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PREVIEW: Tesco to reveal financial results for 2015

Published: 05:30 13 Apr 2016 BST

Tesco extra superstore, financial results due out today will reveal the grocer's progress in 2015

Tesco Plc (LON:TSCO) will be the key feature of Wednesday’s early dealing, as Britain’s biggest supermarket releases its financial results.

Given the grocer’s recent share performance (up nearly 30% in 2016 to date) the valuation could be on something of a knife-edge and sentiment could potentially be vulnerable to a disappointment.

Deal news - a US$129mln stake sale of an Asian online grocery business – distracted somewhat on Tuesday.

Eyes will, as ever, be on sales volumes and inferences regarding Tesco’s position in terms of its relative market share versus heavy discounting rivals like Lidl and Aldi.

Goldman Sachs, in a note last week, highlighted that growth among Tesco’s discounting rivals has been picking up in early 2016. It says, for example, that Aldi retains a 20% pricing advantage over Tesco.

Rob Joyce, analyst at Goldman Sachs, forecasts Tesco’s financial year revenues at £55.3bn which is in line with consensus, but, says predicts operating profit of £929mln which is slightly lower than the £932nln market consensus.

The investment bank in a note last week repeated a ‘sell’ recommendation which carries a 158p price target, implying almost 20% downside to the supermarket’s current share price of 196p.

Joyce emphasised that Tesco faces continuing underperformance in the sector, which he believes will in time bring the valuation lower.

“We believe continued underperformance of peers in the monthly Kantar data, particularly if it is driven by a recovery from Asda, will be a negative catalyst,” the analyst said in a note.

While the front page headline writers will be focusing on prelims from Tesco on Wednesday, small cap hunters could be homing in on Midatech Pharma.

The nano-medicine specialist is a company in a hurry, with chief executive officer Jim Phillips telling Proactive Investors earlier this year that the company could see as much as a “tenfold increase in revenue” this year, so Wednesday's full-year figures will determine how high the bar has been set on the revenue growth front.

Like a lot of small-caps, the stock is not widely researched by the broking community, but there are enough analysts out there tracking the company to generate a consensus forecasts for 2015 revenue, which is £1.13mln, up from £157,000 in 2014.

Earlier this week the company's push into cancer and related  treatments has stepped up a gear with the launch of anti-emetic Zuplenz in the US.

Acquired from Galena Biopharma in December, Zuplenz is a novel orally taken anti-vomiting drug for chemo and radiotherapy patients.

Zuplenz will exploit Midatech’s existing commercial infrastructure in the US, with sales, marketing and administrative functions all  beefed up ahead of the launch.

The launch reflects a determined effort by the company to increase its presence in both the US and cancer treatments generally, and shareholders will be keen to learn of the company's plans in this regard when it announces its results.

Dr Jim Phillips, chief executive officer, and Nick Robbins-Cherry, chief financial officer, will host a conference call for sell-side analysts at 13:00 BST. The call will be recorded and a replay will be available on the company's web site for 30 days.

Anticipated trading announcements

Finals: Tesco Plc (LON:TSCO), Midatech Pharma Plc (LON:MTPH)

Interims: WH Smith Plc (LON:SMWH)

Trading statement: WS Atkins Plc (LON:ATK), Halfords Group Plc (LON:HFD),  Jupiter Fund Management plc (LON:JUP), Robert Walters Plc (LON:RWA).

Other updates: Fresnillo Plc (LON:FRES)

AGMs: Hunting Plc (LON:HTG), Primary Health Properties PLC (LON:PHP)

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