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(Alliance News) - Tesco on Wednesday reported a drop in annual profit despite "exceptionally strong" sales growth during the Covid-19 pandemic, but it predicted a rebound in profitability in its new financial year.
For the year that ended February 27, revenue including fuel was GBP57.9 billion, down 0.4% from GBP58.1 billion in financial 2020 and pretax profit was GBP825 million, down 20% from GBP1.03 billion.
Revenue excluding VAT and fuel on a comparable 52-week basis was GBP53.45 billion, up 7.1% on GBP49.95 billion the year before but missing the company-compiled consensus forecast of GBP58.41 billion, while pretax profit missed the estimate of GBP891 million.
The UK's largest supermarket chain held its annual dividend at 9.15 pence by declaring a 5.59 final payout.
In addition, Tesco confirmed a press report that it hired Kingfisher CEO Thierry Garnier as a non-executive director. Tesco also appointed Bertrand Bodson, the chief digital officer of Swiss pharmaceutical firm Novartis, as a non-executive director. Bodson was previously chief digital & marketing officer at the Argos division of Tesco peer J Sainsbury.
Looking ahead, Tesco said it is well placed for the current year with strong improvement in profitability expected. It also anticipates a return to profit for Tesco Bank in financial 2022 from a GBP175 million operating loss in financial 2021.
"Whilst we expect some of the additional sales volumes we have gained this year in our core UK market to fall away as COVID-19 restrictions ease, we expect a strong recovery in profitability and retail free cash flow as the majority of the additional costs incurred as a result of the pandemic in the 2020-21 financial year will not be repeated," the company said.
Chief Executive Ken Murphy added: "While the pandemic is not yet over, we're well-placed to build on the momentum in our business."
Tesco shares were down 3.3% early Wednesday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.1% at 6,882.76
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Hang Seng: up 1.2% at 28,846.85
Nikkei 225: closed down 0.4% at 29,620.99
DJIA: closed down 68.13 points, 0.2%, at 33,677.27
S&P 500: closed up 0.3% at 4,141.59
Nasdaq Composite: closed up 1.1% at 13,996.10
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EUR: up at USD1.1968 (USD1.1930)
GBP: up at USD1.3793 (USD1.3738)
USD: down at JPY108.88 (JPY109.25)
Gold: up at USD1,747.95 per ounce (USD1,742.96)
Oil (Brent): up at USD64.50 a barrel (USD63.84)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come
0830 BST UK Halifax house price index
1100 CEST EU industrial production
0830 EDT US import and export price indices
1400 EDT US Fed Beige Book
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Rapid spread of coronavirus variants could necessitate the reimposition of lockdown measures, a scientist advising the UK government said. Professor Peter Openshaw said his fellow scientists were "very concerned" after a cluster of cases of the South African coronavirus variant were found in London. Some 44 confirmed cases of the variant have been found in Lambeth and Wandsworth, with a further 30 probable cases identified, the Department of Health & Social Care said. Surge testing for those who live, work or travel through those areas is being made available, while NHS Test & Trace is providing additional testing in an area of Southwark where a case linked to the other cluster has been identified.
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US health authorities have recommended pausing the Johnson & Johnson Covid-19 shot over blood clot fears, with the company announcing it would delay its European rollout in a setback for global immunization efforts. Out of nearly 7 million Americans who have so far received the single-dose vaccine, 6 women between age 18 and 48 developed a rare type of clot in the brain, officials said. One later died, while another is in critical condition. US Food & Drug Administration scientist Peter Marks has said the disorder might be triggered by a rare immune response to the vaccine similar to that seen in a few hundred recipients of the AstraZeneca jab in Europe. Meanwhile in Germany, people under the age of 60 who have received a first dose of the AstraZeneca vaccine will receive a different jab for their second dose. But while J&J paused output, Pfizer said it increased production and could deliver 10% more doses than expected to the US by the end of May.
