Somerfield takeover talks at 'advanced stage'

British supermarket group Somerfield unveiled a 63% rise in profits today as it said discussions with potential takeover parties had reached an “advanced stage”.

The improved annual performance cae after the Bristol-based company embarked on its biggest ever programme of refits and added new sites as part of a drive to capture more of the market for convenience store shopping.

It described current trading conditions as challenging, but said the decline in like-for-like sales at the Somerfield fascia had narrowed to 0.7% in the nine weeks to July 2, from 1.2% over the previous six months.

Somerfield added that “substantial progress” had been made by parties interested in buying the group – a takeover saga that dates back to a failed £1bn (€1.47bn) bid from Icelandic retail investment group Baugur in February.

Baugur remains part of a consortium still circling Somerfield, while a second group is said to feature London & Regional Properties and Japanese bank Nomura.

Somerfield chief executive Steve Back said today: “Discussions have now reached an advanced stage. There can, however, be no certainty at this time that an offer for the group will be forthcoming.”

In today’s figures, Somerfield reported profits before exceptional items of £53.1m (€78.2m), following sales of £5.2bn (€7.6bn) – an improvement of £161m (€237m) despite the closure of stores with business of £2.2bn (€3.2bn) in 2003/04.

Among the changes, Somerfield withdrew its Kwik Save brand from Scotland and set about refocusing the chain on its traditional heartland of the Midlands, Wales and the North of England.

Many of the division’s sites were closed while 76 stores were converted to Somerfield stores as the core estate grew from 634 in April 2004 to 814 at the end of the last financial year. The Kwik Save portfolio reduced from 634 to 494.

The acquisition of 114 former Safeway Compact stores increased the company’s share of the grocery market from 3.5% to 4.2% while the group’s total market holding increased to 6% by the year end, in line with its growth targets.

Mr Back said he was hopeful the chain could improve its market share further, even though trading conditions remained tough.

He added: “We expect the year ahead to be challenging with subdued consumer demand and continued intense competition. We remain confident, however, that the transformation plans for the business will create sustainable growth.”