There is an awful lot to like about Tesco’s half-year update. The company is growing revenues, winning market share and importantly, increasing operating margins.

Investors will also be delighted with the 15% increase in operating profit for the period.

UK & ROI adjusted operating margins were 4.7% compared to 4.2% for the last full year period. The increase in operating margins is interesting, given the supermarket is locked in a bitter price war with the discounters to win over cost-conscious consumers.

“We have lowered prices on thousands of lines, launched or improved over 860 products in partnership with our suppliers and growers, and our customer satisfaction scores continue to improve across a broad range of measures,” said Ken Murphy, Chief Executive.

“The combination of price, quality and innovation means we are as competitive as we have ever been, and we have been the cheapest full-line grocer for nearly two years.”

Action on pricing has resulted in Tesco growing its market share and cementing its place as the UK’s leading supermarket. Tesco’s market share hit 27.8% in the period, Tesco’s highest market share level since January 2022.

“Tesco’s excellent 2024 performance is reflected in this morning’s results as the UK’s largest supermarket reported a further increase in profits as their shares surged to an eleven-year high,” said Mark Crouch, market analyst at investment platform eToro.

“Throughout a period in which supermarkets have faced a whole host of headwinds, from a global pandemic to high inflation and a cost-of-living crisis, Tesco has not only maintained their market share but increased it to the highest point in almost three years. And despite the rise of budget supermarket chains, who have managed to wrestle away market share from other big names in the sector, Tesco has not been one of them. 

“There are several reasons for this. Food sales growth has been an area where Tesco is rarely beaten, offering a larger and wider variety of products to their customers. Price-matching and Tesco’s Club Card loyalty program, which has grown to over 22 million members and counting, have also been a resounding success.”

Tesco shares were 2% higher at the time of writing.

British Land has made a bold move to increase its exposure time UK retail parks by raising £300m to help fund the acquisition of seven sites.

The high street is dead, and it has been for some time. That said, out of town retail parks are proving to be increasingly popular.

The mix of shopping and leisure experiences in retail parks that consumers can easily drive to have stolen the footfall of UK shoppers and British Land is realigning its portfolio accordingly.

The seven sites will considerably increase British Land’s weighting towards retail and generate the Real Estate Investment Trust 6.7% in net yields initially.

British Land raised cash for the acquisitions by way of a placing at a 3.6% discount to yesterday’s closing price. 

“British Land has raised around £301mn from investors to help fund the purchase of seven retail parks for £441mn. Sites like this now make up around 32% of the entire portfolio, up from 18% just 18 months ago, and are core to British Land’s expansion strategy,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.

“There are two key takeaways here. The first is that the ongoing consumer shift from the high street to out-of-town retail locations is clearly a trend that companies are trying to take advantage of – we heard from Greggs earlier this week who is taking this approach for new store locations. The second is that the large-scale acquisition market for property giants is back open, after a period of low activity.”

The FTSE 100 was higher on Wednesday despite major escalations in the Middle East overnight as commodities provided a safe haven for investors.

Iran launched a barrage of missiles at Israel while Israel moved more troops into Lebanon overnight sparking concerns of all-out war in the region.

However, the dynamics of the FTSE 100 index and its leaning towards safe havens meant London’s leading found support as investors flocked to commodities companies.

“As Iran’s cruise missile attack on Israel and fresh strikes on Hezbollah in Lebanon have unnerved investors,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“The uncertainty has made safe-haven assets like gold more popular, with demand for the precious metal ticking up close to record levels, as violence spills further across the Middle East, briefly climbing above $2,670 an ounce. Already sought after, amid concerns that inflationary pressures would persist, fresh geopolitical fracture has increased demand for gold.  The dollar has steadied after gaining ground and US Treasuries proved more popular, indicated by falling yields, as investors have sought out trusted shelters amid the widening conflict.

Oil prices are climbing, with Brent Crude approaching $75 a barrel, as supply concerns swirl again, sparked by heightened aggression. These worries are being mitigated by expectations that Saudi Arabia will turn on the taps more fully, and lower demand from China, but upwards pressure is likely to continue while uncertainty reigns about just how far conflict will spread.”

