Smaller Companies: Freebies create winners all round

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The Independent Online
SALES promotion - the assorted gimmicks that invite shoppers to buy an item because of a special offer or freebie attached to the purchase - is a rapidly growing market, writes Richard Phillips.

Some estimates suggest it is worth up to pounds 1.2bn, but there are relatively few players of substance in what is an extremely fragmented sector.

Within sales promotion, travel promotion is an even more specialised market. Apart from a division of Thomas Cook, the travel agents, and Air Miles, there are only a handful of companies carving out a niche.

Of these, Landround is the only quoted provider dedicated to travel promotions. It links up a travel provider - P&O Ferries, say - with a product such as Le Piat Chardonnay: buyers of bottles of wine carrying the attached promotion get free travel on a P&O cross-channel ferry.

This may look like a bargain for the consumer, but P&O wins out as nearly all passengers on its ferries spend money in the bars and shops on board. In return UDV, the owners of Le Piat, benefit from the consumer being presented with a tempting opportunity to make an impulse purchase.

The formula so far has proved effective for Landround. The cost of obtaining the free travel concessions is negligible and the margins it obtains are juicy. Last week, at its interim results, it posted pre-tax profit up 250 per cent at pounds 405,000 on sales which more than doubled to pounds 1.23m. On this performance the shares are a strong buy.