UK Booker Grows Profits Ahead of Tesco Merger
As it prepares for a GBP3.7bn (EUR4.52bn) takeover by Tesco, the UK’s largest wholesaler recorded a 15% increase in full-year profits. Booker's sales for the year to 24 March 2017 grew 6.7% to GBP5.3bn (EUR6.47bn), up 0.5% on a like-for-like basis. Operating profit jumped 14% to GBP176.1mn (EUR214.89mn) with the wholesaler continuing to make progress on both the catering and retail sides of its business. Around 62% of Booker’s delivered sales during the year were to retailers and the company said that its Premier, Family Shopper and Londis convenience formats were working well. Online sales grew 10% to reach GBP1.072bn (EUR1.31bn).
In a company statement Booker confirmed that its planned merger with Tesco was expected to complete in late 2017 / early 2018, subject to competition authority and shareholder approval. The wholesaler said it expected the move to improve choice, quality, prices and service for consumers and help Booker’s catering and retail small businesses prosper in a challenging market.
Lisa Byfield-Green (Senior Retail Analyst)
Opinion A Healthy Merger?
Tesco is looking to strengthen its already leading UK position by acquiring Booker. It will create the UK’s largest food business. And the numbers are huge. In the convenience sector alone this potentially adds a further 5,312 Premier, Londis and Budgens convenience stores to Tesco’s portfolio, to complement its existing 2,678 (as of year end) Tesco Express and One Stop outlets.
The move also gives Tesco an opportunity to diversify its business, with an entry into the wholesale market, where Booker saw a 4.4% increase in like-for-like sales to caterers, including leading accounts such as Byron, Prezzo and Wagamama.
And Booker recorded its first billion pounds in e-commerce sales last year, with 569,000 online clients. This is encouraging and could allow Tesco further growth in this fast-moving channel, including the potential to utilise Booker warehouses for online fulfilment or Tesco click & collect.
As Tesco embarks on this acquisition, there is no doubt that Booker is in a strong financial position and gives the resurgent retailer diversification opportunities in growing channels, away from its core supermarket business. However, Tesco will need to be careful on two counts: firstly, that it does not allow the size of the integration task to distract it from the progress it is making to get its UK operations back on track. Secondly, that it does not face a backlash from consumers by becoming too big.