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Tesco's share price hit a three-month high on these half-year results, which were ahead of analysts' consensus forecasts. Although the supermarket giant was not immune to the bad weather, sales in the UK grew by 5.4 per cent in its core food and petrol business, reassuring investors after a cautious statement in June.
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Since then, Tesco has implemented a round of price cuts to keep customers coming, but growth in the first half was also driven by increased sales of high margin products, such as Tesco Finest.
Sales in non-food slowed slightly as a result of the miserable summer weather, but trading in the autumn had started well. The Cheshunt-based retailer still has strong ambitions for this part of its business, with Tesco Direct, its catalogue and online division, expected to generate £150m of sales in the current financial year. And the fast -growing international division also performed strongly, despite challenges in countries such as Thailand and Hungary.
Broker Citi is maintaining its full-year EPS forecast of 23.6p (from 21.1p in 2007), rising to 27p in 2009.
TESCO (TSCO) |
||||
|---|---|---|---|---|
| ORD PRICE: | 451p | MARKET VALUE: | £ 35,424m | |
| TOUCH: | 451.5-451.2p | 12-MONTH HIGH: | 473p | LOW: 365p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 136p | NET DEBT: | 49% | |
| Half-year to 25 Aug | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Net div per share (p) |
|---|---|---|---|---|
| 2006 | 20.7 | 1.09 | 9.95 | 2.81 |
| 2007 | 22.6 | 1.29 | 11.83 | 3.20 |
| % change | +9 | +18 | +19 | +14 |
Ex-div: 10 Oct Payment: 21 Dec * includes intangibles of £2.1bn, or 27p a share |
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Tesco will open its first US store next month. It will be interesting to see if it can successfully roll out its format in a market, where other retailers have seen their ambitions crushed. The shares are hardly a bargain on a 2008-09 forward PE ratio of 16.7. However, the rating looks warranted given that earnings per share are forecast to grow by 13 per cent a year between 2008 and 2010. Good value.
Last IC View: good value, 435p, 20 Jun 2007
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
