Tesco’s important move, Randgold’s mining code shock and Ryanair’s gloomy outlook

“The FTSE 100 starts the week on a bad note, falling 1.1% to 7,358, echoing a similar sell-off in Asia and following a weak session on the US last Friday,” says AJ Bell Investment Director Russ Mould.

Tesco

“Tesco’s guidance for current financial year operating profit of at least £1.575bn shows the business is making steady progress in rebuilding its fortunes since overstating profits in 2014. The latest earnings guidance implies a second year in a row of growth in both operating profit and margins.

“Having last month announced plans to cut 1,700 UK management roles as part of broader efforts to reset the company’s cost structure, today it announces that Booker’s boss Charles Wilson will become CEO of Tesco’s retail and wholesale operations in the UK and Ireland. That shouldn’t be too much of a surprise given the Booker takeover is about to go to shareholder vote and the deal is widely expected to be approved.

“Wilson is considered to be one of the best names in the retail industry and a potential successor to Tesco boss Dave Lewis longer term.”

Randgold Resources

“Three words can send shivers down the spines of mining bosses and they are ‘new mining code’. Governments in many parts of the world have a tendency to rework their mining industry laws when commodity prices start to pick up, as they seek to take a greater slice of the revenue pie. Randgold Resources is the latest miner to fall foul of such actions.

“Randgold has called the Democratic Republic of Congo’s new mining code ‘draconian’ and says it will severely limit the country’s economic prospects and mining industry growth.

“Tougher rules such as higher taxes, increased local ownership and a requirement for local processing have historically deterred many investors from wanting to back certain mining companies. Tanzania was last year’s trouble spot for many of these reasons; will the DRC be 2018’s problem child?

Ryanair

“Budget airline Ryanair may have launched a €750m share buyback but in typical forward-looking fashion the market was far more interested in chief executive Michael O’Leary’s gloomy prognosis for the fourth quarter running to the end of March.

“O’Leary, never known for his subtlety, says the company could be targeted by strikes this Easter as he pledged not to bow to ‘laughable’ demands from pilots.

“Ryanair agreed to recognise unions for the first time in December to avoid industrial action over Christmas. However, it also appears determined to defend its position as the lowest cost operator among its peer group.”

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