Why garden centres are blooming

The boom in British gardening - at Moneyweek.com - the best of the week's international financial media.

by Euan Stuart

Last month's Chelsea Flower Show proved once again just how popular gardening has become with the British public popularity that borders on obsession. These days, the annual event is a cross between a grand garden party and a photo opportunity, says Victoria Summerley in The Independent. Celebrities can be found "crawling all over it" like aphids on a rosebud. If gardening has any claim to be today's rock 'n' roll, then celebrity gardener Diarmuid Gavin is its Liam Gallagher.

Indeed, this is a boom time for British gardening, says Matthew Goodman in The Sunday Times. The market is worth an estimated £5bn, up 20% year on year. This boom has been fuelled by the success of television programmes such as Ground Force and interest has been raised further by several new magazines launched to cater for the pastime. But why is gardening taking off now? It's the economy, stupid. The "surging" interest at the moment partly reflects all the gloom elsewhere in the economy: gardening becomes more popular when there is an economic downturn.

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Not surprisingly, the sector's upturn is fuelling interest in gardening companies. Wyevale Group, one of the biggest garden-centre companies, is currently at the centre of a three-way management battle. Laxey Partners, the activist group, has built a stake of more than 18% and is seeking to topple David Williams, Wyevale's chairman, and replace him with Robert Ware, a former director of MEPC, the property group, says Jim Pickard in the Financial Times. Laxey started building its stake in Wyevale late last year with the acquisition of shares from Brian Evans, the outgoing chairman, and has since increased its stake further, adding another one million shares, so that it now owns ten million. Although not thought to be planning a takeover of Wyevale, Laxey does have a history of hostile battles against management and is understood to be critical of Wyevale's performance as a retailer in comparison with rivals in the sector. Jack Petchey, the property tycoon, also owns 4% of Wyevale. And Millennium, an aggressive US hedge fund, recently announced that it had acquired 10.1%.

Meanwhile, the popularity of gardening is prompting a shake up elsewhere in the sector. Thompson & Morgan, one of the country's leading suppliers of packet seeds and young plants, is looking to "graft on" one or two rivals. The group, which is based in Ipswich, has hired the corporate-finance arm of KPMG, the accountancy firm, to find potential acquisitions. Industry sources said that these could include Suttons, another name that is well known to British gardeners and currently owned by the French horticultural group Vilmorin Clause & Cie. Thompson & Morgan hopes to expand "significantly" ahead of a possible sale or flotation.

Gardening companies should do well because they are exposed to one of the most potentially lucrative segments of the consumer economy: older people, says David Budworth in The Sunday Times. Research by Alliance Trust, an investment company, suggests that the prices of goods favoured by pensioners have been rising 67% faster than those popular with young spenders because of strong demand as the population ages. Given that gardening is a leisure pursuit that appeals to the older generation, it is small wonder that shares such as Wyevale's are being tipped for "long-term success".

How to profit from the gardening boom

Wyevale Garden Centres' shares have had a good run this year, thanks to aggressive buying by Jack Petchey, the veteran investor, and Laxey Partners, the activist fund that holds 18% of the company. With his background in property, Petchey has probably calculated that the price of Wyevales' shares does not reflect the full value of its garden-centre sites. "Keep buying".

Garden-centre group Blooms of Bressingham swung into profit last year despite a drop in sales, says The Birmingham Post. Pre-tax profit was £670,000, up from a loss of £569,000 a year earlier on turnover of £15.99m. The company said that, although like-for-like sales in the first 14 weeks of the current year were 1.8% down on 2004 owing in part to a late start to the season after a wet and cold April both of the group's new centres continued to trade "significantly" ahead of estimates.

Blooms said it was experiencing good overall sales growth, in excess of 28% for the last six weeks. The company is now focused exclusively on prime edge-of-town and large-scale centres and said it was poised to begin a period of "rapid" growth as its very large and well-sited new centres in Gloucester and Rugby begin to contribute to sales and profits.