Flying Flowers issues warning of slower growth blights

Flying Flowers, the Jersey-based mail-order horticulturalists, warned yesterday that its rapid growth will slow in the second half. The shares fell 17.5p to 384.5p even though the group announced sales rose by 54 per cent to pounds 23.7m and profits by 106 per cent to pounds 3.37m in the six months to the end of June.

First-half figures have been boosted by contributions from three business acquired a year ago for pounds 7m. Second-half figures will get a lesser boost. The surge was also helped by the trebling of sales of bedding plants through the mail order brand, Gardening Direct, which accounted for a quarter of group sales in the latest results, and is seasonally biased towards the first half of the year.

Historically profits have split roughly one third in the first half and two thirds in the second. In future the split is likely to be virtually even. Growth in the second half is more likely to be 30-40 per cent but the brokers Beeson Gregory have increased their profit forecast for the full year from pounds 6.1m to pounds 6.3m on the basis of the first half-figures.

The market refused to be consoled, however, and the shares, which have enjoyed a great run since being floated at 65p when the company floated four years ago, failed to recover.

All four retail businesses have performed well and contributed pounds 402,000 to operating profits. But the real surge in sales and profits has come from the mail order businesses which grew sales by 56 per cent to pounds 15.3m and profits to pounds 3.2m. Operating margins increased from 17.6 per cent to 21.0 per cent.

The mail order side of the business as a whole, including Gardening Direct and Blooms, which specialises in perennials, are likely to continue to outgrow the original cut flower and retail parts of the business.

The original business was heavily skewed to the Christmas trade which accounted for a third of all sales. The balance has changed permanently and although DPA Direct, the business which provides reader's offers for leading newspapers, has suffered from competition with other parts of the business it remains a profit centre.

Blooms' mail order side will be the next growth surge, chairman Walter Goldsmith said yesterday. Odd man out in the group is Benhams, the specialist supplier of first day covers to philatelists which was acquired in June last year. Its sales are under pounds 2m but orders are already rolling in for the Queen's Golden Wedding in November.

The group is hoping to spend around pounds 3m on new greenhouses in Jersey and the same again on a new call centre on the mainland, but net debt is small. Earnings per share were up 84 per cent to 11.33p and the interim dividend has gone up 80 per cent to 2.45p.

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