Booker surges on Londis, Budgens deal as it posts full-year profit growth

Shares in food wholesaler Booker surged nearly 10% on Thursday after the company said it has signed an agreement to acquire the entire issued share capital of Musgrave Retail Partner, which comprises the Londis and Budgens businesses for £40m, and announced a capital return of 3.50p a share.

Following completion, Booker's aim is to further develop the Budgens and Londis brands alongside Premier and Family Shopper, Booker's retail brands.

The company said it expects the acquisition to be earnings neutral in the first complete year of ownership and earnings enhancing thereafter.

Londis operates 1,630 convenience stores while Budgens has 167 stores.

Booker also said on Thursday that it has had a successful start to the new financial year, although it warned that the challenging consumer and market environment will persist tough the coming year and said the UK’s food market remains very competitive.

The capital return follows the successful integration of the Makro business.

“Following the successful integration of Makro into the Group and a period of strong cash generation, the Board implemented a capital return to shareholders of 3.50 pence per ordinary share (at a cost of approximately £61m) in July 2014,” said Booker. “Given the continued successful development of the Group, the Board is proposing a second capital return to shareholders of 3.50 pence per ordinary share” it added.

The company posted a 14% rise in pre-tax profit to £138.8m from £122.1m, despite tough competition in the UK food market and proposed a final dividend of 3.14p a share, up from 2.75 last year. This brings the total dividend for the year to 3.66p per share, up 14% from 2014.

Peel Hunt said the results were ahead of its £136m estimate and the consensus forecast of £138.8m, while the agreement to buy Londis and Budgens looks “excellent.”