LONDON BRIEFING: Tesco Profits Surge Amid Stocking Up By Consumers

Wed, 07th Oct 2020 07:54

(Alliance News) - Tesco on Wednesday reported a rise in interim profit and also said it has hired a new chief financial officer.

The grocer has appointed Imran Nawaz as its new finance chief, who will join in April 2021. Nawaz is currently CFO at Tate & Lyle.

Turning to the results, revenue for the 26 weeks to August 29 rose 0.7% to GBP28.72 billion from GBP28.51 billion a year ago, while pretax profit jumped 29% to GBP551 million from GBP428 million.

The rise in profit came despite GBP533 million of Covid-19 costs taken in the half, though this was largely offset by business rates relief of GBP249 million and a contribution from higher-than-expected food sales. For the full-year, these costs are estimated at GBP725 million.

Group like-for-like sales in the half grew 6.5%, with the UK & Ireland up 7.2%.

Looking ahead, the supermarket chain said it expects a "broadly even balance" to the year in terms of retail profitability in the first and second half. Retail operating profit in the current financial year is now expected to be "at least" the same level as the year before on a continuing operations basis.

Tesco added: "We continue to expect to report a loss for the Bank of between GBP175 million and GBP200 million for the 2020/21 financial year. We will review any changes made to macro-economic forecasts and this could result in releases from or further additions to the bad debt provision. Whilst headline profitability is impacted in the short term, the Bank's capital ratios and liquidity remain strong."

The company boosted its dividend by 21% to 3.20 pence.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: called flat at 5,948.70

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Hang Seng: up 0.9% at 24,185.58

Nikkei 225: closed down 0.1% at 23,422.82

DJIA: closed down 375.88 points, 1.3%, at 27,772.76

S&P 500: closed down 1.4% at 3,360.95

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GBP: down at USD1.2901 (USD1.2956)

EUR: down at USD1.1751 (USD1.1787)

Gold: down at USD1,890.89 per ounce (USD1,909.10)

Oil (Brent): soft at USD42.21 a barrel (USD42.58)

(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

China National Day Golden Week continues. Financial markets closed

0830 BST UK Halifax house price index

0930 BST UK House price index

1100 BST Ireland Industrial production and turnover

0800 SAT South Africa Gold & foreign exchange reserves

0800 CEST Germany Industrial production Index

0845 CEST France Foreign trade

0900 CEST Spain Industrial production

1000 CEST Italy Retail sales

0700 EDT US MBA weekly mortgage applications survey

1030 EDT US EIA weekly petroleum status report

1400 EDT US FOMC meeting minutes

1500 EDT US Consumer Credit

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Five of the UK's biggest lenders will pocket nearly GBP1 billion in a taxpayer-funded payout for supporting small businesses during the Covid-19 pandemic, according to a new report. An in-depth analysis of the UK government's GBP38 billion loan scheme by the National Audit Office also showed that "significantly above" GBP2 billion could have been paid out to fraudsters. The report warned the fraud risk was high because of the speed at which the bounce back loan scheme was implemented earlier this year. More than GBP38 billion bounce back loans of up to GBP50,000 each have been lent to close to 1.3 million companies. The government guaranteed the loans and promised to cover the first year's interest payments. Barclays, HSBC, Lloyds, NatWest and Santander paid out GBP31.3 billion of loans between them while 18 lenders others were responsible for GBP3.9 billion.

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Top US Democrat Nancy Pelosi slammed Donald Trump and the "complete disarray" of the White House Tuesday after he halted coronavirus stimulus talks, saying the president was "putting himself first" at the country's expense. "Today, once again, President Trump showed his true colors: putting himself first at the expense of the country, with the full complicity of the GOP Members of Congress," the House speaker said after Trump postponed negotiations on a new plan until after the November 3 presidential election. "Clearly, the White House is in complete disarray," she said, adding that Trump was rejecting Federal Reserve warnings that too little support would result in a weak recovery with unnecessary hardship for millions of American households and businesses.

