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Categorized | Financial

Park Group weathers downturn

Posted on December 18, 2012

Park Group, the gift card and Christmas hamper company, has reported an increase in revenues, as its customers have continued to spend despite the tough economic climate.

Average customer spend is now £430 a year, up from £416 a year ago, the Birkenhead-based company said.

    Chris Houghton, chief executive, said the downturn had not affected its performance. “Low income families can put a bit away so that they have a good Christmas,” he explained.

    Mr Houghton added that 15 institutional investors – including Investec, Axa and Cazenove – had bought into the company, acquiring a 35 per cent stake sold by founder and chairman Peter Johnson, who has taken a non-executive role. Mr Johnson, who is also owner of Tranmere Rovers football club and a former chairman of Everton, has retained a 29.95 per cent holding.

    “They are quality investors and improve the free float and liquidity,” Mr Houghton said.

    Mr Johnson, 73, who has moved to Switzerland and made £31.5m from his share sale, said Park’s performance in its typically lossmaking first half, to September 30, had been “excellent”, as customer billings rose 12 per cent from £48.6m to £54.6m, while revenue was up 2 per cent from £46m to £46.9m and pre-tax losses fell from £4.4m to £4.1m.

    Billings are higher than revenue as a result of the accounting treatment of its Flexecash prepaid card, launched in June 2010. Revenue from the cards is recognised only after the value loaded on the card has been redeemed.

    Flexecash cards and vouchers can be used in high street retailers such as Argos and Boots. They are often given by companies to staff in lieu of cash to reward performance.

    Corporate billings increased 11 per cent to £46.2m while consumer billings rose 24 per cent to £8.5m.

    Park said its UK agents, who sell door to door, now number 122,000, up from 114,000 last year, and customer base had grown to 423,000 from 415,000.

    It announced a 4.8 per cent increase in interim dividend to 0.55p a share. The company’s loss per share narrowed from 1.94p to 1.83p.

    Arden Partners, the house broker, has forecast annual pre-tax profits of £9.5m, up from £8.5m a year ago.

    FT Comment

    A decade ago, Park employed hundreds of people to pack hampers every Christmas. But, since the Farepak scandal of 2006 – in which tens of thousands of people lost their savings in a rival hamper company – it has reinvented itself. Park now spends more than £1m annually on IT and – with the exception of its £9m or so of remaining hamper orders – it handles no products. It is basing its future on its Flexecash cards, which allow cash to be saved and then spent in dozens of shops. Higher inflation and interest rates, as hinted at by new Bank of England governor-elect Mark Carney, would potentially boost revenues from its savings products. Park’s shares, on forward price/earnings ratio of 13.4 against a sector average of 18.4, look an equally worthy investment.