer numbers continued to climb during the year reaching a record 5,600 (2010: 5,200), while retentions were stable at 81 per cent. Our business development team is very active and innovative, designing schemes to meet the varied requirements of customers. The team will advise on how to set up a new initiative, the best product for a particular objective or how a scheme should be administered. In addition they will give guidance on what has worked well in the past and come up with a tailored solution for individual customers' needs.

Park's research has highlighted that companies with up to 350 employees, that want to provide voluntary benefit schemes for staff, often find the cost rather high. Around 70 per cent of Park's customers fall into this size bracket and there is a lack of low-cost schemes in the market. Park has addressed this by designing Everyday Benefits, as part of its Love2Reward portfolio, to be attractive to companies of all sizes. Everyday Benefits can be set up for use by employees either online or offline and is completely flexible in terms of content. The structure of the scheme is attractive to both Park and the customer as it delivers a higher return from the benefits on offer rather than charging a substantial fee to run the scheme.

The Love2Shop gift card, the flexecash® prepaid card version of the voucher, is being accepted by many leading retailers including Argos, BHS, Boots, Comet, Debenhams, HMV, Matalan, ToysRUs and Wilkinsons. Initial indications show that a large proportion of card sales are to new customers or are new applications from existing customers. We are confident that the card and voucher products can operate successfully alongside each other.

The card introduces new levels of functionality and security, for example, it can be personalised and restricted to a particular retailer or group of retailers in the same market sector. The card can be supplied with a balance preloaded, which the recipient has to activate by a PIN. Alternatively it can be supplied with a nil balance and corporate users can top it up electronically. Ongoing electronic top-up is secure, irrespective of the sum involved, and it is also immediate and cost effective, eliminating postage and handling costs.

Consumer

The strength and appeal of Park's traditional Christmas savings business continues to grow, reflecting the attractions of the product boosted by the introduction of new ways to participate. Customers have already placed orders valued at more than £93 million for Christmas 2011 via the web. The majority of sales are vouchers, mainly Love2Shop, but also individual store vouchers and gift cards.

In 2011, highstreetvouchers.com, Park's online direct to consumer offering attracted over £8.3 million of sales (2010: £5.3 million). This rapid expansion demonstrates the power of the internet and the accessibility of the portal. The appeal and ease of use of the web site is very convenient for customers and is also financially attractive to Park, as it is premium priced and commission free, while reducing the need for a call centre operation. A further substantial rise in the value of online business is expected in the current year.

The Christmas savings concept is particularly attractive to individuals, because it introduces control and discipline into a family's financial preparation for Christmas. It encourages saving by collecting payments over a 45 week period with products ordered being delivered in the period running up to Christmas. The product range is varied and includes vouchers, prepaid cards, hampers and other gift products. Our vouchers and prepaid cards can also be used to book holidays with Park's in-house travel agency, Park Travel. This flexibility and compelling portfolio of options helps families to get the best value and access the widest range of choices from their Christmas savings.

The number of agents for Christmas 2010 increased to 110,500, compared with 109,500 for the previous year. The number of customers increased to 410,000, which was 10,000 above the number for Christmas 2009. The average customer order value for Christmas 2010 increased to £401, which was close to seven per cent ahead of the Christmas 2009 level. The indications for Christmas 2011, at this early stage, are most encouraging: agent numbers are currently up 6.7 per cent and customer numbers are 4.3 per cent ahead compared with last year.

Carefully targeted television advertising continues to be central to the marketing of Christmas savings with the campaign running from September to February. The campaign is monitored on a daily basis and is carefully adjusted and refined depending on the number and location of the responses; this ensures a tightly managed and cost effective outcome. Customers like to identify with Park and the group encourages this link through various social media networks such as Facebook, Twitter, Linkedin and Review Sites.

The integration of the Irish business, acquired in October 2010, is virtually complete. The introduction of Park's systems and controls has already improved operating efficiency and will continue to do so. The catalogue has been trimmed and unprofitable lines discarded, while the level of customer service has been raised. This will provide Park with an excellent platform from which to broaden its Christmas savings range by launching its market leading products into Ireland.

