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Booker shares gain after reporting first quarter sales growth amid Tesco takeover probe

Booker's first quarter results were boosted by favourable weather and a late Easter
Booker's tobacco sales have been adversely affected by tightened legislation

Booker Group plc (LON:BOK) proposed a special dividend after “another good quarter” as competition authorities continued to review its planned takeover by Tesco  plc (LON:TSCO).

The UK’s largest wholesale operator, which also owns the Budgens, Premier and Londis stores, reported a 4.0% rise in total sales in the first quarter to 16 June, as a 9.4% increase in non-tobacco sales offset an 8.2% drop in tobacco sales. Tobacco sales continued to be adversely affected by changes in legislation, Booker said.

On a like-for-like basis, sales grew 4.2% with non-tobacco up 9.6% and tobacco down 7.9%.

Chief executive, Charles Wilson, said: "Overall Booker Group had another good quarter. Favourable weather and the late Easter assisted this growth.”  

He added: “Booker Direct, Chef Direct, Ritter and Booker India performed as we expected.  Premier continues to grow and we continue to make good progress with Budgens and Londis.”

The group has recommended a special dividend of 3.02p per ordinary share at a cost of £54mln on top of the final dividend of 4.97p. Shareholders will vote on the proposed dividends at the company’s annual general meeting today.

Shares rose 3.75% to 191.10p in late morning trading. 

Booker's planned Tesco merger under review 

On its planned £3.7bn Tesco tie-up, the company said it would not be making forward looking statements for the duration of the offer period.

The Competition and Markets Authority is currently reviewing whether the merger could reduce choice for shoppers and for Booker’s small stores.

Since the companies announced the deal in January, some of Tesco’s shareholders have voiced their opposition to the takeover. In March, Schroders – one of Tesco’s biggest investors – said it felt the company was paying a premium for Booker and that the deal would distract it from its turnaround plans for its core supermarket business. 

Booker's first quarer trading 'outstanding', says Shore Capital 

Shore Capital said Booker's first quarter trading update was "outstanding", which implies "upgrade potential". 

However, the broker said the performance of Booker's share price is largely dependent on the outcome of its proposed merger with Tesco.

"If the Tesco merger goes through then in time Booker shareholders may participate in the ongoing recovery of Britain’s leading supermarket chain," ShoreCap said.

"However, even with this excellent trading momentum recorded in Q1, should the CMA put a spanner in the works then we see Booker shares losing a lot of rating, possibly a third, and hence we retain our 'sell' recommendation."

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