Rain hits Hozelock forecasts

Click to follow
The Independent Online
First it was drought, now it is flood - either way, the British weather has not been kind to Hozelock, the country's biggest maker of garden hoses. Yesterday its shares plunged 78p to 280p, knocking pounds 19m off the company's market value, after it warned that the wettest June this century had hammered sales in what is normally the best selling season of the year. Not surprisingly, people have just not been buying hoses and the pain has continued into July, which with June, normally represents a quarter of the group's annual turnover.

Analysts wiped around pounds 4m from their profit forecasts for this year in the light of the warning, leaving expectations at around pounds 6.5m to pounds 7m.

The latest black cloud to overshadow Hozelock has scudded in from a blue sky. Earlier this year it was fears over the exceptionally dry spring which were hitting the share price, amid reports that the UK was "enjoying" the driest two years since the 18th century. The possibility that the water companies would have to reintroduce widespread hosepipe bans sent the shares spiralling downwards from a high of 488p in February, prompting the company to issue a statement in April that in fact it was enjoying "ideal selling conditions" of good weather with fewer water restrictions. Trading was said to be "substantially" ahead of last year.

All that has gone into reverse since June, which was "a diabolical month" according to Hozelock's chief executive, David Codling. The period totted up total rainfall of 113mm, three-times the long-run average and getting on for four-times the 31mm recorded in June 1996. To add to Hozelock's woes, the strong pound is hitting the third of its sales exported to Europe.

Although half the foreign business is covered by hedging contracts taken out last September, the currency effect would shear pounds 1m from profits this year, the company warned. Geoff Douglas of Barclays de Zoete Wedd said trading may come back next year, assuming a more normal summer, but there could be a much bigger impact from currency. He expects to cut his 1998 forecast from pounds 12m to around pounds 8m.

Hozelock said the recent departure of operations director Paul Snowden, who sold pounds 9,800-worth of shares at 426p in June, had no connection with the latest profits warning.