Investment: Somerfield keeps the City doubters at bay

SOMERFIELD, the supermarket group which merged with Kwik Save last year, said yesterday that the integration of the Kwik Save stores was on track and sales in its Somerfield outlets were encouraging.

Reporting doubled profits before exceptional items to pounds 113.8m in the six months to November, the company said it had started the conversion of the Kwik Save stores to the Somerfield format. It is also expanding its petrol forecourt deal with Elf to open up to 50 more stores over the next 18 months, creating 1,500 new jobs.

Somerfield, which walked away from a merger with the Booker cash and carry chain in September, said a Booker deal was no longer part of its plans. "It's not on our radar screens," said David Simons, chief executive. However, he refused to rule out a possible deal at a later stage.

It is deals that have transformed the Somerfield share price since its troubled launch on the stock market in August 1996. The shares soared on the back of the Kwik Save merger as the market warmed to the potential cost savings and buying efficiencies.

Though the City has been sceptical about the company's ability to grow sales and keep pace with industry leaders such as Tesco and Asda, US investors, in particular, have concentrated instead on the company's strong cash generation. US investors now account for more than a third of Somerfield's equity.

Yesterday's figures kept the doubters at bay once again, though like- for-like sales have slowed and the Kwik Save stores are being run for cash. Like-for-like sales at the Somerfield fascia were up by 3.4 per cent in the half, but this has slowed to 1.7 per cent in the eight weeks over Christmas.

At Kwik Save sales are down by 3.1 per cent on a same-store basis. However, the company said it would stop reporting like-for-like sales for the chain as they are no longer a prime consideration. It will concentrate instead on squeezing profits higher ahead of their ultimate conversion to Somerfield.

Ten of the Kwik Save outlets have been converted to the Somerfield format with a further 53 to change over the next four months. The Kwik Save head office in Prestatyn has been closed with only 100 of the 800 workers being offered jobs at Somerfield's Bristol headquarters.

The Food Giant stores have already been converted to the Kwik Save format. But though Mr Simons and his team insist the number of store closures will remain at 130, analysts believe the final number will be higher and that other under-performers will be closed.

The management task of integrating nearly 900 Kwik Saves with Somerfield's own 472-strong portfolio should not be under-estimated, though management has done well so far.

On full-year forecasts of pounds 221m the shares - up 5.5p to 431.5p yesterday - trade on a forward rating of 13. Though the company has its supporters, Paul Smiddy at Credit Lyonnais Laing is not impressed. "You could buy Safeway shares at the same price with less risk," he says.

Start your day with The Independent, sign up for daily news emails
Voices
Barn owls are among species that could be affected
charity appeal
News
Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Sport
After another poor series in Sri Lanka, Alastair Cook claimed all players go through a lean period
cricketEoin Morgan reportedly to take over ODI captaincy
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas