City snapshot: B&M posts double digit sales and profit growth

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B&M Bargains owner B&M European Value Retail has posted a double-digit hike to sales and profits in the first half as organic growth and new store openings boosted performance.

Reporting results for the 26 weeks to 23 September, the group saw total sales growth of 10.4% to £2.55bn.

Existing B&M UK stores saw like-for-like sales increase by 6.2%, with around half coming from increased customer transaction numbers and helped by a focus on store operational standards.

It also opened 13 gross new B&M UK stores, a net increase of five stores, with total sales area outgrowing growth in store numbers.

The group expects to open no fewer than 35 stores this financial period, and no fewer than 45 stores in each of the next two years.

Its French operations delivered total sales growth of over 26%, with LFL sales growth in double figures. France remains on track for 10 new stores across this financial year, and at least the same number next year.

Meanwhile its frozen Heron Foods outlets saw total sales up 17% including nine net new stores, with it remaining on track to open 20 new stores in the current financial year.

Group gross profit increased by 16.4% year on year, thanks to the strong performance across the group and in particular the execution of the garden & outdoor trading periods in B&M UK with only limited markdowns being carried out in general merchandise categories.

Adjusted EBITDA increased by 16.1% to £269m representing a margin of 10.5% (up from 10% last year) as inflationary pressures following minimum wage changes were managed effectively by each of the fascias.

Meanwhile its agreement to acquire up to 51 ex-Wilko stores is “a significant step which underpins our opening programme”.

Over the next three years it expects to open not less than 125 new B&M stores in the UK, adding up to 20% to the group’s sales area.

CEO Alex Russo said: “I am delighted that many of our existing shareholders have been with us since our IPO and continue to see our long-term growth potential. With our new store number guidance (of not less than 1,200 B&M UK stores) and continued LFL growth, we have the runway to at least double our size in the UK in the medium term, while France also offers sizeable long-term potential.”

In the first six weeks of the Golden Quarter, B&M UK LFL growth has been 1.6%, with momentum has been particularly strong in the last three weeks at growth of 4.5%.

“The group is trading against tough comparatives making this a pleasing result against an uncertain and ever-changing economic background,” Russo added.

Given the strong first half results and positive momentum, the group’s 2024 adjusted EBITDA guidance has been increased to a range of £620m-£630m, materially higher than the previous year’s performance of £573m.

B&M shares are down 4.2% on the news to 515.2p.

Morning update

WH Smith has seen an almost doubling of annual profits as the rebound of travel sales boosted performance.

For the year to 31 August, total group revenue was up 28% to £1.79bn.

In Travel, it saw a strong performance across all markets with total revenue up 43% and up 27% on a like-for-like basis.

Passenger numbers have recovered strongly during the year and momentum has continued into the new financial year, the group said.

Travel growth was driven by strong performances across its geographies, with travel UK up 36% on a total basis, North America up 32%, and ROW up 99%.

It also said the pace of winning new business in travel remains strong. Across the UK, North America and Rest of the World the group won 92 stores in the year and now have over 110 stores won and due to open, of which it expects over 100 to open this financial year whilst closing 22 stores as it focuses on better quality space.

Meanwhile, it also saw a “consistently good” performance in high street throughout the year, with the Christmas trading period flat year on year on a LFL basis.

Travel delivered a headline trading profit in the year of £164m up from £89m, while the high street maintained a profit of £32m compared to £33m last year.

That saw headline group profit before tax and non-underlying items up 96% to £143m.

Including non-underlying items, group pre-tax profits was up to £110m from £63m.

WH Smith also said it has seen a strong start to the new financial year with continued momentum across travel and total revenue in the first 9 weeks to 4 November 2023 up 13% in travel UK, 15% in North America and up 27% in ROW.

CEO Carl Cowling said: “This has been another year of significant progress for the Group.

