I think they’re in a bad place operationally and clearly in the head office - but seems the new CEO has the right plan on in store execution and then good to see no nonsense with the removal of the CFO as a result.
I’m going to remodel before adding but fairly sure this will look great value if one believes they’re not in terminal decline (which I doubt they are)
Thinking out loud now before really modelling - let’s take worst case EBITDA (pre IFRS 16) of £470m, then knock of £100m of D&A gives £370m EBIT
On an enterprise value (again pre IFRS 16) of £2,600m gives and EV/EBIT of 7 or EBIT yield of 14%
Then to lazily look at FCF - EBITDA of £470m less Capex of £140m gives £330m less interest of £70m and tax of £120m gives £280m FCF which would comfortably cover £140m of dividends for a 14p dividend which is today’s 8% dividend yield
Done this while sat on the sofa watching TV so its peak lazy analysis but looks pretty damn cheap
How do you calculate the EV? I assume you are excluding leases. If I exclude leases I get 2181M - 367M + 1137M = 2951M. Including leases it is 4382M. I am not a financial statement expert so I don't know what figure would make most sense.
Still seems pretty cheap as long as the biz volume / margins don't go further in decline.
Not sure about the Koyfin, but those data providers are not accurate all the time especially for non-US stocks given that different accounting standards such as IFRS 16 etc.
Additionally - I think the CEO has made about 50% of the obligated share purchases he needs to - whilst he may be short of cash now, I’ll be watching to see if he takes this opportunity to buy more
The pace is very quick! He's purchased around GBP$1m already at cost. From the most recent earnings call - the strategy to return to basics is pretty straightforward and clear and his purchases does signal that he thinks the issues are fixable and the stock is undervalued. Just have to note we will need to wait 12-18 months to see the results of his actions.
I think he can also build it using the stocks vesting as part of the compensation still that could the part of the deal that have talked verbally between him and board.
Are you concerned the business fundamentals have changed? Last 5 years declining operating margin, large debt acquisitions, new CEO, bad accounting, CFO resigned (fired), new CEO is reducing prices (acknowledges has no pricing power), etc.
I am a bit concerned given the large debt that the core business is broken and the debt will sink it.
B&M is a discount “variety” retailer, and the core economics of that model don’t normally lurch overnight. That said, margins can and do swing with freight, FX, mix (general merchandise vs FMCG), shrink and execution.
On management quality: recent events justify tighter scrutiny. On the other hand as Warren Buffett says often paraphrased as “buy businesses so good an idiot can run them” speaks to preferring resilient models over hero CEOs—but it’s a reminder, not a free pass on governance and controls.
On leverage and dividends: B&M targets net debt / adj. EBITDA (pre-IFRS 16) of 1.0–1.5×; it ended FY25 at 1.26× after paying £149m ordinary and £151m special dividends. Dividends are discretionary—if servicing debt became a concern, the board can trim or suspend distributions to preserve balance-sheet flexibility.
Agreed - they are targeting lower double-digit EBITDA in the long term. If we use the low end - 10% on stabilised revenue of $5.5b, $550 EBITDA less $100m D&A less interest of $66 less tax (25%) of $96 = $288 EAT.
Even if we use the downgraded EBITDA of $470, we still have earnings of $228.
Don't think they'll be going bankrupt any time soon.
Quick and rough math using more conservative numbers (i.e. higher debt, interest rate based on 2023 HY notes - whereas they have lower IR debt at different maturities)
I think they’re in a bad place operationally and clearly in the head office - but seems the new CEO has the right plan on in store execution and then good to see no nonsense with the removal of the CFO as a result.
I’m going to remodel before adding but fairly sure this will look great value if one believes they’re not in terminal decline (which I doubt they are)
I agree, I think their problems are fixable and some of them are not their fault such as business cycle.
Update us when you remodel. I am curious what conclusions you come to.
Will do!
