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(Sharecast News) - Shore Capital said on Thursday that Tesco had delivered a resilient firsthalf performance in a UK grocery market that tightened over the summer, with the grocery chain posting 1.6% constantcurrency sales growth and a 6.3% rise in adjusted underlying earnings.
The broker, which has a 480p target price on the stock, noted Tesco had been more active on promotions than expected earlier in the year but continued to show strong cash discipline, supporting a 5.2% increase in the interim dividend and an expanded £950m buyback.
While Shore welcomed Tesco's decision to lift the lower end of FY27 guidance to £3.15bn to £3.30bn, it cautioned that festive trading was likely to be highly competitive and reiterated its 'hold' rating.
Tesco reported group sales of £33.8bn, excluding VAT and fuel, with adjusted underlying earnings rising to around £1.78bn. Free cash flow increased 21% yearonyear to £1.57bn, helped by a £250m timing benefit, while net debt stood at £10bn, modestly higher yearonyear but below the FY26 yearend level. Adjusted earnings per share rose 12.2% to 17.3p.
The FTSE 100-listed firm also maintained guidance for £1.5bn to £2bn free cash flow and now expects capital expenditure of around £1.7bn, up £100m. Shore kept its FY27 tradingprofit estimate at £3.22bn and left pre-tax profit and earnings per share forecasts unchanged.
Analysts at Berenberg cut their recommendation on Harworth Group to 'hold' from 'buy' and lowered their target price to 187p on Thursday, bringing it into line with Peel Holdings' recommended final cash offer and signalling that the takeover process was now effectively complete.
Berenberg noted that Peel Pepper had moved from initial unsolicited bids of 172.5p and 177.5p to a "best and final" offer of 187p per share, valuing Harworth at £631.7m. The board has unanimously recommended shareholders accept the terms, which represent a 30.2% premium to the prebid closing price, but a 10.4% discount to Harworth's June EPRA net disposal value.
The German bank said Peel has already secured enough acceptances and market purchases to pass the majoritycontrol threshold, declaring the offer unconditional. With Peel now holding effective operational and voting control, Berenberg said any prospect of a counterbid or improved offer was "effectively ruled out", leaving the shares trading at the offer price and removing further upside for investors.
Berenberg added that Peel was progressing towards the 75% level required to delist Harworth from the London Stock Exchange, and ultimately the 90% threshold for a compulsory squeeze-out. As liquidity and free float diminish, the broker expects remaining shareholders to accept the offer.
Reflecting the absence of further upside and the impending delisting, Berenberg cut its price target to 187p from 195p, matching the takeover terms.
Reporting by Iain Gilbert at Sharecast.com