News Column

UK WINNERS & LOSERS: Tesco Profit Warning Drags Down All UK Grocers

August 29, 2014

LONDON (Alliance News) - The following stocks are the leading risers and fallers within the main London indices midday Friday.




HSBC Holdings, up 0.8%. The bank has had its rating raised by UBS to Buy from Neutral with a price target increase to 715 pence from 645p. The company trades at 652.3p.




Tesco, down 4.2%. The supermarket said it has brought forward the start date for its new chief executive, David Lewis, and has tasked him with conducting a review of the whole group, after it slashed its interim dividend, cut its capital expenditure plans, and said it expects trading profit to be significantly lower than last year. Tesco said trading conditions remain challenging and its ongoing investments in its customer offer - which includes big price cuts - have weighed on its expected performance. It said it was uncertain about how fast the benefits of the investments it is making would flow through in the second half of its financial year. The company said it now expects its trading profit in the current financial year that ends in February 2015 to be between GBP2.4 billion and GBP2.5 billion, and trading profit for the first half ending August 23 to be about GBP1.1 billion. That's a significant drop from the GBP3.32 billion trading profit it posted in the whole of its last financial year, and the GBP1.59 billion in trading profit it posted in the first half of that year. Furthermore, it expects to set an interim dividend of 1.16 pence, 75% below last year's interim dividend.

Wm Morrison Supermarkets, down 4.2%, J Sainsbury, down 2.7% and Marks and Spencer Group, down 2%. Tesco's statement has dragged down its UK rivals with it.




Bwin.Party Digital Entertainment, up 10%. The online gaming company announced it will simplify its structure to cut even more costs out of the business and drive revenue growth. It said the new approach would also allow it to consider alternative financing and corporate structures, which would create additional value. The company reported a pretax loss of EUR100.5 million for the six months to end-June, significantly wider than the EUR9.1 million loss it posted a year earlier, as revenue fell to EUR317.1 million, from EUR342.5 million, and it booked a EUR94.7 million impairment, mainly against its poker assets.

Entertainment One, up 3.8%. The company has said it has completed the acquisition of the Canadian television producer Force Four Productions from partners Rob Bromley, John Ritchie and Gillian Lowrey. Force Four has produced series including 'Border Security: Canada'sFront Line', 'The Cupcake Girls', 'Village on a Diet' and 'Seed.'

Ophir Energy, up 3.4%. The upstream oil and gas exploration company has launched a share buyback programme of up to USD100 million, saying it took the decision after having assessed the near-term capital needs of the company and the discount at which its shares currently trade against the value of its asset base. Ophir said the maximum number of shares it will buy back is 59.2 million, with the maximum price the higher of 105% of the average middle-market price of its shares over the five business days preceding each purchase and the price stipulated in European Commission regulation.




Exova Group, down 13%. The testing and advisory services group leads the FTSE 250 fallers after reporting a much wider pretax loss in the first half, caused by costs related to its initial public offering combined with weak performance in some markets. The company said its pretax loss in the six months to June 30 hit GBP38.1 million, nearly four times the GBP10.3 million loss reported a year earlier. Revenue in the period was down to GBP134.7 million, against GBP138.4 million last year. Results were hit in part by a rise in financing costs in the period, much of which was related to its IPO. Total financing costs in the period were GBP40.2 million, up from GBP25.8 million a year earlier, with GBP13.3 million of those costs related to its IPO. Exova also was hit by a drop in revenue from its Americas division, with revenue falling 11% to GBP46.7 million from GBP52.4 million a year earlier.

Afren, down 4.5%. The oil and gas producer reported pretax profit from continuing operations of USD133.1 million for the six months to June 30, down from USD260.4 million a year earlier, as revenue declined to USD565.4 million, from USD796.8 million. Its working interest production from continuing operations fell to 33,488 barrels of oil a day, from 44,712 barrels a day a year earlier, mainly due to a reduced share of production and liftings from the Ebok field in Nigeria as it recovered costs. The decline was only partially offset by a 4% rise in the average realised oil price to USD107.6 a barrel.

Restaurant Group, down 3.3%. Numis downgraded the stock to Add from Buy, saying second-half results will not be able to match the progress in the first half. Restaurant Group on Friday posted rises in pretax profit and revenue in the first half, hiking its interim dividend and saying it remains on track to deliver another positive full year. It said pretax profit in the 26 weeks to 29 June rose 12% to GBP33.7 million from GBP30.0 million a year earlier. That came on the back of a 10% rise in revenue in the period to GBP308 million, against GBP280 million last year, as like-for-like sales rose 2.5% and operating profit margins rose by 20 basis points. The results prompted the group to lift its interim dividend by 16% to 6.1 pence per share, from 5.25 pence last year.

Perform Group, down 3.1%. The digital media company said it was on track for its revenue and adjusted earnings expectations for the full year, as it saw a widened loss in the half year to end-June on higher costs. It posted a pretax loss of GBP4.2 million, widened from a loss of GBP2.6 million in the previous year, despite seeing revenue rise to GBP118.8 million from GBP92.4 million, as cost of sales and administrative expenses rose, and it posted GBP7.6 million in exceptional costs.




Victoria, up 10%. The carpets and floor coverings manufacturer and distributor said it swung to a pretax profit in its last financial year as revenue rose. It cut costs and booked a gain on the sale of properties, and said it was encouraged about its outlook as the UK economic recovery improves consumer confidence. Victoria reported a pretax profit of GBP2.3 million in the year to March 29, compared with the GBP3.3 million loss it reported a year earlier. Its revenue rose to GBP71.4 million, from GBP70.9 million, and it slashed its debt to GBP1.5 million at the end of the year, from GBP7.5 million a year earlier, thanks to improved cash generation.




Oxford Advanced Surfaces Group, off 14%. The company announced plans to split its operating business into a separate company in order to help it achieve commercial success. It also posted a pretax loss of GBP546,000 in the half year to June 30, narrowed from GBP932,000 in the previous year, as it saw revenue of GBP19,000, up from GBP3,000, and it slashed its cost of sales and other operating costs. Oxford Advanced has decided, following a strategic review, to split its operating business Oxford Advanced Surfaces Ltd into a separate company. It said it believes that operating the business from within a listed group, with associated costs and regulation, is not the best means to achieve success.

ZOO Digital, down 11%. The company expressed cautious optimism for its future as a trend of increasing monthly billings continued into its new financial year, though it posted a widened pretax loss in the year that ended March 31. It posted a pretax loss of USD2.7 million, widened from a loss of USD1.2 million, as revenue declined to USD9.6 million from USD10.4 million, and cost of sales more than doubled to USD1.7 million from USD745,000. Costs were higher primarily due to the expansion of the company's sales and marketing team.


By Neil Thakrar;

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Source: Alliance News

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