Blue Diamond reports record profits after adding Wyevale garden centres

Blue Diamond garden centres has reported record profits for the first six months of 2019.

The 37-garden centre group produced a profit before tax of £7.6m, which was a 56% increase on 2018, and was the result of strong trading in both the core business and the nine garden centres bought from Wyevale in the second half of 2018.
 
Total sales increased by 57%, while like for like sales also grew by 12%, "driven by outperforming the industry across most major categories and the generally benign weather".
 
The nine former Wyevale stores delivered average sales growth of 37% against their performance under previous ownership in 2018, with some centres achieving nearly 60% sales growth, and they contributed significantly to EBITDA. They have all received investment and have seen good improvements in their profits and standards, added Blue Diamond.
 
In September, Blue Diamond completed the acquisition of seven further garden centres from Wyevale, including Bridgemere Garden Centre in Cheshire. These centres generated an EBITDA of £2.6m in 2018 and were bought for just over £7.5m, plus stock, fees and taxes.
 
Blue Diamond managing director Alan Roper said: “We see a significant opportunity to continue to grow profits in the short, medium and long term from a combination of driving trade in the core business, optimising the performance of the newly-acquired 16 former Wyevale centres and the further greenfield sites we have identified.”
 
Trading has remained positive since the end of June and the board is optimistic about the full year outcome.

The Group is privately owned but there is an active market in the trading of its shares - see https://www.bluediamond.gg/investor-relations

Elveden Estate, near Thetford in Suffolk, has lodged plans with West Suffolk Council to build a garden centre, with Blue Diamond the proposed operator, and replacement farm shop and restaurant, within its walled garden.

Blue Diamond chairman Simon Burke said: "Total sales increased by 57% to £86.7m whilst like for like sales (including East Bridgford) were 12% ahead of 2018. UK like-for-like sales were up 13% and Channel Islands sales were up 4%. The weather was generally benign, which helped this performance, but we continue to outperform the GCA, both in total and across most of the major categories. Gross margins strengthened in the period, driven in particular by improved restaurant figures and new buying arrangements for furniture. Although we saw some increases in overheads, and in interest payable on our enlarged debt, profit before tax increased by 56% to £7.6m. This includes an exceptional profit of £0.5m from the sale of surplus land at Fryer's. Our net debt at the end of June was equivalent to one and a half times annual EBITDA, against the Board’s ceiling of three times, and our gearing was 39%.

"Given the level of activity involved in the Wyevale acquisitions, and its potential to distract from the core business, we are pleased to have achieved such a strong performance from the existing Blue Diamond centres. Some of the larger stores, including Redfields, Trentham and Grosvenor, did particularly well. East Bridgford is now trading like for like and we are pleased with its progress. In the nine stores purchased from Wyevale last year, we saw overall sales growth of 37% compared with their performance a year ago (under previous ownership). We have carried out a diverse range of improvements to these stores, from full refurbishment to minor layout changes. In Bicester and Nailsworth, where we did full refurbishments, we have recorded sales increases of 55% and 27% respectively; but there has been significant improvement in every store. Overall, we are very pleased with the performance of the nine stores and they contributed a significant profit in the period.

"In July I wrote to tell you that we planned to acquire a further six stores from Wyevale, with the possibility of one other. In the event we acquired all seven sites and they joined the Blue Diamond family in September. Along with the six listed in my letter, we also acquired the Bridgemere Garden Centre, a site with significant heritage which came with a seventy-acre freehold nursery, from which we will be able to supply both mainstream and exclusive plants to our own stores. The total outlay including stock was £10.3m, and the most recent annual results from these stores showed turnover of £18.6m and EBITDA of £2.6m. The acquisition was funded by a combination of additional debt facilities and existing resources. We are now beginning the process of integrating these stores, making use of the learnings from the first group of acquired centres. There are many opportunities to invest in these stores, to expand their capacity or to make other improvements, and there remain many good opportunities to invest in the previously existing Blue Diamond estate, in the earlier Wyevale acquisitions, and in some promising green-field developments. These will underpin our ability to continue growing the business into the medium term. For now, however, the Board's priority is to reduce debt and create better headroom underneath our targeted three times net debt to EBITDA ceiling. With this in mind we are proposing an interim dividend of 2p per share, an increase of 11% on 2018.

"Since the end of the period we have seen good trading and we are confident in our Christmas offer. We believe that we can bring substantial improvement to the latest group of Wyevale stores, which will further grow profits. The continuing cloud on the horizon is the unresolved Brexit position and the instability it is causing. I believe this is a significant risk to our trading, in common with a great many other businesses." 


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