CMA investigations into Tesco begin, Auto Trader shares crash and stock market reaction to General Election – Finance Friday

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CMA begin Tesco investigation

Finance Friday – a brief look at this week’s finance and investor news from around the UK

Tesco

The CMA has started its investigation into the pending merger between Booker and Tesco, but until there is more news on this front, it’s the group’s underlying trading that will command the most attention.

In April, Tesco was able to confirm a first full year of positive like-for-like sales growth in the UK since 2009/10, and with almost £2bn of debts paid down, the balance sheet looks a bit better too. The group is now working towards restoring operating margins to 3.5-4% by 2020.

Auto Trader

Auto Trader shares fell slightly after full year results. The results were marginally ahead of market expectations, although the number of retailers signed up to the website fell slightly more than had been expected.

Auto Trader’s operating profit in the 12 months to 31 March 2017 was £203.1m, up 18% on the previous year. The increase was driven by a 9% increase in revenue, to £311m, and a 6 percentage point rise in operating margins, to 67%.

Ocado

Ocado has announced news of an agreement with a regional European retailer to use its ‘Smart Platform’. The shares rose over 5% on the news this week.

Its new partner, who has not yet been named, will pay an up-front fee to Ocado for access to its Start Platform technology, together with ongoing fees that are based on the volume of products sold online. Ocado expects this to start boosting the bottom line from 2019 onwards.

RPC

Full year results at RPC were ahead of market expectations as it posted an operating profit for the year of £308.2m, an increase of 77%. The group announced a final dividend of 17.9p per share, resulting in a full year dividend of 24p, representing a 50% increase over the previous year. The shares rose as much as 4% in early trading before reversing course and falling 5%.

AO World

UK adjusted earnings were up 41.7% to £24.4m, but adjusted losses in Europe increased by 25.5% to £26.5m, reflecting losses in The Netherlands and Germany, as the group seeks to build scale. The shares fell 6% on the news.

Ashtead

Shares in construction equipment lessor Ashtead have surged more than 30% since last November, thanks largely to the group’s substantial exposure to the US market. However, that strength has subsided more recently, as Donald Trump’s political fortunes have looked less certain.

With 87% of revenues generated in the US, the group looked set to benefit from President Trump’s planned infrastructure splurge. Its Q3 results the group suggested plenty of opportunities for profitable growth. As a result, capital expenditure was expected to be towards the upper end of guidance (around £1.2bn).

Election result fallout

Following the UK election, sterling is coming under pressure, with a weak pound once more helping the FTSE 100. However, underlying that market strength, investors are betting that the average Brit will be poorer following this morning’s election result.

Housebuilders are down but are joined by restaurants, high street banks, fashion retailers and media outlets.

Sinking share prices at Next, Restaurant Group, easyJet and Dixons Carphone are all a reflection of the fact that lower sterling and political uncertainty mean the pounds in Britons’ pockets seem set to be lighter going forwards. Housebuilders such as Howdens and Travis Perkins have fallen.

Retailers such as Burberry and Ted Baker as well as Fresnillo and BHP Billiton are up thanks to dollar denominated earnings.

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