Alistair Houghton meets COLIN GIBSON, chief executive of travel promotions business Landround

COLIN GIBSON knew he was taking on a tough job at travel promotions business Landround when the share price fell more than 60% on the day he was appointed chief executive.

By June, 2006, Landround had, in his own words, already “fallen out of favour” with the City, and so news that day the company was issuing a profit warning and reshaping its management team sent shares into freefall.

The Chester plc was close to the edge – but since then Gibson has led the business back towards profitability, with ana-lysts predicting it will be back in the black this financial year.

The key moment for Gibson was raising £1.6m from share-holders late 2006 to give the busi-ness a boost after reporting loss-es of over £2m for two years .

Landround has two main activ-ities – promotions, where it pro-vides offers such as free flights or holiday vouchers to its clients, and its rewards programme and Air Miles rival Buy and Fly.

Gibson has worked to promote the reward programme side of the business, which offers longer-term contracts and so greater long-term financial stability. It’s a strategy he says is winning the trust of the City after the years of uncertainty.

He said: “As a small company, not massively well-funded, we lost £2m a year for two years. We were getting reasonably close to the edge at that point.

“If funding wasn’t raised, there was considerable uncertainty about the future. Banks don’t want to get into a position where they’re taking a lot of equity risk.

“It’s for shareholders to step in and keep the business going, which thankfully they did. In terms of business strategy and relationships with the City, since I’ve come in it’s very much focus-ed on growing the rewards pro-gramme side of the business.

“The promotions side of the business tends to be one-off contracts with people looking to promote a product for a short period. They might run for two or three months and be finished.

“But, with the reward pro-grammes, some of the contracts are for five years. It’s the stuff the City likes rather than the feast or famine with the vouchers.”

Gibson, originally from Glas-gow, spent 10 years as an accoun-tant at KPMG in the city before becoming financial controller at Pringle knitwear owner Dawson International.

Next he moved to Berkshire-based IT company QA, where he spent eight years as finance director, before moving to the North West in 2006 to take the same role at Landround.

But, in June, 2006, Landround announced sales were plunging with senior members of its man-agement team, including chief executive David Lyne, leaving the business. Mr Gibson became chief executive, appointed a new management team and began the process he calls “clearing the stables” as he prepared the company for the future.

“The company fell out of favour with the Stock Market in a signi-ficant way around 2005 before I joined,” he said. “There was a big profits warning and a big restate-ment of accounting policies because there was a perception we were too aggressive in the way we were accounting for things and not taking a cautious enough view of how much it was going to cost us to provide the travel.”

For Gibson, Landround’s strength lay in its long-term relationships providing rewards programmes for firms such as Morgan Stanley and Citigroup.

By securing more of those contracts, it can cover operating expenses and be less dependent on its promotions business, which wins shorter-term con-tracts and has more fluctuating income levels.

Gibson said: “The strategy we were presenting to the people that backed the placing was that if we build the rewards pro-gramme up we get to a position where our overheads can be covered by the income just from that. Any income from tactical promotions is then jam on top.

“Because we had a good rela-tionship with people like Morgan Stanley, there was a belief there’d be more of that coming.

“We raised £1.6m at that point. We had to meet a set of profita-bility and cashflow forecasts, and we’ve done well and are still on track 18 months later.

“That’s gone a long way to restoring significant confidence among shareholders.”

Buy and Fly was launched in 2000 and took off when Landround was chosen by Morgan Stanley to provide Buy and Fly with its UK credit cards (now Goldfish).

In Ireland, where Landround’s bigger partners do not have a presence, Buy and Fly points are available with Tesco Clubcards and MBNA credit cards, as well as through O2 and AXA.

In Sweden, Landround has won a contract with Resurs bank.

Landround also secured a major deal with Banesto bank in Spain, though that contract is now coming to an end.

“We don’t have the brand strength of Air Miles or Nectar,” said Gibson. “They have marketing budgets bigger than our turnover. But we’re quite competitive as a budget proposition.”

Landround itself is an ABTA-registered travel agent which organises the travel and leisure requirements for its promotions. Its vouchers have been used by companies from Virgin to Tesco.

Gibson says promotions offer companies another way of differentiating their products or services without resorting to price cuts.

As well as its own schemes, Landround also provides “white label” services to companies who want to run own-brand promotions.

Its biggest customer is Citigroup, for whom it runs programmes in Portugal, Belgium and Sweden, with two further countries on the way.

Landround’s smallest subsidiary is Travel Offers, a club which offers its members free accommodation at some 320 hotels provided they commit to buying dinner and breakfast.

Gibson says the credit crunch-related slowdown could have a negative impact on Landround as people cut back on their credit card spending – and therefore on the number of Landround points they use.

But he says Landround’s exposure to different markets – just 25% of its rewards programme revenues come from the UK – gives it some protection, while the company is also expanding into new markets.

For Landround’s promotions arm, however, the story could be very different.

“There’s an argument that people promote products more heavily in tough times,” said Gibson.

“Without the budget for a television campaign, people could move to a more tactical campaign with flight vouchers. It’s an alternative to a price cut to provide an incentive.

“There’s nothing that’s concerning me too much at this stage.”

Landround this year reported a pre-tax loss of £1.68m, thanks to significant writedowns on the value of Travel Offers, but revenues were up and the results were well-received by analysts.

“The real impact on the share price and on people investing in the business is going to await getting back to profitability,” said Gibson. “People want to see numbers in the black before they start getting too interested.

“I feel we’re well on the way to that. We’re not out of the woods yet, but significantly more positive than we were.”

alistairhoughton