No Pain, No Gain: 'A niche market in the stricken travel industry is thriving'

The stock market is an unforgiving place. When a successful company suddenly blots its copybook it can take many years before its misdemeanour is pardoned and investor confidence returns. But Landround, a little AIM-traded business that has carved out a niche providing travel-based promotions, appears to have reestablished its old relationship with investors in double-quick time.

For a high-flying company enjoying a heady share valuation, it suffered a disastrous setback in the year to September, 2001. Profits crashed from £1.5m to £159,000 and the dividend was slashed. Last week, it demonstrated it was again among the more exciting companies on the junior Alternative Investment Market.

Interim profits emerged at £896,000 and it looks as though the year's results will be a record £1.7m. Next year's figure could be £2.25m.The shares, at 250p, are still a long way below their 400p peak but that is more a reflection of the more subdued stock market atmosphere than any lingering despair over the profits slump.

Landround was laid low by the successful launch of what is known as a "buy and fly" scheme, a rival to Air Miles. The launch cost was more than envisaged and it probably devoted too much attention to the new exercise at the expense of other operations. The foot-and-mouth epidemic also took its toll.

Still, its recovery has been remarkable. Many parts of the travel industry are still reeling from the devastation caused by the terror attacks on the US. The group has also had to shrug off the international tension as well as the economic slowdown. The founding chairman, Michael Crompton, says the company's performance this year underlines the defensive merits of sales promotion, an activity I would have regarded as an early casualty of the present environment.

Mr Crompton, with his wife Jan as bookkeeper, started the Chester-based company in 1992. It was their fourth time around. Their first venture was a frozen food operation; then came a couple of promotion companies specialising in hotel stays. The two promotion businesses merged with other operations with Mr Crompton sacrificing control. He was, therefore, unable to prevent them running into trouble.

So when Landround was floated on AIM in the summer of 1997 he was determined to keep a firm grip on the company. It is a team operation. Besides Mr and Mrs Crompton, two Landround operation directors, Janet Wilcock and Tina Mills, were involved in the earlier promotional businesses. The company's business model is simple. It offers a portfolio of travel and holiday vouchers, suitable for sales campaigns or staff motivation. Through an operation acquired three years ago, it also provides hotel deals.

There are more than 1,000 companies using the group's vouchers. They range from Asda to Thames Water. Some voucher campaigns are huge. For example McDonald's, the fast-food chain, is said to have given away £115m of Thomson Holiday vouchers in a promotional offer. And Rothmans, the cigarette group, indulged in a £100m exercise. The "buy and fly" vouchers, after their controversial start, continue to gain momentum. Half-year sales were up 46 per cent.

Landround has a progressive dividend policy. It should pay 7p a share this year (the interim is 3.5p) and next year's distribution could be 9.5p a share. But a basket of shareholder perks helps compensate for a relatively low dividend yield. Investors with at least 500 shares can claim as many vouchers as they like for SeaFrance and Hoverspeed to France and on Irish Ferries routes. Other offers include £100 off a holiday and return flights to four European capitals.

Although Mr Crompton, who is 49, may have lost out through takeovers he believes that one day Landround will need a bigger partner and accepts the company will be absorbed.

Plenty of momentum remains within the group, capitalised at £14m, but it is too small to realise what he regards as its full international potential, and a global player could provide the answer. Thirty months ago, Landround had an approach. But after five months of talks with a marketing and public relations group, the proposed merger was abandoned. The Cromptons have 25.7 per cent of the capital, although Mr Crompton is now non-executive chairman.