F&C's Scott comments on Tesco's results

Commenting on the announcement from Tesco, which has reported a 13% rise in full-year underlying profits to £2.55bn, Ted Scott manager of the Stewardship Growth and Stewardship Income Funds said:

"These are a robust set of figures. Tesco has continued to deliver strong performance in the UK but perhaps more pleasing have been the better than expected results from its overseas operations."

Tesco is among Scott's top three holdings in the Stewardship Growth Fund. He also has a large holding in what is today Britain's largest retailer, in the Stewardship Income fund.

"Tesco has shown further improvement in profit margins. Shares in the company have responded particularly well to the sale of some of its property portfolio, allowing the company to return money to shareholders via share buybacks."

According to Scott this reflects the current trend in shareholder activism in equity markets, as witnessed most recently by rival supermarket giant Sainsbury's.

"The recent failed private equity bid for Sainsbury's was attracted by the value of the company's supermarket portfolio. This has prompted property magnate Robert Tchenguiz to increase his stake in Sainsbury's to more than 5 per cent and put pressure on the board to restructure its balance sheet and realize the value of Sainsbury's property portfolio.

"There has been a significant rise in commercial property values over the past few years and it seems prudent that Tesco should take advantage of the higher valuations accorded to its stores and reward shareholders."