Tesco’s (LON:TSCO) compensation scheme does not impact the group’s investment case, Hargreaves Lansdown has said. The comments came after the blue-chip supermarket announced yesterday that it was starting to compensate shareholders who bought shares and bonds in the company between August 29, 2014, when the blue-chip grocer issued a misleading trading update, and September 19, 2014, shortly before the company informed the market of the false accounting.
Tesco’s share price rose in the previous session, adding 1.57 percent to close at 187.10p, outperforming the broader UK market, with the benchmark FTSE 100 index closing 0.01 percent higher at 7,382.65 points. The group’s shares have added more than 17 percent to their value over the past year, as compared with a more than seven-percent rise in the Footsie.
Hargreaves Lansdown’s analyst George Salmon commented in a note yesterday that Tesco’s compensation scheme, launched yesterday, did not really impact the investment case for the supermarket.
“These compensation and penalty payments for historic accounting misdemeanours are nothing new,” the analyst commented, and pointed to the supermarket’s exceptional charge of £235 million, including the £129 million due to be paid to the Serious Fraud Office in relation to the accounting scandal which rocked the company nearly three years ago.
“The recent past has been difficult, with the shares trading at less than half of the January 2012 price,” Salmon continued, adding, however, that “while Tesco may still be in recovery, there are at least signs we’re ‘at the end of the beginning’”.
The analyst further said that while the FTSE 100 supermarket “might not be targeting a return to the heady days” of six-percent margins just yet, the fact that it thinks four percent is within reach by the end of the decade “is testament to the group’s increased confidence in its future”.