Christmas savings firm 'recovers'

Customers can save for food, gifts or High Street vouchers

Christmas savings firm Park Group has said its sales are recovering after the failure of hamper firm Farepak in 2006 hit confidence in the industry.

The collapse of Farepak, its rival, caused Park Group's Christmas revenues to fall by 34% last year compared with the position a year earlier.

But orders for Christmas 2008 are now up 17%, thanks to its new payment protection scheme, the firm said.

After-tax profit for the group rose 11% in the year to March 2008 to £4.7m.

Despite the slowdown in the UK economy, Park Group said the outlook for this Christmas remained "encouraging".

"I am pleased to report that Christmas savings orders for Christmas 2008 have shown a healthy recovery after the disappointing decline last year and that our corporate voucher business continues to grow," he said.

"The outlook for the current year remains encouraging, assisted by the growth in web-enabled transactions," Mr Johnson added.

Customers save money with the company to buy food or gifts from the Park catalogue, or vouchers to spend in certain High Street shops.

Confidence

Farepak collapsed two years ago, causing more than 100,000 people - many on low incomes - to lose £40m in savings between them. Some families lost up to £2,000.

In the wake of that firm's collapse, customers also deserted its main rival, Park.

In the past financial year, the number of customers at the company fell from 612,000 to 398,000 and its revenue from its continuing businesses dropped by 26% to £225m.

To restore confidence in its business, Park set up a payment protection scheme with government backing.

Money paid over in advance by its agents, which is in effect being saved with the company, is now held in trust, so that if Park were to go bust like Farepak, its customers would not lose their cash.

In the past year, the money held in trust peaked at nearly £96m.

Investigation

The government is currently taking advice and considering whether or not it can take legal action against the Farepak directors after receiving a 700-page report from the Companies Investigations Branch.

Savers have been offered just 5p for every pound they lost.

Farepak, based in Swindon, had been in business since 1968.

Its collapse was attributed to the firm paying over £33m to its parent company, European Home Retail, which was not paid back.

This exposed a hole in the regulation of this type of savings firm. As a result, the government moved swiftly to ensure that savers' funds are now ring-fenced.