Investors in Discover Leisure made a run for the exit this morning after the UK motor home group warned that profits would be below market expectations.
Discover Leisure has been on an acquisition spree over the past two years, building up a 7% market share in the UK motor home market. However, the credit crunch, which is now entering its second year, has had an impact on any business related to the retail consumer market, including motor homes.
Today Discover Leisure said it had witnessed reduced demand across the entire UK leisure vehicle market. The group as a whole still traded profitably, but lower transaction levels combined with higher interest charges on group debt had hit profits before tax ('PBT'). As a result, the company now expects PBT to come in “materially below market expectations”. Revenues for the year were approximately £138 million, the company said.
Discover Leisure added that it had taken “additional measures” to gain market share, reduce costs, and optimise working capital.
Group debt at the end of the current financial year is expected to be around £22 million, up from £11.2 million last year, in part due to the acquisition of the Cannock dealership. Discover Leisure stated that it was taking measures to reduce stock and cut debt.
Looking ahead, the company said it expected “difficult trading conditions to persist”.
Shares in Discover Leisure fell 32% to 2.63 pence, a new all time low.