Companies: DCG   

A resilient performance by Dobbies' chain of garden centres, and a better-than-expected contribution from the larger format stores, enabled it to lift sales, profits and earnings at the interim stage. Elliott Davis reports.

Chief executive James Barnes told Growth Company Investor that the milder British spring weather, plus an excellent contribution from expanded stores at Milmgavie and Shrewsbury, allowed the company to post pre-exceptional profits of £1.7 million – around £1 million ahead of last year.

Sales improved by a healthy 51 per cent to £18 million. However, Barnes is eager to remind investors that last year's figures were hindered by the partial closure of the Milmgavie and Shrewsbury stores (so that they could be redeveloped) and very poor spring weather.

By mid-June, like-for-like sales were said to be running 10 per cent ahead of last year.

Reported interim pre-tax profits were further boosted by a £2.1 million exceptional gain against the sale (to supermarket giant Tesco) of its leasehold in Perth. Rather cannily, Dobbies is building a replacement site across the road that has 'more than twice the selling space'. It hopes to open this in August.

Redevelopment work is due to begin at the recently-acquired, 80,000 sq ft Cross Lanes Farm site in Atherstone, Nottinghamshire, in the next few weeks. When complete, it will be the largest store in Dobbies' portfolio.

According to chairman Alex Hammond-Chambers, 'unforeseen events aside', Dobbies will report 'further progress in sales and profits for the full year'.

Broker Seymour Pierce forecasts a £3.6 million profit (£2.9 million) and earnings of 27.1p for the full year. This puts Dobbies on a forward p/e of 17.8.

The shares have performed well since we first recommended them at 405p last August. They are still well worth holding on to.

Share price: 482.5p

Market cap: £46.1 million

Sector: General Retailers

Listing: Aim