Argyll stages pounds 208m share buy-back

Argyll, the Safeway supermarket group, undertook the first share buy- back in the supermarket sector yesterday when it acquired 60 million of its own shares. Priced at 346p per share, the total value of the transaction was pounds 208m. The deal represents 5.25 per cent of the company's share capital.

Argyll bought the shares yesterday afternoon after it had been granted shareholder approval at the company's annual meeting in the morning. Argyll's gearing will rise from the year-end level of 13 per cent to 30 per cent as a result. The company expects the buy-back to enhance earnings per share by about 1 per cent this year. It said the company's higher gearing would not constrain the Safeway's expansion plans.

In an update on current trading, Argyll chairman Sir Alistair Grant said sales in the 13 weeks of its current year were 9.7 per cent ahead of the same period last year. Stripping out new stores openings, like-for-like sales were 5.2 per cent ahead.

Gross margins, excluding petrol, are slightly down on the year. Sir Alistair said this was "as anticipated" though the trend was improving. The petrol price war continues to have "an adverse effect" on Safeway's petrol business which is understood to be operating at break even levels.

Sir Alistair said the group was starting to benefit from the Safeway 2000 restructuring programme. "Free from the disruption which inevitably accompanied these changes we are confident of delivering a year of good profit growth," Sir Alistair said.

Argyll sought formal approval from shareholders to change the company name to Safeway.