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BROKER RATING CHANGES
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GOLDMAN SACHS RAISES GLENCORE TO 'BUY' (NEUTRAL) - PRICE TARGET 350 (290) PENCE
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HSBC RAISES TULLOW OIL TO 'HOLD' ('REDUCE') - TARGET 43 (17) PENCE
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JPMORGAN CUTS RESTAURANT GROUP TO 'NEUTRAL' ('OVERWEIGHT') - PRICE TARGET 120 (95) PENCE
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COMPANIES - FTSE 100
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AstraZeneca said its Tagrisso drug has been approved in China for early-stage lung cancer. The approval comes after positive results from a Phase 3 trial, in which Tagrisso "reduced the risk of disease recurrence or death by 80%," AstraZeneca said. Tagrisso the only early-stage treatment for the disease to show efficacy in a global trial and the first to be approved in China, which has more than a third of the world's lung cancer patients, the drugmaker said. The drug is approved in "more than a dozen" countries including the US.
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COMPANIES - FTSE 250
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easyJet its interim results for the financial year that ended March 31 were slightly better than expectations, and it maintains significant liquidity, while also saying second-quarter cash burn was better than guidance. easyJet said it has operated a "disciplined" flying programme over the winter months whilst continuing to deliver a major restructuring and cost reduction programme. As a result, the carrier expects to report a first half headline pretax loss in the range of GBP690 million to GBP730 million, which is slightly better than expectations. It posted a headline pretax loss of GBP193 million last year. The airline said passenger numbers for the period decreased by 89% to 4.1 million, in line with a decrease in capacity to 6.4 million seats. This led to total group revenue for the six months decreasing by 90% to GBP235 million, with passenger revenue dropping by 91% to GBP165 million and ancillary revenue shrinking by 87% to GBP70 million.
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COMPANIES - OTHER UK
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Virgin Media's GBP31 billion mega-merger with telecoms firm O2 has been provisionally cleared by the UK competition watchdog. The Competition & Markets Authority said its in-depth investigation found that the deal is unlikely to lead to any substantial lessening of competition in relation to the supply of wholesale services. The CMA launched its probe amid concerns that Virgin and O2 could have an incentive to raise prices or reduce the quality of wholesale services to other network operators in the UK, or even withdraw them altogether, which could have ultimately led to a worse deal for retail consumers. But in its provisional decision, the CMA said the merged company would face competition from other providers and would therefore need to remain competitive or risk losing wholesale customers.
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Tracking technology company Buddi is set for an initial public offering in London later this year, Sky News reported on Tuesday. The company has appointed Zeus Capital to oversee the listing later this year, which could value Buddi at GBP500 million, Sky News said. Buddi was founded in 2005 by Sara Murray, the creator of price comparison site Confused.com. The company makes wristbands which can track the location of vulnerable people and prisoners. Buddi supplies more than 80% of local authorities in the UK and has government customers around the world, Sky said.
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COMPANIES - GLOBAL
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The arrival Wednesday of cryptocurrency exchange Coinbase on Nasdaq is one of the most anticipated events of the year on Wall Street, where enthusiasm for record-breaking bitcoin is in full swing, despite questions about the sustainability of the market. The first company devoted entirely to cryptocurrency to enter the US stock exchange, Coinbase – which will be listed under the symbol COIN – is already a heavyweight. Nasdaq on Tuesday night set a reference price for Coinbase at USD250 per share. Taking into account the shares in circulation, stock options and restricted shares, Coinbase's overall valuation will begin at USD65.3 billion. That makes Coinbase the biggest new US stock market entrant since Uber in 2019.
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Toshiba Chief Executive Nobuaki Kurumatani resigned on Wednesday, a week after Toshiba received an acquisition proposal from a UK private equity firm. The Japanese industrial conglomerate said its board of directors has accepted his resignation and appointed Satoshi Tsunakawa to take over the role. The changes are effective immediately, it said. Toshiba said last week it had received an initial buyout proposal from CVC Capital Partners, where Kurumatani previously served as Asia-Pacific chair. Japan's business daily Nikkei reported CVC Capital Partners was considering purchasing the 145-year-old Toshiba for JPY2.3 trillion, about USD21 billion.
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Wednesday's Shareholder Meetings
AFC Energy PLC - AGM
Smith & Nephew PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2021 Alliance News Limited. All Rights Reserved.
