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Tesco says turnaround is on track as record sales



On a continuing operations basis      1H 2017/18        1H 2016/17      Change at constant rates   Change at actual rates

Headline measures1:

Group sales2                                           £25.2bn             £24.4bn                         0.7%                                    3.3%

Group operating profit before

exceptional items3                                £759m                  £596m                        23.7%                                   27.3%

Diluted EPS pre-exceptional items,

IAS 19 finance costs and IAS

39 fair value remeasurements4             5.46p                    3.19p                                                                    71.2%

Dividend per share (interim)                  1.0p     –                                                                                             n/a

Retail operating cash flow5                  £1,139m                   £955m                                                                19.3%

Net debt5,6                                              £(3,260)m                  £(4,352)m                                                      down 25.1%


Statutory measures:

Revenue                                                      £28.3bn                            £27.3bn                       1.4%                        3.7%

Operating profit                                      £885m                                 £515m                        67.4%                       71.8%

Profit before tax                                        £562m                                 £71m                          667.6%                      691.5%

Diluted EPS                                                 5.21p                                   0.42p                           1,140.7%


  • Positive sales2 and profit3 growth, strong cash5 generation
  • Group sales2 up 3.3% to £25.2bn – seventh consecutive quarter of growth
  • UK like-for-like sales7 up 2.2%; transactions up 0.4%; volumes8 up 0.3%
  • Strong fresh food volume growth in the UK of 1.5% driven by ongoing improvements in our offer
  • Group operating profit before exceptional items3 up 27.3% to £759m; UK & ROI up 21.1% to £471m
  • Group operating margin3 up to 2.7% from 2.2% last year; on track for 3.5-4.0% ambition by 2019/20
  • Improved profit margin in Central Europe (up 132 basis points) and in Asia (up 146 basis points)
  • Retail operating cash flow5 up 19.3% to £1.1bn; Retail free cash flow5 of £586m
  • Triennial pension review concluded; annual contributions to increase by £15m to £285m from April 2018
  • Interim dividend of 1.0p per share reflects improved performance and Board confidence
  • Statutory revenue up 3.7% to £28.3bn; Profit before tax up £491m to £562m

Further progress against each of our six strategic drivers

  • Brand health9 continues to strengthen; voted ‘Britain’s favourite supermarket’ for 3rd consecutive year10
  • Further cost savings of £259m achieved in 1H towards the £1.5bn medium-term target; £485m to date
  • Generated £1.1bn of retail operating cash5; £237m underlying working capital11 inflow
  • Improving the mix across geographies and channels; 1.6% like-for-like sales growth in our UK Extra format
  • Released a further £175m value12 from property; 50 sites sold; 0.4m sq. ft. space re-purposed
  • Innovations including launch of contactless Clubcard; nationwide roll-out of same day delivery service; further 807 new products introduced

Dave Lewis, Chief Executive:

“We are continuing to make strong progress. Sales are up, profits are up, cash generation continues to strengthen and net debt levels are less than half what they were when we started our turnaround three years ago. All of this is possible because of the focus we have placed on serving shoppers a little better every day. Our offer is more competitive and more customers are shopping at Tesco.

Today’s announcement that we are resuming our dividend reflects our confidence that we can build on our strong performance to date and in doing so, create long-term, sustainable value for all of our stakeholders.”


Headline Group results

In these results, we have redefined two alternative performance measures to help improve understanding of earnings per share momentum and free cash flow. We have also provided more detail in our presentation of free cash flow and net finance costs and reported ‘Central Europe’ and ‘Asia’ as separate segments, aligning to our Executive Committee structure.


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