Company: Dobbies Garden Centres
Sector: General Retailers
Address : Melville Nursery,
Lasswade,
EH18 1 AZ
Tel: 0131 663 1941
Fax: 0131 654 2548
Brokers: Brewin Dolphin Securities Ltd.
Advisors: Brewin Dolphin Securities Ltd.
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INVESTMENT INFORMATION |
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FINANCIAL REVIEW |
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Price of Ordinary Shares |
355p |
Year to: October £’000 |
1996 |
1997 |
1998 |
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High/Low |
390/255p |
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Number of shares in issue |
6.6m |
Turnover |
6,619 |
8,489 |
11,093 |
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Market Capitalisation |
£23m |
Gross Profit/(Loss) |
3,058 |
3,943 |
5,023 |
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Stated earnings per share |
18.3p |
Operating Profit/(Loss) |
741 |
1,138 |
1,489 |
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Historic P/E ratio |
1900% |
Net Int. Receivable/(Payable) |
-112 |
-120 |
-62 |
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Gross Dividend yield |
1% |
Pre tax Profit/(Loss) |
629 |
1,017 |
1,427 |
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Gross Dividend Yield relative to FTSE |
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Profit att. to ord shares |
458 |
737 |
1,070 |
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P/E ratio relative to FTSE |
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Earnings per share |
16.00p |
17.22p |
18.27 |
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Net Asset Value |
£11,927, 741 |
Dividends per share |
- |
4.25 |
5 |
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Net Asset value per share |
181p |
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Net Borrowings/Cash |
£63,722 |
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Gearing Ratio |
- |
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Gearing Ratio ex. Intangibles |
- |
Comment
Dobbies now runs 10 garden centres, seven in Scotland and three in England. Despite the dreadful 1998 weather like for like sales rose by more than 8%. Average sales per unit were more than £1 million. Over the last five years, retail selling space has nearly doubled, and sales per square foot have continued to increase.
The general assumption is that gardening as a hobby is growing, in part due to demographic trends. But the company's big idea, following a retail trend of long standing is to develop, in areas which its expertise in identifying suitable catchment areas give the belief of a basis for success, is to trade up, establishing much larger centres capable of generating sales of £3 million or more. There are four of these at present, and two of these still have to punch their full weight in respect of reported results. Even so, for the six month period to April 1999, sales were 43% up, and this enabled the generation earnings per share of 5.8p, a 31% increase on the comparable period.
It is obvious that expansion, particularly on this scale, takes money, and after a successful March 1997 flotation Dobbies' next fund raising took place a year later, raising £5.3 million at 310p. But despite the company's doing all that it said it would, the shares took a discouraging dip, before rallying to the present price. Now with the latest money all spent, and borrowings at the interim stage of more than £4 million, the strategic problems of expansion loom again.
The vagaries of the weather apart, progressive returns from the still growing business, underpinned by what are becoming increasingly recognised as quality property assets, should give Dobbies a bit of elbow room.
INVESTMENT RECOMMENDATION
Buy.