B&M European Value Retail (BME) floated in June, selling about two-fifths of its shares to institutions at 270p. The shares remain at that level today, but its first results as a listed entity should give those who supported the IPO grounds to hold their nerve.
Like-for-like sales in the core UK market grew 5 per cent in the first half, while the group extended its reach with 20 new outlets. B&M has 400 stores in the UK, but chief executive Simon Arora reckons the market has capacity for 850.
Gross margins were up 80 basis points to 34.7 per cent, as B&M increased its buying power and avoided heavy mark-downs. A large proportion of the retailer's goods are directly sourced from the Far East, helping keep prices low. It also enjoyed a £7m profit contribution from Jawoll, a German business acquired in the period. All this helped boost cash profit by a third to £73m.
Because of the capital restructuring before the IPO and the subsequent refinancing, year-on-year comparisons of finance costs - which totalled £58.2m in the period - and therefore pre-tax profit are meaningless. A further £21m of one-off costs relating to the flotation process also hit reported profit.
Numis Securities expects adjusted pre-tax profit of £137.5m for the full year, giving EPS of 11p.
| B&M EUROPEAN VALUE RETAIL (BME) | ||||
|---|---|---|---|---|
| ORD PRICE: | 270p | MARKET VALUE: | £2.7bn | |
| TOUCH: | 269-270p | 12-MONTH HIGH: | 297p | LOW: 277p |
| DIVIDEND YIELD: | 0.3% | PE RATIO: | na | |
| NET ASSET VALUE: | * | NET DEBT: | £448m | |
| Half-year to 27 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 570 | -8.1 | -0.9 | 0 |
| 2014 | 740 | -16.5 | -2.1 | 0.9 |
| % change | +30 | - | - | - |
Ex-div: 4 Dec Payment: 16 Jan *Negative shareholders' funds | ||||
