2008 Review

Sir Tom Hunter & West Coast Capital
This has been a difficult year for Sir Tom Hunter’s investments in the garden industry. Troubles at Flying Brands (he owns almost 30%) started in January with the announcement that the chief executive would leave the company after a poor Christmas. This was followed by a dividend cut, profit warnings and the closure of Greetings Direct, one of the mail-order channels within the group. Soon after, WCC announced that it was in discussions to buy the company. These were later aborted.

In April, Dobbies, at that time 65% owned by Tesco, announced they were raising £150 million from shareholders. This put pressure on Sir Tom Hunter who owned 29.9%. He would have had to find £43 million for an asset that was providing no income. His investment vehicle, West Coast Capital, sued Dobbies and lost, resulting in the sale of his stake to Tesco.

The 2007 Christmas holiday had hardly ended when Wyevale announced that Jim Hodkinson would assume the day-to-day running of Wyevale, following the departure of chief executive, Barry Stevenson. His aim was to drive the business forward and reap the benefits of acquisitions and changes made in the previous 18 months.

Signs that all was not well came in July with a reorganisation to cut costs. Then the industry was stunned by news that Hodkinson was to step down and be replaced as chief executive by Nicholas Marshall, who had been chief executive of Country Gardens until he lost the group to a hostile bid from Wyevale in 2000. He was and is also CX of Country Homes and Gardens.

By October, Wyevale was seeking to calm market fears as credit insurers reduced cover as a reaction to Baugur being one of the shareholders. It also emerged that Wyevale depended on a £359 million bridging loan from troubled HBOS, which expires next July. Sources within Wyevale and HBOS appeared confident that the new financial structure would be agreed by Christmas. In the event, the paperwork has yet to be completed. The deal will see some of the HBOS debt converted to equity, diluting the holdings of Sir Tom Hunter and presumably Baugur.

Garden Centres
Garden centres changing hands in 2008 include Burcot, bought by Nicci and Neil Gow in January. Early in the year Country Homes and Gardens purchased Flowerland GC in Salisbury; Wyevale acquired Heighley Gate, and Klondyke made it 24 by buying Lady Green GC on the outskirts of Liverpool before adding Brookside GC, Cheshire at the end of the year. Blue Diamond added to its portfolio by buying three Garden Centres of Excellence at Derby, Matlock and Chatsworth. In June, Shoots Garden Gentre added Seymours in Cobham to make it three sites for the emerging group.

It has been a relatively quiet year for Dobbies, having rid themselves of Hunter. In April Dobbies purchased Sandyholm GC at Crossford in Lanarkshire for £8m. This was followed in September with news that it had acquired a site belonging to its Aberdeen rival James Cocker & Sons on which it plans to build its greenest garden centre yet. Several other planning applications had been lodged, but the authorities, especially at York and Carlisle were resisting the Tesco owned group.

In August Garden Park Investments revealed that it had established a £50m fund to buy garden centres with backing from the Middle East. The following month the ceremonial turf was cut at their Peterborough development where Van Hage will be the anchor tenant. This, however, is funded separately.

This has been a year of reorganisation at Notcutts. In March it sold it’s ‘Select and Collect’ cash-and-carry business to Hillier Nurseries. The group then emerged in October as buyer of the six troubled garden centres owned by NWF.

New entrants to the market included Countrywide, which announced 15 new look garden centres within its stores, and Marks & Spencer, which expanded its gardening range in 14 stores and on its website.

Fire destroyed part of Castle Gardens at Sherborne in March and Wyevale, Caddington in July. The former bounced back to win the GCA Christmas display competition, while the latter awaits approval from planners before rebuilding.

At the end of March, Princess Anne opened Barton Grange’s lavish new garden centre at Brock near Preston. Later in the year Hayes GC, Ambleside, won planning permission for a new ‘World of Plants’.

Casualties of the recession started to emerge. The Grange GC, Melton Mowbray, called in administrators during October, as did HotSpring Spas, which had concessions on at least 15 garden centres. In November Brookside GC in Cheshire followed the same course as did Craft Central, with concessions on 40 garden centres, a month later. The year ended with news that The Pavilion GC near Wolverhampton was holding a closing down sale. Also to close is Worsley Hall GC, which has been sold to become part of a resurrected Manchester racecourse.

In January Joseph Metcalf was acquired by William Sinclair for £3 million, increasing its peat reserves and adding the Gem range of compost, seeds and garden chemicals to the Sinclair portfolio. At that stage, chief executive Bernard Burns said the company was demonstrably healthy and aiming for substantial growth. This was followed in July and September by two profit warnings and a dividend cut, following another failure of its peat harvest.

Casco Group announced plans to expand into mainland Europe with the acquisition of Korail Group, which owned the brand, Aquastyl. In the same month, April, Hozelockannounced that it was investing £1 million in injection moulding machinery tooling, following the integration of its production on the one site last year. Also investing was Forest Garden, which revealed a £2.5 million restructuring that involved expansion at Hartlebury and the closure of Eardisley with the loss of 53 jobs.

