One to watch: Park Group

Published on Wednesday 8 October 2008 21:19

15p UNCH Scotsman says HOLD

PARK Group operates through two segments: a Christmas savings operation; and the provision of corporate vouchers.

The company's Christmas savings side is based on a catalogue accessed through the internet, with customers placing an order supported by an initial deposit. The customer then makes regular small instalments over the coming months until fully paid up in time for a Christmas delivery. This has a number of advantages for Park Group, not least in terms of cash flow but it also reduces the risk of bad debts by ensuring the goods are not dispatched until the account is fully settled.

Park Group's range of corporate vouchers are used to reward and motivate staff. They are accepted in a large range of outlets.

Park Group was hit by the collapse of Farepak and, last year, pre-tax profits fell to 4.5 million from 6.2m. However, orders have picked up. At its recent AGM, the company confirmed it was trading "in line with expectations". Park Group responded to the Farepak debacle rapidly, the Pre-Payments Protection Trust holding payments from agents thereby improving protection for customers savings. At present, Park Group has more than 100m in cash, 25m higher than at the same stage last year, on which it earns a significant return, so a high level of liquidity is important. Interest rates will fall further and this could affect Park Group's earnings.

On the other hand, its savings model has attractions in these difficult economic times and customer numbers should continue to increase. The shares, on a yield of more than 8 per cent, have defensive qualities in these turbulent times.

&#149 The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.