Tesco's (TSCO) full-year results were hammered by a whopping £7bn impairment charge, predominantly for non-cash items. The lion's share - £4.7bn - related to property write-downs. The scale of these charges was unexpected, but it's hardly surprising that new boss 'Drastic' Dave Lewis wants to take a big hit up front in order to build Tesco's investment story anew - the well-trodden kitchen-sink path.
The fact is, underlying trading wasn't too bad. Adjusted trading profit of £1.4bn was 58 per cent lower than last year, but in line with guidance. UK like-for-like sales volumes rose for the first time in three years in the final quarter, suggesting Tesco's investment in service, products and prices is attracting shoppers. However, that investment drove UK profits down 79 per cent, while trading in Asia and Europe showed little sign of improvement.
"We have a long way to go and I don't think it will be smooth," said Mr Lewis. He added that maintaining profits even at current levels would be "challenging", and further investment might be needed. On the potential for fundraising, he said all options were "on the table", but that he would try to realise as much value from the business as possible before considering an injection of fresh equity.
The consensus adjusted EPS forecast for the current financial year is 10p, up from 9p.
| TESCO (TSCO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 235p | MARKET VALUE: | £19bn | |
| TOUCH: | 235-235p | 12-MONTH HIGH: | 313p | LOW: 155p |
| DIVIDEND YIELD: | 0.5% | PE RATIO: | na | |
| NET ASSET VALUE: | 87p* | NET DEBT: | 148% | |
| Year to 28 Feb | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 60.5 | 3.64 | 34.4 | 14.5 |
| 2012 | 63.9 | 4.04 | 34.9 | 14.76 |
| 2013 | 63.4 | 2.06 | 0.4 | 14.76 |
| 2014 | 63.6 | 2.26 | 12.1 | 14.76 |
| 2015 | 62.3 | -6.38 | -70.8 | 1.16 |
| % change | -2 | - | - | -92 |
Ex-div: na Payment: na *Includes intangible assets of £3.78bn, or 46p a share | ||||
