Tesco (TSCO) and Elementis (ELM) – two very different companies. The first announced their preliminary results this morning, and the second held their AGM today which I attended.
The opening line of the Tesco announcement says it all: “It’s has been a very difficult year for Tesco“. Although it said like-for-like sales volumes were up for the first time in four years, the rest of the commentary was pretty negative and of course there will be no final dividend.
Debts are rising, pension deficit is rising, the size of the provision for previous profit over-statements related to accounting issues is increased, and there are lots of asset write-offs. The new CEO is taking a bath as the saying goes. It’s tough trading conditions in Europe, and in Asia. The only bright spot is that they do seem to be taking some tough decisions to rationalise the business.
Is there any “outlook” statement in the announcement? Only a brief one which commences with “The market is still challenging and we are not expecting any let up in the months ahead. When you add to this the fundamental changes we are making to our business and our offer, it is likely to lead to an increased level of volatility in short-term performance. Our clear priority – and the one that will deliver sustainable value for our shareholders – is to improve consistently for customers. The changes we have made and will continue to make put us in a stronger position to do this.”
That’s enough to spook any investor and the share price is down 5% at the time of writing.
Elementis and Voting Arrangements
This is a FTSE-250 speciality chemical company with a rather more predictable business than Tesco. The AGM was unexceptional this year after a positive trading statement was issued in the morning except that it was unusual in using an electronic voting system. This is normally the domain of large FTSE-100 companies but I did complain a couple of years ago about the change to the Articles which mandated a poll on all resolutions. For a relatively small company (only about 30 shareholders at the AGM), doing a poll using poll cards wastes time and delays getting the results out – so people cannot see what the votes are at the meeting, or ask questions about the numbers. The use of electronic voting devices solves those problems and is a good alternative to “show of hands” voting. So the company is to be congratulated on doing it this way. However it might be cheaper to change the Articles again and revert to “show of hands”.
There is a full report on the Elementis AGM here.