Park's not just for Xmas

Park's core service is a 'Christmas hamper' savings vehicle that allows consumers to budget for their festive spending. At the beginning of the year, savers decide how much they can afford to put aside each month towards their Christmas shopping, and then choose the gift cards and vouchers - including Park's multi-retailer Love2shop card - that they would like to receive from October. They then pay this weekly or monthly amount via direct debit or through one of Park's more than 120,000 local agents. The company sells the vouchers at par value and collects any interest, before retailers redeem the voucher at a discount and Park collects the margin.

The rise in consumer spending fuelled by the UK economic recovery has been clear to see. For Park, this sent its customer numbers up 3 per cent to 424,000 last year, and the average order size up from £440 to £463. As a result, operating profit in the consumer division, which accounts for slightly less than half the group's total, increased by 11 per cent to £5.9m. During the period, Currys PC World, Waterstones and The Perfume Group all signed up to accept the Love2shop card. It has also partnered with Primark, Asda, Morrisons and Sainsbury's on a combined budgeting service that allows customers to pick up their festive food and drink in store and spend the rest with other retailers.

This business is highly predictable, given the cycle of saving. Following an 8 per cent increase in billings last year to £197m, management was able to confirm in June that the order book for the coming Christmas is "well ahead". Within that, there has been a large increase in demand for the 'combi' vouchers.

The corporate business, which accounts for the other half of profits, is growing even faster. Billings were up 14 per cent last year to £176m and the number of businesses using the company's gift vouchers and prepaid cards to reward staff increased from 6,798 to a record 7,509, while customer retention stood at 84 per cent. The flexecash card, which provides employers with the infrastructure to top up prepayment for more than 65 high-street retailers, generated billings up by just under a third. The highstreetvouchers.com website, which also targets corporate customers, attracted 3.5m visitors and 200,000 orders over the year.

Not everything is rosy, though. Interest on savers' money has been restrained by flat central bank interest rates and finance income was down to £1.2m last year from £1.6m. A stock so beholden to consumer sentiment is also potentially vulnerable to a stumble in the consumer economy. Meanwhile last year's capital expenditure on IT and technical support was notable at £3.6m, but this should be set against an improving cash position for the business, with own cash up from £15m at the end of March 2014 to £23m a year later.