The price war engulfing the big four supermarkets has so far had little impact on Bargain Booze-owner Conviviality Retail (CVR), which reported like-for-like sales growth of 1.2 per cent over the crucial Christmas trading period. The Aim-traded company's customers, who shop little and often, "know we are 10 per cent cheaper than the multiple deals on offer at the supermarkets", says chief executive Diana Hunter.
An agreement giving franchisees a stake in the company's equity is helping re-energise sales, with 1.1 per cent more stock sold to each member during the first half. That helped offset sales lost to the closure of underperforming stores, keeping revenues flat overall. Franchisees are now on a more financially sustainable footing, too, with 87 per cent less debt written off than in the previous year.
The equity incentive plan is expensive, though. Associated costs of £0.4m contributed to a 28 per cent increase in underlying operating expenses. That knocked operating profit back by 2 per cent, despite higher gross profits.
After a period of consolidation, the company, which also owns the Wine Rack and Thorougoods businesses across 599 sites in England and Wales, is back in expansion mode. It is due to enter the Scottish market by piloting six stores in a franchise agreement with Scotmid, the country's largest retail co-operative.
House broker Zeus Capital expects adjusted pre-tax profit of £9.7m this year, giving EPS of 11.4p (from 10.8p in 2014).
| CONVIVIALITY RETAIL (CVR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 130p | MARKET VALUE: | £87m | |
| TOUCH: | 128-132p | 12-MONTH HIGH: | 195p | LOW: 127p |
| DIVIDEND YIELD: | 6.2% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 72p* | NET CASH: | £4.2m | |
| Half-year to 26 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 184 | -1.1 | -1.9 | 2.0 |
| 2014 | 183 | 2.7 | 3.2 | 2.0 |
| % change | -0 | +47 | - | - |
| *Includes intangible assets of £37.8m, or 56p a share | ||||
