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Booker says it's 'business as usual' ahead of Tesco tie up

The wholesaler is waiting to get the green light from regulators to proceed with its Tesco merger
October 16, 2017

Booker's (BOK) shareholders are biding their time, waiting to see if the wholesale grocery group is successfully taken over as part of a planned merger with supermarket Tesco (TSCO). That probably explains why the share price failed to react to what was otherwise a good set of half-year numbers.

IC TIP: Hold at 205.8p

The Tesco deal is currently undergoing an in-depth second-phase investigation by the Competition and Markets Authority (CMA). Provisional findings are expected by the end of this month, ahead of a final report at the end of the year. The merger should then complete in early 2018, subject to shareholder approval.

For now, it’s business as usual and business, it appears, is good. Like-for-like sales rose by a steady 2.7 per cent (7.7 per cent excluding tobacco) during the first half which, along with steady margins, helped to lift the bottom line by a handy 9 per cent. The integration of the Londis and Budgens brands continues too, and although that process has cost Booker in the region of £40m, the two businesses have generated £48m in cash in the two years since acquisition.

Analysts have suspended forecasts in light of the impending merger, but management says sales momentum has continued into the second half, with non-tobacco revenues ahead of last year.

BOOKER (BOK)   
ORD PRICE:205.8pMARKET VALUE:£3.67bn
TOUCH:205.8-206.1pp12-MONTH HIGH:215pLOW: 164p
DIVIDEND YIELD:2.8%PE RATIO:23
NET ASSET VALUE:30p*NET DEBT:£165m
Half-year to 8 SepTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20162.5281.03.830.63
20172.5988.04.190.69
% change+2+9+9+10
Ex-div:26 Oct   
Payment:24 Nov   
*Includes intangible assets of £465m, or 26p a share