For caravan and leisure retailer Discover Leisure, forecasts for the busier second half-year have been downgraded following a bout of tough trading.

Turnover for the half year to 2 March was up a mammoth 412% to £51.8m, on the back of two motor home retail business acquisitions last July. Fixed costs and the seasonal dip in first-half sales produced a pre-tax loss of £1.8m (2007: £0.7m), although the loss per share was reduced from 1.57p to 0.85p.

Discover Leisure's overall strategy, according to chief executive Trevor Parker, an experienced motor industry man, is to create a broad-based leisure group with diversified offerings across the sector. He plans to develop the Discover brand and grow its accessories and services divisions through ‘more effective and attractive’ retail outlets and a newly launched website that has already turned over £2m.

Parker is adamant about the ‘exceptional’ strength of the group, backed up by an estimated property portfolio of £40m, over three times Discover Leisure's market cap. He is content with house broker Panmure Gordon’s downgraded £2m profit before tax estimate for the year, which he insists would still be a ‘credible result’.

Trading is uneven moving into the summer period and the share price is reflecting this unease at 7.12p, down from Growth Company Investor’s recommendation at 27p last August. Based on downgraded earnings for the September year-end, reduced from 1.5p to 0.9p, the shares trade on a prospective earnings multiple of only 7.9 times.

Though the group faces a gloomy retail climate, given its property asset-backing and targeting of demographics less susceptible to recession, such as the comfortably retired, there’s no point in selling now. Sit tight.

Discover Leisure	AIM	£6.01m	3.88p	0.00p
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