Britain’s biggest grocer Tesco (LON:TSCO) has said that the new accounting standard, IFRS 16, would have increased its operating profit in the 2018/19 financial year, and decreased its profit before tax. The update comes with the company introducing the new accounting standard for the 2019/20 financial year.
Tesco’s share price has been little changed in London this morning, and as of 09:04 BST, stood at 250.00p, flat in percentage terms. The stock is marginally underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.11 percent higher at 7,436.51 points.
Accounting standard update
Tesco said in a statement this morning that the first statements prepared under the IFRS 16 accounting scandal would be the 2019/20 interim results, published in October this year, to be followed by the 2019/20 preliminary results in April next year. The company, however, issued the 2018/19 full-year financial statements under the new standard, disclosing that its operating profit would have increased by £401m to £2.61 billion, with rent removed and only part-replaced by depreciation.
The group’s profit before tax, however, would have dipped by £125 million, due to the combination of depreciation and interest being higher than the rent they replace. Tesco’s group sales and total cash flow remain completely unaffected.
Analysts on blue-chip grocer
The 14 analysts offering 12-month targets for the Tesco share price for the Financial Times have a median target of 282.50p, with a high estimate of 305.00p and a low estimate of 230.00p. According to MarketBeat, Britain’s biggest grocer currently has a consensus ‘buy’ rating and an average valuation of 275.31p.
Deutsche Bank reaffirmed the blue-chip supermarket as a ‘buy’ last week, arguing that it sees more upside to Tesco’s share price, as “momentum should remain strong, with a better sales dynamic than the other Big 4 in the UK” and further margin improvement.