“Our global travel business is growing in all our key markets. It is highly scalable with multiple medium and long term growth opportunities and we are seeing great results from sharing our expertise and innovation across our different geographies. Our North American business is benefiting from our forensic approach to space management which has always been a key feature of our UK Travel operations. In the same way, the ability of our North American business to provide bespoke retail formats is now being successfully harnessed outside of the US.

“These results would not be possible without the extraordinary efforts of our entire team across the globe, and I would like to offer my sincere thanks for their support.”

Elsewhere on the busy morning, Tate & Lyle has issued half year results showing a “robust” performance in the six months to 30 September.

Revenue was up 4% reflecting good mix management, pricing and the recovery of inflation.

Its ‘food & beverage solutions’ business performed well delivering revenue growth, particularly in Europe, and adjusted EBITDA growth.

The underlying performance of the Sucralose business remained steady, with the phasing of orders into the comparative period resulting in lower profits. The optimisation of ‘primary products Europe’ is continuing with losses significantly reduced.

The group said it continued to intentionally reset Tate & Lyle as a growth-focused speciality business through a focus on revenue growth and margin expansion, ahead of volume, by way of solution selling, mix management and pricing.

This approach, together with softer consumer demand, customer de-stocking and the ongoing transition of capacity out of Primary Products Europe combined to deliver 4% revenue growth to £857m.

Adjusted EBITDA was up 7%, driven by mix management, pricing, productivity and cost discipline.

Adjusted profit before tax rose 16%, helped by strong FBS growth, increased Primient share of profit, and lower finance charges.

The group stated: “Following consecutive periods of high input cost inflation which significantly accelerated revenue growth, we are now seeing input cost deflation with revenue in the second half expected to reflect the pass through of these lower costs as customer contracts for the 2024 calendar year are renewed.”

CEO Nick Hampton commented: “Tate & Lyle delivered a robust financial performance in the first half despite challenging market conditions and made good progress on its growth-focused strategy.

“The strategic re-positioning of Tate & Lyle to focus on speciality food and beverage solutions is enhancing the quality of the business and driving performance. Our strong ingredient portfolio and solutions capabilities in sweetening, mouthfeel and fortification mean we are well-placed to benefit from the long-term trends towards healthier, tastier and more sustainable food and drink.”

Chapel Down, England’s largest winemaker, has announced its intention to seek admission of the entire issued share capital of the company to trading on AIM.

The move will “be in the best interests of the company and its shareholders and given the growing scale of the business, is a more appropriate market for the company and will enable it to attract a wider pool of investors and improve liquidity over time”.

Meanwhile the company has also today published an update on its record breaking 2023 harvest with tonnage 86% higher than 2022.

CEO Andrew Carter said: “We are pleased to announce Chapel Down’s plan to admit its shares to trading on AIM, a move which reflects the maturity of the business and the ambitious growth plan we are committed to delivering in the years ahead. Chapel Down has greatly benefitted from its AQSE listing over the past 20 years as it has grown from a startup in an embryonic industry into England’s leading and largest winemaker with a consistent track record of profitable growth.

“We believe that a move to AIM will attract a wider pool of investors to participate in Chapel Down’s growth as the leading producer in the world’s newest global wine region and as we continue to pursue our well progressed and fully funded plan to double the size of the business in the five years to 2026.

“Today’s confirmation of a record 2023 harvest, with tonnage 86% higher than 2022 and 75% higher than the previous record posted in 2018, is creating great excitement within our business, and will underpin our strategic ambition to double the size of the business by 2026 as we continue to build Chapel Down’s position as England’s number one and most celebrated winemaker.”

Domino’s Pizza Group has posted moderately increased third quarter sales in an “uncertain” market.

Like-for-like system sales, excluding splits, grew by 3.7% and total system sales were £363.7m, up 5.5% on the third quarter of last year boosted by new store openings.

Total orders in Q3 were down 1.2% to 16.7m. Growth in collections remained strong in Q3 and were up 8.4%.

The group said it continues to see a good opportunity to grow collections over the coming years as they remain lower as a percentage of total orders than other Domino’s systems globally.

