Interactive Investor

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

A focus on value in tough economic times and with store numbers growing both here and overseas. We assess prospects.

14th December 2023 08:37

Keith Bowman from interactive investor

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."

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.   

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

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