Tesco Reports Record Full Year Net Profits

Group trading profit was £3,679m, up 7.8% on last year and Group trading margin, at 6.0%, increased by 4 basis points. Underlying profit before tax rose to £3,813m, an increase of 12.3%.

4/19/2011 --- UK retail giant Tesco has reported that group sales, including VAT, increased by 8.1% to £67.6bn. At constant exchange rates, sales increased by 6.6% (including petrol) and 6.0% (excluding petrol).

Group trading profit was £3,679m, up 7.8% on last year and Group trading margin, at 6.0%, increased by 4 basis points. Underlying profit before tax rose to £3,813m, an increase of 12.3%. Before property, underlying profit before tax grew by 12.2%. On a statutory basis, Group operating profit rose by 10.2% to £3,811m. Group profit before tax increased 11.3% to £3,535m.

Net finance costs increased to £333m (£314m last year). However, before the non-cash IAS 19, 32, and 39 adjustments, actual net interest cost fell by £83m to £334m. This reflects the continued reduction in net debt.

Total Group tax has been charged at an effective rate of 24.4% (last year 26.4%). This reduction was largely driven by a reduction in the rate of UK corporation tax, and a lower Japan impairment than last year. We expect the tax rate for 2011/12 to be broadly unchanged.

Net debt reduced to £6.8bn, ahead of the target of £7.0bn, helped by strong cash generation in the seasonally important second half of the year. During the year, the company repaid £926m of our debt early and repaid £777m of maturing bonds.

Philip Clarke Chief Executive stated: "I am pleased with our strong overall performance in the face of some challenging conditions and we are well-positioned, with multiple opportunities to deliver long-term growth and rising returns. I want to thank the 500,000 people who work at Tesco for their contribution to this performance. We have equipped the business for global growth with new management structures and teams including an experienced UK Board, which is bringing more focus and energy to our largest business. Asia and Europe made excellent progress contributing nearly 70% of our profit growth in the year. The momentum in the USA is building but still has some way to go."

Tesco reported that its strategy is, and will remain, about broadly-based, profitable growth “and we have multiple opportunities to pursue that growth in the UK, internationally, in food and other categories and in services. We also believe growth and sustainability are aligned, for example through our commitments to the communities we serve and the low-carbon programme we are pursuing in our business and our supply chain. So the fundamental elements of our strategy won’t alter but some are evolving as, for example, our increased focus on internet retailing, demonstrates.”

Tesco have set six immediate team objectives “against which we intend to be judged.” They are as follows: “First, keeping the UK strong and growing; second, becoming outstanding internationally, not just successful; third, as the combination of stores and online becomes compelling for customers, we aim to become a multi-channel retailer wherever we trade; fourth, we will deliver on the potential of Retailing Services of which the Bank is a big part; fifth, by applying Group skill and scale we will add more value and competitive advantage to our businesses and finally delivering higher returns for shareholders has resumed and it will continue.”

In terms of outlook the company reported, “A generally improving global economic environment provides a helpful background for Tesco in most of our markets in Asia and Europe as well as in the United States. In some specific countries not least of course the UK as consumers deal with higher taxes, public sector contraction and rising fuel costs, demand growth remains subdued. In these markets, we are assuming that the retail environment will remain challenging in 2011, particularly in the more discretionary product categories, but we have strong plans for growth, supported by improved productivity, which will help increase our competitiveness for customers. Overall, we believe Tesco is well-positioned to trade through these challenges successfully as is evidenced by today’s results.”