Changes continue at Gardman, following the sale of a controlling stake by Paris Natar to Barclays Private Equity at the end of 2007. UK managing director Andy Bestwick, will leave in January, shortly after marketing director John Stratford, who left at the end of the year.

There was a name change for the rapidly growing Spotless UK, formerly known as Guaber. It now trades as Spotless Punch as it is integrated with Punch, which markets shoe care products and Dylon fabric dyes.

Thelma de Jager sold P de Jager and Sons, where she had worked for 50 years, to two of her customers, George and Rose Clowes, who have plans to develop the bulb specialist.

In June, the industry was shocked by news that Spread Garden Supplies was entering a period of consultation with staff prior to closure of the business in August. Shortly after, Solus announced that it had acquired Joseph Bentley, the garden tool business.

In the autumn, Syngenta added the Californian plant breeder Goldsmith Seeds to its portfolio in a deal worth $74 million and Henri Studio ceased manufacture in the UK, relying on imports from Illinois. This was followed by news that Chempak called in a financial recovery specialist to agree a CVA.

Peter Wood sold Delamore Young Plants to a management buyout in January, and Butters group announced a major shake-up in the face of tough trading conditions in order to save costs.

Sussex based New Place Nurseries reorganised in the spring, following the retirement of its owners, George and Priscilla Duncan. At the same time it acquired the stock of Hewton Nurseries in Devon, which closed after the season.

John Woods Nurseries, the MBO from Notcutts, opened a cash and carry operation at Woodbridge.

Phyllis Self, the centenarian owner of Whitehall Garden Centre was never far from the news. In November she missed the ceremony to collect a lifetime achievement award as it clashed with the presentation of her MBE.

The industry lost two stalwarts. David Thompson of Thompson Nursery Ltd along with Thompsons Plant and Garden Centres Ltd died in July. Peter Buckley, President of the RHS, died in December after a short illness.

Early in the year both B&Q and Homebase were reporting lower sales volumes. B&Q's parent, Kingfisher, warned of lower investment and reduced dividends. By September, Homebase’s 6-month figures were 10% lower than the previous year, while those at B&Q were 2.6% lower.

At the same time, figures from the GCA barometer of trade showed garden centre sales were lagging 1.5% behind 2007, the biggest impact being felt in the sales of outdoor plants, garden furniture and hard landscaping. This trend was confirmed when the Glee trade show confirmed that visitor numbers were lower than the last two years.

In the first half of the year the industry was expecting massive inflation in 2009 due to inflation in China and massive price increases of raw materials, transport and energy. There was also the weakening pound. William Sinclair were expecting compost prices to increase by 30%. At Glee the consensus was that general prices would rise 10% or more. Then came the banking crisis, with falling oil prices and the threat of collapsing consumer demand. Prices for 2009 are fluid and suppliers are finding it much harder to get commitment from retailers.

Other News
Internet garden centre, Crocus, signed a major deal to provide the online plant buying service to Homebase customers.

Scottsdale, one of the country's largest garden centres, decided in April to join the Tillington Group, a marketing alliance of prominent family owned garden centres. It was followed shortly after by Whitehall Garden Centres in the West Country.

Another marketing group, Future Marketing, lost five Northern garden centres who decided to work separately as the Trans-Pennine Group. However, it soon added All-in-One of Rochdale, bringing its membership up to 12.

2008 saw the last of Derris Dust with sodium chlorate likely to follow.

From October 1st householders have been required to seek planning permission if they wish to lay a front drive, unless they use a permeable solution.

What to watch in 2009
In mid January the European Parliament will vote on the draft regulation on Placing of Plant Protection Products. If intensive lobbying is not successful, ornamental growers and the public could find themselves without products for the control of powdery mildew, rust and blackspot on many garden plants.

The ‘Grow Your Own’ campaign should give a spring boost to the sector during the financial winter. The joint messages of saving money and healthier living should ensure plenty of column inches as the season for gardening starts.

Expect confirmation that Wyevale will have completed its financial restructuring shortly, leaving HBOS as the largest shareholder. This may not be the end of the matter. Will the bank want to remain a shareholder for the long term?

Will this be the year that Tesco/Dobbies makes its imprint on the garden sector?

It will be interesting to see how Glee/Petindex reasserts its market leader status as Solex, the specialist furniture show, enters a second year and PATS, two new regional pet shows, challenge Petindex.

At the end of 2007 the Garden Centre Association and AIS rattled the sector by lifting the covers off a new buying group, GRO. However, progress has been frustrated by the failure to find a buyer within the trade. In September, a buyer from outside the garden sector was appointed. The industry has yet to see the impact. Is this a delayed start or will 2009 see the demise of GRO?

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