Interactive Investor

ii view: B&M makes record profit but forgets forecast

Shares in this FTSE 100 retailer are up by more than 45% over the last five years. With growing store numbers and France in its sights, we assess prospects.

5th June 2024 15:42

by Keith Bowman from interactive investor

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Full-year results to 30 March

  • Total revenue up 10.1% to £5.5 billion
  • Adjusted profit (EBITDA) up 9.7% to £629 million
  • Final dividend of 9.6p per share
  • Total dividend for the year up 0.7% to 14.7p per share
  • Net debt excluding leases up 1.8% to £737 million

Chief executive Alex Russo said:

"FY24 has been another good year for B&M. The three key components of our business - buying, logistics and retail, are working in balance and we continue to deliver excellent products at everyday low prices to our consumers. We are well set for the years ahead.”

ii round-up:

Retailer B&M European Value Retail SA (LSE:BME) today detailed sales and profits matching its previous forecasts but offered no current trading update or forecasts for the year ahead. 

Revenue for the 12 months to late March rose by a tenth year-over-year to a record £5.5 billion, driving up adjusted profit by a similar amount to a record £629 million. Accompanying management outlook comments repeated plans to open at least 45 stores in the year ahead, leaving it confident regarding profit growth and cash generation. The City currently expects adjusted profit to improve to around £676 million. 

Shares in the FTSE 100 general merchandise and food seller fell 7% in UK trading having come into these latest results up around 2% year-to-date. That’s similar to fellow retailer Sainsbury (J) (LSE:SBRY) but comfortably behind a 39% increase for sugar grower and owner of the Primark clothing chain Associated British Foods (LSE:ABF). The FTSE 100 index is up around 7% so far in 2024. 

B&M currently operates 741 variety stores across the UK, along with 335 Heron Food and B&M express stores and 124 B&M branded outlets in France.

Most of the B&M variety UK store openings in the year to March came in the fourth quarter, potentially pushing the benefit of new sales and profits into the current financial year. 

B&M, whose stores were able to stay open during the pandemic given they sold food, continues to target 1,200 UK variety outlets, along with increased store numbers for both Heron and its French outlets. 

A final dividend of 9.6p takes the total ordinary payment for the year to 14.7p per share. It also paid a special dividend of 20p in January. 

A first-quarter trading update is scheduled for 16 July.

ii view:

Started in 1978, B&M came to the UK stock market in June 2014. A constituent of the FTSE 100 index and employing over 35,000 people, it competes against supermarket operators like Tesco (LSE:TSCO), and even DIY retailers such as B&Q owner Kingfisher (LSE:KGF). Its UK variety B&M stores account for its biggest slug of sales at 80%, with the 20% balance split almost evenly between Heron outlets and stores in France.  

For investors, the tough economic backdrop for its customers including elevated borrowing costs needs to be remembered. As with all retailers, the weather can also influence demand. What's more, costs for businesses and including wages are now higher, while an estimated price/earnings ratio above the three-year average suggests the shares are not obviously cheap.   

To the upside, store numbers continue to grow, and diversity of both product and geographical location exists, with just over 120 French outlets offering room for future expansion. The ratio of net debt to adjusted profit has also reduced, while the shares currently stand on a forecast dividend yield of around 3%.   

On balance, and despite continued risks, B&M’s core focus on product value and expanding store numbers should please long-term fans of this discount retailer.

Positives: 

  • Diversified product range
  • Previous payment of special dividends

Negatives:

  • Uncertain economic outlook  
  • Exposure to currency movements 

The average rating of stock market analysts:

Buy

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