Every little yelps

17 April 2013 By George Hay Follow @gfhay

The UK’s biggest retailer saw annual profit dip for the first time in 20 years, and shuttered its disastrous U.S. foray. Yet it’s better to kitchen-sink now than later. And if a facelift for its UK stores improves sales, Tesco could return excess cash to investors in 2015.

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Tesco reported on April 17 underlying profit before tax for the year to 23 February of 3.5 billion pounds, down 14.5 percent on the year before.
Statutory profit before tax was 1.96 billion pounds, hit by an 804 million pound writedown related to UK property, a 495 million pound goodwill impairment on Polish, Czech and Turkish operations, and a 115 million pound increase in provisions against mortgage insurance mis-selling.
Tesco has also formally discontinued its U.S. business, Fresh & Easy, with restructuring and other one-off costs of 1 billion pounds. The business’s 1.2 billion pound loss for the year pushed Tesco’s overall profit for the year to 120 million pounds, down 96 percent on 2012.
Return on Capital Employed was 12.7 percent, down 200 basis points, and a target range of 12-15 percent ROCE will now replace a long-term target of 14.6 percent by 2015. Tesco maintained its dividend at 14.76 pence per share, and cut its capital expenditure by 19 percent to 3 billion pounds.
Tesco’s like-for-like sales growth excluding petrol sales was 0.5 percent in the fourth quarter.
At 1130 GMT, Tesco shares were trading at 373 pence, down 3.1 percent.

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