Investment column: Clubhaus

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The Independent Online
CHARLIE PARKER, chief executive of golf operator Clubhaus, says the company has arrived at where it said it wanted to be. Does this mean its impressive growth rate - in the half year like-for-like sales climbed 24 per cent - is about to tail off? Clubhaus says two-thirds of its courses are mature, though there's scope in the remainder to lift the number of rounds played from 700,000 to around a million a year. Mr Parker's opportunities to acquire courses are limited and prices are high.

No surprise then that Clubhaus is diversifying. By next summer, half of sales are expected to come from its healthclubs. All are attached to existing golf courses; six more are planned. Like Centrica, the British Gas owner which diversified into financial services, Clubhaus identifies its principal asset as its membership base as it principal asset, containing potential customers of holidays and retail products. Of group sales, food and drink already account for 27 per cent, other retail represents 13 per cent. It is set to launch an Internet site within weeks.

The moves are aimed at giving the group a more reliable income stream. The weather is a powerful earnings driver, with the clement early summer helping lift members by 15 per cent to 21,200. The financial benefit from them should boost second half earnings.

The signs so far are that the strategy is working. Health memberships more than doubled to 5,200. Membership of the Castle Royle healthclub filled immediately upon its opening. The downside is that the investment is costly. Not all courses receive planning permission for a healthclub. And members' loyalty cannot be guaranteed.

Deutsche Bank forecasts full-year pre-tax profits of pounds 8.5m this year and earnings of 6.4p per share, rising to pounds 10.7m and 8.1p in 2000, putting the shares, unmoved yesterday, on a forward p/e of 12. For a growth stock, the rating is cheap. While there may be practical limits to Clubhaus's growth, especially without some good acquisitions, the shares are a buy.

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