ii view: B&M targets growth but Arora family sells stake

First-half results to 23 September

• Total revenue up 10.4% to £2.55 billion
• Adjusted profit (EBITDA) up 16% to £269 million
• Net debt down 5% to £700 million
• Ordinary interim dividend up 2% to 5.1p per share

Guidance:

• Now expects full-year adjusted profit of between £620-£630 million, up from last year’s £573 million
• Now expects to reach not less than 1,200 B&M UK stores, up from a previous 950

Chief executive Alex Russo said:

"All four of our channels of growth are delivering strong results, underpinned by our relentless focus on low prices, cost control, simplicity in everything we do and disciplined profitable growth."

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ii round-up:

B&M European Value Retail SA (LSE:BME) is a variety retailer operating both in the UK and France. 

It has 712 stores in the UK operating under the B&M brand. It also operates a further 328 stores under either the Heron Foods or B&M Express brands. 

In France its B&M branded stores total 119.

For a round-up of these latest results announced on 9 November, please click here. 

ii view:

Founded in 1978 with its first store opening in Blackpool, B&M is today a constituent of the FTSE 100 index. The UK generates most of its sales at just over 90%, with France the balance. A current stock market value of around £5.6 billion, remains bigger than that of Marks & Spencer Group (LSE:MKS) at £5.2 billion although below Next (LSE:NXT) at £10.3 billion. 

For investors, heightened mortgage and rental costs are likely to see many consumers spending cautiously. They might also be concerned about the sale of a 2.8% stake in the business by the founding Arora family via its SSA investment vehicle. We heard on Wednesday that they'd offloaded 27.8 million ordinary shares via a placing at 582.5p per share to raise £162.1 million. SSA Investments still owns about 3.4% of B&M's ordinary shares.

Competition across the high street also remains intense, while a forecast price/earnings ratio above the three-year average may suggest the shares are not obviously cheap.   

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More favourably, store numbers continue to grow, with its previous acquisition of around 50 Wilko stores helping it to increase its target for UK B&M store numbers to reach not less than 1,200 from a prior 950 target. Under 120 stores in France gives room for further growth. Group net debt of £700 million remains within management’s comfort zone, while the shares and excluding special dividends which have previously been paid, currently offer a forecast dividend yield of over 2.7%.  

On balance, and despite continued risks, the combination of expanding store numbers and a focus on consumer value should be enough to satisfy long-term fans of the budget retailer.

Positives: 

• Diversified product range
• Both UK and French store outlets

Negatives:

• Uncertain economic outlook  
• Exposure to currency movements 

The average rating of stock market analysts:

Strong hold