Discover gains market share in tough climate

However, the East Yorkshire-based group, which runs five caravan dealerships across the north of England, said it is gaining market share from rivals, helping half-year sales increase on a year earlier.

Discover said it expects the second half of its financial year, from March to August, to be “equally challenging”.

The group’s sales increased by 10 per cent to £20m in the six months to the end of February. Discover typically makes the bulk of its sales between Easter and the end of August.

Its pre-tax losses decreased to £1.5m from £1.9m a year earlier.

“My gut instinct tells me (the second half) is probably going to be similar to last year,” said chief executive Trevor Parker.

“What we’re doing is managing the business as though it’s going to be a very tough marketplace.”

Discover is wading through the toughest retail climate for decades, as consumers delay spending on big ticket items.

The British Retail Consortium this week revealed the biggest sales drop in its history.

The BRC said total sales in March were down 1.9 per cent on a year ago in the biggest decline since the start of the trade body’s monthly survey in 1995. The BRC said it was clear consumers did not want to spend “unless they really had to”.

Discover said “in spite of a fragile economy and a market still around its trough”, it has made good progress on increasing market share, cutting debt and generating cash.

“The predictions for only a modest growth in the UK economy in 2011 are proving to be accurate,” it said. “Consumer confidence remains fragile and may well weaken again as the deficit cuts and the tax increases begin to bite from April.”

Net debt was cut by £0.9m during the period to £10.5m, aided by the £2.03m sale of surplus properties.

Discover was unable to quantify its exact market share, but Mr Parker said its figures suggest it is outperforming the market.

Statistics from the National Caravan Council showed the total leisure market grew by 1.9 per cent in the six months to the end of February. Within this, sales of touring caravans dropped by 0.6 per cent to 12,783. Total sales of motor homes increased by 14.9 per cent to 2,847.

Discover said the VAT sales tax increase to 20 per cent in January may have caused customers to bring forward sales, skewing the market. “If correct, there may be some negative impact on the size of the market in the high season,” it added.

Against this, Discover’s sales of new touring caravans increased by 22 per cent, and used caravan sales surged 35 per cent.

However, Discover’s profits margin fell to 11 per cent from 13.6 per cent a year earlier as struggling competitors cut prices and dealers liquidated old stock inventories.

The group said it expects the usual Easter/summer seasonal uplift in sales. Discover may also benefit from struggling rivals, it added. However, it expects another tough period for margins and cash.

“The group’s results in the first half were better than last year but were impacted nonetheless by continued recessionary conditions and pressure on margins,” said chairman David Morrow.

“Whilst the stock pressure may be lessening, the second half year is expected to be equally challenging.”

Discover was saved from collapse in 2009 with a company voluntary arrangement (CVA).

It had to shut 11 sites and make hundreds of job cuts, but the deal saved the group from administration. However, unsecured creditors had to write off almost 80 per cent of the debt they were owed.

The company now trades from five sites in its Northern heartland – in Birtley, Chorley, Darlington, Delamere and York. These sites accounted for 60 per cent of turnover prior to the CVA. Since the CVA Discover has paid £764,000 to the scheme’s supervisor.

Discover did not recommend paying a dividend. It also cast doubt over its going concern status, but said despite this it has adequate resources to keep trading for the foreseeable future.

Discover is now exploring strategic options, it added. The group has invested in its aftersales offering to try to boost alternative sales channels.

With customers opting to hang on to old models rather than invest in new caravans, the group now offers a parts service as well as repairing caravans in owners’ driveways. “It’s an area where we’re definitely making headway,” said Mr Parker.

A survey by Nationwide, the UK’s biggest building society, this week showed consumer confidence edged up during March as Britons become slightly more optimistic about the outlook for the economy.

Nationwide recorded a nine point jump in its expectations index, as nearly one in five people said they thought the economy would be in better shape in six months’ time.

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