Delivery orders were down 6.3% in Q3 reflecting softer demand in the wider delivery market.

Year to date, total orders are up 1.5% driven by the growth of collections.

New store openings well ahead of plan with 45 year to date, vs. 21 at the same point in FY22. As a result, we now expect to open at least 60 new stores in FY23.

New store openings trading ahead of expectations and its 2024 pipeline continues to grow with over 45 stores now in development compared to 25 in August 2023.

It has also made “significant digital progress”, with 8.7m active app customers, a 55% increase, and app orders as a percentage of online rising to 79.4% compared with 53.1% last year.

A trial with Uber Eats will start in some stores in early 2024.

CEO Andrew Rennie said: “Having been in the business for 100 days and spent that time travelling around the UK and Ireland visiting franchisees, suppliers and colleagues I’m even more excited about the opportunities ahead for Domino’s and our outstanding franchisees. I look forward to providing an initial outline on these growth opportunities for the business on 11 December.”

“Our franchisees are performing well in an uncertain market, and we are all benefiting from an aligned system. We remain focused on giving our customers great tasting food, exceptional service and great value, every single time. Together, our store openings are ahead of plan and trading well, collections are continuing to grow, our digital strategy is powering ahead, and we are bringing exciting menu innovation to our customers focused on different parts of the day.

“We’ve continued to make great strategic progress to drive sustainable growth. As we look into next year, we see inflation stabilising and our focus will be on continued customer and order growth, as well as franchisee profitability. We remain confident that our resilient, asset-light business model will deliver further financial and strategic progress, and increased returns for our shareholders.”

Finally, consumer group Henkel has raised its outlook for its 2023 financial year following strong performance in the third quarter.

In the third quarter of 2023, Henkel recorded Group sales of around €5.4bn and achieved organic sales growth of 2.8%.

This growth was driven by continued strong pricing in view of significantly higher raw material prices compared to the prior year.

Volume development was negative but showed a noticeable improvement compared to the second quarter.

Nominally, sales were 9% below the prior-year quarter, mainly due to the exit from the business activities in Russia in the second quarter and to negative foreign exchange effects.

“Despite a persistently challenging market environment, we successfully sustained our growth momentum in the third quarter, with both business units contributing. Based on this performance, we have today raised our outlook for the current fiscal year. Particularly for adjusted earnings per preferred share, we now expect a significant increase in the range of 15 to 25 per cent at constant exchange rates,” said Henkel CEO Carsten Knobel.

Henkel highlighted “very strong” organic sales growth in its consumer brands business unit, which has been operating in a new set-up since the beginning of the year and was driven by the global business areas laundry & home care and hair.

On the markets this morning, the FTSE 100 has edged down 0.1% to 7,396.2pts.

Risers include Naked Wines, up 7.3% to 30.6p, Premier Foods, up 1.6% to 126.4p and Glanbia, up 1.4% to €15.52.

Fallers include Domino’s Pizza Group, down 5.4% to 351.6p, Nichols, down 2.2% to 933.4p and C&C Group, down 1.6% to 141.5p.

Yesterday in the City

The FTSE 100 fell by 0.1% back to 7,401.7pts yesterday.

The day was headlined by a resurgent Marks & Spencer jumping 8.4% to 244.1p on strong than expected first half profits growth and the reintroduction of a shareholder dividend.

Other risers included McBride, up 5.9% to 49.3p, Hilton Food Group, up 4.8% to 706p, Nichols, up 3.7% to 954p, Tate & Lyle, up 3.6% to 655.5p, Associated British Foods, up 2.5% to 2,307p and Greencore, up 2.4% to 92.8p.

The day’s fallers included Virgin wines, down 2.7% to 36p, Ocado Group, down 2% to 539.2p, THG, down 1.8% to 68.8p, Sainsbury’s, down 1.4% to 267.7p and Naked Wines, down another 1.4% to 28.5p.