Chris Houghton

Group Managing Director

14 June 2011

Financial Review 2011

Profit from continuing operations

The group's continuing operations are divided into two operating segments:

All other segments comprise central costs and property costs.

Revenue and margin from sales of flexecash® cards is included in both operating segments.

Operating profit is detailed below:

Operating profit for the year ended 31 March 2011 has increased by £6.8m to £11.1m.

In the corporate division revenue has increased by 4.0 per cent to £111.5 million, with an overall slight margin improvement to 3.5 per cent from 3.0 per cent, reflecting an improved mix of business and improving margins, offset by increased costs associated with the launch of flexecash®.

The consumer business includes £4.4 million of profit arising from the VAT 'Fleming claim'. Excluding this, margins improved to 2.7 per cent from 1.8 per cent on revenue growth of £12.4 million to £168.4 million (7.9 per cent).

Other segments for 2011 includes a £1.09 million profit arising on the sale of unutilised surplus land in Birkenhead.

Taxation

The effective tax rate for the year was 23.9 per cent (2010: 32.9 per cent) of profit before tax.

The low effective tax rate this year is mainly due to two matters. Firstly, the profit of £1.09 million made on the sale of the asset held for sale has not been taxed due to the availability of capital losses. If these losses were not available the tax on the sale would have been in the region of £0.3 million. Secondly, the adjustment to current tax in respect of prior periods of £0.3 million relates to tax relief on research and development allowances claimed in prior years' computations. This was in respect of the software development for the new flexecash® system. Although the allowances were claimed in the computations, a decision was made to not reflect the relief in the accounts until the computations were agreed by HM Revenue and Customs (HMRC).

At the time of the interim statement we said that the amount of £1.89 million of VAT received in respect of the over declaration of output tax for prior periods ('Fleming claim') had not been treated as taxable income. Whilst it is still our contention that this is the case, it is clear from correspondence we have had with HMRC that it believes this amount to be taxable. We have therefore made the decision to provide for an adverse outcome in these financial statements, and have provided for tax on the receipt in full.

Earnings per share

Basic earnings per share increased to 5.76p from 2.14p.

Dividends

The board has recommended an increase in the final dividend of 36 per cent to 1.20p per share. An interim dividend of 0.50p per share was paid on 6 April 2011. Subject to approval of the final dividend at the annual general meeting (AGM), the total dividend for 2011 will be 1.70p per share.

Cash flows

At the end of March 2011 £6.8 million (2010: £15.5 million) of cash and cash equivalents was held by the group with a further £38.2 million (2010: £21.5 million) being held by the Park Prepayments Trustee Company Ltd. The decline in cash and cash equivalents is primarily due to cash not being withdrawn from the trust before the year end. The trust holds payments received from agents in respect of orders for delivery the following Christmas. 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.

In addition at 31 March 2011 the group holds £1.4 million of cash in the Park Card Services Ltd E money Trust to support the E money Float in accordance with regulatory requirements.

The total amount of cash held by the group combined with the monies held in trust has increased in the year to £46.4 million from £36.9 million as at 31 March 2010. These total balances peaked at almost £140 million in the year. The group had no bank borrowings in the period.

During the year, the group purchased the customer lists of Celtic Hampers and Family Hampers at a cost of £872,000 and invested a further £646,000 in improving its customer facing web based support systems. The group also purchased the freehold interest in its Birkenhead Valley Road site, the location for the majority of its operations, for a cash consideration of £4.75 million plus VAT and stamp duty payable of £228,000.

Provisions

At the year end provisions had increased to £34.1 million from £30.2 million. This was due to the increased value of unspent vouchers arising primarily from increased sales in the corporate business.

