Property sales help Discover Leisure pay off its debts

DISCOVER Leisure, the specialist caravan, motor home and leisure industry retailer, has confirmed that it has sold all but two of its seven surplus properties as it works to reduce its outstanding debts.

Among the properties sold is Warrington for £495,000 and Herne Bay at £400,000.

The sales mean that the outstanding balance of a “non-performing” £5m due to NatWest has fallen to £2.5m.

Trading activity at the properties ceased last May following restructuring of the company.

According to Discover Leisure interest at the closed branch at Weston-super-Mare had been expressed and that it is expected that the carrying value will be achieved.

The company hopes that the sale of the remaining properties will clear the debt and a “significant” proportion of associated interest.

Yesterday, the East Yorkshire firm told shareholders that the firm was making “good progress” in creating a stable platform for growth.

The company said at its annual general meeting that the trend in improving sales in the touring caravan market, which emerged in September and October last year, strengthened in November with a 36.7% year-on-year increase in trade sales.

The rise is the first upturn in 16 months.

In December, Discover Leisure revealed it slumped to a £16.7m annual loss.

Problems arose following a decline in consumer demand in early 2009, which gave rise to an overstocked market, smaller margins and significantly reduced cash flows.

However, in the quarter to November 2009 tourer production rose by 22% over last year and trade sales increased by 4%.

Discover said that a similar pattern had started to emerge for motor homes but that it hadn’t seen any evidence that monthly year-on-year registrations had started to turn positive.

David Morrow, the firm’s chairman, also added that the winter period is traditionally a quieter time for caravan and motor home sales.

The positive impact of the VAT reduction, which ended on December 31 and recent extreme weather conditions were other factors.

In the four months to December 2009 howerver group turnover and margins were both in line with expectations.

Like-for-like new vehicle orders for the first four months of the financial year were 8% less than the equivalent period last year. Orders for the new 2010 model were up an encouraging 370%.

Stock levels were stabilised with a total investment in December of £11.7m – 68% less than in December 2008.

Mr Morrow said: “Looking ahead to the second half year to August 31, 2010, the continuing economic uncertainties and the need to assess the market at Easter make it difficult to predict the group’s results.

“In the interim, we expect trading to improve but to remain challenging.”

In 2009 Discover Leisure implemented a Company Voluntary Arrangement (CVA) – a move aimed at helping the business to move forward and restructure following a slump in trade.

The CVA saved jobs and 60% of sales capacity was retained at five of the company’s largest freehold sites.

The group now has five branches employing 260 people across the north of England, at Birtley in Tyneside, Delamere in Cheshire, Chorley in Lancashire, Darlington in County Durham, and York.