Rising oil prices helped lift oil majors BP and Shell on Wednesday with gains of 2.1% and 2.5% respectively.

Prudential was the top riser as optimism around China was untouched by developments in the Middle East. China has ramped up its efforts to stimulate the economy, paying particular attention to the financial sector. Prudential shares were 3% higher at the time of writing.

JD Sports was the top faller amid ongoing worries about Nike. Despite JD reaffirming guidance for the year, investors were more concerned with Nike’s ongoing uncertainty given the fact around half of JD’s sales around from Nike products.

“JD Sports has a multi-brand strategy and is continuing to roll out new stores and make acquisitions globally, yet Nike’s warning that the festive period may be littered with discounts could well have had some contagion effect,” said Adam Vettese, market analyst at investment platform eToro.

“Investors who have been in JD Sports for a while will be haunted by last year’s disappointing Christmas figures which saw shares plummet in January and will be looking to avoid a repeat performance this year.”

GenIP started life as a London-listed company on Wednesday after the Generative AI analytics specialist raised £1.75m in an oversubscribed fundraise.

Although many retail brokers had not yet to listed GenIP of their platforms in the early hours of Wednesday trade, most trades placed in the stock on Wednesday were at a premium to the IPO price of 39p.

In a statement released on Wednesday, GenIP outlined a strategy to grow revenues through expanding its sales and marketing activities. Investors would have been encouraged to learn its new Generative AI services have already been a big hit with clients who have placed substantial orders for the company’s Generative AI analytics services.

“I’m looking forward to demonstrating GenIP’s revenue-generating capabilities as we assist our clients in commercialising leading technological innovations,” said Melissa Cruz, CEO of GenIP.

GenIP will allocate the proceeds of the IPO to ramp up sales and marketing efforts, which have already been proven to support the company’s long plans. The company works with some of the world’s leading research institutions to commercialise technological innovations. Each year, thousands of startups are launched based on university-generated technology. GenIP’s services will feed directly into this process and help bring exciting new discoveries to market.

The Generative AI company is led by a world-class board, including Lord David Willetts, President of the Resolution Foundation and Chair of the UK Space Agency, and Dr David Gann, Chair of UK Industrial Fusion Solutions and non-executive director of VenCap International plc.

“GenIP has laid the foundations for robust growth, and I’m delighted to have the opportunity to lead the board as we deliver Generative AI analytics services to some of the world’s leading research institutions,” said Lord David Willetts, GenIP’s Non-Executive Chairman.

Despite the share price action after last week’s Interim Results announcement, I have not lost my confidence in the progress of the £71m valued ASA International (LON:ASAI) microfinance group. 

On Monday 9^th September, they were trading at 87p, on the basis of being on 6 times current year current year earnings and just 4.5 times prospective. 

Within days of that date the group’s shares fell off the cliff, easing back to 56p just before the Interim Results were published. 

For the life of me I could see no justifiable reason for such a fall away, apart from ‘more sellers than buyers’ – but then the market, as we all know by now, can be a ‘wicked mistress’ not to be played. 

The Business 

The company is one of the world’s largest international microfinance institutions, with a strong commitment to financial inclusion and socio-economic progress.  

It provides small, socially responsible loans to low-income, financially underserved entrepreneurs, predominantly women, across South Asia, Southeast Asia, West and East Africa.   

ASA International provides small socially responsible loans, bank accounts, savings and other financial services to start or grow businesses.   

The business, which has over 2,016 branches, across 13 countries, handling its 2.3m clients, operates in Pakistan, India, Sri Lanka, The Philippines, Myanmar, Ghana, Nigeria, Sierra Leone, Tanzania, Kenya, Uganda, Rwanda and Zambia.  

The Interim Results  

Last Friday morning, 27^th September, the company declared its Interim Results for the six months to end-June, showing a sustained improvement in its business and financial performance. 

Its half-way pre-tax profits were up 267% at $28.3m ($13.8m), on the back of a 7% increase in the number of clients to 2.4m (2.2m). 

