Opening Quote: Booker sales show what Tesco hopes to gain

Booker shareholders – want to know what you’ll be missing? Tesco shareholders – want to know what you might not necessarily be gaining?

If certain analysts are to be believed, this is pretty much what this morning’s trading update from Booker shows, given the proposed takeover of the food wholesaler by the supermarket group. One argument they put forward is that Tesco’s share price will not be re-rated to Booker’s earnings multiple but Booker’s stock will subsumed into a lower rated Tesco.

And this morning’s trading update from Booker certainly shows what has driven its own share price to a heady 25 times earnings. Group like-for-like sales, excluding tobacco, were up 4.7 per cent in the 12 weeks to March 24, and total sales were up 4.5 per cent. Tobacco like-for-likes were down 7.5 per cent but this reflected the in store display ban and new plain packaging restrictions coming into force.

As a result, for the 52 weeks to March 24, total sales reached £5.3bn, and increase of 6.7% compared to last year. According to the company, both its Budgens and Londis convenience store chains are performing well, while internet sales grew by 8 per cent to £233m.

Chief executive Charles Wilson said:

Booker Group remains on track to Focus, Drive and Broaden the business. On 27 January we announced the planned merger with Tesco. We are excited about the benefits the enlarged Group will bring to consumers, our customers, suppliers, colleagues and shareholders. The merger is going through the competition process. Meanwhile it is business as usual as we continue to improve choice, prices and service for our retail, catering and small business customers.

Imperial Brands shareholders already know what they will be gaining: the UK’s second largest tobacco company by revenues has told them first half revenues and earnings per share are set to be boosted by sterling’s weakness – delivering an uplift in both of 13 to 14 per cent.

However, in its trading update, the owner of the Winston, Gauloises and Golden Virginia brands said a £300m investment plan in 2017 would weigh on revenue growth when measured in constant currency terms.

Overall, though, the company – which changed its name from Imperial Tobacco last year, kept its full year earnings guidance unchanged.

Shareholders in oil explorer Genel already know what they’ll be missing. On Tuesday, the Kurdistan-focused oil company chaired by former BP boss Tony Hayward, admitted for a second time that its flagship asset contains far less crude than first thought – and its shares lost 20 per cent, taking its market value from more than £3bn in 2014 to an all time low of £164m. Its Taq Taq field in the semi-autonomous Kurdistan region of Iraq was is estimated to hold a remaining 59.1m barrels, down from a previous assessment of 171.8m.

This morning, in its 2016 results, it booked impairments of nearly $780m against its exploration assets, and reported that production fell to 53,300 barrels of oil per day, from 84,900 a year earlier.

As a result, revenue was down 44 per cent to $190.7m and pre-tax losses increased to $1.25bn from $1.16bn in 2015 on

Genel also warned there was still “significant uncertainty” over the revised forecasts for Ta Taq and said the field is currently producing just 19,000 barrels of oil a day compared to 36,000 at the end of last year.

Earlier in the week, analysts noted that, with net debt of $240m at end-16 and $675m of bonds maturing in early 2019, Taq Taq was only increasing the group’s balance sheet risk.

William Hill shareholders are no longer missing a full management team, now that newly confirmed chief executive Philip Bowcock has a new chief financial officer. Ruth Prior, the chief operating officer of payments processor Worldpay, is joining the bookmaker in that role. She was previously deputy chief financial officer at WorldPay, chief financial officer of EMI, and worked for the private equity firm Terra Firma.

Mr Bowcock said:

“Ruth is a strong addition to the William Hill Board and Executive team. Her experience in digital operations, online payments and finance is all highly relevant to our strategic priorities to deliver an even better customer experience and faster growth.”

And, finally, Lloyds of London staff now know where they will gain access to the EU in future. This morning, the insurance market has confirmed that it will open a new office in Brussels in response to Brexit. Faced with the loss of passporting rights from its London home, the organisation said it would have a new subsidiary running in time for the January 2019 insurance renewal season.

Chief executive Inga Beale said:

It is important that we are able to provide the market and customers with an effective solution that means business can carry on without interruption when the UK leaves the EU. Brussels met the critical elements of providing a robust regulatory framework in a central European location, and will enable Lloyd’s to continue to provide specialist underwriting expertise to our customers.

News of its decision came as annual results showed annual profits were flat at £2.1bn. A a 12 per cent jump in premium income was offset by higher claims, mostly from Hurricane Matthew. Consequently, Lloyd’s combined ratio – of claims to premiums – worsened from 90 per cent to 97.9 per cent in 2016.

FT Opening Quote, with commentary by Matthew Vincent, is your early Square Mile briefing. You can sign up for the full newsletter here.