Park Group Share Discussion Threads

[mctmct] 22/12/2015 15:47

ALNC headline says"Park Group Chairman To Sell 27% Stake For GBP32.6 Million (ALLISS)"

[topvest] 22/12/2015 15:38

Hi link doesn't work - what's it about please?

[sportbilly1976] 22/12/2015 13:59

Reason for the fall this month...

hxxp://news.insidermedia.com/c/120Fmpu4rGCnmn8WPvOgaIOVx1

[hastings] 22/12/2015 08:51

A few thoughts that may be of interest to others taking a look.

hxxp://www.cambridge-news.co.uk/business/private-punter

[gfrae] 03/12/2015 11:30

Looks to me like a large sell order.

[wjccghcc] 02/12/2015 20:08

It's not very liquid as 25% is owned by the chairman, so you often get big moves. Also, it had a good run up to the results.

[jamf70] 02/12/2015 18:53

I've got the same question - my stop loss fired so now I'm out. Was expecting the price to climb - didn't expect a correction this severe. Maybe the market makers are shaking the tree a little...

[swarren] 02/12/2015 17:24

Anyone know why Park Group tanked today? Results seemed OK and a confident statement.

[mctmct] 06/7/2015 08:49

Does anyone know whether Lord Lee is still holding or whether he sold out a few months ago?

[sharesoc] 02/6/2015 11:58

We are holding one of our popular Investor Masterclasses in Manchester so local investors and shareholders in PKG may be interested in attending as PKG is based nearby our venue...

[a1samu] 18/9/2014 19:22

With Motivcom being sold to Sodexho by its management, it is only a matter of time, when it will be the turn of Park to be sold to somebody better able to manage the company, now that Peter Johnson seems to be selling out in a very clumsy way.

[a1samu] 03/1/2014 09:33

According to the above Park commissioned and paid for report, the share price is worth between 55 and 56p fully valued.

They are budgeting a reduced net profit after tax of £7.244 for the current year, from £7.595 and a very slight increase in dividends to 2.20p!

[a1samu] 03/1/2014 09:20

20 December 2013
Park Group is a research client of Edison Investment Research Limited, which means that Park authorises Edison to look at its numbers and report them when agreed with management for which Park pay Edison.

Anybody can register with Edison and look up the original report on edisongroup.com

Long-term investment in digital technology has supported growth in recent years, despite challenged market conditions in the group's main distribution channels (UK small and mid-sized businesses and consumers) and depressed interest earnings on its substantial cash balances. Product innovation continues, with the flexecash prepaid card at the vanguard. Weakness in the demand from one group of customers in the home collected credit sector has caused a set back this year. But general trading conditions, in consumer in particular, seem to be easing and the rating is modest for this cash-generative, debt-free business. We believe the group will proceed cautiously to manage the risk of European expansion.

H1 set back masks progress

H1 accounts for less than 20% of annual business activity; the usual seasonal loss declined slightly on higher sales (billings up c 8%). Despite the tough UK consumer marketplace, most of the business has performed well and the group has continued invest and innovate for future growth. However, one area of the corporate division, providing cards and vouchers to home collected credit operators (HCC), has turned down; we suspect there is more focus on credit collection than new customer activity. We have reduced forecast sales to HCC significantly, with knock-on effects on earnings estimates (FY14 normalised PBT estimate down 9.5%). However, we see a resumption of growth next year; marketing for Christmas 2014 is underway with positive indications, further flexecash product innovations are anticipated for coming months, and opportunities in Europe may present themselves.

flexecash driving growth opportunities

flexecash, Park's prepaid card, continues to drive the top line; H1 billings grew by 35%. The card continues to be rolled out, with new features and applications that allow it to reach previously unavailable customers and markets, supported by an increased range of retailers, leisure and other service providers. The group continues to explore opportunities to expand its European distribution, using its experience in Ireland, where flexecash was recently introduced, and the portability of its UK e-money authorisation.

