Tesco Achieves 10% Rise in Profits

Tesco’s UK business delivered a solid performance in competitive market conditions. Sales growth in the second half moderated a little compared with the first half.

20 Apr 2010 --- Tesco has reported an 8.5% increase in Group sales* (ex-petrol); 6.8% inc-petrol at £62.5bn in its preliminary results for 2009/10. There was a 12.3% growth in Group trading profit and 10.1% rise in underlying profit before tax. Tesco reported underlying diluted EPS growth of 9.1%; dividend per share growth of 9.1%

Terry Leahy, Chief Executive, comments: “By remaining focused on our strategy Tesco has weathered the economic storm well. Across the Group, we have successfully adapted our cost structures and ranges to help customers save money when they’ve needed to and treat themselves when they’ve wanted to. Our positions in international markets and non-food meant we faced strong headwinds when the downturn came but it will be these parts of our business which will grow fastest as the recovery strengthens.”

“Across all parts of our strategy UK, International, Non-food, Services our business is now stronger than it was before the recession. With leaner operations, improved market shares, strategic acquisitions performing well and a strong organic development programme, we’re well-placed for sustained profitable growth. And with the balance sheet strengthening, we have strong foundations in place for improving returns on capital going forward,” he added.

Tesco’s UK business delivered a solid performance in competitive market conditions. Sales growth in the second half moderated a little compared with the first half. Relative performance was stronger in the second half with competitors’ growth reflecting significantly reduced inflation in the industry. Excluding petrol and adjusting for VAT, like-for-like sales were 3.7% in the first half and 2.7% in the second half, driven by a strong volume performance. “Achieving our target of opening 2 million square feet of new space during the year ensured that sales from new space made a good contribution to total sales growth, which was 6.5% for the first half and 5.7% for the second half (excluding petrol and adjusted for VAT),” the retailer reported.

In International, Tesco delivered a resilient performance in the face of strong economic headwinds. “After a very tough first half of the year we are now seeing encouraging sales trends across almost all our markets; we saw strong improvements in like-for-like sales in the fourth quarter compared to the third and 7 of our 13 markets have started 2010/11 with positive like-for-like sales growth,” the company stated.

“With clear signs that our international markets are starting to recover we are planning to resume a faster pace of new space opening in the coming year. In 2009/10 we opened 5.1 million square feet of new space and in 2010/11 we will open 8.5 million square feet in addition to nine shopping malls in China. The performance of our international businesses through this severe recession has provided reassurance on the quality and resilience of our assets and local management teams and strengthens our confidence in our international strategy and long-term growth prospects,” Tesco pointed out.