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Booker (BOK) has signed a deal with Musgrave to buy its Londis and Budgens chains in the UK for £40m.
Booker said the deal “will help independent retailers and consumers throughout Great Britain” and it will develop the brands alongside its existing convenience retail chains Premier and Family Shopper.
Budgens and Londis customers will retain their brands, but “will benefit from a better local and national supply chain”. Booker said he increased scale and operational efficiencies should help lower prices, and retailers will benefit from a better delivery and cash and carry service helping independent retailers to cope with the changes occurring in the UK grocery market.
Charles Wilson, chief executive of Booker, said: “Booker, Londis and Budgens are joining forces to help independent retailers prosper throughout Great Britain. This transaction should strengthen Londis, Budgens, Premier, Family Shopper and other Booker retailers, through improving choice, prices and service to consumers. Overall it will help independent retailers prosper.”
Booker and Musgrave will also develop a strategic partnership to share expertise and explore further opportunities for cooperation between the groups.
The deal is not dependent on approval from Booker shareholders, but will need to be rubber-stamped by the Competition & Markets Authority.
Morning update
Booker has also issued its full-year results this morning, with sales for the year to 27 March up 1.5% to £4.8bn.
Booker like-for-like sales (excluding Makro) were up 2.3% during the period, with non-tobacco sales (excluding Makro) up 2.9% and tobacco sales rising by 1.1%. Booker said Makro’s turnaround was “on track” with the wholesaler it bought in 2012 making a “good contribution to the group”
Operating profit was up 17% to £140.3m (not including the prior year £3.4m net exceptional credit relating to Makro acquisition), while profit after tax (post exceptionals) was 12% up to £117.7m.
Chief executive Charles Wilson said: “This was a good year. Customer satisfaction continued to improve, which helped grow Group sales to £4.8bn. Our plans to Focus, Drive and Broaden the business remain on track. We look forward to helping our customers prosper in the years ahead.”
Elsewhere, Dairy Crest (DCG) saw revenues slip by 4% to £1.33bn for the year to 31 March and profit before tax slump by 59% to £22.1m.
Dairy Crest explained that profits in its dairies operations, which are in the process of being sold to Müller “have reduced markedly in the year reflecting strong competition in liquid milk markets and sharp falls in commodity realisations” amid a “a very difficult year for dairy farmers”.
However, profits in its retained cheese and spreads businesses were up 19% year on year to £66.9m, with Cathedral City sales up 5%. The spreads sector “remains difficult” with Clover sales 8% down and Country Life down 9%.
Mark Allen, Dairy Crest chief executive said: “”This has been another year of significant progress for Dairy Crest. We have grown combined Cheese and Spreads sales despite the deflationary market environment. We have also delivered an encouraging improvement in the combined margin of these businesses.
“Conditional sale of our dairies operations is a positive development for Dairy Crest and the wider UK dairy sector. Completion of the sale will result in Dairy Crest operating from five well-invested manufacturing sites. It will be a much simpler, more focused, predominantly branded business.”
Finally, travel-based food to go group SSP (SSPG) saw sales rise by 3% in the six months to 31 March thanks to solid trading the UK, US and Rest of the World. Revenues were up 2.6% to £859.2m on a constant currency basis, but down 0.8% at actual exchange rates. Operating profit rose by 35.2% in constant currency to £25.2m.
Kate Swann, CEO of SSP Group, said: “We delivered a good performance in the first half of 2015 with profit up 28% and like-for-like sales growth of 3%. We have continued to successfully implement our strategy, and are encouraged by the significant contract wins we have secured so far this year.
UK revenues decreased slightly by 0.3% on a constant currency basis, comprising like-for-like growth of 3.7% and net contract losses of 4%. Like-for-like growth was particularly strong in the air sector, driven by continued growth in UK airport passenger numbers and increased spend per passenger., while the net contract losses were primarily a consequence of the loss of a rail on-board catering contract part way through 2014.
The overall FTSE has opened flat this morning, but Booker has leapt 10.3% higher to 167.7p after the announcement of its takeover of Londis and Budgens setting a new annual high for the shares.
SSP is down 0.8% to 309.8p, while Dairy Crest fell 3% to 502.5p this morning.
Tesco (TSCO) is one of the FTSE 100’s top early risers, climbing 1.6% to 224p.
Yesterday in the City
It was a strange day for Marks & Spencer’s (MKS) share performance. Opening 1.3% down on Tuesday’s 586.1p closing price as it reported its first rise in profits since Marc Bolland took the helm four years ago. It had recovered by lunch to be one of the biggest risers on the FTSE 100 and almost touch 600p before trailing off to close 0.3% down at 583.5p. The stock is still up more than 20% so far this year and had already registered big gains from last week as analysts tipped positive news on the company’s bottom line ahead of the actual results. Shore Capital also upgraded the stock from ‘hold’ to ‘buy’. Pre-tax profits jumped by 3.4% to £600m as Bolland curbed the significant capital expenditure of recent years, food performed well and gross margin improved significantly in the general merchandise division.
Robinson’s owner Britvic (BVIC) had a poor day, with its share price falling 2.4% to 747.5p on news its sales fell 3% in the first half to £650.3m and its CFO John Gibney was retiring.
Greencore (GNC) lost its ground on Tuesday’s 1.2% gain – following a rise in first half revenues and profits – as the stock fell 1.7% to 351.8p. Premier Foods (PFD) also lost more ground, with shares down 0.2% to 45.8p.
Listed suppliers Finsbury Food Group (FIF) and Hilton Food Group (HFG) sat at the top of the day’s grocery risers, up 1.2% to 86.5p and 4.3% to 458.8p respectively.
The FTSE 100 held steady to finish 0.2% up at 7,007.3 points as bid speculation surrounding Vodafone lifted the mobile network operator and offset the slump at luxury fashion house Burberry.
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