The Investment Column: Booker

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The Independent Online
WHO WOULD have thought it? Booker, that dull old cash and carry business, is trying to become an Internet stock. That was the implication of its announcement yesterday that Booker plans to use its huge distribution and warehouse capability to offer a delivery service to online partners.

It may sound far-fetched but there is some logic to the thoughts of Stuart Rose, the former Argos chief executive who joined Booker last year. Booker has 176 depots and six huge distribution centres capable of reaching 95 per cent of the UK's population. These low-cost, well capitalised centres are currently under-used by Booker. They can therefore easily be offered as fulfilment centres for e-business operators that may have a sexy web site but no cost-effective means of delivery.

All this is further good news for Booker's long-suffering shareholders who have seen the shares treble from their low of 45.5p in January to 137.5p yesterday, up 0.5p on the day.

The surge has been achieved on the back of heavy cost-cutting and asset disposals which wrecked the half-year results.

Those results showed that pounds 149m of exceptional losses led to a pre-tax loss of pounds 129m compared to the previous year's pounds 47m profit. But debts are down to pounds 300m and the business is now focused on its cash-and-carry division where operating profits doubled to pounds 29m last year.

Like-for-like sales, excluding tobacco, have moved from a position of minus 5 per cent a year ago to flat.

The market is getting tougher due to the Wal-Mart effect, but Booker plans to drive sales by relaunching its Happy Shopper label in January and increasing its presence in chilled and ethnic foods.

On ABN Amro's full-year profit forecast of pounds 38m the shares trade on a forward multiple of 12. With a strong management team in place, that looks good value.