The business delivered strong operational performance in H1 2024 as its loan book grew following increased demand from clients. 

In the period its assets surpassed the $500m mark, the highest level since 2022. 

The boosted profitability was achieved despite the negative impact of $3.5m from hyperinflation accounting for Ghana and Sierra Leone.  

Pakistan, the Philippines, Ghana, Tanzania, and Kenya made a key contribution to the group’s financial performance due to increased loan demand and high loan portfolio quality in all these markets. 

CEO Karin Kersten stated that: 

“H1 2024 saw both operational growth as well as importantly increased profitability. The overall operating environment across most of our markets improved during the first half of the year.  

Encouragingly, demand remains high for our products from clients as economic conditions, while still challenging, have eased when compared to the same period in 2023.  

Clients and staff continue to demonstrate their resilience in these economic circumstances.  

In particular, we have demonstrated improved performance in our major operating countries – Pakistan, the Philippines, Ghana, Tanzania and Kenya – almost all of which recorded excellent portfolio quality, client and OLP growth, and profitability.  

The improved performance in our major operating markets was slightly offset by FX movements in certain markets.  

Currencies in most of our markets have been relatively stable against the USD in H1 2024. 

Away from the clear operational impacts, the effects of inflation, including hyperinflation accounting, other currency movements, are expected to continue to dampen financial performance in USD terms in 2024.  

However, given the improved operating developments we have already seen in 2024, we are confident of being able to continue our strong performance for the remainder of 2024.” 

Analyst View 

Stephen Barrett at Cavendish Capital Markets has upped his Price Objective to 148p from 136p previously, reflecting his higher forecasts. 

His current year estimate to end-December, is for revenues of $168.2m ($148.2m) and $53.4m ($38.0m) in adjusted pre-tax profits, generating 23.2c (15.0c) per share with the UK equivalent of 17.9p (12.1p), and paying a 4.6p dividend per share (nil). 

For 2025 Barrett goes for $183.4m revenues, $56.6m profits, 27.5c earnings (UK 21.2p) and paying a 5.7p per share dividend. 

Even better figures are being shown in his estimates for 2026, where he is setting his cap at $201.3m revenues, $64.2m profits and 34.4c per share in earnings (UK – 26.6p), with a 7.7p dividend. 

In My View 

On the basis of the Cavendish Capital Markets estimates, the current 71p share price offers massive upside. 

In the last year it has been up to 110p and as low as 23p, clearly showing that it is a tight market and subject to big swings in share price. 

However, I believe that as the message starts to get out into the marketplace, the company’s value will be appreciated, with its shares reflecting such recognition. 

JD Sports shares dropped on Wednesday despite releasing upbeat interim results as investors chose to fixate on the ongoing issues with Nike whose products make up a large proportion of JD’s sales.

JD Sports reported robust H1 2024 results, with revenue up 5.2% to £5.0bn and profit before tax and adjusting items rising 2.0% to £405.6m.

Investors will be pleased to see the sportswear giant maintains its full-year profit guidance of £955-1,035m, despite currency headwinds.

Looking to the future, JD’s expansion strategy remains aggressive, with 83 new JD stores opened in H1 and plans for around 200 new stores by year-end.

The company also completed the acquisition of Hibbett, significantly boosting its presence in North America, which now represents about 40% of pro-forma annualised group revenue.

“Following on from Nike’s disappointing numbers yesterday, JD Sports shares are also down this morning despite posting a profit ahead of estimates and reiterated guidance,” said Adam Vettese, market analyst at investment platform eToro.

“JD Sports has a multi-brand strategy and is continuing to roll out new stores and make acquisitions globally, yet Nike’s warning that the festive period may be littered with discounts could well have had some contagion effect this morning. Investors who have been in JD Sports for a while will be haunted by last year’s disappointing Christmas figures which saw shares plummet in January and will be looking to avoid a repeat performance this year.

“That said, conditions for the retailer should be better than 12 months ago with inflation easing up and potentially another rate cut in between now and the end of the year. Shares have steadily climbed this ear paring those January losses but are still some 20% from the 12 month high.”