Accounting Policies

With the launch of the flexecash® card in the year our accounting policy in respect of revenue recognition has been updated for new terms and regulations associated with flexecash® cards. Revenue from cards is recorded differently to revenue from paper vouchers and is the margin earned based on customer billings, recognised when the value loaded on the card has been redeemed. The amount included in this year's income statement as revenue from flexecash® cards is £1.2 million.

Pensions

The group continues to operate defined benefit pension schemes, where pensions at retirement are based on service and final salary. These schemes are now closed to future accrual of benefit arising from service with the group. The pension deficit based on the valuation performed at 31 March 2011 is largely unchanged at £3.8 million.

Under IAS 19 Employee Benefits the group has recognised a cost of £255,000 (2010: £330,000) in its Income Statement. It has also recognised an actuarial loss in the statement of comprehensive income (SOCI) of £174,000 (2010: loss of £2.2 million) net of tax.

In the year ended 31 March 2011 contributions by the company to the schemes totalled £656,000, in response to the actuarial valuations performed, the latest of which was as at 31 March 2010. This indicated a technical provisions deficit of £3.3 million and expected future company contributions of £670,000 per annum.

Martin Stewart

Group Finance Director

14 June 2011

Park Group plc

Park Group plc

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR TO 31 MARCH 2011

Park Group plc

STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2011

Approved by the board of directors and signed on its behalf on 14 June 2011.

P R Johnson

Chairman

Park Group plc

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Park Group plc

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2011

(1) Basis of preparation

The group and company 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 group's business activities, together with factors likely to affect its future development, performance and position are set out in the operational review. The financial position of the group, its cash flows and liquidity position are described in the financial review.

The group's forecasts and projections, taking into account reasonably possible changes in trading performance and customer behaviour, show that the group has sufficient financial resources (without requiring bank borrowings) to fund the business for the foreseeable future despite the group's net liabilities. The group continues to trade profitably and has no bank borrowings. Accordingly the directors continue to adopt the going concern basis in preparing the consolidated financial statements.

The financial statements have been prepared under the historical cost convention, as modified by the accounting for financial instruments at fair value where required by IAS 39 Financial Instruments: Recognition and Measurement. The accounting policies have, unless otherwise stated, 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 3 (revised) Business combinations and IAS 27 Consolidated and separate financial statements.

The following standards and interpretations have been adopted by the EU but are not yet effective for the year ended 31 March 2011 and have not been applied in preparing the financial statements. Their adoption is not expected to have a material impact on the financial statements.

- IAS 24 Related party disclosures (revised), effective for accounting periods starting on or after 1 January 2011.

- IFRIC 14 IAS 19 Prepayment of a minimum funding requirement (amendment), effective for accounting periods starting on or after 1 January 2011.

- IFRIC 19 Extinguishing financial liabilities with equity instruments, effective for accounting periods starting on or after 1 July 2010.

(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 2010 as amended by the following additional accounting policy. The annual report and accounts for the year ended 31 March 2010 can be found on our website at www.parkgroup.co.uk.

Income recognition - flexecash® cards

Revenue is the fees charged to cardholders and service fees receivable from retailers/redemption partners. This is recognised usually when amounts are deducted from values held on cards, ie when cards are redeemed at retailers/redemption partners or when charges are levied. Revenue is recorded net of value added tax rebates and discounts.

(4) Segmental analysis

The amount included within the other segments/elimination column with respect to revenue reflects vouchers sold by the corporate segment to the consumer segment. They have been included in other segments/elimination so as to show the total revenue for both segments.

All other segments comprise central costs and property costs.

(5) Taxation

Comments on the effective tax rate can be found in the financial review.

(6) Earnings per share

The calculation of basic and diluted earnings per share is based on the profit on ordinary activities after taxation of £9,514,000 (2010: £3,540,000) and on the weighted average number of shares, calculated as follows:

(7) Reconciliation of net profit to net cash (outflows)/inflows from operating activities

(8) The annual report will be posted to shareholders on 25 July 2011 and the AGM of the company will be held in Birkenhead on Tuesday 20 September 2011.