Booker confirms £3.7bn Tesco merger on track amid 9% profits surge
Wholesaler Booker has reported a 9% rise in profits and confirmed that its £3.7 billion merger with Tesco is still set to close by early 2018, despite an ongoing competition probe into the deal.
The group released interim results showing that pre-tax profit jumped just shy of double digits to £88 million in the 24 weeks to September 8, though total sales grew only 2.5% to £2.6 billion.
Revenues were weighed down in part by a 9% drop in tobacco sales in light of "legislative changes", with shops having been forced to stop displaying tobacco products earlier this year.
Non-tobacco sales rose 7.5%, helping to offset the decline.
The company also cheered "good progress" in its catering and retail operations, which saw like-for-like sales rise 8.1% and 0.6%, respectively.
Booker added that it was still confident it would close a multibillion-pound merger deal with Tesco by early next year.
"It is expected that the merger will complete in early 2018, subject to, amongst other things, the necessary shareholder approvals," Booker said.
"During this process Booker will continue to ensure it is 'business as usual'. We are excited by the opportunities the merger will create for consumers, our customers, suppliers, colleagues and shareholders," it added.
The deal is facing an in-depth investigation by the Competition and Markets Authority (CMA) amid concerns that competition could be harmed in more than 350 local areas where there is an overlap between Tesco shops and Booker "symbol stores".
Booker is the country's largest wholesaler and owns Londis and Budgens as franchised outlets, and the CMA is concerned that shoppers could face worse terms when buying their groceries as a result of the deal.
Provisional findings from the probe, which was first announced in July, are expected to be made public by the end of October, Booker said.
The final report is slated before year-end.
If the merger follows Booker's forecasted timeline, it would bring the deal to a close around one year after it was first announced in January 2017.
Julie Palmer, a retail expert for insolvency firm Begbies Traynor, said there were still concerns about the deal's success.
"While tobacco sales continue to be a weak spot for the group, these issues pale in comparison to the potential risks associated with the CMA's investigation into Booker's proposed £3.7 billion merger with Tesco which, if you believe the hype, could be hanging in the balance," she said.
"Despite confidence from Tesco's CEO Dave Lewis, recent calls from the UK's seven biggest wholesalers for the CMA to block the Tesco-Booker merger have created a cloud of uncertainty around the prospects of a deal for investors, who will be waiting until the end of the year to see which way the cookie crumbles."
Booker shares edged higher in the wake of the trading update, up nearly 0.4%, or 0.8p, at 206.1p in morning trading.