Tesco plc has abandoned the sale of its data analytics unit, Dunnhumby, after failing to get the desired price, and the retailer said that it wouldn’t exclude a rights issue to raise cash.
“I won’t sell assets if the price isn’t right," chief executive officer Dave Lewis said on a call with reporters. “We think there is an awful lot more that we can do to generate cash from our core operations."
Tesco shares fell as much as 3.8 per cent in London. The decision not to proceed with a disposal means that a process started nine months ago has yielded nothing. In February, people familiar with the matter told Bloomberg News that potential buyers of the business were pressuring Tesco to lower its £2 billion asking price.
When asked about a possible rights issue, Lewis said, "Never say never."
Operating profit in the UK and Ireland fell 69 per cent to £166 million ($253 million), excluding one-time adjustments, in the six months to 29 August, the Cheshunt, England-based grocer said in a recent statement. The median estimate of 12 analysts surveyed by Bloomberg News was £130.5 million.
Despite agreeing to sell its Korean business for £4 billion last month, Tesco’s credit is still rated junk by the major rating agencies, with any potential upgrade contingent on an improvement in UK trading.
Tesco’s same-store sales in the UK and Ireland fell 1 per cent, excluding fuel, in the second quarter. That compared with a 5.6-per-cent drop in the same period last year. After cutting prices on more than 500 product lines this year, Tesco sold 1.4 per cent more groceries than in the same period last year.
“Tesco’s profit has exceeded expectations due to a combination of higher sales volumes and cost-cutting," Charles Allen, an analyst at Bloomberg Intelligence, said by email. “Sales volumes have grown for the third quarter running, which is better than peers."
On a conference call, Lewis reiterated that he aspires to repeat last year’s so-called trading profit of £1.4 billion this year. Tesco’s capital expenditure for the full year is on track to be less than £1 billion, and it will not pay an interim dividend, the company said.
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