Discover on cost savings drive as losses rise

CARAVAN retailer Discover Leisure is looking to make annual savings of £2m following deepening losses caused by falling sales in the over 50s market.

The struggling retailer made a pre-tax annual loss of £3.72m in the year to August 31, up from £571,000 last time.

The company, which bought Lancashire-based Barrons for £20m last year, said the fall in consumer confidence caused by the credit squeeze had led to a drop in caravan sales during the second half of the year, meaning the firm sold fewer units than in the previous year. 

And it warned that it was difficult to predict when the market would improve and said it would remain “challenging”.

The firm saw revenues grow from £54.3m to £135.7m over the period following the sale of 9,000 new and used vehicles.

Discover employs more than 520 people at 15 branches across England and Wales including Delamere and Warrington in Cheshire, and Chorley in Lancashire.

In a joint statement, chief executive Trevor Parker and chairman David Morrow said: “After the first six months to February 2008, when all market segments were ahead of the previous year and results were in line with expectations, the year became increasingly dominated by the deterioration in the financial markets and the subsequent, significant fall in consumer confidence. 

“Despite a generally more resilient customer profile, these factors led to a fall in the UK market for leisure vehicles in the second half year to August 2008.”

The pair, who said Discover would not be paying a dividend, said the over 50s market, which had previously been protected from squeezes in credit, had been affected by the well documented economic problems.

Discover also embarked on a strategy to make cost savings in the financial year to August 31, they said, and this had continued into the present financial year with objectives including making market share gains and reducing costs by eliminating waste.

The group’s banking facilities have also been renewed with covenants revised in line with its redcued forecasts.

The statement added: “Previous experience indicates that an average of two years is required to emerge from a credit induced crisis so we are assuming that the market in 2009 will stay at its current, lower level and that trading will be very competitive.

“The group has already adapted to these conditions to achieve stability and maintain confidence. 

“Our budget is based on this scenario and we will remain focused on cash, costs and tactical market share gains. Good progress was made in all of these areas before and after year end with cumulative cost savings of £2m forecast for 2009. Further restructuring costs have been incurred in the current year and the board continues to monitor the situation closely.”

In September the group warned annual pre-tax profit were expected to be below expectations and said market conditions were the worst many had seen.

Discover reported a pre-tax half-year loss of £1.8m, rising from £788,000 last year, in May.

Although Discover Leisure has its headquarters in Yorkshire, its North West ties are strong.

After the Barrons acquisition in July last year, Discover’s largest site is at Chorley, while chairman David Morrow lives in Cheshire and non executive director Ian Currie is a leading figure on the Manchester financial scene.