Broker snap: Sainsbury given 'hold' rating after annual results

8th May 2013 12:09

Sainsbury's 2012 results met expectations as it lifted profits 6.2 per cent to 756m pounds, according to Jefferies International.However, the analyst said it was disappointed with the UK grocer's capital expenditure (capex) guidance. Sainsbury's expects core capital expenditure of around £1.1bn in 2014/15."The shape of future capex was underwhelming given an actual increase in net capex to £1.1bn in the year to come [still 4.1% of gross sales]," the broker said. "Despite a reduction in destination store openings, infrastructure spend looks set to double in the near term."In its annual results, the supermarket also announced it reached an agreement to take full ownership of its joint venture banking business.Across the group, with total sales rising 4.6% to £25.6bn, underlying profits up 6.2% to £756m and earnings per share up 9.3% to 30.7p in the 52 weeks to March 16th 2013, the firm hiked its dividend 3.7% to 16.7p."We see no reason to change our profit and loss estimates [2013/14 profit before tax £791m, consensus £785m] before the impact of the buy-out of the 50% partner in Sainsbury Bank," Jefferies added. "This will likely be dilutive in the mid-term (given the inevitable double-running costs involved as Sainsbury builds a dedicated platform)."Jefferies told investors to 'hold' and gave the company's stock a target price of 396.50p.RD