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B&M: Strategic Review of German Business As Group Profit Drops Significantly

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B&M European Value Retail S.A. has published its latest interim results for the 26 weeks to 29 September 2019, advising of a strong UK performance in the first half and a strategic review of the German business.

· Group revenues (excluding Babou which was acquired after the half year in FY19) increased by +12.4% to £1,759.4m, and +12.3% on a constant currency basis1

· B&M UK stores business2 revenue was up +13.8%, which included like-for-like ("LFL") revenues3 of +3.7%

· Trading so far in Q3 has seen continued solid LFL3 sales growth in the B&M UK stores business and it is well placed for the 'golden quarter' trading

· Group adjusted EBITDA5 increased by 5.7% and on a post IFRS basis by 12.0%.The B&M UK stores business adjusted EBITDA5 grew by +13.7% to £137.3m (FY19: £120.8m)

· Group adjusted profit before tax5 decreased by 2.8% to £96.0m (FY19: £98.8m). The Group's profit before tax4 decreased by 70.5% to £32.2m (FY19: £109.1m), which included an impairment charge of £59.5m relating to Jawoll. Earnings per share were 1.5p (FY19: 8.9p) and adjusted diluted earnings per share5 were 8.2p (FY19: 8.0p) 

· 30 gross new B&M UK store openings of which 4 were relocations (net 25 after 1 closure), and on track to open at least 46 net new B&M UK stores this financial year

· Heron Foods has continued to trade well and opened 10 gross new stores (net 9 after 1 closure), and on track to open at least 20 gross new stores this financial year

· Continued disappointing financial performance in Germany, due to distribution issues and weak sales performance. Strategic review being undertaken to determine the future of the business 

· Important progress in evolving the product offer at Babou, with the first 3 B&M branded stores opened in France. After a year of ownership, progress made on the integration of Babou with the clearing of old stock and introduction of a number of directly sourced new product ranges 

· Cash flow from operations after Jawoll impairment was £165.9m (FY19: £142.7m) reflecting EBITDA growth offset by working capital increases

· Interim dividend6 in line with last year 2.7p per share (FY19: 2.7p per share) to be paid on 20 December 2019

· Completion of construction phase of new 1 million sq ft Distribution Centre in Bedford, which is currently in fit-out and initial 'soft opening' phase. Strong investor demand for the sale and leaseback investment 

Simon Arora, Chief Executive, said, "In Europe, we have seen contrasting performances from Babou in France and Jawoll in Germany. Babou has made good progress with the planned changes to its product offer. The performance of Jawoll has continued to be impacted by trading and operational issues and its financial performance remains disappointing. The Board is carrying out a strategic review of Jawoll in order to determine its future. 

"We have delivered a solid overall first half performance driven by our core B&M UK stores business which constitutes 86% of Group sales. Our existing stores performed consistently well through the last two quarters, generating half year LFL3 of 3.7%. The current crop of new stores also achieved especially strong results. The core business has made a solid start to the second half of the financial year. Heron Foods has continued to grow in the UK and we remain very pleased with the overall progress of that business.  

"We are well placed for the golden quarter in our main B&M UK stores business. Despite the continued uncertainty in the economic environment generally, we are very proud to say that each of the top five store opening days in our history have all been in stores we have opened in the last 12 months." 

Source : Insight DIY Team and B&M

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12 November 2019

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