Valuation: Attractive with interest rate upside

Our DCF valuation of 56p and peer P/E comparison valuation of 55p are similar. The prospective 4.5% dividend yield is also attractive and well supported. Park earns interest on customer cash balances and our earnings estimates would benefit from any increase in interest rates (with 50bp adding c 6% to forecast PBT).

Business description

Park Group is a financial services business. It is one of the UK's leading multi-retailer voucher and prepaid gift card businesses, focused on the corporate gift and Christmas prepayments markets. Sales are generated through agents, a direct sales force and the internet.


Next event
Trading update
April 2014
Analyst
Martyn King
[phone]
[e-mail]
Edison profile page
Financial services

Accounting treatment for billings differs to vouchers

The accounting treatment for recognising revenues from prepaid cards is very different from that for vouchers and in our view, as flexecash continues to drive overall growth, billings are the better way to track business progress. Voucher revenue is recorded at the point of sale (not when the voucher is redeemed), generating a gross profit contribution that reflects the size of the retailer discount provided to the group. Prepaid card sales are only recorded in revenues when the pre-paid balances are actually spent, and then at the gross margin level rather than the full face value.

Source: Park Group, Edison Investment Research

The group reports the (non-statutory accounting) measure of billings as an indicator of customer activity; it represents the face value of voucher sales and the amount of value loaded on to prepaid cards. Exhibit 5 shows how £100 of billings generates very different accounting revenues depending on whether it is a voucher or prepaid card. Assuming all card balances are spent in the same accounting period as the voucher sale, the gross margin contribution is the same (the assumed 7% level is similar to the group average). However, in reality, it is unlikely that all card balances will be spent in the accounting period, deferring gross profit (and a similar amount of revenue); as card balances grow, so too does the deferral. Accumulated, unspent customer card balances are held on balance sheet within the segregated e-Money Trust, a regulatory requirement, and increased by c £2.7m in H1 FY14 to c £8.5m (£5.8m at H1 FY13). We estimate this represents c £0.5-0.6m of deferred gross profit (and revenue). Because voucher revenues and profits are recognised at the point of sale, there is no profit deferral, and a provision is established to cover the amounts that will eventually be claimed by the accepting retailers. The provision recognises that a small percentage of vouchers may never be spent.

Valuation

There are no directly comparable quoted peers to Park, which makes it difficult to value in a sector context. Our earnings-based approach gives a fair value of 55p and our DCF-based approach suggests 56p.

Most competitor employee benefits and service providers are private companies or relatively small parts of larger groups.

Management identifies Asperity Employee Benefits and Motivcom as direct competitors to its UK corporate division). Asperity, with more than 700 employer customers, was acquired by Inflexion Private Equity for £25.5m in 2010.

Motivcom is AIM quoted (market cap around £40m) and, as well as employee motivation and incentive services, provides marketing communication and events services that account for more than 50% of profits.

We also identify Sodexho Motivation Solutions, serving more than 400,000 clients in more than 30 countries, but minority part of Sodexho Group. Edenred is listed on the NYSE Euronext Paris market with a capitalisation of c £4.8bn and describes itself as the world leader in prepaid corporate services, although meal vouchers account for a substantial share of the issued value of services.

As well as the differences of scale and focus with Park, it is a more international business operating in 40 countries. Looking at Park's traditional Christmas prepayments business, we perceive a degree of socioeconomic overlap with the customer base of the home collected credit lender, Provident Financial (an important Park customer). However, we would expect a premium rating for Park as it does not have similar credit risk, and we believe it has less regulatory risk.

In the context of the peer group valuations and allowing for Park's relatively small market cap, earnings decline in FY14 but attractive yield, we feel a P/E of at least 12.5x calendar 2014 would be fair, or 55p per share.

