Apr 14, 2021

To thrive from here, cash cow Tesco needs to keep delivering

The most eye-catching figure in the report was £1.2bn, the annual free cash flow, which in spite of Covid-19 costs had hardly budged on an underlying basis from the previous year. Ken Murphy, Tesco's newish chief executive, has made clear a commitment to delivering predictable cash returns rather than promising growth. Upward re-rating of the stock based on reliable cash flows requires confidence that cash flows are reliable. With its strategy of consistent cash returns Tesco wants to be more like Netherlands-listed counterpart Ahold Delhaize. Absent one of those arguments of value are unlikely to win over investors whose promised cash cow has too often turned out to be a dead cat.

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