Demonstrating solid retail skills, Jumbo hit a new net income record for a sixth consecutive year, rising 8% y-o-y to EUR162.9m in FY19, driven by booming Romania, strong Bulgaria and a domestic sales uptrend in the six-month period ending 30 June 2019, coming in 2% ahead of our EUR160.2m call.
This small net income beat stems from a) less-than-feared gross margin decline in H2 (on particularly tough base effects along with the USD strengthening vs euro), down 1.3pp y-o-y to 54.2%, but, take note, 0.6% higher vs our expectations, and b) a tight grip on the distribution cost front, rising 1% to EUR73.8m in H2 (5% below PSe), compared to +11% in H1 and +7% in FY19.
Surprising to the upside, Jumbo lifted FY19 final DPS by 29% y-o-y to EUR0.28 (vs PSe of EUR0.25), implying a 1.6% yield on Tuesday’s close (already paid-out a EUR0.19 interim DPS last May, while the ex-date is set for 11 November).
On the flip side, endJune 2019 net cash shaped at EUR295.8m, EUR28m short of our expectations, owing to WC deterioration (FCF eased to EUR78m vs EUR129m in FY18, implying 3.3% FCFY down from 5.5%).
The latter largely mirrors an increase of 17% in inventories (WC now at 35.4% of sales from 31.8% in FY18) as Jumbo most likely stocked up heavily ahead of new store openings and a potential stronger Christmas period in Greece this year. Looking ahead, Jumbo said that fiscal 1Q20 sales were up by a good 8%-plus y-o-y, ie at slightly stronger growth rate compared to 2H19, paving the way for a strong 2020e. In fact, we expect FY20e group sales, EBITDA and net income to expand by