B&M European Value Retail 's (BME) mission to deliver explosive earnings and revenue growth by rapidly expanding its store estate has gained further traction. The opening of a record 79 new discount outlets during the reported period, coupled with increased buying power and a larger proportion of high-margin non-grocery product sales, triggered a 16 per rise in adjusted cash profits to £203m.
Investors responded to this success, and the surprising payment of a £100m special dividend after a year of significant investment, by sending the shares up more than 3 per cent. But, despite the clear optimism surrounding B&M's prospects and impressive cash generation, stagnant sales growth from existing stores indicates that the business model isn't without problems.
Management mainly blamed flat organic revenues on major supermarket chains cutting prices in a bid to win back customers. Worryingly, it also admitted to a cannibalisation of sales, owing to the fact that some of its new stores were opened in close proximity to existing ones.
However, B&M refused to let this setback derail its plans to continue expanding in the year ahead. Management pledged to open 50 net new stores in the UK and about 19 in the "highly fragmented" German market, which is home to the group's Jawoll chain.
Broker Numis expects pre-tax profit of £189m for the year to March 2017, giving EPS of 14.7p (from £161m and 13p in FY2016).
| B&M EUROPEAN VALUE RETAIL (BME) | ||||
|---|---|---|---|---|
| ORD PRICE: | 291p | MARKET VALUE: | £2.9bn | |
| TOUCH: | 290.9-291.1p | 12-MONTH HIGH: | 361p | LOW: 243p |
| DIVIDEND YIELD: | 1.6% | PE RATIO: | 23 | |
| NET ASSET VALUE: | * | NET DEBT: | £354m | |
| Year to 26 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 0.76 | 53.8 | na | nil |
| 2013 | 0.99 | 62.3 | na | nil |
| 2014 | 1.35 | -14.3 | -1.9 | nil |
| 2015 | 1.65 | 61.7 | 3.4 | 3.4 |
| 2016 | 2.04 | 154.5 | 12.5 | 4.8** |
| % change | +24 | +150 | +268 | +41 |
Ex-div: 23 Jun Payment: 5 Aug *Negative shareholders' funds **Excludes special dividend of 10p a share, payable on 8 Jul 2016 | ||||
