A year after having issued a profit warning, and following £1bn of investment to improve the UK operation, profits at Tesco (TSCO) - the UK's biggest supermarket - have taken a hefty dive. That significantly reflects a £1bn writedown at the now discontinued US Fresh & Easy business, which revealed a painful £169m trading loss. Adjust for that, and various other charges, and weak trading helped underlying pre-tax profit to slide 14 per cent in 2012 to £3.55bn.
As well as the widely-expected US exit, there were a further £1.4bn of one-off charges - including a £804m UK property writedown on more than 100 sites originally earmarked for development. Now, in a sign that the so-called supermarket space race is over, Tesco is shifting its investment to online and convenience stores. Tesco also took a £495m charge on its struggling businesses in Poland, the Czech Republic and Turkey, and increased its provision for payment protection insurance claims by £115m at Tesco Bank.
Underlying trading looks tough, too. In the UK, same store sales - excluding VAT, petrol and vouchers - fell 0.3 per cent, while UK trading profit dropped 8.3 per cent to £2.27bn. A 5 per cent like-for-like decline in general merchandise sales also dragged on performance. Although clothing did well - sales from Tesco's F&F brand exceeded £1bn and like-for-like sakes grew 9 per cent for the year.
Overseas, meanwhile, restrictions on store opening hours in Korea and weak conditions in central Europe helped international same store sales to fall 2 per cent - resulting in a 19.6 per cent fall in the international trading profit to £990m. Still Tesco's online sales grew 13 per cent, surpassing the £3bn mark for the first time.
Broker Shore Capital has cut its 2013 pre-tax profit forecast, adjusted for property, by 1.5 per cent to £3.32bn, giving adjusted EPS of 32.5p (from 31.5p in 2012).
| TESCO (TSCO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 377p | MARKET VALUE: | £30.4bn | |
| TOUCH: | 376-377p | 12-MONTH HIGH: | 388p | LOW: 295p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 245 | |
| NET ASSET VALUE: | 207p* | NET DEBT: | 40% | |
| Year to 23 Feb | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 53.5 | 2.88 | 27.1 | 12.0 |
| 2010 | 56.9 | 3.18 | 29.3 | 13.1 |
| 2011 | 60.5 | 3.64 | 34.4 | 14.5 |
| 2012 | 63.9 | 4.04 | 34.9 | 14.76 |
| 2013 | 64.8 | 1.96 | 1.54 | 14.76 |
| % change | +1 | -51 | -96 | - |
Ex-div: 24 Apr Payment: 5 Jul *Includes intangible assets of £4.36bn, or 54p a share | ||||