Discounted cash flow

Our DCF valuation gives a value of 56p per share. We have adjusted the usual DCF formula (which excludes interest earnings) to include interest earned on segregated customer cash balances (but not on the group cash balance), as this is an integral part of the return and these customer balances have been excluded from the overall valuation. We have grown our FY15 forecasts at 5% for 10 years to FY25, enhanced by a gradual rise in interest rates from current levels to 3% between FY16 and FY17, valued the terminal cash flow at 12x, and discounted by 10%. The terminal value represents 41% of the total. A 1% increase in the assumed discount rate, a reduction in the terminal multiple to 11x, or a 1% reduction in the long-term growth rate reduce the value by c 8%, 4%, or 5% respectively.

[a1samu] 16/12/2013 15:46

Wow, often before a major rerating, there is a massive dip as happened here.

Certainly a P/E nearer 20 would be deserved, if Park are to be acknowledged by the market as an innovative company.

Lets hope this upswing will continue for a good, long time to come!

[poikka] 05/12/2013 11:53

Don't put too much weight on the held divi; there's another 8.4m shares to spread it over post the fund-raising.

Yes, there were some negatives, but hopefully the full year results will look better. The Corporate side has plenty of competition, but they should be able to at least hold their own.

The management seem to be doing the right things IMO. I'm holding.

[a1samu] 04/12/2013 15:56

The hype that has been pushed out by management for years is catching up with the share price.

Clearly this share has not yet graduated into the class of growth stocks!

It is not helpful that it reports £3M pre tax losses for the first six months, which then it turns into a profit for the year of £9.5M, or it makes £12.5M in the last six months.

There are other acceptable ways of apportioning costs and overheads, if revenue is not taken at the half way stage, soothing out the results for the year.

It now appears that profits for the current year may not be as much as the £9.5M achieved last year.

The market may rerate this share downwards in the absence of other indicators given out by the company.

Neither does the average shareholder know what the presentation given yesterday contained.

Neither is any P/E ratio applicable in this case and there is no reason why it should not drop to lowly single figures, for management has not yet earned credibility.

[grahamg8] 04/12/2013 09:00

Bought in on the dip. So far so good. The results weren't that good, but on the other hand they weren't all that bad either. Perhaps the fall was because previous RNS were pretty positive and a better half year outcome was expected, as well as a rise in the dividend. With cash in trust down on last year then the H2 revenues look as if they may be down a bit. But with such a strong seasonality its all a bit of a guess. Relax and enjoy the yield. Wait for an share price recovery, the patient will be rewarded IMO.

[coolen] 03/12/2013 22:37

I would be surprised if one of those declared stakeholders will not top up after the fall.

[topvest] 03/12/2013 21:51

I disagree. Management seem to be doing a pretty good job to me. What exactly was wrong with the results to cause a 10% price down? Odd! It looks like this year will be a year of transition, but the underlying metrics are favourable and next year is looking good.

[a1samu] 03/12/2013 08:23

PE of 10 and there is still room for the share price to fall!

What is wrong with this share? This should be going up 10% not going down!

Rothschilds, Soros, new non executive directors makes no difference.

It is clear that the present management team is lacking in the ability to take this company forward despite the flexecash innovation.

Expect a wholesale exodus of the present management team soon.

In June 2012, the share price hit a low of 42.63 and there is no reason why it should not be aiming for this low again, this time.

Pretty powerful list of shareholders, none of whom will be happy with the share price performance.

Mr P R Johnson 34,485,680 18.96%
Schroders plc 20,108,887 11.06%
Huntress Nominees Limited 16,235,386 8.93%
SFM UK Management LLP 15,660,000 8.61%
Miton Group plc 9,370,380 5.15%
Henderson Global Investors 9,162,000 5.04%
Axa Investment Management SA 8,500,000 4.67%
Investec Asset Management Limited 7,250,000 3.99%
Cazenove Capital Management Limited 6,925,875 3.81%
Last updated 30 October 2013

[poikka] 02/12/2013 16:59

And...?

Whatever, Interims tomorrow.

