B&M offers up another special dividend

Intuitively, a prolonged bout of weak consumer confidence does not typically bode well for retailers – that has not been the case for B&M European Value Retail (BME). Instead, a wave of bargain hunters has nearly doubled operating profit to £283m at the half-year mark, compared with the 2019 half-year. 

Indeed, management noted that the surge in activity came on the back of new customers shopping at its discount stores for the first time. Across the group, stronger trading and rising cash flows helped management to push down the net debt to adjusted cash profits (Ebitda) multiple to 0.7 at the end of the first half, compared with 2.2 at the same point last year. 

The retailer has bumped up its half-year dividend by more than half to 4.3p a share, and has announced a special dividend of 25p a share. The group was quick to note that it has repaid the £3.7m of furlough money that it borrowed from the government earlier in the spring, but the second special payout of its kind this year may raise some eyebrows. 

Management was cautious on the macroeconomic environment that lies ahead, but is still targeting a total 950 stores in the UK, up from its current 657. And despite the coronavirus disruption, that seems within reach: the group’s focus on value has proved again that it performs exceptionally well during periods of uncertainty. A counter-cyclical buy. 

FactSet places the consensus forecast for 2021 EPS at 34.4p per share. 

Last IC view: Buy, 486p, 13 Aug 2020