Top British supermarket Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) is due to announce its half-year results on Wednesday next week (2 October).
At the time of writing, Tesco’s shares are trading at 374p – up 1% from six months ago compared with a 3% rise for the FTSE 100.
How will Tesco’s business have performed in the first half compared with last year? And is the group on track to meet forecasts for this year’s key full-year numbers? Here’s your cut-out-and-fill-in table!
| H1 2012/13 | FY 2012/13 | H1 2013/14 | Forecast FY 2013/14 |
Forecast FY growth |
|
|---|---|---|---|---|---|
| Revenue* | £32.31bn | £65.40bn | ? | £67.28bn | +2.9% |
| Trading profit | £1.59bn | £3.45bn | ? | £3.50bn | +1.4% |
| Trading margin | 4.91% | 5.28% | ? | 5.20% | |
| Underlying profit before tax |
£1.76bn | £3.55bn | ? | £3.43bn | -3.4% |
| Underlying earnings per share (diluted) |
17.48p | 35.97p | ? | 33.31p | -7.4% |
| Dividend per share | 4.63p | Final: 10.13p Total: 14.76p |
? | 15.02p | +1.8% |
* Excluding VAT, including petrol
Source: Tesco corporate website
Not many Footsie companies give analyst consensus forecasts on their websites; and I applaud Tesco for being one of the virtuous few. However, on Monday morning this week Tesco’s website was showing consensus forecasts dated May 2013. I contacted investor relations, asking whether these forecasts still represented “current market expectations”. That evening investor relations got back to me, saying they had just published updated figures.
The new consensus forecasts for the year ending 14 February 2014 are lower across the board than those that had graced Tesco’s website up until nine days before the release of the company’s half-year results this coming Wednesday. Just saying.
Revenue
The analyst consensus is for a near 3% rise in revenue (excluding VAT, including petrol) for the full year, so shareholders should be looking for a first-half improvement on last year’s H1 figure of £32.3bn.
Expect to see such improvement coming from new business, because Tesco’s report on this year’s first quarter showed like-for-like sales declines in all markets, with the exception of modest growth in Hungary (+0.2%) and Malaysia (+1.3%). Keep an eye out for improvement or deterioration in the like-for-likes, and also watch the bank and motor insurance numbers where veteran retail analyst Clive Black is expecting to see first-half weakness.
Profit, EPS and dividend
The analyst consensus is for a somewhat lower trading margin for the full year (5.2% versus last year’s 5.9%), meaning forecast trading-profit growth (+1.4%) is below the level of revenue growth. Nevertheless, shareholders should be hoping to see a better-than-1.4% improvement in first-half trading profit on last year’s £1.6bn, because that was achieved at a margin of 4.9%.
However, at the levels of underlying profit before tax (PBT) and earnings per share (EPS) the analyst consensus is for full-year declines of 3.4% and 7.4%, respectively. Look to see if this year’s first-half numbers compared with last year’s H1 (PBT £1.76bn; EPS 17.48p) are consistent with the full-year forecast declines.
Tesco held last year’s dividend at the same level as the previous year (14.76p). The analyst consensus is for an increase to 15.02p this year. If there is an increase, I think it more likely to come with the final dividend, so I’m expecting next week’s interim to be held at the same level as last year’s 4.63p. Anything above that would be a very bullish signal that management is confident the business is back on track.