Half-year numbers from discount chain B&M (BME) took us by surprise, but we weren’t the only ones. Although half-year pre-tax profits of £115m comfortably beat consensus expectations of £99m, flat like-for-like UK sales growth has spooked the market. Cutting back on promotions and clearance activity helped gross margins expand, but this seemed to come at the expense of underlying volumes. Therefore, top-line growth of 16 per cent was largely a reflection of 22 new store openings (five of which were relocations) during the period, out of a planned gross total of 58 this financial year.
It’s probably a good thing, then, that B&M is expanding internationally, having recently announced its acquisition of French discounter Babou. This adds to the group’s European footprint, which is currently limited to Germany via its Jawoll business. Analysts at Liberum are waiting for further financial details on the Babou deal, but continue to expect group pre-tax profit of £263m for the year ending March 2019, giving EPS of 21.4p, compared with £222m and 17.8p in FY2018. The broker has described the Babou deal as “a good opportunity” but admits it’s “not without risk” given the necessary overhaul to improve Babou’s profitability.
| B&M EUROPEAN VALUE RETAIL (BME) | ||||
| ORD PRICE: | 376p | MARKET VALUE: | £3.76bn | |
| TOUCH: | 375-376p | 12-MONTH HIGH: | 436p | LOW: 352p |
| DIVIDEND YIELD: | 2% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 97p* | NET DEBT: | 60% | |
| Half-year to 29 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 1.35 | 86.8 | 6.8 | 2.40 |
| 2018 | 1.56 | 115 | 9.3 | 2.70 |
| % change | +16 | +32 | +37 | +13 |
| Ex-div: | 22 Nov | |||
| Payment: | 21 Dec | |||
| *Includes intangible assets of £1.05bn, or 105p a share | ||||