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The US Food & Drug Administration made public its guidance for issuing emergency approval for a Covid-19 vaccine on Tuesday, making it clear it wants to see follow-up two months after trial volunteers have their second dose. It is therefore unlikely for Donald Trump's administration to have a vaccine on the market before the November 3 election, something the president frequently says is on the cards. The two companies that are furthest along in their vaccine trials, Moderna and Pfizer, both began their final stages at the end of July, and both require two separate injections 28 days apart. That would mean that only the first few people who signed up for the trial would have completed the follow-up period by the end of October, and there would probably not be enough data to apply for emergency use. The vaccines will have to inoculate half of all patients against Covid-19 and the FDA will need to say at least five cases of people severely ill in the placebo group.

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BROKER RATING CHANGES

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CREDIT SUISSE RAISES TAYLOR WIMPEY TO 'OUTPERFORM' ('NEUTRAL') TARGET 158(154) PENCE

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CREDIT SUISSE CUTS PERSIMMON TO 'NEUTRAL' ('OUTPERFORM') - TARGET 3094 PENCE

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JPMORGAN RAISES GLENCORE TO 'NEUTRAL' ('UNDERWEIGHT') - TARGET 230 (210) PENCE

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JEFFERIES RAISES DIAGEO TO 'BUY' (UNDERPERFORM) - PRICE TARGET 3300 (2200) PENCE

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COMPANIES - FTSE 250

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IP Group said Swiss pharma giant Roche has bought investee Enterprise Therapeutics's novel TMEM16A potentiator portfolio. Under the deal, Enterprise's shareholders received an upfront payment of GBP75 million and are eligible to receive additional contingent payments. As a result of this transaction, IP Group's cash realisations for the year to date now total GBP183.9 million, which it said is "2.3 times greater" than the GBP79.5 million recorded for the whole of 2019. Following completion of the transaction, IP Group holds just under a 22% stake in Enterprise.

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Liontrust Asset Management said it delivered a "strong" sales and fund performance over the past three months. The fund management firm posted net inflows of GBP777 million in the three months to September 30, and GBP1.75 billion for the six months to September. Assets under management & advice were GBP20.6 billion at the end of September, an increase of 28% since the start of the current financial year. "The strong momentum of the business over the past few years has continued through the Covid-19 crisis. This is testament to our fund management teams and their robust investment processes, strong relationships with clients, the power of the brand and how successfully everyone at Liontrust has adapted to the current environment," said Chief Executive John Ions.

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COMPANIES - MAIN MARKET AND AIM

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Inkjet printing technology company Xaar said it has been subject to a "cyber security incident" which involved unauthorised access to its computer systems. "Xaar has contained the incident and not experienced any impact to business operations and continues to fulfil all customer requirements. To date there is no evidence that any data has been extracted," the company said. It appointed external forensic cyber security experts whose investigations are ongoing. Xaar said it will work on a safe recovery of all systems, applications and data "as quickly as possible" to minimise any fallout from the incident on business.

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COMPANIES - GLOBAL

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Medtronic Executive Chair Omar Ishrak has decided to retire, and will not stand for re-election at the medical device company's upcoming annual general meeting. Ishrak was previously chief executive officer of Medtronic. "Ishrak's decision to retire, not stand for reelection and resign as executive chair and chair of the board was not the result of any dispute or disagreement with the company, the company's management or the board on any matter relating to the operations, policies or practices of the company," Medtronic said. The company also noted its current CEO, Geoffrey Martha, will take on Ishrak's role of chair of the board, and decided to reduce the number of seats on its board to 12 from 13.

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Wednesday's Shareholder Meetings

Argo Group Ltd AGM

Frasers Group PLC AGM

Goodwin PLC AGM

Unilever PLC GM re unification

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By Tapan Panchal; tapanpanchal@alliancenews.com