Scotmid on lookout for takeover targets after Botterills move

SCOTMID is seeking further takeover targets after posting a small rise in sales for the first half of the year, boosted by a strong performance at the convenience stores it picked up in 2010 with the acquisition of Botterills.

The Newbridge-based co-operative, which also owns the Semichem health and beauty chain and a funeral business, said the trading environment remained “very challenging” in the face of the recession and a squeeze on customers’ spending power, but its results had been better than expected.

Chief executive John Brodie told The Scotsman: “The former Botterills stores are performing ahead of our core estate, which we expected, and we continue to invest in our online offering at Semichem. It’s started from a small base, relative to the whole business, and it’s showing some pretty impressive growth.”

For the six months to 28 July, the group reported an operating profit of £2.2 million, down from £2.6m a year earlier, although total turnover nudged up 0.8 per cent to £211.1m despite fierce competition from the likes of Sainsbury’s, which is expanding its Local convenience store format.

The poor summer weather put a significant dampener on sales during June and July, with products such as ice cream, salads and soft drinks being particularly affected, while sales of sun tan lotions were also hit at its 140 Semichem stores.

However, Brodie said the group was happy with its performance during the first half, traditionally its least profitable period. While underlying trading conditions have not changed since the start of the second half, he said full-year results are expected to be in line with last year, when it posted a profit of £6.5m.

He added: “Whilst these are exceptionally challenging conditions, they do bring opportunities. We’ve considered a number of things in the past six months, and we can afford to be selective in the current environment, so if there are complementary businesses that we feel would add value to Scotmid, we would look at them very seriously.”

Brodie said the 150-year-old retailer could look to make small bolt-on acquisitions to grow its existing businesses, or seek takeover targets that could sit alongside its current operations.

He added: “It’s hard to define, but given that we have a head office infrastructure and skills in multi-site operations and other disciplines, we could look at different opportunities.”

Scotmid, which has around 190 food stores across Scotland, is trialling a new branch format in Edinburgh’s Marchmont district, and Brodie said features such as an in-store Costa coffee kiosk, free wifi and an expanded range of fresh produce from local suppliers have been well received by customers. Despite increasing competition and a declining death rate, Brodie said the group’s funeral business had made “very good progress” and was looking for further expansion following the recent opening of two more funeral homes in Edinburgh.