Kwik Save offloads Lateshopper chain: Blakemore buys 'very profitable' corner shops business in pounds 9.5m deal

Click to follow
KWIK SAVE is increasing its focus on discount retailing with the sale of its Lateshopper chain of corner shops in a deal worth pounds 9.5m.

The 71 stores are being bought by A F Blakemore, which operates 35 convenience shops and supplies Spar and VG stores in central England, East Anglia and North Wales. It is paying pounds 3.5m and settling about pounds 6m of inter-company loans.

Kwik Save said when it announced its results in November that it was reviewing the alternatives for the chain.

'It is a very profitable business,' said Derek Pretty, finance director. 'But it represents less than 2 per cent of our turnover and 1 per cent of our profits. To develop to the next stage it needs a quantum of management resources disproportionate to the returns we can see.

'Particularly in the current retailing climate, we felt we should not be diverting management effort away from our core business to something that is not expected to be a significant profit-earner.'

Kwik Save acquired Tates, owner of Lateshopper, seven years ago when it had 16 stores. In the year to August it made pounds 1.4m pre-tax profit on sales of pounds 57.8m.

At the time of acquisition the group had few Kwik Save stores in Lateshopper's northern England heartland, but it now has more than 100 and there is a risk that the two chains will start to compete.

The deal will leave Kwik Save with 814 discount stores as well as Liquorsave, which runs its in-store off-licences, and Colemans, which operates its concessions.

The group was one of the first discount operators in Britain and its no-frills formula has proved successful. It is, however, facing increasing competition from European discounters and the main supermarket groups.

The group will break even on the disposal after taking account of goodwill previously written off against reserves.

In a related deal, Kwik Save bought Lateshopper's 35 freehold sites for pounds 7.6m and is leasing them back to Blakemore for pounds 700,000 a year. Mr Pretty said this was designed to help Blakemore, a private company, fund the deal.

Kwik Save shares fell 6p to 606p.