Despite the name, B&M European Value Retail (BME) is first and foremost a UK-based business, deriving 86 per cent of its revenues from its home market via its B&M UK stores and Heron Foods. Yet a strong performance on its home turf – along with promising signs from recently acquired French group Babou – could not offset distribution issues and poor sales in the German Jawoll business, which forced the group to take a £59.5m impairment charge, sharply cutting progress and leading to analyst downgrades on the day.
The troubled division slipped into a £12.2m adjusted cash loss in the six months to September, compared with a £1.1m profit in the comparative period. Management is now carrying out an ominous-sounding strategic review of the business “to determine its future”.
Jawoll ran into margin pressure in the full year last year, when clearing old stock to make way for new lines sourced from the wider group’s supply chain. This could raise concerns that management is pursuing the same strategy with Babou, but it says it is “continuing to learn the lessons” from Jawoll’s troubles, and has “applied those learnings” to the French business.
Broker Peel Hunt cut adjusted pre-tax profit forecasts by £10m to £264.7m, giving EPS of 21.4p. However, this is still an improvement on last year’s £239.7m and 19.7p.
| B&M EUROPEAN VALUE RETAIL | ||||
| ORD PRICE: | 356p | MARKET VALUE: | £3.6bn | |
| TOUCH: | 355.9-356p | 12-MONTH HIGH: | 427p | LOW: 278p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 30 | |
| NET ASSET VALUE: | 97p* | NET DEBT: | 72%** | |
| 26 weeks to 28 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 (restated) | 1.57 | 148 | 8.90 | 2.70 |
| 2019 | 1.90 | 76 | 1.50 | 2.70 |
| % change | +22 | -49 | -83 | |
| Ex-div: | 21 Nov | |||
| Payment: | 20 Dec | |||
| *Includes intangible assets of £1.04bn, or 104p a share **Excludes lease liabilities of £1.25m | ||||
