Unlike majority shareholders Schroders and Artisan Partners, who recently criticised Tesco for pursuing a takeover of wholesale operator Booker, Old Mutual’s Murphy regards the deal as a “sensible” move for both parties that will “enhance Tesco’s recovery story.”
Shareholders in the mega food retailer were likely comforted by the improvement in Tesco’s sales growth in 2016, as the company reported its first full-year increase in like-for-like sales in seven years.
But the negative elements of the British’s grocer trading update were enough to push its shares down by close to 4% to 187.85p by mid-morning on Wednesday.
Although the group’s operating profit hit analysts’ target of £1.28bn and easily beat last year’s performance of £985m, it was “still only a fraction of the £4billion profit they recorded six years ago,” indicated Ayondo Markets chief trader Jordan Hiscott.
He added: “Since then, we’ve seen the dual effect of the accounting scandal and negative profit warnings drag the share price to a 14-year low of 137p, leading Warren Buffet, the third largest shareholder, to call his 4.1% stake his ‘worst ever investment’.”
Others were apprehensive that Tesco’s takeover of Booker would derail the group on its road to recovery.
