Park Group (LON:PRKG) recently issued a trading update ahead of publishing results on 12 June for the year to 31 March 2018. Due to a later start for a significant corporate order FY18 billings are lower than expected, although the contract is now underway. Given the scale of the billings impact, Park’s guidance that results will only be marginally below market expectations implies that trading margins are stronger than we had forecast, which would continue a multi-year trend that has been driven by product innovations and digital efficiencies.
Changes to estimates ahead of results
FY18 results will be affected by the delayed start to the contract and some additional costs related to the ongoing senior management changes. Ahead of the full details, we have interpreted “marginally below market expectations” as a 2% reduction in FY18 PBT, which implies an increase in gross margin. This most likely reflects a continuation of the H118 product sales mix trend (more flexecash product and fewer third-party vouchers) that is margin positive. For FY19, more cautious billings growth assumptions flow through to a 5% reduction in forecast PBT. Our forecast DPS growth is unchanged and the dividend remains well covered while the cash position remains strong.
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