IMPLEMENTING THE PLAN – INVESTING IN A BETTER TESCO
Group sales up 1.4% to £36.0bn* (up 3.2% at constant rates); Group sales exc. petrol up 1.6% (up 3.7% at constant rates)
Statutory profit before tax down (11.6)% to £1.7bn; Underlying profit before tax down (8.5)% to £1.8bn
Group trading profit of £1.6bn, down (10.5)% – UK down (12.4)% to £1.1bn; International down (17.1)% to £0.4bn; Tesco Bank up 114% to £94m
Underlying diluted EPS reduction of (7.9)%**
Interim dividend per share maintained at 4.63p
Group capital expenditure brought down from £2.1bn to £1.6bn; on track for a full year reduction to c.£3.2bn.
UK plan implementation underway, with improvements in UK sales performance, including like-for-like sales growth in second quarter.
Reduced new UK space programme on track; greater focus on Express, with 60 new stores in H1
Grocery online business continues to outperform, growing by 11% in the UK; dotcom now launched in Poland and Slovakia, with Thailand and Malaysia launching soon.
Tesco Bank migration successfully completed onto new, modern platforms; mortgages launched
Majority of businesses in Asia and Europe gained or held share, in tough external environment
United States losses reduced slightly to £(72)m at constant rates; actions taken to reduce losses further in the second half.
Successful property transactions completed in Thailand and Korea, raising c.£700m proceeds
Japanese market exit deal agreed with Aeon.
UK Plan – Building a Better Tesco:
Our £1bn investment programme to improve the shopping trip for customers is on schedule, with tangible improvements in all elements of the plan:
1.Service & Staff – second phase now complete; total of 8,000 additional staff now in store
2.Stores & Formats – over 230 stores refreshed in first half; c.40% reduction in full-year new space growth confirmed; started process of reallocating space within existing stores
3.Price & Value – increased use of personalised Clubcard offers starting to deliver results
4.Range & Quality – successful Everyday Value launch; over 2,000 core Tesco products also upgraded so far
5.Brand & Marketing – store-specific ranging work underway; new creative agency W+K in place; new marketing campaign launching before the end of the year
6.Clicks & Bricks – Click & Collect rolled out to over 1,300 locations; 200,000 non-food product lines now available online.
Philip Clarke – Chief Executive
“We continue to act decisively to tackle challenges and seize opportunities across the Group. In April, I set out our plans to 'Build a Better Tesco' in the UK.
We have been hard at work and I am encouraged by our customers’ initial responses to the changes we have made – but there is much more to be done. I am pleased that the team is in place, highly focused and energised, and I want to thank them for everything they have done.
“The external environment continues to present challenges all over the world. Whilst our businesses in Asia and Europe have continued to do a great job for customers, our financial performance there reflects the tough economic backdrop and particularly the regulatory changes in South Korea.
That we have gained or held market share in the majority of markets is a testimony to the skill of our teams across the Group.
“We have made some important strategic changes which have fundamentally altered our approach to capital allocation.
First, significantly reducing space growth in the UK and focusing on improving the performance of our existing stores – and second, investing in online to enable Tesco to take a leadership role in the digital revolution: playing our part in shaping the future of retailing.
“It is in serving the changing needs of customers, as Tesco has done over many years, that we will create more value for shareholders."
26 weeks ended 25 August 2012 (unaudited) 2012/13 Change
Group sales (inc. VAT)* £36,010m 1.4%
Group revenue (exc. VAT) £32,311m 1.6%
Group trading profit £1,587m (10.5)%
Underlying profit before tax £1,759m (8.5)%
Group profit before tax £1,662m (11.6)%
Underlying diluted earnings per share 17.08p (7.9)%**
Diluted earnings per share 16.14p (9.8)%
Dividend per share 4.63p 0.0%
Whilst there is a long way to go, we believe that our investment in ‘Building a Better Tesco’ in the UK will continue to strengthen our competitiveness by delivering further improvements in the shopping trip for customers.
Consistent with our previous guidance, we expect trading margins in the UK to be similar in the second half to the first.
We are planning on the basis that the global economic environment continues to be very challenging, with customers facing real financial pressures and our businesses bearing the burden of higher costs.
In Korea, the new regulations restricting opening hours for large retailers are having an immediate, unhelpful effect on our performance and are expected to impact our profit performance by around £100m for the year, weighted towards the second half.
Financial Strategy and Returns for Shareholders
We are on track with our plans to invest a lower level of Group capital expenditure in the current financial year and now expect our full-year investment to be c.£3.2bn. This is mainly due to our reduced new space programme in the UK, which will result in an overall reduction in UK capital expenditure, even though we are stepping up our investment in existing stores and online.
Our investment outside the UK will also show a reduction year-on-year, due to our decision to slow down further our new store opening programme in the United States and the application of higher hurdle rates for new capital investment around the Group, as we described at our full year results in April.
This reduction in capital expenditure demonstrates our continued commitment to the financial strategy we laid out in April: investing to support sustainable business growth while also moving towards a higher level of cash generation and improving returns for shareholders.
*Group sales (inc. VAT) exclude the accounting impact of IFRIC 13.
**Underlying diluted EPS reduction calculated on a constant tax rate basis; (6.7)% at actual tax rates.
Meat Trade News Daily Supporting British Pig Farmers
Source: Argentine Beef Packers S.A.
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