Park Group’s AGM statement says that trading in the first five months of the current financial year has been in line with management expectations and provides an update on implementation of the strategic business plan aimed at boosting medium-term growth. Shareholders also approved changing the name of the group to Appreciate Group, which the board believes will better reflect the company’s product and market position as an innovative payments, savings and rewards provider.
Trading in the current year is in line with previous guidance, with continued growth in the corporate business and a stable performance in the Christmas savings market. We are making no changes to the estimates set out in our July 2019 report, which look for further billings growth but for the net investment costs related to the implementation of the strategic business plan to negatively affect FY20e PBT by a net c £2.0m. Our FY21 forecast includes reduced net investment costs and further top-line growth, but does not capture the medium-term strategic business plan benefits. Management targets P&L benefits of £2–5m pa after FY21.
The AGM was held at the group’s new offices in Chapel Street, in the centre of Liverpool, to which the group relocated its core operations last week. The move to ‘fit for purpose’ new offices is one element in the strategic plan, which aims to build existing strengths and market positioning to accelerate growth and improve efficiency by enhancing its products, providing product and branding clarity, and investing in its core infrastructure with a particular focus on increased digitalisation. Park says it is making good progress on rationalising its brand architecture and implementing its technology upgrades, and that work on the planned new digitally optimised product, targeting currently untapped areas of the gift voucher market, is showing encouraging progress. A further update on the product as well as a launch date will be provided later in the year.
Our modified DCF valuation, incorporating a two-stage, long-term growth assumption to capture the benefits of the strategic investment, is unchanged at 90p. With near-term earnings suppressed by investment spend, the implied CY20e P/E at 90p is 18.0x and CY21e 16.2x, which we believe is reasonable in a peer group context.