Blue Diamond Group will thrive, says its chairman

its chairman

SIMON BURKE said the Guernsey-headquartered business, which is a major operator of garden centres in the Channel Islands and the UK, had proved resilient in the face of the pandemic and associated lockdown measures in the first half of a year that had been like no other.

Garden centres would emerge as one of the ‘winners’ from the crisis, he also said in the group’s interim condensed consolidated financial statements for the six months ended 30 June 2020.

But Mr Burke did warn of short term risks ahead in the report, which was published before UK prime minister Boris Johnson unveiled further Covid-19 restrictions. Mr Johnson also warned a second national lockdown was possible if the rules were not followed, while his Chancellor unveiled a new job support scheme.

Profit before tax fell by 17% to £6.3m. at Blue Diamond for the first six months of 2020 (a 12% drop excluding the profit on sale of freehold properties in 2019). That was despite the fact that all but one of Blue Diamond’s centres were closed for almost one-third of the period and restaurants for more than half the period.

Total sales fell by 5% while like-for-like sales dropped by 16%, 7% down in retail and 58% in the restaurants.

‘Gross margins fell only because of the change in mix, with a lower proportion of our sales coming from the higher-margin restaurants. Like-for-like margins were in line with last year,’ said the Blue Diamond chairman.

‘The ex-Wyevale centres, purchased in both 2018 and 2019, saw the strongest performance in sales and continued to track well ahead of their targets (adjusted for Covid).

‘This resilient financial performance is due to a number of factors. Firstly, the online and delivery business we set up during lockdown, the business rates holiday and the furlough scheme all greatly helped to mitigate the impact of closure. A majority of our landlords also helped to support us with rent reductions. Secondly, the rebound in trading following reopening exceeded our expectations, and, even more welcome, it has been sustained at strong levels ever since. We have also been able to find ways of reducing overhead costs, many of which we will continue into the future.’

Cash had been conserved to the point where net cash flow was actually strongly positive in the period, he said, although that needed to be seen in the context of a significant increase in creditors as many cash payments were delayed, a VAT deferral of £3m., and the postponement of other liabilities such as bonuses.

‘Some of this cash will therefore have flowed back out since the period end, or will do so later, but it is good news that we have not needed to use the additional bank facilities we negotiated back in March.

‘The strength of recent trade, including in the restaurants, has restored some measure of confidence in the prospects for the year as a whole.

‘However, there are still many potential risks in the short term and it would be unwise to make any firm predictions.’

Looking ahead, Mr Burke concluded: ‘I believe that garden centres will be one of the winners from this crisis, benefiting from a further decline in the attractiveness of high streets and large shopping centres, and people’s reinvigorated focus on their homes and gardens as a result of the pandemic.

‘Blue Diamond’s broad, high quality ranges with so much exclusive product position us well to take advantage of these trends, as we have already seen in our continuing out-performance of industry figures.

‘We also now have an operational online business that we can develop in coming years. It is still unclear what kind of world will emerge from the pandemic, but I am optimistic that Blue Diamond can continue to thrive in it.’

. The Blue Diamond group board is proposing to pay an interim dividend for 2020 of 2p per share, in line with 2019, off the back of its recovery. The dividend will be paid on 3 December 2020 to shareholders on the register at 30 November 2020. The position will be reviewed again at the year-end.