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LONDON (Alliance News) - After initially opening higher due to a strong performance in Asian stock indices, UK equities slipped back to close lower Wednesday, as the final results of Tesco's annus horribilis dragged down other UK supermarket stocks.

Tesco said it swung to a big loss in its last financial year, after booking a staggering GBP7.0 billion of impairments, writedowns and restructuring charges, as it tried to put a difficult year behind it and get back on track in a revamp that new Chief Executive Dave Lewis admitted is going to take a long time.

The UK's biggest retailer reported a pretax loss for the year ended February 28 of GBP6.38 billion, compared with a profit of GBP2.26 billion a year earlier, as it booked GBP5.61 billion of impairments, mainly on its property portfolio, GBP570 million of stock-related charges, GBP416 million in restructuring costs, and a GBP208 million adjustment accounting for profit overstatements in previous years.

Lewis, who has embarked on a massive restructuring project, said reinvestment will be key to the company's success going forward.

"To rebuild our profit this year, even back to the level of what we achieved last year, isn't without its challenges," he told journalists. "We've got a long, long way to go, and I don't think it will be smooth as we walk through the changes we want to make."

Shore Capital said the supermarket's results "do not make for a pleasant read for any long-standing investors in Tesco" but the broker said it is happy with the new management team at the helm.

"Whilst the challenges are considerable and that there is no quick fix to Tesco's problems, with little or no hope to our minds of achieving the performance levels of halcyon days of old, we are pleased with the management team that has been put into place, which gives us some confidence of improvement and better times ahead," said Shore analyst Clive Black.

Tesco had traded higher earlier in the session but closed as the worst performer in the FTSE 100, down 5.2%. Tesco shares have lost 24% of their value in the past 12 months, despite a strong rally since the start of 2015.

Tesco shares were followed by Wm Morrison Supermarkets, down 3.9% Wednesday, and J Sainsbury, down 3.7%.

The FTSE 100 closed down 0.5% at 7,028.24, having briefly dipped below the 7,000 mark in the afternoon. The FTSE 250 closed down 0.4% at 17,635.55, and the AIM All-Share ended down 0.2% at 749.68.

In Europe, the CAC 40 in Paris outperformed to close up 0.4%, while the DAX 30 in Frankfurt ended down 0.6%.

At the closed of European equity markets, Wall Street was posting broad gains. The DJIA was up 0.3%, with the S&P 500 also up 0.3%. The Nasdaq Composite was up 0.1%.

The pound rose against the dollar to above the USD1.50 mark after the Bank of England's policy meeting minutes revealed another unanimous vote to keep interest rates and size of asset purchases unchanged. However, two of the nine members of the Monetary Policy Committee said the decision to keep rates on hold was a close call.

"All Committee members agreed that it was appropriate to leave the stance of monetary policy unchanged at this meeting, although two members regarded this month's decision as finely balanced," the minutes of the April 8-9 meeting read. "There was a range of views over the most likely future path of Bank Rate, but all members agreed that it was more likely than not that Bank Rate would rise over the three-year forecast period."

The minutes also stated that the impact of the strong pound was feeding into the consumer price index more quickly than expected, implying less downward pressure on prices in the coming months and a faster pickup in inflation once the effects of recent falls in energy and food prices drop out of the annual comparison.

At the London close, the pound traded the dollar at USD1.5029.

Rolls Royce ended as the best blue-chip performer, up 4.1% after it said Chief Executive John Rishton will retire on July 2 and be succeeded by former ARM Holdings CEO Warren East, an unexpected move that was welcomed by markets in the wake of several profit warnings in 2014.

East was CEO of chip designer ARM from 2001 to 2013, and became a non-executive director on the Rolls-Royce board in January 2014. Rolls said it had conducted an "extensive international search" for its new CEO.

Travis Perkins closed up 2.7% after it said total sales rose 7.2% and like-for-like sales grew 5.1% in the first quarter of 2015, well ahead of its medium-term like-for-like sales growth target. The builders merchant said strong growth in its general merchanting, consumer and contracts businesses more than offset a 3.7% decline in total sales and 6.1% decline in like-for-like sales in its heating and plumbing business.

Hargreaves Lansdown closed down 2.9% after its stock was downgraded to Hold from Buy by Jefferies, while Tate & Lyle closed as the worst performer in the FTSE 250, down 5.3% as it was cut to Underperform from Neutral by Credit Suisse.

Ladbrokes, down 3.2%, said its profit in the first quarter dropped heavily on the back of unfavourable sporting results and the implementation of tax hikes in the UK, as its new chief executive pushes ahead with plans to restructure the business.

Group net revenue was up 3.3% in the quarter, with UK retail net revenue up 4.3% and digital net revenue up by 9.5%, despite the latter taking a big hit from a sharp fall in revenue from its Sportsbook business, which was offset by a good performance in Australia.

In the economic calendar Thursday, there is the preliminary Japanese manufacturing Purchasing Managers' Index at 0235 BST and the Chinese manufacturing PMI at 0245 BST. After the UK market open, Markit services, composite and manufacturing PMI readings are due from France at 0800 BST, from Germany at 0830 BST, and from the eurozone at 0900 BST. US Markit manufacturing PMI is at 1345 BST. UK retail sales and public sector net borrowing are both due at 0930 BST.

In the UK corporate calendar, there are trading statements from defence engineer Meggitt and media buying giant WPP, an interim management statement from housebuilder Taylor Wimpey, and first-quarter production results from miner Anglo American. Fellow miner Acacia Mining issues first quarter results, and bookmaker William Hill and IT infrastructure services provider Computacenter both release first quarter interim management statements. Pace also releases an interim management statement.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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