Somerfield disposals get underway - Brief Article

Eurofood, Feb 3, 2000

UK supermarket group Somerfield has withdrawn from the market 57 of the 100-140 stores it was planning to shed as part of a major disposal plan. The group denied the plan was in trouble after it announced the sale of 45 larger stores for 305m [pounds sterling] (??484m) but said it had received no acceptable offers for the 57 larger stores. Somerfieid still intends to sell 350 of the stores it acquired from Kwik Save and is "in discussion with a number of parties, on the basis of a large scale disposal," finance director Martin Gatto revealed. The other Somerfield stores will be sold in a piecemeal fashion.

News of the change to the disposal plan emerged after Somerfield revealed a steep decline in first half profits from 113.8m [pounds sterling] to 63.9m [pounds sterling] for the six months ended 28 November last year. Like-for-like sales in the first ten weeks of the second half were down by 8.4% and 5% in the last four weeks, the retailer added. In a very mature sector, Somerfield is trying to make itself over as a convenience store group, which is why it has decided to sell off many of its larger stores.

Somerfield stores to be sold

                                  Freehold   Leasehold   Total

Number of stores                        19          26      45
Square feet ('000)                     349         504     853
Net book value (m [pounds
 sterling])                            109          63     172
Sales (m [pounds sterling]
 1998/99)                                                  512
Contribution before overheads
 (m [pounds sterling] 1998/99)                              59
Estimated profits before tax
 (m [pounds sterling] 1998/99)                              29

Source: Somerfield

Somerfield H1 results ([pounds sterling] m)

                   1998            1999

Sales           3 210.2         2 980.5
Profits(1)         63.9           113.8

Source: Reuters Note 1 Pre-tax pre-exceptional