The Investment column: Drought warning hits Hozelock
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Your support makes all the difference.Few can have been surprised that Hozelock was forced yesterday to issue a statement to reassure investors about its prospects given the precipitate fall in its share price this year. The near straight-line drop from 488p in February to a recent low of 377.5p was prompted by growing fears of water shortages after the driest two years in the UK since the 18th century. As the UK's dominant manufacturer of garden hoses, with around 70 per cent of the market, the company has been inundated with calls from investors worried about the possible effect of hosepipe bans and other restrictions on water use.
Yesterday it moved to soothe nerves by pointing out that restrictions had yet to be enforced anywhere, apart from a sprinkler ban covering 825,000 consumers in the Southern Water region. More to the point, it said that profits for the first six months to March would be over pounds 3m. Even though that represents a significant fall on the pounds 3.33m reported last year and includes a pounds 300,000 profit on the sale of the group's old warehouse, it was in line with market expectations, sending the shares 45.5p higher to 425.5p by the close.
David Codling, the chief executive who steered the group to flotation in November 1993, said spring had come early for Hozelock, with an "excellent" April and strong demand for its products right across Europe. Such is the confidence of Mr Codling and his board that their bullishness spreads out as far as the prospects for the company's full year to September.
The fall in first-half figures has been well flagged by Hozelock, which is seeing more sales and profits pushed into the summer months by the big retailers' just-in-time stocking strategy. Williams de Broe, the stockbrokers, are looking for full-year profits of pounds 10.9m, which puts the shares on a forward multiple of 14.
The threat clearly remains that the dry spell will eventually cause hosepipe bans, or that the summer weather fizzles out half-way through, also like last year. Still worth holding, with growth to come in Europe and from new businesses.
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