Full year profits from this cash savings and multi-redemption voucher business are better than we expected.

• Sales were £8m higher than we expected at £263m,and also 5% higher than the previous year.

• Operating Profits were £0.3m higher than weexpected at £4.3m, and were up 38% on theprevious year.

• Only an abnormally high 32% tax charge kept eps down to our forecast (2.14p vs the 2.20p we hadexpected).

• The dividend has been maintained at 1.32p/share, giving a very good 1.6X cover.

• As expected, there are no bank borrowings, and cash, excluding monies held in trust for customers, is £15.5m, equivalent to over 9p a share.

We found the recovery in margins in the cash savings business particularly encouraging. In fact the company’s cost control has been first rate, with distribution and admin costs down as a % of revenue, and also a significant gain in the gross margin. The Chairman’s statement makes encouraging comments on the current year, with both core businesses ahead of the comparable period twelve months earlier, even before the new pre-paid card, flexecash®, has any impact. We also note that interbank short term money rates have been hardening over the past two months, and at peak times Park Group has c. £120m on deposit.

We highlight an increase in the number of customers in Christmas Savings so far in the current year (good), over 40% of orders now being placed via the internet (good, it cuts costs) and an increase in the pension deficit caused by changed actuarial assumptions (up from £1m to £3.8m, bad). We are very comfortable with our estimates, and believe there may be scope to upgrade as the year progresses.

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