B&M European Value's interims disappoint
By Oliver Haill
Date: Tuesday 13 Nov 2018
(Sharecast News) - B&M European Value Retail reported a rise half-year profit but sales growth slowed in the second quarter and margins were squeezed in Germany as the group introduces a new product range from the UK.
Revenues of £1.6bn in the 26 weeks to 29 September were up 16.1% on last year, with UK revenues up 7.1% after 15 net new B&M UK store opening, of which five were relocations and including two closures. The group said it was on track to open at least 58 gross new B&M stores this financial year.
Underlying UK like-for-like sales growth slowed to 0.9% after a decline of 1.6% for the second quarter as trading was hit by a lack of availability of key seasonal outdoor product ranges after strong sales in the first quarter.
However, management said the start of the third quarter has seen positive LFL sales in B&M fascia stores in the UK, at a similar level to the 0.9% level seen across the half and the business "is well placed for the 'golden quarter' trading". The third quarter was also boosted by the €91.2m acquisition of French discount retailer Babou. https://uk.webfg.com/news/news-and-announcements/bm-european-value-retail-buys-french-retailer-babou--3552179.html
Last year's acquisition in the UK, convenience grocery chain Heron Foods, was said to have continued to "trade well" with nine gross new stores, five closures and on track to open at least 20 gross new stores for the year.
In Germany, Jawoll grew sales 4.1% but margins shrank 292 basis points due to clearance activity on old stock lines as the chain introduces more B&M sourced products. Two new Jawoll stores were opened in the period, with management aiming to open 10 over the year and the the second half seen as likely to give "an accurate basis to gauge Jawoll's progress" with early indication on the new B&M-sourced ranges said to be "encouraging".
Group earnings before interest, tax, depreciation and amortisation of £131.8m was up 13.5% year on year, while profit before tax was up 10.2% to £98.8m. The interim dividend was hiked 12.5% to 2.7p per share.
Chief executive Simon Arora said, "The core B&M fascia stores made good progress and we have made a solid start in the second half of the financial year. Heron Foods has grown strongly in the UK, and in Jawoll the new management team is now utilising the B&M supply chain, with clear early signs that customers are responding positively to the new products."
On the outlook, Arora said conditions across the retail sector remain challenging due sluggish economic growth in the UK, structural change across the retail industry and the uncertainty around Brexit.
"In that context though, B&M remains a clear winner and is well-positioned to extend its strong 13 year track record of profitable growth as consumers seek out value."
Shares in B&M fell 7.5% to 374.6p by late Tuesday morning, recovering a little after hitting a new 52-week low of 352p.
Broker Numis said it would trim its full year estimates to reflect the back-weighting of UK store openings and an half-year shortfall at Jawoll, but would leave our FY20 estimates unchanged as the upgraded total FY19 roll-out comes through.
RBC Capital Markets said EBITDA was in line with its estimate but with underlying revenue trends weaker than expected. Analysts felt B&M shares look attractive as the group still offers a "strong rollout story in the UK" and looks "on track to deliver a European expansion story".
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