Thursday, July 27, 2017

Tesco to exceed predictions with jump in annual profits

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Tesco is expected to see a jump in annual profits as it aims to reassure shareholders ahead of the looming £3.7 billion merger deal with Booker.

On Wednesday, the grocer is set to reveal underlying profits above the City’s expectations of £1.2 billion, marking a definitive end to a turbulent time following 2014’s accounting scandal.

The UK’s largest grocer saw a profit of £944 million last year, which pales in comparison with a £4 billion profit just five years earlier.

Many investors are concerned the recovery process will be jeopardised by the integration of Booker under chief executive Dave Lewis.

Schroders and Astisan Partners, who have a nine per cent stake between them in the govery retailer, revealed their opposition to the deal last week.


READ MORE: Tesco axes 24hr trading service in 8 stores


Late last month, Tesco agreed to pay a £129 million settlement to end the investigation by the Serious Fraud Office into the accounting scandal of 2014.

It is estimated that the restructure following the affair cost the company £6.4 billion as it cut the value of its property and stock.

Tesco’s lawyers will attend Southwark Crown Court this week hoping to put a definitive end to the ordeal, seeking approval for a deferred prosecution agreement in relation to the SFO’s investigation.

This would enable the company to avoid further prosecution by paying a fine.

In recent months, Tesco’s focus on continual discounting and own-label farm brands has seen it win back customers favour in the UK market.

Lewis has said he wanted to see 3.5p in every £1 spent go to operating profits by 2020. Tesco currently makes around 2.2p in the pound.

He is also aiming to cut around £1.5 billion from Tesco’s running costs by making its distribution network more efficient, which has already seen 3000 jobs put at risk.

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