Broker snap: Tesco's UK recovery on track, says Panmure

17th Apr 2013 10:57

Panmure Gordon has maintained its 'buy' rating and 440p target price for supermarket group Tesco, highlighting a 'welcome shift in strategy' following the firm's full-year results.Underlying profit before tax (PBT) fell by 14.5% to £3,549m, but this was after treating the US as a discontinued business. Panmure said that this implies a PBT of £3,669m, against its forecast for £3,513m.The broker said that a poor performance in Europe and a higher interest charge was slightly offset by a better UK trading profit performance.Panmure reckons that Tesco is on track in the UK and expects the recovery to "slowly emerge" this year.As for the company's decision to exit the US, the broker said this was not a surprise. "The main focus of these results will therefore be upon the shift in strategy to focus on generating positive free cash flow. We think that this will be taken well by the market, especially as it signals the end of the space race in the UK."Panmure said that it's possible that the company will announce share buy-backs with the interim results in October when the UK recovery ought to be more evident.The broker said that the prime drivers of shareholder value are: the UK recovery, lower capital expenditure, high returns and opportunity online.The stock was down 2.86% at 373.84p by 10:57 on Wednesday.BC