ii view: B&M reviewing domicile and shareholder returns

First-half results to 28 September

• Total revenue up 3.7% to £2.64 billion
• Adjusted profit (EBITDA) up 2% to £274 million
• Interim dividend up 3.9% to 5.3p per share
• Net debt up 13% to £788 million

Guidance:

• Expects full-year 2025 adjusted profit (EBITDA) of between £620-£660 million, potentially up from 2024’s £629 million

Chief executive Alex Russo said:

“This is a good performance as we annualise a record prior year of earnings growth with strong first half comparatives. Our model is underpinned by a disciplined and low-cost approach across all three of our businesses, focusing on simple, sustainable growth, delivered through the hard work of our teams.

“Our long-term ambition for the Group remains unchanged, in supporting customers with exceptional value. As we trade through the Golden Quarter, we are encouraged by recent volume momentum and remain focussed on delivering profitable, cash-generating growth for all of our shareholders.”

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ii round-up:

B&M European Value Retail SA (LSE:BME) today detailed sales and profits broadly matching City forecasts, with the budget retailer commencing a review of its country home, or domicile. 

First-half revenues rose 3.7% to £2.64 billion, pushing adjusted profits up 2% to £274 million. Expected full-year 2025 profits of  £620-£660 million are potentially up from £629 million in 2024. A possible change in domicile, although retaining a UK stock market listing, would simplify administrative processes and give greater flexibility in returning capital to shareholders. 

Shares in the FTSE 100 general merchandise and food retailer rose 3% in UK trading having come into these latest results down by close to a third year-to-date. That’s similar to the fall in JD Sports Fashion (LSE:JD.) shares over that time although in contrast to a near 4% gain for the FTSE 100 index itself in 2024. 

B&M currently operates 764 variety stores across the UK, along with 338 Heron Food and B&M express stores, and 129 B&M branded outlets in France.

Sales in France led the way during the period, rising 6.8% to £247 million. Sales for the group’s core UK variety outlets followed, gaining 3.7% to £2.12 billion, with Heron Foods sales up 1.1% to £276 million.  

The retailer opened a net 39 new stores during the first half, 30 for B&M UK, five in France and four for Heron. B&M, whose stores were able to stay open during the pandemic given its selling of food, continues to target 1,200 UK variety outlets, along with increased French and Heron store outlets. 

Trading director, Bobby Arora will retire from B&M in March 2025 with a succession plan in place. An interim dividend of 5.3p per share, to be paid on 13 December, is up from 5.1p last year. A third quarter trading update is likely to be announced early to mid-January. 

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, B&M competes against supermarket operators like Tesco (LSE:TSCO), Aldi, and even DIY retailers such as B&Q owner Kingfisher (LSE:KGF). UK variety stores account for most sales at 80%, with the balance (20%) split relatively evenly between Heron and French stores.  

For investors, the tough economic backdrop for its customers including elevated borrowing costs needs to be remembered. As with all retailers, the weather can influence demand. Costs for businesses and including wages are now higher, while the retirement of another key director in the group’s growth journey generates some caution. 

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More favourably, a review of the corporate domicile could see increased flexibility given to shareholder returns and potential share buybacks. Store numbers continue to grow. Diversity of both product and geographical location exist, with potential to increase French store numbers persisting, while a forecast dividend yield in the region of 4% is not to be overlooked. 

For now, and despite ongoing risks, a consensus analyst estimate of fair value sat at over 500p per share may pique investor interest.

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