Tesco, Britain's biggest retailer, beat forecasts for full-year profit, showing its recovery is picking up pace and potentially giving a boost to its stuttering campaign to win investor backing for a takeover of wholesaler Booker.
The supermarket group said on Wednesday it made an operating profit before exceptional items of 1.28 billion pounds ($1.60 billion) in the year to Feb. 25 2017.That was ahead of analysts' average forecast of 1.26 billion pounds, according to Reuters data, and an increase of 30 percent on the 944 million pounds made in 2015-16. Alan Stewart, chief financial officer (CFO) at Tesco, told CNBC Wednesday that the U.K.-based firm had made "a good step" on its road to recovery and was now "slightly ahead of target".The stronger-than-expected results could help soothe concern from Tesco's shareholders. Last month, two of the U.K. grocer's biggest shareholders urged the supermarket group to drop its attempt to buy Booker, saying it was overpaying and the deal would be a distraction from its turnaround plan."We will talk with all of our shareholders, we'll go through the competition process and we're actively engaged with that ... Once we get clarification of what that means we will then go to our shareholders and ask them to approve the merger," Stewart told CNBC.Board is unanimously in favour of Booker deal
The surprise takeover bid for Booker is arguably Tesco CEO Dave Lewis's most audacious move since joining the supermarket group shortly before an accounting scandal plunged the firm into its worst crisis in its near 100-year history.Tesco's attempted acquisition of Booker occurred in conjunction with the resignation of Richard Cousins, the former senior independent director of the company who reportedly disagreed with the takeover."Richard made his own decision ... The clarity with which he formed his views and communicated those is one which everybody is now able to see but the board is unanimously in favor of the transaction and we will take it from here as it develops," Stewart said.Meanwhile, Tesco's shares hit the bottom of the European benchmark shortly after Wednesday's open as details of a regulatory fine seemed to hamper profits for the U.K. grocer.
The supermarket group said U.K. sales at stores open over a year rose 0.7 percent in the 13 weeks to Feb. 25, its fiscal fourth quarter - a fifth straight quarter of underlying growth.
"We are confident that we can build on this strong performance in the year ahead," said Chief Executive Dave Lewis.By 2020, Lewis has said he wants Tesco to earn between 3.5 pence and 4 pence of operating profit for every 1 pound spent by shoppers. The U.K. grocer would need to witness an increase from 2.3 pence in 2016 to achieve this aim though, as sales increase and £1.5 billion of costs are taken out of the business. Stewart argued the group were ahead of schedule.
—Reuters contributed to this report.