Thinking out loud now before really modelling - let’s take worst case EBITDA (pre IFRS 16) of £470m, then knock of £100m of D&A gives £370m EBIT
On an enterprise value (again pre IFRS 16) of £2,600m gives and EV/EBIT of 7 or EBIT yield of 14%
Then to lazily look at FCF - EBITDA of £470m less Capex of £140m gives £330m less interest of £70m and tax of £120m gives £280m FCF which would comfortably cover £140m of dividends for a 14p dividend which is today’s 8% dividend yield
Done this while sat on the sofa watching TV so its peak lazy analysis but looks pretty damn cheap
How do you calculate the EV? I assume you are excluding leases. If I exclude leases I get 2181M - 367M + 1137M = 2951M. Including leases it is 4382M. I am not a financial statement expert so I don't know what figure would make most sense.
Still seems pretty cheap as long as the biz volume / margins don't go further in decline.
Yeah that’s right took leases out as all pre IFRS 16 numbers they’re using.
I saw enterprise value (including leases) of 4000 and then leases (current and non current) totalling 1400 so removing that leaves the 2600
What’s your method?
I just looked at the financial statement provided by koyfin (not sure if it is accurate). Took the Market cap - cash + long/short term debt
Not sure about the Koyfin, but those data providers are not accurate all the time especially for non-US stocks given that different accounting standards such as IFRS 16 etc.
earlier today, I took the same action
Additionally - I think the CEO has made about 50% of the obligated share purchases he needs to - whilst he may be short of cash now, I’ll be watching to see if he takes this opportunity to buy more
Are you sure that those ones were contractual obligation?
I think so as think he needs to accumulate 200% of salary in a number of years - but the pace of them is pretty indicative of a bullish view
The pace is very quick! He's purchased around GBP$1m already at cost. From the most recent earnings call - the strategy to return to basics is pretty straightforward and clear and his purchases does signal that he thinks the issues are fixable and the stock is undervalued. Just have to note we will need to wait 12-18 months to see the results of his actions.
I think he can also build it using the stocks vesting as part of the compensation still that could the part of the deal that have talked verbally between him and board.
Obligated share purchase? You mean as part of his employment contract he is required to buy shares? Where did you find this out?
Directors’ shareholding and share interests
Under the remuneration policy which operated during the year, the shareholding guideline for the Chief Executive Officer and Chief Financial Officer
is for a shareholding to be built up and maintained of 200% and 175% of base salary respectively.
https://www.bandmretail.com/~/media/Files/B/Bmstores-Corp/documents/investors/company-meetings/agm/2025/bm-ar-and-accounts-2025.pdf
Are you concerned the business fundamentals have changed? Last 5 years declining operating margin, large debt acquisitions, new CEO, bad accounting, CFO resigned (fired), new CEO is reducing prices (acknowledges has no pricing power), etc.
I am a bit concerned given the large debt that the core business is broken and the debt will sink it.
B&M is a discount “variety” retailer, and the core economics of that model don’t normally lurch overnight. That said, margins can and do swing with freight, FX, mix (general merchandise vs FMCG), shrink and execution.
On management quality: recent events justify tighter scrutiny. On the other hand as Warren Buffett says often paraphrased as “buy businesses so good an idiot can run them” speaks to preferring resilient models over hero CEOs—but it’s a reminder, not a free pass on governance and controls.
On leverage and dividends: B&M targets net debt / adj. EBITDA (pre-IFRS 16) of 1.0–1.5×; it ended FY25 at 1.26× after paying £149m ordinary and £151m special dividends. Dividends are discretionary—if servicing debt became a concern, the board can trim or suspend distributions to preserve balance-sheet flexibility.
Agreed - they are targeting lower double-digit EBITDA in the long term. If we use the low end - 10% on stabilised revenue of $5.5b, $550 EBITDA less $100m D&A less interest of $66 less tax (25%) of $96 = $288 EAT.
Even if we use the downgraded EBITDA of $470, we still have earnings of $228.
Don't think they'll be going bankrupt any time soon.
Quick and rough math using more conservative numbers (i.e. higher debt, interest rate based on 2023 HY notes - whereas they have lower IR debt at different maturities)
Debt = 1.5 x $550 EBITDA = $825
Interest = 8% x $825 = $66