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Booker still growing ahead of Tesco tie-up

Booker still growing ahead of Tesco tie-up

These full-year results from Booker (BOK) are likely to be overshadowed by the wholesaler's upcoming merger with the UK's largest supermarket chain, Tesco (TSCO). That's a shame, because these numbers were good. Sales rose 6.7 per cent compared with the previous year, or 0.5 per cent on a like-for-like basis.

The underlying operating margin increased by 19 basis points to 3.3 per cent, which trickled through into a 14 per cent improvement in operating profits. Internet-based sales are also growing, up 10 per cent to top £1bn. All in all, this has allowed for another special dividend, this time worth 3.02p a share.

Subject to shareholder approval and regulatory hoop-jumping, the merger is due to complete in late 2017/early 2018. Chief executive Charles Wilson said the deal should deliver "significant benefits" not just for Booker customers and consumers, but shareholders too. But because of takeover conditions, the group said it could not make forward-looking statements beyond confirming that sales for the first seven weeks of the financial year are ahead of the prior comparable period.

Analysts at Peel Hunt expect pre-tax profits of £193m for the year ending March 2018, giving 8.9p, up from £174m in FY2017.

TOUCH:199.5-199.7p12-MONTH HIGH:219pLOW: 159p

Year to 24 MarTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
% change+7+15+20+22

Ex-div: 8 Jun

Payment: 7 Jul

*Includes intangible assets of £466m, or 13p a share

**Excludes special dividend worth 3.02p a share, payable on same dates


We downgraded our view on Booker when news of the deal first emerged, and there are still concerns that this merger serves neither Booker's nor Tesco's shareholders well. Given the lack of regulatory or shareholder approval so far, we're inclined to stay neutral - especially given the shares' 22 times forward PE rating. Hold.

Last IC View: Hold, 203p, 2 Feb 2017

visible-status-Standard story-url-Booker_FYresults_18_5_17.xml

By Harriet Russell,
19 May 2017

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