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Discover Leisure

  • BY: Andrew Hore |
  • POSTED: 28/05/2008 |

Caravan retailer Discover Leisure is cautious about the fourth quarter of its financial year.

Discover lost £1.8m on revenues of £51.8m in the six months to the beginning of March 2008. Comparative figures are meaningless because the business has been built up through acquisitions. The purchase of the Cannock dealership for £2.66m came after the period end.

The business always loses money in the first half with two-thirds of sales coming in the second half. The final quarter is the most important period.

While March and April were tough, Discover reports an upturn in activity in May. Even so, it is difficult to assess whether this will continue in the fourth quarter.

Despite the credit crunch the number of caravans and motor homes were finance was provided with the sale has increased substantially. One-quarter of the buyers are taking out warranties. The integration of the acquisitions made to form the business is helping to improve the buying power of the company.

Net debt is £19.8m but this should be a seasonal high. There are significant land assets which could be sold to help reduce debt. There are 13 freehold properties in the balance sheet. The property assets were valued at £14.64m at the end of August 2007. That is before the purchase of the Cannock dealership but it has a leasehold site. Management reckons that more than one-third of the 35 acres Discover owns could be redeveloped for housing.

Discover still has most of a £6m acquisition facility it arranged last year. It used some of the cash to help finance the acquisition of the Cannock business.

House broker Panmure Gordon has cut its earnings per share forecast for 2007-08 from 1.5p to 0.9p. There has also been a sharp cut in the 2008-09 forecast from 1.8p to 1p. 

The shares slumped 1.375p to 7.125p, valuing Discover at £11m. The shares are trading on eight times prospective earnings for this year.

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