Cantor Fitzgerald analyst Freddie George says he would not be surprised if Wyevale Garden Centres (WGC) returns to the stock market after posting revenues of £290.4m for the year ending 28 December 2014, up from £276m in 2013.
In 2014 WGC added 10 centres that have now had a full year to contribute, including the £40m turnover Garden & Leisure, meaning like-for-like income is down by an estimated 10 per cent.
However, strengthening the property portfolio by increasing concessions from 478 to 566 over the year and increasing margins may make 151-centre WGC attractive to investors.
The WGC report stated: "The majority of this growth has been driven by acquisitions, with minimal organic growth. This is, however, a result of the management's strategy to discontinue a number of non-core product lines and instead use concession partners."
Gross margin increased by 3.3 per cent to 56.5 per cent as a result of "a focus on the supplier tendering process and central hub distribution". Concession income grew by £3.8m to £18.1m, making overall income £310.6m, up from £291.5m.
Some £28.3m went on acquisitions and £34.6m on capital expenditure, including rebranding as WGC. Centre numbers went from 139 to 148. Some 31 stores were redeveloped, with concessions such as Laithwaites (wine), Brantano (footwear), Jolleys (pets) and Peacocks (clothing) going in as well as in-store improvements.
The report added: "This strategic focus has led to some top-line revenue reduction, as the sales move to our concession partners. But overall margin impact is positive." The group reported earnings before interest, taxes, depreciation and amortisation of £56.1m and operating profit at £34.2m. There are 5,900 staff. Net debt was £335.7m, up from £273.1m in 2013.
Acquisitions were Brooks, Moreton Park, Ashford, Raglan, Podington and Golden Acres' four centres. WGC bought 10 centres in 2013, including Garden & Leisure's seven centres.
In 2015 it hopes to launch multichannel retailing with home delivery and click-and-collect. WGC said no one would be interviewed about the report.
Industry reaction to Wyevale Garden Centres' results:
"Whilst debt has increased significantly this looks like a pretty good set of results. Of particular note is the increase in gross profit to 56 per cent - a very respectable figure. It's no surprise the income from concessions has grown significantly as this is a key strand of Wyevale's strategy. These results might be viewed as encouraging by the Wyevale team and probably give them plenty of confidence to continue current acquisition strategy."
Neville Stein, consultant
"This is a positive set of profit figures that (Wyevale owner) Terra Firma is no doubt really pleased with. Whilst the shift of some sales to concession partners was to be expected, there is no indication of underlying like-for-like sales growth, yet with Garden Centre Association figures for 2014 showing nearly nine per cent sales growth during 2014 across its members, it looks like Wyevale may have performed behind the market at a sales level."
Andy Newman, director, Mdj2 associates.