[a1samu] 02/12/2013 15:38

The Board

Peter Johnson

Non-Executive Chairman

Peter is the company's founder and has the role of non-executive chairman. He has a service agreement with the company entered into on 6 April 2012 which requires six months' notice of termination by either party.

Chris Houghton

Chief Executive Officer

Chris was appointed to the board on 11 October 2000 and became chief executive officer on 11 April 2012. He is a Fellow of the Chartered Institute of Management Accountants and joined the group as group accountant in 1986. He became group finance director on 29 March 2001 and up to his appointment as chief executive officer was previously group managing director. He has a service agreement with the company entered into on 29 June 2001 which requires 12 months' notice of termination by either party.

Martin Stewart

Group Finance Director

Martin was appointed to the board on 1 November 2004 and is the group finance director. He is a Fellow of the Institute of Chartered Accountants in England and Wales and joined the group from Eddie Stobart Group, where he was group finance director. Prior to this he was with UK Waste Management Limited from 1992 to 2000, from 1997 as finance director, and earlier in his career held financial positions with The Littlewoods Organisation, ICI PLC and Price Waterhouse. He has a service agreement with the company entered into on 1 November 2004 which requires 12 months' notice of termination by either party.

Gary Woods

Managing Director, Park Retail Limited

Gary was appointed to the board on 29 March 2001. He joined the group with the acquisition of Chrisco Hampers in 1980 and has gained wide experience in divisional roles. He is managing director of Park Retail Limited. He has a service agreement with the company entered into on 29 June 2001 which requires 12 months' notice of termination by either party.

John Dembitz

Non-Executive Director

John was appointed to the board as a non-executive director on 8 May 2008. He has a service agreement with the company entered into on 8 May 2008 which requires six months' notice of termination by either party. He was formerly chairman of a number of companies including Tack International Limited, Coffee Point plc, CVO Group BV and held senior executive positions with McKinsey & Co, Consolidated Gold Fields Plc, Charterhouse Japhet and Valin Pollen Limited. He is currently chairman of Allanfield Group Plc and EAC Management Limited and a non-executive director of Avidity-IP Group and Lee Baron. John is chairman of the nomination committee and a member of the audit and remuneration committees.

Laura Carstensen

Non-Executive Director

Laura was appointed to the board as a non-executive director on 23 September 2013. Laura is a former partner in City law firm Slaughter and May (1994-2004). She is a Member (and former Deputy Chairman) of the UK Competition Commission and a Commissioner of the Equality & Human Rights Commission. She is a Trustee of National Museums Liverpool and a Board Member with MLex a provider of online subscription based predictive intelligence. She is also co-founder and director of two online mail order businesses, Blue Banyan Ltd and Hortica. She was educated at Withington Girls School in Manchester, and read English at St. Hilda's College, Oxford.

Michael de Kare-Silver

Non-Executive Director

Michael was appointed to the board as a non-executive director on 23 September 2013. Michael is an advisor and business consultant to the digital, e-commerce and mobile communications sectors. His experience includes: identifying opportunities for corporates to implement technology-enabled change and helping businesses grow by advising on new strategies; go-to-market plans; and team-building. He has previously served as a main board director at a number of companies including FTSE 100 GUS plc and FTSE 250 Thus Group plc. He also headed up Argos.co.uk, Experian.com and Burberry online as CEO of GUSco.com and founded successful start-ups born2learn.com and MyFaveShop.com. Michael was Managing Director at major digital technology marketing agencies Digitas and AKQA and served as Chairman at WIN plc and Breeze Tech. Early in his career he gained valuable experience at both Procter & Gamble and McKinsey & Company. Michael is a Law graduate from St. Catharine's College Cambridge.

[johnthespacer] 18/11/2013 13:00

Currys have now signed up...

[topvest] 11/11/2013 20:28

Well I've bought a few today. This is a quality company and the shares are quite lowly rated for such a successful and stable business paying a good dividend. The business model is also leveraged towards rising interest rates as their cash pile will then start to generate a substantial return.