Booker: sales down slightly, but profits up 10%

Booker, the UK’s biggest wholesaler, today announced a 10% increase in interim pre-tax profits.

The company said pre-tax profit rose from £67.4m to £74.1m in the first half of its financial year, helped by the benefits from its Makro acquisition three years ago; its expansion into delivered and foodservice; and selling more fresh food.

Sales fell slightly, from £2.26bn to £2.24bn in the six months to September 11, as tobacco sales slipped, hit by factors such as the display ban and the rise of e-cigarettes. CEO Charles Wilson said the tobacco market remained “challenging”, but added that Booker was running in the line with the rest of the market.

Excluding tobacco, sales from stores open at least a year were up 0.6%.

Booker also had £118.1m of net cash at September 11, after paying its dividend, and a £62m special dividend in July. The acquisition earlier this year of Musgrave’s Budgens and Londis business for £40m, leaves Booker with about £80m of net cash.

“We have a better balance sheet than anyone else in the [wholesale]sector,” said Wilson. “Makro customer satisfaction levels are the highest they have ever been.”

The wholesaler set out to analysts and the media its plans for Budgens for the first time, with the chain expected to reduce operating profit by £3m in the year to March 2016, and then make a £5m contribution to operating profit in the following financial year.

Charles Wilson said the Budgens acquisition in May would broaden Booker’s retail footprint, giving it access to more affluent shoppers and enabling it to up its fresh and chilled offer across the group.

“Moving to fresh will help cover losses on tobacco,” he said.

“We can now place the right proposition into the right catchment,” he told analysts. Booker’s retail operations were also expanding through the rollout of its Family Shopper chain of discount convenience stores. It has 47 of the local discount stores, putting it on track to reach its target of 300 in the next three years. “Discounters are here to stay,” he said. “Family Shopper is a very strong competition that will allow our customers to compete.”

Wilson told The Financial Times that some of its small business customers, such as pubs and caravan parks, had been hit by the poor summer. Consequently, they were not seeing the boost that official economic figures would suggest.

Wilson said the impact on Booker from the national living wage would be “negligible” as it had been increasing pay rates, moving from being in the bottom quartile a decade ago to the top quartile today.

“For us, the most important thing is what it does to our small business customers,” he said.

 

 

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